The Bank of Princeton Announces Fourth Quarter and Full-Year 2018 Results

PRINCETON, N.J., Jan. 29, 2019 /PRNewswire/ -- The Bank of Princeton (the "Bank") (NASDAQ: BPRN) today reported unaudited results of operations and financial condition for the quarter and twelve months ended December 31, 2018. The Bank reported net income of $3.8 million, or $0.55 per diluted common share, for the fourth quarter of 2018, compared to net income of $3.7 million, or $0.54 per diluted common share, for the third quarter of 2018, and net income of $1.7 million, or $0.25 per diluted common share, for the fourth quarter of 2017.

For the twelve month period ended December 31, 2018, the Bank reported net income of $14.7 million, or $2.14 per diluted common share, compared to $11.0 million, or $1.90 per diluted common share for the same period in 2017. The diluted earnings per shares calculation in 2018 was impacted by the common stock offering that was completed August 2017.

Highlights for the three and twelve month periods ended December 31, 2018 are as follows:

• Net income for the three month period ended December 31, 2018 increased $2.1 million, or 121.9%, over the same period in 2017.
• Net-interest income for the twelve month period ended December 31, 2018 increased $1.9 million, or 4.8%, over the same period in 2017.
• Total net income for the twelve month period ended December 31, 2018 increased $3.7 million, or 33.5%, when compared to the same period in 2017.
• Net loans increased $111.2 million, to exceed $1.0 billion at December 31, 2018. This reflects an annualized increase of 11.5% year over year.

"The Bank of Princeton fourth quarter results continued to show earnings improvement year over year 2018 earnings reflecting an increase of 33.5% resulting from strong loan growth and continued expense management.  The Bank's capital position provides a source of strength to accomplish future organic growth and explore future inorganic growth opportunities," stated Edward Dietzler, President/CEO.

Chairman Richard Gillespie states, "The Bank continues opportunistic expansion including two new branch locations expected to open during the first half of 2019."

Balance Sheet Review

Total assets were $1.25 billion at December 31, 2018, an increase of $51.0 million, or 4.2%, when compared to $1.20 billion at the end of 2017. The primary reason for the increase in total assets was due to an increase in net loans of approximately $111.2 million, primarily consisting of commercial and residential real estate loans, partially offset by a reduction of $56.4 million in cash and cash equivalents, used to fund loan growth.

Total deposits at December 31, 2018 decreased by $21.4 million, or 2.1%, when compared to December 31, 2017. Since December 31, 2017, we experienced deposit increases of $78.7 million in time deposit, $39.6 million in money markets deposits, which were more than offset by a $131.0 million decrease in interest-bearing demand accounts (primarily related to municipal deposits).  At December 31, 2018, the Bank had borrowings of $55.4 million in short-term advances to fund its loan growth, while having no such borrowings outstanding borrowings at December 31, 2017.  

Total stockholders' equity increased $16.0 million, or 9.5%, when compared to the end of 2017. This increase was primarily due to earnings reported during the first twelve months of 2018 and the exercising of common stock granted through the Bank's Stock Option Plan.  In October 2018, the Bank declared its first cash dividend of approximately $0.03 per share of common stock. Book value per share increased $2.00 during 2018 to $27.69.  The ratio of equity to total assets was 14.7%, 0.7% higher than year-end 2017.

Asset Quality

At December 31, 2018, non-performing assets were $5.7 million, a decrease of $4.3 million, or 42.6%, when compared to $10.0 million at December 31, 2017.  This decrease was primarily the result of three large commercial real estate credits totaling $8.0 million that paid-off, partially offset with addition of one commercial loan totaling $1.9 million and one commercial real estate property loan totaling $1.7 million.  Total troubled debt restructuring ("TDRs") balance totaled $1.3 million at December 31, 2018, a decline of $5.1 million from year-end 2017. All TDRs are performing to their agreed upon terms.

Review of Quarterly Financial Results

Net interest income was $10.3 million for the fourth quarter of 2018, compared to $10.5 million for the third quarter of 2018 and $10.3 million for the fourth quarter of 2017.  The decrease from the previous quarter was a result of an increase in interest income of $58 thousand, or 0.4%, offset by an increase in interest expense of $293 thousand.  The net interest margin for the fourth quarter 2018 was 3.47%, decreasing four basis points, when compared to the third quarter of 2018. This decrease was primarily associated with an increase of 13 basis points paid on cost of funds, partially offset by an increase of six basis points earning on interest earning assets.  When comparing the same three month period ended December 31, 2018 and 2017, net interest income slightly decreased $37 thousand, which was primarily due to the increased yield paid on deposits and overnight borrowings. For the twelve month period ended December 31, 2018, net interest income was $41.0 million, an increase of $1.9 million, or 4.8%, over the same period in 2017, which was primarily due to a higher volume of average earning assets of approximately $136.9 million.  Total rate on interest-bearing liabilities, which includes non-interest-bearing deposits for the three month period ended December 31, 2018 and 2017 was 1.44% and 1.00%, respectively. 

