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Two River Bancorp Reports 2017 Third Quarter Financial Results

TINTON FALLS, N.J., Oct. 24, 2017 (GLOBE NEWSWIRE) -- Two River Bancorp (Nasdaq:TRCB) (the "Company"), the parent company of Two River Community Bank ("the Bank"), today reported a 25.5% and 18.6% increase in net income for the three and nine months ended September 30, 2017, respectively, excluding the effect of a Bank Owned Life Insurance ("BOLI") death benefit received during the prior year’s third quarter. All share and per share data for all referenced reporting periods have been adjusted for a 5% stock dividend paid on February 28, 2017.

2017 Third Quarter Operating and Financial Highlights
(all comparisons to the same prior year’s quarter unless otherwise noted)

  • Net income was $2.24 million, or $0.26 per diluted share, compared to $2.64 million, or $0.31 per diluted share.
    • The 2016 quarter included in net income a tax-free BOLI death benefit of $862,000, or $0.10 per diluted share. Excluding the BOLI death benefit, net income increased 25.5%. The receipt of this benefit affected several 2016 quarterly and year-to-date metrics.
  • Net interest income increased 12.7% to $8.42 million.
  • Non-interest income decreased 26.7% to $1.45 million, as a result of the BOLI benefit. Mortgage banking revenues increased 13.3% while gains on the sale of SBA loans increased 163.8%.
  • Net interest margin improved to 3.62% from 3.55%, largely due to both higher asset yields and core checking deposits.
  • Tangible book value per share was $10.46 at September 30, 2017, compared to $9.88 at December 31, 2016 and $9.63 at September 30, 2016.
  • Total assets at September 30, 2017 were $1.0 billion, compared to $940.2 million at December 31, 2016.
  • Total loans as of September 30, 2017 were $816.1 million, up 8.4% from $753.1 million at December 31, 2016.
  • Total deposits as of September 30, 2017 were $821.9 million, up 5.8% from $776.6 million at December 31, 2016.

Management Commentary
William D. Moss, President and CEO, stated, “The Company posted another strong performance during the third quarter, highlighted by linked quarter improvement in all key metrics along with solid growth in loans and deposits. Excluding the BOLI benefit of $0.10 per share in the prior year’s quarter, earnings showed considerable growth, increasing to $0.26 from $0.21 in the prior year. Our earnings improvement was driven by high quality loan growth and fee income contributions from both our SBA and mortgage business lines. Loan growth of 11.2% annualized from year-end 2016 was tempered by two residential portfolio adjustable rate mortgage loan sales completed earlier this year, which totaled $8.2 million.”

Mr. Moss continued, “The Bank closed and consolidated two branches into a new and more visible location in Sea Girt, NJ at the end of the third quarter, which was a continuation of the Company’s strategic plan to maximize the profitability of our branch network. We expect annual pre-tax expense savings of $300,000 from this initiative while expecting this new location to provide better opportunity for growth. We also have continued to see solid increases in deposits, largely as a result of new municipal relationships, and have a number of initiatives in place to gain higher levels of deposits from existing customers.”

Dividend Information
On October 18, 2017, the Company’s Board of Directors declared a quarterly cash dividend of $0.045 per share, payable on November 29, 2017 to shareholders of record as of the close of business on November 8, 2017. This marks the 19th consecutive quarterly cash dividend, which is in addition to the 5% stock dividend paid in February 2017.

Key Quarterly Performance Metrics

3rd Qtr.2nd Qtr.1st Qtr.4th Qtr.3rd Qtr.9 Mo.
Ended
9 Mo.
Ended
2017
2017 2017 2016 20169/30/20179/30/2016
Net Income (in thousands) $2,237 $ 2,128 $1,802 $2,567 $2,644 $6,167 $ 6,064
Earnings per Common Share – Diluted $0.26 $ 0.25 $0.21 $0.30 $0.31 $0.71 $ 0.71
Return on Average Assets 0.89% 0.87% 0.76% 1.08% 1.16% 0.84% 0.91%
Return on Average Tangible Assets(1) 0.91% 0.88% 0.77% 1.10% 1.19% 0.86% 0.93%
Return on Average Equity 8.39% 8.26% 7.18% 10.25% 10.81% 7.96% 8.48%
Return on Average Tangible Equity(1) 10.13% 10.01% 8.74% 12.53% 13.29% 9.64% 10.46%
Net Interest Margin 3.62% 3.49% 3.45% 3.43% 3.55% 3.52% 3.56%
Non-Performing Assets to Total Assets 0.23% 0.32% 0.18% 0.19% 0.20% 0.23% 0.20%
Allowance as a % of Loans 1.25% 1.25% 1.25% 1.27% 1.25% 1.25% 1.25%


