Two River Bancorp Reports 2019 First Quarter Financial Results Highlighted by Strong Loan and Deposit Growth

TINTON FALLS, N.J., April 23, 2019 (GLOBE NEWSWIRE) -- Two River Bancorp (Nasdaq: TRCB) (the "Company"), the parent company of Two River Community Bank (the "Bank"), today reported financial results for the first quarter ended March 31, 2019, highlighted by improved net income driven by solid loan and deposit growth.

2019 First Quarter Financial Highlights
(comparisons to 2018 first quarter)

• Net income increased 4.0% to $2.78 million
• Earnings per diluted share (EPS) increased 3.3% to $0.32
• Return on average assets of 1.01%, compared to 1.04%
• Return on average equity of 9.59%, compared to 10.08%
• Net interest margin decreased by 3 basis points to 3.60%
• Net interest income increased 6.2% to $9.3 million
• Non-interest income decreased 11.7% to $1.2 million
• Efficiency ratio⁽¹⁾ improved to 59.95% from 61.59%

(Totals at March 31, 2019; comparisons to December 31, 2018)

• Total loans were $948.5 million, an increase of $27.2 million, or 11.8% annualized
• Total deposits were $959.7 million, an increase of $42.3 million, or 18.4% annualized
• Total assets increased to a record $1.141 billion, compared to $1.096 billion
• Tangible book value per share⁽²⁾ increased to $11.66, compared to $11.43

(1) Efficiency ratio represents the ratio of non-interest expense to the sum of net interest income and non-interest income.
(2) Non-GAAP Financial Information. See “Reconciliation of Non-GAAP Financial Measures” at end of release.

Management Commentary
Mr. William D. Moss, Chairman, President and CEO, stated, “I am very pleased with our growth in the first quarter, as loans increased 11.8% and deposits grew by 18.4% on an annualized basis. Commercial and residential real estate lending drove top-line growth and we continue to convert a strong loan pipeline, driven by long-standing relationships and referrals in our markets. All of our efforts have led to higher net income, which we believe has laid the groundwork for continued growth and profitability throughout 2019.”

Mr. Moss continued, “We continue to focus on optimizing our branch network and to that end, opened a new branch in the Ironbound district of Newark, NJ in Essex County in early April. We were able to reallocate human resources from our former New Brunswick office, which we closed in December 2018. This new branch will build on the existing success we have enjoyed since our entry into this market over the past year.”

Dividend Information
On April 18, 2019, the Company's Board of Directors declared a quarterly cash dividend of $0.07 per share, payable May 30, 2019 to shareholders of record as of the close of business on May 10, 2019. This marks the 25^th consecutive quarterly cash dividend, represents a 27% increase from the prior quarter, and is the sixth consecutive year the Company has raised its cash dividend. 

Key Quarterly Performance Metrics

Loan Composition
The components of the Company’s loan portfolio at March 31, 2019 and December 31, 2018 are as follows:  

Deposit Composition
The components of the Company’s deposits at March 31, 2019 and December 31, 2018 are as follows:  

2019 First Quarter Financial Review

Net Income
Net income for the three months ended March 31, 2019 was $2.8 million, or $0.32 per diluted common share, compared to $2.7 million, or $0.31 per diluted common share, for the same period last year, an increase of 4.0%. The increase was due primarily to higher net interest income, partially offset by lower non-interest income and a higher effective tax rate of 26.4% compared to 23.2% during the same period last year.

Net Interest Income
Net interest income for the quarter ended March 31, 2019 was $9.3 million, an increase of 6.2% compared to $8.8 million in the corresponding prior year period. This was largely due to an increase of $66.8 million, or 6.8%, in average interest earning assets, primarily driven from strong growth in the loan portfolio.  

Net Interest Margin
The Company reported a net interest margin of 3.60% for the first quarter of 2019, compared to the 3.56% reported in the fourth quarter of 2018 and 3.63% reported in the first quarter of 2018. The 4 basis point improvement from the fourth quarter of 2018 was primarily the result of higher yielding interest-earning assets. The 3 basis point decline from the first quarter of 2018 was primarily the result of higher cost of funds.

Non-Interest Income
Non-interest income for the quarter ended March 31, 2019 totaled $1.2 million, a decrease of $153,000, or 11.7%, compared to $1.3 million in the corresponding prior-year period. This was largely the result of lower gains on the sale of SBA loans, mortgage banking revenues and service fees on deposit accounts, partially offset by higher other loan fees, primarily due to loan prepayment fees.

Non-Interest Expense
Non-interest expense for the quarter ended March 31, 2019 totaled $6.3 million, an increase of $68,000, or 1.1%, compared to the same period in 2018, mainly due to higher professional fees, partially offset by lower salaries and benefits and occupancy and equipment costs. The Company’s efficiency ratio was 59.95% for the quarter, compared to 61.59% for the same period in 2018.

Income Tax Expense
The Company’s effective tax rate increased to 26.4% for the three months ended March 31, 2019 compared to 23.2% for the same period last year. This was due to a lower tax benefit related to the accounting treatment of equity-based compensation, in which a $41,000 benefit was recognized in the first quarter of 2019 compared to a $90,000 benefit from the same period last year. Additionally, New Jersey enacted a Corporation Business Tax surtax of 2.5%, which did not take effect until July 1, 2018 and, as such, negatively impacted income tax expense by approximately $75,000 in the first quarter of 2019 compared to the same period in 2018.

At the present time, the Company is anticipating a 2019 effective tax rate of 28%.

