Two River Bancorp Reports Higher Net Income and Solid Loan Growth in the Third Quarter of 2016

TINTON FALLS, N.J., Oct. 25, 2016 (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, 2016.

Third Quarter 2016 Operating and Financial Highlights

  • Net income available to common shareholders increased 57.7% to $2.64 million, or $0.33 per diluted share, up from $1.68 million, or $0.21 per diluted share, in the corresponding prior year’s quarter.
  • During the period, the Company received a tax-free Bank Owned Life Insurance (“BOLI”) death benefit of $862,000, or $0.11 per diluted share, which was included in non-interest income. The receipt of this benefit positively affected several quarterly and year-to-date metrics.
  • Non-interest income increased 137.2% to $1.98 million compared to the same period in 2015 as a result of the BOLI benefit, higher gains on the sale of SBA loans and other loan fees.
  • Non-performing assets to total assets decreased to 0.20% at September 30, 2016, from 0.42% at December 31, 2015 and 0.50% at September 30, 2015. Non-performing assets at September 30, 2016 have declined by $1.7 million, or 48.5%, from December 31, 2015.
  • Return on average assets (ROAA) was 1.16% for the third quarter of 2016, compared to 0.78% for the previous quarter and 0.79% for the same prior year’s quarter. 

  • Return on average equity (ROAE) was 10.81% for the three months ended September 30, 2016, compared to 7.28% for the previous quarter and 6.95% for the same prior year’s quarter.
  • Tangible book value per share was $10.11 at September 30, 2016, compared to $9.44 at December 31, 2015, and $9.28 at September 30, 2015.
  • Total assets at September 30, 2016 were $909.2 million, compared with $863.7 million at December 31, 2015.
  • Total loans as of September 30, 2016 were $754.0 million, an increase of $60.8 million, or 8.8% (11.7% annualized), from December 31, 2015, predominantly due to growth in both the commercial real estate and residential mortgage sectors.
  • Total deposits as of September 30, 2016 were $739.2 million, an increase of $30.8 million, or 4.3% (5.8% annualized), compared with $708.4 million as of December 31, 2015.  

Management Commentary
William D. Moss, President and CEO, stated, “Our third quarter core results are indicative of a continued commitment to achieving long-term sustainable growth, profitability, and shareholder value without compromising asset quality. We experienced annualized loan growth of 11.7% and deposit growth of 5.8%, reflecting our strong commitment to fostering customer relationships within our core markets.  The increase in net interest income over the past several quarters primarily reflects this growth in the loan portfolio despite a challenging rate environment. The tax-free BOLI benefit positively affected our non-interest income and earnings during the quarter; however, we achieved strong growth in core operations excluding this item. Non-interest income increased by over 34%, excluding the BOLI benefit, and we continued positive momentum in our core earnings.  The Bank concluded the third quarter with a favorable credit profile, ample liquidity, and a strong pipeline of potential new business.”

Dividend Information
On October 19, 2016, the Company’s Board of Directors declared a quarterly cash dividend of $0.04 per share, payable on November 30, 2016 to shareholders of record as of the close of business on November 9, 2016. This marks the 15th consecutive quarterly cash dividend paid by the Company to its shareholders.  

Key Quarterly Performance Metrics

  3rd Qtr.     2nd Qtr.   1st Qtr. 4th Qtr. 3rd Qtr. 9 Mo.
Ended
9 Mo.
Ended
2016     2016   2016 2015 2015 9/30/2016 9/30/2015
Net Income (in thousands) $ 2,644   $ 1,727   $ 1,693   $ 1,751   $ 1,692   $ 6,064       $  4,596  
   
 
 