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

Loan Composition
The components of the Company’s loan portfolio at September 30, 2017 and December 31, 2016 are as follows:

(in thousands)
September 30,
2017
December 31,
2016
Commercial and industrial $ 99,601 $ 93,697
Real estate – construction 118,553 111,914
Real estate – commercial 507,507 460,685
Real estate – residential 62,416 59,065
Consumer 28,773 28,279
Unearned fees (772) (548)
816,078 753,092
Allowance for loan losses (10,223) (9,565)
Net Loans $ 805,855 $ 743,527

Deposit Composition
The components of the Company’s deposits at September 30, 2017 and December 31, 2016 are as follows:


(in thousands)
September 30,
2017
December 31,
2016
Non-interest-bearing $ 163,841 $ 160,104
NOW accounts 208,128 152,771
Savings deposits 261,766 261,438
Money market deposits 62,514 62,495
Listed service CD’s 38,971 47,648
Time deposits / IRA 55,629 56,489
Wholesale deposits 31,023 35,622
Total Deposits $ 821,872 $ 776,567

2017 Third Quarter Financial Review

Net Income
Net income for the three months ended September 30, 2017 decreased 15.4% to $2.24 million, or $0.26 per diluted common share, compared to $2.64 million, or $0.31 per diluted common share, for the same period last year. The decrease was a result of the previously mentioned BOLI benefit received in the third quarter of 2016. Excluding the BOLI benefit, net income increased 25.5%.

On a linked quarter basis, third quarter 2017 net income increased 5.1% from the second quarter of 2017. The second quarter included an income tax benefit related to the adoption of ASU 2016-09, Compensation - Stock Compensation, Improvements to Employee Share-Based Payment Accounting, that positively impacted net income by $145,000, or $0.02 per diluted share, as compared to a benefit of $32,000 in the current quarter.

Net income for the nine months ended September 30, 2017 increased 1.7% to $6.17 million, or $0.71 per diluted share, compared to $6.06 million, or $0.71 per diluted share, in the same prior year period. Excluding the BOLI benefit, net income increased 18.6%.

Net Interest Income
Net interest income for the quarter ended September 30, 2017 was $8.42 million, an increase of 12.7% compared to $7.47 million in the corresponding prior year period. This was largely due to an increase of $84.4 million, or 10.1%, in average interest-earning assets, primarily attributable to growth in the loan portfolio. On a linked quarter basis, net interest income increased $458,000, or 5.8%, from $7.96 million.

For the nine months ended September 30, 2017, net interest income increased 9.8% to $24.0 million from $21.9 million in the prior year period.

Net Interest Margin
The Company reported a net interest margin of 3.62% for the third quarter of 2017, compared to 3.49% in the second quarter of 2017 and 3.55% reported for the third quarter of 2016. The net interest margin improvement from the second quarter of 2017 was the result of slightly higher yielding interest-earning assets coupled with a higher level of average core checking deposits.

The net interest margin for the first nine months of 2017 was 3.52%, compared to 3.56% in the prior year period.

Non-Interest Income
Non-interest income for the quarter ended September 30, 2017 totaled $1.45 million, a decrease of $530,000, or 26.7%, compared to the same period in 2016. The decrease was the result of the previously mentioned BOLI benefit received in the third quarter of 2016. Residential mortgage banking revenue increased $42,000, or 13.3%, from the prior year period while gains from the sale of SBA loans increased $190,000. Additionally, service fees on deposit accounts increased by $70,000, or 45.5%, mainly due to a realignment of fees on various products.

On a linked quarter basis, non-interest income decreased by $85,000, or 5.5%, from the second quarter of 2017, which included an $86,000 gain from the sale of $3.6 million of portfolio adjustable rate mortgages compared to no such sale in the current quarter.

For the nine months ended September 30, 2017, non-interest income increased $74,000, or 1.8%, to $4.1 million from the same period in 2016.

