First Choice Bancorp Reports Second Quarter 2018 Financial Results

and Declares Quarterly Dividend

 

Highlights

 

	●	Net income of $3.4 million, or $0.47 per diluted share
	●	Annualized return on average assets and average equity was 1.48% and 12.51%, respectively
	●	Total gross loans of $787.2 million at June 30, 2018, a decline of 0.81% from prior quarter
	●	Average net loans of $801.3 million, an increase of 3.49% from prior quarter
	●	Total deposits of $785.0 million at June 30, 2018, an increase of 3.45% from prior quarter
	●	The Company was added to the Russell 3000® Index and the Russell 2000® Index when Russell investments reconstituted its comprehensive set of U.S. and global equity indexes after the market close on June 22, 2018
	●	Quarterly cash dividend of $0.20 declared
	●	Acquisition of Pacific Commerce Bancorp completed on July 31, 2018

 

Cerritos, CA, August 1, 2018 – First Choice Bancorp, (“First Choice” or the “Company”) (NASDAQ: FCBP), the holding company of First Choice Bank (the “Bank”), today reported financial results for the second quarter ended June 30, 2018.

 

For the second quarter of 2018, net income was $3.4 million, or $0.47 per diluted share, compared to net income of $2.4 million, or $0.33 per diluted share, for the first quarter of 2018, and net income of $2.3 million, or $0.32 per diluted share, for the second quarter of 2017.

 

On July 26, 2018, the Company also declared a cash dividend of $0.20 per share. The dividend is payable on September 10, 2018 to shareholders of record on August 27, 2018.

 

“We delivered strong year-over-year growth in earnings, driven by higher net interest income, improved efficiencies and stable asset quality,” said Robert M. Franko, President and CEO of First Choice Bancorp. “Our end-of-period loan growth in the second quarter was impacted by fluctuations in commercial line utilization from one large commercial customer. Our average net loans increased 3.49% compared to the first quarter of 2018, which is more reflective of the growth trends we are experiencing. Our loan pipeline remains healthy and we expect to see a consistent level of organic loan growth over the second half of the year.”

 

“As announced today, we completed our acquisition of Pacific Commerce Bancorp and we are very excited to welcome our new customers and colleagues to the First Choice family. The combination of our two banks creates the 16th largest publicly traded bank in Southern California and significantly improves our competitive positioning. Our top priority for the remainder of 2018 is managing the integration of Pacific Commerce and realizing all of the synergies we project for this transaction. We continue to expect the acquisition to be approximately 15% accretive to earnings per share in 2019, significantly improving our earnings power and the level of returns that we generate for our shareholders,” said Mr. Franko.

 

Operating Results for the Second Quarter 2018

 

Net Interest Income

 

Net interest income for the second quarter of 2018 was $10.8 million, an increase of 13.26% from $9.6 million for the first quarter of 2018. The increase in net interest income from the first quarter was primarily attributable to higher average loan balances and early payoffs in the purchased SBA loan portfolio, which resulted in the accelerated recognition of income from the unamortized loan discounts.

 

 

Net Interest Margin

 

Net interest margin for the second quarter of 2018 was 4.73%, an increase from 4.38% for the first quarter of 2018. The net interest margin was positively impacted by an increase in accretion income on acquired loans due to an increase in payoffs.

 

Excluding the impact of accretion income on acquired loans, the net interest margin decreased 5 basis points compared to the first quarter of 2018. The decrease was attributable to a 2 basis points decrease in dividend income from FHLB and other bank stocks, and an 18 basis points increase in the average cost of funds, attributed in large part to a deposit promotion program in the second quarter which ended on June 30, 2018, and partially offset by a 15 basis points increase in the average loan yield.

 

Non-interest Income

 

Non-interest income for the second quarter of 2018 was $0.8 million, an increase of 38.37% from $0.6 million for the first quarter of 2018. The increase was primarily the result of an increase in the gain on sale of SBA loans. During the second quarter of 2018, the Company sold $5.8 million in SBA loans, resulting in a gain on sale of $0.4 million. During the first quarter of 2018, the Company sold $2.7 million in SBA loans, resulting in a gain on sale of $0.2 million.

