Liberty Bell Bank Reports Fourth Quarter 2016 Results of Operations

MARLTON, N.J.--()--Liberty Bell Bank (OTC:LBBB) today reported net income of $67,000 for the three months ended December 31, 2016, compared to net income of $43,000 for the same period in 2015, an increase of $24,000. Net income for the year ended December 31, 2016 was $202,000, an improvement of $59,000 as compared to net income of $143,000 for the same period in 2015. At December 31, 2016, our common equity tier 1 capital to risk weighted assets, leverage, tier 1 capital to risk weighted assets and total risk based capital ratios all increased to 9.15%, 6.73%, 9.15% and 10.31%, respectively.

As previously announced, in February 2017 the Bank was notified by the Federal Deposit Insurance Corporation (FDIC) and the New Jersey Department of Banking and Insurance that the Consent Orders to which the Bank voluntarily consented in November 2013 with each of such regulators have been terminated.

Ben Watts, President and CEO, noted, "The lifting of the Consent Orders is a testament to the progress we have made in strengthening our operations.” He continued, "We thank our regulatory partners for their guidance through this process and commend our team, whose commitment to moving our bank forward has enabled us to reach this important milestone."

The increase in the Bank’s net income for this quarter over the same quarter in 2015 was due primarily to an increase in its net-interest income of $30,000, a decrease in non-interest expense of $56,000 and an increase in non-interest income of $7,000. However, partially offsetting these improvements, the Bank’s provision for loan losses increased $40,000 and the Bank had a gain on the sale of securities of $29,000 in the fourth quarter of 2015 compared to no securities gains in 2016.

The increase in net-interest income was due to $49,000 increase in interest and fees from loans partially offset by a $22,000 decrease in interest earned from investments and cash deposits at other banks. Also interest expense from interest paid on deposits decreased by $3,000 due to an increase in the average rate paid on deposits from 0.63% in last year’s quarter to 0.64% this quarter caused by an increase in the rate of interest paid on certificates of deposit accounts. In addition, the average balance in the Bank’s interest-bearing accounts decreased $7.3 million to $115.7 million for the quarter ended December 31, 2016.

The increase of $49,000 in interest and fees from loans was due primarily to an increase in average loan balances outstanding for the three months ended December 31, 2016 of $8.9 million as compared to the three months ended December 31, 2015. Partially offsetting the positive impact on interest income due to a higher average loan balance, the interest yield from the loan portfolio decreased 0.20% to 4.76% for the fourth quarter of 2016 from 4.96% for the fourth quarter of 2015.

The $56,000 decrease in non-interest expense was due primarily to insurance expenses, mainly relating to the Bank’s deposit insurance, decreasing $49,000. In addition, a $12,000 reduction in expenses relating to the Bank’s other real estate owned, a $10,000 decrease in compensation expense due to a reduction in salaries paid, and $14,000 and $9,000 decreases in expenses related to the amortization of leasehold improvements and equipment licensing fees, respectively, also contributed to lower non-interest expense. In addition, loan related expenses and other expenses decreased $4,000 and $3,000, respectively. Partially offsetting these positive variances, audit fees increased $16,000, director fees increased $13,000, legal fees increased $13,000, other professional fees increased $8,000, marketing expense increased $4,000 and printing expense increased $2,000. All of these increases were due to our improved operations and growth.

Net interest margin for the fourth quarter of 2016 was 3.48%, an increase of 0.17% from the 3.31% net interest margin for the fourth quarter of 2015. The improvement in the net interest margin resulted from an increase of 0.17% in the yield from earning assets, primarily deposits at other banks as the federal funds rate increased.

The $59,000 net income improvement for the year ended December 31, 2016 as compared to the year ended December 31, 2015 can be primarily attributed to an increase in gains from the sale of investment securities of $43,000, a $36,000 decrease in losses from the sale or write-down of other real estate and a $93,000 decline in other expenses. A decline in net interest income of $34,000, an increase in the provision for loan losses of $55,000, a decline in other non-interest income of $3,000 and an increase in the provision for income taxes of $21,000 partially reduced the impact of the favorable variances. The decline in other non-interest income was due primarily to the receipt in the third quarter of 2015 of $103,000 of other non-interest income associated with the sale of other real estate owned compared to no such proceeds in the third quarter of 2016.

The $34,000 decrease in net interest income was mainly due to a $42,000 increase in interest expense, as well as a $141,000 decrease in interest earned from investment securities partially offset by an increase of $48,000 in interest from cash and cash equivalents and a $101,000 increase in interest and fees from loans. The increase in interest expense was primarily due an increase in the average rate paid on deposits from 0.56% in 2015 to 0.58% this year-to-date caused by an increase in the rate of interest paid on money market deposit accounts and certificates of deposit. These increases were caused by increases in market rates generally. The average balance in deposit accounts decreased $201,000 to $116.5 million for the fourth quarter of 2016.

