Two River Bancorp Reports Higher Net Income and Solid Loan Growth in the Third Quarter of 2016

Company Release - 10/25/2016 8:00 AM ET

TINTON FALLS, N.J., Oct. 25, 2016 (GLOBE NEWSWIRE) -- Two River Bancorp (Nasdaq:TRCB) (the "Company"), the parent company of Two River Community Bank ("the Bank"), today reported financial results for the third quarter and nine months ended September 30, 2016.

Third Quarter 2016 Operating and Financial Highlights

  • Net income available to common shareholders increased 57.7% to $2.64 million, or $0.33 per diluted share, up from $1.68 million, or $0.21 per diluted share, in the corresponding prior year’s quarter.

  • During the period, the Company received a tax-free Bank Owned Life Insurance (“BOLI”) death benefit of $862,000, or $0.11 per diluted share, which was included in non-interest income. The receipt of this benefit positively affected several quarterly and year-to-date metrics.

  • Non-interest income increased 137.2% to $1.98 million compared to the same period in 2015 as a result of the BOLI benefit, higher gains on the sale of SBA loans and other loan fees.

  • Non-performing assets to total assets decreased to 0.20% at September 30, 2016, from 0.42% at December 31, 2015 and 0.50% at September 30, 2015. Non-performing assets at September 30, 2016 have declined by $1.7 million, or 48.5%, from December 31, 2015.

  • Return on average assets (ROAA) was 1.16% for the third quarter of 2016, compared to 0.78% for the previous quarter and 0.79% for the same prior year’s quarter. 

  • Return on average equity (ROAE) was 10.81% for the three months ended September 30, 2016, compared to 7.28% for the previous quarter and 6.95% for the same prior year’s quarter.

  • Tangible book value per share was $10.11 at September 30, 2016, compared to $9.44 at December 31, 2015, and $9.28 at September 30, 2015.

  • Total assets at September 30, 2016 were $909.2 million, compared with $863.7 million at December 31, 2015.

  • Total loans as of September 30, 2016 were $754.0 million, an increase of $60.8 million, or 8.8% (11.7% annualized), from December 31, 2015, predominantly due to growth in both the commercial real estate and residential mortgage sectors.

  • Total deposits as of September 30, 2016 were $739.2 million, an increase of $30.8 million, or 4.3% (5.8% annualized), compared with $708.4 million as of December 31, 2015.  

Management Commentary
William D. Moss, President and CEO, stated, “Our third quarter core results are indicative of a continued commitment to achieving long-term sustainable growth, profitability, and shareholder value without compromising asset quality. We experienced annualized loan growth of 11.7% and deposit growth of 5.8%, reflecting our strong commitment to fostering customer relationships within our core markets.  The increase in net interest income over the past several quarters primarily reflects this growth in the loan portfolio despite a challenging rate environment. The tax-free BOLI benefit positively affected our non-interest income and earnings during the quarter; however, we achieved strong growth in core operations excluding this item. Non-interest income increased by over 34%, excluding the BOLI benefit, and we continued positive momentum in our core earnings.  The Bank concluded the third quarter with a favorable credit profile, ample liquidity, and a strong pipeline of potential new business.”

Dividend Information
On October 19, 2016, the Company's Board of Directors declared a quarterly cash dividend of $0.04 per share, payable on November 30, 2016 to shareholders of record as of the close of business on November 9, 2016. This marks the 15th consecutive quarterly cash dividend paid by the Company to its shareholders.  

