Two River Bancorp Reports 2019 Third Quarter Financial Results

Company Release - 10/22/2019 8:00 AM ET

TINTON FALLS, N.J., Oct. 22, 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 third quarter and nine months ended September 30, 2019.

2019 Third Quarter Financial Highlights
(comparisons to 2018 third quarter)

  • Announced the signing of a definitive merger agreement with OceanFirst Financial Corp. (NASDAQ:OCFC) (“OceanFirst”), parent company of OceanFirst Bank N.A. (“OceanFirst Bank”).
  • Net income was $2.1 million, or $0.24 per diluted share, as the Company incurred $828,000, or $662,000 after-tax, in expenses relating to the Company’s pending merger with OceanFirst and a $411,000, or $288,000 after-tax, write-down on an OREO property. These expenses impacted several metrics within the quarter and year-to-date.
  • Excluding the aforementioned expenses, 2019 third quarter net income was $3.1 million, or $0.35 per diluted share.
  • Return on average assets was 0.73%, compared to 1.04%
  • Return on average equity was 6.84%, compared to 9.98%
  • Net interest margin decreased 15 basis points to 3.40%
  • Efficiency ratio(1) was 70.22%, compared to 61.78%

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

  • Total loans were $959.9 million, an increase of $38.6 million, or 5.6% annualized
  • Total deposits were $963.3 million, an increase of $45.9 million, or 6.7% annualized
  • Total assets were $1.147 billion, compared to $1.096 billion
  • Tangible book value per share(2) increased to $12.08, 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, “We were pleased to report solid core profitability and book value growth despite higher expenses related to the Company’s pending merger and write-down on one of our OREO properties. Our loan growth of $6.8 million for the quarter was tempered by larger than expected payoffs, much of which is the result of the completion and ultimate sale of several construction loan projects.”

Dividend Information
On October 16, 2019, the Company's Board of Directors declared a quarterly cash dividend of $0.07 per share, payable on November 29, 2019 to shareholders of record as of the close of business on November 6, 2019. This marks the 27th consecutive quarterly cash dividend.

        
Key Quarterly Performance Metrics      9 Mo. 9 Mo. 
 3rd Qtr.
2nd Qtr.
1st Qtr.
4th Qtr.
3rd Qtr.
Ended
Ended
2019
2019
2019
2018
2018
9/30/2019
9/30/2018
Net Income (in thousands)$2,115 $3,048 $2,783 $3,046 $2,834 $7,946 $8,160 
Earnings per Common Share – Diluted$0.24 $0.35 $0.32 $0.35 $0.33 $0.91 $0.94 
Return on Average Assets0.73%1.07%1.01%1.10%1.04%0.93%1.03%
Return on Average Tangible Assets(1)0.74%1.08%1.02%1.11%1.06%0.95%1.04%
Return on Average Equity6.84%10.18%9.59%10.52%9.98%8.84%9.91%
Return on Average Tangible Equity(1)8.03%11.98%11.33%12.49%11.90%10.41%11.86%
Net Interest Margin3.40%3.54%3.60%3.56%3.55%3.51%3.59%
Efficiency Ratio(2)70.22%59.58%59.95%60.69%61.78%63.20%61.99%
Non-Performing Assets to Total Assets0.33%0.37%0.39%0.18%0.18%0.33%0.18%
Allowance as a % of Loans1.23%1.23%1.22%1.24%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 September 30, 2019 and December 31, 2018 are as follows:

       
  (in thousands)
    
  September 30,
2019
  December 31,
2018
  %
Change
 
Commercial and industrial $  107,944  $109,362  (1.3)%
Real estate – construction  144,577   144,865  (0.2)%
Real estate – commercial  579,214   552,549  4.8%
Real estate – residential  98,047   84,123  16.6%
Consumer  30,791   31,144  (1.1)%
Unearned fees  (709)  (742) (4.5)%
   959,864   921,301  4.2%
Allowance for loan losses  (11,811)  (11,398) 3.6%
Net Loans $  948,053  $909,903  4.2%
            

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

      
  (in thousands)
   
  September 30,
2019
  December 31,
 2018
 %
Change
 
Non-interest-bearing $     179,610   $176,655 1.7%
NOW accounts  201,924   193,347 4.4%
Savings deposits  251,217   258,666 (2.9)%
Money market deposits  35,775   43,936 (18.6)%
Listed service CD’s  44,016   39,807 10.6%
Time deposits / IRA  177,350   130,863 35.5%
Wholesale deposits  73,405   74,080 (0.9)%
 Total Deposits $   963,297  $917,354 5.0%
           

2019 Third Quarter Financial Review

Net Income
Net income for the three months ended September 30, 2019 decreased 25.4% to $2.1 million, or $0.24 per diluted common share, compared to $2.8 million, or $0.33 per diluted common share, for the same period last year. The decrease was largely due to merger related expenses of $828,000 and a $411,000 write-down on an OREO property, which was partially offset by lower FDIC insurance expense.