 

Non-interest Expense

 

Non-interest expense for the second quarter of 2018 was $6.3 million, a decrease of 5.39% from $6.7 million for the first quarter of 2018. The decrease was primarily attributable to a decrease in the salary and benefits and customer service costs. Non-interest expense for the second quarter of 2018 included approximately $0.4 million in merger-related and public company registration expense related to the Company’s Nasdaq listing and the pending acquisition of Pacific Commerce Bancorp. The Company’s operating efficiency ratio was 54.47% in the second quarter of 2018, compared with 66.01% in the first quarter of 2018.

 

Excluding the impact of accretion income on acquired loans and the merger-related and public company registration expense, the Company’s operating efficiency ratio was 55.75% in the second quarter of 2018, compared with 62.31% in the first quarter of 2018. The improvement in operating efficiency was due to an increase in operating income, and decrease in non-interest expense in the second quarter of 2018.

 

Income Taxes

 

The Company recorded income tax expense of $1.5 million for the second quarter of 2018, representing an effective tax rate of 30.76%, compared to 26.53% reported for the first quarter of 2018. The increase in the effective tax rate reflects a lower tax benefit from stock-based compensation in the second quarter of 2018.

 

Loan Portfolio

 

Total gross loans, excluding loans held for sale, were $787.2 million at June 30, 2018, a decrease of 0.81% from $793.6 million at March 31, 2018. The decrease was primarily attributable to the paydown of one large commercial line of credit.

During the second quarter of 2018, the Company originated $88.1 million in new loan commitments, the majority of the growth during the quarter occurred in construction and commercial real estate loans, $52.7 million, or 59.84% of total new loan commitments, and in commercial and industrial loans, $25.3 million, or 28.69% of total new loan commitments.

 

Deposits

 

Total deposits were $785.0 million at June 30, 2018, an increase of 3.45% from $758.8 million at March 31, 2018. The increase in noninterest bearing demand, money market, time deposits and brokered deposits was $14.1 million, $52.5 million, $21.0 million and $4.0 million, respectively, as depositors are shifting balances to higher yielding accounts. Offsetting these increases were reductions in interest checking and savings accounts of $47.3 million and $18.2 million, respectively.

 

Credit Quality

 

Non-performing assets totaled $1.6 million, or 0.16% of total assets, at June 30, 2018, compared with $1.1 million, or 0.11% of total assets, at March 31, 2018. The increase in non-performing assets was primarily attributable to two SBA loans placed on non-accrual status.

 

 

The Company recorded net recoveries of $46 thousand in the second quarter.

 

The Company recorded a provision for loan losses of $0.3 million for the second quarter of 2018, which was primarily attributable to the increase in non-performing assets.

 

The Company’s allowance for loan losses was 1.32% of total gross loans and 657.54% of non-performing assets at June 30, 2018, compared with 1.26% and 943.45%, respectively, at March 31, 2018.

 

Capital Ratios

 

At June 30, 2018, the Bank exceeded all regulatory capital requirements under Basel III and was considered to be a ‘‘well-capitalized’’ financial institution.

 

Bank Only		June 30, 2018				March 31, 2018				December 31, 2017
Total Capital (to Risk-Weighted Assets)			14.73	%			14.26	%			14.72	%
Tier 1 Capital (to Risk-Weighted Assets)			13.48	%			13.01	%			13.46	%
CET1 Capital (to Risk-Weighted Assets)			13.48	%			13.01	%			13.46	%
Tier 1 Capital (to Average Assets)			12.16	%			12.19	%			11.75	%

 

ABOUT FIRST CHOICE BANCORP

 

First Choice Bancorp is a community-based bank holding company headquartered in Cerritos, California, and it is the sole shareholder of First Choice Bank. As of July 31, 2018, the First Choice had total assets of approximately $1.5 billion. First Choice Bank, headquartered in Cerritos, California is a community-focused financial institution, serving diverse consumers and commercial clients and specializing in loans to small businesses, private banking clients, commercial and industrial (C&I) loans, and commercial real estate loans with a niche in providing financing for the hospitality industry. First Choice Bank is a Preferred Small Business Administration (SBA) Lender. Founded in 2005, First Choice Bank has quickly become a leading provider of financial services that enable our customers to grow, maintain strength, and achieve their business objectives. We strive to surpass our clients’ expectations through our efficiency and professionalism and are committed to being “First in Speed, Service, and Solutions.” First Choice Bancorp stock is traded on the Nasdaq Capital Market under the ticker symbol “FCBP.”

 

First Choice Bank’s website is www.FirstChoiceBankCA.com.