Key Quarterly Performance Metrics

 
3rd Qtr.
  2nd Qtr. 1st Qtr.4th Qtr.3rd Qtr.9 Mo.
Ended
9 Mo.
Ended
2016  2016 2016201520159/30/20169/30/2015
Net Income (in thousands)$2,644  $1,727 $1,693 $1,751 $1,692 $6,064    $ 4,596 
  
 
 
Net Income Available to Common Shareholders (in thousands)$2,644  $1,727 $1,693 $1,739 $1,677 $6,064    $ 4,551 
Earnings per Common Share – Diluted$0.33  $0.21 $0.21 $0.21 $0.21 $0.75    $ 0.56 
Return on Average Assets 1.16% 0.78% 0.78% 0.81% 0.79% 0.91%   0.75%
Return on Average Tangible Assets (1) 1.19% 0.80% 0.80% 0.83% 0.80% 0.93%   0.76%
Return on Average Equity 10.81% 7.28% 7.25% 7.14% 6.95% 8.48%   6.44%
Return on Average Tangible Equity (1) 13.29% 8.98% 8.98% 8.78% 8.55% 10.46%   7.94%
Net Interest Margin 3.55% 3.57% 3.57% 3.65% 3.65% 3.56%   3.69%
Non-Performing Assets to Total Assets 0.20% 0.22% 0.22% 0.42% 0.50% 0.20%   0.50%
Allowance as a % of Loans 1.25% 1.30% 1.27% 1.26% 1.25% 1.25%   1.25%
 
(1) Non-GAAP Financial Information. See “Reconciliation of Non-GAAP Financial Measures” at end of release.

Loan Composition
The components of the Company’s loan portfolio at September 30, 2016 and December 31, 2015 are as follows:  

   
  (In Thousands)
  September 30,
2016
  December 31,
2015
 
Commercial and industrial $  103,050  $  100,154 
Real estate – construction  102,658   104,231 
Real estate – commercial  467,118   422,665 
Real estate – residential  54,580   39,524 
Consumer  27,162   27,136 
Unearned fees  (586)  (560)
   753,982   693,150 
Allowance for loan losses  (9,452)  (8,713)
Net Loans $  744,530  $  684,437 


Deposit Composition
The components of the Company’s deposits at September 30, 2016 and December 31, 2015 are as follows:  


 
  
  (In Thousands)
  September 30,
2016
  December 31,
 2015
 
Non-interest bearing $  152,412  $  144,627 
NOW accounts  138,162   148,373 
Savings deposits  234,326   222,091 
Money market deposits  73,286   75,323 
Listed service CD’s  47,896   33,261 
Time deposits / IRA  55,443   46,902 
Wholesale deposits  37,722   37,859 
  Total Deposits $  739,247  $  708,436 

2016 Third Quarter and First Nine Month Financial Review

Net Income
Net income available to common shareholders for the three months ended September 30, 2016 was $2.64 million, or $0.33 per diluted common share, compared to $1.68 million, or $0.21 per diluted common share, for the same period last year, an increase of 57.7%. The increase was largely due to both higher net interest income and non-interest income, which included the previously noted BOLI benefit of $862,000, or $0.11 per diluted common share, which was partially offset by a higher loan loss provision.  Expenses during this period were unchanged. On a linked quarter basis, third quarter 2016 net income available to common shareholders increased 53.1% from the second quarter of 2016.

Net income available to common shareholders for the nine months ended September 30, 2016 increased 33.2% to $6.06 million, or $0.75 per diluted common share, compared to $4.55 million, or $0.56 per diluted common share, in the same prior year period.

Net Interest Income
Net interest income for the quarter ended September 30, 2016 was $7.47 million, an increase of 3.1% compared to $7.25 million in the corresponding prior year period. This increase was largely due to an increase of $49.5 million, or 6.3%, in average interest earning assets, primarily attributable to growth in the Company’s loan portfolio. On a linked quarter basis, net interest income increased $200,000, or 2.8%, from $7.27 million.

For the first nine months of 2016, net interest income increased 4.4% to $21.9 million from $21.0 million in the same prior year period.

Net Interest Margin
The Company reported a net interest margin of 3.55% for the third quarter of 2016, slightly less than the 3.57% in the second quarter of 2016 and 3.65% reported for the third quarter of 2015. 

The net interest margin for the first nine months of 2016 was 3.56%, compared to 3.69% in the prior year period.

The 10 and 13 basis point declines in net interest margin from the third quarter and first nine months of 2015, respectively, were mainly due to the interest expense associated with the Company’s $10 million subordinated debenture placement, which was funded in December 2015 and accounted for approximately 8 basis points of the contraction. The subordinated debentures have a maturity date of December 31, 2025 and currently bear an annual interest rate of 6.25%.