On a linked quarter basis, third quarter 2019 net income decreased 30.6% compared to the second quarter of 2019.

Net Interest Income
Net interest income for the quarter ended September 30, 2019 was $9.2 million, an increase of 1.4% compared to $9.1 million in the corresponding prior year period. This was largely due to an increase of $58.9 million, or 5.8%, in average interest-earning assets, primarily attributable to growth in the loan portfolio.

Net Interest Margin
The Company reported a net interest margin of 3.40% for the third quarter of 2019, compared to 3.54% in the second quarter of 2019 and 3.55% reported for the third quarter of 2018. The decline from both prior periods was primarily due to higher cost of funds.

Non-Interest Income
Non-interest income for the quarter ended September 30, 2019 decreased to $1.1 million, compared to $1.4 million in the corresponding prior year period. This 17.0% decrease was largely the result of lower gains on the sale of SBA loans and lower other loan fees, primarily due to higher loan prepayment fees in the prior year.  These decreases were partially offset by both higher mortgage banking revenues and other income.

On a linked quarter basis, non-interest income decreased 8.7%, from the second quarter of 2019, mainly due to lower gains on the sale of SBA loans.

Non-Interest Expense
Non-interest expense for the quarter ended September 30, 2019 totaled $7.3 million, an increase of $808,000, or 12.5%, from the $6.5 million reported in same period in 2018, primarily due to expenses relating to the Company’s pending merger with OceanFirst, and the aforementioned write-down of an OREO property. During the current quarter, no FDIC insurance expense was recorded, as compared to $128,000 in the same prior year period. The FDIC notified the Bank that it was eligible for small bank assessment credits since the Deposit Insurance Fund reserve ratio of 1.40% at June 30, 2019 exceeded the 1.38% level. As such, the total credit awarded to the Bank was $252,000, which more than covered the September 30, 2019 payment of $117,000. Accordingly, no expense was incurred during the third quarter. The Company’s efficiency ratio was 70.22% for the quarter, compared to 61.78% for the same period in 2018.

On a linked quarter basis, non-interest expense increased $915,000, or 14.4%, mainly due to the same reasons as noted above. 

Income Tax Expense
The Company’s effective tax rate was 28.5% for the three months ended September 30, 2019, compared to 26.3% for the same period last year mainly due to the non-deductibility of certain merger related expenses. The Company recognized a $29,000 tax benefit related to the accounting treatment of equity-based compensation in the third quarter of 2019, compared to a $35,000 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 $125,000 was expensed, compared to $150,000 in the same prior year period. The majority of the third quarter 2019 provision was to support loan growth. The Company had $2,000 and $39,000 in net loan recoveries during the third quarter of 2019 and 2018, respectively.

2019 Nine Month Financial Review

Net Income
Net income for the nine months ended September 30, 2019 was $7.9 million, or $0.91 per diluted share, compared to $8.2 million, or $0.94 per diluted share, in the same prior year period. This decrease was due to the same reasons noted earlier in the third quarter review.

Net Interest Income
For the first nine months of 2019, net interest income increased 4.2% to $28.0 million from $26.9 million in the prior year period. This was largely due to an increase of $64.2 million, or 6.4%, in average interest-earning assets, primarily attributable to growth in the loan portfolio.

Net Interest Margin
The net interest margin for the first nine months of 2019 was 3.51%, compared to 3.59% in the prior year period, primarily due to higher cost of funds.

Non-Interest Income
For the nine months ended September 30, 2019, non-interest income decreased $648,000, or 15.6%, to $3.5 million from the same period in 2018 mainly due to the same reasons noted earlier in the third quarter review.

Non-Interest Expense
For the nine months ended September 30, 2019, non-interest expense increased $679,000, or 3.5%, to $19.9 million, compared to $19.2 million the same period last year mainly due to the same reasons noted earlier in the third quarter review. The efficiency ratio for the nine months ended September 30, 2019 was 63.20% compared to 61.99% in the same prior year period.

