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Lincoln Park Bancorp Announces Year Ended 2019 and Fourth Quarter Results

Tuesday, 04 February 2020 09:00 AM

Topic:
Earnings

LINCOLN PARK, NJ / ACCESSWIRE / February 4, 2020 / Lincoln Park Bancorp (OTC PINK:LPBC) (the "Company"), the holding company of Lincoln 1st Bank (the "Bank"), announced a net loss of $1.7 million or $0.97 per basic share for the year ended December 31, 2019 compared to net income of $98 thousand or $0.08 per basic and diluted share for the twelve months ended December 31, 2018.

For the quarter ended December 31, 2019, the Company reported a net loss of $504 thousand, or $0.29 per basic share or a 19% improvement for the same period in 2018.

Both the year to date and quarterly loss reflect restructuring efforts, as the Company moves towards a sustainable and profitable balance sheet. During 2019, significant financial restructuring was undertaken resulting in a reduction of cost of funds, as well as, various expenses, which are not expected to recur. In addition, certain initial investment costs were required as the Company successfully built out multiple revenue arms, focusing on increasing core deposits and originating high-quality loans.

Company Highlights:

  • Transaction account average balances continued to trend upward, increasing 5% from September 30, 2019 and 22% year over year. For the same periods average savings account balances increased 24% or $10.1 million and 67% or $21.0 million respectively.
  • The Company saw a 22% or $24.4 million increase year over year within the organic loan portfolio. With much of the growth coming from commercial lending.
  • Reliance on brokered and listing deposits decreased 57% or $53.6 million year over year.
  • The year-to-date 2019 mark-to-market adjustment on the derivative required a valuation adjustment resulting in a loss of $448 thousand.

Stephen Dormer, CEO commented: "The Bank completed a significant part of its turn-around plan in 2019. The newly formed and refocused core business lines of the Bank- commercial lending, consumer lending, commercial checking and savings deposit generation- all performed at or above plan. This was accomplished by acquiring new and effective leadership and an appropriate number of supporting staff members in each of these critical revenue generating positions. The Bank also hired a new head of Human Resources to assist in recruiting and managing talent as well assuring compliance with regulatory need. Importantly, the Bank recruited three new Board members with substantial regulatory, banking and capital markets experience to help formulate and guide the Bank's strategy.

The business activities of the Bank, nonetheless, were undertaken concurrent with the repositioning of the balance sheet. This entailed substantial reduction of the investment portfolio as a percentage of assets while allowing the runoff of brokered and internet deposits. This unwinding of the former management's strategy produced losses in the short run exacerbated by the write down of the interest rate cap and the sudden mid-year decrease in interest rates. However, these activities were essential for the long-range health of the organization. The resulting smaller balance sheet evidences a more conventional mix of assets and liabilities and, importantly, a notably improved tier-one capital level. While the legacy issues are not entirely resolved the new organization and restructured balance sheet position the Bank for growth and profitability."

Financial Performance Overview:

YTD 2019 v. YTD 2018

For the twelve months ended December 31, 2019, net losses totaled $1.7 million, which reflects an increased loss of $1.8 million, in comparison to net income of $98 thousand for the twelve months ended December 31, 2018.

Net interest income for the twelve months ended December 31, 2019 decreased $477 thousand, or 8.0%, to $5.49 million, as compared to $5.97 million for the twelve months ended December 31, 2018. The decrease can be attributed to legacy assets and the change in the interest rate environment year over year. During 2019 the Bank saw increased prepayments on both the investment and participated loan portfolio, which resulted in acceleration of their associated premiums.

Allowance for loan losses provision for the twelve months ended December 31, 2019 increased $122 thousand, or 93.1%, to $253 thousand as compared to $131 thousand for the twelve months ended December 31, 2018. The provision for loan losses was derived from a normal assessment of the Company's environmental factors and increased commercial loan holdings.

Non-interest income increased $265 thousand, or 86.0%, to $573 thousand for the twelve months ended December 31, 2019, compared with income of $308 thousand for the twelve months ended December 31, 2018. This increase is primarily attributed to increased fee income related to commercial loans and deposits.

The valuation of the interest rate cap decreased $537 thousand, or 603.4%, to a loss of $448 thousand for the twelve months ended December 31, 2019, compared with income of $89 thousand for the twelve months ended December 31, 2018. The remaining fair value associated with the interest rate cap is $48 thousand.

