Revere Bank Announces Fourth Quarter and Annual 2018 Record Earnings – 2018 Net Income of $27.6 Million Increased 69.8% Over 2017

ROCKVILLE, Md., Jan. 29, 2019 (GLOBE NEWSWIRE) -- Revere Bank (the “Bank”) (OTCQX: REVB) today reported record quarterly net income of $7.21 million for the quarter ended December 31, 2018, a 161.1% increase compared to $2.76 million for the quarter ended December 31, 2017 and a 2.9% increase over the quarter ended September 30, 2018.  Pre-tax net income for the quarter ended December 31, 2018 was $9.92 million, an increase of 16.7% compared to $8.50 million for the quarter ended December 31, 2017.  We believe pre-tax net income provides a better comparison to last year due to the impact of the Tax Cuts and Jobs Act (“Tax Act”), as discussed under the Earnings and Growth Highlights section. 

Net income per basic common share for the fourth quarter of 2018 was $0.61 compared to $0.28 for the same period in 2017, an increase of 117.9%. Net income per diluted common share increased 118.5% to $0.59 for the fourth quarter of 2018 compared to $0.27 for the same period in 2017. 

For the year ended December 31, 2018, net income was $27.63 million, a 69.8% increase compared to $16.27 million for the year ended December 31, 2017.  Pre-tax net income increased 24.1% to $37.05 million for the year ended December 31, 2018, from $29.85 million for the year ended December 31, 2017. Net income per basic common share for the year ended December 31, 2018, was $2.62 compared to $1.67 for 2017, an increase of 56.9%. Net income per diluted common share increased 58.5% to $2.52 for the year ended December 31, 2018, compared to $1.59 for 2017.

Quarterly Highlights

• Pre-tax net income grew by 4.9% compared to the third quarter of 2018 and by 16.7% compared to the fourth quarter of 2017.
• Period end loans grew 14.9%, or $270.1 million, compared to the fourth quarter of 2017, and grew 4.4%, or $87.3 million, compared to the third quarter of 2018.
• Period end deposits grew 16.4%, or $293.9 million, compared to the fourth quarter of 2017 and grew 7.1%, or $138.6 million, compared to the third quarter of 2018.  Core deposits, defined as total deposits excluding brokered deposits and listing services deposits, grew 8.0%, or $149.8 million, compared to the third quarter of 2018.  This increase includes approximately $40.0 million of short term deposits that are expected to be withdrawn in the first quarter of 2019.  As adjusted to eliminate the impact of these short term deposits, our fourth quarter 2018 growth of total and core deposits was 5.1% and 5.9%, respectively, compared to the third quarter of 2018.

Drew Flott, Co-President and CEO, said, “We are proud of our growth and increased earnings especially when comparing pre-tax net income, the best apples-to-apples comparison of our year-over-year performance.  We continue to be optimistic about our future.”

Ken Cook, Co-President and CEO, added, “Our strong earnings momentum continued on both a year-over-year and a linked quarter basis, complemented by continued outstanding credit quality. Robust balance sheet growth throughout 2018, but particularly in the fourth quarter, has set the stage for continued healthy income growth in 2019.”

Earnings and Growth Highlights

Fourth quarter net income increased $4.45 million, or 161.1%, compared to the fourth quarter of 2017, driven by stronger pre-tax earnings and a lower tax rate in 2018 and the negative impact of the $2.41 million one-time deferred tax charge related to the Tax Act taken during the fourth quarter of 2017.  Pre-tax net income, a more comparable metric, increased $1.42 million, or 16.7%, compared to the quarter ended December 31, 2017, primarily driven by a 17.1% increase in net interest income.  Net income increased $206 thousand, or 2.9%, compared to the third quarter of 2018 also driven by net interest income growth.  The fourth quarter diluted EPS declined compared to the third quarter of 2018, despite higher earnings, due to the incremental shares from the late third quarter capital raise being outstanding for the entire period.  Compared to the prior year quarter, EPS increased significantly due to strong pre-tax net income growth and the previously discussed impacts of the Tax Act.

For the year ended December 31, 2018, net income increased $11.36 million, or 69.8%, compared to 2017.  The change in year-to-date net income was similarly impacted by a lower tax rate in 2018 and the one-time deferred tax charge in the fourth quarter of 2017 related to the Tax Act.  During the year diluted EPS increased $0.93 per share, or 58.5%, as a result of increased pre-tax net income and a decrease in tax expense, as previously mentioned.

