The Bank of Princeton Announces Third Quarter 2019 Results

PRINCETON, N.J., Oct. 24, 2019 /PRNewswire/ -- The Bank of Princeton (the "Bank") (NASDAQ – BPRN) today reported unaudited results of operations and financial condition for the quarter ended September 30, 2019.  The Bank reported net income of $3.7 million, or $0.54 per diluted common share, for the third quarter of 2019, compared to net income of $2.8 million, or $0.41 per diluted common share, for the second quarter of 2019, and net income of $3.7 million, or $0.54 per diluted common share, for the third quarter of 2018. The increase in net income, when comparing the three months ended June 30, 2019, was primarily due to an increase in net-interest income of approximately $402 thousand, a $225 thousand reduction in the provision for loan losses, an increase of $292,000 in loan fees collected and a $627 thousand one-time expense in the three months ended June 30, 2019 related to the acquisition of five branches that closed during the second quarter. For the nine month period ended September 30, 2019, the Bank recorded net income of $6.8 million, or $0.98 per diluted common share, compared to $10.9 million, or $1.59 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 $4.0 million of which $3.9 million was recorded in the first quarter of 2019. 

Highlights for the quarter-ended September 30, 2019 are as follows:

• Total deposits increased $143.7 million, or 14.3% from the $1.01 billion at December 31, 2018.
• Net loans increased $71.1 million (excluding $4.3 million in charge-offs) from the $1.07 billion at December 31, 2018. This reflects an annualized increase of 8.9%.
• Non-performing assets decreased $3.3 million, or 57.6%, from $5.7 million at December 31, 2018 and decreased $280 thousand from the previous quarter.
• Interest income for the three month period ended September 30, 2019 increased $1.1 million, or 7.9%, over the same period in 2018.
• Non-interest income for the three month period ended September 30, 2019 increased $428 thousand, or 65.9%, over the same period in 2018.

"We are pleased with the strong earnings recorded this quarter, which was aided by our growth in loans and the 7 bps improvement in our net interest margin versus the linked quarter," stated Edward Dietzler, President/CEO.

Chairman Richard Gillespie noted that, "Our plan to build a substantial and valuable footprint along the I95 corridor continues with the opening of a new branch during the third quarter, another branch expected in the fourth quarter and 3 more branches planed for the first half of 2020."

Balance Sheet Review

Total assets were $1.38 billion at September 30, 2019, an increase of $128.0 million or 10.2% 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 $15.0 million right-of-use asset resulting from the adoption of FASB Update No. 2016-02 ("Leases"). Net loans also increased $71.1 million (excluding $4.3 million in net charge-offs) from the $1.07 billion at December 31, 2018. Investment securities classified available-for-sale increased $17.3 million from the $91.7 million as of December 31, 2018.

Total deposits at June 30, 2019 increased by $143.7 million, or 14.3%, when compared to December 31, 2018, primarily due to acquiring $177.9 million in deposits in the Beneficial branch acquisition, partially offset by not renewing $39.1 million of brokered deposits which carry a higher cost.  When comparing September 30, 2019 to balances at December 31, 2018, interest checking increased $46.7 million, savings accounts increased $61.2 million, time deposits increased $35.5 million and non-interest deposits increased $44.5 million, partially offset by a $44.1 million decrease in money markets. In addition, during the quarter, the Bank borrowed $13.4 million in overnight FHLB short-term advances down from the $55.4 million level at December 31, 2018.    

Total stockholders' equity increased $8.8 million or 4.77% when compared to the end of 2018. This increase was primarily due to earnings recorded during the first nine months of 2019, exercises of stock options from the Bank's equity incentive plans and an increase of $1.4 million in the fair-value of the available-for-sale investment portfolio.   The ratio of equity to total assets was 14.0% compared to 14.7% at December 31, 2018.

