Attached files
| file | filename |
|---|---|
| 8-K - 8-K - 1ST CONSTITUTION BANCORP | fccy8-k20184qearnings.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 NET INCOME OF $3.3 MILLION FOR THE FOURTH QUARTER AND
$12.0 MILLION FOR THE FULL YEAR 2018 AND
DECLARES QUARTERLY DIVIDEND OF $0.075 PER SHARE
Cranbury NJ - January 31, 2019 -- 1ST Constitution Bancorp (NASDAQ: FCCY), the holding company (the “Company”) for 1ST Constitution Bank (the “Bank”), today reported net income of $3.3 million for the three months ended December 31, 2018 compared to net income of $574,000 for the three months ended December 31, 2017. Diluted earnings per share were $0.38 for the three months ended December 31, 2018 compared to diluted earnings per share of $0.07 for the three months ended December 31, 2017.
Adjusted Net Income, which is net income excluding the after-tax effect of merger-related expenses, gain on bargain purchase and revaluation of deferred tax assets, increased 32.1% to $3.3 million for the fourth quarter of 2018 compared to Adjusted Net Income of $2.5 million for the fourth quarter of 2017. For the fourth quarter of 2018, the Company recorded a $46,000 gain on bargain purchase due to adjustments to deferred tax assets related to acquisition accounting. For the fourth quarter of 2017, $265,000 of merger-related expenses were incurred and an additional $1.7 million of income tax expense was recorded due to the revaluation of the Company’s deferred tax assets.
For the fourth quarter of 2018, Adjusted Net Income per diluted share was $0.38, an increase of 26.7%, compared to Adjusted Net Income per diluted share of $0.30 for the fourth quarter of 2017.
The Board of Directors declared a quarterly cash dividend of $0.075 per share of common stock that will be paid on February 28, 2019 to shareholders of record on February 15, 2019.
FOURTH QUARTER 2018 HIGHLIGHTS
• | Return on average assets and return on average equity were 1.14% and 10.37%, respectively. |
• | Book value per share and tangible book value per share were $14.77 and $13.34, respectively, at December 31, 2018. |
• | Net interest income was $11.3 million and the net interest margin was 4.19% on a tax equivalent basis. |
• | A provision for loan losses of $225,000 and net charge-offs of $88,000 were recorded. |
• | Total loans were $883.2 million at December 31, 2018 and increased $1.6 million from September 30, 2018. Commercial business, commercial real estate and construction loans totaled $658.4 and increased $31.8 million, or 5.1%, compared to $626.6 million at September 30, 2018. During the fourth quarter of 2018, mortgage warehouse loans declined $28.6 million to $154.2 million due to the lower volume of home purchase financing activity. Historically, home purchase activity is at a lower level in the fourth quarter compared to the third quarter. |
• | There were no merger related expenses incurred in the fourth quarter of 2018. |
• | Non-performing assets were $9.1 million, or 0.77% of assets, and included $2.5 million of OREO at December 31, 2018. |
• | As a result of the exercise of all outstanding warrants held by warrant holders, 198,378 shares of common stock were issued on December 19, 2018. |
For the year ended December 31, 2018, the Company reported net income of $12.0 million and Adjusted Net Income of $13.4 million compared to net income of $6.9 million and Adjusted Net Income of $8.8 million for the year ended December 31, 2017. For the year ended December 31, 2018, diluted earnings per share were $1.40 and Adjusted Net Income per diluted share was $1.56 compared to diluted earnings per share of $0.83 and Adjusted Net Income per diluted share of $1.06 for the year ended December 31, 2017.
On April 11, 2018, the Company completed the merger of New Jersey Community Bank (“NJCB”) with and into the Bank (the “NJCB merger”). As a result of the NJCB merger, merger related expenses of $2.1 million were incurred primarily in the second quarter of 2018 and the after-tax effect of the merger expenses reduced net income for the year ended December 31, 2018 by $1.6 million. The acquisition method of accounting for the business combination resulted in the recognition of a gain on the bargain purchase of $230,000 and no goodwill.
