Attached files
| file | filename |
|---|---|
| 8-K - 8-K - 1ST CONSTITUTION BANCORP | a1stconstitution_form8-kan.htm |
CONTACT: | Robert F. Mangano | Stephen J. Gilhooly |
President & Chief Executive Officer | Sr. Vice President & Chief Financial Officer | |
(609) 655-4500 | (609) 655-4500 | |
PRESS RELEASE – FOR IMMEDIATE RELEASE
1ST CONSTITUTION BANCORP
REPORTS FIRST QUARTER 2016 RESULTS
Cranbury NJ - April 22, 2016 - 1ST Constitution Bancorp (NASDAQ: FCCY), the holding company (the “Company”) for 1ST Constitution Bank (the “Bank”), today reported net income and earnings per share for the first quarter of 2016.
FIRST QUARTER 2016 HIGHLIGHTS
• | Net income was $2.2 million and diluted earnings per share was $0.27. |
• | Return on Average Assets and Return on Average Equity were 0.94% and 9.20%, respectively. |
• | Book value per share and tangible book value per share were $12.42 and $10.76, respectively. |
• | Net interest income was $8.5 million and the net interest margin was 3.93% on a tax equivalent basis. |
• | Loans held in portfolio were $659 million at March 31, 2016 and the loan to asset ratio was 69.4% at March 31, 2016. |
• | $0.7 million of non-performing assets were resolved during the first quarter and non-performing assets declined to $6.7 million and 0.70% of assets at March 31, 2016. |
• | The Bank recorded a credit (negative) provision for loan losses of $200,000 due to lower loan loss reserve factors that reflect the improvement in loan credit quality, the reduction of non-performing loans and the low level of net charge-offs over the last five quarters and the decline in total loans, primarily mortgage warehouse loans. |
Robert F. Mangano, President and Chief Executive Officer, stated, “We were able to achieve a similar level of net income in the first quarter of 2016 compared to the first quarter of last year despite not having the favorable effect of the significant level of residential mortgage refinancing activity that drove increases in mortgage warehouse line utilization and higher levels of residential mortgage loan sales by our residential mortgage banking group last year. Mr. Mangano added, “Our continued focus on disciplined loan credit administration and underwriting and the steady resolution of non-performing loans and assets over the last two years is reflected in the current low level of non-performing assets and our lower loan loss factors, which positively affected our net income.”
Discussion of Financial Results
Net income was $2.2 million, or $0.27 per diluted share, for the first quarter of 2016 compared to $2.3 million, or $0.28 per diluted share, for the first quarter of 2015. Net income per diluted share declined due to the slight decrease of $38,000 in net income and the higher average number of shares outstanding in 2016. All share and per share amounts have been adjusted to reflect the effect of the five percent common stock dividend paid on April 7, 2015 and the five percent common stock dividend paid on February 1, 2016.
Net interest income was $8.5 million for the quarter ended March 31, 2016, which represented a slight decrease of $33,000 compared to $8.5 million earned for the first quarter of 2015 and a decrease of $182,000 compared to $8.7 million earned for the fourth quarter of 2015. Average earning assets were $895.9 million and $902.6 million, respectively, and the yield of average earning assets were 4.49% and 4.47% for the first quarter of 2016 and the first quarter of 2015, respectively.
Interest expense on average interest bearing liabilities was $1.2 million, or 0.70%, for the first quarter of 2016 compared to $1.1 million, or 0.66%, for the first quarter of 2015 and $1.2 million, or 0.67%, for the fourth quarter of 2015. The slight increase of $41,000 in the interest expense of interest bearing liabilities for the first quarter of 2016 reduced the net interest margin to 3.93% on a tax equivalent basis for the first quarter of 2016 compared to the net interest margin of 3.96% on a tax equivalent basis for the first quarter of 2015.
The provision for loan losses was a credit (negative expense) of $200,000 for the first quarter of 2016 compared to $500,000 for the first quarter of 2015. The credit provision for the first quarter of 2016 reflects lower loan loss factors due to the improvement in loan credit quality, the resolution and reduction of non-performing loans and the low level of net charge-offs over the last five quarters and the decline in total loans, primarily mortgage warehouse loans, compared to March 31, 2015.