The Company's non-interest expenses increased by $1.7 million, or 27.4%, to $7.9 million for the twelve months ended December 31, 2019, as compared to $6.2 million for the twelve months ended December 31, 2018. The increase in expense is attributed to the expansion of the commercial loan and business development departments, advertising costs utilized in launching our "Local 1st" campaign, and audit and accounting fees which are not expected to re-occur.

QTD 2019 v. QTD 2018

For the three months ended, December 31, 2019, net losses totaled $504 thousand which reflects an improvement of $122 thousand, in comparison to net losses of $626 thousand for the three months ended December 31, 2018.

Net interest income for the three months ended December 31, 2019 decreased slightly to $1.33 million as compared to $1.4 million for the three months ended December 31, 2018. The slight decrease in net interest incomes was caused by a reduction in average interest-bearing assets of $20.1 million compared to the same period 2018. This decrease was partially off-set by an improved net interest margin, driven by higher yielding organic loans.

Allowance for loan losses for the three months ended December 31, 2019 increased $18 thousand, to $83 thousand as compared to $65 thousand for the three months ended December 31, 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.

Non-interest income increased $36 thousand, or 40.9%, to $124 thousand for the three months ended December 31, 2019, compared with non-interest income of $88 thousand for the three months ended December 31, 2018. This increase is primarily attributed to a recognized gain associated on the sale of a Small Business Administration (SBA) loan sale.

The valuation of the interest rate cap increased $494 thousand, or 100.2%, to income of $1 thousand for the three months ended December 31, 2019, as compared to a loss of $493 thousand for the three months ended December 31, 2018. The purchase of the interest rate cap, in the fourth quarter of 2017, was part of the previously mentioned 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 $252 thousand, or 13.6%, to $2.11 million for the three months ended December 31, 2019, compared to $1.86 million the three months ended December 31, 2018. This increase in expense is attributed to the expansion of the services required to be provided by our auditors & accountants together with increased compensation costs associated with the build-out of the Company's revenue-generating departments.

Financial Condition:

As of December 31, 2019, the Company's total assets were $308.1 million, a decrease of $31.4 million, or 9.2%, as compared to total assets of $339.5 million at December 31, 2018. The decrease in total assets was associated with a $33.9 million reduction in investments, and $14.8 million reduction in participations purchased, as compared to balances at December 31, 2018. These funds were used to originate higher-yielding organic loans or deleverage the balance sheet to reduce reliance on wholesale funding.

Net loans receivable increased $9.4 million, or 4.9%, to $202.3 million as of December 31, 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 $34.8 million, or 14.2% to $210.9 million at December 31, 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 the exercise of our call option of $22.3 million of high cost brokered deposits during 2019. Average organic deposits continued the positive trend growing 13% year to date or $19.7 million. Demand Deposit Accounts (DDA) and NOW Accounts continue to trend upward growing $6.4 million or 26.0% from December 31, 2018.

As of December 31, 2019, the Company's total stockholders' equity was $17.4 million, which is an increase of $900 thousand when compared to December 31, 2018. The improvement was associated with the Company's accumulated other comprehensive position improving from a unrealized loss of $2.5 million at December 31, 2018 to a unrealized loss of $82 at December 31, 2019. Driving the change in position was the investment portfolio which stood at a $115 thousand unrealized loss at December 31, 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 December 31, 2019, Tier I 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 7.00%, 12.64%, 12.64% and 13.23%, respectively, all in excess of the ratios required to be deemed "well-capitalized."

About Lincoln Park Bancorp

Established in 1923 and headquartered in Lincoln Park, N.J., Lincoln Park Bancorp (OTC Bulletin Board: LPBC) through its wholly owned subsidiary Lincoln 1st Bank operates 2 branch locations in Lincoln Park and Montville, New Jersey. The Bank provides businesses and individuals a wide range of loans and deposit products, along with retail and commercial banking services. For more information, please visit www.mylincoln1st.com.

Forward-Looking Statements

The foregoing material may contain forward-looking statements concerning the unaudited financial condition, results of operations and business of the Company. We caution that such statements are subject to a number of uncertainties and actual results could differ materially, and, therefore, readers should not place undue reliance on any forward-looking statements. The Company does not undertake, and specifically disclaims, any obligation to publicly release the results of any revisions that may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements

Contact:

Stephen Dormer
Chief Executive Officer
862 777 8540

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

   
 
        (audited)  
 
  December 31, 2019     December 31, 2018  
 
           
ASSETS
           
 
           