Non-Interest Expense
Non-interest expense for the quarter ended September 30, 2017 totaled $6.18 million, an increase of $836,000, or 15.7%, from the $5.34 million reported in same period in 2016, primarily due to salary and benefit increases along with a one-time $250,000 expense recovery settlement from an OREO property in the third quarter of 2016. On a linked quarter basis, non-interest expense increased $104,000, or 1.7%.

For the nine months ended September 30, 2017, non-interest expense increased $1.91 million, or 11.8%, to $18.0 million compared to the same prior year period.

Provision for Loan Losses
During the quarter, a provision for loan losses of $255,000 was expensed, compared to $470,000 in the same prior year period. The majority of the third quarter 2017 provision was to support the strong loan growth. The Company had $15,000 in net loan recoveries during the quarter, compared to $436,000 in net loan charge-offs during the same period last year. For the nine months ended September 30, 2017, a provision of $855,000 was expensed, compared to $860,000 for the same prior year period. The Company had $197,000 of net loan charge-offs during the first nine months of 2017, compared to $121,000 in net loan charge-offs in the same prior year period.

As of September 30, 2017, the Company's allowance for loan losses was $10.22 million, as compared to $9.57 million as of December 31, 2016. The loss allowance as a percentage of total loans was 1.25% at September 30, 2017 compared to 1.27% at December 31, 2016.

Financial Condition / Balance Sheet

At September 30, 2017, the Company maintained capital ratios that were in excess of regulatory standards for well capitalized institutions. The Company's Tier 1 capital to average assets ratio was 9.07%, its common equity Tier 1 to risk weighted assets ratio was 10.09%, its Tier 1 capital to risk weighted assets ratio was 10.09%, and its total capital to risk weighted assets ratio was 12.39%.

Total assets as of September 30, 2017 were $1.0 billion, an increase of 6.4% compared to $940.2 million as of December 31, 2016.

Total loans as of September 30, 2017 were $816.1 million, an increase of 8.4% compared to $753.1 million at December 31, 2016.

Total deposits as of September 30, 2017 were $821.9 million, an increase of 5.8% compared to $776.6 million as of December 31, 2016. Core checking deposits at September 30, 2017 increased to $372.0 million, up $59.1 million, or 18.9% from year-end. This growth was primarily driven by a new municipal relationship in the first nine months of 2017 along with the Company’s focus on building core checking account deposit relationships.

Asset Quality
The Company's non-performing assets at September 30, 2017 were $2.35 million as compared to $1.81 million at December 31, 2016 and $1.85 million at September 30, 2016. Non-performing assets to total assets at September 30, 2017 were 0.23% compared to 0.19% at December 31, 2016 and 0.20% at September 30, 2016.

Non-accrual loans were $2.35 million at September 30, 2017, compared to $1.55 million at December 31, 2016 and $1.59 million at September 30, 2016. During the second quarter, three relationships migrated to non-accrual status. These relationships were previously identified as TDRs or exhibited negative financial trends which management had identified. During the third quarter of 2017, one non-accrual loan totaling $548,000 paid off and $75,000 of recaptured interest and legal costs associated with that loan were received. There was no OREO at September 30, 2017, compared to $259,000 at both December 31, 2016 and September 30, 2016 as the one OREO property was sold for a loss of $17,000 during the current quarter.

Troubled debt restructured loan balances amounted to $8.05 million at September 30, 2017, with all but $1.13 million performing. This compares to $8.23 million at December 31, 2016 and $8.52 million at September 30, 2016.

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, 2016. 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
E-mail: aprior@equityny.com

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


TWO RIVER BANCORP
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For the Three Months and Nine Months Ended September 30, 2017 and 2016
(in thousands, except per share data)
Three Months Ended
September 30,
Nine Months Ended
September 30,


