Liberty Bell Bank Reports Fourth Quarter 2014 Results of Operations

MARLTON, N.J.--(BUSINESS WIRE)-- Liberty Bell Bank (OTCQB: LBBB) today reported a net loss of $1.6 million or $(0.19) per diluted share for the three months ended December 31, 2014, compared to a net loss of $656,000 or $(0.20) per diluted share for the same period in 2013. For the year ended December 31, 2014, the Bank had a $3.9 million net loss, or $(0.60) per diluted share, compared to a net loss of $3.0 million or $(0.89) per diluted share for 2013. At December 31, 2014, the Bank had total assets of $148.2 million, total deposits of $135.4 million, total capital of $8.9 million, and was adequately capitalized by all regulatory measures.

The loss of $1.6 million in the last quarter of 2014 was due primarily to the recording of a valuation provision expense of $540,000 for other real estate owned to reflect the decreased fair market value of such properties and an additional provision for loan losses of $620,000 in order to replenish reductions in the allowance for loan losses caused by the charge-off of $538,000 of loans which management determined to be uncollectable.

The Bank’s President and Chief Executive Officer, Benjamin Watts, indicated “the Bank completed efforts to identify and recognize losses on the remaining portfolio of troubled assets. We believe that the Bank is now well positioned for growth and profitability as we continue to meet the financial needs of the communities we serve.”

The $902,000 increase in the Bank’s quarterly loss as compared to the three months ended December 31, 2013 was due primarily to an increase of $389,000 in the provision for loan and lease losses and the $540,000 valuation provision expense described above. In addition, in the three months ended December 31, 2014, net interest income decreased $130,000, non-interest expenses increased $85,000, and the Bank sustained a loss from the sale of securities of $14,000, as compared to the three months ended December 31, 2013. These negative variances were partially offset by a $57,000 increase in non-interest income, a net decrease in losses from the write-down and sale of other real estate owned of $174,000 and an income tax benefit of $25,000.

The decrease of $130,000 in net interest income for the three months ended December 31, 2014 as compared to the three months ended December 31, 2013 was due to a $211,000 decrease in interest income partially offset by a $81,000 reduction in interest expense, $50,000 of which resulted from the Bank’s payoff of its $5.0 million advance from the Federal Home Loan Bank of New York in December 2013 and $31,000 of which resulted from a decline in interest expense on deposits due to balance and rate decreases. The decrease in interest income was due primarily to a decrease of $173,000 in interest from loans and a decrease of $39,000 in interest earned from investments.

The decrease of $173,000 in interest from loans was due primarily to a decrease of $12.0 million in average loan balances outstanding for the three months ended December 31, 2014 as compared to the three months ended December 31, 2013. In addition, the yield from the loan portfolio decreased 7 basis points from 5.06% to 4.99%. The reduction in average loan balances was due primarily to pay-downs and pay-offs of commercial loans. The decrease of $36,000 in interest on investments, including overnight fed funds sold, was due primarily to a $7.3 million decrease in the average balances outstanding from $43.0 million to $35.7 million. In addition, the yield from the investment portfolio decreased by 14 basis points from 1.29% to 1.15%.

The $85,000 increase in non-interest expense was due primarily to an increase of $107,000 in compensation expenses as the Bank hired a Senior Credit Officer to strengthen the credit administration function. In addition, marketing expenses increased $13,000 and other operating expenses increased $27,000. Partially offsetting these negative variances, occupancy and equipment expense decreased $43,000 and expenses related to other real estate owned decreased $19,000.

The $27,000 increase in other operating expenses was due primarily to audit and other professional expense, which increased $82,000 primarily due to the resolution of problem assets. In addition, FDIC deposit insurance expense increased $12,000, other miscellaneous fees (including loan workout expenses) increased $59,000, and directors fees of $21,000 were paid. Directors were not paid a fee in 2013. Other operating expenses for the fourth quarter of 2013 included a $151,000 prepayment penalty related to the early pay off of a Federal Home Loan Bank advance.

Net interest margin for the fourth quarter of 2014 was 3.37%, an increase of 0.09% from the 3.28% net interest margin for the fourth quarter of 2013. The margin increase was mainly the result of a 0.10% reduction in the rate paid for interest-bearing liabilities partially offset by a 0.04% lower yield from interest earning assets.