Non-Interest Income
Non-interest income for the quarter ended September 30, 2016 totaled $1.98 million, an increase of $1.15 million, or 137.2%, compared to the same period in 2015. The increase included the receipt of a tax-free Bank Owned Life Insurance (“BOLI”) death benefit of $862,000. Additionally, the Company reported higher gains on the sale of SBA loans and other loan fees. Residential mortgage banking revenue was $316,000 during the third quarter of 2016, which was slightly lower than the $327,000 reported in the prior year period.  However, the 2015 period included a one-time $113,000 gain on the sale of $5.6 million in residential adjustable rate mortgage (“ARM”) loans.

On a linked quarter basis, non-interest income increased $817,000, or 70.1%, from $1.17 million in the second quarter of 2016 mainly due to the BOLI benefit. Residential mortgage banking revenue increased $35,000, or 12.5%, from $281,000 during the second quarter of 2016, while other loan fees increased by $126,000, due to higher loan prepayment fees.  However, gains on the sale of SBA loans decreased $249,000, or 68.2%, from $365,000 during the second quarter of 2016 due to the timing of loan closings.

For the nine months ended September 30, 2016, non-interest income increased $1.49 million, or 58.3%, to $4.04 million from the same period in 2015.

Non-Interest Expense
Non-interest expense for the quarter ended September 30, 2016 totaled $5.34 million, remaining largely flat from the same period in 2015 and on a linked quarter basis, as higher salaries and benefits were offset by lower other real estate owned (“OREO”) property expenses resulting primarily from a $250,000 recovery of settlement expenses from an OREO property.

For the nine months ended September 30, 2016, non-interest expense increased $269,000, or 1.7%, to $16.12 million compared to the same prior year period.

Provision for Loan Losses
During the quarter, a provision for loan losses of $470,000 was required, compared to $120,000 in the same prior year period. The Company recorded a specific allowance of $113,000 against one commercial loan whereby the underlying collateral value had been impaired by an environmental issue, which the Company fully charged off during the current quarter.  The remaining $357,000 of loan loss provision was to support the Company’s strong loan growth. 

For the first nine months of 2016, a provision of $860,000 was expensed, compared to $400,000 for the same prior year period. The Company had $121,000 of net loan charge-offs during the first nine months of 2016, compared to $40,000 in net loan recoveries in the same prior year period.

The Bank continues to be proactive in identifying troubled credits early, to record charge-offs promptly based on current collateral values, and to maintain an adequate allowance for loan losses. The Company closely monitors local and regional real estate markets in its core Monmouth, Middlesex, Union and Ocean County, New Jersey market areas and other risk factors related in its loan portfolio.

As of September 30, 2016, the Company's allowance for loan losses was $9.45 million, as compared to $8.71 million as of December 31, 2015. The loss allowance as a percentage of total loans was 1.25% at September 30, 2016 compared to 1.26% at December 31, 2015.

Financial Condition / Balance Sheet

At September 30, 2016, the Company maintained capital ratios that were in excess of regulatory standards for well capitalized institutions. The Company's Tier 1 capital to average assets ratio was 9.11%, common equity Tier 1 to risk weighted assets ratio was 10.10%, Tier 1 capital to risk weighted assets ratio was 10.10%, and total capital to risk weighted assets ratio was 12.54%.

Total assets as of September 30, 2016 were $909.2 million, compared to $863.7 million as of December 31, 2015.

Total loans as of September 30, 2016 were $754.0 million, compared to $693.2 million reported at December 31, 2015.

Total deposits as of September 30, 2016 were $739.2 million, compared to $708.4 million as of December 31, 2015. Core checking deposits at September 30, 2016 decreased slightly to $290.6 million compared to $293.0 at year-end 2015, due primarily to seasonality in municipal relationships. The Company continues to focus on building core funded non-interest bearing deposit relationships.