Net Income Available to Common Shareholders (in thousands) $ 2,644   $ 1,727   $ 1,693   $ 1,739   $ 1,677   $ 6,064       $  4,551  
Earnings per Common Share – Diluted $ 0.33   $ 0.21   $ 0.21   $ 0.21   $ 0.21   $ 0.75       $  0.56  
Return on Average Assets   1.16 %   0.78 %   0.78 %   0.81 %   0.79 %   0.91 %       0.75 %
Return on Average Tangible Assets (1)   1.19 %   0.80 %   0.80 %   0.83 %   0.80 %   0.93 %       0.76 %
Return on Average Equity   10.81 %   7.28 %   7.25 %   7.14 %   6.95 %   8.48 %       6.44 %
Return on Average Tangible Equity (1)   13.29 %   8.98 %   8.98 %   8.78 %   8.55 %   10.46 %       7.94 %
Net Interest Margin   3.55 %   3.57 %   3.57 %   3.65 %   3.65 %   3.56 %       3.69 %
Non-Performing Assets to Total Assets   0.20 %   0.22 %   0.22 %   0.42 %   0.50 %   0.20 %       0.50 %
Allowance as a % of Loans   1.25 %   1.30 %   1.27 %   1.26 %   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, 2016 and December 31, 2015 are as follows:  

     
    (In Thousands)
    September 30,
2016
    December 31,
2015
 
Commercial and industrial   $   103,050     $   100,154  
Real estate – construction     102,658       104,231  
Real estate – commercial     467,118       422,665  
Real estate – residential     54,580       39,524  
Consumer     27,162       27,136  
Unearned fees     (586 )     (560 )
      753,982       693,150  
Allowance for loan losses     (9,452 )     (8,713 )
Net Loans   $   744,530     $   684,437  

Deposit Composition
The components of the Company’s deposits at September 30, 2016 and December 31, 2015 are as follows:  


 
   
    (In Thousands)
    September 30,
2016
    December 31,
 2015
 
Non-interest bearing   $   152,412     $   144,627  
NOW accounts     138,162       148,373  
Savings deposits     234,326       222,091  
Money market deposits     73,286       75,323  
Listed service CD’s     47,896       33,261  
Time deposits / IRA     55,443       46,902  
Wholesale deposits     37,722       37,859  
  Total Deposits   $   739,247     $   708,436  

2016 Third Quarter and First Nine Month Financial Review

Net Income
Net income available to common shareholders for the three months ended September 30, 2016 was $2.64 million, or $0.33 per diluted common share, compared to $1.68 million, or $0.21 per diluted common share, for the same period last year, an increase of 57.7%. The increase was largely due to both higher net interest income and non-interest income, which included the previously noted BOLI benefit of $862,000, or $0.11 per diluted common share, which was partially offset by a higher loan loss provision.  Expenses during this period were unchanged. On a linked quarter basis, third quarter 2016 net income available to common shareholders increased 53.1% from the second quarter of 2016.

Net income available to common shareholders for the nine months ended September 30, 2016 increased 33.2% to $6.06 million, or $0.75 per diluted common share, compared to $4.55 million, or $0.56 per diluted common share, in the same prior year period.

Net Interest Income
Net interest income for the quarter ended September 30, 2016 was $7.47 million, an increase of 3.1% compared to $7.25 million in the corresponding prior year period. This increase was largely due to an increase of $49.5 million, or 6.3%, in average interest earning assets, primarily attributable to growth in the Company’s loan portfolio. On a linked quarter basis, net interest income increased $200,000, or 2.8%, from $7.27 million.

For the first nine months of 2016, net interest income increased 4.4% to $21.9 million from $21.0 million in the same prior year period.

Net Interest Margin
The Company reported a net interest margin of 3.55% for the third quarter of 2016, slightly less than the 3.57% in the second quarter of 2016 and 3.65% reported for the third quarter of 2015. 

The net interest margin for the first nine months of 2016 was 3.56%, compared to 3.69% in the prior year period.

The 10 and 13 basis point declines in net interest margin from the third quarter and first nine months of 2015, respectively, were mainly due to the interest expense associated with the Company’s $10 million subordinated debenture placement, which was funded in December 2015 and accounted for approximately 8 basis points of the contraction. The subordinated debentures have a maturity date of December 31, 2025 and currently bear an annual interest rate of 6.25%.

