The Bank of Princeton Announces Fourth Quarter 2019 Results

PRINCETON, N.J., Jan. 29, 2020 /PRNewswire/ -- The Bank of Princeton (the "Bank") (NASDAQ – BPRN) today reported unaudited results of operations and financial condition for the quarter ended December 31, 2019.  The Bank reported net income of $3.4 million, or $0.49 per diluted common share, for the fourth quarter of 2019, compared to net income of $3.7 million, or $0.54 per diluted common share, for the third quarter of 2019, and net income of $3.8 million, or $0.55 per diluted common share, for the fourth quarter of 2018. The decrease in net income, when comparing the three months ended September 30, 2019, was primarily due to a decrease in net-interest income of approximately $353 thousand and a reduction of loan fees collected of approximately $295 thousand, partially offset by a $325 thousand reduction in non-interest expenses. The decrease in net income, when comparing the three months ended December 31, 2018, was attributed to an increase in non-interest operating expenses resulting from the acquisition of 5 branches from Beneficial Bank which closed in May 2019 and the recording of a $125 thousand provision for loan losses in the fourth quarter of 2019, partially offset by an increase in service charges collected on deposits of $173 thousand.

For the twelve month period ended December 31, 2019, the Bank recorded net income of $10.1 million, or $1.47 per diluted common share, compared to $14.7 million, or $2.14 per diluted common share for the same period in 2018. The decline in earnings was primarily due to an increase in the Bank's provision for loan losses of $4.1 million of which $3.9 million was recorded in the first quarter of 2019. 

Highlights for the quarter-ended December 31, 2019 are as follows:

• Net loans increased $109.3 million (excluding $4.5 million in charge-offs) from the $1.07 billion at December 31, 2018. This reflects an annual increase of 10.2%.
• Total deposits increased $230.6 million, or 22.9% from the $1.01 billion at December 31, 2018.
• Non-performing assets decreased $3.3 million, or 57.2%, from $5.7 million at December 31, 2018.
• Interest income for the three month period ended December 31, 2019 increased $1.0 million, or 7.1%, over the same period in 2018.
• Non-interest income for the three month period ended December 31, 2019 increased $193 thousand, or 32.1%, over the same period in 2018.

"We are pleased with the strong earnings recorded this quarter, supporting our investment in branch expansion. We had strong growth in loans and deposits in the 4th quarter, finishing the year with a 10% growth rate," stated Edward Dietzler, President/CEO.

Chairman Richard Gillespie noted that, "The Bank continues to execute on its Branch Expansion Program to strategically build a franchise by increasing our footprint along the I95 corridor.  We have 3 more branches planned for the first half of 2020."

Balance Sheet Review

Total assets were $1.45 billion at December 31, 2019, an increase of $203.3 million or 16.2% when compared to $1.25 billion at the end of 2018. The primary reason for the increase in total assets was a result of the Bank's branch acquisition from Beneficial Bank and WSFS Bank in which the Bank received $159.9 million in cash and recorded $15.7 in intangible and other assets. The Bank also recorded a $14.5 million right-of-use asset resulting from the adoption of FASB Update No. 2016-02 ("Leases"). Net loans also increased $104.8 million from the $1.07 billion at December 31, 2018. Cash and cash equivalents increased $46.2 million or 175.2% to $72.6 million as December 31, 2019. Investment securities classified available-for-sale increased $20.6 million from the $91.7 million as of December 31, 2018.

Total deposits at December 31, 2019 increased by $230.6 million, or 22.9%, when compared to December 31, 2018, primarily due to acquiring $177.9 million in deposits in the Beneficial Bank branch acquisition, partially offset by not renewing $58.2 million of brokered deposits which carry a higher cost.  When comparing December 31, 2019 to balances at December 31, 2018, interest checking increased $61.5 million, savings accounts increased $60.0 million, time deposits increased $62.0 million and non-interest earning deposits increased $38.7 million. In addition, at the end of the quarter, the Bank did not have any outstanding balance in FHLB short-term advances, down from the $55.4 million level at December 31, 2018.    

Total stockholders' equity increased $11.6 million or 6.3% when compared to the end of 2018. This increase was primarily due to earnings recorded during the twelve months of 2019, exercises of stock options from the Bank's equity incentive plans and an increase of $1.1 million in the fair-value of the available-for-sale investment portfolio.   The ratio of equity to total assets was 13.5% compared to 14.7% at December 31, 2018.

Asset Quality

At December 31, 2019, non-performing assets were $2.4 million, a decrease of $3.3 million, or 57.1%, when compared to $5.7 million at December 31, 2018.  This decrease at December 31, 2019 from December 31, 2018 was primarily due to $2.6 million in charge-offs recorded in the first quarter consisting of a $1.9 million commercial and industrial loan and a $750 thousand partial charge-off of a commercial real estate loan.  Total troubled debt restructurings ("TDR") totaled $9.3 million at December 31, 2019, an increase of $8.0 million from year-end 2018, resulting from the restructure of three commercial real estate loans to two separate borrowers. All TDR's are performing to their agreed upon terms.

