Liberty Bell Bank Reports Third Quarter 2015 Results of Operations

MARLTON, N.J.--()--Liberty Bell Bank (Other OTC: LBBB) today reported net income of $76,000 or $0.01 per diluted share for the three months ended September 30, 2015, compared to a net loss of $1.5 million or $(0.18) per diluted share for the same period in 2014, an improvement of $1.5 million or $0.19 per diluted share. Net income for the nine months ended September 30, 2015 was $100,000 or $0.01 per diluted share, an improvement of $2.5 million as compared to a net loss of $2.4 million or $(0.42) per diluted share for the same period in 2014. At September 30, 2015, the Bank is adequately capitalized by all regulatory measures.

“The Bank's dedicated staff has been successful in executing our troubled asset reduction plan as projected. The Bank continues to work out of our legacy loan problems resulting from the recession, and these remaining loan problems will continue to adversely impact earnings until fully resolved.”

“Our restructuring and capital enhancements undertaken in 2014 and throughout this year have positioned Liberty Bell Bank to deliver continued improvements in asset quality and loan growth,” observed Board Chairman William Dunkelberg. The Bank's President and Chief Executive Officer, Benjamin Watts, noted that, "The Bank's dedicated staff has been successful in executing our troubled asset reduction plan as projected. The Bank continues to work out of our legacy loan problems resulting from the recession, and these remaining loan problems will continue to adversely impact earnings until fully resolved."

For the quarter ended September 30, 2015, the Bank’s $30,000 provision for loan losses represented a decrease of $897,000 from the same period in 2014. In addition, the Bank’s net interest income increased by $132,000, as compared to the three months ended September 30, 2014. This was due to a $128,000 increase in interest and dividend income and a $4,000 reduction in interest expense from decreased interest expense on deposits. The increase in interest and dividend income was due primarily to an increase of $143,000 in interest and fees from loans partially offset by a decrease of $16,000 in interest earned from investments.

The increase of $143,000 in interest and fees from loans was due primarily to a $6.7 million increase in the average loan balances outstanding for the three months ended September 30, 2015 as compared to the three months ended September 30, 2014. In addition, the interest yield from the loan portfolio increased from 4.70% for the third quarter of 2014 to 4.94% for the same time period in 2015.

Non-interest income for the quarter ended September 30, 2015 also increased by $128,000 over the prior year’s third quarter. Loan related fee income increased $36,000 primarily from the sale of residential first mortgage loans, from $58,000 for the three months ended September 30, 2014 to $93,000 for the three months ended September 30, 2015. Deposit account related and other fee income increased $92,000 from $59,000 to $151,000, primarily due to proceeds associated with the sale of other real estate owned of $103,000.

The Bank’s loss on the sale and write down of other real estate decreased by $126,000 and its non-interest expenses decreased by $235,000, both as compared to the third quarter of 2014. The $235,000 decrease in non-interest expense was due primarily to a $94,000 decrease in other operating expenses and a $105,000 decrease in compensation expense. In addition, decreases in expenses related to other real estate owned, occupancy, and equipment of $15,000, $6,000, and $22,000, respectively, contributed to lower non-interest expense. Marketing expense increased $7,000. The $94,000 decrease in other operating expenses was due primarily to a $72,000 decrease in legal expenses primarily related to troubled assets, a $19,000 decrease in other professional fees primarily related to consent order compliance and a $30,000 decrease in loan related expenses. Decreases in director fee expense, printing and supply costs, and insurance expense of $12,000, $5,000, and $4,000, respectively, also contributed to lower other operating costs. Income tax expense also decreased $9,000. Partially offsetting these positive variances, information technology expense increased $39,000 as the Bank outsourced core processing functions and enhanced network functionality and security. In addition, audit expenses and correspondent bank expense increased $3,000 each, while telephone, postage and miscellaneous expenses also increased $6,000.

Net interest margin for the third quarter of 2015 was 3.53%, an increase of 0.47% from the 3.06% net interest margin for the third quarter of 2014. The improvement in the net interest margin resulted from an improvement of 0.49% on its yield from earning assets partially offset by a reduction of 0.02% in the rate paid for interest bearing deposits and borrowings.

The net income improvement of $2.5 million for the nine months ended September 30, 2015 as compared to the nine months ended September 30, 2014 can be primarily attributed to a $518,000 reduction in the loss from the sale and write down of other real estate owned, a $1.1 million lower provision for loan losses and a $511,000 decrease in non-interest expenses. In addition, higher loan related fees of $137,000, primarily from an SBA loan sale and the sale of residential first mortgage loans, contributed to improved earnings, as did lower income tax expenses of $25,000. Net interest income increased $118,000 while deposit account related and other fee income decreased $16,000.

The increase of $118,000 in net interest income was due to a $128,000 increase in interest and fees from loans and a $44,000 decrease in interest expense, primarily resulting from a decrease of interest expense on deposits. These positive results were partially offset by a $54,000 reduction in interest earned from investments.

