Two River Bancorp Reports 2018 Second Quarter Financial Results Highlighted by 24.5% Increase in Net Income

Company Release - 7/24/2018 8:00 AM ET

TINTON FALLS, N.J., July 24, 2018 (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 second quarter and six months ended June 30, 2018, highlighted by higher net income driven by solid loan growth during the quarter.

2018 Second Quarter Financial Highlights
(comparisons to respective prior year’s period)

  • Net income increased 24.5% to $2.65 million, or $0.30 per diluted share, which included $137,000, or $0.02 per diluted share, of additional income tax expense due to New Jersey’s newly enacted Corporation Business Tax (CBT) surtax, for which the Company recorded six months of retroactive state income tax expense in the second quarter of 2018.
  • Effective tax rate will increase from 26% to approximately 28% in future periods due to the impact of CBT changes
  • Return on average assets of 1.00%, up from 0.87%
  • Return on average equity of 9.67%, up from 8.26%
  • Net interest margin improved 10 basis points to 3.59%
  • Net interest income increased 12.7% to $8.97 million
  • Efficiency ratio(1) improved to 62.6% compared to 63.9%
  1. Efficiency ratio represents the ratio of non-interest expense to the sum of net interest income and non-interest income.

(Totals at June 30, 2018; comparisons to December 31, 2017)

  • Total loans were $890.4 million, an increase of $39.5 million, or 9.3% annualized
  • Total deposits were $880.9 million, an increase of $19.3 million, or 4.5% annualized
  • Total assets increased to a record $1.056 billion, compared to $1.040 billion, or 3.0% annualized
  • Tangible book value per share(1) increased to $10.90, compared to $10.44
  1. Non-GAAP Financial Information. See “Reconciliation of Non-GAAP Financial Measures” at end of release.

Management Commentary
William D. Moss, President and CEO, stated, “The Company’s net income increased 24.5% as a result of strong loan growth and an improvement in key performance metrics during the period. We remain on track to achieve our growth and earnings goals. Higher net interest income, lower credit costs and well controlled expenses led to a 21.0% increase in income before taxes for the quarter. Although second quarter and first half results were negatively impacted by the newly enacted state tax legislation on July 1, 2018, our overall effective tax rate is expected to be comparably lower for the second half of 2018 from the prior year. Growing our lending business, while expanding core deposit relationships, continue to be our priorities. On an annualized basis, loans grew 9.3%, predominantly in the commercial real estate and construction sectors. We expect that this growth, coupled with a strong loan pipeline, will help drive profitability for the remainder of 2018.”

Dividend Increased to $0.055 per share
On July 18, 2018, the Company’s Board of Directors declared a quarterly cash dividend of $0.055 per share, payable on August 29, 2018 to shareholders of record as of the close of business on August 10, 2018. This marks the 22nd consecutive quarterly cash dividend, which represents a 22.2% increase from the prior quarter, and is the fifth consecutive year in which the Company has raised its cash dividend. 

Key Quarterly Performance Metrics

 2nd Qtr.
1st Qtr.
4th Qtr.3rd Qtr.2nd Qtr.6 Mo.
Ended
 
6 Mo.
Ended
 
 2018
2018
 2017
 2017
 2017
6/30/2018
6/30/2017
Net Income (in thousands)$2,650  $2,676 $335 $2,237 $2,128 $5,326  $3,930 
Earnings per Common Share – Diluted$0.30  $0.31 $0.04 $0.26 $0.25 $0.61  $0.45 
Return on Average Assets 1% 1.04% 0.13% 0.89% 0.87% 1.02% 0.81%
Return on Average Tangible Assets(1) 1.02% 1.06% 0.13% 0.91% 0.88% 1.04% 0.83%
Return on Average Equity 9.67% 10.08% 1.24% 8.39% 8.26% 9.87% 7.73%
Return on Average Tangible Equity(1) 11.57% 12.12% 1.49% 10.13% 10.01% 11.84% 9.39%
Net Interest Margin 3.59% 3.63% 3.56% 3.62% 3.49% 3.61% 3.47%
Efficiency Ratio(2) 62.59% 61.59% 59.96% 62.57% 63.93% 62.1% 64.92%
Non-Performing Assets to Total Assets 0.18% 0.19% 0.2% 0.23% 0.32% 0.18% 0.32%
Allowance as a % of Loans 1.26% 1.26% 1.25% 1.25% 1.25% 1.26% 1.25%
 