2017 2016 2017 2016
INTEREST INCOME:
Loans, including fees $ 9,227 $ 8,337 $ 26,363 $ 24,335
Securities:
Taxable 247 187 715 571
Tax-exempt 267 234 831 664
Interest-bearing deposits 83 19 257 84
Total Interest Income 9,824 8,777 28,166 25,654
INTEREST EXPENSE:
Deposits 1,069 972 3,170 2,800
Securities sold under agreements to repurchase 18 15 50 44
Federal Home Loan Bank ("FHLB") and other borrowings 157 157 449 452
Subordinated debt 164 164 493 492
Total Interest Expense 1,408 1,308 4,162 3,788
Net Interest Income 8,416 7,469 24,004 21,866
PROVISION FOR LOAN LOSSES 255 470 855 860
Net Interest Income after Provision for Loan Losses 8,161 6,999 23,149 21,006
NON-INTEREST INCOME:
Service fees on deposit accounts 224 154 535 427
Mortgage banking 358 316 1,258 831
Other loan fees 188 188 402 311
Earnings from investment in bank owned life insurance 137 118 411 337
Death benefit on bank owned life insurance - 862 - 862
Gain on sale of SBA loans 306 116 817 575
Net gain on sale of securities - - - 72
Other income 240 229 693 627
Total Non-Interest Income 1,453 1,983 4,116 4,042
NON-INTEREST EXPENSES:
Salaries and employee benefits 3,641 3,309 10,554 9,609
Occupancy and equipment 1,112 1,056 3,215 3,084
Professional 366 273 1,102 888
Insurance 57 56 158 160
FDIC insurance and assessments 123 114 354 324
Advertising 110 85 345 315
Data processing 151 135 406 405
Outside services fees 120 131 347 369
Amortization of identifiable intangibles - - - 9
OREO expenses, impairment and sales, net 25 (245) 44 (271)
Loan workout expenses 8 44 174 142
Other operating 462 381 1,324 1,081
Total Non-Interest Expenses 6,175 5,339 18,023 16,115
Income before Income Taxes 3,439 3,643 9,242 8,933
INCOME TAX EXPENSE 1,202 999 3,075 2,869
Net Income $ 2,237 $ 2,644 $ 6,167 $ 6,064
EARNINGS PER COMMON SHARE:
Basic $ 0.27 $ 0.32 $ 0.74 $ 0.73
Diluted $ 0.26 $ 0.31 $ 0.71 $ 0.71
Weighted average common shares outstanding:
Basic 8,393 8,323 8,373 8,319
Diluted 8,656 8,537 8,647 8,515



TWO RIVER BANCORP
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands, except share data)
September 30, December 31,
2017 2016
ASSETS
Cash and due from banks $24,858 $19,844
Interest-bearing deposits in bank 21,445 22,233
Cash and cash equivalents 46,303 42,077
Securities available for sale 30,061 34,464
Securities held to maturity 57,058 57,843
Restricted investments, at cost 5,522 4,805
Loans held for sale 1,082 4,537
Loans 816,078 753,092
Allowance for loan losses (10,223) (9,565)
Net loans 805,855 743,527
OREO - 259
Bank owned life insurance 21,440 21,029
Premises and equipment, net 5,350 4,662
Accrued interest receivable 2,313 2,234
Goodwill 18,109 18,109
Other assets 7,152 6,665
TOTAL ASSETS $1,000,245 $940,211
LIABILITIES
Deposits:
Non-interest-bearing $163,841 $160,104
Interest-bearing 658,031 616,463
Total Deposits 821,872 776,567
Securities sold under agreements to repurchase 22,576 19,915
FHLB and other borrowings 30,300 25,300
Subordinated debt 9,879 9,855
Accrued interest payable 114 100
Other liabilities 8,937 7,758
Total Liabilities 893,678 839,495
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 – 8,766,577 and 8,677,536 at September 30, 2017 and December 31, 2016, respectively
Outstanding – 8,454,483 and 8,365,442 at September 30, 2017 and December 31, 2016 respectively 79,576 79,056
Retained earnings 29,580 24,447
Treasury stock, at cost; 312,094 shares at September 30, 2017 and December 31, 2016 (2,396) (2,396)
Accumulated other comprehensive loss (193) (391)
Total Shareholders' Equity 106,567 100,716
TOTAL LIABILITIES and SHAREHOLDERS’ EQUITY $1,000,245 $940,211