The decrease of $141,000 in interest earned from investment securities was due primarily to a $4.9 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. In addition, the interest yield from the investment securities portfolio decreased 36 basis points from 1.88% to 1.52%. The $48,000 increase in interest earned from interest-bearing cash deposits, primarily at the Federal Reserve Bank, was due to an increase of $3.1 million in average balances outstanding. The increase of $101,000 in interest and fees from loans was due primarily to a $5.3 million increase in average loan balances outstanding for 2016 as compared to 2015. Partially offsetting the impact of an increase in average loan balances outstanding, the interest yield for the loan portfolio decreased 15 basis points from 4.96% to 4.81%.

The $93,000 decrease in other expenses for the year ended December 31, 2016 as compared to the year ended December 31, 2015 was due primarily to a $107,000 decrease in compensation related expenses due to a reduction in staffing and lower medical insurance expense, a $69,000 decrease in equipment expenses due to data processing outsourcing and lower depreciation costs, a $74,000 decrease in expenses related to other real estate owned, a $44,000 decrease in occupancy expenses due to lower amortization of leasehold improvement expense, a $43,000 decrease in insurance expense primarily from a reduction of deposit insurance, a $16,000 decrease in marketing expense, and a $7,000 decrease in legal expense related to the positive results from Bank’s ongoing troubled asset reduction plan. In addition, loan related expenses decreased $10,000 and communication expenses decreased $3,000. Partially offsetting these positive variances, data processing expenses increased by $139,000 as the Bank outsourced data processing functions, director fees increased by $64,000, other professional fees increased by $34,000 and miscellaneous expenses increased by $25,000 and audit related expenses increased $18,000.

Net interest margin for the year ended December 31, 2016 was 3.36%, a decrease of 0.12% from the 3.48% net interest margin for the year ended December 31, 2015. The decrease in the net interest margin resulted from a decrease of 0.10% in the yield generated from interest-earning assets coupled with an increase of 0.02% in the rate paid for interest bearing deposits and borrowings

Total assets at December 31, 2016 were $149.6 million, representing a decrease of $1.8 million from $151.4 million at December 31, 2015. The decrease was due primarily to a $6.5 million reduction in investment securities, a $3.0 million decrease in cash and cash equivalents primarily in an interest-bearing account at the Federal Reserve Bank, a $759,000 decrease in other real estate and a $357,000 decrease in other assets. Partially offsetting these negative variances, loans increased $8.8 million.

Total deposits decreased by $2.0 million to $136.1 million at December 31, 2016 from $138.1 million at December 31, 2015. This was primarily due to a $4.5 million decrease in interest bearing accounts, offset by a $2.5 million increase in non-interest bearing accounts.

The decrease in interest-bearing deposit accounts of $4.5 million was due primarily to money market deposit accounts, which decreased $11.2 million. This decrease was partially offset by increases in certificates of deposit, savings and interest-bearing checking accounts of $5.4 million, $931,000 and $449,000, respectively. Attracting and maintaining money market deposits has become increasingly competitive. The Bank continues to be successful in replacing the decrease in money market accounts with certificates of deposits from its local marketplace.

At December 31, 2016, our adversely classified loans totaled $3.6 million, which represents a decrease of $1.8 million since December 31, 2015. Other real estate owned totaled $1.9 million at December 31, 2016, a decrease of $759,000 from December 31, 2015. The Bank’s Texas Ratio was 36.64% at December 31, 2016 as compared to 44.91% at December 31, 2015.

The Chairman of the Board of Directors of the Bank, William Dunkelberg added, “After the presidential election, the economy seems to be recovering its legs. 2016 was a good year for Liberty Bell, not so good for the economy, but there is renewed interest in growth which is presenting the Bank with lending and growth opportunities which our management team is taking full advantage of. 2017 is off to a great start and we expect continued improvement throughout the year.”

Set forth below is certain selected balance sheet and income statement data at December 31, 2016 and December 31, 2015 and for the three months and years ended December 31, 2016 and 2015.

 
SELECTED BALANCE SHEET DATA
(Unaudited, in thousands)
 

December 31,

 

December 31,

2016

2015

 
Cash and cash equivalents $

14,090

$

17,050

Investment securities

10,897

17,422

Net loans receivable

119,468

110,711

Total assets

149,576

151,402

Deposits

136,159

138,128

Shareholders’ equity

9,730

9,538

 
Capital Ratios:

Common Equity Tier 1 Capital to Risk Weighted Assets

9.15

%

8.85

%

Leverage Capital

6.73

%

6.44

%

Tier 1 Capital to Risk Weighted Assets

9.15

%

8.85

%

Total risk based capital

10.31

%

10.10

%

 
         
SELECTED INCOME STATEMENT DATA
(Unaudited, in thousands except per share data)
 

Quarter ended December 31,

Year ended December 31,

2016

2015

2016

2015

 
Net interest income $

1,226

$

1,196

$

4,790

$

4,824

Provision for loan losses

40

0

95

40

Gain on sale of securities

0

29

72

29

Other Non-interest income

123

116

664

667

Loss on write-down or sale of ORE

0

0

4

40

Other expenses

1,242

1,298

5,202

5,295

Provision for income taxes

0

0

23

2

Net income $

67

$

43

$

202

$

143

 
Earnings per share:
Basic $

0.01

$

0.01

$

0.02

$

0.02

Diluted $

0.01

$

0.01

$

0.02

$

0.02

 

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; merger and acquisition activity, 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

Contacts

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