Adjusted Net Income, Adjusted Net Income per diluted share, Adjusted return on average assets and Adjusted return on average equity are non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to, but not as a substitute for, the Company’s GAAP financial results. A reconciliation of these non-GAAP financial measures to the GAAP financial results is attached to this press release. Management believes that the presentation of these non-GAAP financial measures of the Company in this press release may be helpful to readers in understanding the Company’s financial performance without including the financial impact of the NJCB merger and the revaluation of the deferred tax assets when comparing the Company’s income statement for the three and twelve-month periods ended December 31, 2018 and 2017.
Robert F. Mangano, President and Chief Executive Officer, stated, “We are very pleased with our record 2018 results that were driven by the growth of our loan portfolio as well as the year over year improvement of 28 basis points in our net interest margin. The higher interest rate environment had a positive effect on net interest income and our net interest margin.” Mr. Mangano added, “We remain committed to delivering superior banking experience in the communities we serve and look forward to continued success in 2019.”
Discussion of Financial Results
The Company’s net income was $3.3 million for the three months ended December 31, 2018 compared to net income of $574,000 for the three months ended December 31, 2017.
For the three months ended December 31, 2018, net interest income was $11.3 million, compared to $9.8 million for the three months ended December 31, 2017. The increase in interest-earning assets and the higher yield on loans were the primary drivers of the $1.5 million increase in net interest income. Non-interest expenses were $8.3 million for the fourth quarter of 2018 compared to $8.1 million for the fourth quarter of 2017.
Total interest income was $13.8 million for the three months ended December 31, 2018 compared to $11.2 million for the three months ended December 31, 2017. This increase was due in part to the $90.8 million increase in average loans, reflecting growth primarily of commercial real estate, construction and commercial business loans. The growth in average loans included average loans of approximately $67.3 million from the NJCB merger. Average interest-earning assets were $1.1 billion with a tax-equivalent yield of 5.02% for the fourth quarter of 2018 compared to $1.0 billion with a tax-equivalent yield of 4.49% for the fourth quarter of 2017. The higher yield on average interest-earning assets for the fourth quarter of 2018 also contributed to the increase and reflected primarily the higher yield earned on the loan portfolio. The 100 basis point increase in the Federal Reserve’s targeted federal funds rate and the corresponding increase
in the Prime Rate since December 2017 have had a positive effect on the yields of construction, commercial business, home equity and warehouse loans with variable interest rate terms for the fourth quarter of 2018.
Interest expense on average interest-bearing liabilities was $2.4 million, with an interest cost of 1.19%, for the fourth quarter of 2018 compared to $1.4 million, with an interest cost of 0.75%, for the fourth quarter of 2017. The $998,000 increase in interest expense on interest-bearing liabilities for the fourth quarter of 2018 reflected primarily higher interest costs due to higher short-term market interest rates in the fourth quarter of 2018 compared to the fourth quarter of 2017 and an increase of $51.0 million in average interest-bearing liabilities. The increase in average interest-bearing liabilities was comprised primarily of increases in certificates of deposit and short-term borrowings, which generally have higher interest cost than other types of interest-bearing deposits.
The net interest margin increased to 4.19% for the fourth quarter of 2018 compared to 3.98% for the fourth quarter of 2017 due primarily to the higher yield on average interest-earning assets, which more than offset the increase in the interest cost of average interest-bearing liabilities.
The Company recorded a higher provision for loan losses of $225,000 for the fourth quarter of 2018 compared to a provision for loan losses of $150,000 for the fourth quarter of 2017 due primarily to the growth of the loan portfolio and the change in the mix of loans in the loan portfolio.
At December 31, 2018, total loans were $883.2 million and the allowance for loan losses was $8.4 million, or 0.95% of total loans, compared to total loans of $789.9 million and an allowance for loan losses of $8.0 million, or 1.01% of total loans, at December 31, 2017. Management believes that the current economic conditions in New Jersey and operating conditions for the Bank are generally positive, which were also considered in management’s evaluation of the adequacy of the allowance for loan losses.