 

Disclosure

 

This press release contains certain non-GAAP financial disclosures for tangible common equity and tangible assets and adjusted earnings. The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance.

 

 

Forward-Looking Statements

 

Certain matters set forth herein (including the exhibits hereto) constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including forward-looking statements relating to the Company’s current business plans and expectations and our future financial position and operating results. These forward-looking statements are subject to risks and uncertainties that could cause actual results, performance and/or achievements to differ materially from those projected. These risks and uncertainties include, but are not limited to, local, regional, national and international economic and market conditions and events and the impact they may have on us, our customers and our assets and liabilities; our ability to attract deposits and other sources of funding or liquidity; supply and demand for real estate and periodic deterioration in real estate prices and/or values in California or other states where we lend, including both residential and commercial real estate; a prolonged slowdown or decline in real estate construction, sales or leasing activities; changes in the financial performance and/or condition of our borrowers, depositors or key vendors or counterparties; changes in our levels of delinquent loans, nonperforming assets, allowance for loan losses and charge-offs; the costs or effects of acquisitions or dispositions we may make, whether we are able to obtain any required governmental approvals in connection with any such acquisitions or dispositions, and/or our ability to realize the contemplated financial or business benefits associated with any such acquisitions or dispositions; the effect of changes in laws, regulations and applicable judicial decisions (including laws, regulations and judicial decisions concerning financial reforms, taxes, banking capital levels, consumer, commercial or secured lending, securities and securities trading and hedging, compliance, employment, executive compensation, insurance, vendor management and information security) with which we and our subsidiaries must comply or believe we should comply; changes in estimates of future reserve requirements and minimum capital requirements based upon the periodic review thereof under relevant regulatory and accounting requirements, including changes in the Basel Committee framework establishing capital standards for credit, operations and market risk; inflation, interest rate, securities market and monetary fluctuations; changes in government interest rates or monetary policies; changes in the amount and availability of deposit insurance; cyber-security threats, including loss of system functionality or theft or loss of Company or customer data or money; political instability; acts of war or terrorism, or natural disasters, such as earthquakes, drought, or the effects of pandemic diseases; the timely development and acceptance of new banking products and services and the perceived overall value of these products and services by our customers and potential customers; the Company’s relationships with and reliance upon vendors with respect to the operation of certain of the Company’s key internal and external systems and applications; changes in commercial or consumer spending, borrowing and savings preferences or behaviors; technological changes and the expanding use of technology in banking (including the adoption of mobile banking and funds transfer applications); the ability to retain and increase market share, retain and grow customers and control expenses; changes in the competitive and regulatory environment among financial and bank holding companies, banks and other financial service providers; volatility in the credit and equity markets and its effect on the general economy or local or regional business conditions; fluctuations in the price of the Company’s common stock or other securities; and the resulting impact on the Company’s ability to raise capital or make acquisitions, the effect of changes in accounting policies and practices, as may be adopted from time-to-time by our regulatory agencies, as well as by the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard-setters; changes in our organization, management, compensation and benefit plans, and our ability to retain or expand our workforce, management team and/or our board of directors; the costs and effects of legal, compliance and regulatory actions, changes and developments, including the initiation and resolution of legal proceedings (such as securities, consumer or employee class action litigation), regulatory or other governmental inquiries or investigations, and/or the results of regulatory examinations or reviews; our ongoing relations with our various federal and state regulators, including the SEC, FDIC, FRB and California DBO; our success at managing the risks involved in the foregoing items and all other factors set forth in the Company’s public reports, including its registration statements as filed under Form S-4 and Form 8-A, and particularly the discussion of risk factors within that document. The Company does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements except as required by law. Any statements about future operating results, such as those concerning accretion and dilution to the Company’s earnings or shareholders, are for illustrative purposes only, are not forecasts, and actual results may differ.

