Lincoln Park Bancorp Announces Third Quarter 2019 Results

LINCOLN PARK, NJ / ACCESSWIRE / October 30, 2019 / Lincoln Park Bancorp (OTC PINK:LPBC) (the "Company"), the holding company of Lincoln 1^st Bank, announced a net loss of $1.2 million, or $0.68 per basic and diluted share for the nine months ended September 30, 2019, compared to net income of $724 thousand or $0.42 per basic share, and $0.41 per diluted share for the nine months ended September 30, 2018. "The quarterly losses can be attributed to lower interest rates, and prepayments of legacy assets, as well as the continued acquisition of talent to execute the redirection of the bank." said Chairman and Chief Executive Officer Stephen Dormer.

Company Highlights:

• Transaction account average balances continue to trend upward, increasing 16.0% at September 30, 2019 as compared to December 31, 2018; this reflects the Company's continued efforts to reduce the Bank's cost of funds.
• The Company's commercial loan growth increased by $19.4 million, or 55.7%, at September 30, 2019, as compared to December 31, 2018.
• For the nine months ended September 30, 2019, the Company called $22.3 million of higher costing brokered deposits, to continue to reduce the Bank's cost of funds.
• The year-to-date 2019 mark-to-market adjustment on the derivative required a valuation adjustment resulting in a loss of $449 thousand.

Stephen Dormer commented: "The decline in interest rates in the third quarter afforded us the opportunity to reduce brokered deposits, and shrink non-productive assets in our investment portfolio. These actions accelerated the transition of the Bank's balance sheet to that of a conventional community bank. The Bank continued to experience growth in its core deposits and its core lending businesses. As a result, organic commercial, and residential loans increased to 41% as a percentage of total assets, a 9% increase from December 31, 2018. Likewise, core deposits are equivalent to 54% of total assets, compared to 45% at December 31, 2018."

Financial Performance Overview:

QTD 2019 v. QTD 2018

For the three months ended September 30, 2019, net losses totaled $376 thousand which reflects an increased loss of $434 thousand, in comparison to net income of $58 thousand for the three months ended September 30, 2018.

Net interest income for the three months ended September 30, 2019 decreased $300 thousand, or 20.0%, to $1.2 million as compared to $1.5 million for the three months ended September 30, 2018. The decrease can be attributed to the ongoing restructuring of the balance sheet, coupled with improved positioning the bank for sustainable future growth. The Company's average interest-bearing assets have decreased $12.3 million.

Allowance for loan losses for the three months ended September 30, 2019 increased $34 thousand, to $52 thousand as compared to $18 thousand for the three months ended September 30, 2018. The provision for loan losses was derived from a normal assessment of the Company's environmental factors, as part of the ASC-450 general reserve and ASC-310 specific reserve calculations. The increase is attributed to the continued emphasis on growth of the commercial loan portfolio.

Non-interest income increased $213 thousand, or 575.7%, to $250 thousand for the three months ended September 30, 2019, compared with non-interest income of $37 thousand for the three months ended September 30, 2018. During the quarter, Lincoln 1^st Banks sold a portion of the investment portfolio resulting in a $164,000 gain on sale. The remaining increase can be attributed to the increase focus on growing the Bank.

The valuation of the interest rate cap decreased $176 thousand, or 139.7%, to a loss of $50 thousand for the three months ended September 30, 2019, as compared to a gain of $126 thousand for the three months ended September 30, 2018. The loss for the third quarter of 2019 can be attributed to the decreasing rate environment. The purchase of the interest rate cap, in the fourth quarter of 2017, was part of the necessary asset restructuring, together with better management of the Company's interest rate risk. The mark-to-market effects on our income statement resulting from the interest rate cap are by their nature volatile and may increase or decrease our income in future periods.

The Company's non-interest expenses increased by $500 thousand, or 33.3%, to $2.0 million for the three months ended September 30, 2019, compared to $1.5 million for the three months ended September 30, 2018. This increase in expense was attributed to additional salary needed to build out and support the revenue generating business lines of the Company.

YTD 2019 v. YTD 2018

For the nine months ended September 30, 2019, net losses totaled $1.2 million, which reflects an increased loss of $1.9 million, in comparison to net income of $724 thousand for the nine months ended September 30, 2018.