Non-interest income was $1.8 million for the fourth quarter of 2018, a decrease of $92,000 compared to $1.9 million for the fourth quarter of 2017. Gains on the sale of loans declined $163,000, which was partially offset by increases in income on Bank-owned life insurance of $19,000 and gain on bargain purchase of $46,000. In the fourth quarter of 2018, $19.4 million of residential mortgages were sold and $553,000 of gains were recorded compared to $28.8 million of residential mortgage loans sold and $1.1 million of gains recorded in the fourth quarter of 2017. Management believes that the decrease in residential mortgage loans sold was due primarily to lower residential mortgage lending activity as a result of higher mortgage interest rates in 2018 compared to 2017. In the fourth quarter of 2018, $7.5 million of SBA loans were sold and gains of $497,000 were recorded compared to $1.5 million of SBA loans sold and gains of $139,000 recorded in the fourth quarter of 2017. SBA guaranteed commercial lending activity and loan sales vary from period to period, and the level of activity is due primarily to the timing of loan originations.
Non-interest expenses were $8.3 million for the fourth quarter of 2018, which was an increase of $233,000, or 2.9%, compared to $8.1 million for the fourth quarter of 2017. Salaries and employee benefits expense increased $218,000, or 4.4%, in the fourth quarter of 2018 due primarily to salaries for former NJCB employees who joined the Company, merit increases and increases in employee benefit expenses. Occupancy costs increased $231,000, or 29.3%, due primarily to the addition of the two former NJCB branch offices in the second quarter of 2018. Other real estate owned expenses increased $58,000 to $82,000 for the fourth quarter of 2018 due primarily to ownership costs for property insurance and other maintenance expenses associated with a commercial real estate property that was foreclosed in the third quarter of 2018. Merger related expenses of $265,000 were incurred in the fourth quarter of 2017. Other operating expenses were relatively unchanged and included a check fraud loss of $155,000 recorded in the fourth quarter of 2018.
Income tax expense was $1.3 million for the fourth quarter of 2018, resulting in an effective tax rate of 28.8%, compared to income tax expense of $3.0 million, which resulted in an effective tax rate of 83.7%,
for the fourth quarter of 2017. As previously discussed, the Company recorded additional income tax expense of $1.7 million in the fourth quarter of 2017 due to the revaluation of deferred tax assets as a result of the enactment of the Tax Cuts and Jobs Act (“Tax Act”) in December 2017. Excluding the additional income tax expense, the Company’s effective tax rate would have been 35.1% for the fourth quarter of 2017. The effective tax rate decreased in the fourth quarter of 2018 due primarily to the decrease in the maximum federal corporate income tax rate from 35% to 21% beginning in 2018 as a result of the Tax Act. Partially offsetting the lower federal corporate income tax rate was the enactment of legislation by the State of New Jersey in July of 2018, which increased the corporate income tax rate to 11.5% from 9% for taxable income of $1.0 million or more effective January 1, 2018 and resulted in an approximately 2% higher effective tax rate for the fourth quarter of 2018.
At December 31, 2018, the allowance for loan losses was $8.4 million compared to $8.0 million at December 31, 2017. As a percentage of total loans, the allowance was 0.95% at December 31, 2018 compared to 1.01% at December 31, 2017. The decrease in the allowance as a percentage of loans was due primarily to the acquisition accounting for the NJCB merger, which resulted in the elimination of the NJCB allowance for loan losses and the NJCB loans being recorded at their fair value. Included in the fair value of the loans at the date of acquisition was a credit risk adjustment discount of approximately $1.6 million.
Total assets increased $98.8 million to $1.18 billion at December 31, 2018 from $1.08 billion at December 31, 2017 due primarily to a $93.3 million increase in total loans. The increase in assets was funded primarily by a $28.7 million increase in deposits and a $51.3 million increase in overnight borrowings. Total portfolio loans at December 31, 2018 were $883.2 million compared to $789.9 million at December 31, 2017. The increase in loans was due primarily to an increase of $79.5 million in commercial real estate loans, a $13.0 million increase in construction loans, a $27.7 million increase in commercial business loans and a $6.8 million increase in residential real estate loans which were partially offset by a $35.2 million decrease in mortgage warehouse lines. The NJCB merger contributed approximately $67.4 million to the increase of loans at December 31, 2018.