(1)  Non-GAAP Financial Information. See “Reconciliation of Non-GAAP Financial Measures” at end of release.
(2)  Efficiency ratio represents the ratio of non-interest expense to the sum of net interest income and non-interest income.
 

Loan Composition
The components of the Company’s loan portfolio at June 30, 2018 and December 31, 2017 are as follows:  

  (in thousands)  
  June 30,
2018
  December 31,
2017
 %
Change
 
Commercial and industrial $  107,398  $  101,371 5.9%
Real estate – construction  134,520   118,094 13.9%
Real estate – commercial  551,216   537,733 2.5%
Real estate – residential  66,855   64,238 4.1%
Consumer  31,214   30,203 3.3%
Unearned fees  (834)  (765)9.0%
   890,369   850,874 4.6%
Allowance for loan losses  (11,201)  (10,668)5.0%
Net Loans $   879,168  $  840,206 4.6%
 

Deposit Composition
The components of the Company’s deposits at June 30, 2018 and December 31, 2017 are as follows:  

  (in thousands)  
  June 30,
2018
  December 31,
 2017
 %
Change
 
Non-interest-bearing $   166,506   $  167,297 (0.5)%
NOW accounts  198,393   232,673 (14.7)%
Savings deposits  264,371   242,448 9.0 %
Money market deposits  51,567   59,818 (13.8)%
Listed service CD’s  46,441   44,436 4.5 %
Time deposits / IRA  94,151   74,183 26.9 %
Wholesale deposits  59,450   40,702 46.1 %
  Total Deposits $  880,879   $  861,557 2.2 %
 

2018 Second Quarter Financial Review

Net Income
Net income for the three months ended June 30, 2018 increased 24.5% to $2.65 million, or $0.30 per diluted common share, compared to $2.13 million, or $0.25 per diluted common share, for the same period last year. The increase was largely due to higher net interest income and a lower loan loss provision coupled with a lower Federal corporate income tax rate, which was partially offset by an increase in non-interest expense and an increase in the New Jersey state income tax expense, as discussed below.

On July 1, 2018, New Jersey enacted Assembly Bill No. 4202 to make several changes to the New Jersey Corporation Business Tax (CBT), most notably establishing a temporary CBT surtax, effectively increasing the current CBT tax rate of 9% to 11.5%, retroactive to January 1, 2018. The CBT surtax will reduce to 1.5% from 2.5% for tax years beginning on or after January 1, 2020 through December 31, 2021. As a result of this increase, the Company recorded six months of additional state income tax expense in the second quarter of 2018 of $137,000, or $0.02 per diluted share.

On a linked quarter basis, second quarter 2018 net income remained flat compared to the first quarter of 2018, despite this additional tax expense.

Net income for the six months ended June 30, 2018 increased 35.5% to $5.33 million, or $0.61 per diluted share, compared to $3.93 million, or $0.45 per diluted share, in the same prior year period. For the first half of 2018, the Company recorded a $133,000 tax benefit related to the accounting treatment of equity-based compensation, as compared to $145,000 for the same period last year.

Net Interest Income
Net interest income for the quarter ended June 30, 2018 was $8.97 million, an increase of 12.7% compared to $7.96 million in the corresponding prior year period. This was largely due to an increase of $87.4 million, or 9.6%, in average interest-earning assets, primarily attributable to growth in the loan portfolio. On a linked quarter basis, net interest income increased $170,000, or 1.9%, from $8.80 million.

For the first half of 2018, net interest income increased 14.0% to $17.8 million from $15.6 million in the prior year period.

