Liberty Bell Bank Reports Third Quarter 2013 Results of Operations

  Liberty Bell Bank Reports Third Quarter 2013 Results of Operations

Business Wire

MARLTON, N.J. -- November 6, 2013

Liberty Bell Bank (OTCQB:LBBB) today reported net income of $39,000 or $0.01
per diluted share for the three months ended September 30, 2013, compared to a
net loss of $1.6 million or $(0.53) per diluted share for the same period in
2012, an improvement of $1.6 million. For the nine months ended September 30,
2013, the Bank had a $2.3 million net loss, or $(0.70) per diluted share,
compared to a net loss of $2.4 million or $(0.78) per diluted share for the
same period in 2012. At September 30, 2013, the Bank is adequately capitalized
by all regulatory measures.

The improvement in the Bank’s quarterly earnings of $1.6 million as compared
to the three months ended September 30, 2012 was due primarily to a decrease
in the provision for loan losses of $831,000 and a reduction of losses on the
sale of other real estate owned of $610,000 from $617,000 in 2012 to $7,000 in
2013. In addition, non-interest expense decreased $236,000 from $1.6 million
for the three months ended September 30, 2012 to $1.4 million for the three
months ended September 30, 2013. The provision for income taxes also decreased
$18,000. These positive variances were partially offset by a decrease in net
interest income of $23,000 and a decrease in fee income of $38,000.

The decrease in the provision for loan losses from $840,000 to $9,000 reflects
our constrained loan growth and the lack of any material deterioration in our
loan portfolio, coupled with the sale of some problem assets since September
30, 2012.

The decrease of $23,000 in net interest income for the three months ended
September 30, 2013 as compared to the three months ended September 30, 2012
was due to a $134,000 decrease in interest income partially offset by an
$111,000 reduction in interest expense, primarily from a decrease in interest
expense on deposits. The decrease in interest income was due primarily to a
decrease of $179,000 in interest from loans offset by an increase of $44,000
in interest earned from investments.

The decrease of $179,000 in interest from loans was due primarily to a 39
basis point reduction of the yield from the loan portfolio from 5.52% to
5.13%. In addition, the average loan balances outstanding for the three months
ended September 30, 2013 as compared to the three months ended September 30,
2012 decreased by $5.1 million. The reduction in average loan balances was due
primarily to pay-downs and pay-offs of commercial loans. The increase of
$44,000 in interest on investments was due primarily to an increase in the
average balance outstanding of $10.8 million from $32.2 million to $43.1
million.

The $236,000 decrease in non-interest expense was due primarily to a $141,000
reduction in compensation expense, a $38,000 reduction in other operating
expense, a $29,000 reduction in expenses related to other real estate owned
and a $14,000 reduction in equipment expense. The reduction in compensation
expense was due primarily to a decrease in personnel due to the Mt. Laurel
branch closing and the resignation of two senior officers. The reduction in
other operating expenses was due primarily to a reduction in expenses related
to the loan portfolio.

Net interest margin for the third quarter of 2013 was 3.33%, a decrease of
0.19% from the 3.52% net interest margin for the third quarter of 2012. The
margin decrease was mainly the result of a 0.51% lower yield from
interest-earning assets partially offset by a 0.30% reduction in the rate paid
for interest-bearing deposits.

The loss for the nine months ended September 30, 2013 was primarily due to the
Bank being a victim of a check kiting scheme by one of its commercial deposit
and loan customers. As a result of this check kiting activity, the Bank
recognized approximately $2.1 million ($.62 per diluted share) as a loan
charge-off. In addition, the Bank has $2.8 million of loans secured by leases
originated through this customer. The Bank continues to take steps it deems
necessary to ensure the payment of the related lease payment receivables.

The Bank’s net loss of $2.3 million for the nine months ended September 30,
2013 was $14,000 less than the loss over the same period in 2012. The
provision for loan losses for the nine months ended September 30, 2013 was
$2.6 million, an increase of $980,000 as compared to $1.6 million for the nine
months ended September 30, 2012. Net interest income decreased by $199,000
from $4.2 million to $4.0 million for the nine months ended September 30, 2012
and 2013, respectively. These negative variances were offset by an increase of
$686,000 in non-interest income, a decrease of $482,000 in non-interest
expense and a $24,000 reduction in our provision for income taxes.

The decrease of $199,000 in net interest income for the nine months ended
September 30, 2013 as compared to the nine months ended September 30, 2012,
was due to a $543,000 decrease in interest income, partially offset by a
$344,000 reduction in interest expense, primarily resulting from a decrease of
interest paid on deposits. The decrease in interest income was due primarily
to a decrease of $682,000 in interest from loans, offset partially by an
increase of $139,000 in interest earned from investments.