The Bank’s net loss of $3.9 million for 2014 was $953,000 greater than the loss for the year ended December 31, 2013. This increase was due primarily to a $637,000 decrease in net interest income from $5.3 million to $4.6 million for 2013 and 2014, respectively. In addition, losses from the sale or write-down of other real estate owned increased $301,000, the valuation provision expense of $540,000 for other real estate owned was recorded in 2014 and the Bank incurred losses from the sale of investment securities of $14,000 in 2014 as compared to a gain of $183,000 in 2013. Also, non-interest expenses increased $444,000 from $5.7 million for 2013 to $6.1 million for 2014. These negative variances were partially offset by a reduction of $1.0 million in the provision for loan losses from $2.8 million for 2013 to $1.8 million for 2014 and a $134,000 increase in non-interest income due primarily from service charges on deposit accounts and other fees.

The decrease of $637,000 in net interest income for 2014, as compared to 2013, was due to a $1.0 million decrease in interest income, partially offset by a $396,000 reduction in interest expense. The decrease in interest income was due primarily to a decrease of $920,000 in interest from loans and a decrease of $114,000 in interest earned from investments. The decrease in interest expense primarily resulted from a $202,000 decrease of interest expense paid on the advance from the Federal Home Loan Bank and a decrease of $194,000 of interest paid on deposits.

The decrease of $920,000 in interest from loans was due primarily to the average loan balances outstanding for 2014 as compared to 2013 decreasing by $14.1 million and a 19 basis point reduction of the yield from the loan portfolio from 5.14% to 4.95%. The decrease of $114,000 in interest earned from investments was due primarily to a decrease of $2.9 million in the average balance outstanding from $40.9 million to $38.0 million.

The $444,000 increase in non-interest expense for 2014 as compared to 2013 was due primarily to a $219,000 increase in compensation expense due primarily to staff additions in the credit administration function. In addition, expenses related to other professional services increased $283,000, primarily due to legal expenses associated with the attempt to recover losses associated with the check kite in 2013. FDIC assessments for deposit insurance increased $55,000, expenses associated with other real estate owned increased $20,000 and marketing expense increased $14,000. Partially offsetting these expense increases, expenses related to equipment decreased $13,000, occupancy expense decreased $123,000 primarily due to the closure of our Mount Laurel office in June of 2013, and other operating expense decreased $11,000.

Net interest margin for 2014 was 3.32%, a decrease of 0.04% from the 3.36% net interest margin for 2013. The margin decrease was mainly the result of a 0.22% lower yield from interest-earning assets partially offset by a 0.18% reduction in the rate paid for interest-bearing liabilities.

Total assets at December 31, 2014 were $148.2 million, representing a decrease of $9.7 million from $157.9 million at December 31, 2013. The decrease was due primarily to net loans which decreased $8.4 million and investment securities which decreased $5.2 million. In addition, due to our problem asset remediation and expense reduction efforts, other real estate owned decreased $1.7 million, other assets held for sale decreased $342,000 and fixed and other assets decreased $412,000 from December 31, 2013. These decreases were partially offset by cash and cash equivalents which increased $6.3 million from $12.1 million at December 31, 2013 to $18.3 million at December 31, 2014. The reduction in loans was due primarily to the pay down and pay off of commercial loans.

Total deposits decreased $11.5 million to $135.4 million at December 31, 2014 from $146.9 million at December 31, 2013. The decrease was primarily due to a $14.6 million decrease in interest bearing deposits partially offset by a $3.1 million increase in non-interest bearing deposits.

The Bank continues to increase non-interest bearing deposit accounts. Total non-interest bearing deposit accounts at December 31, 2014 were $23.1 million as compared to $20.1 million at December 31, 2013. The growth in non-interest bearing deposits continues to be from the Bank’s local market area.

The decrease in interest-bearing deposit accounts of $14.6 million was due primarily to a $7.2 million decrease in certificates of deposit, our highest cost deposits, from $59.3 million at December 31, 2013 to $52.1 million at December 31, 2014. Interest bearing checking accounts, which include money market accounts, decreased $6.9 million and savings accounts decreased $470,000.