Provision / Allowance for Loan Losses
During the quarter, the Company reported a $425,000 provision for loan losses, compared to $400,000 in the prior year period. The increase was largely due to the strong loan growth during the period. The Company also had $241,000 in net loan charge-offs during the quarter, compared to $106,000 of net loan charge-offs in the same period last year. The charge-offs during the first quarter of 2019 were primarily related to a $242,000 partial writedown on a $2.9 million residential construction loan, which was placed into non-accrual status during the quarter.

As of March 31, 2019, the Company's allowance for loan losses was $11.6 million, compared to $11.4 million at December 31, 2018. The loss allowance as a percentage of total loans was 1.22% at March 31, 2019, compared to 1.24% at December 31, 2018.

Financial Condition / Balance Sheet
At March 31, 2019, the Bank maintained capital ratios that were in excess of regulatory standards for well-capitalized institutions. The Bank’s Tier 1 capital to average assets ratio was 10.03%, common equity Tier 1 to risk weighted assets ratio was 11.00%, Tier 1 capital to risk weighted assets ratio was 11.00%, and total capital to risk weighted assets ratio was 12.16%. Due to the adoption of ASU 2016-02 (Topic 842), Leases, the Company recognized an operating right-of-use asset of $5.0 million and a lease liability of $5.1 million on its balance sheet as of March 31, 2019. This negatively impacted the Company’s capital ratios by approximately 5 basis points compared to December 31, 2018.

Total assets as of March 31, 2019 were $1.141 billion, compared to $1.096 billion at December 31, 2018 and $1.042 billion at March 31, 2018.

Total loans as of March 31, 2019 grew to $948.5 million, compared to $921.3 million reported at December 31, 2018 and $872.3 million at March 31, 2018. This loan growth was funded primarily from the increase in deposits.

Total deposits as of March 31, 2019 grew to $959.7 million, compared to $917.4 million as of December 31, 2018 and $870.9 million at March 31, 2018. Core checking deposits at March 31, 2019 were $378.5 million, compared to $370.0 million at December 31, 2018 and $375.9 million at March 31, 2018. The Company continues to focus on building core checking account relationships, which can vary from quarter to quarter due to seasonality in municipal and other relationships.

Asset Quality
The Company's non-performing assets at March 31, 2019 were $4.5 million, compared to $2.0 million at both December 31, 2018 and March 31, 2018. Non-performing assets to total assets at March 31, 2019 were 0.39%, compared to 0.18% at December 31, 2018 and 0.19% at March 31, 2018.

Non-accrual loans were $3.9 million at March 31, 2019, compared to $1.4 million at December 31, 2018 and $2.0 million at March 31, 2018. As previously mentioned, a $2.9 million residential construction loan was placed into non-accrual status during the current quarter and the Company subsequently recorded a $242,000 partial writedown on the loan. OREO was $585,000 at March 31, 2019 and December 31, 2018, compared to no OREO at March 31, 2018.

Troubled debt restructured loan balances amounted to $7.4 million at March 31, 2019, with all but $711,000 performing. This compared to $7.7 million at December 31, 2018 and $6.8 million at March 31, 2018.

About the Company
Two River Bancorp is the holding company for Two River Community Bank, which is headquartered in Tinton Falls, New Jersey. Two River Community Bank operates 14 branches along with two loan production offices throughout Monmouth, Union, Essex, and Ocean Counties, New Jersey. More information about Two River Community Bank and Two River Bancorp is available at www.tworiver.bank.

The foregoing contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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, technology and market conditions. These statements may be identified by such forward-looking terminology as "continuing," "expect," "look," "believe," "anticipate," "may," "will," "should," "projects," "strategy," or similar statements. Actual results may differ materially from such forward-looking statements, and no 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; competition levels; loan and investment prepayments differing from our assumptions; insufficient allowance for credit losses; a higher level of loan charge-offs and delinquencies than anticipated; material adverse changes in our operations or earnings; a decline in the economy in our 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 or an inability to close loans currently in the pipeline; changes in laws and regulations; adoption, interpretation and implementation of accounting pronouncements; operational risks, including the risk of fraud by employees, customers or outsiders; unanticipated effects of our new banking platform; and the inability to successfully implement or expand new lines of business or new products and services. For a list of other factors which would affect our results, see the Company's filings with the Securities and Exchange Commission, including those risk factors identified in the "Risk Factor" section and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2018. The statements in this press release are made as of the date of this press release, even if subsequently made available by the Company on its website or otherwise. The Company assumes no obligation for updating any such forward-looking statements at any time, except as required by law.

 (1)  Non-GAAP Financial Information. See “Reconciliation of Non-GAAP Financial Measures” at end of release.

(1)  Included in interest income on loans are net unearned loan fees.
(2)  Includes non-performing loans.
(3)  The interest rate spread is the difference between the weighted average yield on average interest-earning and the weighted average cost of average interest-bearing liabilities.
(4)  The interest rate margin is calculated by dividing annualized net interest income by average interest earning assets.

Reconciliation of Non-GAAP Financial Measures

The press release contains certain financial information determined by methods other than in accordance with generally accepted accounting policies in the United States (GAAP). These non-GAAP financial measures are "book value per common share," "tangible book value per common share," "return on average tangible assets," and "return on average tangible equity." This non-GAAP disclosure has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies. Our management uses these non-GAAP measures in its analysis of our performance because it believes these measures are material and will be used as a measure of our performance by investors.