MONTEREY, CA / ACCESSWIRE / January 31, 2017 / 1st Capital Bank (OTC PINK: FISB) reported unaudited net income of $1.03 million for the three months ended December 31, 2016, an increase of 52.8% compared to net income of $674 thousand in the three months ended December 31, 2015 and an increase of 59.7% compared to net income of $645 thousand in the three months ended September 30, 2016, the immediately preceding quarter. Earnings per share were $0.23 (diluted), compared to $0.15 (diluted) for the prior quarter.
Unaudited net income for the year ended December 31, 2016 increased 28.9% to $3.07 million, compared to $2.38 million for the year ended December 31, 2015, when operating results included $249 thousand of non-recurring, non-taxable bank-owned life insurance benefits.
Net interest income before provision for loan losses for the three-month period ended December 31, 2016 was $4.57 million, an increase of $390 thousand, or 9.3% compared to $4.18 million recognized in the three-month period ended September 30, 2016. On a year-over-year basis, quarterly net interest income before provision for loan losses increased $555 thousand, or 13.8%, from $4.02 million recognized in the fourth quarter of 2015. For the year ended December 31, 2016, net interest income before provision for loan losses increased 12.9%, from $15.04 million in the year ended December 31, 2015 to $16.98 million in the year ended December 31, 2016. Average gross loans outstanding increased $19 million, to $409 million for the three months ended December 31, 2016 from $390 million for the three months ended September 30, 2016, and increased $32 million, or 8.6%, from an average balance of $377 million for the three months ended December 31, 2015. Net interest margin increased from 3.20% in the third quarter of 2016 to 3.41% in the fourth quarter of 2016.
Annual loan growth was concentrated in commercial real estate loans, which organically grew $22 million, or 12.4%, in 2016, from $176 million as of December 31, 2015 to $198 million as of December 31, 2016. Over the same period, commercial and industrial loans grew $3 million, or 6.3%, from $43 million as of December 31, 2015 to $45 million as of December 31, 2016, while the single-family residential portfolio, which consists primarily of purchased loans, decreased $1 million, or 0.6%, from $133 million as of December 31, 2015 to $132 million as of December 31, 2016. Overall, the loan portfolio increased $29 million, or 7.6%, from $377 million as of December 31, 2015 to $405 million as of December 31, 2016.
For the year ended December 31, 2016, the Bank recorded a provision for loan losses of $295 thousand, compared to a provision for loan losses of $565 thousand in the year ended December 31, 2015. The Bank did not record a provision for loan losses in the fourth quarter of 2016 or 2015, while it recorded a provision for loan losses of $255 thousand in the third quarter of 2016. Non-performing assets declined from $1.7 million as of December 31, 2015 and $1.6 million as of September 30, 2016 to $139 thousand as of December 31, 2016.
“Our fourth quarter operating results are a reflection of the success we have had in building our team of skilled relationship managers and their success in expanding our core loan portfolio in 2016,” said Thomas E. Meyer, President and Chief Executive Officer. “Our gross loans outstanding now exceed $400 million, and our core commercial and industrial and commercial real estate portfolios make up an increasing percentage of the total. This growth in our core business, while maintaining the Bank’s exceptional asset quality, is the key to our increased momentum.”
Total deposits increased $25 million, or 5.3% to $500 million as of December 31, 2016, from $475 million as of September 30, 2016, and increased $32 million, or 6.9% from $468 million as of December 31, 2015. In addition to the $500 million carried on the Bank’s balance sheet as of December 31, 2016, the Bank manages $24 million in additional deposits placed into Promontory Interfinancial Network’s Insured Cash Sweep (“ICS”) product, compared to $27 million as of September 30, 2016 and $0 as of December 31, 2015. These funds may be moved back into the Bank’s deposit portfolio at the Bank’s discretion.
“During the fourth quarter, our reported operating results were enhanced by certain non-recurring items, including $78 thousand in interest income recognized in connection with the payoff of a non-accrual loan, a special dividend of $117 declared by the Federal Home Loan Bank of San Francisco, and the resolution of a dispute involving Enterprise Zone income tax credits with the California Franchise Tax Board that reduced our provision for income taxes by $69 thousand,” said Michael J. Winiarski, Chief Financial Officer. “In addition, demand deposits as of December 31, 2016 include $20 million received shortly before year-end that we believe are transitory in nature.”