The Bank’s continued earnings growth is driven by strong loan and deposit growth.  As of December 31, 2018, loans were $2.08 billion, an increase of 4.4% compared to loans of $2.00 billion as of September 30, 2018, and an increase of 14.9% compared to loans of $1.81 billion as of December 31, 2017.  Deposits increased 7.1% to $2.09 billion as of December 31, 2018, compared to $1.95 billion as of September 30, 2018, and increased 16.4% compared to $1.80 billion as of December 31, 2017. 

Income Statement Review
Net interest income

Our net interest income continues to grow and drive increased earnings. Fourth quarter net interest income increased 17.1% compared to the same period last year and 6.3% compared to the prior quarter. Net interest income for the year increased 15.3% compared to last year. Interest income increased for all periods from a combination of strong loan growth and increasing yields on interest-earning assets. Similarly, interest expense has increased due to the competitive rate environment as well as the increased volume of deposits used to fund loan growth.

On a year-to-date basis our net interest margin increased by one basis point from last year to 3.77%. Our current quarter’s net interest margin increased six basis points from the prior quarter and decreased one basis point compared to the same period last year. Our net interest margin has normalized compared to the prior period as we have deployed the funds from the CD campaign and capital raise that took place during the third quarter. Although our loan portfolio is positioned to respond well in a rising rate environment, with approximately one third of our portfolio maturing or repricing within one year, the increasing cost of interest-bearing liabilities outpaced the increases in our interest-earning assets during the year and has continued to put pressure on our net interest margin.  This has been partially mitigated by the successful growth in our non-interest bearing deposits of 13.9% in 2018. As always our focus remains on maintaining the net interest margin and the quality of our loan portfolio.

Provision for Loan Losses
For the fourth quarter of 2018, the provision for loan losses increased $693 thousand and $687 thousand compared to the third quarter of 2018 and fourth quarter of 2017, respectively.  For the year ended December 31, 2018, the provision increased $930 thousand compared to the prior year.  The increase in our provision for the fourth quarter of 2018 and for the year was in line with loan growth during the respective periods. 

Non-interest income and Non-interest expense

Non-interest income was $632 thousand for the fourth quarter, an increase of $114 thousand, or 22.0%, compared to the fourth quarter of 2017, and $207 thousand, or 48.7%, compared to the third quarter of 2018.  For the year ended December 31, 2018, total non-interest income increased by 5.5% to $2.25 million, compared to $2.13 million for the year ended December 31, 2017. A $141 thousand recovery received during the fourth quarter of 2018, related to an acquired loan, caused the increase compared to all reported periods.

Non-interest expense increased by $1.24 million, or 12.1%, in the fourth quarter compared to the same period last year. The year-over-year increase was driven by higher salaries and benefits expense, partially offset by lower FDIC premiums due to our stronger capital position. Compared to the third quarter of 2018, non-interest expense increased $362 thousand, or 3.2%, primarily driven by an increase in salaries and benefits and partially offset by decreases in legal and professional fees and lower FDIC premiums due to our stronger capital position. 

For the year, non-interest expense increased $2.97 million, or 7.3%, to $43.95 million, compared to $40.98 million during the year ended 2017.  The year-to-date increase was also primarily the result of an increase in salaries and benefits due to an increase in the number of employees to support our continued growth and the initiation of a brand identity marketing campaign that began during the third quarter of 2018.  

During the fourth quarter our efficiency ratio improved to 50.61% compared to 52.93% in the same period last year and improved for the year ended December 31, 2018, to 51.65% from 55.38% for 2017. The improvement is primarily due to strong net interest income growth, continued economies of scale as we continue to grow, and to a lesser extent, a reduction in acquisition expense compared to the prior year. Compared to the prior quarter our efficiency ratio improved to 50.61% from 52.53% primarily due to an increase in net interest income.

Performance Ratios

Return on average assets and return on average equity increased 67 basis points and 517 basis points, respectively, during the quarter compared to the same period last year.  These increases for the fourth quarter over the prior year period were primarily driven by increased earnings and the impact of the Tax Act, as previously discussed.  Return on average assets effectively remained unchanged quarter over quarter.  Return on average equity declined by 205 basis points quarter over quarter as a result of our capital raise late in the third quarter.  We expect our return on equity to normalize once we have fully deployed our new capital.

Balance Sheet Review

Asset growth from December 31, 2017, to December 31, 2018, was $356.4 million, or 17.0%, and was driven primarily by loan growth, and to a lesser extent increases in cash and due from banks and securities available-for-sale.  Assets increased $137.5 million compared to the prior quarter, or 5.9%, also due to loan growth and increases in cash and due from banks and securities available-for-sale.

Loans increased $270.1 million, or 14.9%, compared to December 31, 2017, driven primarily by an increase in commercial real estate loans and commercial loans.  Compared to September 30, 2018, loans increased $87.3 million, or 4.4%, primarily due to commercial real estate loan growth.

