Exhibit 99.2
First Quarter 2018
Shareholders Report
May 11, 2018
Dear Fellow Shareholder,
Enclosed please find our quarterly shareholder report summarizing our Company’s financial performance for the three months ended March 31, 2018, and highlighting the progress we are making in executing on our strategy to deliver long-term profitable growth and generate returns for our investors. The first quarter financial results were highlighted by reported net income of $1.34 million, or $0.19 per diluted share, a 26.42% increase from $1.06 million, or $0.17 per diluted share, in the prior year period.
Net interest income for the first quarter of 2018 was $6.7 million, an increase of $669,000 or 11.07%, compared to $6.0 million for the same period of 2017. We are very pleased with the increase in net interest income which is attributable to the strong loan growth of 9.4% last year. The increase in total loans, along with an increase in our net interest rate spread, expanded our net interest margin to 3.10% at March 31, 2018, from 2.93% at December 31, 2017.
Total loans were $723.8 million at March 31, 2018, up $2.6 million, from the December 31, 2017 balance of $721.2 million. Commercial loan growth was $9 million in the first quarter of 2018 and our pipeline remains active.
Total deposits were $759.0 million at March 31, 2018, down $29.3 million, or 3.72% from the December 31, 2017 balance of $788.3 million. While we experienced a cyclical decline in municipal and government deposits attributable to real estate tax payments, our focus on driving organic deposits higher with free checking products resulted in an increase in demand deposits of 2.5% at quarter end. The market is highly competitive but we are pleased with our new business and personal account activity.
Following please find further detail on our financial results. We look forward to the remainder of 2018, as we plan for continued growth, expanding relationships and community involvement.
Very truly yours,
| 
| 
|
| Gerald A. Calabrese, Jr. | Nancy E. Graves |
| Chairman of the Board | President and Chief Executive Officer |
| | Period Ended | |
| | March 31,
2018 | | December 31,
2017 | |
Loan Composition | | | | | |
Commercial Real Estate | | $ | 582,890 | | $ | 573,941 | |
Residential Mortgages | | 64,685 | | 66,497 | |
Commercial and Industrial | | 26,250 | | 27,237 | |
Home Equity | | 49,729 | | 53,199 | |
Consumer | | 235 | | 317 | |
Total Loans | | 723,789 | | 721,191 | |
Deferred Loan Fees and Costs, net | | (786 | ) | (798 | ) |
Allowance for Loan Losses | | (8,111 | ) | (8,317 | ) |
Net Loans | | $ | 714,892 | | $ | 712,076 | |
| | | | | |
Deposit Composition | | | | | |
Noninterest-Bearing Demand Deposits | | $ | 136,938 | | $ | 133,661 | |
Savings and Interest-Bearing Transaction Accounts | | 271,293 | | 307,583 | |
Time Deposits $250 and under | | 231,148 | | 231,224 | |
Time Deposits over $250 | | 119,617 | | 115,825 | |
Total Deposits | | $ | 758,996 | | $ | 788,293 | |
First Quarter 2018 Financial Review
Net Income
Net income for the first quarter of 2018 was $1.34 million compared to net income of $1.06 million for the first quarter of 2017. The increase in net income for the three month period ended March 31, 2018 compared to the same period in 2017 was primarily due to an increase in net interest income due to loan growth and a decrease in the tax expense related to a lower federal corporate tax rate in 2018 provided by the Tax Cuts and Jobs Act (the “Tax Act”) signed in to law on December 22, 2017, partially offset by an increase in non-interest expenses and a $325,000 provision for loan losses recognized by the Company in the first quarter of 2018, while no provision was recognized for the same period in 2017.
Net Interest Income
For the three month period ended March 31, 2018, net interest income increased by $669,000 or 11.07% versus the same period last year. Interest income increased by $916,000, or 11.78% for the three months ended March 31, 2018 as compared to the corresponding period last year. This increase in interest income was primarily due to loan growth and higher interest received on cash and investment balances due to rising interest rates.
