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1st Capital Bank Announces First Quarter 2018 Financial Results Record Average Earning Assets

ACCESSWIRE

By 1st Capital Bank

SALINAS, CA / ACCESSWIRE / April 26, 2018 / 1st Capital Bank (OTC PINK: FISB) reported unaudited net income of $1.24 million for the three months ended March 31, 2018, an increase of 57.3% compared to net income of $787 thousand in the first quarter of 2017 and an increase of 681% compared to income of $182 thousand in the fourth quarter of 2017, the immediately preceding quarter. During the fourth quarter of 2017, the bank adjusted the value of its deferred tax assets in accordance with the reduction in corporate tax rates from 35% to 21%, recognizing $913 thousand of additional income tax expense. Earnings per share were $0.26 (diluted) for the first quarter of 2018, compared to $0.04 (diluted) for the prior quarter, and $0.17 (diluted) for the first quarter of 2017.

Total assets grew $16.5 million in the first quarter, to $597 million at March 31, 2018, compared to $580 million at December 31, 2017. Net loans likewise increased $24.5 million during the first quarter, from $421 million at December 31, 2017 to $446 million at March 31, 2018. Growth was concentrated primarily in single family residential loans, which increased nearly $24 million during the first quarter. Loan outstandings in the core relationship banking portfolio were essentially flat this past quarter, although the core banking relationship portfolio has increased 8.3% above prior year levels to $325 million from $300 million as of March 31, 2017. Increases in the investor owned real estate and multifamily loan categories essentially offset reductions in commercial and industrial loans and owner occupied commercial real estate loans during the quarter. Because of favorable changes in the loan portfolio mix and continuing declines in historical loss rates, a provision for loan losses of $20 thousand was taken in the first quarter of 2018, compared with $65 thousand in the fourth quarter of 2017, and no provision in the first quarter of 2017.

”We are pleased to report strong growth in revenues in the first quarter of 2018,” said Thomas E. Meyer, President and Chief Executive Officer. ”We continue to increase noninterest income from our depositors as well as brokerage fees from our growing single family mortgage referral program. We additionally are entering the second quarter with a robust pipeline of new relationship lending opportunities, including nearly $8 million in government guaranteed loans.”

Net interest income before provision for loan losses (”NII”) increased $88 thousand, or 1.7%, to $5.21 million, compared to $5.12 million in the prior quarter; and increased 17.0% over the first quarter 2017 NII of $4.45 million. Net interest margin increased slightly from 3.68% in the fourth quarter of 2017 to 3.70% in the first quarter of 2018, reflecting improved yields on the bank’s investment portfolio as well as the continued low cost of deposits.

Non-interest income increased $70 thousand, or 22.6%, from $311 thousand in the fourth quarter of 2017 to $381 thousand in the first quarter of 2018, and increased 48.5% from $256 thousand earned in the first quarter of 2017, as various fee income initiatives continue to show demonstrative results.

The Bank’s efficiency ratio increased from 65.8% in the fourth quarter of 2017 to 69.4% in the first quarter of 2018, as the cost of employing skilled bankers has risen sharply in recent months.

NET INTEREST INCOME BEFORE PROVISION FOR CREDIT LOSSES

Net interest income before provision for credit losses was $5.21 million in the first quarter of 2018, an increase of $88 thousand, or 1.7%, compared to $5.12 million in the fourth quarter of 2017 and an increase of $757 thousand, or 16.5%, compared to $4.45 million in the first quarter of 2017.

Average earning assets were $571 million during the first quarter of 2018, an increase of 3.3% compared to $552 million in the fourth quarter of 2017. The yield on earning assets was 3.81% in the first quarter of 2018, compared to 3.78% in the fourth quarter of 2017, primarily due to increased yields in the investment portfolio. The average balance of the investment portfolio increased nominally by $300 thousand, from $73.6 million in the fourth quarter of 2017 to $73.9 million in the first quarter of 2018. The yield on the investment portfolio increased from 1.31% in the first quarter of 2017 to 1.69% in the fourth quarter of 2017 and 2.01% in the first quarter of 2018, resulting from increased yields from floating rate securities.