Total deposits were $950.7 million at December 31, 2018 compared to $922.0 million at December 31, 2017. The NJCB merger contributed $69.6 million of deposits at December 31, 2018. Total deposits, excluding the NJCB deposits, declined $40.9 million during the year 2018. Municipal deposits, primarily interest-bearing demand deposits and savings accounts, declined approximately $46.2 million from the end of 2017. As a result of the Tax Act, a number of the Bank’s municipal customers experienced significant advanced payments in December 2017 for real estate taxes that were due in 2018. As the Bank’s municipal customers disbursed these additional funds in 2018, their deposit balances declined from the levels at December 31, 2017.
Regulatory capital ratios for the Company and the Bank continue to reflect a strong capital position. Under current regulatory capital standards, the Company’s common equity Tier 1 to risk-based assets (“CET1”), total risk-based capital, Tier I capital, and leverage ratios were 10.80%, 13.25%, 12.47% and 11.80%, respectively, at December 31, 2018. The Bank’s CET1, total risk-based capital, Tier 1 capital and leverage ratios were 12.48%, 13.26%, 12.48% and 11.80%, respectively, at December 31, 2018. The Company and the Bank are considered “well capitalized” under these capital standards.
Asset Quality
Non-performing loans were $6.6 million at December 31, 2018 compared to $7.1 million at December 31, 2017. During the fourth quarter of 2018, $240,000 of principal payments were recorded on non-accrual loans and loans totaling $4,000 were placed on non-accrual status. Charge-offs of loans were $88,000 and no recoveries of loans previously charged-off were recorded for the fourth quarter of 2018. The allowance
for loan losses was 128% of non-performing loans at December 31, 2018 compared to 113% of non-performing loans at December 31, 2017.
Overall, management observed generally stable trends in loan quality, with non-performing loans to total loans of 0.75% and non-performing assets to total assets of 0.77% at December 31, 2018 compared to non-performing loans to total loans of 0.90% and non-performing assets to total assets of 0.66% at December 31, 2017.
OREO at December 31, 2018 was $2.5 million and consisted of one residential real estate property acquired in the NJCB merger with a carrying value of $1.1 million, land with a carrying value of $93,000 that was foreclosed in the second quarter of 2018 and a commercial real estate property that was foreclosed in the third quarter of 2018 with a fair value of $1.3 million.
About 1ST Constitution Bancorp
1ST Constitution Bancorp, through its primary subsidiary, 1ST Constitution Bank, operates 20 branch banking offices in Cranbury (2), Asbury Park, Fort Lee, Freehold, Hamilton, Hightstown, Hillsborough, Hopewell, Jamesburg, Lawrenceville, Little Silver, Neptune City, Perth Amboy, Plainsboro, Princeton, Rocky Hill, Rumson, Fair Haven and Shrewsbury, New Jersey.
