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Two River Bancorp Reports 2014 Third Quarter Financial Results

TINTON FALLS, N.J., Oct. 21, 2014 (GLOBE NEWSWIRE) -- Two River Bancorp (Nasdaq:TRCB), (the "Company"), the parent company of Two River Community Bank ("Two River"), today reported financial results for the third quarter and nine months ended September 30, 2014.

2014 Third Quarter Operating and Financial Highlights

  • Net income to common shareholders increased 26.2% to $1.7 million, or $0.20 per diluted share, compared to the same prior-year period.
  • Loans, net of unearned fees, increased $3.8 million to $616.2 million from last quarter. The increase was due to growth in commercial lending, partially offset by several large payoffs during the period.
  • Net interest margin improved to 3.80%, compared to 3.78% for the previous quarter, and 3.77% in the third quarter of 2013.
  • Total assets as of September 30, 2014 were $775.5 million, compared with $769.7 million at December 31, 2013.
  • Return on average assets (ROAA) was 0.87%, an increase from 0.74% in the previous quarter and 0.73% from the third quarter of the prior year.
  • Tangible book value per share of $8.63 at September 30, 2014 compared to $8.45 at June 30, 2014 and $7.97 at September 30, 2013.
  • Company expanded residential mortgage operations subsequent to end of quarter.

Dividend Information

On October 15, 2014, the Company's Board of Directors declared a quarterly cash dividend of $0.03 per share, payable November 28, 2014 to shareholders of record as of November 7, 2014. This marks the 7th consecutive quarterly cash dividend paid by the Company to its shareholders.

Management Commentary – Quarterly Review

William D. Moss, President and CEO, stated, "We reported solid year-over-year improvement in nearly every financial and operating metric in the third quarter, highlighted by a strong lending pipeline. Two River has steadily improved its return on assets in recent quarters, primarily through fundamental commercial lending in a market where our strong local brand continues to gain traction. Our results were positively affected by an increase in net interest income primarily due to higher average loans and core checking deposits, higher non-interest income and less than a 1% increase in non-interest expenses as a result of tighter cost controls. We are proud of the progress made in reducing the Company's total non-performing assets throughout 2014, which has improved with each quarterly period. We also had net recoveries of $497,000 during the third quarter from previously charged off loans, which resulted in no required provision for loan losses in the period."

Management Commentary – Outlook / Market Overview

Mr. Moss continued, "We have been successful in cost-effectively expanding Two River's branch and loan production office (LPO) network throughout our core New Jersey markets. We opened a full-service branch in New Brunswick in May, which was a direct result of the success of two LPOs that we operated in Middlesex county. In the coming quarters, we will look to enter other adjacent markets surrounding our core operations where we can leverage our existing brand recognition, relationship banking and local expertise. In terms of loan generations, we continue to see steady demand generated by our lending team. We are growing market share in the counties in which we operate by providing service execution that larger institutions are not equipped to meet, along with competitive rate offerings. We recently announced the expansion of our residential mortgage operations, using this same core model to reach out to residential buyers that desire a local partner and ease of process. We remain committed to increasing the value of our Company to existing shareholders through stable increases in tangible book value and return on equity, while continuing to build our business based on sustainable, profitable, scalable and compliant growth."

Key Quarterly Performance Metrics
3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 9 Mo. 9 Mo.
2014 2014 2014 2013 2013 Ended Ended
9/30/14 9/30/13
Net Income (000's) $1,688 $1,420 $1,450 $1,414 $1,380 $4,558 $3,745
Income Available to Common Shareholders (000's) $1,658 $1,390 $1,420 $1,384 $1,314 $4,468 $3,514
Earnings per Common Share – Diluted $0.20 $0.17 $0.17 $0.17 $0.16 $0.55 $0.43
Return on Average Assets 0.87% 0.74% 0.78% 0.73% 0.73% 0.80% 0.68%
Return on Average Tangible Assets (1) 0.89% 0.76% 0.79% 0.75% 0.75% 0.82% 0.70%
Return on Average Equity 6.85% 5.90% 6.13% 5.89% 5.81% 6.31% 5.35%
Return on Average Tangible Equity (1) 8.42% 7.28% 7.57% 7.29% 7.21% 7.78% 6.66%
Net Interest Margin 3.80% 3.78% 3.83% 3.79% 3.77% 3.80% 3.86%
Non-Performing Assets to Total Assets 1.03% 1.06% 1.26% 1.14% 1.43% -- --
Allowance as a % of Loans 1.35% 1.27% 1.28% 1.31% 1.42% -- --
(1) Non-GAAP Financial Information. See "Reconciliation of Non-GAAP Financial Measures" at end of release