The cost of interest-bearing liabilities increased to 0.23% in the first quarter of 2018, from 0.22% in the first quarter of 2017 and the fourth quarter of 2017, while the average balance of interest-bearing liabilities decreased from $278 million in the first quarter of 2017 to $271 million in the fourth quarter of 2017, and increased to $285 million in the first quarter of 2018, as the Bank experienced seasonal fluctuations in deposits, particularly from larger depositors, and managed its leverage ratio, primarily with the ICS program. The average balance of noninterest-bearing demand deposit accounts increased from $220 million, or 44.2% of total deposits, in the first quarter of 2017 to $244 million, or 47.3% of total deposits, in the fourth quarter of 2017, and $245 million, or 46.3% of total deposits in the first quarter of 2018. The Bank’s overall cost of funds decreased, from 0.13% in the first quarter of 2017 to 0.12% in the fourth quarter of 2017 and the first quarter of 2018.

”During the first quarter of 2018, we attracted an additional $16 million in deposits, while interest rates in our market remained stable. This continued growth in our core deposits has proven to be a good source of funding for our growing loan portfolio, and has enabled us to improve our net interest margin,” noted Michael J. Winiarski, Chief Financial Officer.

PROVISION FOR CREDIT LOSSES

The provision for credit losses is a charge against current earnings in an amount determined by management to be necessary to maintain the allowance for loan losses at a level sufficient to absorb estimated probable losses inherent in the loan portfolio in light of losses historically incurred by the Bank and adjusted for qualitative factors associated with the loan portfolio.

The Bank recorded a provision for loan losses in the first quarter of 2018 of $20 thousand, a decrease from the $65 thousand recorded in the fourth quarter of 2017, reflecting reductions in the level of criticized assets, changes in the mix of loan types within the portfolio and their respective historical loss rates, and management’s assessment of the amounts expected to be realized from certain loans identified as impaired. Impaired loans totaled $3.9 million at March 31, 2018, compared to $5.2 million at December 31, 2017, and $8.0 million at March 31, 2017.

At March 31, 2018, non-performing loans were 0.06% of the total loan portfolio, unchanged from 0.06% at December 31, 2017 and increased from 0.03% at March 31, 2017. At March 31, 2018, the allowance for loan losses was 1.42% of outstanding loans, compared to 1.49% at December 31, 2017 and 1.52% at March 31, 2017, respectively. The Bank recorded net recoveries of $12 thousand in the first quarter of 2018, compared to net recoveries of $12 thousand in the fourth quarter of 2017, and net charge-offs of $59 thousand in the first quarter of 2017.

NON-INTEREST INCOME

Non-interest income recognized in the first quarter of 2018 was $381 thousand, including $70 thousand in gain on sale of Small Business Administration (”SBA”) guaranteed loans, compared to $311 thousand in the fourth quarter of 2017. The Bank recognized $82 thousand in gain on sale of SBA loans in the fourth quarter of 2017 and $72 thousand in the first quarter of 2017. Overall, this represents an increase non-interest income of $70 thousand, or 22.6%, compared to the fourth quarter of 2017, and an increase of $125 thousand compared to the first quarter of 2017, when non-interest income totaled $256 thousand.

Management has been actively seeking to increase non-interest income across a range of sources, including account analysis fees and mortgage brokerage fees, which increased $11 thousand and $14 thousand, respectively, compared to the first quarter of 2017. Service charges on deposits increased from $52 thousand in the first quarter of 2017 to $68 thousand in the fourth quarter of 2017 and $71 thousand in the first quarter of 2018.

