Two River Bancorp Reports 2019 Second Quarter Financial Results Highlighted by 15.0% Increase in Net Income

Company Release - 7/23/2019 8:00 AM ET

TINTON FALLS, N.J., July 23, 2019 (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, 2019, highlighted by higher net interest income and lower non-interest expenses.

2019 Second Quarter Financial Highlights
(comparisons to 2018 second quarter)

  • Net income increased 15.0% to $3.0 million, or $0.35 per diluted share
  • Return on average assets of 1.07%, up from 1.00% 
  • Return on average equity of 10.18%, up from 9.67%
  • Net interest margin decreased 5 basis points to 3.54%
  • Net interest income increased 5.2% to $9.4 million
  • Efficiency ratio(1) improved to 59.58%, compared to 62.59%


(Totals at June 30, 2019; comparisons to December 31, 2018)

  • Total loans were $953.1 million, an increase of $31.8 million, or 6.9% annualized
  • Total deposits were $972.6 million, an increase of $55.2 million, or 12.0% annualized
  • Total assets increased to a record $1.154 billion, compared to $1.096 billion
  • Tangible book value per share(2) increased to $11.93, compared to $11.43

(1) Efficiency ratio represents the ratio of non-interest expense to the sum of net interest income and non-interest income.
(2) Non-GAAP Financial Information. See “Reconciliation of Non-GAAP Financial Measures” at end of release.

Management Commentary
William D. Moss, Chairman, President, and CEO, stated, “The Company’s net income increased 15.0% as a result of solid improvement in net interest income coupled with controlled expenses. During the quarter, we recognized a $188,000 gain on the sale of an OREO property recorded during the period, which partially contributed to a reduction in operating expenses. Loans grew $4.6 million during the quarter as originations were mostly offset by higher than expected payoffs, which included $3.2 million of adversely classified credits. On an annualized basis, loans grew 6.9%, predominantly in the commercial real estate and residential mortgage sectors. We expect that this growth, coupled with a strong loan pipeline and efficiencies from our new banking platform, will help drive profitability for the remainder of 2019.”

Mr. Moss continued, “Our non-interest income declined during the quarter, largely due to lower gains on the sale of SBA loans. Interest rates and loan quality in the SBA sector will remain headwinds in the near term. This decline was partially offset by higher residential mortgage banking revenues during the period.”

Dividend Information

On July 17, 2019, the Company's Board of Directors declared a quarterly cash dividend of $0.07 per share, payable on August 30, 2019 to shareholders of record as of the close of business on August 9, 2019. This marks the 26th consecutive quarterly cash dividend.

Key Quarterly Performance Metrics

 2nd Qtr.1st Qtr.4th Qtr.3rd Qtr.2nd Qtr.6 Mo. Ended 6 Mo. Ended
201920192018201820186/30/20196/30/2018
Net Income (in thousands)$3,048 $2,783 $3,046 $2,834 $2,650  $5,831 $5,326 
Earnings per Common Share – Diluted$0.35 $0.32 $0.35 $0.33 $0.30  $0.67 $0.61 
Return on Average Assets1.07%1.01%1.10%1.04%1.00% 1.04%1.02%
Return on Average Tangible Assets(1)1.08%1.02%1.11%1.06%1.02% 1.05%1.04%
Return on Average Equity10.18%9.59%10.52%9.98%9.67% 9.89%9.87%
Return on Average Tangible Equity(1)11.98%11.33%12.49%11.90%11.57% 11.66%11.84%
Net Interest Margin3.54%3.60%3.56%3.55%3.59% 3.57%3.61%
Efficiency Ratio(2)59.58%59.95%60.69%61.78%62.59% 59.77%62.10%
Non-Performing Assets to Total Assets0.37%0.39%0.18%0.18%0.18% 0.37%0.18%
Allowance as a % of Loans1.23%1.22%1.24%1.26%1.26% 1.23%1.26%
 
(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, 2019 and December 31, 2018 are as follows:  

