1st Capital Bank Announces First Quarter 2019 Financial Results Record Average Earning Assets

SALINAS, CA / ACCESSWIRE / April 30, 2019 / 1st Capital Bank (OTC PINK: FISB) reported unaudited net income of $1.78 million for the three months ended March 31, 2019, an increase of 43.3% compared to net income of $1.24 million in the first quarter of 2018 and a decrease of 8.4% compared to income of $1.94 million in the fourth quarter of 2018, the immediately preceding quarter. Earnings per share were $0.34 (diluted) for the first quarter of 2019, compared to $0.38 (diluted) for the prior quarter, and $0.24 (diluted) for the first quarter of 2018.

Total assets grew $12.1 million in the first quarter, to $634.4 million at March 31, 2019, compared to $622.3 million at December 31, 2018. Net loans decreased $4.1 million, or 0.9%, during the first quarter, from $480.8 million at December 31, 2018 to $476.7 million at March 31, 2019. Growth in higher yielding commercial and industrial loans of $3.4 million and increases in the commercial real estate portfolio of $2.4 million were not sufficient to offset the $11.0 million decline in lower yielding single-family residential mortgages during the first quarter. Loan outstandings in the core relationship banking portfolio increased 1.8% during the first quarter to $357.6 million from $351.1 million at December 31, 2018, and increased 7.5% above prior year levels of $332.8 as of March 31, 2018. Because of the relatively unchanged level of loans and continuing strong performance of the loan portfolio, no provision for loan losses was taken in the first quarter of 2019, compared with $100 thousand in the fourth quarter of 2018, and a $20 thousand provision in the first quarter of 2018.

“We believe our solid first quarter results, and our continued investments in infrastructure and previously announced high profile additions to our group of experienced relationship managers will enable the Bank to continue our growth during the remainder of 2019,” said Thomas E. Meyer, President and Chief Executive Officer. “We are optimistic that the strong local economies along California’s Central Coast will continue to present excellent opportunities to attract quality new relationships.”

Net interest income before provision for loan losses (“NII”) increased $50 thousand, or 0.8%, to $6.18 million, compared to $6.13 million in the prior quarter; and increased 18.7% over the first quarter 2018 NII of $5.21 million. Net interest margin increased 9 basis points from 4.01% in the fourth quarter of 2018 to 4.10% in the first quarter of 2019, reflecting improved yields on the Bank’s investment portfolio as well as the continued low cost of deposits.

Non-interest income decreased $67 thousand, or 12.4%, from $541 thousand in the fourth quarter of 2018 to $474 thousand in the first quarter of 2019, and increased 24.4% from $381 thousand earned in the first quarter of 2018. Continued progress in generating income from the brokering of single-family residential mortgages was more than offset by the decline in gains on sale of SBA 7a loans.

The Bank’s return on average assets increased from 0.86% in the first quarter of 2018 to 1.15% in the first quarter of 2019, but declined slightly from 1.24% in the fourth quarter of 2018. Return on average equity also increased from 9.51% in the first quarter of 2018 to 11.95% in the first quarter of 2019, but also declined from 13.33% recognized in the previous quarter.

The Bank’s efficiency ratio increased from 58.3% in the fourth quarter of 2018 to 63.7% in the first quarter of 2019, primarily due to the investment in additional relationship managers combined with increases in other noninterest expenses.

NET INTEREST INCOME BEFORE PROVISION FOR CREDIT LOSSES

Net interest income before provision for credit losses was $6.18 million in the first quarter of 2019, an increase of $50 thousand, or 0.8%, compared to $6.13 million in the fourth quarter of 2018 and an increase of $972 thousand, or 18.7%, compared to $5.21 million in the first quarter of 2018.

Average earning assets were $611.3 million during the first quarter of 2019, an increase of 0.8% compared to $606.2 million in the fourth quarter of 2018. The yield on earning assets was 4.28% in the first quarter of 2019, compared to 4.18% in the fourth quarter of 2018, primarily due to an improved mix in the loan portfolio and increased yields in the investment portfolio. The average balance of the investment portfolio decreased nominally by $224 thousand, from $69.8 million in the fourth quarter of 2018 to $69.6 million in the first quarter of 2019. The yield on the investment portfolio increased from 2.01% in the first quarter of 2018 to 2.48% in the fourth quarter of 2018 and 2.66% in the first quarter of 2019, resulting from increased yields from floating rate securities.