Income Tax Expense
For the nine months ended September 30, 2019, the effective tax rate was 27.4%, compared to 26.0% for the same period last year. The Company recorded a $67,000 tax benefit related to the accounting treatment of equity-based compensation, as compared to $168,000 for the same period last year.

Provision for Loan Losses
For the first nine months of 2019, a provision of $650,000 was expensed, compared to $775,000 for the same prior year period. The Company had $237,000 and $53,000 in net loan charge-offs for the first nine months of 2019 and 2018, respectively.

Financial Condition / Balance Sheet

At September 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 10.07%, its common equity Tier 1 capital to risk weighted assets ratio was 11.30%, its Tier 1 capital to risk weighted assets ratio was 11.30%, and its total capital to risk weighted assets ratio was 12.47%.

Total assets as of September 30, 2019 were $1.147 billion, compared to $1.096 billion at December 31, 2018 and $1.086 million as of September 30, 2018.

Total loans as of September 30, 2019 were $959.9 million, compared to $921.3 million at December 31, 2018 and $900.9 million as of September 30, 2018.

Total deposits as of September 30, 2019 were $963.3 million, compared to $917.4 million as of December 31, 2018 and $905.7 million as of September 30, 2018. Core checking deposits at September 30, 2019 were $381.5 million, compared to $370.0 million at December 31, 2018 and $369.1 million at September 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 September 30, 2019, the Company's allowance for loan losses was $11.8 million, compared to $11.4 million as of December 31, 2018. The loss allowance as a percentage of total loans was 1.23% at September 30, 2019 compared to 1.24% at December 31, 2018.

Asset Quality
The Company's non-performing assets at September 30, 2019 were $3.8 million, as compared to $4.3 million at June 30, 2019 and $2.0 million at December 31, 2018. Non-performing assets to total assets at September 30, 2019 were 0.33%, compared to 0.37% at June 30, 2019 and 0.18% at December 31, 2018.

Non-accrual loans were $1.3 million at September 30, 2019, compared to $1.4 million at both December 31, 2018 and September 30, 2018. OREO was $2.5 million at September 30, 2019, compared to $585,000 at December 31, 2018 and September 30, 2018. As mentioned earlier, the Company recorded a $411,000 write-down on an OREO property during the quarter.

Troubled debt restructured loan balances amounted to $5.6 million at September 30, 2019, with all but $555,000 performing. This compared to $7.7 million at December 31, 2018 and $6.6 million at September 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, the ability to obtain regulatory approvals and satisfy other closing conditions to the merger with OceanFirst, including approval by shareholders of Two River; the timing of closing the merger; that the merger may not be timely completed, if at all; that prior to the completion of the merger, the Company’s business may not perform as expected due to transaction-related uncertainty or other factors; reputational risks and the reaction of the Company’s stockholders, customers, employees and other constituents to the merger; litigation related to the merger, diversion of management time as a result of matters related to the merger; 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 President   Adam Cadmus, Marketing Director
The Equity Group Inc. Two River Community Bank
Phone: (212) 836-9606   Phone: (732) 982-2167
Email: aprior@equityny.com Email: acadmus@tworiverbank.com 
  
  