 (in thousands)   
 June 30,
2019
 December 31,
2018
 %
Change
  
Commercial and industrial$  110,791 $109,362 1.3 %
Real estate – construction 144,404  144,865 (0.3)%
Real estate – commercial 574,660  552,549 4.0 %
Real estate – residential 92,829  84,123 10.3 %
Consumer 31,185  31,144 0.1 %
Unearned fees (789) (742)6.3 %
  953,080  921,301 3.4 %
Allowance for loan losses (11,684) (11,398)2.5 %
Net Loans$ 941,396 $909,903 3.5 %
          

Deposit Composition
The components of the Company’s deposits at June 30, 2019 and December 31, 2018 are as follows:  

 (in thousands)   
 June 30,
2019
 December 31,
 2018
 %
Change
  
Non-interest-bearing$   179,886  $  176,655 1.8 %
NOW accounts 200,044  193,347 3.5 %
Savings deposits 251,057  258,666 (2.9)%
Money market deposits 39,561  43,936 (10.0)%
Listed service CD’s 44,508  39,807 11.8 %
Time deposits / IRA 179,131  130,863 36.9 %
Wholesale deposits 78,405  74,080 5.8 %
  Total Deposits$  972,592 $  917,354 6.0 %
          

2019 Second Quarter Financial Review

Net Income
Net income for the three months ended June 30, 2019 increased 15.0% to $3.0 million, or $0.35 per diluted common share, compared to $2.7 million, or $0.30 per diluted common share, for the same period last year. The increase was largely due to higher net interest income, a lower loan loss provision and a decrease in non-interest expenses. In addition, the Company reported a $188,000 one-time gain on the sale of OREO, which reduced non-interest expense for the period.

On a linked quarter basis, second quarter 2019 net income increased 9.5% compared to the first quarter of 2019.

Net Interest Income
Net interest income for the quarter ended June 30, 2019 was $9.4 million, an increase of 5.2% compared to $9.0 million in the corresponding prior year period. This was largely due to an increase of $66.9 million, or 6.7%, in average interest-earning assets, primarily attributable to the growth in the loan portfolio. Additionally, $86,000 of late fees were received during the current quarter from one adversely classified loan payoff.

Net Interest Margin
The Company reported a net interest margin of 3.54% for the second quarter of 2019, compared to 3.60% in the first quarter of 2019 and 3.59% reported for the second quarter of 2018. The slight decline from both prior periods was primarily due to higher cost of funds.

Non-Interest Income
Non-interest income for the quarter ended June 30, 2019 decreased to $1.2 million, compared to $1.5 million in the corresponding prior year period. This decrease was largely the result of lower gains on the sale of SBA loans and service fees on deposit accounts, and was partially offset by higher mortgage banking revenues and higher other income.  

On a linked quarter basis, non-interest income increased by $75,000, or 6.5%, from the first quarter of 2019, mainly due to higher residential mortgage banking revenues.

Non-Interest Expense
Non-interest expense for the quarter ended June 30, 2019 totaled $6.4 million, a decrease of $197,000, or 3.0%, from the $6.6 million reported in same period in 2018, primarily due to lower salary and employee benefit expenses and the aforementioned gain from the sale of an OREO property. The Company’s efficiency ratio improved to 59.58% for the quarter, compared to 62.59% for the same period in 2018.

On a linked quarter basis, non-interest expense increased $59,000, or 0.9%, primarily due to higher salary and employee benefit expenses and professional fees.

Income Tax Expense
The Company’s effective tax rate was 27.6% for the three months ended June 30, 2019, compared to 28.2% for the same period last year. The Company recognized no tax benefit related to the accounting treatment of equity-based compensation in the second quarter of 2019, compared to a $43,000 benefit in the same period last year.

At the present time, the Company is anticipating a 2019 effective tax rate of 28%.