Asset Quality
The Company's non-performing assets at September 30, 2016 decreased to $1.85 million as compared to $3.59 million at December 31, 2015 and $4.18 million at September 30, 2015. Non-performing assets to total assets at September 30, 2016 declined to 0.20%, compared to 0.42% at December 31, 2015, and 0.50% at September 30, 2015.

Non-accrual loans decreased to $1.59 million at September 30, 2016, compared to $3.18 million at December 31, 2015 and $3.68 million at September 30, 2015.  OREO was $259,000 at September 30, 2016, compared to $411,000 at December 31, 2015 and $495,000 at September 30, 2015. 

Troubled debt restructured loan balances amounted to $8.52 million at September 30, 2016, with all but $157,000 performing.  This compared to $10.84 million at December 31, 2015 and $12.87 million at September 30, 2015.

About the Company
Two River Bancorp is the holding company for Two River Community Bank, which is headquartered in Tinton Falls, New Jersey. Two River Community Bank operates 15 branches and two Loan Production Offices throughout Monmouth, Middlesex, Union and Ocean Counties, New Jersey.  More information about Two River Community Bank and Two River Bancorp is available at www.tworiverbank.com.

The foregoing contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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, technology and market conditions. These statements may be identified by such forward-looking terminology as "continue," "expect," "look," "believe," "anticipate," "may," "will," "should," "projects," "strategy" or similar statements. Actual results may differ materially from such forward-looking statements, and no 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; competition levels; loan and investment prepayments differing from our assumptions; insufficient allowance for credit losses; a higher level of loan charge-offs and delinquencies than anticipated; material adverse changes in our operations or earnings; a decline in the economy in our 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 or an inability to close loans currently in the pipeline; changes in laws and regulations; adoption, interpretation and implementation of accounting pronouncements; operational risks, including the risk of fraud by employees, customers or outsiders; and the inability to successfully implement or expand new lines of business or new products and services. For a list of other factors which would affect our results, see the Company's filings with the Securities and Exchange Commission, including those risk factors identified in the "Risk Factor" section and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2015. The statements in this press release are made as of the date of this press release, even if subsequently made available by the Company on its website or otherwise. The Company assumes no obligation for updating any such forward-looking statements at any time, except as required by law.



TWO RIVER BANCORP
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For the Three and Nine Months Ended September 30, 2016 and 2015
 (in thousands, except per share data)
 
  Three Months Ended
September 30,
 Nine Months Ended
September 30,
 

 
   2016   2015  2016   2015 
INTEREST INCOME:           
Loans, including fees $  8,337  $7,834 $  24,335  $22,720 
Securities:           
Taxable  187   178  571   607 
Tax-exempt  234   188  664   412 
Interest bearing deposits  19   18  84   58 
Total Interest Income  8,777   8,218  25,654   23,797 
INTEREST EXPENSE:           
Deposits  972   799  2,800   2,325 
Securities sold under agreements to repurchase  15   19  44   51 
Federal Home Loan Bank (“FHLB”) and other borrowings  157   155  452   468 
Subordinated debt  164   -  492   - 
Total Interest Expense  1,308   973  3,788   2,844 
Net Interest Income  7,469   7,245  21,866   20,953 
PROVISION FOR LOAN LOSSES  470   120  860   400 
Net Interest Income after Provision for Loan Losses  6,999   7,125  21,006   20,553 
NON-INTEREST INCOME:           
Service fees on deposit accounts  154   142  427   433 
Mortgage banking  316   327  831   613 
Other loan fees  188   32  311   112 
Earnings from investment in bank owned life insurance  118   112  337   335 
Death benefit on bank owned life insurance  862   -  862   - 
Gain on sale of SBA loans  116   32  575   309 
Net realized gain on sale of securities  -   9  72   37 
Gain on sale of premises and equipment  -   -  -   208 
Other income  229   182  627   506 
Total Non-Interest Income  1,983     836  4,042   2,553 
NON-INTEREST EXPENSES:           
Salaries and employee benefits  3,309   3,198  9,609   9,318 
Occupancy and equipment  1,056   964  3,084   2,940 
Professional  273   272  888   718 
Insurance  56     74  160   249 
FDIC insurance and assessments  114   119  324   324 
Advertising  85    120  315   365 
Data processing  135    110  405   352 
Outside services fees  131    131  369   376 
Amortization of identifiable intangibles  -    10  9   38 
OREO expenses, impairment and sales, net  (245)  (137) (271)  (161)
Loan workout expenses  44   65  142   278 
Other operating  381    382  1,081   1,049 
Total Non-Interest Expenses  5,339    5,308  16,115   15,846 
Income before Income Taxes  3,643    2,653  8,933   7,260 
INCOME TAX EXPENSE  999    961  2,869   2,664 
Net Income  2,644    1,692  6,064   4,596 
Preferred stock dividend  -   (15) -   (45)
Net Income Available to Common Shareholders $  2,644  $1,677 $  6,064  $4,551 
EARNINGS PER COMMON SHARE:           
Basic $  0.33  $0.21 $  0.77  $0.57 
Diluted $  0.33  $0.21 $  0.75  $0.56 
Weighted average common shares outstanding:           
Basic  7,926   7,930  7,923   7,932 
Diluted  8,131   8,130  8,109   8,130 