Non-Interest Income
Non-interest income for the quarter ended September 30, 2016 totaled $1.98 million, an increase of $1.15 million, or 137.2%, compared to the same period in 2015. The increase included the receipt of a tax-free Bank Owned Life Insurance (“BOLI”) death benefit of $862,000. Additionally, the Company reported higher gains on the sale of SBA loans and other loan fees. Residential mortgage banking revenue was $316,000 during the third quarter of 2016, which was slightly lower than the $327,000 reported in the prior year period.  However, the 2015 period included a one-time $113,000 gain on the sale of $5.6 million in residential adjustable rate mortgage (“ARM”) loans.

On a linked quarter basis, non-interest income increased $817,000, or 70.1%, from $1.17 million in the second quarter of 2016 mainly due to the BOLI benefit. Residential mortgage banking revenue increased $35,000, or 12.5%, from $281,000 during the second quarter of 2016, while other loan fees increased by $126,000, due to higher loan prepayment fees.  However, gains on the sale of SBA loans decreased $249,000, or 68.2%, from $365,000 during the second quarter of 2016 due to the timing of loan closings.

For the nine months ended September 30, 2016, non-interest income increased $1.49 million, or 58.3%, to $4.04 million from the same period in 2015.

Non-Interest Expense
Non-interest expense for the quarter ended September 30, 2016 totaled $5.34 million, remaining largely flat from the same period in 2015 and on a linked quarter basis, as higher salaries and benefits were offset by lower other real estate owned (“OREO”) property expenses resulting primarily from a $250,000 recovery of settlement expenses from an OREO property.

For the nine months ended September 30, 2016, non-interest expense increased $269,000, or 1.7%, to $16.12 million compared to the same prior year period.

Provision for Loan Losses
During the quarter, a provision for loan losses of $470,000 was required, compared to $120,000 in the same prior year period. The Company recorded a specific allowance of $113,000 against one commercial loan whereby the underlying collateral value had been impaired by an environmental issue, which the Company fully charged off during the current quarter.  The remaining $357,000 of loan loss provision was to support the Company’s strong loan growth. 

For the first nine months of 2016, a provision of $860,000 was expensed, compared to $400,000 for the same prior year period. The Company had $121,000 of net loan charge-offs during the first nine months of 2016, compared to $40,000 in net loan recoveries in the same prior year period.

The Bank continues to be proactive in identifying troubled credits early, to record charge-offs promptly based on current collateral values, and to maintain an adequate allowance for loan losses. The Company closely monitors local and regional real estate markets in its core Monmouth, Middlesex, Union and Ocean County, New Jersey market areas and other risk factors related in its loan portfolio.

As of September 30, 2016, the Company’s allowance for loan losses was $9.45 million, as compared to $8.71 million as of December 31, 2015. The loss allowance as a percentage of total loans was 1.25% at September 30, 2016 compared to 1.26% at December 31, 2015.

Financial Condition / Balance Sheet

At September 30, 2016, 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 9.11%, common equity Tier 1 to risk weighted assets ratio was 10.10%, Tier 1 capital to risk weighted assets ratio was 10.10%, and total capital to risk weighted assets ratio was 12.54%.

Total assets as of September 30, 2016 were $909.2 million, compared to $863.7 million as of December 31, 2015.

Total loans as of September 30, 2016 were $754.0 million, compared to $693.2 million reported at December 31, 2015.

Total deposits as of September 30, 2016 were $739.2 million, compared to $708.4 million as of December 31, 2015. Core checking deposits at September 30, 2016 decreased slightly to $290.6 million compared to $293.0 at year-end 2015, due primarily to seasonality in municipal relationships. The Company continues to focus on building core funded non-interest bearing deposit relationships.

Asset Quality
The Company’s non-performing assets at September 30, 2016 decreased to $1.85 million as compared to $3.59 million at December 31, 2015 and $4.18 million at September 30, 2015. Non-performing assets to total assets at September 30, 2016 declined to 0.20%, compared to 0.42% at December 31, 2015, and 0.50% at September 30, 2015.

