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	%