TWO RIVER BANCORP
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands, except share data)
 
 September 30, December 31, 
 2016 2015 
ASSETS       
  Cash and due from banks$18,102 $21,566 
  Interest bearing deposits in bank  8,843  25,161 
   Cash and cash equivalents  26,945  46,727 
        
  Securities available for sale  31,366  33,530 
  Securities held to maturity  46,349  43,167 
  Restricted investments, at cost  4,962  3,596 
  Loans held for sale 2,561  3,050 
  Loans  753,982  693,150 
  Allowance for loan losses  (9,452) (8,713)
  Net loans  744,530  684,437 
        
 OREO  259  411 
 Bank owned life insurance  20,889  17,294 
 Premises and equipment, net  4,835  5,083 
 Accrued interest receivable  1,928  1,912 
 Goodwill  18,109  18,109 
 Other intangible assets  -  9 
 Other assets  6,437  6,371 
        
  TOTAL ASSETS$909,170 $863,696 
       
LIABILITIES       
  Deposits:       
Non-interest bearing$152,412 $144,627 
Interest bearing  586,835  563,809 
   Total Deposits  739,247  708,436 
        
  Securities sold under agreements to repurchase  18,645  19,545 
  FHLB and other borrowings  35,300  26,500 
  Subordinated debt 9,847  9,824 
  Accrued interest payable  89  118 
  Other liabilities  7,448  6,271 
        
  Total Liabilities  810,576  770,694 
        
SHAREHOLDERS' EQUITY       
  Preferred stock, no par value; 6,500,000 shares authorized, no shares issued and outstanding  -  - 
  Common stock, no par value; 25,000,000 shares authorized;       
 Issued – 8,257,170 and 8,213,196 at September 30, 2016 and December 31, 2015, respectively      
 Outstanding – 7,959,938 and 7,929,196 at September 30, 2016 and December 31, 2015, respectively 73,181  72,890 
 Retained earnings  27,948  22,759 
 Treasury stock, at cost; 297,232 shares and 284,000 shares at September 30, 2016 and
  December 31, 2015, respectively
 (2,396) (2,248)
  Accumulated other comprehensive loss  (139) (399)
  Total Shareholders' Equity  98,594  93,002 
        
  TOTAL LIABILITIES and SHAREHOLDERS’ EQUITY$909,170 $863,696 



TWO RIVER BANCORP
Selected Consolidated Financial Data (Unaudited)
 
Selected Consolidated Earnings Data
(in thousands, except per share data)
     