Asset Quality

At September 30, 2019, non-performing assets were $2.4 million, a decrease of $3.3 million, or 57.6%, when compared to $5.7 million at December 31, 2018, and a decrease of $280 thousand when compared to the previous quarter.  This decrease at September 30, 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 $9.8 million at September 30, 2019, an increase of $8.6 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 $10.8 million for the third quarter of 2019, compared to $10.4 million for the second quarter of 2019 and $10.5 million for the third quarter of 2018.  The increase from the previous quarter was a result of an increase in interest and dividend income of $253 thousand, or 1.7%, and a decrease in interest expense of $149 thousand.  The net interest margin for the third quarter 2019 was 3.37%, increasing 7 basis points, when compared to the second quarter of 2019. This increase was primarily associated with an increase of 1 basis point of yield on earning assets and a reduction of 5 basis points in total cost of funds.   When comparing the three month periods ended September 30, 2019 and 2018, net interest income increased $224 thousand, which was primarily due to a higher volume of average earnings assets of approximately $76.4 million.  Interest and dividend income increased by $1.1 million, offset by an increase in interest expense of $898 thousand. The total rate on interest-bearing liabilities, which includes non-interest-bearing deposits, for the three month period ended September 30, 2019 and 2018 was 1.55% and 1.32%, respectively. For the nine month period ended September 30, 2019, net interest income was $31.0 million, an increase of $336 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 $83.0 million, partially offset by a 20 basis points reduction in net interest margin. 

The provision for credit losses was $125 thousand and $4.7 million for the three and nine months ended September 30, 2019, respectively, compared to no provision recorded and $665 thousand for the same periods in 2018, respectively.  When compared to the three months ended June 30, 2019, the provision for credit losses decreased by $225 thousand. The primary reason behind the reduction in the amount of provision required in the third quarter of 2019 was a decrease in the qualitative factors, specifically in the delinquency risk factor component, of the Bank's methodology used in determining the overall allowance. The ratio of allowance for credit losses to period end loans was 1.09% at September 30, 2019, 1.10% at December 31, 2018 and 1.15% at September 30, 2018, which reflects management's assessment of the credit quality in the loan portfolio.

Total non-interest income for the third quarter of 2019 increased $428 thousand to $1.1 million, or 65.9%, when compared to the same period in 2018. This increase was primarily due to an increase in service charges on deposits and loan fees collected.  Total non-interest income, comparing the three month periods ended September 30, 2019 and June 30, 2019, reflected an increase of $348 thousand, or 47.7%, primarily due to a higher level of fees generated on loans recorded between the two periods.  For the nine month period ended September 30, 2019, non-interest income increased $530 thousand, or 25.7%, primarily due to increases in service charges on deposits and loan fees collected.  

Total non-interest expense for the third quarter of 2019 increased $544 thousand, or 8.2%, when compared to the same period in 2018.  This increase was primarily due to an increase in salaries and benefits expense, occupancy and equipment expenses, data processing communications expenses and core deposit intangible expense, all related to the Beneficial branch acquisition, partially offset by a $540 thousand loss from the sale of an OREO property recorded in the third quarter of 2018. Also, during the third quarter of 2019, the Bank received notification from the Federal Deposit Insurance Corporation ("FDIC"), that the Deposit Insurance Fund exceeded 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 nine month period ended September 30, 2019, non-interest expense was $20.9 million, compared to $19.0 million for the same period in 2018. The $1.9 million increase was attributed to expenses recorded relating to the Beneficial branch acquisition and its impact on other operating expenses.

For the three month period ended September 30, 2019, the Bank recorded income tax expense of $801 thousand, resulting in an effective tax rate of 17.7%, compared to $618 thousand income tax expense, resulting in an effective tax rate of 18.0%, for the three month period ended June 30, 2019, and compared to an income tax expense of $830 thousand, resulting in an effective tax rate of 18.3%, for the three month period ended September 30, 2018. The current effective tax yields for the three and nine months ended September 30, 2019, were reduced, in part, by the level of non-taxable income the Bank earns and the impact by recording a tax benefit related to the exercise of warrants and stock options. 

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.