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Bancorp of New Jersey Reports 2019 Third Quarter Financial Results

/EIN News/ -- FORT LEE, N.J., Nov. 08, 2019 (GLOBE NEWSWIRE) -- Bancorp of New Jersey, Inc. (NYSE American:  BKJ) (the “Company”), holding company for Bank of New Jersey (the “Bank”), today reported financial results for its third quarter and nine months ended September 30, 2019. Net income for the third quarter of 2019 was $517 thousand, or $0.07 per diluted share, compared to net income of $1.76 million, or $0.24 per diluted share, for the third quarter of 2018. Net income for the nine months ended September 30, 2019 was $3.42 million, or $0.47 per diluted share, compared to net income of $4.30 million, or $0.61 per diluted share, for the nine months ended September 30, 2018, a decrease of $873 thousand or 20.4%. This decrease in net income for the three and nine month periods is primarily due to merger related expenses, lower net interest income and an increase in the effective tax rate.

Total loans were $798.1 million at September 30, 2019, up $32.2 million or 4.2% from the December 31, 2018 balance of $765.9 million. Total deposits were $799.9 million at September 30, 2019, up $63.2 million or 8.6% from the December 31, 2018 balance of $736.7 million.

Nancy E. Graves, Bancorp of New Jersey’s President and Chief Executive Officer, stated, “We are pleased with our continued organic growth in loans and core deposits during 2019.  With the definitive merger agreement of August 15, 2019, the Company and ConnectOne Bancorp, Inc. (“ConnectOne”) are focused on completing the customary closing conditions of the merger, including outstanding regulatory approvals and approval by the Company’s and ConnectOne’s shareholders. It is anticipated that the transaction will close during the first quarter of 2020.”

The following tables show information regarding the growth in our loan and deposit portfolios (in thousands):



At the Period Ended
  September 30, 2019
  December 31, 2018
Loan Composition              
Commercial Real Estate $ 676,154     $ 640,627  
Residential Mortgages   54,420       58,281  
Commercial and Industrial   23,975       24,852  
Home Equity   43,359       41,833  
Consumer   166       326  
Total Loans   798,074       765,919  
Deferred Loan Fees and Costs, net   (830 )     (937 )
Allowance for Loan Losses   (8,696 )     (8,393 )
Net Loans $ 788,548     $ 756,589  
       
Deposit Composition      
Noninterest-Bearing Demand Deposits $ 128,152     $ 118,489  
Savings and Interest-Bearing Transaction Accounts   272,516       298,108  
Time Deposits $250 and under   268,199       213,855  
Time Deposits over $250   131,040       106,250  
Total Deposits $ 799,907     $ 736,702  
               

Three and Nine Months Ended September 30, 2019 Financial Review

Net Interest Income
Net interest income decreased by $322 thousand or 4.6% and $719 thousand or 3.6% for the three and nine months ended September 30, 2019, respectively, versus the same periods last year.  The lower net interest income is a result of the increase in total interest expense outpacing the increase in total interest income in 2019. Net interest margin was 2.88% at the end of the third quarter compared to 2.92% at the end of the second quarter of 2019.

Total interest income increased by $992 thousand or 10.6% and $2.7 million or 10.1% for the three and nine months ended September 30, 2019, respectively, as compared to the corresponding periods in 2018, and was driven primarily in loan growth.

Total interest expense increased by $1.3 million or 54.9% in the third quarter of 2019 to $3.7 million compared to $2.4 million in the third quarter of 2018. For the nine months ended September 30, 2019, total interest expense increased by $3.4 million or 51.9% versus the same period in 2018. The increase in total interest expense for the three and nine month periods was due to higher deposit balances and rates paid on deposits and borrowed funds.

Provision for Loan Losses
The Company recorded a provision for loan losses of $250 thousand and $390 thousand for both the three and nine months ended September 30, 2019, respectively, compared to a provision for loan losses of $280 thousand and $930 thousand for the three and nine months ended September 30, 2018, respectively. The allowance for loan losses to total loans was 1.09% as of September 30, 2019.

Non-Interest Expense
Non-interest expense was $5.5 million and $4.4 million during the third quarter of 2019 and 2018, respectively, as compared to non-interest expense of $14.8 million and $13.8 million for the nine months ended September 30, 2019 and 2018, respectively. Included in non-interest expense for the three and nine months ended September 30, 2019 are legal and professional fees of approximately $700 thousand in merger related expenses.

Income Tax Expense
The income tax accrual for the three months ended September 30, 2019 was $440 thousand compared to $589 thousand for the same period in 2018. The decrease in income tax expense was the result of lower income before provision of income taxes. The effective tax rate for the three months ended September 30, 2019 and 2018 was 46.2% and 25.1%, respectively.  The increase in the effective tax rate reflected a year-to-date catch up in the accrual for income taxes in anticipation of the issuance of regulations implementing New Jersey’s adoption of tax legislation requiring a combined filing of affiliated companies. In addition, certain merger related costs are not tax deductible.