Net interest income for the nine months ended September 30, 2019 decreased $500 thousand, or 10.6%, to $4.2 million, as compared to $4.7 million for the nine months ended September 30, 2018. The decrease can be attributed to a $12.3 million reduction in average interest-earnings assets. The basis point decrease in the net interest margin is attributable to the increased fee amortization relating to the calling of $22.3 million in brokered deposits.

Allowance for loan losses for the nine months ended September 30, 2019 increased $105 thousand, or 159.1%, to $171 thousand as compared to $66 thousand for the nine months ended September 30, 2018. The provision for loan losses was derived from a normal assessment of the Company's environmental factors as non-performing assets improved and remain well below industry averages. The increase is attributed to the continued emphasis on growth of the organic loan portfolio.

Non-interest income increased $364 thousand, or 428.2%, to $449 thousand for the nine months ended September 30, 2019, compared with income of $85 thousand for the nine months ended September 30, 2018.

The valuation of the interest rate cap decreased $1.0 million, or 177.1%, to a loss of $449 thousand for the nine months ended September 30, 2019, compared with income of $582 thousand for the nine months ended September 30, 2018. The remaining fair value associated with the interest rate cap is $47 thousand.

The Company's non-interest expenses increased by $1.4 million, or 32.6%, to $5.7 million for the nine months ended September 30, 2019, as compared to $4.3 million for the nine months ended September 30, 2018.

Financial Condition:

As of September 30, 2019, the Company's total assets were $306.7 million, a decrease of $32.9 million, or 9.7%, as compared to total assets of $339.6 million at December 31, 2018. The decrease in total assets was associated with a $25.5 million reduction in investments, and $5.6 million reduction in cash held, as compared to balances at December 31, 2018. These funds were used to call $22.3 million in brokered deposits during the three months ended September 30, 2019.

Net loans receivable increased $1 million, or 0.5%, to $193.9 million as of September 30, 2019, compared to $192.9 million at December 31, 2018. The increase in net loans receivable was primarily in the commercial loan portfolio, which was netted against continued paydowns in the residential and participated loan portfolio.

The Company's total deposits decreased $33.0 million, or 13.4% to $212.7 million at September 30, 2019, from $245.7 million at December 31, 2018. The decrease in deposits reflected an intentional outflow of deposits that the Bank chose not to retain given their above market rates and associated volatility, as well as calls of $22.3 million in brokered deposits during the three months ended September 30, 2019. Average organic deposits continued the positive trend growing 8.9% year to date or $13.6 million. Demand Deposit Accounts (DDA) and NOW Accounts continue to trend upward growing $3.9 million or 16.0% from December 31, 2018.

As of September 30, 2019, the Company's total stockholders' equity was $18.7 million, which is an increase of $2.2 million when compared to December 31, 2018. The improvement was associated with the Company's accumulated other comprehensive position, while transitioning from a loss at December 31, 2018 to a positive position at September 30, 2019. Driving the change in position was the investment portfolio which stood at a $766 thousand unrealized gain at September 30, 2019, compared to an unrealized loss of $3.4 million at December 31, 2018. The Bank will continue to monitor and adjust its investment portfolio position. As of September 30, 2019, Tier1 capital leverage ratio and all three risk-based capital ratios common equity tier 1 capital ratio, Tier 1 capital ratio and total capital ratios for the Bank continue to show adequate capitalization of 6.92%, 12.65%, 12.65% and 13.22%, respectively, all in excess of the ratios required to be deemed "well-capitalized."

Note to shareholders:

Beginning with the December 31, 2019 quarterly releases please visit www.mylincoln1st.com to view all future releases.

About Lincoln Park Bancorp

LINCOLN PARK BANCORP
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands)
(unaudited)

LINCOLN PARK BANCORP
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands)
(unaudited)

LINCOLN PARK BANCORP
FINANCIAL RATIOS
(in thousands, except per share amounts)
(unaudited)

¹The ratio presented for the nine months ended September 30, 2018 is a Non GAAP measure; the net interest income numerator does not include a one-time income adjustment relating to a change in the accounting method associated with premiums on participated loans in March 2018.

SOURCE: Lincoln Park Bancorp