Loan Composition

The components of the loan portfolio at September 30, 2014 and December 31, 2013 are as follows:

(In Thousands)
September 30, December 31,
2014 2013
Commercial and industrial $ 104,335 $ 91,887
Real estate – construction 90,913 98,284
Real estate – commercial 362,824 355,530
Real estate – residential 30,083 25,588
Consumer 28,778 32,413
616,933 603,702
Allowance for loan losses (8,301) (7,872)
Unearned fees (691) (886)
Net Loans $ 607,941 $ 594,944

2014 Third Quarter and Nine Month Financial Review

Net Income

Net income to common shareholders for the three months ended September 30, 2014 increased 26.2% to $1.7 million, or $0.20 per diluted share, as compared to $1.3 million, or $0.16 per diluted share, for the corresponding prior-year period. The increase was primarily due to higher net interest income and no provision for loan losses during the period, partially offset by an increase in non-interest expense.

Net income to common shareholders for the nine months ended September 30, 2014 increased 27.1% to $4.5 million, or $0.55 per diluted share, compared to $3.5 million, or $0.43 per diluted share, in the prior-year period.

Net Interest Income

Net interest income for the quarter ended September 30, 2014 was $6.8 million, an increase of 3.8% compared to $6.6 million in the prior-year period. This increase was largely due to a $20.3 million, or 2.9%, increase in average interest earnings assets, primarily due to growth in the Company's loan portfolio. On a linked-quarter basis, net interest income increased by $118,000, or 1.8%, in the third quarter, principally due a $9.1 million increase in average loans from the second quarter of 2014.

Net interest income for the nine months ended September 30, 2014 totaled $20.1 million, an increase of $340,000, or 1.7%, over the same period in 2013.

The Company reported a net interest margin of 3.80% for the quarter ended September 30, 2014, representing an increase of 2 basis points when compared to the 3.78% net interest margin reported in the second quarter of 2014 and an increase of 3 basis points when compared to the 3.77% reported for the same three month period in 2013.

For the nine months ended September 30, 2014, the Company's net interest margin was 3.80%, a decrease of 6 basis points when compared to 3.86% for the same period in 2013, resulting from the maturity, prepayment and contractual re-pricing of loans and investment securities during this extended period of low interest rates.

Non-Interest Income

Non-interest income for the quarter ended September 30, 2014 totaled $712,000, an increase of $31,000, or 4.6%, compared to the same period in 2013. This was due to an $82,000 increase in gains on SBA loan sales and a $27,000 increase in title agency fees, partially offset by lower residential mortgage fees of $64,000.

For the nine months ended September 30, 2014, non-interest income increased $127,000, or 6.1%, from the same period in 2013. This was largely due to gains on SBA loan sales and an increase in service deposit fees, offset by lower net realized gains in sales of securities and lower residential mortgage fees.

Non-Interest Expense

Non-interest expense for the quarter ended September 30, 2014 totaled $4.8 million, an increase of $25,000, or 0.5%, compared to the same period in 2013. On a linked quarter basis, non-interest expense decreased $82,000, or 1.7%, due primarily to lower OREO and loan workout expenses.

For the nine month period ended September 30, 2014, non-interest expense totaled $14.5 million, a decrease of $688,000, or 4.5%, compared to the same period in 2013, primarily due to lower OREO and loan workout expenses.

Provision / Allowance for Loan Losses

The Company had $497,000 of net loan recoveries during the third quarter ended September 30, 2014, largely due to two credits, which had been charged off in previous periods. As a result, no provision for loan losses were required for the third quarter ended September 30, 2014, compared to a provision for loan losses of $250,000 in the same prior-year period.

For the nine months ended September 30, 2014, the Company reported a provision for loan losses of $521,000 compared to $710,000 in the prior-year period.

As of September 30, 2014, the Company's allowance for loan losses was $8.3 million as compared to $7.9 million as of December 31, 2013. Loss allowance as a percentage of total loans was 1.35% at September 30, 2014 as compared to 1.27% at June 30, 2014 and 1.31% at December 31, 2013.