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: 2017 2017 2016 2017 2016
Total Interest Income $ 9,824 $ 9,349 $ 8,777 $ 28,166 $ 25,654
Total Interest Expense 1,408 1,391 1,308 4,162 3,788
Net Interest Income 8,416 7,958 7,469 24,004 21,866
Provision for Loan Losses 255 375 470 855 860
Net Interest Income after Provision for Loan Losses 8,161 7,583 6,999 23,149 21,006
Other Non-Interest Income 1,453 1,538 1,983 4,116 4,042
Other Non-Interest Expenses 6,175 6,071 5,339 18,023 16,115
Income before Income Taxes 3,439 3,050 3,643 9,242 8,933
Income Tax Expense 1,202 922 999 3,075 2,869
Net Income $ 2,237 $ 2,128 $ 2,644 $ 6,167 $ 6,064
Per Common Share Data:
Basic Earnings $ 0.27 $ 0.25 $ 0.32 $ 0.74 $ 0.73
Diluted Earnings $ 0.26 $ 0.25 $ 0.31 $ 0.71 $ 0.71
Book Value $ 12.60 $ 12.40 $ 11.80 $ 12.60 $ 11.80
Tangible Book Value(1) $ 10.46 $ 10.25 $ 9.63 $ 10.46 $ 9.63
Average Common Shares Outstanding (in thousands):
Basic 8,393 8,372 8,322 8,373 8,319
Diluted 8,656 8,654 8,538 8,647 8,514

(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,
2017 2017 2017 2016 2016
Total Assets $ 1,000,245 $ 983,099 $ 967,073 $ 940,211 $ 909,170
Investment Securities and Restricted Stock 92,641 92,634 94,850 97,112 82,677
Total Loans 816,078 794,908 762,687 753,092 753,982
Allowance for Loan Losses (10,223) (9,953) (9,567) (9,565) (9,452)
Goodwill and Other Intangible Assets 18,109 18,109 18,109 18,109 18,109
Total Deposits 821,872 810,725 799,705 776,567 739,247
Repurchase Agreements 22,576 25,823 21,437 19,915 18,645
FHLB and Other Borrowings 30,300 24,300 24,300 25,300 35,300
Subordinated Debt 9,879 9,871 9,863 9,855 9,847
Shareholders' Equity 106,567 104,524 102,406 100,716 98,594
Asset Quality Data (by Quarter)
(dollars in thousands) Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
2017 2017 2017 2016 2016
Nonaccrual Loans $ 2,345 $ 2,946 $ 1,511 $ 1,548 $ 1,587
OREO - 233 259 259 259
Total Non-Performing Assets 2,345 3,179 1,770 1,807 1,846
Troubled Debt Restructured Loans:
Performing 6,925 6,990 7,754 8,075 8,366
Non-Performing 1,129 960 405 157 157
Non-Performing Loans to Total Loans 0.29% 0.37% 0.20% 0.21% 0.21%
Non-Performing Assets to Total Assets 0.23% 0.32% 0.18% 0.19% 0.20%
Allowance as a % of Loans 1.25% 1.25% 1.25% 1.27% 1.25%

Capital Ratios

September 30, 2017 December 31, 2016
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 Bancorp10.09 %9.07%
10.09%
12.39%
10.33%8.94%10.33%12.76%
Two River Community Bank11.11%10.00%
11.11%
12.27%
11.49%9.95%11.49%12.68%
"Well capitalized" institution
(under prompt corrective action
regulations)*
6.50%5.00%
8.00%
10.00%
6.50%5.00%8.00%10.00%


*Applies to Bank only. For the Company to be “well capitalized,” the Tier 1 Capital to Risk Weighted Assets has to be at least 6.00%.