Total interest expense increased by $247,000 in the first quarter of 2018 to $2.0 million compared to $1.7 million in the prior year. The increase in interest expense was due to higher interest rates as market rates continue to increase in our market area, and we continue to face significant competition for deposits.
Provision for Loan Losses
The Company recognized a provision for loan losses of $325,000 for the three months ended March 31, 2018 compared to no provision in the three months ended March 30, 2017. The allowance for loan losses to total loans was 1.12% as of the end of the first quarter of 2018.
Non-Interest Expense
Non-interest expense was $4.7 million during the first quarter of 2018, up from $4.5 million in the first quarter of 2017, an increase of $202 thousand or 4.5%. The increase was primarily in salaries and employee benefits, data processing, occupancy and equipment expenses and legal fees, partially offset by decreases in professional fees and FDIC premiums and related expenses. The increase in salaries and employee benefits costs is associated with health insurance premium increases, annual increases and executive stock awards expenses. The increase in occupancy and equipment expense is related to the relocation of the corporate offices located in Englewood Cliffs. The decrease in professional fees is mainly attributable to non-recurring consulting fees related to enhancing the Company’s risk management system in the prior year.
Financial Condition
At March 31, 2018, 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 9.68%, common equity Tier 1 capital and Tier 1 capital to risk weighted assets were both 10.97% and total capital to risk weighted assets ratio was 12.05%.
Total consolidated assets decreased by $29.9 million, or 3.37%, from $887.4 million at December 31, 2017 to $857.5 million at March 31, 2018, reflecting a decrease in deposits.
Total cash and cash equivalents decreased from $92.6 million at December 31, 2017 to $61.1 million at March 31, 2018, a decrease of $31.5 million. The change in cash is mainly due to the decrease in deposit account balances.
Loans receivable, or “total loans,” increased from $721.2 million at December 31, 2017 to $723.8 million at March 31, 2018, an increase of $2.6 million.
Total deposits decreased by $29.3 million to $759.0 million at March 31, 2018, from $788.3 million at December 31, 2017. The decrease is mainly due to outflows of government and municipal deposits attributable to the cyclical nature of real estate tax collections and payments, which may have been compounded this quarter due to the timing of the Tax Act and its impact on payments of local municipal taxes.
Loan Quality
At March 31, 2018 the Bank had non-accrual loans of $16.8 million. Included in this total are $8.9 million in Troubled Debt Restructured Loans (“TDRs”). At year-end 2017, non-accrual loans totaled $18.4 million. The reduction in non-accrual loans was mainly due to a sale of three non-performing loans in the first quarter of 2018. Accruing loans delinquent greater than 30 days were $8.3 million as of March 31, 2018, compared to $6.3 million at December 31, 2017. Of the $8.3 million in delinquent loans at March 31, 2018, five loans totaling $4.4 million reached maturity and were in the process of extension or renewal.
About the Company
Founded in 2006, Bancorp of New Jersey 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 has 9 branch offices located in Fort Lee, Hackensack, Haworth, Harrington Park, Englewood, Cliffside Park, and Woodcliff Lake, New Jersey. 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. 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.