The cost of interest-bearing liabilities increased to 0.38% in the first quarter of 2019, from 0.23% in the first quarter of 2018 and 0.36% in the fourth quarter of 2018, while the average balance of interest-bearing liabilities increased nominally from $283.9 million in the first quarter of 2018 to $284.9 million in the fourth quarter of 2018, and increased to $287.3 million in the first quarter of 2019, as the Bank actively managed its leverage ratio, primarily with the placement of large depositor deposits into the ICS program. The average balance of noninterest-bearing demand deposit accounts increased from $245.1 million, or 46.3% of total deposits, in the first quarter of 2018 to $276.9 million, or 49.3% of total deposits, in the fourth quarter of 2018, and decreased to $275.9 million, or 49.0% of total deposits in the first quarter of 2019. The Bank’s overall cost of funds increased, from 0.12% in the first quarter of 2018 to 0.19% in the fourth quarter of 2018 and 0.20% in the first quarter of 2019.

“We are pleased to report that there was no significant attrition in the average balances of our noninterest-bearing deposits during a competitive first quarter of 2019, which contributed to the continued improvement in 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 no provision for loan losses in the first quarter of 2019 compared with a provision of $100 thousand recorded in the fourth quarter of 2018, 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 $279 thousand at March 31, 2019 compared to $3.0 million at December 31, 2018, and $3.9 million at March 31, 2018.

At March 31, 2019, there were no non-performing loans in the Bank’s loan portfolio, compared with $2.7 million at December 31, 2018, and $252 thousand at March 31, 2008. A large nonaccrual loan paid off in full together with accrued interest during the first quarter. At March 31, 2019, the allowance for loan losses was 1.36% of outstanding loans, compared to 1.34% at December 31, 2018 and 1.42% at March 31, 2018. The Bank recorded net recoveries of $12 thousand in the first quarter of 2019, compared to net recoveries of $13 thousand in the fourth quarter of 2018, and $12 thousand in the first quarter of 2018.

NON-INTEREST INCOME

Non-interest income recognized in the first quarter of 2019 was $474 thousand, compared to $541 thousand in the fourth quarter of 2018. The primary cause of the decrease was that the Bank recognized $8 thousand in gain on sale of SBA loans in the first quarter of 2019 compared to $59 thousand in the fourth quarter of 2018. Overall, this represents a decrease in non-interest income of $67 thousand, or 12.4%, compared to the fourth quarter of 2018, and an increase of $93 thousand compared to the first quarter of 2018, when non-interest income totaled $381 thousand.

NON-INTEREST EXPENSES

Non-interest expenses increased $354 thousand, or 9.1%, to $4.24 million in the first quarter of 2019, compared to $3.89 million for the fourth quarter of 2018, and increased $360 thousand, or 9.3%, compared to $3.88 million recognized in the first quarter of 2018.

Salaries and benefits increased $151 thousand, or 6.0%, to $2.67 million in the first quarter of 2019 from $2.52 million in the fourth quarter of 2018, and increased $193 thousand, or 7.8%, compared to $2.48 million in the first quarter of 2018. These increases primarily reflect key additions to staff, primarily in the lending departments. From the fourth quarter of 2018 to the first quarter of 2019, base salaries and wages increased $24 thousand, or 1.29%, from $1.85 million to $1.88 million, health insurance premiums increased $25 thousand, or 15.1%, from $168 thousand to $193 thousand, and the employer’s portion of payroll taxes increased $68 thousand, or 63.1%, from $108 thousand to $176 thousand, reflecting the seasonal pattern of such taxes. Payroll taxes decreased $41 thousand, or 18.9%, year over year. Non-interest expenses other than salaries and benefits experienced a broad-based increase of $203 thousand, or 14.9%, from $1.36 million in the fourth quarter of 2018 to $1.57 million in the first quarter of 2019, reflecting the Bank’s expanded scope of operations and technology upgrades to enhance the customer experience and support internal operating needs.

