Liberty Bell Bank (fka LBBB)

[Enterprising Investor]

Liberty Bell Bank Reports Third Quarter 2014 Results of Operations and a Management Reorganization (10/20/14)

MARLTON, N.J.--(BUSINESS WIRE)--Liberty Bell Bank (OTCQB:LBBB) today reported that the Bank continues to meet all required regulatory capital levels. The Bank also reported that efforts to complete its Troubled Asset Resolution Plan continued during the third quarter of 2014. Primarily as a result of these efforts the Bank reported a net loss of $1.45 million or $(0.18) per diluted share for the three months ended September 30, 2014, compared to net income of $39,000 or $0.01 per diluted share for the same period in 2013. The net loss for the nine months ended September 30, 2014 was $2.39 million or $(0.42) per diluted share, compared to a net loss of $2.34 million or $(0.76) per diluted share for the same period in 2013.

The Bank also announced several management changes designed to strengthen its business development efforts and streamline its operations. Effective November 14, 2014: President and CEO Kevin L. Kutcher moves to Vice Chairman and Director of Corporate and Business Development; Chief Financial Officer Benjamin F. Watts moves to President and CEO; Senior Vice President/Finance Dennis Costa moves to Chief Financial Officer and Kenneth R. Lehman, the Bank’s largest shareholder, becomes a member of its Board of Directors.

“Having successfully completed a $5 million capital raise earlier this year, the Bank has made a concerted effort to use the offering proceeds to clean up its balance sheet through the adoption of its Troubled Asset Resolution Plan and to substantially increase its business development activity so that we may once again focus our efforts on the Bank’s growth,” said Chairman Bill Dunkelberg. “Mr. Watts and Mr. Kutcher have worked as a team for years and have the experience and expertise to rebalance their efforts to further enhance our growth opportunities. We have made significant progress in cleaning up the problems we have faced from the recession and the multi-bank check kite. We will use the fourth quarter to finish the cleanup and look forward to starting 2015 with more normal operations and a year of profitability,” he concluded.

On the addition of Mr. Lehman to the Board of Directors, Chairman Dunkelberg stated, “We are very pleased that Ken Lehman has accepted our request to serve on our Board. We are delighted that he has chosen to invest in us and his substantial banking expertise will greatly assist our Board going forward.”

The loss of $1.45 million in the third quarter of 2014 was due primarily to:

• write down and loss on the sale of other real estate owned of $167,000,

• an additional provision for loan losses of $927,000 to replenish our allowance for loan losses after reductions resulting from charge-offs of problem loans,

• a $135,000 increase in compensation expense due to additional hires to enhance our business development initiative,

• additional legal expenses of $110,000 related to the troubled asset portfolio,

• $36,000 of expenses associated with our other real estate owned,

• miscellaneous reductions in interest income totaling $70,000 recognized in the second quarter of 2014,

• $23,000 in professional fees to support development of a regulatory compliance plan and a strategic plan, and

• expenses of $11,000 incurred to perform maintenance and address environmental issues on properties serving as collateral for non-accrual loans.

For the quarter ended September 30, 2014, the Bank increased its provision for loan losses by $918,000 from the same period in 2013. In addition, the Bank’s net interest income decreased by $254,000, as compared to the three months ended September 30, 2013. This was due to a $355,000 decrease in interest and dividend income, partially offset by a $101,000 reduction in interest expense from decreased interest on deposits and borrowings. The decrease in interest and dividend income was due primarily to a decrease of $313,000 in interest and fees from loans and by a decrease of $42,000 in interest earned from investments.

The decrease of $313,000 in interest and fees from loans was due primarily to a 43 basis point reduction of the yield from the loan portfolio from 5.13% to 4.70%. The reduction in yield was due primarily to the reversal of $70,000 of accrued interest on loans that were placed on non-accrual during the quarter. In addition, the average loan balances outstanding for the three months ended September 30, 2014 as compared to the three months ended September 30, 2013 decreased by $15.8 million. The reduction in average loan balances was due primarily to pay-downs and pay-off of commercial mortgage loans and other commercial loans.