Non-accrual loans decreased to $1.59 million at September 30, 2016, compared to $3.18 million at December 31, 2015 and $3.68 million at September 30, 2015.  OREO was $259,000 at September 30, 2016, compared to $411,000 at December 31, 2015 and $495,000 at September 30, 2015. 

Troubled debt restructured loan balances amounted to $8.52 million at September 30, 2016, with all but $157,000 performing.  This compared to $10.84 million at December 31, 2015 and $12.87 million at September 30, 2015.

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 15 branches and 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, 2015. 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, 2016 and 2015
 (in thousands, except per share data)
 
    Three Months Ended
September 30,
  Nine Months Ended
September 30,
 

 

      2016       2015     2016       2015  
INTEREST INCOME:                      
Loans, including fees   $   8,337     $ 7,834   $   24,335     $ 22,720  
Securities:                      
Taxable     187       178     571       607  
Tax-exempt     234       188     664       412  
Interest bearing deposits     19       18     84       58  
Total Interest Income     8,777       8,218     25,654       23,797  
INTEREST EXPENSE:                      
Deposits     972       799     2,800       2,325  
Securities sold under agreements to repurchase     15       19     44       51  
Federal Home Loan Bank (“FHLB”) and other borrowings     157       155     452       468  
Subordinated debt     164           492        
Total Interest Expense     1,308       973     3,788       2,844  
Net Interest Income     7,469       7,245     21,866       20,953  
PROVISION FOR LOAN LOSSES     470       120     860       400  
Net Interest Income after Provision for Loan Losses     6,999       7,125     21,006       20,553  
NON-INTEREST INCOME:                      
Service fees on deposit accounts     154       142     427       433  
Mortgage banking     316       327     831       613  
Other loan fees     188       32     311       112  
Earnings from investment in bank owned life insurance     118       112     337       335  
Death benefit on bank owned life insurance     862           862        
Gain on sale of SBA loans     116       32     575       309  
Net realized gain on sale of securities           9     72       37  
Gain on sale of premises and equipment                     208  
Other income     229       182     627       506  
Total Non-Interest Income     1,983       836     4,042       2,553  
NON-INTEREST EXPENSES:                      
Salaries and employee benefits     3,309       3,198     9,609       9,318  
Occupancy and equipment     1,056       964     3,084       2,940  
Professional     273       272     888       718  
Insurance     56       74     160       249  
FDIC insurance and assessments     114       119     324       324  
Advertising     85       120     315       365  
Data processing     135       110     405       352  
Outside services fees     131       131     369       376  
Amortization of identifiable intangibles           10     9       38  
OREO expenses, impairment and sales, net     (245 )     (137 )   (271 )     (161 )
Loan workout expenses     44       65     142       278  
Other operating     381       382     1,081       1,049  
Total Non-Interest Expenses     5,339       5,308     16,115       15,846  
Income before Income Taxes     3,643       2,653     8,933       7,260  
INCOME TAX EXPENSE     999       961     2,869       2,664  
Net Income     2,644       1,692     6,064       4,596  
Preferred stock dividend           (15 )         (45 )
Net Income Available to Common Shareholders   $   2,644     $ 1,677   $   6,064     $ 4,551  
EARNINGS PER COMMON SHARE:                      
Basic   $   0.33     $ 0.21   $   0.77     $ 0.57  
Diluted   $   0.33     $ 0.21   $   0.75     $ 0.56  
Weighted average common shares outstanding:                      
Basic     7,926       7,930     7,923       7,932  
Diluted     8,131       8,130     8,109       8,130  

TWO RIVER BANCORP
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands, except share data)
 
  September 30,   December 31,  
  2016   2015  
ASSETS            
  Cash and due from banks $ 18,102   $ 21,566  
  Interest bearing deposits in bank   8,843     25,161  
   Cash and cash equivalents   26,945     46,727  
             
  Securities available for sale   31,366     33,530  
  Securities held to maturity   46,349     43,167  
  Restricted investments, at cost   4,962     3,596  
  Loans held for sale   2,561     3,050  
  Loans   753,982     693,150  
  Allowance for loan losses   (9,452 )   (8,713 )
  Net loans   744,530     684,437  
             