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

 
  2019  2018 2019  2018 
INTEREST INCOME:               
Loans, including fees $   11,707  $10,656 $  34,750  $30,720 
Securities:               
Taxable  293   274  922   861 
Tax-exempt  224   280  697   842 
Interest-bearing deposits  260   132  663   293 
Total Interest Income  12,484   11,342  37,032   32,716 
INTEREST EXPENSE:               
Deposits  2,981   1,924  8,170   4,923 
Securities sold under agreements to repurchase  10   14  30   43 
Federal Home Loan Bank ("FHLB") and other borrowings  99   136  332   382 
Subordinated debt  166   165  497   495 
Total Interest Expense  3,256   2,239  9,029   5,843 
Net Interest Income  9,228   9,103  28,003   26,873 
PROVISION FOR LOAN LOSSES  125   150  650   775 
Net Interest Income after Provision for Loan Losses  9,103   8,953  27,353   26,098 
NON-INTEREST INCOME:               
Service fees on deposit accounts  197   236  536   713 
Mortgage banking  373   239  1,077   986 
Other loan fees  155   378  453   626 
Earnings from investment in bank owned life insurance  127   133  398   395 
Gain on sale of SBA loans  42   203  378   921 
Net realized gain on sale of securities  -   -  1   - 
Other income  230   166  670   520 
Total Non-Interest Income  1,124   1,355  3,513   4,161 
NON-INTEREST EXPENSES:               
Salaries and employee benefits   3,756    4,024   11,539    11,919 
Occupancy and equipment   1,076    966   3,148    3,099 
Professional   355    432   1,261    1,260 
Insurance   70    59   201    180 
FDIC insurance and assessments   -     128   238    374 
Advertising   90    90   280    280 
Data processing   209    184   571    510 
Outside services fees   65    89   179    250 
OREO expenses, impairment and sales, net   448    7   298    (8)
Loan workout expenses   8    28   17    124 
Merger related expenses  828    - 828   - 
Other operating   364    454  1,358    1,251 
Total Non-Interest Expenses  7,269   6,461  19,918   19,239 
Income before Income Taxes  2,958   3,847  10,948   11,020 
Income Tax Expense  843   1,013  3,002   2,860 
Net Income  $  2,115  $2,834 $  7,946  $8,160 
Earnings Per Common Share:               
Basic $  0.25  $0.33 $  0.92  $0.96 
Diluted $  0.24  $0.33 $  0.91  $0.94 
Weighted average common shares outstanding:               
Basic  8,619   8.513  8,605   8,489 
Diluted  8,720   8,700  8,721   8,695 
                


TWO RIVER BANCORP
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands, except share data)
 
 September 30, December 31, 
 2019 2018 
ASSETS      
Cash and due from banks$28,416 $24,067 
Interest-bearing deposits in bank 35,004  24,059 
Cash and cash equivalents 63,420  48,126 
       
Securities available for sale  21,031   24,407 
Securities held to maturity  39,935   47,455 
Equity securities  2,582   2,451 
Restricted investments, at cost  6,772   6,082 
Loans held for sale  1,357   1,496 
Loans  959,864   921,301 
Allowance for loan losses  (11,811) (11,398)
Net loans  948,053   909,903 
       
OREO  2,501   585 
Bank owned life insurance  22,315   22,098 
Premises and equipment, net  6,658   5,917 
Operating right-of-use asset  4,698   - 
Accrued interest receivable  2,560   2,583 
Goodwill  18,109   18,109 
Other assets  7,003   7,207 
       
TOTAL ASSETS$1,146,994 $1,096,419 
       
LIABILITIES      
Deposits:      
Non-interest-bearing$179,610 $176,655 
Interest-bearing 783,687  740,699 
 Total Deposits 963,297  917,354 
       
Securities sold under agreements to repurchase  15,084   19,402 
FHLB and other borrowings  19,700   22,500 
Subordinated debt  9,951   9,923 
Accrued interest payable  81   119 
Lease liability  4,833   - 
Other liabilities  10,676   10,623 
       
 Total Liabilities 1,023,622  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 – 9,076,305 and 8,935,437 at September 30, 2019 and December 31, 2018, respectively      
Outstanding – 8,715,338 and 8,606,992 at September 30, 2019 and December 31, 2018, respectively 81,405  80,481 
Retained earnings 45,355  39,109 
Treasury stock, at cost; 360,967 and 328,445 shares at September 30, 2019 and December 31, 2018 (3,135) (2,647)
Accumulated other comprehensive loss (253) (445)
Total Shareholders' Equity 123,372  116,498 
       
TOTAL LIABILITIES and SHAREHOLDERS’ EQUITY$1,146,994 $1,096,419 
       

    

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:2019 2019 2018 2019 2018
Total Interest Income$   12,484 $12,479 $11,342 $   37,032 $32,716
Total Interest Expense 3,256  3,047  2,239  9,029  5,843
Net Interest Income 9,228  9,432  9,103  28,003  26,873
Provision for Loan Losses 125  100  150  650  775
Net Interest Income after Provision for Loan Losses 9,103  9,332  8,953  27,353  26,098
Other Non-Interest Income 1,124  1,232  1,355  3,513  4,161
Other Non-Interest Expenses 7,269  6,354  6,461  19,918  19,239
Income before Income Taxes 2,958  4,210  3,847  10,948  11,020
Income Tax Expense 843  1,162  1,013  3,002  2,860
Net Income$   2,115 $3,048 $2,834 $   7,946 $8,160
               