Financial Condition / Balance Sheet

At September 30, 2014, 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 10.73%, Tier 1 capital to risk-weighted assets ratio was 12.01% and total capital to risk-weighted assets ratio was 13.24%.

Total assets as of September 30, 2014 were $775.5 million, an increase of 0.8%, compared to $769.7 million as of December 31, 2013.

Total loans as of September 30, 2014 were $616.2 million, an increase of 2.2%, compared to $602.8 million reported at December 31, 2013.

Total deposits as of September 30, 2014 were $627.8 million, a decrease of 0.9%, compared with $633.4 million as of December 31, 2013. Core checking deposits at September 30, 2014 increased $3.8 million, or 1.6%, to $246.7 million, from year-end.

Asset Quality

The Company's non-performing assets at September 30, 2014 decreased to $8.0 million as compared to $8.2 million at June 30, 2014 and $8.8 million at December 31, 2013. Non-performing assets to total assets at September 30, 2014 improved to 1.03%, compared to 1.06% at June 30, 2014 and 1.14% at December 31, 2013.

Non-accrual loans increased to $6.9 million at September 30, 2014 compared to $6.7 million at June 30, 2014 and $6.0 million at December 31, 2013.

OREO and repossessed assets decreased to $1.1 million as of September 30, 2014 compared to $1.5 million at June 30, 2014 and $2.8 million at December 31, 2013. The decrease during the third quarter of 2014 was primarily due to a property sale during the three month period.

Troubled Debt Restructured loan balances amounted to $22.4 million at September 30, 2014, of which all but $5.1 million were performing. This compares to $25.8 million at June 30, 2014 and $25.4 million at December 31, 2013. The decrease of $3.4 million during the third quarter is primarily due to payoffs and paydowns.

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 currently operates 15 branches and 3 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 "continues," "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; changes in loan and investment prepayment 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 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, 2013. The statements in this press release are made as of the date of this press release, even if subsequently made available by the Company on its website or otherwise. The Company assumes no obligation for updating any such forward-looking statements at any time, except as required by law.