NON-INTEREST EXPENSES

Non-interest expenses increased $306 thousand, or 8.5%, to $3.88 million in the first quarter of 2018, compared to $3.58 million for the fourth quarter of 2017, and increased $473 thousand, or 13.9%, compared to $3.41 million recognized in the first quarter of 2017.
Salaries and benefits increased $287 thousand, or 13.1%, to $2.48 million in the first quarter of 2018 from $2.19 million in the fourth quarter of 2017 and increased $290 thousand, or 13.2%, compared to $2.19 million in the first quarter of 2017. These increases reflect increased costs of staff retention in the lending departments. From the fourth quarter of 2017 to the first quarter of 2018, base salaries and wages increased $44 thousand, or 2.67%, from $1.66 million to $1.71 million, health insurance premiums increased $16 thousand, or 10.6%, from $155 thousand to $171 thousand, and the employer’s portion of payroll taxes increased $119 thousand, or 119.7%, from $99 thousand to $218 thousand, reflecting the seasonal pattern of such taxes. Payroll taxes increased $19 thousand, or 9.2%, year over year. Other non-interest expenses reflect a reclassification of certain electronic transaction fees, but were otherwise relatively unchanged.

The efficiency ratio (non-interest expenses divided by the sum of net interest income before provision for loan losses and non-interest income) was 69.4% for the first quarter of 2018, compared to 65.8% for the fourth quarter of 2017 and 72.4% for the first quarter of 2017. Annualized non-interest expenses as a percent of average total assets were 2.69%, 2.49%, and 2.53% for the first quarter of 2018, the fourth quarter of 2017, and the first quarter of 2017, respectively.

PROVISION FOR INCOME TAXES

The Bank’s effective book tax rate was 26.6% in the first quarter of 2018, compared to 89.8% for the fourth quarter of 2017 and 39.4% for the first quarter of 2017. The lower effective rate in the first quarter or 2018 reflects the impact of lower corporate income tax rates after the passage of the Tax Cuts and Jobs Act of 2017.

About 1st Capital Bank

The Bank’s primary target markets are commercial enterprises, professionals, real estate investors, family business entities, and residents along the Central Coast Region of California. The Bank provides a wide range of credit products, including loans under various government programs such as those provided through the U.S. Small Business Administration (”SBA”) and the U.S. Department of Agriculture (”USDA”). A full suite of deposit accounts is also furnished, complemented by robust cash management services. The Bank operates full service branch offices in Monterey, Salinas, King City, and San Luis Obispo. The Bank’s corporate offices are located at 150 Main Street, Building N, Monterey, California 93940. The Bank’s website is www.1stCapital.bank. The main telephone number is 831.264.4000. The primary facsimile number is 831.264.4001.

Member FDIC / Equal Opportunity Lender / SBA Preferred Lender

Forward-Looking Statements

Certain of the statements contained herein that are not historical facts are ”forward-looking statements” within the meaning of and subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may contain words or phrases including, but not limited, to: ”believe,” ”expect,” ”anticipate,” ”intend,” ”estimate,” ”target,” ”plans,” ”may increase,” ”may fluctuate,” ”may result in,” ”are projected,” and variations of those words and similar expressions. All such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Factors that might cause such a difference include, among other matters, changes in interest rates; economic conditions including inflation and real estate values in California and the Bank’s market areas; governmental regulation and legislation; credit quality; competition affecting the Bank’s businesses generally; the risk of natural disasters and future catastrophic events including terrorist related incidents and other factors beyond the Bank’s control; and other factors. The Bank does not undertake, and specifically disclaims any obligation, to update or revise any forward-looking statements, whether to reflect new information, future events, or otherwise, except as required by law.

This news release is available at the www.1stCapital.bank internet site for no charge.

For further information, please contact:

Thomas E. Meyer
President and Chief Executive Officer
831.264.4057 office
Tom.Meyer@1stCapitalBank.com

or

Michael J. Winiarski
Chief Financial Officer
831.264.4014 office
Michael.Winiarski@1stCapitalBank.com

1ST CAPITAL BANK
CONDENSED FINANCIAL DATA
(Unaudited)
(Dollars in thousands, except per share data)