Provision for Loan Losses
During the quarter, a provision for loan losses of $100,000 was expensed, compared to $225,000 in the same prior year period. The majority of the second quarter 2019 provision was to support the Company’s loan growth. The Company had $2,000 and $14,000 in net loan recoveries during the second quarter of 2019 and 2018, respectively.

2019 First Half Financial Review

Net Income
Net income for the six months ended June 30, 2019 increased 9.5% to $5.8 million, or $0.67 per diluted share, compared to $5.3 million, or $0.61 per diluted share, in the same prior year period. This increase was due to the same reasons noted earlier in the second quarter review.

Net Interest Income
For the first half of 2019, net interest income increased 5.7% to $18.8 million from $17.8 million in the prior year period. This was largely due to an increase of $66.7 million, or 6.7%, in average interest-earning assets, primarily attributable to the growth in the loan portfolio.

Net Interest Margin
The net interest margin for the first half of 2019 was 3.57% compared to 3.61% in the prior year period, primarily due to higher cost of funds.

Non-Interest Income

For the six months ended June 30, 2019, non-interest income decreased $417,000, or 14.9%, to $2.4 million from the same period in 2018 mainly due to the same reasons noted earlier in the second quarter review.

Non-Interest Expense
For the six months ended June 30, 2019, non-interest expense decreased $129,000, or 1.0%, to $12.6 million compared to $12.8 million the same period last year mainly due to the same reasons noted earlier in the second quarter review. Efficiency ratio for the six months ended June 30, 2019 improved to 59.77% from 62.10% compared to the same prior year period.

Income Tax Expense
For the six months ended June 30, 2019, the effective tax rate was 27.0% compared to 25.7% for the same period last year. The Company recorded a $38,000 tax benefit related to the accounting treatment of equity-based compensation, as compared to $133,000 for the same period last year.

Provision for Loan Losses
For the first half of 2019, a provision of $525,000 was expensed, compared to $625,000 for the same prior year period. The Company had $239,000 and $92,000 in net loan charge-offs for the first half of 2019 and 2018, respectively.

Financial Condition / Balance Sheet

At June 30, 2019, the Bank maintained capital ratios that were in excess of regulatory standards for well capitalized institutions. The Bank’s Tier 1 capital to average assets ratio was 9.99%, its common equity Tier 1 to risk weighted assets ratio was 11.16%, its Tier 1 capital to risk weighted assets ratio was 11.16%, and its total capital to risk weighted assets ratio was 12.31%.

Total assets as of June 30, 2019 were $1.154 billion, compared to $1.096 billion at December 31, 2018 and $1.056 million as of June 30, 2018.

Total loans as of June 30, 2019 were $953.1 million, compared to $921.3 million at December 31, 2018 and $890.4 million as of June 30, 2018. This loan growth was funded primarily from the increase in deposits.

Total deposits as of June 30, 2019 were $972.6 million, compared to $917.4 million as of December 31, 2018 and $880.9 million as of June 30, 2018. Core checking deposits at June 30, 2019 were $379.9 million, compared to $370.0 million at December 31, 2018 and $364.9 million at June 30, 2018. The Company continues to focus on building core checking account deposit relationships, which can vary from quarter to quarter due to the seasonality in municipal and other relationships.

Allowance for Loan Losses
As of June 30, 2019, the Company's allowance for loan losses was $11.7 million, compared to $11.4 million as of December 31, 2018. The loss allowance as a percentage of total loans was 1.23% at June 30, 2019 compared to 1.24% at December 31, 2018.

Asset Quality
The Company's non-performing assets at June 30, 2019 were $4.3 million as compared to $4.5 million at March 31, 2019 and $2.0 million at December 31, 2018. Non-performing assets to total assets at June 30, 2019 were 0.37%, compared to 0.39% at March 31, 2019 and 0.18% at December 31, 2018.

Non-accrual loans were $1.3 million at June 30, 2019, compared to $1.4 million at December 31, 2018, and $1.9 million at June 30, 2018. Non-accrual loans, which had increased by $2.5 million during the first quarter of 2019, declined by $2.6 million during the second quarter of 2019 as two loans totaling $2.8 million transferred into OREO while one loan totaling $278,000 was placed into non-accrual status.  OREO increased by $2.3 million due to the aforementioned transfers, partially offset by the sale of an OREO property, which had a book balance of $490,000.