The decrease of $682,000 in interest from loans was due primarily to a 42
basis point reduction of the yield from the loan portfolio from 5.59% to
5.17%. In addition, the average loan balances outstanding for the nine months
ended September 30, 2013 as compared to the nine months ended September 30,
2012 decreased by $7.3 million. The increase of $139,000 in interest earned
from investments was due primarily to an increase of $11.1 million in the
average balance outstanding from $29.1 million to $40.2 million.

The $686,000 increase in non-interest income was due primarily to a $760,000
decrease in losses from the sale and write-down of other real estate owned
from $844,000 for the nine months ended September 30, 2012 to $84,000 for the
nine months ended September 30, 2013. In addition, the Bank recognized
$183,000 from the sale of investment securities in 2013. Partially offsetting
these positive variances, miscellaneous fees decreased $158,000 primarily due
to the $151,000 fraud loss recovery recognized in 2012 and fees from deposit
and loan accounts decreased $98,000 from $334,000 for the first three quarters
of 2012 to $236,000 for the same period in 2013.

The $482,000 decrease in non-interest expense for the nine months ended
September 30, 2013 as compared to the nine months ended September 30, 2012 was
due primarily to a $236,000 reduction in compensation expense due primarily to
staff reductions from the closing of the Mt. Laurel office and consolidation
of management. In addition, expenses related to other real estate owned
decreased $86,000, insurance expense decreased $62,000 and audit expense
decreased $32,000 primarily due to the Bank’s deregistration as a public
company. Expenses related to equipment decreased $71,000, loan related
expenses decreased $31,000, marketing expense decreased $19,000 and occupancy
expenses decreased $17,000. Other miscellaneous expenses decreased $10,000.
Partially offsetting these positive variances, legal expense increased $15,000
and professional expenses increased $41,000 primarily related to other real
estate activity. In addition, data processing expense increased $26,000 as the
Bank outsourced the network administration function with the resignation of
the Chief Information Technology Officer.

Net interest margin for the first nine months of 2013 was 3.39%, a decrease of
0.26% from the 3.65% net interest margin for the first nine months of 2012.
The margin decrease was mainly the result of a 0.57% lower yield from
interest-earning assets partially offset by a 0.30% reduction in the rate paid
for interest-bearing liabilities.

Total assets at September 30, 2013 were $170.3 million, representing a
decrease of $4.0 million from $174.3 million at December 31, 2012. The
decrease was due primarily to net loans which decreased $8.5 million from
December 31, 2012. This decrease was partially offset by investments which
increased $4.2 million and other real estate owned which increased $470,000
from $5.6 million at December 31, 2012 to $6.1 million at September 30, 2013.
The reduction in loans was due primarily to the pay down and pay off of
commercial loans and the sale of $4.5 million of loans in September 2013, as
the Bank moved to reduce its risk profile and increase regulatory capital
ratios. Excess cash was invested in the securities portfolio with the purchase
of primarily government and agency bonds.

Total deposits decreased $1.4 million to $153.4 million at September 30, 2013
from $154.8 million at December 31, 2012. The decrease was primarily due to a
$9.6 million decrease in interest bearing deposits partially offset by an $8.2
million increase in non-interest bearing deposits.

The Bank continues to increase non-interest bearing deposit accounts. Total
non-interest bearing deposit accounts at September 30, 2013 were $23.7 million
as compared to $15.4 million at December 31, 2012. The growth in non-interest
bearing deposits continues to be from the Bank’s local market area.

The decrease in interest-bearing deposit accounts of $9.6 million was due
primarily to a decrease in certificates of deposit, our highest cost deposits,
which decreased $7.7 million from $68.8 million at December 31, 2012 to $61.1
million at September 30, 2013. Money Market accounts decreased $354,000 and
interest bearing checking accounts decreased $1.4 million.

Total capital decreased $3.7 million from $11.6 million at December 31, 2012
to 7.9 million at September 30, 2013. The decrease was due to the net loss for
the first nine months of 2013 of $2.3 million and the shift from an unrealized
gain in the mark-to-market of securities available for sale of $337,000 at
December 31, 2012 to an unrealized loss of $1.0 million at September 30, 2013.
The shift to an unrealized loss is due primarily to the sudden increase in
interest rates during the second quarter and continuing in the third quarter
of 2013. These are not actual losses, but “mark to market” losses on Treasury
and similar securities that are not at risk for a loss of principal but are
primarily held for collateral purposes.

At September 30, 2013, our criticized/classified assets totaled $11.9 million
which includes $2.8 million of loans associated with the commercial customer
who perpetrated the check kiting scheme. These loans are secured primarily by
receivables from U.S. government related agencies, and management believes
they are ultimately collectible. Without these loans, our
criticized/classified assets totaled $9.1 million, substantially the same as
at December 31, 2012, but less than the $15.6 million in such assets at
December 31, 2011. Other real estate owned increased $470,000 from $5.6
million at December 31, 2012 to $6.1 million at September 30, 2013.