 

Contacts

First Choice Bancorp

Robert M. Franko, 562.345.9241

President & Chief Executive Officer

or

Yvonne L. Chen, 562.345.9244

Chief Financial Officer

 

 

Income statement highlights and selected ratios (unaudited):

(dollars in thousands, except per share amounts)

 

		For the three months ended												For the six months ended
		June 30, 2018				March 31, 2018				June 30, 2017 (restated)				June 30, 2018				June 30, 2017 (restated)
Total interest income		$	12,915			$	11,189			$	9,634			$	24,104			$	18,698
Total interest expense			2,096				1,637				1,441				3,733				2,877
Net interest income			10,819				9,552				8,193				20,371				15,821
Provision for loan losses			320				200				—				520				—
Net interest income after provision for loan losses			10,499				9,352				8,193				19,851				15,821
Total noninterest income			779				563				1,222				1,342				2,693
Total noninterest expense			6,317				6,677				5,573				12,994				11,080
Income before taxes			4,961				3,238				3,842				8,199				7,434
Income taxes			1,526				859				1,560				2,385				3,026
NET INCOME		$	3,435			$	2,379			$	2,282			$	5,814			$	4,408
Selected financial and ratios:
Dividends declared per common share		$	0.20			$	0.20			$	0.20			$	0.40			$	0.40
Net income per share-basic			0.47				0.33				0.32				0.80				0.61
Net income per share-diluted 1			0.47				0.33				0.32				0.80				0.61
Weighted average shares - basic			7,172,020				7,160,938				7,102,653				7,166,509				7,092,068
Weighted average shares - diluted 1			7,214,473				7,200,057				7,137,163				7,207,295				7,127,549
Return on assets (annualized)			1.48	%			1.06	%			1.06	%			1.28	%			1.02	%
Return on equity (annualized)			12.51	%			8.86	%			8.69	%			10.71	%			8.45	%
Net interest margin			4.73	%			4.38	%			3.86	%			4.56	%			3.74	%
Cost of Deposits			0.98	%			0.79	%			0.77	%			0.89	%			0.77	%
Cost of Funds			1.03	%			0.85	%			0.77	%			0.94	%			0.77	%
Efficiency ratio			54.47	%			66.01	%			59.19	%			59.84	%			59.85	%

 

(1)	Diluted shares are calculated using the two class method.

 

 

First Choice Bancorp and Subsidiaries

Condensed Consolidated Balance Sheet (unaudited)

(dollars in thousands, except share and per share amounts)

 

		June 30, 2018				March 31, 2018				December 31, 2017
ASSETS
Cash and due from banks		$	5,837			$	6,840			$	5,405
Interest-bearing deposits at other banks			115,317				93,225				97,727
Securities purchased under agreements to resell			—				—				—
Total cash and cash equivalents			121,154				100,065				103,132
Investment securities, available-for-sale			29,732				31,045				35,002
Investment securities, held-to-maturity			5,344				5,292				5,300
Loans held for sale			11,466				11,525				10,599
Gross loans			787,175				793,582				745,887
Unearned fees and costs			(3,688	)			(4,152	)			(4,174	)
Allowance for loan losses			(10,376	)			(10,010	)			(10,497	)
Loans receivable, net			773,111				779,420				731,216
Federal Home Loan Bank, at cost			3,866				3,640				3,640
Equity securities, at fair value			2,506				2,508				—
Accrued interest receivable			3,274				3,358				3,108
Premises and equipment			1,242				1,055				1,035
Servicing assets			2,448				2,508				2,618
Other assets			8,543				7,260				8,145
TOTAL ASSETS		$	962,686			$	947,676			$	903,795
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Noninterest-bearing demand		$	211,611			$	197,503			$	235,584
Money market, interest checking and savings			339,639				352,958				372,699
Time deposits			233,707				208,340				164,396
Total deposits			784,957				758,801				772,679
Federal Home Loan Bank borrowings			60,000				57,000				20,000
Federal funds purchased			—				18,000				—
Senior Secured Debt			4,150				2,550				350
Accrued interest payable			200				165				114
Other liabilities			4,560				4,679				4,958
Total liabilities			853,867				841,195				798,101
Total shareholders’ equity			108,819				106,481				105,694
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	962,686			$	947,676			$	903,795
Book value and tangible book value per share		$	15.00			$	14.68			$	14.56

 

 

First Choice Bancorp and Subsidiaries

Condensed Consolidated Statement of Income (unaudited)

(dollars in thousands)

 