Net Interest Margin
The Company reported a net interest margin of 3.59% for the second quarter of 2018, compared to 3.63% in the first quarter of 2018 and 3.49% reported for the second quarter of 2017. Net interest margin declined slightly from the first quarter of 2018 largely due to a higher cost of funds.

The net interest margin for the first half of 2018 was 3.61%, compared to 3.47% in the prior year period, primarily due to higher yielding interest-earning assets.

Non-Interest Income
Non-interest income for the quarter ended June 30, 2018 declined slightly to $1.50 million, compared to $1.54 million in the corresponding prior year period.  This was largely due to lower residential mortgage banking revenues, partially offset by higher other loan fees, primarily due to loan prepayment fees, and service fees on deposit accounts.

On a linked quarter basis, non-interest income increased by $186,000, or 14.2%, from the first quarter of 2018, mainly due to higher gains on the sale of SBA loans and residential mortgage banking revenues.

For the six months ended June 30, 2018, non-interest income increased $143,000, or 5.4%, to $2.8 million from the same period in 2017.

Non-Interest Expense
Non-interest expense for the quarter ended June 30, 2018 totaled $6.55 million, an increase of $480,000, or 7.9%, from the $6.07 million reported in same period in 2017, primarily due to salary increases, new hires within the lending and deposit teams, and higher data processing expenses. The Company’s efficiency ratio was 62.6% for the quarter, compared to 63.9% for the same period in 2017.

On a linked quarter basis, non-interest expense increased $324,000, or 5.2%, largely due to higher salaries and professional expenses.

For the six months ended June 30, 2018, non-interest expense increased $930,000, or 7.8%, to $12.8 million compared to the same prior year period. Efficiency ratio for the six months ended June 30, 2018 improved to 62.1% from 64.9% compared to the same prior year period.

Provision for Loan Losses
During the quarter, a provision for loan losses of $225,000 was expensed, compared to $375,000 in the same prior year period. The majority of the second quarter 2018 provision was to support the Company’s strong loan growth. The Company had $14,000 in net loan recoveries during the quarter, compared to $11,000 in net loan recoveries during the same period last year.

For the first half of 2018, a provision of $625,000 was expensed, compared to $600,000 for the same prior year period. The Company had $92,000 of net loan charge-offs during the first half of 2018, compared to $212,000 of net loan charge-offs in the same prior year period.

As of June 30, 2018, the Company's allowance for loan losses was $11.20 million, compared to $10.67 million as of December 31, 2017. The loss allowance as a percentage of total loans was 1.26% at June 30, 2018 compared to 1.25% at December 31, 2017. 

Financial Condition / Balance Sheet

At June 30, 2018, 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 8.95%, its common equity Tier 1 to risk weighted assets ratio was 9.82%, its Tier 1 capital to risk weighted assets ratio was 9.82%, and its total capital to risk weighted assets ratio was 12.04%.

Total assets as of June 30, 2018 were $1.056 billion, compared to $1.040 billion at December 31, 2017 and $983.1 million as of June 30, 2017.

Total loans as of June 30, 2018 were $890.4 million, compared to $850.9 million at December 31, 2017 and $794.9 million as of June 30, 2017.

Total deposits as of June 30, 2018 were $880.9 million, compared to $861.6 million as of December 31, 2017 and $810.7 million as of June 30, 2017. Core checking deposits at June 30, 2018 were $364.9 million, compared to $400.0 million at December 31, 2017 and $357.3 million at June 30, 2017. The Company continues to focus on building core checking account deposit relationships, which can vary from quarter to quarter due to seasonality in its municipal relationships.

Asset Quality
The Company's non-performing assets at June 30, 2018 were $1.93 million as compared to $2.07 million at December 31, 2017 and $3.18 million at June 30, 2017. Non-performing assets to total assets at June 30, 2018 were 0.18% compared to 0.20% at December 31, 2017 and 0.32% at June 30, 2017.

Non-accrual loans were $1.93 million at June 30, 2018, compared to $2.07 million at December 31, 2017 and $2.95 million at June 30, 2017. There was no OREO at June 30, 2018 and December 31, 2018, compared to $233,000 at June 30, 2017. 

