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

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

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

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

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

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

Interest and dividend income

Loans

$
4,769

$
4,539

$
4,187

Investment securities

367

313

306

246

Federal Home Loan Bank stock

Other

174

130

165

102

Total interest and dividend income

5,366

5,268

5,066

4,605

Interest expense

Interest bearing checking

Money market deposits

Savings deposits

Time deposits

Total interest expense on deposits

155

148

154

Interest expense on borrowings

—

Total interest expense

158

148

154

Net interest income

5,208

5,120

4,912

4,451

Provision for loan losses

—

Net interest income after provision

for loan losses

5,188

5,055

4,827

4,451

Noninterest income

Service charges on deposits

BOLI dividend income

Gain on sale of loans

Other

188

106

127

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

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)

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

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%

0.03%

Nonperforming assets to total assets

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%

9.07%

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

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

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

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

Go Top