The Bank’s losses from the sale of other real estate increased by $160,000 during the quarter ended September 30, 2014, and non-interest expense increased by $180,000, over the third quarter of 2013. The $180,000 increase in non-interest expense was due primarily to a $135,000 increase in compensation expense, a $11,000 increase in expenses related to other real estate owned and a $73,000 increase in other operating expenses. These variances were partially offset by a reduction in occupancy expense of $34,000 primarily due to closing a branch office in 2013. In addition, marketing expense decreased $5,000. The increase in other operating expense was due primarily to an increase in legal expense of $42,000, audit and consulting fees of $3,000, printing and supplies expense of $2,000 and loan related expenses of $26,000.

Net interest margin for the third quarter of 2014 was 3.06%, a decrease of 0.27% from the 3.33% net interest margin for the third quarter of 2013. The decline in the net interest margin resulted primarily from a reduction of 0.45% in the yield generated from interest-earning assets partially offset by a reduction of 0.15% in the rate paid for interest bearing deposits.

For the nine months ended September 30, 2014 compared to the same period in 2013, the Bank decreased its provision for loan losses by $1.4 million, net-interest income decreased by $507,000, losses from other real estate owned increased by $659,000 and non-interest expense increased by $384,000 from $4.1 million for the nine months ended September 30, 2013 to $4.5 million for the nine months ended September 30, 2014.

The decrease of $507,000 in net interest income was due to a $822,000 decrease in interest and dividend income, partially offset by a $315,000 reduction in interest expense, primarily resulting from a decrease of interest on deposits and reduced borrowings from the Federal Home Loan Bank. The decrease in interest and dividend income was due primarily to a decrease of $747,000 in interest and fees from loans and a decrease of $75,000 in interest earned from investments.

The decrease of $747,000 in interest and fees from loans was due primarily to a 23 basis point reduction of the yield from the loan portfolio from 5.17% to 4.94%. In addition, the average loan balances outstanding for the nine months ended September 30, 2014 as compared to the nine months ended September 30, 2013 decreased by $14.8 million. The decrease of $75,000 in interest earned from investments was due primarily to a 21 basis point reduction of the yield.

The $384,000 increase in non-interest expense for the nine months ended September 30, 2014 as compared to the nine months ended September 30, 2013 was due primarily to a $299,000 increase in other operating expense, a $111,000 increase in compensation expenses and a $40,000 increase in expenses related to other real estate owned, as well as a $25,000 increase in income tax expense. Partially offsetting these negative variances, occupancy expense and equipment expense decreased $88,000 and $4,000, respectively. The $299,000 increase in other operating expense was due primarily to an increase in legal expenses of $111,000, audit and consulting fees of $87,000, insurance expense of $66,000 and loan related expenses of $46,000 and miscellaneous expense increased $15,000 offset by a reduction in communication expense of $29,000.

Total assets at September 30, 2014 were $148.7 million, representing a decrease of $9.2 million from $157.9 million at December 31, 2013. The decrease was due primarily to net loans which decreased $9.7 million; securities which decreased $1.1 million; other real estate owned which decreased $939,000; bank premises and equipment which decreased $164,000 and other assets which decreased $374,000 from December 31, 2013. These decreases were partially offset by cash and cash equivalents which increased $3.1 million. The reduction in loans was due primarily to the pay down and pay off of commercial loans.

Total deposits decreased $12.5 million to $134.4 million at September 30, 2014 from $146.9 million at December 31, 2013. The decrease was primarily due to a $475,000 decrease in non-interest bearing accounts and a $12.0 million decrease in interest bearing accounts.

The decrease in interest-bearing deposit accounts of $12.0 million was due primarily to a decrease in certificates of deposit, our highest cost deposits, which decreased $5.4 million from $59.3 million at December 31, 2013 to $53.9 million at September 30, 2014. Interest bearing checking accounts, including money market accounts, decreased $6.3 million and savings accounts decreased $315,000.

Total capital increased $3.2 million from $7.1 million at December 31, 2013 to $10.2 million at September 30, 2014. The increase was due primarily to a common stock offering of 5,000,000 shares at $1.00 per share which closed on May 12, 2014.

At September 30, 2014, our criticized/classified loans totaled $8.0 million, which represents a decrease of $967,000 since December 31, 2013. Other real estate owned totaled $5.3 million at September 30, 2014, a decrease of $939,000 from $6.3 million at December 31, 2013.

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Liberty Bell Bank is a full-service, state-chartered commercial bank, whose deposits are insured by the Federal Deposit Insurance Corporation (FDIC). The Bank provides diversified financial products through two locations in Burlington County, New Jersey and one location in Camden County, New Jersey.

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