The income tax accrual for the nine months ended September 30, 2019 was $1.2 million compared to $1.4 million for the same period in 2018 which was a result of lower income before provision of income taxes. The effective tax rate for the nine months ended September 30, 2019 was 26.0%, as the Company anticipates the issuance of regulations implementing the tax legislation discussed above and the non-deductibility of certain merger related expenses.

Net Income
Net income for the third quarter of 2019 was $517 thousand compared to net income of $1.76 million for the third quarter of 2018, a decrease of $1.25 million or 70.9%.  Net income for the nine months ended September 30, 2019 was $3.42 million compared to net income of $4.30 million for the same period in 2018, a decrease of $873 thousand or 20.4%. This decrease in net income for the three and nine month periods is primarily due to merger related expenses, lower net interest income and an increase in the effective tax rate.

Financial Condition
Total assets increased by $77.9 million, or 8.8%, from $883.7 million at December 31, 2018 to $961.7 million at September 30, 2019, reflecting an increase in cash and cash equivalents, loans receivable and other assets related to the booking of a right to use asset due to the adoption of Accounting Standards Update 2016-02, Leases as of January 1, 2019.

Total cash and cash equivalents increased from $64.5 million at December 31, 2018 to $108.5 million at September 30, 2019, an increase of $44.0 million. The change in cash is mainly due to an increase in deposit account balances and the maturity of certain securities.

An increase in deposit balances, primarily in time deposits, and customers transferring funds to higher interest-bearing accounts have increased deposit costs. The Bank has sought to increase its core deposits while reducing its reliance on potentially volatile municipal deposits and their effects of seasonal fluctuations related to real estate tax inflows and payments.

Borrowed funds decreased to $49.9 million as of September 30, 2019 from $51.7 million at December 31, 2018.

At September 30, 2019, the Bank maintained capital ratios that were in excess of regulatory standards for well capitalized institutions. The Company’s and Bank’s Tier 1 capital to average assets ratio was 10.01%, each of their common equity Tier 1 capital and Tier 1 capital to risk weighted assets ratios were 11.29% and their total capital to risk weighted assets ratio was 12.34%.

Loan Quality
At September 30, 2019 the Bank had non-accrual loans of $10.8 million. Included in this total are $3.4 million in Troubled Debt Restructured Loans (“TDRs”). At year-end 2018, non-accrual loans totaled $9.4 million, of which $4.5 million were TDRs. Accruing loans delinquent greater than 30 days were $4.3 million as of September 30, 2019, compared to $5.3 million at December 31, 2018. Of the $4.3 million in delinquent loans at September 30, 2019, two loans totaling $1.2 million reached maturity and were in the process of extension or renewal.

About the Company
Founded in 2006, Bancorp of New Jersey, Inc. is the holding company for Bank of New Jersey, which provides traditional commercial and consumer banking products and services. The Bank’s corporate office is in Englewood Cliffs and the Bank currently operates out of 9 branch offices located in Fort Lee, Hackensack, Haworth, Englewood Cliffs, Englewood, Cliffside Park, and Woodcliff Lake. For more information about Bank of New Jersey and its products and services, please visit http://www.bonj.net or call 201-720-3201. If you would like to receive future Bancorp of New Jersey announcements electronically, please email us at shareholder@bonj.net.

Forward-Looking Statements
This press release and other statements made from time to time by Bancorp of New Jersey’s management contain express and implied statements relating to our future financial condition, results of operations, credit quality, corporate objectives, and other financial and business matters, which are considered forward-looking statements. These forward-looking statements are necessarily speculative and speak only as of the date made, and are subject to numerous assumptions, risks and uncertainties, all of which may change over time. Actual results could differ materially from those expected or implied by such forward-looking statements. Risks and uncertainties which could cause our actual results to differ materially and adversely from such forward-looking statements are included in our Annual Report on Form 10-K under Item 1a – Risk Factors and in the description of our business under Item 1. Additional information and other factors that could affect future financial results are included in the Company’s subsequent filings with the Securities and Exchange Commission. Any statements made that are not historical facts should be considered to be forward-looking statements. You should not place undue reliance on any forward-looking statements. We undertake no obligation to update forward-looking statements or to make any public announcement when we consider forward-looking statements to no longer be accurate, whether as a result of new information of future events, except as may be required by applicable law or regulation.

Additional Information
This press release does not constitute an offer to sell or the solicitation of any offer to buy any securities or a solicitation of any vote or approval. Before making any vote or investment decision, investors and shareholders of the Company are urged to read carefully the Company’s definitive proxy statement relating to the merger with ConnectOne Bancorp, Inc.