 OREO   259     411  
 Bank owned life insurance   20,889     17,294  
 Premises and equipment, net   4,835     5,083  
 Accrued interest receivable   1,928     1,912  
 Goodwill   18,109     18,109  
 Other intangible assets       9  
 Other assets   6,437     6,371  
             
  TOTAL ASSETS $ 909,170   $ 863,696  
             
LIABILITIES            
  Deposits:            
Non-interest bearing $ 152,412   $ 144,627  
Interest bearing   586,835     563,809  
   Total Deposits   739,247     708,436  
             
  Securities sold under agreements to repurchase   18,645     19,545  
  FHLB and other borrowings   35,300     26,500  
  Subordinated debt   9,847     9,824  
  Accrued interest payable   89     118  
  Other liabilities   7,448     6,271  
             
  Total Liabilities   810,576     770,694  
             
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 – 8,257,170 and 8,213,196 at September 30, 2016 and December 31, 2015, respectively            
 Outstanding – 7,959,938 and 7,929,196 at September 30, 2016 and December 31, 2015, respectively   73,181     72,890  
 Retained earnings   27,948     22,759  
 Treasury stock, at cost; 297,232 shares and 284,000 shares at September 30, 2016 and
  December 31, 2015, respectively
  (2,396 )   (2,248 )
  Accumulated other comprehensive loss   (139 )   (399 )
  Total Shareholders’ Equity   98,594     93,002  
             
  TOTAL LIABILITIES and SHAREHOLDERS’ EQUITY $ 909,170   $ 863,696  
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:   2016       2016       2015     2016       2015  
Total Interest Income $   8,777     $ 8,539     $ 8,218   $   25,654     $ 23,797  
Total Interest Expense   1,308       1,270       973     3,788       2,844  
Net Interest Income   7,469       7,269       7,245     21,866       20,953  
Provision for Loan Losses   470       390       120     860       400  
Net Interest Income after Provision for Loan Losses   6,999       6,879       7,125     21,006       20,553  
Other Non-Interest Income   1,983       1,166       836     4,042       2,553  
Other Non-Interest Expenses   5,339       5,379       5,308     16,115       15,846  
Income before Income Taxes   3,643       2,666       2,653     8,933       7,260  
Income Tax Expense   999       939       961     2,869       2,664  
Net Income   2,644       1,727       1,692     6,064       4,596  
Preferred Stock Dividend               (15 )         (45 )
Net Income Available to Common Shareholders $   2,644     $ 1,727     $ 1,677   $   6,064     $ 4,551  
                     
Per Common Share Data:                    
Basic Earnings $   0.33     $ 0.22     $ 0.21   $   0.77     $ 0.57  
Diluted Earnings $   0.33     $ 0.21     $ 0.21   $   0.75     $ 0.56  
Book Value $   12.39     $ 12.09     $ 11.57   $   12.39     $ 11.57  
Tangible Book Value (1) $   10.11     $ 9.81     $ 9.28   $   10.11     $ 9.28  
Average Common Shares Outstanding (in thousands):                    
Basic   7,926       7,927       7,930     7,923       7,932  
Diluted   8,131       8,110       8,130     8,109       8,130  

(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,    
    2016     2016     2016     2015     2015    
Total Assets $   909,170   $ 884,700   $ 881,857   $ 863,696   $ 842,269    
Investment Securities and Restricted Stock   82,677     84,246     83,376     80,293     82,081    
Total Loans   753,982     726,414     704,401     693,150     675,584    
Allowance for Loan Losses   (9,452 )   (9,418 )   (8,963 )   (8,713 )   (8,429 )  
Goodwill and Other Intangible Assets   18,109     18,109     18,109     18,118     18,128    
Total Deposits   739,247     726,264     727,104     708,436     690,665    
Repurchase Agreements   18,645     21,683     20,132     19,545     21,303    
FHLB and Other Borrowings   35,300     23,800     23,800     26,500     26,500    
Subordinated Debt   9,847     9,839     9,831     9,824        
Shareholders’ Equity   98,594     96,293     94,613     93,002     97,640    