March 31,
December 31,
September 30,
March 31,
Financial Condition Data1
2018
2017
2017
2017
Assets
Cash and due from banks
$ 11,772 $ 7,727 $ 27,484 $ 20,999
Funds held at the Federal Reserve Bank2
46,920 56,249 32,903 37,975
Time deposits at other financial institutions
996 1,743 747 747
Available-for-sale securities, at fair value
71,300 74,927 72,685 73,504
Loans receivable held for sale
1,000
Loans receivable held for investment:
Construction / land (including farmland)
17,453 16,301 16,532 20,155
Residential 1 to 4 units
140,474 115,340 106,670 113,397
Home equity lines of credit
6,565 8,832 8,804 10,207
Multifamily
54,109 51,983 61,773 53,471
Owner occupied commercial real estate
64,009 67,326 67,124 61,182
Investor commercial real estate
117,896 105,196 102,904 95,485
Commercial and industrial
40,307 51,663 50,145 44,548
Other loans
11,685 11,292 12,560 10,108
Total loans held for investment
452,498 427,933 426,512 408,553
Allowance for loan losses
(6,410) (6,378) (6,301) (6,208)
Net loans
446,088 421,555 420,211 402,345
Premises and equipment, net
2,315 2,308 2,376 1,824
Bank owned life insurance
7,706 7,654 7,599 7,487
Investment in FHLB3 stock, at cost
3,163 3,163 3,163 2,939
Accrued interest receivable and other assets
5,535 4,905 6,168 5,668
Total assets
$ 596,795 $ 580,231 $ 573,336 $ 553,488
Liabilities and shareholders’ equity
Deposits:
Noninterest bearing demand deposits
$ 236,358 $ 261,705 $ 238,560 $ 211,599
Interest bearing checking accounts
39,606 35,082 39,622 36,907
Money market deposits
125,147 107,101 119,384 126,638
Savings deposits
128,659 110,058 109,193 115,094
Time deposits
12,295 12,130 12,922 13,181
Total deposits
542,065 526,076 519,681 503,419
Accrued interest payable and other liabilities
1,839 2,163 2,060 1,283
Shareholders’ equity
52,891 51,992 51,595 48,786
Total liabilities and shareholders’ equity
$ 596,795 $ 580,231 $ 573,336 $ 553,488
Shares outstanding
4,697,873 4,686,521 4,443,889 4,372,184
Nominal and tangible book value per share
$ 11.26 $ 11.09 $ 11.61 $ 11.16
Ratio of net loans to total deposits
82.29% 80.13% 80.86% 79.92%

1 = Loans receivable held for investment are presented according to definitions applicable to the regulatory Call Report.
2 = Includes cash letters in the process of collection settled through the Federal Reserve Bank.
3 = Federal Home Loan Bank

1ST CAPITAL BANK
CONDENSED FINANCIAL DATA
(Unaudited)
(Dollars in thousands, except per share data)

Three Months Ended
March 31,
December 31,
September 30,
March 31,
Operating Results Data1
2018
2017
2017
2017
Interest and dividend income
Loans
$ 4,769 $ 4,769 $ 4,539 $ 4,187
Investment securities
367 313 306 246
Federal Home Loan Bank stock
56 56 56 70
Other
174 130 165 102
Total interest and dividend income
5,366 5,268 5,066 4,605
Interest expense
Interest bearing checking
4 5 3 4
Money market deposits
72 70 78 78
Savings deposits
70 64 64 64
Time deposits
9 9 9 8
Total interest expense on deposits
155 148 154 154
Interest expense on borrowings
3
Total interest expense
158 148 154 154
Net interest income
5,208 5,120 4,912 4,451
Provision for loan losses
20 65 85
Net interest income after provision
for loan losses
5,188 5,055 4,827 4,451
Noninterest income
Service charges on deposits
71 68 65 52
BOLI dividend income
52 55 56 54
Gain on sale of loans
70 82 98 72
Other
188 106 127 78
Total noninterest income
381 311 346 256

1ST CAPITAL BANK
CONDENSED FINANCIAL DATA
(Unaudited)
(Dollars in thousands, except per share data)

Three Months Ended
March 31,
December 31,
September 30,
March 31,
2018
2017
2017
2017
Noninterest expenses
Salaries and benefits
2,481 2,194 2,125 2,191
Occupancy
290 282 283 229
Data and item processing
196 183 186 135
Professional services
138 168 236 124
Furniture and equipment
126 120 115 124
Provision for unfunded loan
commitments
(6) 17 5 18
Other
656 611 566 587
Total noninterest expenses
3,881 3,575 3,516 3,408
Income before provision for income taxes
1,688 1,791 1,657 1,299
Provision for income taxes
449 1,609 636 512
Net income
$ 1,239 $ 182 $ 1,021 $ 787
Common Share Data2
Earnings per common share
Basic
$ 0.26 $ 0.04 $ 0.22 $ 0.17
Diluted
$ 0.26 $ 0.04 $ 0.22 $ 0.17
Weighted average common shares outstanding
Basic
4,691,138 4,680,948 4,659,886 4,592,919
Diluted
4,776,021 4,763,936 4,723,406 4,667,064

