Freehold, New Jersey - (NewMediaWire) - November 25, 2015 - New Jersey Community Bank (
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 $47 thousand, in part due to consulting services utilized by the Bank to comply with the Consent Order among the Bank, the FDIC and the NJ Department of Banking and Insurance. All other operating expenses combined increased moderately.
About the Bank
New Jersey Community Bank
|Analysis of Average Balance Sheet and Net Interest Income|
|For the Three Months Ended|
|September 30, 2015||September 30, 2014|
|Interest Earning Assets:|
|Federal funds sold and interest-bearing deposits with banks||13,845||8||0.23||%||9,472||5||0.21||%|
|Due from banks - time deposits||6,872||13||0.75||%||6,336||11||0.69||%|
|Total interest-earning assets||119,478||1,118||3.72||%||122,955||1,339||4.32||%|
|Allowance for loan loss||(1,586||)||(1,646||)|
|Cash and due from banks - non-interest bearing||1,709||1,742|
|All other assets||8,872||9,210|
|Interest Bearing Liabilities:|
|Savings, NOW and money market||$||49,006||65||0.53||%||$||46,115||51||0.44||%|
|Time deposits $100M and over||38,311||118||1.22||%||44,544||147||1.31||%|
|Time deposits, other||12,208||33||1.07||%||14,218||46||1.28||%|
|Total interest-bearing deposits||99,525||216||0.86||%||104,877||244||0.92||%|
|Total liabilities & stockholders' equity||$||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||%|