SOURCE: New Jersey Community Bank

New Jersey Community Bank

November 25, 2015 15:51 ET

New Jersey Community Bank Reports Third Quarter 2015 Results

FREEHOLD, NJ--(Marketwired - Nov 25, 2015) -  New Jersey Community Bank (OTCQB: NJCB) (the "Bank") reported a net loss of $481 thousand, or ($0.25) per common share for the three months ended September 30, 2015, compared to earnings of $12 thousand, or $0.01 per common share in the third quarter of 2014. For the first nine months of 2015, the Bank reported net loss of $568 thousand, or ($0.30) per common share compared with net income of $54 thousand, or $0.03 per common share for the same period in the prior year. The Bank's results for the first nine months and the third quarter 2015 were negatively impacted by $695 thousand in provision for loan and lease losses recorded in the third quarter 2015 related to the resolution of troubled loans originated prior to the change in senior management in 2015.

The results were further negatively impacted by a decline in interest income on loans as a result of a decrease in total loans, coupled with a decline in fee income on deposit accounts. Net interest margin continues to be pressured, declining 53 basis points year over year primarily due to a decline in yield on earning assets resulting from the reduction in interest income on loans.

Management's focus remains on reducing certain commercial real estate loan concentrations while attempting to grow other segments of the loan portfolio, primarily commercial and industrial loans. Improving asset quality and credit metrics remains management's primary job. While management works on enhancements to the Bank's infrastructure, including strengthening and making more efficient credit administration and the Bank's online banking capability, to produce a better experience for our customers, management also continues to seek out additional efficiencies within the Bank's operations to manage operating expenses.

Balance Sheet Summary

At September 30, 2015, total assets were $126.3 million, an increase of $4.2 million from December 31, 2014. Total cash and cash equivalents and due from banks-time deposits increased $11.6 million and $1.2 million, respectively, compared to year end 2014, primarily as a result of loan payoffs and increase in total deposits. Total investment securities increased $1.3 million from year-end 2014, as management tries to seek avenues to improve interest income while utilizing excess liquidity. Total loans receivable decreased $9.0 million compared to year end 2014, reflecting principal payoffs exceeding new loan originations, as the Bank continues to focus on resolving existing credit issues.

Total deposits increased $4.7 million compared to the levels at year end 2014. Non-interest bearing deposits accounted for 98% of this increase, or $4.6 million, while savings, NOW and money market deposits combined increased $1.0 million. These increases were partially offset by a $0.9 million decline in total time deposits resulting from maturing time deposits which were not renewed.

Shareholders' equity totaled $14.0 million at September 30, 2015, decreasing $474 thousand, from year-end 2014 due to the reported net loss. The Bank's capital ratios remain strong and exceed the regulatory requirements to be deemed a well-capitalized financial institution.

The Bank has been carrying a Deferred Tax Asset ("DTA") on its balance sheet in the amount of $1.5 million. DTAs are recorded on the books for non-cash expenses that are not currently deductible for tax purposes but are future deductions for future income returns when the expense is actually paid. The largest component of the DTA relates to federal and state net operating loss carry forwards ("NOL"). These NOLs are allowed to be carried forward for future income tax returns for 20 years expiring in 2034, if not fully utilized.

US GAAP Accounting Standards Codification Topic 740, requires the Bank to evaluate its net DTAs on at least an annual basis to ensure that the asset is recorded at its net realizable value. If evidence exists which questions the realizability of this net DTA prior to its expiration, then the Bank must record a valuation allowance. Management is currently evaluating all the evidence, including viable tax planning strategies, to determine whether such valuation allowance is needed. If management concludes, given the evidence, the realizability of the DTA is doubtful, based on that it will be required to record a valuation allowance prior to year-end 2015.

Results of Operations

For the quarter ended September 30, 2015, net interest income totaled $901 thousand, decreasing $208 thousand over the same period in the prior year. The decrease in net interest income was a direct result of declining average loan receivables which impacted the interest income on loans. Net interest margin decreased 53 basis points to 3.00% for the quarter ended September 30, 2015, over the comparable quarter in 2014. Average yield on earning assets was 3.72%, decreasing 60 basis points over the prior year and average rate on paying liabilities was 0.86%, a moderate decline over the comparable quarter in the prior year.