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

Three Months Ended Three Months Ended
(dollars in thousands) September 30, 2017 September 30, 2016
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 $25,901 $83 1.27% $18,179 $19 0.42%
Investment securities 92,257 514 2.23% 83,541 421 2.02%
Loans, net of unearned fees(1) (2) 803,553 9,227 4.56% 735,626 8,337 4.51%
Total Interest-Earning Assets 921,711 9,824 4.23% 837,346 8,777 4.17%
Non-Interest-Earning Assets:
Allowance for loan losses (10,056) (9,519)
All other assets 83,244 75,277
Total Assets $994,899 $903,104
LIABILITIES & SHAREHOLDERS' EQUITY
Interest-Bearing Liabilities:
NOW deposits $200,298 239 0.47% $148,664 167 0.45%
Savings deposits 260,919 340 0.52% 228,862 281 0.49%
Money market deposits 63,557 27 0.17% 73,031 31 0.17%
Time deposits 126,566 463 1.45% 139,052 493 1.41%
Securities sold under agreements to repurchase 23,167 18 0.31% 18,995 15 0.31%
FHLB and other borrowings 26,159 157 2.38% 26,967 157 2.32%
Subordinated debt 9,876 164 6.64% 9,844 164 6.66%
Total Interest-Bearing Liabilities 710,542 1,408 0.79% 645,415 1,308 0.81%
Non-Interest-Bearing Liabilities:
Demand deposits 170,267 153,274
Other liabilities 8,351 7,144
Total Non-Interest-Bearing Liabilities 178,618 160,418
Stockholders’ Equity 105,739 97,271
Total Liabilities and Shareholders’ Equity $994,899 $903,104
NET INTEREST INCOME $8,416 $7,469
NET INTEREST SPREAD(3) 3.44% 3.36%
NET INTEREST MARGIN(4) 3.62% 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, 2017 September 30, 2016
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 $34,824 $257 0.99% $22,411 $84 0.50%
Investment securities 94,120 1,546 2.19% 82,346 1,235 2.00%
Loans, net of unearned fees(1) (2) 781,861 26,363 4.51% 715,260 24,335 4.54%
Total Interest-Earning Assets 910,805 28,166 4.13% 820,017 25,654 4.18%
Non-Interest-Earning Assets:
Allowance for loan losses (9,801) (9,117)
All other assets 79,867 77,185
Total Assets $980,871 $888,085
LIABILITIES & SHAREHOLDERS' EQUITY
Interest-Bearing Liabilities:
NOW deposits $196,748 682 0.46% $151,299 491 0.43%
Savings deposits 259,109 1,004 0.52% 226,877 829 0.49%
Money market deposits 63,029 80 0.17% 73,869 91 0.16%
Time deposits 131,380 1,404 1.43% 131,325 1,389 1.41%
Securities sold under agreements to repurchase 22,054 50 0.30% 18,713 44 0.31%
FHLB and other borrowings 24,976 449 2.40% 24,985 452 2.42%
Subordinated debt 9,868 493 6.68% 9,836 492 6.67%
Total Interest-Bearing Liabilities 707,164 4,162 0.79% 636,904 3,788 0.79%
Non-Interest-Bearing Liabilities:
Demand deposits 162,279 148,139
Other liabilities 7,801 7,470
Total Non-Interest-Bearing Liabilities 170,080 155,609
Shareholders’ Equity 103,627 95,572
Total Liabilities and Shareholders’ Equity $980,871 $888,085
NET INTEREST INCOME $24,004 $21,866
NET INTEREST SPREAD(3) 3.34% 3.39%
NET INTEREST MARGIN(4) 3.52% 3.56%

(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,
2017 2017 2017 2016 2016 2017 2016
Total shareholders' equity $106,567 $104,524 $102,406 $100,716 $98,594 $102,406 $98,594
Less: goodwill and other tangibles (18,109) (18,109) (18,109) (18,109) (18,109) (18,109) (18,109)
Tangible common shareholders’ equity $88,458 $86,415 $84,297 $82,607 $80,485 $84,297 $80,485
Common shares outstanding 8,454 8,429 8,389 8,365 8,358 8,454 8,358
Book value per common share $12.60 $12.40 $12.21 $12.04 $11.80 $12.60 $11.80
Book value per common share $12.60 $12.40 $12.21 $12.04 $11.80 $12.60 $11.80
Effect of intangible assets (2.14) (2.15) (2.16) (2.16) (2.17) (2.14) (2.17)
Tangible book value per common share $10.46 $10.25 $10.05 $9.88 $9.63 $10.46 $9.63
Return on average assets 0.89%0.87%0.76%1.08%1.16%0.84%0.91%
Effect of average intangible assets 0.02%0.01%0.01%0.02%0.03%0.02%0.02%
Return on average tangible assets 0.91%0.88%0.77%1.10%1.19%0.86%0.93%
Return on average equity 8.39%8.26%7.18%10.25%10.81%7.96%8.48%
Effect of average intangible assets 1.74%1.75%1.56%2.28%2.48%1.68%1.98%
Return on average tangible equity 10.13%10.01%8.74%12.53%13.29%9.64%10.46%


Source: Two River Bancorp