The efficiency ratio (non-interest expenses divided by the sum of net interest income before provision for loan losses and non-interest income) was 63.7% for the first quarter of 2019, compared to 58.3% for the fourth quarter of 2018 and 69.4% for the first quarter of 2018. Annualized non-interest expenses as a percent of average total assets were 2.74%, 2.48%, and 2.69% for the first quarter of 2019, the fourth quarter of 2018, and the first quarter of 2018, respectively.

PROVISION FOR INCOME TAXES

The Bank’s effective book tax rate was 26.4% in the first quarter of 2019, compared to 27.7% for the fourth quarter of 2018 and 26.6% for the first quarter of 2018. The lower effective rates these past several quarters reflects the permanent 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, Suite 150, Salinas, CA 93901. 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

Michael J. Winiarski

President and Chief Executive Officer

Chief Financial Officer

831.264.4057 office

831.264.4014 office

Tom.Meyer@1stCapitalBank.com

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

2019

2018

Assets

Cash and due from banks

$
6,569

$
6,476

$
5,408

$
11,772

Funds held at the Federal Reserve Bank2

60,979

45,625

33,571

46,920

Time deposits at other financial institutions

–

996

Available-for-sale securities, at fair value

69,320

70,263

68,154

71,300

Loans receivable held for sale

–

1,000

Loans receivable held for investment:

Construction / land (including farmland)

20,189

21,353

22,396

17,453

Residential 1 to 4 units

139,765

150,677

147,205

140,474

Home equity lines of credit

8,676

8,008

7,853

6,565

Multifamily

54,586

53,181

53,984

54,109

Owner occupied commercial real estate

61,775

62,976

65,628

64,009

Investor commercial real estate

141,452

139,261

131,736

117,896

Commercial and industrial

42,098

38,745

38,672

40,307

Other loans

14,724

13,189

17,127

11,685

Total loans

483,265

487,390

484,601

452,498

Allowance for loan losses

(6,560
)

(6,548
)

(6,435
)

(6,410
)

Net loans

476,705

480,842

478,166

446,088

Premises and equipment, net

4,278

2,087

2,109

2,315

Bank owned life insurance

7,916

7,866

7,813

7,706

Investment in FHLB3 stock, at cost

3,163

Accrued interest receivable and other assets

5,498

5,965

6,255

5,535

Total assets

$
634,428

$
622,287

$
606,635

$
596,795

Liabilities and shareholders’ equity

Deposits:

Noninterest bearing demand deposits

$
268,195

$
281,695

$
248,036

$
236,358

Interest bearing checking accounts

35,832

33,144

35,274

39,606

Money market deposits

134,044

129,064

139,037

125,147

Savings deposits

110,877

99,340

109,530

128,659

Time deposits

18,953

17,254

16,010

12,295

Total deposits

567,901

560,497

547,887

542,065

Accrued interest payable and other liabilities

4,818

2,625

2,344

1,839

Shareholders’ equity

61,709

59,165

56,404

52,891

Total liabilities and shareholders’ equity

$
634,428

$
622,287

$
606,635

$
596,795

Shares outstanding

5,118,759

5,105,784

5,041,058

5,026,724

Nominal and tangible book value per share

$
12.06

$
11.59

$
11.19

$
10.52

Ratio of net loans to total deposits

83.94
%

85.79
%

87.27
%

82.29
%

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 Data

2019

2018

Interest and dividend income

Loans

$
5,681

$
5,611

$
5,448

$
4,769

Investment securities

456

436

404

367

Federal Home Loan Bank stock

107

Other

259

236

222

174

Total interest and dividend income

6,452

6,390

6,128

5,366

Interest expense

Interest bearing checking

Money market deposits

129

134

123

Savings deposits

Time deposits

Total interest expense on deposits

272

260

234

155

Interest expense on borrowings

–

Total interest expense

272

260

234

158

Net interest income

6,180

6,130

5,894

5,208

Provision for loan losses

–

100

–

Net interest income after provision

for loan losses

6,180

6,030

5,894

5,188

Noninterest income

Service charges on deposits

BOLI dividend income

Gain on sale of loans

–

Other

339

351

339

188

Total noninterest income

474

541

471

381

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,

2019

2018

Noninterest expenses

Salaries and benefits

2,674

2,523

2,482

2,481

Occupancy

306

292

299

290

Data and item processing

215

193

204

196

Professional services

130

119

161

138

Furniture and equipment

157

116

137

126

Provision for unfunded loan

commitments

(15
)

