MARLTON, N.J.--(BUSINESS WIRE)-- Liberty Bell Bank (OTC:LBBB) today reported net income of $136,000 for the three months ended September 30, 2017, compared to net income of $58,000 for the same period in 2016, an increase of $78,000. Net income for the nine months ended September 30, 2017 was $179,000, an improvement of $44,000 as compared to net income of $135,000 for the same period in 2016. At September 30, 2017, our common equity tier 1 capital to risk-weighted assets ratio was 9.35%, our leverage ratio was 6.74%, our tier 1 capital to risk weighted assets ratio was 9.35%, and our total risk based capital ratio was 10.47%.
As previously reported, on July 20, 2017, Liberty Bell Bank and Delmar Bancorp signed a definitive merger agreement pursuant to which Liberty Bell Bank will be merged into Delmar Bancorp’s subsidiary, The Bank of Delmarva, subject to the satisfaction of certain conditions including shareholder and regulatory approval. The transaction is expected to be completed in the first quarter of 2018.
The increase in the Bank’s net income for this quarter over the same quarter in 2016 was due primarily to an increase of $132,000 in its net interest income before the provision for loan losses, partially offset by a $46,000 increase in non-interest expense, a $6,000 decrease in non-interest income and an increase of $5,000 in the Bank’s provision for loan losses. The Bank’s provision for income taxes decreased $3,000 in the third quarter of 2017.
The increase in net interest income was due to a $152,000 increase in interest and fees from loans due primarily to an increase in average loan balances outstanding for the quarter of $10.9 million as compared to the comparable 2016 quarter, as well as a $14,000 increase in interest earned from investments and cash and cash equivalents. In addition to the positive impact on interest income due to a higher average loan balance, the interest yield from the loan portfolio increased 0.05% to 4.83% for the third quarter of 2017 from 4.78% for the third quarter of 2016.
Interest expense from interest paid on deposits increased by $34,000 due to an increase in the average rate paid on deposits from 0.68% in last year’s third quarter to 0.77% this quarter caused by an increase in the rate of interest paid on the Bank’s certificates of deposit. In addition, the average balance in the Bank’s interest-bearing accounts increased $679,000 to $112.6 million for the quarter ended September 30, 2017.
The $46,000 increase in non-interest expense was due primarily to a $33,000 increase in legal expenses, which is primarily attributable to the merger, and a $20,000 increase in compensation expense due primarily to an increase in salary expenses. In addition, marketing expense increased $17,000 as the Bank continues to support local non-profit organizations, miscellaneous expenses increased $11,000, expenses related to professional fees increased $8,000, director fees increased $3,000 and communication expenses increased $2,000. Partially offsetting these negative variances, insurance expense, primarily deposit insurance expense, decreased $23,000, data processing expenses decreased $8,000, expenses related to other real estate decreased $6,000, audit expenses decreased $6,000 and expenses for equipment and occupancy decreased $3,000 and $2,000, respectively.
Net interest margin for the third quarter of 2017 was 3.67%, an increase of 0.25% from the 3.42% net interest margin for the third quarter of 2016. The increase in the net interest margin resulted from an increase of 0.25% in the yield from earning assets, primarily the loan portfolio.
The $44,000 net income improvement for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, can be primarily attributed to an increase in net interest income before the provision for loan losses of $335,000, a decline in non-interest expense of $90,000, and a decline in the provision for income taxes of $40,000. An increase in the provision for loan losses of $300,000 primarily to replenish the allowance for loan losses after the charge-off of a non-accruing loan, a decline in gains from the sale of securities of $68,000, a decrease in loan and deposit fee income of $44,000 and a $9,000 loss from the sale of other real estate all partially reduced the impact of the favorable variances.
The $335,000 increase in net interest income before the provision for loan losses was mainly due to a $364,000 increase in interest income, partially offset by an increase of $29,000 in interest expense. The $364,000 increase in interest income was primarily from an increase on interest earned from loans of $379,000 due primarily to a $10.8 million increase in the average loan balance outstanding, and an increase in interest from cash and cash equivalents, primarily at the Federal Reserve Bank, of $18,000 due to an increase of 0.44% in the interest yield earned from 0.47% to 0.91%. These positive variances were partially offset by a decline in interest earned from investment securities of $33,000. The increase in interest expense was primarily due an increase in the average rate paid on interest-bearing deposits from 0.68% in last year’s first nine months to 0.72% this year-to-date, caused by an increase in the rate of interest paid on the Bank’s certificates of deposit. However, the average balance in interest-bearing deposits decreased $2.2 million to $115.4 for the nine months ended September 30, 2017.
The decline of $33,000 in interest earned from investment securities was due primarily to a $3.9 million decrease in the average investment balance outstanding, as the bank sold securities primarily to fund the growth in loans and to monetize gains in the portfolio. However, the interest yield from the investment securities portfolio increased 12 basis points from 1.50% to 1.62%.
The $90,000 decrease in other expenses for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016 was due primarily to a $95,000 decrease in insurance expenses, primarily deposit insurance expense, a $43,000 decrease in expenses related to other real estate owned, a $20,000 decrease in audit fees, and a $19,000 decrease in equipment and occupancy expenses. Partially offsetting these positive variances, compensation and benefits expense increased $33,000, primarily due to salary expense, miscellaneous expenses increased $19,000, marketing expenses increased $16,000, legal fees increased $14,000, primarily attributable to the merger, and director fees increased by $9,000.