TWO RIVER BANCORP
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For the Three and Nine Months Ended September 30, 2014 and 2013
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2014 2013 2014 2013
INTEREST INCOME:
Loans, including fees $ 7,299 $ 7,076 $ 21,578 $ 21,502
Securities:
Taxable 233 263 732 763
Tax-exempt 109 115 326 329
Interest bearing deposits 14 19 51 55
Total Interest Income 7,655 7,473 22,687 22,649
INTEREST EXPENSE:
Deposits 713 790 2,176 2,504
Securities sold under agreements to repurchase 17 19 47 62
Borrowings 121 109 365 324
Total Interest Expense 851 918 2,588 2,890
Net Interest Income 6,804 6,555 20,099 19,759
PROVISION FOR LOAN LOSSES -- 250 521 710
Net Interest Income after Provision for Loan Losses 6,804 6,305 19,578 19,049
NON-INTEREST INCOME:
Service fees on deposit accounts 166 180 526 481
Other loan fees 123 228 470 587
Earnings from investment in life insurance 116 101 347 311
Net realized gain on sale of securities 19 -- 19 153
Net gain on sale of SBA loans 106 24 384 109
Other income 182 148 450 428
Total Non-Interest Income 712 681 2,196 2,069
NON-INTEREST EXPENSES:
Salaries and employee benefits 2,842 2,777 8,581 8,253
Occupancy and equipment 868 803 2,594 2,662
Professional 191 204 572 637
Insurance 77 85 231 246
FDIC insurance and assessments 113 156 373 425
Advertising 128 84 294 237
Data processing 95 115 283 407
Outside services fees 119 89 348 371
Amortization of identifiable intangibles 19 29 67 96
OREO and repossessed asset expenses, impairment and sales, net (7) 51 (72) 522
Loan workout expenses 59 33 217 204
Other operating 318 371 1,030 1,146
Total Non-Interest Expenses 4,822 4,797 14,518 15,206
Income before Income Taxes 2,694 2,189 7,256 5,912
INCOME TAX EXPENSE 1,006 809 2,698 2,167
Net Income 1,688 1,380 4,558 3,745
Preferred stock dividend (30) (66) (90) (231)
Income available to common shareholders $ 1,658 $ 1,314 $ 4,468 $ 3,514
EARNINGS PER COMMON SHARE:
Basic $ 0.21 $ 0.16 $ 0.56 $ 0.44
Diluted $ 0.20 $ 0.16 $ 0.55 $ 0.43
Weighted average common shares outstanding:
Basic 7,923 8,074 7,939 8,029
Diluted 8,105 8,245 8,116 8,182
TWO RIVER BANCORP
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands, except share data)
September 30, December 31,
2014 2013
ASSETS
Cash and due from banks $ 20,020 $ 16,003
Interest-bearing deposits in bank 23,996 31,862
Cash and cash equivalents 44,016 47,865
Securities available-for-sale 44,751 45,093
Securities held-to-maturity 26,903 28,670
Restricted investments, at cost 3,097 3,278
Loans 616,242 602,816
Allowance for loan losses (8,301) (7,872)
Net loans 607,941 594,944
OREO and repossessed assets 1,069 2,771
Bank-owned life insurance 16,736 16,389
Premises and equipment, net 5,302 4,232
Accrued interest receivable 1,598 1,760
Goodwill 18,109 18,109
Other intangible assets 76 143
Other assets 5,896 6,453
TOTAL ASSETS $ 775,494 $ 769,707
LIABILITIES
Deposits:
Non-interest bearing $ 138,748 $ 129,179
Interest bearing 489,017 504,270
Total Deposits 627,765 633,449
Securities sold under agreements to repurchase 27,562 18,440
Accrued interest payable 55 66
Long-term debt 16,000 17,500
Other liabilities 5,475 4,825
Total Liabilities 676,857 674,280
SHAREHOLDERS' EQUITY
Preferred stock, no par value; 6,500,000 shares authorized;
Preferred stock, Series B, none issued or outstanding -- --
Preferred stock, Series C, $12,000 liquidation preference; 12,000 shares authorized; 12,000 issued and outstanding at September 30, 2014, and December 31, 2013, respectively 12,000 12,000
Common stock, no par value; 25,000,000 shares authorized;
Issued – 8,159,978 and 8,113,080 at September 30, 2014 and December 31, 2013, respectively
Outstanding – 7,932,366 and 8,036,368 at September 30, 2014 and December 31, 2013, respectively 72,465 72,191
Retained earnings 16,305 12,474
Treasury stock, at cost; 227,612 shares and 76,712 shares at September 30, 2014 and December 31, 2013, respectively (1,751) (554)
Accumulated other comprehensive loss (382) (684)
Total Shareholders' Equity 98,637 95,427
TOTAL LIABILITIES and SHAREHOLDERS' EQUITY $ 775,494 $ 769,707
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: 2014 2014 2013 2014 2013
Total Interest Income $7,655 $7,552 $7,473 $22,687 $22,649
Total Interest Expense 851 866 918 2,588 2,890