Troubled debt restructured loan balances amounted to $6.71 million at June 30, 2018, with all but $877,000 performing. This compared to $7.05 million at December 31, 2017 and $7.95 million at June 30, 2017.

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 14 branches along with 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, 2017. 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.

  
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
Two River Community Bank
Phone: (732) 982-2167
Email: acadmus@tworiverbank.com
  

 

  
TWO RIVER BANCORP
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For the Three Months and Six Months Ended June 30, 2018 and 2017
(in thousands, except per share data)
 
  
  Three Months Ended
June 30,
 Six Months Ended
June 30,
 
   2018   2017  2018   2017 
INTEREST INCOME:           
Loans, including fees $   10,243   $  8,733 $  20,064  $  17,136 
Securities:           
Taxable  290    235   587   468 
Tax-exempt  280    279   562   564 
Interest-bearing deposits  94    102   161   174 
Total Interest Income  10,907   9,349  21,374   18,342 
INTEREST EXPENSE:           
Deposits  1,641   1,063  2,999   2,101 
Securities sold under agreements to repurchase  15   17  29   32 
Federal Home Loan Bank ("FHLB") and other borrowings  116   147  246   292 
Subordinated debt  165   164  330   329 
Total Interest Expense  1,937   1,391  3,604   2,754 
Net Interest Income  8,970   7,958  17,770   15,588 
PROVISION FOR LOAN LOSSES  225   375  625   600 
Net Interest Income after Provision for Loan Losses  8,745   7,583  17,145   14,988 
NON-INTEREST INCOME:           
Service fees on deposit accounts  239   161  477   311 
Mortgage banking  409   474  747   900 
Other loan fees  137   122  248   214 
Earnings from investment in bank owned life insurance  132   138  262   274 
Gain on sale of SBA loans  387   394  718   511 
Other income  192   249  354   453 
Total Non-Interest Income  1,496     1,538  2,806   2,663 
NON-INTEREST EXPENSES:           
Salaries and employee benefits  4,010   3,460  7,895   6,913 
Occupancy and equipment  1,043   1,049  2,133   2,103 
Professional  488   395  828   736 
Insurance  64     53  121   101 
FDIC insurance and assessments  123   108  246   231 
Advertising  130   125  190   235 
Data processing  174    125  326   255 
Outside services fees  80    124  161   227 
OREO expenses, impairment and sales, net  (14)  22  (15)  19 
Loan workout expenses  45   139  96   166 
Other operating  408    471  797   862 
Total Non-Interest Expenses  6,551    6,071  12,778   11,848 
Income before Income Taxes  3,690    3,050  7,173   5,803 
Income Tax Expense  1,040    922  1,847   1,873 
Net Income  $  2,650  $  2,128 $  5,326  $  3,930 
Earnings Per Common Share:           
Basic $  0.31  $  0.25 $  0.63  $  0.47 
Diluted $  0.30  $  0.25 $  0.61  $  0.45 
Weighted average common shares outstanding:           
Basic  8,488   8,372  8,480   8,363 
Diluted  8,690   8,654  8,695   8,642 
                

 

     
TWO RIVER BANCORP
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands, except share data)
     
 June 30, December 31, 
 2018 2017 
ASSETS       
Cash and due from banks$16,839 $29,575 
Interest-bearing deposits in bank  7,443  18,644 
Cash and cash equivalents  24,282  48,219 
        
Securities available for sale  28,174  28,684 
Securities held to maturity  57,953  58,002 
Equity securities 2,417  2,448 
Restricted investments, at cost  5,905  5,430 
Loans held for sale 2,537  2,581 
Loans  890,369  850,874 
Allowance for loan losses  (11,201) (10,668)
Net loans  879,168  840,206 
        
Bank owned life insurance  21,835  21,573 
Premises and equipment, net  6,134  6,239 
Accrued interest receivable  2,707  2,554 
Goodwill  18,109  18,109 
Other assets  6,306  5,753 
        