  Three Months Ended Nine Months Ended 
 Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30, 
Selected Consolidated Earnings Data: 2016   2016   2015  2016   2015 
Total Interest Income$  8,777  $8,539  $8,218 $  25,654  $23,797 
Total Interest Expense 1,308   1,270   973  3,788   2,844 
Net Interest Income 7,469   7,269   7,245  21,866   20,953 
Provision for Loan Losses 470   390   120  860   400 
Net Interest Income after Provision for Loan Losses 6,999   6,879   7,125  21,006   20,553 
Other Non-Interest Income 1,983   1,166   836  4,042   2,553 
Other Non-Interest Expenses 5,339   5,379   5,308  16,115   15,846 
Income before Income Taxes 3,643   2,666   2,653  8,933   7,260 
Income Tax Expense 999   939   961  2,869   2,664 
Net Income 2,644   1,727   1,692  6,064   4,596 
Preferred Stock Dividend -   -   (15) -   (45)
Net Income Available to Common Shareholders$  2,644  $1,727  $1,677 $  6,064  $4,551 
           
Per Common Share Data:          
Basic Earnings$  0.33  $0.22  $0.21 $  0.77  $0.57 
Diluted Earnings$  0.33  $0.21  $0.21 $  0.75  $0.56 
Book Value$  12.39  $12.09  $11.57 $  12.39  $11.57 
Tangible Book Value (1)$  10.11  $9.81  $9.28 $  10.11  $9.28 
Average Common Shares Outstanding (in thousands):          
Basic 7,926   7,927   7,930  7,923   7,932 
Diluted 8,131   8,110   8,130  8,109   8,130 

(1) Non-GAAP Financial Information. See “Reconciliation of Non-GAAP Financial Measures” at end of release.



Selected Period End Balances
(in thousands)
 
 Sept. 30, June 30, March 31,  Dec. 31, Sept. 30,  
  2016  2016  2016  2015  2015  
Total Assets$  909,170 $884,700 $881,857 $863,696 $842,269  
Investment Securities and Restricted Stock 82,677  84,246  83,376  80,293  82,081  
Total Loans 753,982  726,414  704,401  693,150  675,584  
Allowance for Loan Losses (9,452) (9,418) (8,963) (8,713) (8,429) 
Goodwill and Other Intangible Assets 18,109  18,109  18,109  18,118  18,128  
Total Deposits 739,247  726,264  727,104  708,436  690,665  
Repurchase Agreements 18,645  21,683  20,132  19,545  21,303  
FHLB and Other Borrowings 35,300  23,800  23,800  26,500  26,500  
Subordinated Debt 9,847  9,839  9,831  9,824  -  
Shareholders' Equity 98,594  96,293  94,613  93,002  97,640  



Asset Quality Data (by Quarter)
(dollars in thousands)
 
 Sept. 30, June 30, March 31,  Dec. 31, Sept. 30,  
  2016  2016  2016  2015  2015  
Nonaccrual Loans$  1,587 $  1,697 $  1,723 $  3,178 $  3,680  
OREO 259  259  259  411  495  
Total Non-Performing Assets 1,846  1,956  1,982  3,589  4,175  
            
Troubled Debt Restructured Loans:           
Performing 8,366  8,492  8,920  9,289  11,290  
Non-Performing 157  158  161  1,552  1,578  
            
Non-Performing Loans to Total Loans 0.21% 0.23% 0.24% 0.46% 0.54% 
Non-Performing Assets to Total Assets 0.20% 0.22% 0.22% 0.42% 0.50% 
Allowance as a % of Loans 1.25% 1.30% 1.27% 1.26% 1.25% 


Capital Ratios
      
  September 30, 2016 December 31, 2015 
 CET 1 Capital
to Risk Weighted
Assets Ratio
 Tier 1
Capital
to
Average
Assets
Ratio
 Tier 1
Capital
to Risk
Weighted
Assets Ratio
 Total
Capital
to Risk Weighted
Assets
Ratio
 CET 1 Capital
to Risk Weighted
Assets Ratio
 Tier 1
Capital
to
Average Assets
Ratio
 Tier 1
Capital
to Risk Weighted
Assets Ratio
 Total
Capital to
Risk Weighted
Assets
Ratio
 
         
         
Two River Bancorp10.10  %9.11%10.10%12.54%10.13%8.97%10.13%12.65%
Two River Community Bank11.28%10.18%11.28%12.46%11.39%10.09%11.39%12.56%
"Well capitalized" institution (under prompt corrective action regulations)*6.50%5.00%8.00%10.00%6.50%5.00%8.00%10.00%
*Applies to Bank only.  For the Company to be “well-capitalized,” the Tier 1 Capital to Risk Weighted Assets has to be at least 6.00%.