CASH AND CASH EQUIVALENTS
  $ 2,752     $ 7,566  
INVESTMENTS
    86,837       120,829  
INTEREST RATE CAP
    48       495  
LOANS RECEIVABLE
    133,740       109,344  
PARTICIPATED LOANS RECEIVABLE
    69,633       84,429  
LESS: ALLOWANCE FOR LOAN LOSSES
    (1,085 )     (832 )
NET LOANS RECEIVABLE
    202,288       192,941  
PREMISES AND EQUIPMENT
    2,671       2,750  
FHLB/ACBB STOCK
    3,645       3,589  
INTEREST RECEIVABLE
    1,160       1,249  
OTHER ASSETS
    2,598       4,162  
TOTAL ASSETS
  $ 308,147     $ 339,542  
 
               
LIABILITIES
               
DEPOSITS
  $ 169,947     $ 151,158  
BROKERED AND LISTING DEPOSITS
    40,986       94,578  
BOND ISSUE
    4,860       4,838  
BORROWED MONEY
    71,724       69,898  
OTHER LIABILITIES
    3,228       2,382  
TOTAL LIABILITIES
  $ 290,744     $ 322,854  
 
               
TOTAL EQUITY
  $ 17,403     $ 16,688  
 
               
TOTAL LIABILITIES AND EQUITY
  $ 308,147     $ 339,542  
                 

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

 
                       
 
  for the twelve months ended     for the three months ended  
 
  December 31     December 31  
 
  2019     2018     2019     2018  
 
                       
INTEREST INCOME
                       
LOANS RECEIVABLE
  $ 8,479     $ 8,306     $ 2,150     $ 2,051  
SECURITIES
    2,807       3,392       560       806  
OTHER
    342       272       58       66  
TOTAL INTEREST INCOME
    11,628       11,970       2,768       2,923  
 
                               
INTEREST EXPENSE
                               
DEPOSITS
    3,918       3,744       860       952  
BOND ISSUANCE
    418       418       105       105  
BORROWINGS
    1,796       1,836       465       464  
TOTAL INTEREST EXPENSE
    6,132       5,998       1,430       1,521  
 
                               
NET INTEREST INCOME
    5,495       5,972       1,338       1,402  
 
                               
PROVISION FOR LOAN LOSSES
    253       131       83       65  
 
                               
NET INTEREST INCOME AFTER
                               
PROVISION FOR LOAN LOSSES
    5,242       5,841       1,256       1,337  
 
                               
NON-INTEREST INCOME
    573       308       124       88  
NON-INTEREST EXPENSE
    7,852       6,194       2,109       1,857  
INTEREST RATE CAP (LOSS) GAIN
    (448 )     89       1       (493 )
(LOSS) INCOME BEFORE INCOME TAXES
    (2,485 )     44       (729 )     (925 )
 
                               
INCOME TAX (BENEFIT)
    (795 )     (54 )     (225 )     (299 )
 
                               
NET (LOSS) INCOME
  $ (1,690 )   $ 98     $ (504 )   $ (626 )
                                 

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

 
                       
 
  for the twelve months ended     for the three months ended  
 
  December 31     December 31  
 
  2019     2018     2019     2018  
 
                       
EARNINGS PER SHARE:
                       
BASIC
  $ (0.97 )   $ 0.08     $ (0.29 )   $ (0.34 )
DILUTED
    -       0.08       -       -  
 
                               
NET INTEREST MARGIN (NIM)1:
                               
(INTEREST INCOME - INTEREST EXPENSE)
    5,495       5,654       1,338       1,402  
AVERAGE INTEREST BEARING ASSETS
    317,794       339,069       304,651       324,775  
 
    1.73 %     1.67 %     1.76 %     1.73 %
 
                               
RETURN ON ASSETS (ROA):
                               
NET INCOME
    (1,690 )     98       (504 )     (626 )
AVERAGE TOTAL ASSETS
    328,511       353,113       314,209       339,495  
 
    (0.51 %)     0.03 %     (0.64 %)     (0.74 %)
 
                               
RETURN ON EQUITY (ROE):
                               
NET INCOME
    (1,690 )     98       (504 )     (626 )
BOOK VALUE OF EQUITY
    17,350       16,636       17,350       16,636  
 
    (9.74 %)     0.59 %     (11.62 %)     (15.05 %)
 
                               
NON-PERFORMING ASSETS (NPA):
                               
NET NON-PERFORMING ASSETS
    725       168                  
OUTSTANDING LOANS
    203,289       193,675                  
 
    0.36 %     0.09 %                
 
                               
     

1The ratio presented for the twelve months ended December 31, 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

Topic:
Earnings
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