The Bank recorded $695 thousand in provision for loan and lease losses during the third quarter 2015 primarily as a result of a loan write-off coupled with additional reserves required for certain existing problem credits. Compared to the third quarter 2014, the provision for loan loss increased $665 thousand. The allowance for loan loss at period-end was $2.0 million, or 2.58% of total loans. Asset quality continues to be monitored and management estimates the current level of allowance for loan loss to be adequate.

Non-interest income totaled $88 thousand for the quarter ended September 30, 2015, a moderate decrease compared with the same quarter in the prior year resulting from decreased levels of fees and service charges on deposit accounts.

Non-interest expense totaled $1.1 million for the quarter ended September 30, 2015, a decrease of $44 thousand from the year-ago same quarter. For the year, non-interest expense increased $216 thousand compared to the same period in 2014. The increase in non-interest expense was directly related to the reversal of $500 thousand in a litigation expense recorded in the second quarter of 2014 related to a judgment entered and expensed in 2013 that was subsequently settled at a cost lower than the accrued expense. Had it not been for this one-time adjustment to the operating expenses in 2014, non-interest expenses would have decreased $284 thousand or 8%, year over year.

Salaries and employee benefits decreased $74 thousand due to a reduction in executive level compensation. Data processing costs decreased $24 thousand quarter over quarter as a result of onetime expenses associated with the installation of a new core processing system in 2014. Professional and other fees increased $47 thousand, in part due to consulting services utilized by the Bank to comply with the Consent Order among the Bank, the FDIC and the NJ Department of Banking and Insurance. All other operating expenses combined increased moderately.

About the Bank
New Jersey Community Bank is a state-chartered commercial bank headquartered in Freehold, New Jersey. The Bank opened for business in July 2008 and operates three full-service banking offices in the central New Jersey counties of Monmouth and Middlesex. The Bank provides traditional commercial and retail banking services to small businesses and consumers. For additional information about New Jersey Community Bank, please visit www.njcbk.com or call 732-431-2265.

Forward-Looking Statements
This release contains forward-looking statements relating to present or future trends or factors affecting the banking industry, and specifically the financial condition and results of operations, including without limitation, statements relating to the earnings outlook of the Bank, as well as its operations, markets and products. Actual results could differ materially from those indicated. Among the important factors that could cause results to differ materially are interest rate changes, change in economic climate, which could materially impact credit quality trends and the ability to generate loans, changes in the mix of the Bank's business, competitive pressures, changes in accounting, tax or regulatory practices or requirements, resolution of tax reviews, and those risk factors detailed in the Bank's periodic reports. The Bank undertakes no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this release.

   
   
New Jersey Community Bank  
Selected Financial Highlights  
(unaudited)  
       
    As of or for the Quarters Ended  
(in thousands, except per share and percentage data)   9/30/2015     6/30/2015     3/31/2015     12/31/2014     9/30/2014  
                                         
Summary of Operations:                                        
  Interest income   $ 1,118     $ 1,238     $ 1,219     $ 1,218     $ 1,339  
  Interest expense     217       216       211       207       230  
    Net interest income     901       1,022       1,008       1,011       1,109  
  Provision for loan and lease loss     695       -       15       263       30  
    Net interest income after provision for loan loss     206       1,022       993       748       1,079  
  Non-interest income     88       86       80       78       92  
  Non-interest expense     1,097       1,175       1,149       1,052       1,141  
    Income (loss) before income tax expense (benefit)     (803 )     (67 )     (76 )     (226 )     30  
  Income tax (benefit) expense     (322 )     (26 )     (30 )     (103 )     18  
    Net income (loss)   $ (481 )   $ (41 )   $ (46 )   $ (123 )   $ 12  
                                         