1 = Certain reclassifications have been made to prior period financial statements to conform them to the current period presentation.
2 = Earnings per common share and weighted average common shares outstanding have been restated to reflect the effect of the 5% stock dividend declared November 22, 2017 and paid December 15, 2017.

1ST CAPITAL BANK
CONDENSED FINANCIAL DATA
(Unaudited)
(Dollars in thousands)

March 31,
December 31,
September 30,
March 31,
Asset Quality
2018
2017
2017
2017
Loans past due 90 days or more and accruing
interest
$ $ $ $
Nonaccrual restructured loans
Other nonaccrual loans
252 255 257 124
Other real estate owned
$ 252 $ 255 $ 257 $ 124
Allowance for loan losses to total loans
1.42% 1.49% 1.48% 1.52%
Allowance for loan losses to nonperforming loans
2,543.65% 2,501.18% 2,451.75% 5,006.45%
Nonaccrual loans to total loans
0.06% 0.06% 0.06% 0.03%
Nonperforming assets to total assets
0.04% 0.04% 0.04% 0.02%
Regulatory Capital and Ratios
Common equity tier 1 capital
$ 53,515 $ 52,097 $ 51,726 $ 49,137
Tier 1 regulatory capital
$ 53,515 $ 52,097 $ 51,726 $ 49,137
Total regulatory capital
$ 58,722 $ 57,161 $ 56,756 $ 53,889
Tier 1 leverage ratio
9.14% 9.14% 9.07% 8.97%
Common equity tier 1 risk based capital ratio
12.88% 12.91% 12.90% 12.98%
Tier 1 risk based capital ratio
12.88% 12.91% 12.90% 12.98%
Total risk based capital ratio
14.14% 14.16% 14.15% 14.23%
Three Months Ended
March 31,
December 31,
September 30,
March 31,
Selected Financial Ratios1
2018
2017
2017
2017
Return on average total assets
0.86% 0.13% 0.71% 0.58%
Return on average shareholders’ equity
9.51% 1.38% 7.93% 6.61%
Net interest margin
3.70% 3.68% 3.52% 3.36%
Net interest income to average total assets
3.61% 3.56% 3.42% 3.30%
Efficiency ratio
69.44% 65.83% 66.87% 72.40%

1 = All Selected Financial Ratios are annualized other than the Efficiency Ratio.

Three Months Ended
March 31,
December 31,
September 30,
March 31,
Selected Average Balances
2018
2017
2017
2017
Gross loans
$ 441,069 $ 431,144 $ 419,933 $ 400,404
Investment securities
73,879 73,586 74,471 76,057
Federal Home Loan Bank stock
3,163 3,163 3,163 2,939
Other interest earning assets
52,773 44,568 56,673 57,376
Total interest earning assets
$ 570,884 $ 552,461 $ 554,240 $ 536,776
Total assets
$ 585,047 $ 569,812 $ 569,570 $ 546,805
Interest bearing checking accounts
$ 35,668 $ 36,702 $ 33,672 $ 34,223
Money market deposits
115,386 112,179 119,533 121,748
Savings deposits
120,323 109,936 109,916 108,703
Time deposits
12,543 12,368 12,985 13,097
Total interest bearing deposits
283,920 271,185 276,106 277,771
Noninterest bearing demand deposits
245,085 243,874 240,149 219,807
Total deposits
$ 529,005 $ 515,059 $ 516,255 $ 497,578
Borrowings
$ 933 $ 1 $ $
Shareholders’ equity
$ 52,826 $ 52,365 $ 51,049 $ 48,260

SOURCE: 1st Capital Bank

ReleaseID: 497733