1ST Constitution Bancorp is traded on the Nasdaq Global Market under the trading symbol “FCCY” and information about the Company 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 | Twelve months ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Per Common Share Data: | |||||||||||||||
Earnings per common share: | |||||||||||||||
Basic | $ | 0.39 | $ | 0.07 | $ | 1.45 | $ | 0.86 | |||||||
Diluted | 0.38 | 0.07 | 1.40 | 0.83 | |||||||||||
Book value per common share at the period-end | 14.77 | 13.81 | |||||||||||||
Tangible Book value per common share at the period-end | 13.34 | 12.27 | |||||||||||||
Average common shares outstanding: | |||||||||||||||
Basic | 8,432,971 | 8,075,173 | 8,320,718 | 8,049,981 | |||||||||||
Diluted | 8,680,778 | 8,340,318 | 8,593,509 | 8,312,784 | |||||||||||
Shares Outstanding at end of period | 8,605,978 | 8,082,903 | |||||||||||||
Performance Ratios/Data: | |||||||||||||||
Return on average assets | 1.14 | % | 0.21 | % | 1.06 | % | 0.67 | % | |||||||
Return on average equity | 10.37 | % | 2.03 | % | 10.11 | % | 6.36 | % | |||||||
Net interest income (tax-equivalent basis) 1 | $ | 11,464 | $ | 10,055 | $ | 43,961 | $ | 37,192 | |||||||
Net interest margin (tax-equivalent basis) 2 | 4.19 | % | 3.98 | % | 4.09 | % | 3.81 | % | |||||||
Efficiency ratio (tax-equivalent basis) 3 | 62.37 | % | 67.28 | % | 65.70 | % | 68.25 | % | |||||||
December 31, | December 31, | ||||||||||||||
Loan Portfolio Composition: | 2018 | 2017 | |||||||||||||
Commercial real estate | $ | 388,431 | $ | 308,924 | |||||||||||
Mortgage warehouse lines | 154,183 | 189,412 | |||||||||||||
Construction loans | 149,386 | 136,412 | |||||||||||||
Commercial business | 120,590 | 92,906 | |||||||||||||
Residential real estate | 47,263 | 40,494 | |||||||||||||
Loans to individuals | 22,478 | 21,025 | |||||||||||||
Other loans | 665 | 183 | |||||||||||||
Gross loans | 882,996 | 789,356 | |||||||||||||
Deferred costs, net | 168 | 550 | |||||||||||||
Total loans | $ | 883,164 | $ | 789,906 | |||||||||||
Asset Quality Data: | |||||||||||||||
Loans past due over 90 days and still accruing | 55 | — | |||||||||||||
Non-accrual loans | 6,525 | 7,114 | |||||||||||||
OREO property | 2,515 | — | |||||||||||||
Total non-performing assets | $ | 9,095 | $ | 7,114 | |||||||||||
Net recoveries | $ | (88 | ) | $ | 62 | $ | (511 | ) | $ | (81 | ) | ||||
Allowance for loan losses to total loans | 0.95 | % | 1.01 | % | |||||||||||
Allowance for loan losses to non-performing loans | 127.69 | % | 112.64 | % | |||||||||||
Non-performing loans to total loans | 0.75 | % | 0.90 | % | |||||||||||
Non-performing assets to total assets | 0.77 | % | 0.66 | % | |||||||||||
Capital Ratios: | |||||||||||||||
1ST Constitution Bancorp | |||||||||||||||
Common equity to risk weighted assets ("CET 1") | 10.80 | % | 10.19 | % | |||||||||||
Total capital to risk weighted assets | 13.25 | % | 12.84 | % | |||||||||||
Tier 1 capital to risk weighted assets | 12.47 | % | 12.02 | % | |||||||||||
Tier 1 capital to average assets (leverage ratio) | 11.80 | % | 11.23 | % | |||||||||||
1ST Constitution Bank | |||||||||||||||
Common equity to risk weighted assets ("CET 1") | 12.48 | % | 11.74 | % | |||||||||||
Total capital to risk weighted assets | 13.26 | % | 12.55 | % | |||||||||||
Tier 1 capital to risk weighted assets | 12.48 | % | 11.74 | % | |||||||||||
Tier 1 capital to average assets (leverage ratio) | 11.80 | % | 10.96 | % | |||||||||||
1The tax equivalent adjustment was $125 and $246 for the three months ended December 31, 2018 and 2017, respectively.
The tax equivalent adjustment was $529 and $1.0 million for the twelve months ended December 31, 2018 and 2017, respectively.
2Represents net interest income on a taxable equivalent basis as a percent of average interest-earning assets.