The increase of $128,000 in interest and fees from loans was due primarily to a $3.1 million increase in the average loan balances outstanding for the nine months ended September 30, 2015 as compared to the nine months ended September 30, 2014. The yield from the loan portfolio also increased from 4.94% to 4.96%. The decrease of $44,000 in interest expense was due primarily to a $7.5 million decrease in the average deposit balances outstanding for the nine months ended September 30, 2015 as compared to the nine months ended September 30, 2014. The decrease in interest earned from investments was due primarily to a $6.2 million decrease in the average investment balance outstanding, as the bank sold securities primarily to fund the growth in loans.

The $511,000 decrease in non-interest expense for the nine months ended September 30, 2015 as compared to the nine months ended September 30, 2014 was due primarily to a $158,000 decrease in legal expense related to the Bank’s ongoing troubled asset reduction plan, a $94,000 decrease in professional fees primarily related to fees incurred in 2014 in complying with the terms of the Bank’s Consent Order, a $93,000 reduction in compensation expense, a $36,000 decrease in miscellaneous expenses, a $45,000 decrease in expenses related to other real estate owned, a $33,000 decrease in equipment expenses due to reduced equipment maintenance costs, a $31,000 decrease in occupancy expense due to lower real estate taxes, a $42,000 reduction in loan related expenses and a $25,000 decrease in insurance expense primarily due to lower deposit insurance premiums. In addition, director fees, correspondent bank expense, and printing and supplies expenses declined $30,000, $5,000, and $15,000, respectively. Partially offsetting these positive variances, information technology expense increased $46,000 as the Bank outsourced some data processing functions, communication related expenses increased $29,000 as the Bank improved its communications network, and auditing expenses increased $18,000.

Net interest margin for the nine months ended September 30, 2015 was 3.54%, an increase of 0.24% from the 3.30% net interest margin for the nine months ended September 30, 2014. The improvement in the net interest margin resulted from an improvement of 0.22% in the yield generated from interest-earning assets coupled with a reduction of 0.02% in the rate paid for interest bearing deposits and borrowings.

Total assets at September 30, 2015 were $144.5 million, representing a decrease of $3.6 million from $148.1 million at December 31, 2014. The decrease was due primarily to reduction in cash and cash equivalents of $4.8 million caused primarily by a $3.6 million reduction in deposits discussed below and the need to fund the Bank’s $5.3 million increase in net loans from $101.7 million at December 31, 2014 to $107.0 million at September 30, 2015. In addition, investment securities decreased $1.8 million (also largely in order to fund loan growth), other real estate owned decreased $1.8 million, bank premises and equipment decreased $221,000 and other assets decreased $252,000.

The total deposits decrease of $3.6 million to $131.8 million at September 30, 2015 from $135.4 million at December 31, 2014, was primarily due to a $5.4 million decrease in non-interest bearing accounts, offset in part by a $1.8 million increase in interest bearing accounts.

The increase in interest-bearing deposit accounts of $1.8 million was due primarily to certificates of deposit which increased $2.0 million from $52.1 million at December 31, 2014 to $54.1 million at September 30, 2015. Interest bearing checking accounts, including money market accounts, decreased $922,000 and savings accounts increased $728,000.

At September 30, 2015, our adversely classified loans totaled $7.4 million which represents a decrease of $284,000 since December 31, 2014. Other real estate owned totaled $2.7 million at September 30, 2015, a decrease of $1.8 million from December 31, 2014.

Set forth below is certain selected balance sheet and income statement data at September 30, 2015 and December 31, 2014 and for the three and nine months ended September 30, 2015 and 2014.

               
SELECTED BALANCE SHEET DATA
(Unaudited, in thousands) September 30, December 31,

2015

2014

 
Cash and cash equivalents $ 13,546 $ 18,343
Investment securities 17,959 19,805
Net loans receivable 107,028 101,683
Total assets 144,542 148,141
Deposits 131,780 135,421
Shareholders’ equity 9,192 8,904
 
Capital Ratios:

Common Equity Tier 1 Capital to Risk Weighted Assets

8.59 % N/A
Leverage Capital 6.43 % 6.28 %
Tier 1 Capital to Risk Weighted Assets 8.59 % 8.89 %
Total risk based capital 9.84 % 10.14 %
 
 
SELECTED INCOME STATEMENT DATA
(Unaudited, in thousands except per share data)
 

Quarter ended September 30,

Nine months ended September 30,

2015

2014

2015

2014

 
Net interest income $ 1,209 $ 1,077 $ 3,628 $ 3,510
Provision for loan losses 30 927 40 1,137
Other Non-interest income 245 117 552 329
Loss on sale and write-down of ORE 43 167 43 561
Other expenses 1,305 1,540 3,995 4,506
Provision for income taxes 0 10 2 27
Net income $ 76 $ (1,450 ) $ 100 $ (2,392 )
 
Earnings per share:
Basic $ 0.01 $ (0.17 )
Diluted $ 0.01 $ (0.18 )
 

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 confidence and strategies and management's current views and expectations about new and existing programs and products, relationships, opportunities, taxation, 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 from banks, other financial institutions and other companies; 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 in our primary 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; 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, including issues related to compliance with anti-money laundering and the bank secrecy act laws; adoption, interpretation and implementation of new or pre-existing accounting pronouncements; operational risks, including the risk of fraud by employees and customers; the inability to successfully implement our strategic plan as well as new lines of business or new products and services .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.

Contacts

Liberty Bell Bank
Dennis A. Costa, 856-830-1134

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