NET INTEREST INCOME BEFORE PROVISION FOR CREDIT LOSSES
Net interest income before provision for credit losses was $4.57 million in the fourth quarter of 2016, an increase of $555 thousand, or 13.8%, compared to $4.02 million in the fourth quarter of 2015 and an increase of $390 thousand, or 9.3%, compared to $4.18 million in the third quarter of 2016.
Average earning assets were $533 million during the fourth quarter of 2016, an increase of 2.6% compared to $519 million in the third quarter of 2016. The yield on earning assets was 3.53% in the fourth quarter, compared to 3.33% in the third quarter of 2016, primarily due to an increase in the average balance of loans from $390 million in the third quarter of 2016 to $409 million in the fourth quarter of 2016. In addition, interest and dividend income included $78 thousand of interest recognized in connection with the payoff of a non-accrual loan and a special dividend of $117 thousand declared by the Federal Home Loan Bank of San Francisco. The average balance of the investment portfolio decreased $5 million, from $87 million in the third quarter of 2016 to $82 million in the fourth quarter of 2016, reflecting normal amortization and prepayments on the Bank’s investments in mortgage-backed securities and collateralized mortgage obligations. The yield on the investment portfolio increased from 0.93% in the third quarter of 2016 to 1.03% in the fourth quarter of 2016.
The cost of interest-bearing liabilities declined from 0.23% in the fourth quarter of 2015 and the third quarter of 2016 to 0.22% in the fourth quarter of 2016, while the average balance of interest-bearing liabilities decreased from $282 million in the third quarter of 2016 to $277 million in the fourth quarter of 2016, as the Bank experienced a seasonal decrease in deposits, particularly from larger depositors. The average balance of noninterest-bearing demand deposit accounts (“DDAs”) increased from $194 million, or 40.8% of total deposits, in the third quarter of 2016 to $215 million, or 43.7% of total deposits, in the fourth quarter of 2016. The Bank’s overall cost of funds decreased, from 0.14% in the fourth quarter of 2015 to 0.13% in the third and fourth quarters of 2016.
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 did not record a provision for loan losses in the fourth quarter of 2016 or 2015, whereas in the third quarter of 2016, the Bank recorded a $255 thousand provision for losses, primarily to recognize the increased exposure to credit losses associated with growth in the loan portfolio.
The changes in the provision reflect the growth of the portfolio, changes in the mix of loan types within the portfolio and their respective loss histories, as well as management’s assessment of the amounts expected to be realized from certain loans identified as impaired. Impaired loans totaled $8.0 million at December 31, 2016, compared to $9.5 million at September 30, 2016, and $9.1 million at December 31, 2015.
At December 31, 2016, non-performing loans were 0.03% of the total loan portfolio, compared to 0.39% at September 30, 2016 and 0.46% at December 31, 2015. At December 31, 2016, the allowance for loan losses was 1.55% of outstanding loans, compared to 1.52% at September 30, 2016 and 1.57% at December 31, 2015, respectively. The Bank recorded net recoveries of $12 thousand in the fourth quarter of 2016, compared to net recoveries of $13 thousand in the third quarter of 2016 and net charge-offs of $4 thousand in the fourth quarter of 2015.
NON-INTEREST INCOME
Non-interest income recognized in the fourth quarter of 2016 was $183 thousand, including $78 thousand in gain on sale of Small Business Administration guaranteed loans, compared to $75 thousand in the third quarter of 2016, when no gain on sale was recognized. This represents an increase of $108 thousand compared to third quarter of 2016, and an increase of $109 thousand compared to the fourth quarter of 2015.
NON-INTEREST EXPENSES
Non-interest expenses increased $226 thousand, or 7.8%, to $3.14 million in the fourth quarter of 2016, compared to $2.91 million for the third quarter of 2016, and increased $194 thousand, or 6.6%, compared to $2.95 million recognized in the fourth quarter of 2015. Salaries and benefits increased $109 thousand, or 6.1%, from $1.80 million in the third quarter of 2016 to $1.91 million in the fourth quarter of 2016.
For the year ended December 31, 2016, non-interest expenses were $12.06 million, an increase of $797 thousand, or 7.1%, compared to $11.26 million recognized in the year ended December 31, 2015. Salaries and benefits increased $598 thousand, or 8.7%, from $6.89 million to $7.49 million over the same period, reflecting an increase in average headcount from 68 employees for the year ended December 31, 2015 to 74 employees for the year ended December 31, 2016, including the opening of a branch office in San Luis Obispo, California in June 2015.