Asset Quality Data (by Quarter)
(dollars in thousands)
 
  Sept. 30,   June 30,   March 31,   Dec. 31,   Sept. 30,    
    2016     2016     2016     2015     2015    
Nonaccrual Loans $   1,587   $   1,697   $   1,723   $   3,178   $   3,680    
OREO   259     259     259     411     495    
Total Non-Performing Assets   1,846     1,956     1,982     3,589     4,175    
                       
Troubled Debt Restructured Loans:                      
Performing   8,366     8,492     8,920     9,289     11,290    
Non-Performing   157     158     161     1,552     1,578    
                       
Non-Performing Loans to Total Loans   0.21 %   0.23 %   0.24 %   0.46 %   0.54 %  
Non-Performing Assets to Total Assets   0.20 %   0.22 %   0.22 %   0.42 %   0.50 %  
Allowance as a % of Loans   1.25 %   1.30 %   1.27 %   1.26 %   1.25 %  

Capital Ratios
           
    September 30, 2016   December 31, 2015  
  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 Bancorp 10.10  % 9.11 % 10.10 % 12.54 % 10.13 % 8.97 % 10.13 % 12.65 %
Two River Community Bank 11.28 % 10.18 % 11.28 % 12.46 % 11.39 % 10.09 % 11.39 % 12.56 %
“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, 2016   September 30, 2015
    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 $ 18,179   $ 19   0.42 %   $ 28,062   $ 18   0.25 %
Investment securities 83,541   421   2.02 %   80,533   366   1.82 %
Loans, net of unearned fees (1) (2) 735,626   8,337   4.51 %   679,279   7,834   4.58 %
                           
Total Interest Earning Assets 837,346   8,777   4.17 %   787,874   8,218   4.14 %
                           
Non-Interest Earning Assets:                          
Allowance for loan losses (9,519 )           (8,344 )        
All other assets 75,277             73,829          
                           
Total Assets $ 903,104               $ 853,359            
                           
LIABILITIES & SHAREHOLDERS’ EQUITY                          
Interest-Bearing Liabilities:                          
NOW deposits $ 148,664   167   0.45 %   $ 142,022   143   0.40 %
Savings deposits 228,862   281   0.49 %   229,999   278   0.48 %
Money market deposits 73,031   31   0.17 %   72,520   29   0.16 %
Time deposits 139,052   493   1.41 %   105,048   349   1.32 %
Securities sold under agreements to repurchase 18,995   15   0.31 %   23,907   19   0.32 %
FHLB and other borrowings 26,967   157   2.32 %   27,299   155   2.26 %
Subordinated debt 9,844   164   6.66 %        
                           
Total Interest Bearing Liabilities 645,415    1,308   0.81 %   600,795   973   0.64 %
                           
Non-Interest Bearing Liabilities:                          
Demand deposits 153,274              149,381          
Other liabilities 7,144             6,541          
                           
Total Non-Interest Bearing Liabilities 160,418             155,922          
                           
Stockholders’ Equity 97,271             96,642          
                           
Total Liabilities and Shareholders’ Equity $ 903,104               $ 853,359            
                           
NET INTEREST INCOME     $ 7,469             $ 7,245      
                           
NET INTEREST SPREAD (3)         3.36 %           3.50 %
                           
NET INTEREST MARGIN (4)         3.55 %           3.65 %

(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, 2016   September 30, 2015
    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 $ 22,411   $ 84   0.50 %   $ 30,754   $ 58   0.25 %
Investment securities 82,346   1,235   2.00 %   76,145   1,019   1.78 %
Loans, net of unearned fees (1) (2) 715,260   24,335   4.54 %   652,822   22,720   4.65 %
                           
Total Interest Earning Assets 820,017   25,654   4.18 %   759,721   23,797   4.19 %
                           