Troubled debt restructured loan balances amounted to $5.5 million at June 30, 2019, with all but $555,000 performing. This compared to $7.7 million at December 31, 2018 and $6.7 million at June 30, 2018.

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, Union, Essex, and Ocean Counties, New Jersey. More information about Two River Community Bank and Two River Bancorp is available at www.tworiver.bank.

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 "continuing," "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; unanticipated effects of our new banking platform; 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, 2018. 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:Media Contact:
Adam Prior, Senior Vice PresidentAdam Cadmus, Marketing Director
The Equity Group Inc.Two River Community Bank
Phone: (212) 836-9606Phone: (732) 982-2167
Email: aprior@equityny.comEmail: acadmus@tworiverbank.com
  

     

TWO RIVER BANCORP
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For the Three Months and Six Months Ended June 30, 2019 and 2018
(in thousands, except per share data)
 
 Three Months Ended
June 30,
  Six Months Ended
June 30,
 

 
 2019  2018  2019  2018 
INTEREST INCOME:           
Loans, including fees$   11,731  $10,243  $  23,043  $20,064 
Securities:           
  Taxable 298   290   629   587 
  Tax-exempt 234   280   473   562 
Interest-bearing deposits 216   94   403   161 
Total Interest Income 12,479   10,907   24,548   21,374 
INTEREST EXPENSE:           
Deposits 2,771   1,641   5,189   2,999 
Securities sold under agreements to repurchase 9   15   20   29 
Federal Home Loan Bank ("FHLB") and other borrowings 101   116   233   246 
Subordinated debt 166   165   331   330 
Total Interest Expense 3,047   1,937   5,773   3,604 
Net Interest Income 9,432   8,970   18,775   17,770 
PROVISION FOR LOAN LOSSES 100   225   525   625 
Net Interest Income after Provision for Loan Losses 9,332   8,745   18,250   17,145 
NON-INTEREST INCOME:           
Service fees on deposit accounts 173   239   339   477 
Mortgage banking 424   409   704   747 
Other loan fees 138   137   298   248 
Earnings from investment in bank owned life insurance 128   132   271   262 
Gain on sale of SBA loans 130   387   336   718 
Net realized gain on sale of securities 1   -   1   - 
Other income 238   192   440   354 
Total Non-Interest Income 1,232   1,496   2,389   2,806 
NON-INTEREST EXPENSES:           
Salaries and employee benefits 3,942   4,010   7,783   7,895 
Occupancy and equipment 1,030   1,043   2,072   2,133 
Professional 472   488   906   828 
Insurance 66   64   131   121 
FDIC insurance and assessments 114   123   238   246 
Advertising 120   130   190   190 
Data processing 174   174   362   326 
Outside services fees 60   80   114   161 
OREO expenses, impairment and sales, net (154)  (14)  (150)  (15)
Loan workout expenses 17   45   9   96 
Other operating 513   408   994   797 
Total Non-Interest Expenses 6,354   6,551   12,649   12,778 
Income before Income Taxes 4,210   3,690   7,990   7,173 
  Income Tax Expense 1,162   1,040   2,159   1,847 
Net Income $  3,048  $  2,650  $  5,831  $  5,326 
Earnings Per Common Share:           
Basic$  0.35  $  0.31  $  0.68  $  0.63 
Diluted$  0.35  $  0.30  $  0.67  $  0.61 
Weighted average common shares outstanding:           
Basic 8,596   8.488   8,594   8,480 
Diluted 8,709   8,690   8,715   8,695 
                



TWO RIVER BANCORP
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands, except share data)
 
 June 30,  December 31, 
 2019  2018 
ASSETS       
Cash and due from banks$19,798  $24,067 
Interest-bearing deposits in bank 50,242   24,059 
Cash and cash equivalents 70,040   48,126 
        