Non-interest income was $1.6 million for the first quarter of 2016 a decrease of $535,000, or 25.1%, compared to $2.1 million for the first quarter of 2015. Lower gains from the sales of residential mortgages and SBA loans for the first quarter of 2016 were the primary reasons for the decrease in non-interest income. In the first quarter of 2015, we observed a higher level of residential mortgage refinancing activity which management attributed to the reduction of mortgage insurance premiums by the FHA and lower residential mortgage interest rates. In the first quarter of 2016, residential mortgage interest rates were similar to residential mortgage interest rates in the first quarter of 2015, but refinancing activity was lower because management believes that many borrowers refinanced their mortgages in 2015. As a result, residential lending activity was lower in the first quarter of 2016 compared to the first quarter of 2015. In the first quarter of 2016, $24 million of residential mortgages were sold and $421,000 of gains were recorded compared to $34 million of loans sold and $608,000 of gains recorded in the first quarter of 2015. SBA guaranteed commercial lending activity and loan sales vary from period to period. In the first quarter of 2016, $5.3 million of SBA loans were sold and gains of $482,000 were recorded compared to $6.7 million of loans sold and gains of $684,000 recorded in the first quarter of 2015. Service charges and other income declined due primarily to lower customer activity.
Non-interest expenses were $7.0 million for the first quarter of 2016, an increase of $177,000, or 2.6%, compared to $6.9 million for the first quarter of 2015. Salaries and employee benefits expense increased $130,000, or 3.1%, due to staffing changes and merit increases. Occupancy costs declined $122,000, or 11.0%, due to lower depreciation and facility maintenance expenses. FDIC insurance expense declined $72,000, or 37.9%, due to a lower assessment rate that reflected the Bank’s improvement in asset quality and financial performance over the last five quarters. OREO expense declined due to the significant reduction in OREO assets. Other operating expenses increased $315,000 due primarily to a $220,000 lower net deferral of loan origination costs in the first quarter of 2016 compared to the first quarter of 2015. The lower level of mortgage warehouse funding activity of $806 million in the 2016 period compared to $870 million in the 2015 period was the primary reason there was a lower net deferral of loan origination expenses in the 2016 period compared to the 2015 period. The balance of the increase in other operating expenses reflected additional operating costs to support the growth and expansion of the Bank’s operations.
Income taxes were $1.0 million, which resulted in an effective tax rate of 32.0% in the first quarter of 2016 compared to $1.1 million and an effective tax rate of 31.8% in the first quarter of 2015. The slight decrease in income taxes was due to the lower amount of pre-tax income in the first quarter of 2016 compared to the first quarter of 2015.
At March 31, 2016, the allowance for loan losses was $7.3 million, a $258,000 decrease from the allowance for loan losses at December 31, 2015. As a percentage of total loans, the allowance was unchanged at 1.11% at the end of the first quarter of 2016 compared to year end 2015.
Total assets decreased to $949 million at March 31, 2016 from $968 million at December 31, 2015 due primarily to a $38.6 million decrease in FHLB borrowings, which was partially offset by a $17.1 million increase in deposits. Total portfolio loans at March 31, 2016 were $659.0 million compared to $682.1 million at December 31, 2015. The decrease in loans was due primarily to the decline in mortgage warehouse loans, which reflects, in general, the seasonality of residential mortgage lending in our market areas. Total investment securities at March 31, 2016 were $222.8 million, an increase from $214.7 million at December 31, 2015. Total deposits at March 31, 2016 were $803.8 million compared to $786.8 million at December 31, 2015.
Regulatory capital ratios continue to reflect a strong capital position. Under the regulatory capital standards (Basel III) that became effective on January 1, 2015, the Company’s common equity Tier 1 to risk based assets (“CET1”), total risk-based capital, Tier I capital, and Leverage ratios were 10.36%, 13.41%, 12.53% and 11.07%, respectively, at March 31, 2016. The Bank’s CET1, total risk-based capital, Tier 1 capital and Leverage ratios were 12.24%, 13.12%, 12.24% and 10.82%, respectively, at March 31, 2016. The Company and the Bank are considered “well capitalized” under these capital standards.
