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Liberty Bell Bank Reports Second Quarter 2014 Results of Operations

MARLTON, N.J.--(BUSINESS WIRE)--Liberty Bell Bank (OTCQB:LBBB) today reported a net loss of $493,000 or $(0.09) per diluted share for the three months ended June 30, 2014, compared to a net loss of $2.6 million or $(0.77) per diluted share for the same period in 2013, a decreased loss amount of $2.1 million or $0.68 per diluted share. The weighted average diluted shares for the three months ended June 30, 2014 was 5,774,570 compared to 3,062,102 for the three months ended June 30, 2013. The increase was the result of a stock offering in which 5,000,000 common shares were sold, which closed on May 12, 2014. The net loss for the six months ended June 30, 2014 was $942,000 or $(0.21) per diluted share, compared to a net loss of $2.4 million or $(0.78) per diluted share for the same period in 2013. The weighted average diluted shares for the six months ended June 30, 2014 was 4,442,169 compared to 3,060,414 for the six months ended June 30, 2013. At June 30, 2014, the Bank is adequately capitalized by all regulatory measures.

“We are cleaning up our problems and look forward to starting 2015 with our new capital and few reminders of the recession.”

The loss of $493,000 in the second quarter of 2014 was due primarily to:

  • a loss on the sale of other real estate owned of $214,000,
  • an additional provision for loan losses of $67,000 to replenish our allowance for loan losses after its reduction to absorb a loss of $145,000 related to the sale of property securing a $1.5 million non-accrual loan,
  • additional legal expenses of $35,000 related to the loan relationship with the customer who perpetrated the large check kite against the Bank in 2013,
  • $60,000 of nonrecurring expense associated with our other real estate owned, and
  • miscellaneous reductions in interest income totaling $15,000 recognized in the second quarter of 2014
  • $43,000 in professional fees to support development of plan to address regulatory recommendations and a strategic plan
  • Expenses of $27,000 incurred to perform maintenance and address environmental issues on properties serving as collateral for non-accrual loans
  • Higher FDIC insurance premium of $24,000 as a result of adequate capital designation

“We are excited to move into the second half of 2014 with $4.9 million of new capital that will allow us to resolve our problem loans more quickly, and move back into profitability," said CEO Kevin Kutcher. He added, “We expect losses to continue going forward as we resolve our remaining problem assets. However, our cost of funds continues to decline, which supports our net interest margin in a very difficult rate environment. As the economy continues to improve, we hope to resolve the bulk of the recession-related loan problems by the end of the year and start 2015 with few problems left over from the recession. We continue to increase our marketing and business development efforts, as we believe with the improved economy, our market is ripe for our local community bank business model.” Chairman Bill Dunkelberg observed, “We are cleaning up our problems and look forward to starting 2015 with our new capital and few reminders of the recession.”

For the quarter ended June 30, 2014, the Bank decreased its provision for loan losses by $2.5 million from the same period in 2013. In addition, the Bank’s net interest income decreased by $122,000, as compared to the three months ended June 30, 2013. This was due to a $232,000 decrease in interest and dividend income, partially offset by a $110,000 reduction in interest expense from decreased interest on deposits and borrowings. The decrease in interest and dividend income was due primarily to a decrease of $212,000 in interest and fees from loans and by a decrease of $21,000 in interest earned from investments.

The decrease of $212,000 in interest and fees from loans was due primarily to a 5 basis point reduction of the yield from the loan portfolio from 5.07% to 5.02%. In addition, the average loan balances outstanding for the three months ended June 30, 2014 as compared to the three months ended June 30, 2013 decreased by $15.8 million. The reduction in average loan balances was due primarily to pay-downs and pay-off of commercial mortgage loans and other commercial loans.

The Bank’s losses from the sale of other real estate increased by $165,000 during the quarter ended June 30, 2014, and its non-interest expenses increased by $143,000, over the second quarter of 2013. The $143,000 increase in non-interest expense was due primarily to a $37,000 increase in compensation expense, a $13,000 increase in expenses related to other real estate owned and a $117,000 increase in other operating expenses. These variances were partially offset by a reduction in occupancy expense of $24,000 primarily due to closing a branch office in 2013. The increase in other operating expenses was due primarily to an increase in legal expenses of $12,000, consulting fees of $44,000, insurance expense of $29,000 and loan related expenses of $23,000.

Net interest margin for the second quarter of 2014 was 3.38%, an increase of 0.05% from the 3.33% net interest margin for the second quarter of 2013. The improvement in the net interest margin resulted from a reduction of 0.21% in the rate paid for interest bearing deposits that exceeded the 0.16% lower yield generated from interest-earning assets.