		For the Three Months Ended												For the Six Months Ended June 30,
		June 30, 2018				March 31, 2018				June 30, 2017 (restated(1))				2018				2017 (restated(1))
INTEREST INCOME
Interest and fees on loans		$	12,320			$	10,621			$	9,122			$	22,941			$	17,596
Interest on investment securities			233				239				245				472				500
Dividends on FHLB and other stock			68				69				59				137				148
Other interest income			294				260				208				554				454
Total interest income			12,915				11,189				9,634				24,104				18,698
INTEREST EXPENSE
Interest on savings, interest checking and money market accounts			969				819				1,002				1,788				2,028
Interest on time deposits			919				616				389				1,535				797
Interest on borrowings			208				202				50				410				52
Total interest expense			2,096				1,637				1,441				3,733				2,877
Net interest income			10,819				9,552				8,193				20,371				15,821
Provision for loan losses			320				200				—				520				—
Net interest income after provision for loan losses			10,499				9,352				8,193				19,851				15,821
NONINTEREST INCOME
Gain on sale of loans			448				247				898				695				2,087
Service charges and fees on deposit accounts			208				215				64				423				130
Net servicing fees			126				153				189				279				360
Other (loss) income			(3	)			(52	)			71				(55	)			116
Total noninterest income			779				563				1,222				1,342				2,693
NONINTEREST EXPENSE
Salaries and employee benefits			3,578				4,116				3,698				7,694				7,343
Occupancy expenses			361				348				316				709				617
Professional fees			378				304				119				682				198
Data processing			448				421				357				869				687
Equipment expenses			206				172				173				378				353
Office expenses			193				192				160				385				321
Deposit insurance and regulatory assessments			86				111				112				197				219
Loan related expenses			101				84				19				185				158
Customer service expenses			101				140				119				241				263
Merger-related and public company registration expenses			356				374				—				730				—
Provision for credit losses - off-balance sheet			—				53				142				53				214
Other expenses			509				362				358				871				707
Total noninterest expense			6,317				6,677				5,573				12,994				11,080
Income before taxes			4,961				3,238				3,842				8,199				7,434
Income taxes			1,526				859				1,560				2,385				3,026
Net income		$	3,435			$	2,379			$	2,282			$	5,814			$	4,408

 

(1)	Certain amounts have been restated to reflect adjustments related to the correction of an error.

 

 

Average Balance Sheets

 

		Three Months Ended
		June 30, 2018												March 31, 2018												June 30, 2017
		Average Balance				Interest Income / Expense				Yield / Cost				Average Balance				Interest Income / Expense				Yield / Cost				Average Balance				Interest Income / Expense				Yield / Cost
		(in thousands)
Interest-earning assets:
Due from banks		$	74,325			$	294				1.59	%		$	67,059			$	260				1.57	%		$	82,830			$	200				0.96	%
Federal funds sold/resale agreements			—				—				N/A				—				—				N/A				1,834				8				1.75	%
Investment securities			38,153				233				2.45	%			39,505				239				2.46	%			44,806				245				2.20	%
Loans (1)			801,342				12,320				6.17	%			774,292				10,621				5.56	%			717,784				9,122				5.10	%
FHLB and other bank stock			4,071				68				6.70	%			3,933				69				7.10	%			3,890				59				6.19	%
Total interest-earning assets			917,891				12,915				5.64	%			884,789				11,189				5.13	%			851,144				9,634				4.54	%
Noninterest-earning assets:
Cash and cash equivalents			7,014												6,538												4,403
Allowance for loan losses			(10,037	)											(10,395	)											(11,502	)
Other assets			14,119												13,525												14,412
Total assets		$	928,987											$	894,457											$	858,457
Interest-bearing liabilities:
Interest checking		$	141,598			$	407				1.15	%		$	191,281			$	504				1.07	%		$	252,025			$	681				1.08	%
Money market accounts			151,248				455				1.21	%			91,144				164				0.73	%			70,825				113				0.64	%
Savings accounts			50,978				107				0.84	%			69,611				151				0.88	%			88,443				208				0.94	%
Time deposits			170,148				738				1.74	%			123,182				448				1.48	%			98,654				275				1.12	%
Brokered time deposits			52,801				181				1.37	%			52,406				168				1.30	%			38,129				114				1.2	%
Total interest-bearing deposits			566,773				1,888				1.34	%			527,624				1,435				1.10	%			548,076				1,391				1.02	%
FHLB borrowings			35,429				166				1.88	%			47,378				186				1.58	%			20,440				49				0.96	%
Federal funds purchased			264				1				1.52	%			400				2				2.37	%			—				—				—	%
Senior secured notes			3,218				41				5.11	%			1,122				13				4.77	%			—				—				—	%
Other borrowings			31				—				—	%			36				1				7.80	%			52				1				7.71	%
Total interest-bearing liabilities			605,715				2,096				1.39	%			576,560				1,637				1.15	%			568,568				1,441				1.02	%
Noninterest-bearing liabilities:
Demand deposits			209,009												206,752												180,454
Other liabilities			4,450												3,756												4,422
Shareholders’ equity			109,813												107,389												105,013
Total liabilities and shareholders’ equity		$	928,987											$	894,457											$	858,457
Net interest spread						$	10,819				4.26	%						$	9,552				3.98	%						$	8,193				3.52	%
Net interest margin											4.73	%											4.38	%											3.86	%