Asset Quality
Net charge-offs during the first quarter of 2016 were $58,000. Non-accrual loans were $5.5 million at March 31, 2016 compared to $6.0 million at December 31, 2015. During the first quarter of 2016, one residential mortgage loan for $165,000 and two commercial real estate loans totaling $280,000 were classified as non-performing. The allowance for loan losses was 132% of non-accrual loans at March 31, 2016 compared to 126% of non-accrual loans at December 31, 2015.
Overall, we observed stable trends in loan quality with net charge-offs of $58,000 during the first quarter of 2016 and non-performing loans to total loans of 0.84% and non-performing assets to total assets of 0.70% at March 31, 2016.
OREO at March 31, 2016 increased to $1.1 million from $1.0 million at December 31, 2015 due to the foreclosure of one commercial real estate loan.
About 1ST Constitution Bancorp
1ST Constitution Bancorp, through its primary subsidiary, 1ST Constitution Bank, operates 19 branch banking offices in Cranbury (2), Fort Lee, Hamilton, Hightstown, Hillsborough, Hopewell, Jamesburg, Lawrenceville, Perth Amboy, Plainsboro, Rocky Hill, West Windsor, Princeton, Rumson, Fair Haven, Shrewsbury, Little Silver and Asbury Park, New Jersey.
1ST Constitution Bancorp is traded on the Nasdaq Global Market under the trading symbol “FCCY” and can be accessed through the Internet at www.1STCONSTITUTION.com
The foregoing contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not historical facts and include expressions about management’s confidence and strategies and management’s expectations about new and existing programs and products, relationships, opportunities, taxation, technology and market conditions. These statements may be identified by such forward-looking terminology as “expect,” “look,” “believe,” “anticipate,” “may,” “will,” or similar statements or variations of such terms. Actual results may differ materially from such forward-looking statements. Factors that may cause results to differ materially from such forward-looking statements include, but are not limited to, changes in the direction of the economy in New Jersey, the direction of interest rates, effective income tax rates, loan prepayment assumptions, continued levels of loan quality and origination volume, continued relationships with major customers including sources for loans, a higher level of net loan charge-offs and delinquencies than anticipated, bank regulatory rules, regulations or policies that restrict or direct certain actions, the adoption, interpretation and implementation of new or pre-existing accounting pronouncements, a change in legal and regulatory barriers including issues related to compliance with anti-money laundering and bank secrecy act laws, as well as the effects of general economic conditions and legal and regulatory barriers and structure. 1ST Constitution Bancorp assumes no obligation for updating any such forward-looking statements at any time, except as required by law.
##############
1ST Constitution Bancorp
Selected Consolidated Financial Data
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended | |||||||
March 31, | |||||||
2016 | 2015 | ||||||
Per Common Share Data: 1 | |||||||
Earnings per common share - Basic | $ | 0.28 | $ | 0.29 | |||
Earnings per common share - Diluted | 0.27 | 0.28 | |||||
Tangible book value per common share at the period-end | 10.76 | 9.64 | |||||
Book value per common share at the period end | 12.42 | 11.36 | |||||