Per Common Share:                                        
    Basic   $ (0.25 )   $ (0.02 )   $ (0.02 )   $ (0.06 )   $ 0.01  
    Diluted     (0.25 )     (0.02 )     (0.02 )     (0.06 )     0.01  
  Book value per share     7.35       7.56       7.62       7.60       7.63  
  Average shares outstanding     1,908       1,908       1,908       1,908       1,908  
  Average diluted shares outstanding     1,908       1,908       1,908       1,908       1,908  
                                         
Selected Financial Ratios:                                        
  Return on average assets     -1.50 %     -0.13 %     -0.15 %     -0.39 %     0.04 %
  Return on average common equity     -13.35 %     -1.13 %     -1.26 %     -3.35 %     0.33 %
  Average equity to average assets     11.21 %     11.21 %     11.53 %     11.72 %     11.03 %
  Risk-based capital:                                        
    Total risk-based capital ratio     15.20 %     14.62 %     14.51 %     14.45 %     14.41 %
    Tier 1 risk-based capital ratio     13.92 %     13.26 %     13.26 %     13.19 %     13.16 %
    Tier 1 leverage capital ratio     9.83 %     10.20 %     10.48 %     10.54 %     10.15 %
                                         
Financial Condition:                                        
  Total assets   $ 126,250     $ 132,065     $ 129,317     $ 122,018     $ 128,171  
  Loans, net of unearned income     77,092       81,914       83,058       86,111       86,472  
  Deposits     111,779       117,205       114,293       107,088       113,192  
  Shareholders' equity     14,021       14,420       14,543       14,495       14,554  
                                         
                                         
                                         
New Jersey Community Bank  
Statements of Financial Condition  
(dollars in thousands, except share data)  
             
    September 30,     December 31,  
    2015     2014  
Assets   (unaudited)        
    Cash and due from banks - non-interest bearing   $ 2,120     $ 1,107  
    Federal funds sold and interest-bearing deposits with banks     15,325       4,728  
        Total Cash and Cash Equivalents     17,445       5,835  
    Due from banks - time deposits     6,770       5,577  
    Investment Securities:                
    Available-for-sale     11,463       13,680  
    Held-to-maturity     6,546       3,043  
        Total Investment Securities     18,009       16,723  
    Loans Receivable, net of unearned fees     77,092       86,111  
      Less: Allowance for loan losses     (1,990 )     (1,576 )
        Net Loans     75,102       84,535  
    Premises and equipment, net     2,183       2,361  
    Accrued interest receivable     273       277  
    Bank-owned life insurance     3,751       3,678  
    Deferred tax assets     1,530       1,589  
    Other assets     1,187       1,443  
        Total Assets   $ 126,250     $ 122,018  
                 
Liabilities and Shareholders' Equity                
  Liabilities                
    Deposits:                
      Non-interest bearing   $ 15,299     $ 10,670  
      Savings, NOW and money market     46,043       45,028  
      Time deposits $100M and over     38,202       38,750  
      Time deposits, other     12,235       12,640  
        Total Deposits     111,779       107,088  
                   
    Accrued interest payable     12       10  
    Other liabilities     438       425  
        Total Liabilities     112,229       107,523  
                   
  Shareholders' Equity                
    Common stock, $2 par value; authorized 10,000,000 shares; issued and outstanding 1,908,445 shares, respectively     3,817       3,817  
    Surplus     13,860       13,854  
    Accumulated Deficit     (3,669 )     (3,101 )
    Accumulated other comprehensive loss     13       (75 )
        Total Shareholders' Equity     14,021       14,495  
        Total Liabilities and Shareholders' Equity   $ 126,250     $ 122,018  
                 
                 
                 
New Jersey Community Bank  
Statements of Operations  
(dollars in thousands, except per share data)(unaudited)  
           