The efficiency ratio (non-interest expenses divided by the sum of net interest income before provision for loan losses and non-interest income) was 66.0% for the fourth quarter of 2016, compared to 68.4% for the third quarter of 2016 and 72.0% for the fourth quarter of 2015. Annualized non-interest expenses as a percent of average total assets were 2.31%, 2.21%, and 2.33% for the fourth quarter of 2016, the third quarter of 2016, and the fourth quarter of 2015, respectively.
PROVISION FOR INCOME TAXES
The Bank’s effective book tax rate was 36.2% in the fourth quarter of 2016, compared to 40.7% for the third quarter of 2016 and 41.1% for the fourth quarter of 2015. The lower effective rate in the fourth quarter reflects the settlement of certain disputed Enterprise Zone interest deductions dating from 2011.
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 5 Harris Court, 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 share and per share data)
December 31,
September 30,
June 30,
December 31,
Financial Condition Data(1)
2016
2016
2016
2015
Assets
Cash and due from banks
$
2,754
$
3,585
$
33,927
$
3,334
Funds held at the Federal Reserve Bank(2)
50,884
17,482
32,219
42,857
Time deposits at other financial institutions
2,490
996
1,245
2,241
Available-for-sale securities, at fair value
77,870
84,175
89,178
84,203
Loans receivable held for investment:
Construction / land (including farmland)
18,993
16,453
15,655
17,499
Residential 1 to 4 units
120,983
127,010
112,899
124,741
Home equity lines of credit
11,609
11,578
8,805
8,594
Multifamily
53,338
53,763
49,868
36,862
Owner occupied commercial real estate
50,887
52,526
51,419
56,046
Investor commercial real estate
94,018
94,378
88,920
83,532
Commercial and industrial
45,219
47,440
49,530
42,528
Other loans
10,259
9,259
7,263
6,909
Total loans
405,306
412,407
384,359
376,711
Allowance for loan losses
(6,267
)
(6,255
)
(5,987
)
(5,921
)
Net loans
399,039
406,152
378,372
370,790
Premises and equipment, net
1,477
1,433
1,471
1,612
Bank owned life insurance
7,433
2,395
2,380
2,350
Investment in FHLB3 stock, at cost
2,939
2,939
2,939
2,593
Accrued interest receivable and other assets
5,541
4,551
4,313
3,970
Total assets
$
549,927
$
523,708
$
546,044
$
513,950
Liabilities and shareholders’ equity
Deposits:
Noninterest bearing demand deposits
$
239,799
$
191,079
$
194,904
$
204,624
Interest bearing checking accounts
33,888
36,479
28,742
29,838
Money market deposits
113,289
120,181
146,228
110,490
Savings deposits
100,601
113,052
112,934
94,315
Time deposits
13,044
14,503
15,298
29,121
Total deposits
500,621
475,294
498,106
468,388
Accrued interest payable and other liabilities
1,661
1,403
1,672
1,073
Shareholders’ equity
47,645
47,011
46,266
44,489
Total liabilities and shareholders’ equity
$
549,927
$
523,708
$
546,044
$
513,950
Shares outstanding
4,350,721
4,127,686
4,090,186
4,064,485
Nominal and tangible book value per share
$
10.96
$
11.23
$
11.11
$
10.95
Ratio of net loans held for investment
to total deposits
79.71
%
85.45
%
75.96
%
76.16
%
(1) = Loans 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 share and per share data)
Three Months Ended
December 31,
September 30,
June 30,
December 31,
Operating Results Data(1)
2016
2016
2016
2015
Interest and dividend income
Loans
$
4,298
$
4,028
$
3,933
$
3,938
Investment securities
213
203
190
160
Federal Home Loan Bank stock
169
64
62
58
Other
48
48
100
23
Total interest and dividend income
4,728
4,343
4,285
4,179
Interest expense
Interest bearing checking
5
3
2
3
Money market deposits
75
79
112
71
Savings deposits
69
68
82
72
Time deposits
7
11
9
14
Total interest expense on deposits
156
161
205
160
Interest expense on borrowings