Average common shares outstanding: | |||||||
Basic | 7,939,366 | 7,877,175 | |||||
Diluted | 8,136,708 | 8,031,291 | |||||
Performance Ratios / Data: | |||||||
Return on average assets | 0.94 | % | 0.95 | % | |||
Return on average equity | 9.20 | % | 10.42 | % | |||
Net interest income (tax-equivalent basis) 2 | $ | 8,758 | $ | 8,828 | |||
Net interest margin (tax-equivalent basis) 3 | 3.93 | % | 3.96 | % | |||
Efficiency ratio 4 | 67.9 | % | 67.7 | % | |||
March 31, | December 31, | ||||||
2016 | 2015 | ||||||
Loan Portfolio Composition: | |||||||
Commercial Business | 106,249 | 100,503 | |||||
Commercial Real Estate | 202,788 | 207,250 | |||||
Construction Loans | 93,774 | 93,745 | |||||
Mortgage Warehouse Lines | 192,740 | 216,572 | |||||
Residential Real Estate | 38,840 | 40,744 | |||||
Loans to Individuals | 24,597 | 23,307 | |||||
Total Loans | 658,988 | 682,121 | |||||
Asset Quality Data: | |||||||
Loans past due over 90 days and still accruing | — | — | |||||
Non-accrual loans | 5,523 | 6,020 | |||||
OREO property | 1,144 | 966 | |||||
Other repossessed assets | — | — | |||||
Total non-performing assets | $ | 6,667 | $ | 6,986 | |||
Net charge-offs | $ | (58 | ) | $ | (465 | ) | |
Allowance for loan losses to total loans | 1.11 | % | 1.11 | % | |||
Non-performing loans to total loans | 0.84 | % | 0.88 | % | |||
Non-performing assets to total assets | 0.70 | % | 0.72 | % | |||
Capital Ratios: | |||||||
1ST Constitution Bancorp | |||||||
Common equity to risk weighted assets ("CET 1") | 10.36 | % | 10.03 | % | |||
Tier 1 capital to average assets (leverage ratio) | 11.07 | % | 10.80 | % | |||
Tier 1 capital to risk weighted assets | 12.53 | % | 12.18 | % | |||
Total capital to risk weighted assets | 13.41 | % | 13.08 | % | |||
1ST Constitution Bank | |||||||
Common equity to risk weighted assets ("CET 1") | 12.24 | % | 11.90 | % | |||
Tier 1 capital to average assets (leverage ratio) | 10.82 | % | 10.55 | % | |||
Tier 1 capital to risk weighted assets | 12.24 | % | 11.90 | % | |||
Total capital to risk weighted assets | 13.12 | % | 12.80 | % | |||
1All share and per share amounts have been adjusted to reflect the effect of the 5% stock dividend paid on April 7, 2015 and the 5% stock dividend paid on February 1, 2016.
2The tax equivalent adjustment was $250 and $286 for the three months ended March 31, 2016 and March 31, 2015, respectively.
3Represents net interest income on a taxable equivalent basis as a percent of average interest earning assets.
4Represents non-interest expenses divided by the sum of net interest income on a taxable equivalent basis and non-interest income.
1ST Constitution Bancorp
Consolidated Balance Sheets
(Dollars in thousands)
(Unaudited)
March 31, 2016 | December 31, 2015 | |||||||
ASSETS | ||||||||
Cash and Due From Banks | $ | 14,810 | $ | 11,368 | ||||
Federal Funds Sold/Short Term Investments | — | — | ||||||
Total cash and cash equivalents | 14,810 | 11,368 | ||||||
Investment Securities: | ||||||||
Available for sale, at fair value | 99,806 | 91,422 | ||||||
Held to maturity (fair value of $127,818 and $127,157 at March 31, 2016 and December 31, 2015, respectively) | 123,010 | 123,261 | ||||||
Total investment securities | 222,816 | 214,683 | ||||||
Loans Held for Sale | 860 | 5,997 | ||||||
Loans | 658,988 | 682,121 | ||||||
Less- Allowance for loan losses | (7,302 | ) | (7,560 | ) | ||||
Net loans | 651,686 | 674,561 | ||||||