    Three Months Ended   For the Nine Months Ended  
    September 30,   September 30,  
    2015     2014   2015     2014  
Interest Income                              
  Loans receivable, including fees   $ 999     $ 1,234   $ 3,234     $ 3,746  
  Investment securities     98       89     283       283  
  Federal funds sold and interest-bearing deposits with banks     8       5     42       18  
  Due from banks - interest bearing     13       11     18       31  
      Total Interest Income     1,118       1,339     3,577       4,078  
Interest Expense                              
  Deposits     217       230     644       725  
      Net Interest Income before Provision for Loan Loss     901       1,109     2,933       3,353  
Provision for Loan Loss     695       30     710       365  
      Net Interest Income after Provision for Loan Loss     206       1,079     2,223       2,988  
                                     
Non-Interest Income                              
  Fees and service charges on deposit accounts     47       53     132       205  
  Loan fee income     3       2     11       25  
  Income from bank owned life insurance     24       25     72       111  
  All other income     14       12     39       -  
                                     
      Total Non-Interest Income     88       92     254       341  
                                     
Non-Interest Expense                              
  Salaries and employee benefits     567       641     1,739       1,930  
  Occupancy and equipment     186       194     582       595  
  Data processing services     38       62     148       201  
  Professional and other fees     125       78     397       449  
  Advertising and promotion     2       2     5       10  
  Federal insurance assessment     69       73     204       208  
  Other operating expenses     110       91     347       (187 )
      Total Non-Interest Expenses     1,097       1,141     3,422       3,206  
      Income (Loss) Before Income Tax Expense (Benefit)     (803 )     30     (945 )     123  
  Income tax (benefit) expense     (322 )     18     (377 )     69  
Net Income (Loss)   $ (481 )   $ 12   $ (568 )   $ 54  
Income (loss) per share:                              
  Basic and diluted   $ (0.25 )   $ 0.01   $ (0.30 )   $ 0.03  
Weighted average number of common shares outstanding                              
  Basic and diluted     1,908       1,908     1,908       1,908  
                               
                               
                               
New Jersey Community Bank  
Analysis of Average Balance Sheet and Net Interest Income  
(unaudited)  
       
    For the Three Months Ended  
    September 30, 2015     September 30, 2014  
    Average         Average     Average         Average  
    Balance     Interest   Rate     Balance     Interest   Rate  
Interest Earning Assets:                                        
  Loans   $ 79,365     $ 999   4.99 %   $ 89,892     $ 1,234   5.45 %
  Investment securities     19,396       98   2.02 %     17,255       89   2.06 %
  Federal funds sold and interest-bearing deposits with banks     13,845       8   0.23 %     9,472       5   0.21 %
  Due from banks - time deposits     6,872       13   0.75 %     6,336       11   0.69 %
      Total interest-earning assets     119,478       1,118   3.72 %     122,955       1,339   4.32 %
Allowance for loan loss     (1,586 )                 (1,646 )            
Cash and due from banks - non-interest bearing     1,709                   1,742              
All other assets     8,872                   9,210              
      Total assets   $ 128,473                 $ 132,261              
                                         
Interest Bearing Liabilities:                                        
  Deposits:                                        
    Savings, NOW and money market   $ 49,006       65   0.53 %   $ 46,115       51   0.44 %
    Time deposits $100M and over     38,311       118   1.22 %     44,544       147   1.31 %
    Time deposits, other     12,208       33   1.07 %     14,218       46   1.28 %
      Total interest-bearing deposits     99,525       216   0.86 %     104,877       244   0.92 %
Demand     14,074                   12,374              
Other liabilities     467                   427              
      Total liabilities     114,066                   117,678              
                                         
Stockholders' equity     14,407                   14,583              
      Total liabilities & stockholders' equity   $ 128,473                 $ 132,261              
Net interest income           $ 902                 $ 1,095      
                                         
Average interest rate spread                 2.86 %                 3.40 %
                                         
Net interest margin                 3.00 %                 3.53 %
                                         

Contact Information

  • Contacts at New Jersey Community Bank:

    William H. Placke
    Chairman, President and CEO
    bplacke@njcbk.com

    Naqi A. Naqvi
    Executive Vice President & CFO
    nnaqvi@njcbk.com