Per Common Share Data:              
Basic Earnings$  0.25 $0.35 $0.33 $  0.92 $0.96
Diluted Earnings$  0.24 $0.35 $0.33 $  0.91 $0.94
Book Value$   14.16 $14.03 $13.27 $   14.16 $13.27
Tangible Book Value(1)$   12.08 $11.93 $11.16 $   12.08 $11.16
Average Common Shares Outstanding (in thousands):         
Basic 8,619  8,596  8,513  8,605  8,489
Diluted 8,720  8,709  8,700  8,721  8,695
               
(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,  
 2019 2019 2019 2018 2018 
Total Assets$ 1,146,994 $1,153,797 $1,140,521 $1,096,419 $1,086,299 
Investment Securities and Restricted Stock 70,320  76,373  77,904  80,395  91,296 
Total Loans 959,864  953,080  948,493  921,301  900,895 
Allowance for Loan Losses (11,811) (11,684) (11,582) (11,398) (11,390)
Goodwill and Other Intangible Assets 18,109  18,109  18,109  18,109  18,109 
Total Deposits 963,297  972,592  959,655  917,354  905,745 
Repurchase Agreements 15,084  14,162  15,185  19,402  22,153 
FHLB and Other Borrowings 19,700  20,700  20,700  22,500  24,500 
Subordinated Debt 9,951  9,942  9,932  9,923  9,914 
Shareholders' Equity 123,372  121,416  119,156  116,498  113,891 
                


Asset Quality Data (by Quarter)          
(dollars in thousands)          
 Sept. 30,
 June 30,
 March 31,
 Dec. 31,
 Sept. 30,
 
 2019 2019 2019 2018 2018 
Nonaccrual Loans$  1,341 $1,346 $3,908 $1,390 $1,390 
OREO 2,501  2,912  585  585  585 
Total Non-Performing Assets 3,842  4,258  4,493  1,975  1,975 
                
Troubled Debt Restructured Loans:               
Performing 5,025  4,969  6,726  6,842  5,678 
Non-Performing 555  555  711  877  877 
                
Non-Performing Loans to Total Loans 0.14% 0.14% 0.41% 0.15% 0.15%
Non-Performing Assets to Total Assets 0.33% 0.37% 0.39% 0.18% 0.18%
Allowance as a % of Loans 1.23% 1.23% 1.22% 1.24% 1.26%
                


Capital Ratios   
  September 30, 2019
 December 31, 2018
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Assets
Ratio
        
        
Two River Bancorp10.41% 9.27% 10.41% 12.56% 10.14% 9.10% 10.14% 12.34%
Two River Community Bank11.30% 10.07% 11.30% 12.47% 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 
   Nine Months Ended 
 Sept. 30,  June 30,  March 31,  Dec. 31,  Sept. 30,  Sept. 30,  Sept. 30, 
 2019  2019  2019  2018  2018
  2019  2018 
Net loan (charge-offs) recoveries:                    
Charge-offs$    -  $-  $(247) $-  $-  $  (247) $(127)
Recoveries    2   2   6   8   39   10   74 
Net loan (charge-offs) recoveries$    2  $2  $(241) $8  $39  $  (237) $(53)
Net loan (charge-offs) recoveries to average loans (annualized) 0.00%  0.00%  (0.10)%  0.00%  0.02%  (0.03)%  (0.01)%
                            


Consolidated Average Balance Sheets & Yields
With Resultant Interest and Average Rates
   
    
 Three Months Ended Three Months Ended
(dollars in thousands)September 30, 2019 September 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$46,051 $260 2.24% $26,337 $132 1.99%
Investment securities74,158 517 2.79% 93,341 554 2.37%
Loans, net of unearned fees(1) (2)955,354 11,707 4.86% 896,999 10,656 4.71%
              
Total Interest-Earning Assets1,075,563 12,484 4.60% 1,016,677 11,342 4.43%
              
Non-Interest-Earning Assets:             
Allowance for loan losses(11,735)     (11,341)    
All other assets92,141      75,038     
              
Total Assets$1,155,969       $1,080,374      
              
LIABILITIES & SHAREHOLDERS' EQUITY             
Interest-Bearing Liabilities:             
NOW deposits$206,541 461 0.89% $201,026 320 0.63%
Savings deposits248,914 665 1.06% 267,025 568 0.84%
Money market deposits36,851 21 0.23% 48,606 22 0.18%
Time deposits304,869 1,834 2.39% 213,872 1,014 1.88%
Securities sold under agreements to repurchase13,451 10 0.30% 18,389 14 0.30%
FHLB and other borrowings19,763 99 1.99% 27,870 136 1.94%
Subordinated debt9,948 166 6.67% 9,911 165 6.66%
               