 

(1)

Average loans include net discounts and deferred costs. Interest income on loans includes $142 thousand and $170 thousand related to the accretion of net deferred loans fees and $815 thousand and $(413) thousand related to accretion (amortization) of discounts (premiums) for the three months ended June 30, 2018 and 2017, respectively.

 

 

Average Balance Sheets (continued)

 

		Six Months Ended June 30,
		2018												2017
		Average Balance				Interest Income / Expense				Yield / Cost				Average Balance				Interest Income / Expense				Yield / Cost
		(in thousands)
Interest-earning assets:
Due from banks		$	70,712			$	554				1.58	%		$	91,995			$	422				0.93	%
Federal funds sold/resale agreements			—				—				N/A				4,190				32				1.54	%
Investment securities			38,826				472				2.45	%			44,682				500				2.26	%
Loans (1)			787,892				22,941				5.87	%			709,460				17,596				5.00	%
FHLB and other bank stock			4,002				137				6.90	%			3,828				148				7.80	%
Total interest-earning assets			901,432				24,104				5.39	%			854,155				18,698				4.41	%
Noninterest-earning assets:
Cash and cash equivalents			6,777												5,242
Allowance for loan losses			(10,215	)											(11,575	)
Other assets			13,824												14,159
Total assets		$	911,818											$	861,981
Interest-bearing liabilities:
Interest checking		$	166,302			$	912				1.11	%		$	253,968			$	1,367				1.09	%
Money market accounts			121,362				619				1.03	%			75,001				241				0.65	%
Savings accounts			60,243				257				0.86	%			89,846				420				0.94	%
Time deposits			146,795				1,186				1.63	%			104,227				576				1.11	%
Brokered time deposits			52,604				349				1.34	%			37,051				221				1.20	%
Total interest-bearing deposits			547,306				3,323				1.22	%			560,093				2,825				1.02	%
FHLB borrowings			41,370				351				1.71	%			10,497				50				0.96	%
Federal funds purchased			331				4				2.44	%			—				—				—	%
Senior secured notes			2,176				54				5.00	%			—				—				—	%
Other borrowings			34				1				5.93	%			55				2				7.33	%
Total interest-bearing liabilities			591,217				3,733				1.27	%			570,645				2,877				1.02	%
Noninterest-bearing liabilities:
Demand deposits			207,887												183,293
Other liabilities			4,105												3,737
Shareholders’ equity			108,609												104,306
Total liabilities and shareholders’ equity		$	911,818											$	861,981
Net interest spread						$	20,371				4.12	%						$	15,821				3.39	%
Net interest margin											4.56	%											3.74	%

 

(1)

Average loans include net discounts and deferred costs. Interest income on loans includes $172 thousand and $195 thousand related to the accretion of net deferred loans fees and $757 thousand and $(847) thousand related to accretion (amortization) of discounts (premiums) for the six months ended June 30, 2018 and 2017, respectively.

 

 

Rate/Volume Analysis

 

		Three Months Ended
		June 30, 2018 vs. March 31, 2018												June 30, 2018 vs. June 30, 2017												June 30, 2017 vs. June 30, 2016
		Change Attributable to								Total				Change Attributable to								Total				Change Attributable to								Total
		Volume				Rate				Change				Volume				Rate				Change				Volume				Rate				Change
		(in thousands)
Interest income:
Interest and fees on loans		$	459			$	1,240			$	1,699			$	2,302			$	896			$	3,198			$	2,045			$	680			$	2,725
Interest on investment securities			(5	)			(1	)			(6	)			(33	)			21				(12	)			(38	)			18				(20	)
Dividends on FHLB and other stock			3				(4	)			(1	)			4				5				9				3				4				7
Other interest income			31				3				34				(27	)			113				86				(26	)			100				74
Change in interest income			488				1,238				1,726				2,246				1,035				3,281				1,984				802				2,786
Interest expense:
Savings, interest checking and money market accounts			(28	)			178				150				(205	)			172				(33	)			(203	)			172				(31	)
Time deposits			198				105				303				310				220				530				310				219				529
Borrowings			(24	)			30				6				93				65				158				117				59				176
Change in interest expense			146				313				459				198				457				655				224				450				674
Change in net interest income		$	342			$	925			$	1,267			$	2,048			$	578			$	2,626			$	1,760			$	352			$	2,112