—
—
—
2
Total interest expense
156
161
205
162
Net interest income
4,572
4,182
4,080
4,017
Provision for loan losses
—
255
40
—
Net interest income after provision
for loan losses
4,572
3,927
4,040
4,017
Noninterest income
Service charges on deposits
41
32
32
34
BOLI dividend income
38
14
15
15
Gain on sale of loans
78
—
19
11
Gain on sale of securities
—
—
10
—
Other
26
29
28
14
Total noninterest income
183
75
104
74
1ST CAPITAL BANK
CONDENSED FINANCIAL DATA
(Unaudited)
(Dollars in thousands, except share and per share data)
Three Months Ended
December 31,
September 30,
June 30,
December 31,
2016
2016
2016
2015
Noninterest expenses
Salaries and benefits
1,910
1,801
1,883
1,817
Occupancy
250
231
216
219
Data and item processing
154
149
151
149
Professional services
205
108
142
132
Furniture and equipment
127
114
112
127
Provision for unfunded loan
commitments
(9
)
(10
)
(25
)
19
Other
503
521
496
483
Total noninterest expenses
3,140
2,914
2,975
2,946
Income before provision for income taxes
1,615
1,088
1,169
1,145
Provision for income taxes
585
443
480
471
Net income
$
1,030
$
645
$
689
$
674
Common Share Data(2)
Earnings per share
Basic
$
0.24
$
0.15
$
0.16
$
0.16
Diluted
$
0.23
$
0.15
$
0.16
$
0.16
Weighted average shares outstanding
Basic
4,340,153
4,329,406
4,311,116
4,255,278
Diluted
4,392,963
4,377,177
4,357,571
4,338,245
(1) = Certain reclassifications have been made to prior period financial statements to conform them to the current period presentation.
(2) = Earnings per share and weighted average shares outstanding have been restated to reflect the effect of the 5% stock dividend declared November 23, 2016 and paid December 15, 2016.
1ST CAPITAL BANK
CONDENSED FINANCIAL DATA
(Unaudited)
(Dollars in thousands, except share and per share data)
Twelve Months Ended
December 31,
December 31,
Operating Results Data(1)
2016
2015
Interest and dividend income
Loans
$
16,279
$
14,732
Investment securities
796
617
Federal Home Loan Bank stock
347
279
Other
266
82
Total interest and dividend income
17,688
15,710
Interest expense
Interest bearing checking
13
11
Money market deposits
352
319
Savings deposits
297
280
Time deposits
40
51
Total interest expense in deposits
702
661
Interest expense on borrowings
—
4
Total interest expense
702
665
Net interest income
16,986
15,045
Provision for loan losses
295
565
Net interest income after provision for loan losses
16,691
14,480
Noninterest income
Service charges on deposits
140
123
BOLI dividend income
82
60
BOLI benefits
—
249
Gain on sale of loans
97
100
Gain on sale of securities
10
—
Other
102
78
Total noninterest income
431
610
1ST CAPITAL BANK
CONDENSED FINANCIAL DATA
(Unaudited)
(Dollars in thousands, except share and per share data)
Twelve Months Ended
December 31,
December 31,
2016
2015
Noninterest expenses
Salaries and benefits
7,488
6,890
Occupancy
919
841
Data and item processing
602
596
Professional services
537
532
Furniture and equipment
476
459
Provision for unfunded loan commitments
(29
)
31
Other
2,069
1,916
Total noninterest expenses
12,062
11,265
Income before provision for income taxes
5,060
3,825
Provision for income taxes
1,992
1,444
Net income
$
3,068
$
2,381
Common Share Data(2)
Earnings per share
Basic
$
0.71
$
0.56
Diluted
$
0.70
$
0.55
Weighted average shares outstanding
Basic
4,314,335
4,226,917
Diluted
4,363,723
4,296,133
(1) = Certain reclassifications have been made to prior period financial statements to conform them to the current period presentation.
(2) = Earnings per share and weighted average shares outstanding have been restated to reflect the effect of the 5% stock dividend declared November 23, 2016 and paid December 15, 2016.