Net Interest Income 6,804 6,686 6,555 20,099 19,759
Provision for Loan Losses -- 238 250 521 710
Net Interest Income after Provision for Loan Losses 6,804 6,448 6,305 19,578 19,049
Other Non-Interest Income 712 713 681 2,196 2,069
Other Non-Interest Expenses 4,822 4,904 4,797 14,518 15,206
Income before Income Taxes 2,694 2,257 2,189 7,256 5,912
Income Tax Expense 1,006 837 809 2,698 2,167
Net Income 1,688 1,420 1,380 4,558 3,745
Preferred Stock Dividend 30 30 66 90 231
Income available to common shareholders $1,658 $1,390 $1,314 $4,468 $3,514
Per Common Share Data:
Basic Earnings $0.21 $0.18 $0.16 $0.56 $0.44
Diluted Earnings $0.20 $0.17 $0.16 $0.55 $0.43
Book Value $10.92 $10.75 $10.24 $10.92 $10.24
Tangible Book Value (1) $8.63 $8.45 $7.97 $8.63 $7.97
Average Common Shares Outstanding (in thousands):
Basic 7,923 7,922 8,074 7,939 8,029
Diluted 8,105 8,105 8,245 8,116 8,182
(1) Non-GAAP Financial Information. See "Reconciliation of Non-GAAP Financial Measures" at end of release
Selected Period End Balances
(In thousands)
Sept. 30, Dec. 31, Sept. 30,
2014 2013 2013
Total Assets $775,494 $769,707 $757,217
Investment Securities and Restricted Stock 74,751 77,041 83,257
Total Loans 616,242 602,816 587,875
Allowance for Loan Losses (8,301) (7,872) (8,336)
Goodwill and Other Intangible Assets 18,185 18,252 18,281
Total Deposits 627,765 633,449 625,737
Repurchase Agreements 27,562 18,440 18,553
Long-term Debt 16,000 17,500 13,500
Shareholders' Equity 98,637 95,427 94,707
Asset Quality Data (by Quarter)
(Dollars in thousands)
Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
2014 2014 2014 2013 2013
Nonaccrual loans $6,919 $6,670 $7,280 $6,009 $9,526
Loans past due over 90 days and still accruing -- -- -- -- --
OREO and Repossessed Assets 1,069 1,484 2,363 2,771 1,327
Total Non-Performing Assets 7,988 8,154 9,643 8,780 10,853
Troubled Debt Restructured Loans:
Performing 17,258 20,760 22,813 23,021 12,069
Non-Performing 5,122 5,027 5,118 2,355 2,752
Non-Performing Loans to Total Loans 1.12% 1.09% 1.23% 1.00% 1.62%
Allowance as a % of Loans 1.35% 1.27% 1.28% 1.31% 1.42%
Non-Performing Assets to Total Assets 1.03% 1.06% 1.26% 1.14% 1.43%
Capital Ratios
September 30, 2014 December 31, 2013
Tier 1 Tier 1 Total Capital Tier 1 Tier 1 Total Capital
Capital to Capital to to Capital to Capital to to
Average Risk Risk Weighted Average Risk Risk Weighted
Assets Weighted Assets Ratio Assets Weighted Assets Ratio
Ratio Assets Ratio Ratio Assets Ratio
Two River Bancorp 10.73% 12.01% 13.24% 10.40% 11.99% 13.21%
Two River Community Bank 10.71% 11.98% 13.22% 10.35% 11.94% 13.15%
"Well capitalized" institution (under Federal regulations) 5.00% 6.00% 10.00% 5.00% 6.00% 10.00%
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
As of and for the Three Months Ended Nine Months Ended
Sept. 30, June 30, March 31, Dec. 31, Sept. 30, Sept. 30, Sept. 30,
2014 2014 2014 2013 2013 2014 2013
Total shareholders' equity $98,637 $97,257 $96,013 $95,427 $94,707 $98,637 $94,707
Less: preferred stock (12,000) (12,000) (12,000) (12,000) (12,000) (12,000) (12,000)
Common Shareholders' equity $86,637 $85,257 $84,013 $83,427 $82,707 $86,637 $82,707
Common shares outstanding 7,932 7,931 7,935 8,038 8,079 7,932 8,079
Book value per common share $10.92 $10.75 $10.59 $10.38 $10.24 $10.92 $10.24
Book value per common share $10.92 $10.75 $10.59 $10.38 $10.24 $10.92 $10.24
Effect of intangible assets (2.29) (2.30) (2.30) (2.27) (2.27) (2.29) (2.27)
Tangible book value per common share $8.63 $8.45 $8.29 $8.11 $7.97 $8.63 $7.97
Return on average assets 0.87% 0.74% 0.78% 0.73% 0.73% 0.80% 0.68%
Effect of intangible assets 0.02% 0.02% 0.01% 0.02% 0.02% 0.02% 0.02%
Return on average tangible assets 0.89% 0.76% 0.79% 0.75% 0.75% 0.82% 0.70%
Return on average equity 6.85% 5.90% 6.13% 5.89% 5.81% 6.31% 5.35%
Effect of average intangible assets 1.57% 1.38% 1.44% 1.40% 1.40% 1.47% 1.31%
Return on average tangible equity 8.42% 7.28% 7.57% 7.29% 7.21% 7.78% 6.66%

CONTACT: Investor Contact: Adam Prior, Senior Vice President The Equity Group Inc. Phone: (212) 836-9606 E-mail: aprior@equityny.com Media Contact: Carrie Donzella, Marketing Director Phone: (732) 216-0164 E-mail: cdonzella@tworiverbank.com

Source:Two River Bancorp