Total Interest-Bearing Liabilities840,337 3,256 1.54% 786,699 2,239 1.13%
               
Non-Interest-Bearing Liabilities:              
Demand deposits176,982      171,729     
Other liabilities16,006      9,314     
               
Total Non-Interest-Bearing Liabilities192,988      181,043     
               
Stockholders’ Equity122,644      112,632     
               
Total Liabilities and Shareholders’ Equity$1,155,969       $1,080,374      
              
NET INTEREST INCOME  $9,228      $9,103   
              
NET INTEREST SPREAD(3)    3.06%     3.30%
              
NET INTEREST MARGIN(4)    3.40%     3.55%
              
(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, 2019 September 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$37,164 $663 2.39% $21,923 $293 1.79%
Investment securities76,925 1,619 2.81% 95,574 1,703 2.38%
Loans, net of unearned fees(1) (2)951,073 34,750 4.89% 883,436 30,720 4.65%
              
Total Interest-Earning Assets1,065,162 37,032 4.65% 1,000,933 32,716 4.37%
              
Non-Interest-Earning Assets:             
Allowance for loan losses(11,625)     (11,097)    
All other assets87,535      74,168     
              
Total Assets$1,141,072       $1,064,004      
              
LIABILITIES & SHAREHOLDERS' EQUITY             
Interest-Bearing Liabilities:             
NOW deposits$208,155 1,296 0.83% $219,242 937 0.57%
Savings deposits251,672 1,893 1.01% 259,365 1,415 0.73%
Money market deposits39,020 64 0.22% 53,413 70 0.18%
Time deposits285,112 4,917 2.31% 190,520 2,501 1.76%
Securities sold under agreements to repurchase14,101 30 0.28% 19,734 43 0.29%
FHLB and other borrowings22,040 332 2.01% 26,862 382 1.90%
Subordinated debt9,939 497 6.67% 9,902 495 6.67%
               
Total Interest-Bearing Liabilities830,039 9,029 1.45% 779,038 5,843 1.00%
               
Non-Interest-Bearing Liabilities:              
Demand deposits174,968      165,778     
Other liabilities15,883      9,094     
               
Total Non-Interest-Bearing Liabilities190,851      174,872     
               
Shareholders’ Equity120,182      110,094     
               
Total Liabilities and Shareholders’ Equity$1,141,072       $1,064,004      
              
NET INTEREST INCOME  $28,003      $26,873   
              
NET INTEREST SPREAD(3)    3.20%     3.37%
              
NET INTEREST MARGIN(4)    3.51%     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.
 

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, 
 2019 2019 2019 2018 2018 2019 2018 
Total shareholders' equity$123,372 $121,416 $119,156 $116,498 $113,891 $123,372 $113,891 
Less: goodwill and other tangibles (18,109) (18,109) (18,109) (18,109) (18,109) (18,109) (18,109)
Tangible common shareholders’ equity$105,263 $103,307 $101,047 $98,389 $95,782 $105,263 $95,782 
                      
Common shares outstanding 8,715  8,657  8,668  8,607  8,584  8,715  8,584 
Book value per common share$14.16 $14.03 $13.75 $13.54 $13.27 $14.16 $13.27 
                      
Book value per common share$14.16 $14.03 $13.75 $13.54 $13.27 $14.16 $13.27 
Effect of intangible assets (2.08) (2.10) (2.09) (2.11) (2.11) (2.08) (2.11)
Tangible book value per common share$12.08 $11.93 $11.66 $11.43 $11.16 $12.08 $11.16 
               
Return on average assets0.73%1.07%1.01%1.10%1.04%0.93%1.03%
Effect of average intangible assets0.01%0.01%0.01%0.01%0.02%0.02%0.01%
Return on average tangible assets0.74%1.08%1.02%1.11%1.06%0.95%1.04%
               
Return on average equity6.84%10.18%9.59%10.52%9.98%8.84%9.91%
Effect of average intangible assets1.19%1.80%1.74%1.97%1.92%1.57%1.95%
Return on average tangible equity8.03%11.98%11.33%12.49%11.90%10.41%11.86%

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Source: Two River Bancorp

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