1ST CAPITAL BANK
CONDENSED FINANCIAL DATA
(Unaudited)
(Dollars in thousands)
December 31,
September 30,
June 30,
December 31,
Asset Quality
2016
2016
2016
2015
Loans past due 90 days or more and accruing
interest
$
—
$
—
$
—
$
—
Nonaccrual restructured loans
—
1,465
1,491
1,526
Other nonaccrual loans
139
154
248
205
Other real estate owned
—
—
—
—
$
139
$
1,619
$
1,739
$
1,731
Allowance for loan losses to total loans
1.55
%
1.52
%
1.56
%
1.57
%
Allowance for loan losses to nonperforming loans
4,508.63
%
386.35
%
344.28
%
342.06
%
Nonaccrual loans to total loans
0.03
%
0.39
%
0.45
%
0.46
%
Nonperforming assets to total assets
0.03
%
0.31
%
0.32
%
0.34
%
Regulatory Capital and Ratios
Common equity tier 1 capital
$
48,093
$
46,924
$
46,143
$
44,258
Tier 1 regulatory capital
$
48,093
$
46,924
$
46,143
$
44,258
Total regulatory capital
$
52,740
$
51,469
$
50,447
$
48,461
Tier 1 leverage ratio
8.89
%
8.94
%
8.33
%
8.82
%
Common equity tier 1 risk based capital ratio
12.99
%
12.97
%
13.47
%
13.24
%
Tier 1 risk based capital ratio
12.99
%
12.97
%
13.47
%
13.24
%
Total risk based capital ratio
14.25
%
14.23
%
14.73
%
14.49
%
Three Months Ended
December 31,
September 30,
June 30,
December 31,
Selected Financial Ratios(1)
2016
2016
2016
2015
Return on average total assets
0.76
%
0.49
%
0.50
%
0.53
%
Return on average shareholders’ equity
8.59
%
5.48
%
6.01
%
6.04
%
Net interest margin
3.41
%
3.20
%
2.99
%
3.21
%
Net interest income to average total assets
3.36
%
3.17
%
2.96
%
3.17
%
Efficiency ratio
66.04
%
68.45
%
71.10
%
72.03
%
(1) = All Selected Financial Ratios are annualized other than the Efficiency Ratio.
Three Months Ended
December 31,
September 30,
June 30,
December 31,
Selected Average Balances
2016
2016
2016
2015
Gross loans
$
409,396
$
389,580
$
383,020
$
376,956
Investment securities
82,195
87,364
77,748
86,974
Federal Home Loan Bank stock
2,939
2,939
2,848
2,593
Other interest earning assets
38,435
39,513
84,807
29,366
Total interest earning assets
$
532,982
$
519,396
$
548,423
$
495,889
Total assets
$
540,925
$
524,905
$
553,957
$
502,349
Interest bearing checking accounts
$
35,366
$
32,142
$
29,327
$
31,352
Money market deposits
114,818
121,476
146,985
114,281
Savings deposits
112,046
113,052
120,792
96,740
Time deposits
14,287
15,062
15,434
29,460
Total interest bearing deposits
276,517
281,732
312,538
271,833
Noninterest bearing demand deposits
214,675
194,335
193,762
183,569
Total deposits
$
491,192
$
476,067
$
506,300
$
455,402
Borrowings
$
—
$
65
$
12
$
2,283
Shareholders’ equity
$
47,722
$
46,844
$
46,071
$
44,308
1ST CAPITAL BANK
CONDENSED FINANCIAL DATA
(Unaudited)
(Dollars in thousands)
Twelve Months Ended
December 31,
December 31,
Selected Financial Ratios(1)
2016
2015
Return on average total assets
0.57
%
0.49
%
Return on average shareholders’ equity
6.61
%
5.51
%
Net interest margin
3.20
%
3.14
%
Net interest income to average total assets
3.16
%
3.10
%
Efficiency ratio
69.25
%
71.96
%
(1) = All Selected Financial Ratios are annualized other than the Efficiency Ratio.
Twelve Months Ended
December 31,
December 31,
Selected Average Balances(1)
2016
2015
Gross loans
$
390,544
$
352,971
Investment securities
81,707
96,676
Federal Home Loan Bank stock
2,830
2,411
Other interest earning assets
55,641
27,700
Total interest earning assets
$
530,722
$
479,758
Total assets
$
536,792
$
485,551
Interest bearing checking accounts
$
32,109
$
27,709
Money market deposits
126,528
118,298
Savings deposits
113,795
94,087
Time deposits
16,519
29,868
Total interest bearing deposits
288,952
269,963
Noninterest bearing demand deposits
199,641
169,419
Total deposits
$
488,593
$
439,381
Borrowings
$
19
$
2,056
Shareholders’ equity
$
46,436
$
43,244
(1) = Certain reclassifications have been made to prior period financial statements to conform them to the current period presentation.
SOURCE: 1st Capital Bank
ReleaseID: 453992