Total capital increased $1.8 million from $7.1 million at December 31, 2013 to $8.9 million at December 31, 2014. The increase was due primarily to a common stock offering of 5,000,000 shares at $1.00 per share which closed on May 12, 2014. The increase in capital resulting from the stock offering was partially offset by the net loss for 2014 of $3.9 million. The Bank also benefited from a $937,000 decrease in accumulated other comprehensive loss primarily from a decrease in the unrealized loss in the mark-to-market of securities available for sale at December 31, 2014. The unrealized losses are due primarily to changes in market interest rates and are not actual losses. The “mark to market” loss on Treasury and similar securities do not reflect a risk for loss of principal. Investment securities are primarily held for revenue and collateral purposes.

At December 31, 2014, our criticized/classified loans totaled $7.7 million, a decrease of $2.3 million from $10.0 million of criticized/classified loans at December 31, 2013. Other real estate owned decreased $1.7 million from $6.2 million at December 31, 2013 to $4.5 million at December 31, 2014.

Set forth below is certain selected balance sheet and income statement data at December 31, 2014 and December 31, 2013 and for the three months and years ended December 31, 2014 and 2013.

SELECTED BALANCE SHEET DATA
(Unaudited, in thousands)			December 31,				December 31,
			2014				2013
Cash and cash equivalents			$	18,343			$	12,072
Investment securities				19,805				24,966
Net loans receivable				101,683				110,039
Total assets				148,141				157,871
Deposits				135,421				146,888
Shareholders’ equity				8,904				7,069

SELECTED INCOME STATEMENT DATA (Unaudited, in thousands except per share data)
			Quarter ended				Quarter ended				Year ended				Year ended
			December 31,				December 31,				December 31,				December 31,
			2014				2013				2014				2013
Net interest income			$	1,134			$	1,264			$	4,644			$	5,282
Provision for loan losses				620				231				1,757				2,792
(Loss) gain on sale of securities				(14	)		0					(14	)			183
Other non-interest income				140				83				469				336
Loss on sale/write-down of OREO				76				250				636				335
OREO valuation provision				540			0					540			0
Other expenses				1,607				1,522				6,113				5,669
Income taxes (benefit)				(25	)		0				2				2
Net income			$	(1,558	)		$	(656	)		$	(3,949	)		$	(2,997	)
Earnings per share:
Basic			$	(0.19	)		$	(0.20	)		$	(0.60	)		$	(0.89	)
Diluted			$	(0.19	)		$	(0.20	)		$	(0.60	)		$	(0.89	)
Capital Ratios:
Leverage Capital				6.28	%			4.94	%
Total risk based capital				10.14	%			8.37	%

Liberty Bell Bank is a full-service, state-chartered commercial bank, whose deposits are insured by the Federal Deposit Insurance Corporation (FDIC). The Bank provides diversified financial products through two locations in Burlington County, New Jersey and one location in Camden County, New Jersey.

The Bank may from time to time make written or oral “forward-looking statements”, including statements contained in this release. Such statements are not historical facts and include expressions about management's confidence and strategies and management's current views and expectations about new and existing programs and products, relationships, opportunities, taxation, technology and market conditions. Actual results may differ materially from such forward-looking statements, and no undue reliance should be placed on any forward-looking statement. Factors that may cause results to differ materially from such forward-looking statements include, but are not limited to, unanticipated changes in the financial markets and the direction of interest rates; volatility in earnings due to certain financial assets and liabilities held at fair value; stronger competition from banks, other financial institutions and other companies; insufficient allowance for credit losses; a higher level of net loan charge-offs and delinquencies than anticipated; material adverse changes in the Bank’s operations or earnings; a decline in the economy in our primary market areas; changes in relationships with major customers; changes in effective income tax rates; higher or lower cash flow levels than anticipated; inability to hire or retain qualified employees; a decline in the levels of deposits or loss of alternate funding sources; a decrease in loan origination volume; changes in laws and regulations, including issues related to compliance with anti-money laundering and the bank secrecy act laws; adoption, interpretation and implementation of new or pre-existing accounting pronouncements; operational risks, including the risk of fraud by employees and customers; the inability to successfully implement new lines of business or new products and services .and other factors, many of which are beyond the Bank's control. The words “may”, “could”, “should”, “would”, “believe”, “anticipate”, “estimate”, “expect”, “intend”, “plan”, and similar expressions are intended to identify forward-looking statements. All such statements are made in good faith by the Bank pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. The Bank does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Bank.

Liberty Bell Bank
Dennis A. Costa
Chief Financial Officer
856-830-1134

Source: Liberty Bell Bank

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