BANCORP OF NEW JERSEY, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except for per share data)

             
  For the Three Months Ended September 30,   
  2019
  2018  
INTEREST INCOME            
Loans, including fees $ 9,535     $ 8,779  
Securities   168       229  
Federal funds sold and other   616       319  
TOTAL INTEREST INCOME   10,319       9,327  
             
INTEREST EXPENSE            
Savings and interest bearing transaction accounts   938       546  
Time deposits   2,387       1,663  
Borrowed funds   382       184  
TOTAL INTEREST EXPENSE   3,707       2,393  
             
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES   6,612       6,934  
Provision for loan losses   250       280  
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES   6,362       6,654  
NON-INTEREST INCOME            
Fees and service charges   134       115  
TOTAL NON-INTEREST INCOME   134       115  
             
NON-INTEREST EXPENSE            
Salaries and employee benefits   2,676       2,369  
Occupancy and equipment expense   889       827  
FDIC premiums and related expenses   (95 )     130  
Legal fees   686       120  
Other real estate owned expenses   49       1  
Professional fees   455       237  
Data processing   403       149  
Other expenses   476       585  
TOTAL NON-INTEREST EXPENSE   5,539       4,418  
Income before provision for income taxes   957       2,351  
Income tax expense   440       589  
Net Income $ 517     $ 1,762  
             
PER SHARE OF COMMON STOCK            
Basic $ 0.07     $ 0.24  
Diluted $ 0.07     $ 0.24  
               

BANCORP OF NEW JERSEY, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except for per share data)

             
  For the Nine Months Ended September 30,   
  2019   2018  
INTEREST INCOME            
Loans, including fees $ 27,380   $ 25,106  
Securities   554     698  
Federal funds sold and other   1,448     887  
TOTAL INTEREST INCOME   29,382     26,691  
             
INTEREST EXPENSE            
Savings and interest bearing transaction accounts   2,736     1,427  
Time deposits   6,161     4,786  
Borrowed funds   1,082     356  
TOTAL INTEREST EXPENSE   9,979     6,569  
             
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES   19,403     20,122  
Provision for loan losses   390     930  
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES   19,013     19,192  
NON-INTEREST INCOME            
Fees and service charges   391     320  
TOTAL NON-INTEREST INCOME   391     320  
             
NON-INTEREST EXPENSE            
Salaries and employee benefits   7,546     7,156  
Occupancy and equipment expense   2,707     2,522  
FDIC premiums and related expenses   138     436  
Legal fees   1,036     477  
Other real estate owned expenses   74     10  
Professional fees   892     730  
Data processing   971     687  
Other expenses   1,418     1,814  
TOTAL NON-INTEREST EXPENSE   14,782     13,832  
Income before provision for income taxes   4,622     5,680  
Income tax expense   1,200     1,385  
Net Income $ 3,422   $ 4,295  
             
PER SHARE OF COMMON STOCK            
Basic $ 0.47   $ 0.61  
Diluted $ 0.47   $ 0.61  

BANCORP OF NEW JERSEY, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands, except for per share data)

           
  September 30, 2019   December 31, 2018
Assets          
Cash and due from banks $ 2,601     $ 3,541  
Interest bearing deposits   101,885       59,024  
Federal funds sold   4,035       1,977  
Total cash and cash equivalents   108,521       64,542  
Interest bearing time deposits   500       500  
Securities available for sale   26,914       32,293  
Securities held to maturity (fair value $264 and $5,852 at September 30, 2019 and December 31, 2018, respectively)   264       5,852  
Restricted investment in bank stock, at cost   3,088       3,239  
Loans receivable   798,074       765,919  
Deferred loan fees and costs, net   (830 )     (937 )
Allowance for loan losses   (8,696 )     (8,393 )
Net loans   788,548       756,589  
Premises and equipment, net   12,996       13,440  
Accrued interest receivable   2,849       2,841  
Other real estate owned   1,363       511  
Right of use asset   12,865       -  
Other assets   3,776       3,929  
Total assets $ 961,684     $ 883,736  
Liabilities and Stockholders’ Equity          
LIABILITIES:          
Deposits:          
Noninterest-bearing demand deposits $ 128,152     $ 118,489  
Savings and interest bearing transaction accounts   272,516       298,108  
Time deposits $250 and under   268,199       213,855  
Time deposits over $250   131,040       106,250  
Total deposits   799,907       736,702  
Borrowed funds   49,847       51,658  
Lease liability   13,333       -  
Accrued expenses and other liabilities   5,490       6,269  
Total liabilities   868,577       794,629  
Stockholders’ equity:          
Common stock, no par value, authorized 20,000,000 shares; issued and outstanding 7,293,697 at September 30, 2019 and 7,295,466 at December 31, 2018   76,913       76,713  
Retained earnings   16,236       12,814  
Accumulated other comprehensive loss   (42 )     (420 )
Total stockholders’ equity   93,107       89,107  
Total liabilities and stockholders’ equity $ 961,684     $ 883,736  
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