Securities available for sale 23,604   24,407 
Securities held to maturity 43,774   47,455 
Equity securities 2,548   2,451 
Restricted investments, at cost 6,447   6,082 
Loans held for sale 1,093   1,496 
Loans 953,080   921,301 
Allowance for loan losses (11,684)  (11,398)
Net loans 941,396   909,903 
        
OREO 2,912   585 
Bank owned life insurance 22,188   22,098 
Premises and equipment, net 6,505   5,917 
Operating right-of-use asset 5,004   - 
Accrued interest receivable 2,929   2,583 
Goodwill 18,109   18,109 
Other assets 7,248   7,207 
        
TOTAL ASSETS$1,153,797  $1,096,419 
        
LIABILITIES       
Deposits:       
Non-interest-bearing$179,886  $176,655 
Interest-bearing 792,706   740,699 
Total Deposits 972,592   917,354 
        
Securities sold under agreements to repurchase 14,162   19,402 
FHLB and other borrowings 20,700   22,500 
Subordinated debt 9,942   9,923 
Accrued interest payable 94   119 
Lease liability 5,137   - 
Other liabilities 9,754   10,623 
        
Total Liabilities 1,032,381   979,921 
        
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 – 9,017,520 and 8,935,437 at June 30, 2019 and December 31, 2018, respectively       
Outstanding – 8,656,830 and 8,606,992 at June 30, 2019 and December 31, 2018, respectively 80,954   80,481 
Retained earnings 43,857   39,109 
Treasury stock, at cost; 360,690 and 328,445 shares at June 30, 2019 and December 31, 2018 (3,129)  (2,647)
Accumulated other comprehensive loss (266)  (445)
Total Shareholders' Equity 121,416   116,498 
        
TOTAL LIABILITIES and SHAREHOLDERS’ EQUITY$1,153,797  $1,096,419 
        

  

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:2019 2019 2018 2019 2018
Total Interest Income$   12,479 $12,069 $10,907 $   24,548 $21,374
Total Interest Expense 3,047  2,726  1,937  5,773  3,604
Net Interest Income 9,432  9,343  8,970  18,775  17,770
Provision for Loan Losses 100  425  225  525  625
Net Interest Income after Provision for Loan Losses 9,332  8,918  8,745  18,250  17,145
Other Non-Interest Income 1,232  1,157  1,496  2,389  2,806
Other Non-Interest Expenses 6,354  6,295  6,551  12,649  12,778
Income before Income Taxes 4,210  3,780  3,690  7,990  7,173
Income Tax Expense 1,162  997  1,040  2,159  1,847
Net Income$   3,048 $2,783 $2,650 $   5,831 $5,326
          
Per Common Share Data:         
Basic Earnings$  0.35 $0.32 $0.31 $  0.68 $0.63
Diluted Earnings$  0.35 $0.32 $0.30 $  0.67 $0.61
Book Value$   14.03 $13.75 $13.02 $   14.03 $13.02
Tangible Book Value(1)$   11.93 $11.66 $10.90 $   11.93 $10.90
Average Common Shares Outstanding (in thousands):         
Basic 8,596  8,583  8,488  8,594  8,480
Diluted 8,709  8,712  8,690  8,715  8,695

(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,  
 2019 2019 2018 2018 2018 
Total Assets$  1,153,797 $1,140,521 $1,096,419 $1,086,299 $1,055,527 
Investment Securities and Restricted Stock 76,373  77,904  80,395  91,296  94,449 
Total Loans 953,080  948,493  921,301  900,895  890,369 
Allowance for Loan Losses (11,684) (11,582) (11,398) (11,390) (11,201)
Goodwill and Other Intangible Assets 18,109  18,109  18,109  18,109  18,109 
Total Deposits 972,592  959,655  917,354  905,745  880,879 
Repurchase Agreements 14,162  15,185  19,402  22,153  19,878 
FHLB and Other Borrowings 20,700  20,700  22,500  24,500  24,500 
Subordinated Debt 9,942  9,932  9,923  9,914  9,905 
Shareholders' Equity 121,416  119,156  116,498  113,891  111,347 
                