BANCORP OF NEW JERSEY, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except for per share data)
| | For the Three Months Ended March 31, | |
| | 2018 | | 2017 | |
INTEREST INCOME | | | | | |
Loans, including fees | | $ | 8,148 | | $ | 7,385 | |
Securities | | 236 | | 200 | |
Federal funds sold and other | | 307 | | 190 | |
TOTAL INTEREST INCOME | | 8,691 | | 7,775 | |
| | | | | |
INTEREST EXPENSE | | | | | |
Savings and interest bearing transaction accounts | | 417 | | 438 | |
Time deposits | | 1,514 | | 1,208 | |
Borrowed funds | | 49 | | 87 | |
TOTAL INTEREST EXPENSE | | 1,980 | | 1,733 | |
| | | | | |
NET INTEREST INCOME | | 6,711 | | 6,042 | |
Provision for loan losses | | 325 | | — | |
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | | 6,386 | | 6,042 | |
NON-INTEREST INCOME | | | | | |
Fees and service charges on deposit accounts | | 95 | | 118 | |
TOTAL NON-INTEREST INCOME | | 95 | | 118 | |
| | | | | |
NON-INTEREST EXPENSE | | | | | |
Salaries and employee benefits | | 2,415 | | 2,292 | |
Occupancy and equipment expense | | 867 | | 738 | |
FDIC premiums and related expenses | | 158 | | 233 | |
Legal fees | | 138 | | 83 | |
Other real estate owned expenses | | 7 | | 2 | |
Professional fees | | 248 | | 487 | |
Data processing | | 333 | | 304 | |
Other expenses | | 537 | | 362 | |
TOTAL NON-INTEREST EXPENSE | | 4,703 | | 4,501 | |
Income before provision for income taxes | | 1,778 | | 1,659 | |
Income tax expense | | 435 | | 597 | |
Net income | | $ | 1,343 | | $ | 1,062 | |
| | | | | |
PER SHARE OF COMMON STOCK | | | | | |
Basic | | $ | 0.19 | | $ | 0.17 | |
Diluted | | $ | 0.19 | | $ | 0.17 | |
BANCORP OF NEW JERSEY, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands, except for per share data)
| | March 31, 2018 | | December 31, 2017 | |
Assets | | | | | |
Cash and due from banks | | $ | 2,533 | | $ | 1,627 | |
Interest bearing deposits | | 58,102 | | 90,540 | |
Federal funds sold | | 452 | | 452 | |
Total cash and cash equivalents | | 61,087 | | 92,619 | |
Interest bearing time deposits | | 1,000 | | 1,000 | |
Securities available for sale | | 52,179 | | 53,234 | |
Securities held to maturity (fair value $6,058 and $6,058 at March 31, 2018 and December 31, 2017, respectively) | | 6,058 | | 6,058 | |
Restricted investment in bank stock, at cost | | 1,305 | | 1,380 | |
Loans receivable | | 723,789 | | 721,191 | |
Deferred loan fees and costs, net | | (786 | ) | (798 | ) |
Allowance for loan losses | | (8,111 | ) | (8,317 | ) |
Net loans | | 714,892 | | 712,076 | |
Premises and equipment, net | | 13,578 | | 13,725 | |
Accrued interest receivable | | 2,810 | | 2,695 | |
Other real estate owned | | 415 | | 415 | |
Other assets | | 4,135 | | 4,205 | |
Total assets | | $ | 857,459 | | $ | 887,407 | |
Liabilities and Stockholders’ Equity | | | | | |
LIABILITIES: | | | | | |
Deposits: | | | | | |
Noninterest-bearing demand deposits | | $ | 136,938 | | $ | 133,661 | |
Savings and interest bearing transaction accounts | | 271,293 | | 307,583 | |
Time deposits $250 and under | | 231,148 | | 231,224 | |
Time deposits over $250 | | 119,617 | | 115,825 | |
Total deposits | | 758,996 | | 788,293 | |
Borrowed funds | | 11,713 | | 13,385 | |
Accrued expenses and other liabilities | | 2,165 | | 2,420 | |
Total liabilities | | 772,874 | | 804,098 | |
Stockholders’ equity: | | | | | |
Common stock, no par value, authorized 20,000,000 shares; issued and outstanding 6,948,278 at March 31, 2018 and 6,932,690 at December 31, 2017 | | 70,342 | | 70,182 | |
Retained earnings | | 14,825 | | 13,482 | |
Accumulated other comprehensive loss | | (582 | ) | (355 | ) |
Total stockholders’ equity | | 84,585 | | 83,309 | |
Total liabilities and stockholders’ equity | | $ | 857,459 | | $ | 887,407 | |