Premises and Equipment, net | 10,995 | 11,109 | ||||||
Accrued Interest Receivable | 2,726 | 2,853 | ||||||
Bank-Owned Life Insurance | 21,726 | 21,583 | ||||||
Other Real Estate Owned | 1,144 | 966 | ||||||
Goodwill and Intangible Assets | 13,180 | 13,284 | ||||||
Other Assets | 9,033 | 11,587 | ||||||
Total assets | $ | 948,976 | $ | 967,991 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
LIABILITIES: | ||||||||
Deposits | ||||||||
Non-interest bearing | $ | 162,080 | $ | 159,918 | ||||
Interest bearing | 641,739 | 626,839 | ||||||
Total deposits | 803,819 | 786,757 | ||||||
Borrowings | 20,255 | 58,896 | ||||||
Redeemable Subordinated Debentures | 18,557 | 18,557 | ||||||
Accrued Interest Payable | 883 | 846 | ||||||
Accrued Expenses and Other Liabilities | 6,819 | 6,975 | ||||||
Total liabilities | 850,333 | 872,031 | ||||||
SHAREHOLDERS’ EQUITY: | ||||||||
Preferred stock, no par value; 5,000,000 shares authorized, none issued | — | — | ||||||
Common Stock, no par value; 30,000,000 shares authorized; 7,972,461 and 7,575,492 shares issued and 7,939,163 and 7,545,684 shares outstanding as of March 31, 2016 and December 31, 2015, respectively | 71,015 | 70,845 | ||||||
Retained earnings | 27,811 | 25,589 | ||||||
Treasury Stock, 33,298 shares and 29,808 shares at March 31, 2016 and December 31, 2015, respectively | (368 | ) | (344 | ) | ||||
Accumulated other comprehensive income (loss) | 185 | (130 | ) | |||||
Total shareholders’ equity | 98,643 | 95,960 | ||||||
Total liabilities and shareholders’ equity | $ | 948,976 | $ | 967,991 | ||||
The accompanying notes are an integral part of these financial statements.
1ST Constitution Bancorp
Consolidated Statements of Income
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
INTEREST INCOME: | |||||||
Loans, including fees | $ | 8,308 | $ | 8,289 | |||
Securities: | |||||||
Taxable | 817 | 817 | |||||
Tax-exempt | 520 | 555 | |||||
Federal funds sold and short-term investments | 49 | 25 | |||||
Total interest income | 9,694 | 9,686 | |||||
INTEREST EXPENSE: | |||||||
Deposits | 950 | 932 | |||||
Borrowings | 136 | 126 | |||||
Redeemable subordinated debentures | 99 | 86 | |||||
Total interest expense | 1,185 | 1,144 | |||||
Net interest income | 8,509 | 8,542 | |||||
(CREDIT) PROVISION FOR LOAN LOSSES | (200 | ) | 500 | ||||
Net interest income after (credit) provision for loan losses | 8,709 | 8,042 | |||||
NON-INTEREST INCOME: | |||||||
Service charges on deposit accounts | 197 | 239 | |||||
Gain on sales of loans, net | 903 | 1,292 | |||||
Income on Bank-owned life insurance | 144 | 134 | |||||
Other income | 350 | 464 | |||||
Total non-interest income | 1,594 | 2,129 | |||||
NON-INTEREST EXPENSES: | |||||||
Salaries and employee benefits | 4,316 | 4,186 | |||||
Occupancy expense | 988 | 1,110 | |||||
Data processing expenses | 313 | 319 | |||||
FDIC insurance expense | 118 | 190 | |||||
Other real estate owned expenses | 29 | 97 | |||||
Other operating expenses | 1,269 | 954 | |||||
Total non-interest expenses | 7,033 | 6,856 | |||||
Income before income taxes | 3,270 | 3,315 | |||||
INCOME TAXES | 1,048 | 1,055 | |||||
Net income | $ | 2,222 | $ | 2,260 | |||
NET INCOME PER COMMON SHARE: | |||||||
Basic | $ | 0.28 | $ | 0.29 | |||
Diluted | $ | 0.27 | $ | 0.28 | |||
WEIGHTED AVERAGE SHARES OUTSTANDING | |||||||
Basic | 7,939,366 | 7,877,175 | |||||
Diluted | 8,136,708 | 8,031,291 | |||||
The accompanying notes are an integral part of these financial statements.