Asset Quality Data (by Quarter)
(dollars in thousands)
 
 
 June 30, March 31, Dec. 31, Sept. 30, June 30, 
 2019 2019 2018 2018 2018 
Nonaccrual Loans$  1,346 $3,908 $1,390 $1,390 $1,930 
OREO 2,912  585  585  585  - 
Total Non-Performing Assets 4,258  4,493  1,975  1,975  1,930 
           
Troubled Debt Restructured Loans:          
Performing 4,969  6,726  6,842  5,678  5,831 
Non-Performing 555  711  877  877  877 
           
Non-Performing Loans to Total Loans 0.14% 0.41% 0.15% 0.15% 0.22%
Non-Performing Assets to Total Assets 0.37% 0.39% 0.18% 0.18% 0.18%
Allowance as a % of Loans 1.23% 1.22% 1.24% 1.26% 1.26%
                



Capital Ratios
 
  June 30, 2019
  December 31, 2018
 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 Bancorp10.24%9.17%10.24%12.39% 10.14%9.10%10.14%12.34%
Two River Community Bank11.16%9.99%11.16%12.31% 11.09%9.95%11.09%12.26%
"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” under the Federal Reserve definitions for bank holding companies, the Company is only required to have a Tier 1 Capital to Risk Weighted Assets ratio of at least 6.00% and a Total Capital to Risk Weighted Assets ratio of at least 10.00%.
 


Net Loan Charge-offs
(dollars in thousands)
 
 Three Months Ended
  Six Months Ended
 June 30,  March 31,  Dec. 31, Sept. 30, June 30,
  June 30,
  June 30,
  
 2019  2019  2018 2018 2018  2019  2018  
Net loan (charge-offs) recoveries:                     
Charge-offs$  -  $(247) $- $- $(13) $  (247) $(128) 
Recoveries 2   6   8  39  27   8   36  
Net loan (charge-offs) recoveries$   2  $(241) $8 $39 $14  $  (239) $(92) 
Net loan (charge-offs) recoveries to average loans (annualized) 0.00%  (0.10)% 0.00% 0.02% 0.01 % (0.05)% (0.02)%
                           


Consolidated Average Balance Sheets & Yields
With Resultant Interest and Average Rates
 
 Three Months Ended Three Months Ended
(dollars in thousands)June 30, 2019 June 30, 2018
  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$34,679 $216 2.50% $21,206 $94 1.78%
Investment securities77,409 532 2.75% 95,801 570 2.38%
Loans, net of unearned fees(1) (2)956,225 11,731 4.92% 884,450 10,243 4.64%
              
Total Interest-Earning Assets1,068,313 12,479 4.69% 1,001,457 10,907 4.37%
              
Non-Interest-Earning Assets:             
Allowance for loan losses(11,703)     (11,108)    
All other assets90,796      74,616     
              
Total Assets$1,147,406       $1,064,965      
              
LIABILITIES & SHAREHOLDERS' EQUITY             
Interest-Bearing Liabilities:             
NOW deposits$212,267 422 0.80% $220,421 306 0.56%
Savings deposits250,489 636 1.02% 262,379 494 0.76%
Money market deposits38,682 20 0.21% 53,393 23 0.17%
Time deposits293,333 1,693 2.32% 188,862 818 1.74%
Securities sold under agreements to repurchase13,325 9 0.27% 21,190 15 0.28%
FHLB and other borrowings20,713 101 1.96% 24,503 116 1.90%
Subordinated debt9,939 166 6.68% 9,902 165 6.67%
               
Total Interest-Bearing Liabilities838,748 3,047 1.46% 780,650 1,937 1.00%
               
Non-Interest-Bearing Liabilities:              
Demand deposits172,962      165,416     
Other liabilities15,566      8,925     
               