“We continue to see improvements in the marketplace that justify our optimism
about our continued reduction in our problem loans. In addition, we are
actively pursuing collection of the losses associated with the check kiting
that involved the Bank and several other financial institutions,” said CEO
Kevin Kutcher, adding, “however, the timing and potential results of these
efforts continue to be uncertain. On the non-interest expense side, we closed
our Mount Laurel office and merged it into our headquarters operation with no
material loss of customers, reducing our operating costs without losing
business.” Kutcher went on to add “We are preparing the documentation for our
stockholders’ rights offering, which we plan to commence this quarter. The
capital raised from this offering will bolster our capital position and
support the expected growth in our lending activities. Augmenting capital will
allow the Bank to realize its operating earnings without the continuing burden
of additional cleanup of the residual problems created by the Great
Recession.”

Set forth below is certain selected balance sheet and income statement data at
September 30, 2013 and December 31, 2012 and for the three and nine months
ended September 30, 2013 and 2012.


SELECTED BALANCE SHEET DATA
(Unaudited, in                                            
thousands)
                                                  September       December
                                                   30,             31,
                                                   2013            2012
                                                                             
Cash and cash                                      $ 19,260        $ 19,319
equivalents
Investment                                           25,813          21,655
securities
Net loans                                            114,180         122,508
receivable
Total assets                                         170,338         174,328
Deposits                                             153,447         154,811
Shareholders’                                        7,882           11,572
equity
                                                                             
SELECTED INCOME STATEMENT DATA
(Unaudited, in thousands except per share data)
                                                                             
                   Quarter          Quarter        Nine months     Nine months
                   ended            ended          ended           ended
                   September        September      September       September
                   30,              30,            30,             30,
                   2013             2012           2013            2012
                                                                             
Net interest       $  1,331         $ 1,354        $ 4,018         $ 4,216
income
Provision for         9               840            2,560           1,580
loan losses
Gain on sale          0               0              183             0
of securities
Recovery of           0               0              0               151
Fraud Loss
Other
Non-interest          74              114            252             359
income
Loss on
write-down of         7               617            84              844
ORE
Other expenses        1,360           1,596          4,147           4,630
Provision for         (10    )        8              2               26
income taxes
Net income         $  39            $ (1,593 )     $ (2,340  )     $ (2,354  )
                                                                             
Earnings per
share:
Basic              $  0.01          $ (0.53  )     $ (0.70   )     $ (0.78   )
Diluted            $  0.01          $ (0.53  )     $ (0.70   )     $ (0.78   )
Capital
Ratios:
Leverage              5.16   %        6.65   %
Capital
Total risk            8.64   %        10.07  %
based capital
                                                                             

Liberty Bell Bank is a full-service, state-chartered commercial bank, whose
deposits are insured by the FDIC. The Bank provides diversified financial
products through two locations in Burlington County, New Jersey and one
location in Camden County, New Jersey. The Bank closed its Mount Laurel branch
on June 15, 2013.

The Bank may from time to time make written or oral “forward-looking
statements”, including statements contained in this release. Such statements
are not historical facts and include expressions about management's confidence
and strategies and management's current views and expectations about new and
existing programs and products, relationships, opportunities, taxation,
technology and market conditions. Actual results may differ materially from
such forward-looking statements, and no undue reliance should be placed on any
forward-looking statement. Factors that may cause results to differ materially
from such forward-looking statements include, but are not limited to,
unanticipated changes in the financial markets and the direction of interest
rates; volatility in earnings due to certain financial assets and liabilities
held at fair value; stronger competition from banks, other financial
institutions and other companies; insufficient allowance for credit losses; a
higher level of net loan charge-offs and delinquencies than anticipated;
material adverse changes in the Bank’s operations or earnings; a decline in
the economy in our primary market areas; changes in relationships with major
customers; changes in effective income tax rates; higher or lower cash flow
levels than anticipated; inability to hire or retain qualified employees; a
decline in the levels of deposits or loss of alternate funding sources; a
decrease in loan origination volume; changes in laws and regulations,
including issues related to compliance with anti-money laundering and the bank
secrecy act laws; adoption, interpretation and implementation of new or
pre-existing accounting pronouncements; operational risks, including the risk
of fraud by employees and customers; the inability to successfully implement
new lines of business or new products and services .and other factors, many of
which are beyond the Bank's control. The words “may”, “could”, “should”,
“would”, “believe”, “anticipate”, “estimate”, “expect”, “intend”, “plan”, and
similar expressions are intended to identify forward-looking statements. All
such statements are made in good faith by the Bank pursuant to the “safe
harbor” provisions of the Private Securities Litigation Reform Act of 1995.
The Bank does not undertake to update any forward-looking statement, whether
written or oral, that may be made from time to time by or on behalf of the
Bank.

Contact:

Liberty Bell Bank
Benjamin F. Watts
Chief Financial Officer
(856) 830-1135