Non-Interest Earning Assets:                          
Allowance for loan losses (9,117 )           (8,192 )        
All other assets 77,185             72,167          
                           
Total Assets $ 888,085               $ 823,696            
                           
LIABILITIES & SHAREHOLDERS’ EQUITY                          
Interest-Bearing Liabilities:                          
NOW deposits $ 151,299   491   0.43 %   $ 126,284   402   0.43 %
Savings deposits 226,877   829   0.49 %   229,516   828   0.48 %
Money market deposits 73,869   91   0.16 %   72,050   86   0.16 %
Time deposits 131,325   1,389   1.41 %   102,088   1,009   1.32 %
Securities sold under agreements to repurchase 18,713   44   0.31 %   22,340   51   0.31 %
FHLB and other borrowings 24,985   452   2.42 %   27,236   468   2.30 %
Subordinated debt 9,836   492   6.67 %        
                           
Total Interest Bearing Liabilities 636,904   3,788   0.79 %   579,514   2,844   0.66 %
                           
Non-Interest Bearing Liabilities:                          
Demand deposits 148,139             142,326          
Other liabilities 7,470             6,380          
                           
Total Non-Interest Bearing Liabilities 155,609             148,706          
                           
Shareholders’ Equity 95,572             95,476          
                           
Total Liabilities and Shareholders’ Equity $ 888,085               $ 823,696            
                           
NET INTEREST INCOME     $ 21,866             $ 20,953      
                           
NET INTEREST SPREAD (3)         3.39 %           3.53 %
                           
NET INTEREST MARGIN (4)         3.56 %           3.69 %

(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,    
  2016   2016   2016   2015   2015   2016   2015    
Total shareholders’ equity $ 98,594   $ 96,293   $ 94,613   $ 93,002   $ 97,640   $ 98,594   $   97,640    
Less: preferred stock                   (6,000 )       (6,000 )  
Common shareholders’ equity $ 98,594   $ 96,293   $  94,613   $ 93,002   $ 91,640   $ 98,594   $ 91,640    
Less: goodwill and other tangibles   (18,109 )   (18,109 )   (18,109 )   (18,118 )   (18,128 )   (18,109 )   (18,128 )  
Tangible common shareholders’ equity $ 80,485   $ 78,184   $ 76,504   $ 74,884   $ 73,512   $ 80,485   $ 73,512    
                                             
Common shares outstanding   7,960     7,967     7,943     7,929     7,918     7,960     7,918    
Book value per common share $ 12.39   $ 12.09   $ 11.91   $ 11.73   $ 11.57   $ 12.39   $ 11.57    
                                             
Book value per common share $ 12.39   $ 12.09   $ 11.91   $ 11.73   $ 11.57   $ 12.39   $ 11.57    
Effect of intangible assets     (2.28 )     (2.28 )   (2.28 )   (2.29 )   (2.29 )   (2.28 )   (2.29 )  
Tangible book value per common share $ 10.11   $ 9.81   $ 9.63   $ 9.44   $ 9.28   $ 10.11   $ 9.28    
                               
Return on average assets 1.16 % 0.78 % 0.78 % 0.81 % 0.79 % 0.91 % 0.75 %  
Effect of intangible assets 0.03 % 0.02 % 0.02 % 0.02 % 0.01 % 0.02 % 0.01 %  
Return on average tangible assets 1.19 % 0.80 % 0.80 % 0.83 % 0.80 % 0.93 % 0.76 %  
                               
Return on average equity 10.81 % 7.28 % 7.25 % 7.14 % 6.95 % 8.48 % 6.44 %  
Effect of average intangible assets 2.48 % 1.70 % 1.73 % 1.64 % 1.60 % 1.98 % 1.50 %  
Return on average tangible equity 13.29 % 8.98 % 8.98 % 8.78 % 8.55 % 10.46 % 7.94 %  

CONTACT: Investor Contact:
Adam Prior, Senior Vice President
The Equity Group Inc.
Phone: (212) 836-9606
Email: aprior@equityny.com

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

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