3Represents 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)
December 31, 2018 | December 31, 2017 | ||||||
Assets | |||||||
Cash and due from banks | $ | 4,983 | $ | 5,037 | |||
Interest-earning deposits | 11,861 | 13,717 | |||||
Total cash and cash equivalents | 16,844 | 18,754 | |||||
Investment securities | |||||||
Available for sale, at fair value | 132,222 | 105,458 | |||||
Held to maturity (fair value of $91,220 and $111,865 at September 30, 2018 and December 31, 2017, respectively) | 79,572 | 110,267 | |||||
Total securities | 211,794 | 215,725 | |||||
Loans held for sale | 3,020 | 4,254 | |||||
Loans | 883,164 | 789,906 | |||||
Less: allowance for loan losses | (8,402 | ) | (8,013 | ) | |||
Net loans | 874,762 | 781,893 | |||||
Premises and equipment, net | 11,653 | 10,705 | |||||
Accrued interest receivable | 3,860 | 3,478 | |||||
Bank owned life insurance | 28,705 | 25,051 | |||||
Other real estate owned | 2,515 | 12,496 | |||||
Goodwill and intangible assets | 12,258 | — | |||||
Other assets | 12,680 | 6,918 | |||||
Total assets | $ | 1,178,091 | $ | 1,079,274 | |||
Liabilities and shareholders' equity | |||||||
Liabilities | |||||||
Deposits | |||||||
Non-interest bearing | $ | 212,981 | $ | 196,509 | |||
Interest bearing | 737,691 | 725,497 | |||||
Total deposits | 950,672 | 922,006 | |||||
Short-term borrowings | 71,775 | 20,500 | |||||
Redeemable subordinated debentures | 18,557 | 18,557 | |||||
Accrued interest payable | 1,228 | 804 | |||||
Accrued expense and other liabilities | 8,774 | 5,754 | |||||
Total liabilities | 1,051,006 | 967,621 | |||||
Shareholders' equity | |||||||
Preferred stock, no par value; 5,000,000 shares authorized; none issued | — | — | |||||
Common stock, no par value; 30,000,000 shares authorized; 8,639,276 and 8,116,201 shares issued and 8,605,978 and 8,082,903 shares outstanding as of December 31, 2018 and December 31, 2017, respectively | 79,536 | 72,935 | |||||
Retained earnings | 49,750 | 39,822 | |||||
Treasury stock, 33,298 shares at December 31, 2018 and December 31, 2017 | (368 | ) | (368 | ) | |||
Accumulated other comprehensive loss | (1,833 | ) | (736 | ) | |||
Total shareholders' equity | 127,085 | 111,653 | |||||
Total liabilities and shareholders' equity | $ | 1,178,091 | $ | 1,079,274 | |||
1ST Constitution Bancorp
Consolidated Statements of Income
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Interest income | |||||||||||||||
Loans, including fees | $ | 12,124 | $ | 9,842 | $ | 45,202 | $ | 35,967 | |||||||
Securities: | |||||||||||||||
Taxable | 1,110 | 826 | 4,024 | 3,326 | |||||||||||
Tax-exempt | 471 | 512 | 1,989 | 2,140 | |||||||||||
Federal funds sold and short-term investments | 50 | 47 | 258 | 230 | |||||||||||
Total interest income | 13,755 | 11,227 | 51,473 | 41,663 | |||||||||||
Interest expense | |||||||||||||||
Deposits | 1,969 | 1,198 | 6,511 | 4,550 | |||||||||||
Borrowings | 260 | 81 | 836 | 429 | |||||||||||
Redeemable subordinated debentures | 187 | 139 | 694 | 519 | |||||||||||
Total interest expense | 2,416 | 1,418 | 8,041 | 5,498 | |||||||||||
Net interest income | 11,339 | 9,809 | 43,432 | 36,165 | |||||||||||
Provision for loan losses | 225 | 150 | 900 | 600 | |||||||||||
Net interest income after provision for loan losses | 11,114 | 9,659 | 42,532 | 35,565 | |||||||||||
Non-interest income | |||||||||||||||