(6
)

Other

773

633

682

656

Total noninterest expenses

4,240

3,886

3,969

3,881

Income before provision for income taxes

2,414

2,685

2,396

1,688

Provision for income taxes

638

745

654

449

Net income

$
1,776

$
1,940

$
1,742

$
1,239

Common Share Data1

Earnings per common share

Basic

$
0.35

$
0.38

$
0.35

$
0.25

Diluted

$
0.34

$
0.38

$
0.34

$
0.24

Weighted average common shares outstanding

Basic

5,110,382

5,081,260

5,038,340

5,019,518

Diluted

5,186,796

5,166,613

5,147,292

5,110,342

1 = Earnings per common share and weighted average common shares outstanding have been restated to reflect the effect of the 7% stock dividend to shareholders of record November 21, 2018 and paid December 14, 2018.

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

March 31,

December 31,

September 30,

March 31,

Asset Quality

2019

2018

Loans past due 90 days or more and accruing

interest

$
–

Nonaccrual restructured loans

–

Other nonaccrual loans

–

2,711

2,906

252

Other real estate owned

–

$
–

$
2,711

$
2,906

$
252

Allowance for loan losses to total loans

1.36
%

1.34
%

1.33
%

1.42
%

Allowance for loan losses to nonperforming loans

n/a

241.53
%

221.44
%

2,543.65
%

Nonaccrual loans to total loans

0.00
%

0.56
%

0.60
%

0.06
%

Nonperforming assets to total assets

0.00
%

0.44
%

0.48
%

0.04
%

Regulatory Capital and Ratios

Common equity tier 1 capital

$
61,585

$
59,565

$
57,166

$
53,515

Tier 1 regulatory capital

$
61,585

$
59,565

$
57,166

$
53,515

Total regulatory capital

$
67,209

$
65,177

$
62,747

$
58,722

Tier 1 leverage ratio

9.79
%

9.55
%

9.35
%

9.14
%

Common equity tier 1 risk based capital ratio

13.72
%

13.30
%

12.83
%

12.88
%

Tier 1 risk based capital ratio

13.72
%

13.30
%

12.83
%

12.88
%

Total risk based capital ratio

14.97
%

14.55
%

14.09
%

14.14
%

Three Months Ended

March 31,

December 31,

September 30,

March 31,

Selected Financial Ratios1

2019

2018

Return on average total assets

1.15
%

1.24
%

1.12
%

0.86
%

Return on average shareholders’ equity

11.95
%

13.33
%

12.38
%

9.51
%

Net interest margin

4.10
%

4.01
%

3.89
%

3.70
%

Net interest income to average total assets

3.99
%

3.91
%

3.80
%

3.61
%

Efficiency ratio

63.73
%

58.26
%

62.36
%

69.44
%

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

2019

2018

Gross loans

$
487,838

$
484,041

$
480,621

$
441,069

Investment securities

69,553

69,778

70,152

73,879

Federal Home Loan Bank stock

3,163

Other interest earning assets

50,778

49,212

46,534

52,773

Total interest earning assets

$
611,332

$
606,194

$
600,470

$
570,884

Total assets

$
628,320

$
622,259

$
615,388

$
585,047

Interest bearing checking accounts

$
34,268

$
36,273

$
34,883

$
35,668

Money market deposits

127,764

124,924

140,443

115,386

Savings deposits

107,158

106,889

117,023

120,323

Time deposits

18,099

16,828

15,216

12,543

Total interest bearing deposits

287,289

284,914

307,565

283,920

Noninterest bearing demand deposits

275,956

276,866

249,488

245,085

Total deposits

$
563,245

$
561,780

$
557,053

$
529,005

Borrowings

$
–

$
933

Shareholders’ equity

$
60,286

$
57,751

$
55,858

$
52,826

SOURCE: 1st Capital Bank

ReleaseID: 543583

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