  TOTAL ASSETS$1,055,527 $1,039,798 
       
LIABILITIES       
Deposits:       
Non-interest-bearing$166,506 $167,297 
Interest-bearing  714,373  694,260 
Total Deposits  880,879  861,557 
        
Securities sold under agreements to repurchase  19,878  27,120 
FHLB and other borrowings  24,500  25,800 
Subordinated debt 9,905  9,888 
Accrued interest payable  78  70 
Other liabilities  8,940  8,792 
        
Total Liabilities  944,180  933,227 
        
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 –  8,867,337 and 8,782,124 at June 30, 2018 and December 31, 2017, respectively      
Outstanding –  8,555,243 and 8,470,030 at June 30, 2018 and December 31, 2017, respectively 80,088  79,678 
Retained earnings  34,173  29,593 
Treasury stock, at cost; 312,094 shares at June 30, 2018 and December 31, 2017 (2,396) (2,396)
Accumulated other comprehensive loss  (518) (304)
Total Shareholders' Equity  111,347  106,571 
        
TOTAL LIABILITIES and SHAREHOLDERS’ EQUITY$1,055,527 $1,039,798 
  

 

  
TWO RIVER BANCORP
Selected Consolidated Financial Data (Unaudited)
 
  
Selected Consolidated Earnings Data 
(in thousands, except per share data) 
  
  Three Months Ended Six Months Ended 
 June 30, March 31, June 30, June 30, June 30, 
Selected Consolidated Earnings Data: 2018  2018  2017  2018  2017 
Total Interest Income$  10,907 $  10,467 $   9,349 $  21,374 $  18,342 
Total Interest Expense 1,937  1,667  1,391  3,604  2,754 
Net Interest Income 8,970  8,800  7,958  17,770  15,588 
Provision for Loan Losses 225  400  375  625  600 
Net Interest Income after Provision for Loan Losses 8,745  8,400  7,583  17,145  14,988 
Other Non-Interest Income 1,496  1,310  1,538  2,806  2,663 
Other Non-Interest Expenses 6,551  6,227  6,071  12,778  11,848 
Income before Income Taxes 3,690  3,483  3,050  7,173  5,803 
Income Tax Expense 1,040  807  922  1,847  1,873 
Net Income$  2,650 $  2,676 $  2,128 $  5,326 $  3,930 
           
Per Common Share Data:          
Basic Earnings$  0.31 $  0.32 $  0.25 $  0.63 $  0.47 
Diluted Earnings$  0.30 $  0.31 $  0.25 $  0.61 $  0.45 
Book Value$  13.02 $  12.78 $  12.40 $  13.02 $  12.40 
Tangible Book Value(1)$   10.90 $  10.66 $  10.25 $  10.90 $   10.25 
Average Common Shares Outstanding (in thousands):          
Basic 8,488  8,447  8,372  8,480  8,363 
Diluted 8,690  8,675  8,654  8,695  8,642 
 
(1) Non-GAAP Financial Information. See “Reconciliation of Non-GAAP Financial Measures” at end of release.
 

Selected Period End Balances
(in thousands)

 June 30, March 31, Dec. 31, Sept. 30, June 30,  
  2018  2018  2017  2017  2017 
Total Assets$  1,055,527 $  1,042,277 $  1,039,798 $  1,000,245 $  983,099 
Investment Securities and Restricted Stock 94,449  96,251  94,564  92,641  92,634 
Total Loans 890,369  872,327  850,874  816,078  794,908 
Allowance for Loan Losses (11,201) (10,962) (10,668) (10,223) (9,953)
Goodwill and Other Intangible Assets 18,109  18,109  18,109  18,109  18,109 
Total Deposits 880,879  870,904  861,557  821,872  810,725 
Repurchase Agreements 19,878  18,472  27,120  22,576  25,823 
FHLB and Other Borrowings 24,500  24,500  25,800  30,300  24,300 
Subordinated Debt 9,905  9,896  9,888  9,879  9,871 
Shareholders' Equity 111,347  108,980  106,571  106,567  104,524 
                