 

		Six Months Ended June 30,
		2018												2017
		Change Attributable to								Total				Change Attributable to								Total
		Volume				Rate				Change				Volume				Rate				Change
		(in thousands)
Interest income:
Interest and fees on loans		$	3,260			$	2,085			$	5,345			$	2,880			$	1,997			$	4,877
Interest on investment securities			11				(39	)			(28	)			(4	)			(30	)			(34	)
Dividends on FHLB and other stock			(22	)			11				(11	)			(23	)			11				(12	)
Other interest income			308				(208	)			100				301				(215	)			86
Change in interest income			3,557				1,849				5,406				3,154				1,763				4,917
Interest expense:
Savings, interest checking and money market accounts			(281	)			41				(240	)			(283	)			41				(242	)
Time deposits			387				351				738				387				349				736
Borrowings			295				63				358				319				59				378
Change in interest expense			401				455				856				423				449				872
Change in net interest income		$	3,156			$	1,394			$	4,550			$	2,731			$	1,314			$	4,045

 

 

Loans Composition

 

		June 30, 2018				March 31, 2018				December 31, 2017
		(in thousands)
Construction and land development		$	133,050			$	113,481			$	115,427
Real estate:
Residential			51,331				57,234				62,719
Commercial real estate - owner occupied			59,696				63,832				53,106
Commercial real estate - non-owner occupied			259,086				265,961				252,114
Commercial and industrial			191,969				200,339				169,184
SBA loans			92,043				91,887				92,509
Consumer			—				848				828
Gross loans		$	787,175			$	793,582			$	745,887
Deferred loan fees, net of costs			(424	)			(469	)			(400	)
Net discounts			(3,264	)			(3,683	)			(3,774	)
Allowance for loan losses			(10,376	)			(10,010	)			(10,497	)
Loans receivable, net		$	773,111			$	779,420			$	731,216
Allowance for loan losses as a percentage of total gross loans			1.32	%			1.26	%			1.41	%

 

Allowance for Loan losses

 

		For the three months ended												For the six months ended
		June 30, 2018				March 31, 2018				June 30, 2017				June 30, 2018				June 30, 2017
		(in thousands)
Balance, beginning of period		$	10,010			$	10,497			$	11,523			$	10,497			$	11,599
Provision for loan losses			320				200				—				520				—
Charge-offs			(21	)			(754	)			(190	)			(775	)			(266	)
Recoveries			67				67				—				134				—
Net recoveries(charge-offs)			46				(687	)			(190	)			(641	)			(266	)
Balance, end of period		$	10,376			$	10,010			$	11,333			$	10,376			$	11,333

 

 

Nonperforming loans

 

		June 30, 2018				March 31, 2018				December 31, 2017
		(in thousands)
Construction and land development		$	—			$	—			$	—
Real estate:
Residential			—				—				—
Commercial real estate - owner occupied			—				—				—
Commercial real estate - non-owner occupied			—				—				—
Commercial and industrial			108				111				634
SBA loans			1,470				950				1,200
Consumer			—				—				—
Total nonperforming loans		$	1,578			$	1,061			$	1,834

 

Nonperforming assets ¹

 

		June 30, 2018				March 31, 2018				December 31, 2017
		(in thousands)
Accruing loans past due 90 days or more		$	—			$	—			$	—
Non-accrual			910				—				—
Troubled debt restructurings on non-accrual			668				1,061				1,834
Total nonperforming loans			1,578				1,061				1,834
Foreclosed assets			—				—				—
Total nonperforming assets		$	1,578			$	1,061			$	1,834
Troubled debt restructurings - on accrual		$	363			$	—			$	—
Nonperforming loans as a percentage of gross loans			0.20	%			0.13	%			0.25	%
Nonperforming assets as a percentage of total assets			0.16	%			0.11	%			0.20	%
Allowance for loan losses as a percentage of nonperforming assets			657.54	%			943.45	%			572.36	%

 

(1)	Nonperforming assets include nonaccrual loans, loans past due 90 days or more and still accruing, and other real estate owned