Consolidated Average Balance Sheets & Yields
With Resultant Interest and Average Rates
    
 Three Months Ended Three Months Ended
(dollars in thousands)September 30, 2016 September 30, 2015
  Interest / Income Expense   Interest / Income Expense 
ASSETS Average Balance  Average Yield / Rate Average Balance  Average Yield / Rate
Interest Earning Assets:     
Interest-bearing due from banks$18,179 $19 0.42% $28,062 $18 0.25%
Investment securities83,541 421 2.02% 80,533 366 1.82%
Loans, net of unearned fees (1) (2)735,626 8,337 4.51% 679,279 7,834 4.58%
              
Total Interest Earning Assets837,346 8,777 4.17% 787,874 8,218 4.14%
              
Non-Interest Earning Assets:             
Allowance for loan losses(9,519)     (8,344)    
All other assets75,277      73,829     
              
Total Assets$903,104       $853,359      
              
LIABILITIES & SHAREHOLDERS' EQUITY             
Interest-Bearing Liabilities:             
NOW deposits$148,664 167 0.45% $142,022 143 0.40%
Savings deposits228,862 281 0.49% 229,999 278 0.48%
Money market deposits73,031 31 0.17% 72,520 29 0.16%
Time deposits139,052 493 1.41% 105,048 349 1.32%
Securities sold under agreements to repurchase18,995 15 0.31% 23,907 19 0.32%
FHLB and other borrowings26,967 157 2.32% 27,299 155 2.26%
Subordinated debt9,844 164 6.66% - - - 
              
Total Interest Bearing Liabilities645,415  1,308 0.81% 600,795 973 0.64%
              
Non-Interest Bearing Liabilities:             
Demand deposits153,274       149,381     
Other liabilities7,144      6,541     
              
Total Non-Interest Bearing Liabilities160,418      155,922     
              
Stockholders’ Equity97,271      96,642     
              
Total Liabilities and Shareholders’ Equity$903,104       $853,359      
              
NET INTEREST INCOME  $7,469      $7,245   
              
NET INTEREST SPREAD (3)    3.36%     3.50%
              
NET INTEREST MARGIN (4)    3.55%     3.65%

(1) Included in interest income on loans are loan fees.
(2) Includes non-performing loans.
(3) The interest rate spread is the difference between the weighted average yield on average interest earning and the weighted average cost of average interest bearing liabilities.
(4) The interest rate margin is calculated by dividing annualized net interest income by average interest earning assets.



Consolidated Average Balance Sheets & Yields
With Resultant Interest and Average Rates
 
 Nine Months Ended Nine Months Ended
(dollars in thousands)September 30, 2016 September 30, 2015
  Interest / Income Expense   Interest / Income Expense 
ASSETS Average Balance  Average Yield / Rate Average Balance  Average Yield / Rate
Interest Earning Assets:     
Interest-bearing due from banks$22,411 $84 0.50% $30,754 $58 0.25%
Investment securities82,346 1,235 2.00% 76,145 1,019 1.78%
Loans, net of unearned fees (1) (2)715,260 24,335 4.54% 652,822 22,720 4.65%
              
Total Interest Earning Assets820,017 25,654 4.18% 759,721 23,797 4.19%
              
Non-Interest Earning Assets:             
Allowance for loan losses(9,117)     (8,192)    
All other assets77,185      72,167     
              