For the six months ended June 30, 2014 compared to the same period in 2013, the Bank decreased its provision for loan losses by $2.3 million, net-interest income decreased by $253,000, losses from other real estate owned increased by $317,000 and non-interest expense increased by $179,000 (from $2.8 million for the six months ended June 30, 2013 to $3.0 million for the six months ended June 30, 2014).

The decrease of $253,000 in net interest income was due to a $467,000 decrease in interest and dividend income, partially offset by a $214,000 reduction in interest expense, primarily resulting from a decrease of interest on deposits. The decrease in interest and dividend income was due primarily to a decrease of $434,000 in interest and fees from loans and a decrease of $34,000 in interest earned from investments.

The decrease of $434,000 in interest and fees from loans was due primarily to a 13 basis point reduction of the yield from the loan portfolio from 5.19% to 5.06%. In addition, the average loan balances outstanding for the six months ended June 30, 2014 as compared to the six months ended June 30, 2013 decreased by $14.3 million. The decrease of $34,000 in interest earned from investments was due primarily to a 17 basis point reduction of the yield.

The $179,000 increase in non-interest expense for the six months ended June 30, 2014 as compared to the six months ended June 30, 2013 was due primarily to a $226,000 increase in other operating expense and a $28,000 increase in expenses related to other real estate owned, as well as a $7,000 increase in marketing expense. Partially offsetting these negative variances, compensation related expenses, occupancy expenses and equipment expense decreased $24,000, $54,000 and $4,000, respectively. The $226,000 increase in other operating expenses was due primarily to an increase in legal expenses of $69,000, audit and consulting fees of $84,000, insurance expense of $68,000 and loan related expenses of $20,000 offset by a reduction in communication expense of $24,000.

Total assets at June 30, 2014 were $153.1 million, representing a decrease of $4.8 million from $157.9 million at December 31, 2013. The decrease was due primarily to net loans which decreased $7.2 million; securities which decreased $313,000; other real estate owned which decreased $693,000; and bank premises and equipment which decreased $116,000 from December 31, 2013. These decreases were partially offset by cash and cash equivalents which increased $3.5 million and other assets that grew $54,000. The reduction in loans was due primarily to the pay down and pay off of commercial loans.

Total deposits decreased $9.8 million to $137.1 million at June 30, 2014 from $146.9 million at December 31, 2013. The decrease was primarily due to a $2.9 million decrease in non-interest bearing accounts and a $6.9 million decrease in interest bearing accounts.

The decrease in interest-bearing deposit accounts of $6.9 million was due primarily to a decrease in certificates of deposit, our highest cost deposits, which decreased $2.3 million from $59.3 million at December 31, 2013 to $57.0 million at June 30, 2014. Interest bearing checking accounts, including money market accounts, decreased $4.4 million and savings accounts decreased $249,000.

Total capital increased $4.6 million from $7.1 million at December 31, 2013 to $11.7 million at June 30, 2014. The increase was due primarily to a common stock offering of 5,000,000 shares at $1.00 per share which closed on May 12, 2014.

At June 30, 2014, our criticized/classified loans totaled $8.2 million which represents a decrease of $2.2 million since December 31, 2013. Other real estate owned totaled $5.6 million at June 30, 2014, a decrease of $693,000 from $6.3 million at December 31, 2013.

Set forth below is certain selected balance sheet and income statement data at June 30, 2014 and December 31, 2013 and for the three and six months ended June 30, 2014 and 2013.

       

SELECTED BALANCE SHEET DATA
(Unaudited, in thousands)

 

 

 

 

June 30,
2014

December 31,
2013

 
Cash and cash equivalents

 

$

15,568

 

$

12,072

Investment securities 24,653 24,966
Net loans receivable 102,827 110,039
Total assets 153,086 157,871
Deposits 137,114 146,888
Shareholders’ equity 11,652 7,069
 
               

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

 

 

Quarter ended June 30,

 

Six months ended June 30,

2014

2013

2014

2013

 
Net interest income

 

$

1,204

 

$

1,326

 

$

2,433

 

$

2,686

Provision for loan losses 67 2,542 210 2,551
Gain on sale of securities

 

0

26

 

0

183
Other Non-interest income 138 91 213 179
Loss on write-down of ORE 214 75 394 77
Other expenses 1,545 1,401 2,966 2,787
Provision for income taxes

 

9

 

6

18 12
Net income

 

$

(493

)

 

$

(2,581

)

 

$

(942

)

 

$

(2,379

)

 
Earnings per share:
Basic

 

$

(0.09

)

 

$

(0.77

)

Diluted

 

$

(0.09

)

 

$

(0.77

)

Capital Ratios:
Leverage Capital 7.84 % 5.08 %
Total risk based capital 12.52 % 8.21 %
 

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; a decrease in loan origination volume; 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 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”, “believe”, “anticipate”, “continue(s)”, “estimate”, “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
Benjamin F. Watts, 856-830-1135