Review of Quarterly Financial Results

Net interest income was $10.4 million for the fourth quarter of 2019, compared to $10.8 million for the third quarter of 2019 and $10.3 million for the fourth quarter of 2018.  The decrease from the previous quarter was a result of an increase in interest paid on deposits of $294 thousand, or 6.6%, and a decrease in interest income of $58 thousand.  The net interest margin for the fourth quarter 2019 was 3.10%, decreasing 27 basis points when compared to the third quarter of 2019. This decrease was primarily associated with a decrease of 25 basis points of yield on earning assets resulting from the two 25 basis points rate reductions that occurred in September 2019 and October 2019, as well as the positive impact during the 3rd quarter related to large loan payoffs with deferred fees recorded to income. When comparing the three month periods ended December 31, 2019 and 2018, net interest income increased $106 thousand, which was primarily due to a higher volume of average earnings assets of approximately $152.6 million.  Interest and dividend income increased by $1.0 million, offset by an increase in interest expense of $900 thousand. The total rate on interest-bearing liabilities, which includes non-interest-bearing deposits, for the three month period ended December 31, 2019 and 2018 was 1.57% and 1.44%, respectively. For the twelve month period ended December 31, 2019, net interest income was $41.5 million, an increase of $442 thousand, or 1.1%, over the same period in 2018.  This slight increase was primarily due to a higher volume of average earning assets of approximately $100.5 million, partially offset by a 25 basis points reduction in net interest margin. 

The provision for credit losses was $125 thousand and $4.8 million for the three and twelve months ended December 31, 2019, respectively, compared to no provision recorded and $665 thousand for the same periods in 2018, respectively.  When compared to the three months ended September 30, 2019, the provision for credit losses was $125 thousand for both periods. The Bank was required to record a provision in both the fourth and third quarters of 2019 resulting from the overall growth in the loan portfolio. The ratio of allowance for credit losses to period end loans was 1.06% at December 31, 2019 and 1.10% at December 31, 2018, which reflects management's assessment of the credit quality in the loan portfolio.

Total non-interest income for the fourth quarter of 2019 increased $193 thousand to $794 thousand, or 32.1%, when compared to the same period in 2018. This increase was primarily due to an increase in service charges on deposits of $173 thousand and a $27 thousand gain recorded on available-for-sale securities.  Total non-interest income, comparing the three month periods ended December 31, 2019 and September 30, 2019, reflected a decrease of $283 thousand, or 26.3%, primarily due to a lower level of fees generated on loans recorded between the two periods.  For the twelve month period ended December 31, 2019, non-interest income increased $723 thousand, or 27.2%, primarily due to increases in service charges on deposits and loan fees collected.  

Total non-interest expense for the fourth quarter of 2019 increased $557 thousand, or 8.8%, when compared to the same period in 2018.  This increase was primarily due to an increase in occupancy and equipment expenses, data processing communications expenses, office expense and core deposit intangible expense, all related to the Beneficial Bank branch acquisition, partially offset by a reduction in professional fees and Federal Deposit Insurance Corporation premium expense resulting from the Deposit Insurance Fund exceeding the reserve ratio of 1.38%.  The FDIC issued a Small Bank Assessment Credit which allowed the Bank to reverse any expenses that were recorded during the period covered, which included the second, third and fourth quarter of 2019.  For the twelve month period ended December 31, 2019, non-interest expense was $27.7 million, compared to $25.3 million for the same period in 2018. The $2.4 million increase was attributed to expenses recorded relating to the Beneficial Bank branch acquisition and its impact on other operating expenses along with expenses associated with new branch expansion.

For the three month period ended December 31, 2019, the Bank recorded income tax expense of $817 thousand, resulting in an effective tax rate of 19.4%, compared to $801 thousand income tax expense, resulting in an effective tax rate of 17.7%, for the three month period ended September 30, 2019, and compared to an income tax expense of $801 thousand, resulting in an effective tax rate of 17.5%, for the three month period ended December 31, 2018. The current effective tax yields for the three and twelve months ended December 31, 2019, were increased, in part, by the recording of a $117,000 income tax expense as a result of the New Jersey Division of Taxation issuing TB-86(R) on December 16, 2019, which provided clarity for Business Entities in a Combined Group.  

About The Bank of Princeton

The Bank of Princeton is a community bank founded in 2007.  The Bank is a New Jersey state-chartered commercial bank with 18 branches in New Jersey, including four in Princeton and others in Bordentown, Browns Mills, Chesterfield, Cream Ridge, Deptford, Hamilton, Lambertville, Lawrenceville, Monroe, New Brunswick, Pennington, Princeton Junction, Quakerbridge and Sicklerville.  There are also three branches in the Philadelphia, Pennsylvania area. The Bank of Princeton is a member of the Federal Deposit Insurance Corporation ("FDIC").

Forward-Looking Statements

The Bank of Princeton may from time to time make written or oral "forward-looking statements," including statements contained in the Bank's filings with the FDIC, in its reports to stockholders and in other communications by the Bank (including this press release), which are made in good faith by the Bank pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended.

These forward-looking statements involve risks and uncertainties, such as statements of the Bank's plans, objectives, expectations, estimates and intentions that are subject to change based on various important factors (some of which are beyond the Bank's control). The following factors, among others, could cause the Bank's financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements: the strength of the United States economy in general and the strength of the local economies in which the Bank conducts operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; inflation, interest rate, market and monetary fluctuations; market volatility; the value of the Bank's products and services as perceived by actual and prospective customers, including the features, pricing and quality compared to competitors' products and services; the willingness of customers to substitute competitors' products and services for the Bank's products and services; credit risk associated with the Bank's lending activities; risks relating to the real estate market and the Bank's real estate collateral; the impact of changes in applicable laws and regulations and requirements arising out of our supervision by banking regulators; other regulatory requirements applicable to the Bank; technological changes; acquisitions; changes in consumer spending and saving habits; those risks set forth in the Bank's Annual Report on Form 10-K for the year ended December 31, 2018 under the heading "Risk Factors," and the success of the Bank at managing the risks involved in the foregoing.

The Bank cautions that the foregoing list of important factors is not exclusive. 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, except as required by applicable law or regulation.