Net interest margin for the nine months ended September 30, 2017 was 3.62%, an increase of 0.29% from the 3.33% net interest margin for the nine months ended September 30, 2016. The increase in the net interest margin resulted from an increase of 0.32% in the yield generated from interest-earning assets partially offset by an increase of 0.03% in the rate paid for deposits and borrowings Total assets at September 30, 2017 were $147.6 million, representing a decrease of $2.0 million from $149.6 million at December 31, 2016. The decrease was due primarily to a $4.4 million decrease in cash and cash equivalents, primarily in an interest-bearing account at the Federal Reserve Bank, and a $935,000 reduction in investment securities and a $68,000 decrease in other assets. Partially offsetting these negative variances, loans increased $3.4 million.
Total deposits decreased by $1.6 million to $134.5 million at September 30, 2017 from $136.2 million at December 31, 2016. This was primarily due to a $3.5 million decrease in interest-bearing accounts, offset by a $1.9 million increase in non-interest bearing accounts.
The decrease in interest-bearing deposit accounts of $3.5 million was due primarily to money market deposit accounts which decreased $2.9 million. Savings accounts also decreased $1.4 million and interest bearing checking accounts decreased $1.6 million. Attracting and maintaining money market deposits has become increasingly competitive. The Bank has been successful in replacing the decrease in money market accounts with certificates of deposits from its local marketplace. Certificates of deposit increased $2.5 million from December 31, 2016.
At September 30, 2017, our non-performing assets totaled $3.6 million which represents a decrease of $500,000 since December 31, 2016. Other real estate owned totaled $1.9 million at September 30, 2017 and December 31, 2016. The Bank’s Texas Ratio was 31.63% at September 30, 2017 as compared to 36.65% at December 31, 2016.
The Bank’s President and Chief Executive Officer, Benjamin Watts indicated “We continue to see improvement in our loan growth, which has translated into good growth in our interest income. Coupled with our efforts to reduce expenses, this has allowed us to steadily continue to improve our earnings despite incurring the one-time expenses related to our merger with Delmar.” The Chairman of the Board of Directors of the Bank, William Dunkelberg, added, “Management produced one or our most profitable quarters ever. Our merger with Delmarva will permit us to operate more profitably in the lending market while spreading the fixed costs of operation over a larger base of operations.”
Set forth below is certain selected balance sheet and income statement data at September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016.
|SELECTED BALANCE SHEET DATA|
|(Unaudited, in thousands)||September 30,||December 31,|
|Cash and cash equivalents||$||9,703||$||14,090|
|Net loans receivable||122,900||119,468|
Common Equity Tier 1 Capital to Risk Weighted Assets
|Tier 1 Capital to Risk Weighted Assets||9.35||%||9.15||%|
|Total Risk Based Capital||10.47||%||10.31||%|
|SELECTED INCOME STATEMENT DATA|
|(Unaudited, in thousands except per share data)|
Quarter ended September 30,
Nine months ended September 30,
|Net interest income||$||1,326||$||1,194||$||3,899||$||3,564|
|Provision for loan losses||30||25||355||55|
|Gain (Loss) on sale of securities||0||0||0||72|
|Other Non-interest income||158||167||497||540|
|Loss on write-down or sale of ORE||0||4||9||4|
|Provision (credit) for income taxes||0||3||(17||)||23|
|Earnings per share:|
Liberty Bell Bank is a full-service, state-chartered commercial bank, whose deposits are insured by the Federal Deposit Insurance Corporation (FDIC). The Bank provides diversified financial products through two locations in Burlington County, New Jersey and one location in Camden County, New Jersey.
The Bank may from time to time make written or oral “forward-looking statements”, including statements contained in this release. Such statements are not historical facts and include expressions about management's strategies, views and expectations about its programs and products, pending transactions, relationships, opportunities, technology and market conditions. Actual results may differ materially from such forward-looking statements, and no undue 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; stronger competition; insufficient allowance for credit losses; a higher level of net loan charge-offs and delinquencies than anticipated; material adverse changes in the Bank’s operations or earnings; a decline in the economy; 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; the inability to increase our loan portfolio; the inability to increase our capital to sustain our growth and meet regulatory requirements; changes in laws and regulations; adoption, interpretation and implementation of new accounting pronouncements; operational risks, including the risk of fraud by employees and customers; the ability to obtain required regulatory and shareholder approvals to complete its merger with The Bank of Delmarva; the ability to complete such merger as expected and within the expected timeframe; and the possibility that one or more of the conditions to the completion of such merger may not be satisfied. and other factors, many of which are beyond the Bank's control. The words “may”, “could”, “should”, “would”, “will”, “project”, “continue”, “believe”, “anticipate”, “expect”, “intend”, “plan”, and similar expressions are intended to identify forward-looking statements. All such statements are made in good faith by the Bank pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. The Bank does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Bank.
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Liberty Bell Bank
Dennis A. Costa, 856-830-1134
Source: Liberty Bell Bank