1ST Constitution Bancorp | |||||||||||||||||
Net Interest Margin Analysis | |||||||||||||||||
(Dollars in thousands) | |||||||||||||||||
(Unaudited) | |||||||||||||||||
Three months ended March 31, 2016 | Three months ended March 31, 2015 | ||||||||||||||||
Average Balance | Interest | Average Yield | Average Balance | Interest | Average Yield | ||||||||||||
Assets: | |||||||||||||||||
Federal Funds Sold/Short-Term Investments | 42,564 | 49 | 0.46 | % | 43,317 | 25 | 0.24 | % | |||||||||
Investment Securities: | |||||||||||||||||
Taxable | 135,212 | 817 | 2.42 | % | 133,342 | 817 | 2.45 | % | |||||||||
Tax-exempt (4) | 80,661 | 770 | 3.82 | % | 89,667 | 842 | 3.75 | % | |||||||||
Total | 215,873 | 1,587 | 2.94 | % | 223,009 | 1,659 | 2.97 | % | |||||||||
Loan Portfolio: (1) | |||||||||||||||||
Construction | 92,289 | 1,353 | 5.89 | % | 97,126 | 1,541 | 6.43 | % | |||||||||
Residential real estate | 39,041 | 409 | 4.22 | % | 45,700 | 474 | 4.20 | % | |||||||||
Home Equity | 23,183 | 239 | 4.15 | % | 22,149 | 239 | 4.37 | % | |||||||||
Commercial and commercial real estate | 288,426 | 4,131 | 5.79 | % | 289,320 | 3,995 | 5.60 | % | |||||||||
Mortgage warehouse lines | 165,272 | 1,788 | 4.35 | % | 155,826 | 1,719 | 4.47 | % | |||||||||
Installment | 549 | 6 | 4.23 | % | 380 | 5 | 5.16 | % | |||||||||
All Other Loans | 28,738 | 382 | 5.35 | % | 25,757 | 316 | 4.98 | % | |||||||||
Total | 637,498 | 8,308 | 5.29 | % | 636,258 | 8,289 | 5.28 | % | |||||||||
Total Interest - Bearing Assets | 895,935 | 9,944 | 4.49 | % | 902,584 | 9,973 | 4.47 | % | |||||||||
Allowance for Loan Losses | (7,618 | ) | (7,241 | ) | |||||||||||||
Cash and Due From Bank | 5,175 | 10,095 | |||||||||||||||
Other Assets | 58,974 | 62,256 | |||||||||||||||
Total Assets | 952,466 | 967,694 | |||||||||||||||
Liabilities and Shareholders’ Equity: | |||||||||||||||||
Money Market and NOW Accounts | 296,717 | 269 | 0.36 | % | 308,237 | 256 | 0.34 | % | |||||||||
Savings Accounts | 203,328 | 270 | 0.53 | % | 195,511 | 225 | 0.47 | % | |||||||||
Certificates of Deposit | 143,702 | 410 | 1.15 | % | 163,426 | 451 | 1.12 | % | |||||||||
Other Borrowed Funds | 27,080 | 136 | 2.02 | % | 21,802 | 126 | 2.34 | % | |||||||||
Trust Preferred Securities | 18,557 | 99 | 2.13 | % | 18,557 | 86 | 1.89 | % | |||||||||
Total Interest-Bearing Liabilities | 689,384 | 1,184 | 0.70 | % | 707,533 | 1,144 | 0.66 | % | |||||||||
Net Interest Spread (2) | 3.79 | % | 3.81 | % | |||||||||||||
Demand Deposits | 157,790 | 163,812 | |||||||||||||||
Other Liabilities | 8,134 | 8,372 | |||||||||||||||
Total Liabilities | 855,308 | 879,717 | |||||||||||||||
Shareholders’ Equity | 97,158 | 87,977 | |||||||||||||||
Total Liabilities and Shareholders’ Equity | 952,466 | 967,694 | |||||||||||||||
Net Interest Margin (3) | 8,760 | 3.93 | % | 8,829 | 3.96 | % | |||||||||||
(1) | Loan origination fees are considered an adjustment to interest income. For the purpose of calculating loan yields, average loan balances include non-accrual loans with no related interest income and the average balance of loans held for sale. |
(2) | The net interest rate spread is the difference between the average yield on interest-earning assets and the average rate paid on interest-bearing liabilities. |
(3) | The net interest margin is equal to net interest income divided by average interest earning assets. |
(4) | Tax- equivalent basis. |