Deposits increased $293.9 million, or 16.4%, and $138.6 million, or 7.1%, compared to December 31, 2017 and September 30, 2018, respectively.  As previously mentioned this increase includes approximately $40.0 million of short term deposits that are expected to be withdrawn during the first quarter of 2019.  As adjusted to eliminate the impact of these short term deposits, deposit growth was 14.1% compared to December 31, 2017, and 5.1% compared to September 30, 2018.  The increases for both periods are primarily due to increases in CD and money market deposits. Our non-interest bearing deposits grew by 13.9% compared to December 31, 2017, and by 4.4% compared to September 30, 2018.

Stockholders’ equity increased $76.6 million, or 40.7% compared to December 31, 2017.  The very strong equity growth compared to last year was achieved through record earnings for the year and a successful capital raise that yielded $44.1 million in net capital through the issuance of 1.61 million common shares.  Stockholders’ equity increased by $9.0 million, or 3.5%, compared to September 30, 2018, driven primarily by record earnings for the fourth quarter of 2018.
  
The Bank’s capital ratios remain well above regulatory guidelines for well-capitalized banks. As of December 31, 2018, the Bank’s total risk-based capital ratio and tier 1 leverage ratio were 13.77% and 10.03%, respectively, compared to 11.21% and 7.75%, respectively, as of December 31, 2017.  As of December 31, 2018, the Bank’s tangible equity to total tangible assets ratio was 9.67% compared to 7.60% as of December 31, 2017.

As of December 31, 2018, the Bank’s tangible book value per share was $19.84, up 24.5% compared to $15.94 as of December 31, 2017.  The increase in tangible book value per share was due to strong earnings per share plus approximately $1.41 per share accretion from the capital raise.

Asset Quality Review

Asset quality continues to remain very strong.  As of December 31, 2018, non-performing assets as a percentage of total assets remained flat at 0.08% compared to September 30, 2018, and decreased from 0.11% at December 31, 2017.  The decrease compared to last year was driven by a decline in non-performing assets as well as an increase in total assets.

Loans 30-89 days past due and still accruing interest decreased $384 thousand compared to the prior period and increased $218 thousand compared to the same period last year.  The Bank had $147 thousand of net charge-offs in the fourth quarter of 2018, compared to $265 thousand of net charge-offs in the fourth quarter of 2017, and compared to no net charge-offs in the third quarter of 2018.  For the year ended December 31, 2018, the Bank reported $204 thousand in net charge-offs compared to net charge-offs of $550 thousand during 2017.

The Bank is proactive in monitoring its loan portfolio for any indication of weakness and attempts to mitigate future risks across all lines of business.

Revere Bank is a Maryland, state-chartered bank that commenced operations in November 2007.  The Bank is headquartered in Rockville and has 11 branches located in the suburban Maryland counties of Anne Arundel, Baltimore, Frederick, Howard, Montgomery, and Prince George’s.  The Bank is a community-based, full-service commercial bank that emphasizes the banking needs of community-based businesses, professional entities, and individuals.  Further information on Revere Bank can be obtained by visiting our website at www.reverebank.com.

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Forward-Looking Statement
This press release contains forward-looking statements within the meaning of the Securities and Exchange Act of 1934, as amended, including statements of goals, intentions, and expectations as to future trends, plans, events or results of Bank operations and policies and regarding general economic conditions. In some cases, forward-looking statements can be identified by use of words such as “may,” “will,” “anticipates,” “believes,” “expects,” “plans,” “estimates,” “potential,” “continue,” “should,” and similar words or phrases. These statements are based upon current and anticipated economic conditions, nationally and in the Bank’s market, interest rates and interest rate policy, competitive factors, and other conditions which by their nature, are not susceptible to accurate forecast, and are subject to significant uncertainty. Because of these uncertainties and the assumptions on which this discussion and the forward-looking statements are based, actual future operations and results may differ materially from those indicated herein. Readers are cautioned against placing undue reliance on any such forward-looking statements. The Bank’s past results are not necessarily indicative of future performance.

Non-GAAP Financial Measures
Statements included in this press release include non-GAAP financial measures and should be read along with the Financial Highlights table, which provides a reconciliation of non-GAAP financial measures to GAAP financial measures. This press release and the accompanying tables discuss financial measures, such as tangible common equity, tangible assets and tangible book value per share, which are non-GAAP measures. We believe that such non-GAAP measures are useful because they enhance the ability of investors and management to evaluate and compare the Bank’s operating results from period to period in a meaningful manner. Non-GAAP measures should not be considered as an alternative to any measure of performance as promulgated under GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other banks. Investors should consider the Bank’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Bank. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the Bank’s results or financial condition as reported under GAAP.