Asset Quality Data (by Quarter)
(dollars in thousands)

 June 30, March 31, Dec. 31, Sept. 30, June 30, 
  2018  2018  2017  2017  2017 
Nonaccrual Loans$  1,930 $  1,972 $  2,070 $  2,345 $  2,946 
OREO -  -  -  -  233 
Total Non-Performing Assets 1,930  1,972  2,070  2,345  3,179 
           
Troubled Debt Restructured Loans:          
Performing 5,831  5,965  6,053  6,925  6,990 
Non-Performing 877  878  994  1,129  960 
           
Non-Performing Loans to Total Loans 0.22% 0.23% 0.24% 0.29% 0.37%
Non-Performing Assets to Total Assets 0.18% 0.19% 0.20% 0.23% 0.32%
Allowance as a % of Loans 1.26% 1.26% 1.25% 1.25% 1.25%
                

Capital Ratios

 June 30, 2018 December 31, 2017 
 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 Bancorp9.82%8.95%9.82%12.04%9.68%8.85%9.68%11.93%
Two River Community Bank10.78%9.82%10.78%11.95%10.66%9.76%10.66%11.82%
"Well capitalized" institution (under prompt corrective action regulations.)*6.5%5%8%10%6.5%5%8%10%
                 
*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%. 
                 

Net Loan Charge-offs
(dollars in thousands)

 Three Months Ended 
 June 30, March 31,  Dec. 31,  Sept. 30, June 30,  
 2018 2018  2017  2017 2017 
Net loan charge-offs (recoveries):            
  Charge-offs(12)(115) (239) - - 
  Recoveries26 9  9  15 11 
Net loan (charge-offs) recoveries14 (106) (230) 15 11 
Net loan charge-offs (recoveries) to average loans (annualized)(0.01)%0.05% 0.11% (0.01)%(0.01)%
             

Consolidated Average Balance Sheets & Yields
With Resultant Interest and Average Rates

 Three Months Ended Three Months Ended
(dollars in thousands)June 30, 2018 June 30, 2017
  
  
ASSETS
Interest-Earning Assets:
Average
Balance

 Interest /
Income
Expense

 Average
Yield /
Rate
  Average
Balance

 Interest /
Income
Expense

 Average
Yield /
Rate
 
Interest-bearing due from banks$21,206 $94 1.78% $40,422 $102 1.01%
Investment securities95,801 570 2.38% 94,123 514 2.18%
Loans, net of unearned fees(1) (2)884,450 10,243 4.64% 779,508 8,733 4.49%
              
        Total Interest-Earning Assets1,001,457 10,907 4.37% 914,073 9,349 4.10%
              
Non-Interest-Earning Assets:             
Allowance for loan losses(11,108)     (9,698)    
All other assets74,616      80,633     
              
       Total Assets$1,064,965       $985,008      
              
LIABILITIES & SHAREHOLDERS' EQUITY             
Interest-Bearing Liabilities:             
NOW deposits$220,421 306 0.56% $197,949 231 0.47%
Savings deposits262,379 494 0.76% 259,860 336 0.52%
Money market deposits53,393 23 0.17% 63,841 26 0.16%
Time deposits188,862 818 1.74% 131,209 470 1.44%
Securities sold under agreements to repurchase21,190 15 0.28% 23,577 17 0.29%
FHLB and other borrowings24,503 116 1.90% 24,303 147 2.43%
Subordinated debt9,902 165 6.67% 9,868 164 6.65%
               
       Total Interest-Bearing Liabilities780,650 1,937 1.00% 710,607 1,391 0.79%
               
Non-Interest-Bearing Liabilities:              
Demand deposits165,416      163,198     
Other liabilities8,925      7,854     
               