The Bank did not record a provision for credit losses this quarter and recorded $665 thousand for the twelve months ended December 31, 2018, compared to $2.9 million for the three month period and $3.8 million twelve month period in 2017.  When compared to the prior quarter of 2018, the Bank did not record a provision for credit losses in either quarter.  The Bank realized net charge-offs of $195 thousand in this quarter compared to net charge-offs of $42 thousand in the quarter ended September 30, 2018. The ratio of allowance for credit losses to period end loans was 1.10% at December 31, 2018, compared to 1.20% at December 31, 2017 and 1.15% at September 30, 2018, which reflects management's assessment of the credit quality in the loan portfolio.

Total non-interest income for the fourth quarter of 2018 decreased $199 thousand, to $601 thousand, when compared to the same period in 2017. This decrease was primarily due to a decrease in income from loan fees and service charges, primarily due to a lower level of fees generated on loans earned between the two periods.  The decrease in non-interest income from the previous quarter was $47 thousand primarily due to loan fees collected and other miscellaneous income, partially offset by an increase in service charges collected and income from bank-owned life insurance.  For the twelve month period ended December 31, 2018, non-interest income decreased $168 thousand, or 5.9%, primarily due to a lower level of fees generated on loans, partially offset due to an increase on income earned from bank-owned life insurance.

Total non-interest expense for the fourth quarter of 2018 increased $825 thousand, or 15.0%, when compared to the same period in 2017.  This increase was primarily due increases in salaries and employee benefits, professional services, FDIC deposit insurance and advertising expenses.  When comparing December 31, 2018 to the prior linked quarter, non-interest expense decreased $337 thousand, or 5.1%, primarily due to a one-time charge the Bank recorded against an OREO property, partially offset by an increase in salaries and benefits and professional fees expenses.  For the twelve month period ended December 31, 2018, non-operating expense was $25.3 million, compared to $23.3 million for the same period in 2017. The increase was attributed to an increase of salaries and benefits expense and a one-time charge against an OREO property, partially offset by a reduction in professional fees and FDIC deposit insurance expense.

For the three month period ended December 31, 2018, the Bank incurred income tax expense of $801 thousand, resulting in an effective tax rate of 17.5%, compared to $830 thousand, resulting in an effective tax rate of 18.3%, for the three month period ended September 30, 2018, and compared to $1.0 million, resulting in an effective tax rate of 37.6%, for the three month period ended December 31, 2017. The current effective tax rate for the reporting periods of 2018 were reduced, in part, as a result of the new corporate tax rate of 21.0% from the prior rate of 34.0%.  In addition, both three and twelve months ended December 31, 2018 and three months ended September 30, 2018 were positively impacted by recording a tax benefit related to the exercise of stock options.

About The Bank of Princeton

The Bank of Princeton is a community bank founded in 2007.  The Bank is a New Jersey state-chartered commercial bank with eleven branches in New Jersey, including three in Princeton and others in Cream Ridge, Hamilton, Pennington, Montgomery, Monroe, Lambertville, Lawrenceville, and New Brunswick.  There are also three branches in the Philadelphia, Pennsylvania area, operating as MoreBank, a division of The Bank of Princeton. The Bank of Princeton is a member of the Federal Deposit Insurance Corporation ("FDIC").

Forward-Looking Statements

The Bank of Princeton may from time to time make written or oral "forward-looking statements," including statements contained in the Bank's filings with the FDIC, in its reports to stockholders and in other communications by the Bank (including this press release), which are made in good faith by the Bank pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended.

These forward-looking statements involve risks and uncertainties, such as statements of the Bank's plans, objectives, expectations, estimates and intentions that are subject to change based on various important factors (some of which are beyond the Bank's control). The following factors, among others, could cause the Bank's financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements: the strength of the United States economy in general and the strength of the local economies in which the Bank conducts operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; inflation, interest rate, market and monetary fluctuations; market volatility; the value of the Bank's products and services as perceived by actual and prospective customers, including the features, pricing and quality compared to competitors' products and services; the willingness of customers to substitute competitors' products and services for the Bank's products and services; credit risk associated with the Bank's lending activities; risks relating to the real estate market and the Bank's real estate collateral; the impact of changes in applicable laws and regulations and requirements arising out of our supervision by banking regulators; other regulatory requirements applicable to the Bank; technological changes; acquisitions; changes in consumer spending and saving habits; and the success of the Bank at managing the risks involved in the foregoing.

The Bank cautions that the foregoing list of important factors is not exclusive. 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, except as required by applicable law or regulation.