Total Non-Interest-Bearing Liabilities188,528      174,341     
               
Stockholders’ Equity120,130      109,974     
               
Total Liabilities and Shareholders’ Equity$1,147,406       $1,064,965      
              
NET INTEREST INCOME  $9,432      $8,970   
              
NET INTEREST SPREAD(3)    3.23%     3.37%
              
NET INTEREST MARGIN(4)    3.54%     3.59%
              

(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, 2019 June 30, 2018
  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$32,368 $403 2.51% $19,679 $161 1.65%
Investment securities78,316 1,102 2.81% 96,708 1,149 2.38%
Loans, net of unearned fees(1) (2)948,897 23,043 4.90% 876,541 20,064 4.62%
              
Total Interest-Earning Assets1,059,581 24,548 4.67% 992,928 21,374 4.34%
              
Non-Interest-Earning Assets:             
Allowance for loan losses(11,570)     (10,974)    
All other assets85,502      73,756     
              
Total Assets$1,133,513       $1,055,710      
              
LIABILITIES & SHAREHOLDERS' EQUITY             
Interest-Bearing Liabilities:             
NOW deposits$208,976 835 0.81% $228,502 616 0.54%
Savings deposits253,074 1,228 0.98% 255,471 848 0.67%
Money market deposits40,123 43 0.22% 55,857 48 0.17%
Time deposits275,070 3,083 2.26% 178,651 1,487 1.68%
Securities sold under agreements to repurchase14,431 20 0.28% 20,417 29 0.29%
FHLB and other borrowings23,198 233 2.02% 26,349 246 1.88%
Subordinated debt9,934 331 6.66% 9,898 330 6.67%
               
Total Interest-Bearing Liabilities824,806 5,773 1.41% 775,145 3,604 0.94%
               
Non-Interest-Bearing Liabilities:              
Demand deposits173,950      162,753     
Other liabilities15,820      8,981     
               
Total Non-Interest-Bearing Liabilities189,770      171,734     
               
Shareholders’ Equity118,937      108,831     
               
Total Liabilities and Shareholders’ Equity$1,133,513       $1,055,710      
              
NET INTEREST INCOME  $18,775      $17,770   
              
NET INTEREST SPREAD(3)    3.26%     3.40%
              
NET INTEREST MARGIN(4)    3.57%     3.61%
              

(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, 
 2019 2019 2018 2018 2018 2019 2018 
Total shareholders' equity$121,416 $119,156 $116,498 $113,891 $111,347 $121,416 $111,347 
Less: goodwill and other tangibles (18,109) (18,109) (18,109) (18,109) (18,109) (18,109) (18,109)
Tangible common shareholders’ equity$103,307 $101,047 $98,389 $95,782 $93,238 $103,307 $93,238 
                      
Common shares outstanding 8,657  8,668  8,607  8,584  8,555  8,657  8,555 
Book value per common share$14.03 $13.75 $13.54 $13.27 $13.02 $14.03 $13.02 
                      
Book value per common share$14.03 $13.75 $13.54 $13.27 $13.02 $14.03 $13.02 
Effect of intangible assets (2.10) (2.09) (2.11) (2.11) (2.12) (2.10) (2.12)
Tangible book value per common share$11.93 $11.66 $11.43 $11.16 $10.90 $11.93 $10.90 
               
Return on average assets1.07%1.01%1.10%1.04%1.00%1.04%1.02%
Effect of average intangible assets0.01%0.01%0.01%0.02%0.02%0.01%0.02%
Return on average tangible assets1.08%1.02%1.11%1.06%1.02%1.05%1.04%
               
Return on average equity10.18%9.59%10.52%9.98%9.67%9.89%9.87%
Effect of average intangible assets1.80%1.74%1.97%1.92%1.90%1.77%1.97%
Return on average tangible equity11.98%11.33%12.49%11.90%11.57%11.66%11.84%
               

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Source: Two River Bancorp

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