       Total Non-Interest-Bearing Liabilities174,341      171,052     
               
Stockholders’ Equity109,974      103,349     
               
       Total Liabilities and Shareholders’ Equity$1,064,965       $985,008      
              
NET INTEREST INCOME  $8,970      $7,958   
              
NET INTEREST SPREAD(3)    3.37%     3.31%
              
NET INTEREST MARGIN(4)    3.59%     3.49%

(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

 Six Months Ended Six Months Ended
(dollars in thousands)June 30, 2018 June 30, 2017
ASSETS
Interest-Earning Assets:
Average
Balance
 Interest /
Income
Expense
 Average
Yield /
Rate
  Average
Balance
 Interest /
Income
Expense
 Average
Yield /
Rate
 
Interest-bearing due from banks$19,679 $161 1.65% $39,359 $174 0.89%
Investment securities96,708 1,149 2.38% 95,072 1,032 2.17%
Loans, net of unearned fees(1) (2)876,541 20,064 4.62% 770,860 17,136 4.48%
              
        Total Interest-Earning Assets992,928 21,374 4.34% 905,291 18,342 4.09%
              
Non-Interest-Earning Assets:             
Allowance for loan losses(10,974)     (9,671)    
All other assets73,756      78,119     
              
       Total Assets$1,055,710       $973,739      
              
LIABILITIES & SHAREHOLDERS' EQUITY             
Interest-Bearing Liabilities:             
NOW deposits$228,502 616 0.54% $194,943 443 0.46%
Savings deposits255,471 848 0.67% 258,189 663 0.52%
Money market deposits55,857 48 0.17% 62,760 52 0.17%
Time deposits178,651 1,487 1.68% 133,827 943 1.42%
Securities sold under agreements to repurchase20,417 29 0.29% 21,488 32 0.30%
FHLB and other borrowings26,349 246 1.88% 24,374 292 2.42%
Subordinated debt9,898 330 6.67% 9,864 329 6.67%
               
       Total Interest-Bearing Liabilities775,145 3,604 0.94% 705,445 2,754 0.79%
               
Non-Interest-Bearing Liabilities:              
Demand deposits162,753      158,219     
Other liabilities8,981      7,522     
               
       Total Non-Interest-Bearing Liabilities171,734      165,741     
               
Shareholders’ Equity108,831      102,553     
               
       Total Liabilities and Shareholders’ Equity$1,055,710       $973,739      
              
NET INTEREST INCOME  $17,770      $15,588   
              
NET INTEREST SPREAD(3)    3.40%     3.30%
              
NET INTEREST MARGIN(4)    3.61%     3.47%

(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
Six Months Ended
 
 June 30, March 31, Dec. 31, Sept. 30, June 30, June 30, June 30, 
 2018 2018 2017 2017 2017 2018 2017 
Total shareholders' equity$111,347 $108,980 $106,571 $106,567 $104,524 $111,347 $104,524 
Less: goodwill and other tangibles (18,109) (18,109) (18,109) (18,109) (18,109) (18,109) (18,109)
Tangible common shareholders’ equity$93,238 $90,871 $88,462 $88,458 $86,415 $93,238 $86,415 
                      
Common shares outstanding 8,555  8,525  8,470  8,454  8,429  8,555  8,429 
Book value per common share$13.02 $12.78 $12.58 $12.60 $12.40 $13.02 $12.40 
                      
Book value per common share$13.02 $12.78 $12.58 $12.60 $12.40 $13.02 $12.40 
Effect of intangible assets (2.12) (2.12) (2.14) (2.14) (2.15) (2.12) (2.15)
Tangible book value per common share$10.90 $10.66 $10.44 $10.46 $10.25 $10.90 $10.25 
               
Return on average assets1.00%1.04%0.13%0.89%0.87%1.02%0.81%
Effect of average intangible assets0.02%0.02%- 0.02%0.01%0.02%0.02%
Return on average tangible assets1.02%1.06%0.13%0.91%0.88%1.04%0.83%
               
Return on average equity9.67%10.08%1.24%8.39%8.26%9.87%7.73%
Effect of average intangible assets1.90%2.04%0.25%1.74%1.75%1.97%1.66%
Return on average tangible equity11.57%12.12%1.49%10.13%10.01%11.84%9.39%

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Source: Two River Bancorp

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