Total Assets$888,085       $823,696      
              
LIABILITIES & SHAREHOLDERS' EQUITY             
Interest-Bearing Liabilities:             
NOW deposits$151,299 491 0.43% $126,284 402 0.43%
Savings deposits226,877 829 0.49% 229,516 828 0.48%
Money market deposits73,869 91 0.16% 72,050 86 0.16%
Time deposits131,325 1,389 1.41% 102,088 1,009 1.32%
Securities sold under agreements to repurchase18,713 44 0.31% 22,340 51 0.31%
FHLB and other borrowings24,985 452 2.42% 27,236 468 2.30%
Subordinated debt9,836 492 6.67% - - - 
              
Total Interest Bearing Liabilities636,904 3,788 0.79% 579,514 2,844 0.66%
              
Non-Interest Bearing Liabilities:             
Demand deposits148,139      142,326     
Other liabilities7,470      6,380     
              
Total Non-Interest Bearing Liabilities155,609      148,706     
              
Shareholders’ Equity95,572      95,476     
              
Total Liabilities and Shareholders’ Equity$888,085       $823,696      
              
NET INTEREST INCOME  $21,866      $20,953   
              
NET INTEREST SPREAD (3)    3.39%     3.53%
              
NET INTEREST MARGIN (4)    3.56%     3.69%

(1) Included in interest income on loans are loan fees.
(2) Includes non-performing loans.
(3) The interest rate spread is the difference between the weighted average yield on average interest earning and the weighted average cost of average interest bearing liabilities.
(4) The interest rate margin is calculated by dividing annualized net interest income by average interest earning assets.



Reconciliation of Non-GAAP Financial Measures
 
The press release contains certain financial information determined by methods other than in accordance with generally accepted accounting policies in the United States (GAAP). These non-GAAP financial measures are "book value per common share," "tangible book value per common share," "return on average tangible assets," and "return on average tangible equity." This non-GAAP disclosure has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies. Our management uses these non-GAAP measures in its analysis of our performance because it believes these measures are material and will be used as a measure of our performance by investors.
 

(in thousands, except per share data)
 As of and for the Three Months Ended As of and for the Nine Months Ended  
 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, Sept. 30, Sept. 30,  
 2016 2016 2016 2015 2015 2016 2015  
Total shareholders' equity$98,594 $96,293 $94,613 $93,002 $97,640 $98,594 $  97,640  
Less: preferred stock -  -  -  -  (6,000) -  (6,000) 
Common shareholders' equity$98,594 $96,293 $ 94,613 $93,002 $91,640 $98,594 $91,640  
Less: goodwill and other tangibles (18,109) (18,109) (18,109) (18,118) (18,128) (18,109) (18,128) 
Tangible common shareholders’ equity$80,485 $78,184 $76,504 $74,884 $73,512 $80,485 $73,512  
                       
Common shares outstanding 7,960  7,967  7,943  7,929  7,918  7,960  7,918  
Book value per common share$12.39 $12.09 $11.91 $11.73 $11.57 $12.39 $11.57  
                       
Book value per common share$12.39 $12.09 $11.91 $11.73 $11.57 $12.39 $11.57  
Effect of intangible assets   (2.28)   (2.28) (2.28) (2.29) (2.29) (2.28) (2.29) 
Tangible book value per common share$10.11 $9.81 $9.63 $9.44 $9.28 $10.11 $9.28  
                
Return on average assets1.16%0.78%0.78%0.81%0.79%0.91%0.75% 
Effect of intangible assets0.03%0.02%0.02%0.02%0.01%0.02%0.01% 
Return on average tangible assets1.19%0.80%0.80%0.83%0.80%0.93%0.76% 
                
Return on average equity10.81%7.28%7.25%7.14%6.95%8.48%6.44% 
Effect of average intangible assets2.48%1.70%1.73%1.64%1.60%1.98%1.50% 
Return on average tangible equity13.29%8.98%8.98%8.78%8.55%10.46%7.94% 



Investor Contact:
Adam Prior, Senior Vice President
The Equity Group Inc.
Phone: (212) 836-9606
Email: aprior@equityny.com

Media Contact:
Adam Cadmus, Marketing Director
Phone: (732) 982-2167
Email: acadmus@tworiverbank.com

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Source: Two River Bancorp

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