Service charges on deposit accounts | 162 | 152 | 638 | 596 | |||||||||||
Gain on sales of loans | 1,050 | 1,213 | 4,475 | 5,149 | |||||||||||
Income on bank-owned life insurance | 150 | 131 | 575 | 522 | |||||||||||
Gain on bargain purchase | 46 | — | 230 | — | |||||||||||
Gain on sales of securities | — | — | 12 | 129 | |||||||||||
Other income | 430 | 434 | 1,988 | 1,844 | |||||||||||
Total non-interest income | 1,838 | 1,930 | 7,918 | 8,240 | |||||||||||
Non-interest expense | |||||||||||||||
Salaries and employee benefits | 5,140 | 4,922 | 19,853 | 18,804 | |||||||||||
Occupancy expense | 1,019 | 788 | 3,623 | 3,169 | |||||||||||
Data processing expenses | 323 | 331 | 1,332 | 1,314 | |||||||||||
FDIC insurance expense | 105 | 105 | 486 | 360 | |||||||||||
Other real estate owned expenses | 82 | 24 | 158 | 42 | |||||||||||
Merger-related expenses | — | 265 | 2,141 | 265 | |||||||||||
Other operating expenses | 1,628 | 1,629 | 6,492 | 7,052 | |||||||||||
Total non-interest expenses | 8,297 | 8,064 | 34,085 | 31,006 | |||||||||||
Income before income taxes | 4,655 | 3,525 | 16,365 | 12,799 | |||||||||||
Income taxes | 1,342 | 2,951 | 4,317 | 5,871 | |||||||||||
Net Income | $ | 3,313 | $ | 574 | $ | 12,048 | $ | 6,928 | |||||||
Net income per common share | |||||||||||||||
Basic | $ | 0.39 | $ | 0.07 | $ | 1.45 | $ | 0.86 | |||||||
Diluted | 0.38 | 0.07 | 1.4 | 0.83 | |||||||||||
Weighted average shares outstanding | |||||||||||||||
Basic | 8,432,971 | 8,075,173 | 8,320,718 | 8,049,981 | |||||||||||
Diluted | 8,680,778 | 8,340,318 | 8,593,509 | 8,312,784 | |||||||||||
1ST Constitution Bancorp
Net Interest Margin Analysis
(Unaudited)
Three months ended December 31, 2018 | Three months ended December 31, 2017 | ||||||||||||||||||||
(Dollars in thousands) | Average | Average | Average | Average | |||||||||||||||||
Assets | Balance | Interest | Yield | Balance | Interest | Yield | |||||||||||||||
Interest-earning assets: | |||||||||||||||||||||
Federal funds sold/short term investments | $ | 16,804 | $ | 50 | 1.18 | % | $ | 19,622 | $ | 47 | 0.95 | % | |||||||||
Investment securities: | |||||||||||||||||||||
Taxable | 148,495 | 1,110 | 2.99 | % | 136,776 | 826 | 2.42 | % | |||||||||||||
Tax-exempt (1) | 67,371 | 596 | 3.54 | % | 83,792 | 758 | 3.62 | % | |||||||||||||
Total | 215,866 | 1,706 | 3.16 | % | 220,568 | 1,584 | 2.87 | % | |||||||||||||
Loans (2): | |||||||||||||||||||||
Commercial real estate | 377,820 | 4,926 | 5.10 | % | 294,799 | 3,763 | 4.99 | % | |||||||||||||
Mortgage warehouse lines | 143,322 | 2,085 | 5.69 | % | 175,598 | 1,923 | 4.29 | % | |||||||||||||
Construction | 146,661 | 2,542 | 6.78 | % | 129,197 | 1,983 | 6.01 | % | |||||||||||||
Commercial business | 114,271 | 1,668 | 5.74 | % | 97,120 | 1,481 | 5.99 | % | |||||||||||||
Residential real estate | 47,327 | 568 | 4.80 | % | 41,192 | 442 | 4.29 | % | |||||||||||||
Loans to individuals | 22,467 | 303 | 5.35 | % | 21,411 | 203 | 3.76 | % | |||||||||||||
Loans held for sale | 1,764 | 22 | 4.99 | % | 3,572 | 37 | 4.14 | % | |||||||||||||
All other loans | 1,388 | 10 | 2.82 | % | 1,283 | 10 | 3.05 | % | |||||||||||||
Total Loans | 855,020 | 12,124 | 5.56 | % | 764,172 | 9,842 | 5.05 | % | |||||||||||||
Total interest earning assets | 1,087,690 | 13,880 | 5.02 | % | 1,004,362 | 11,473 | 4.49 | % | |||||||||||||
Non-interest-earning assets: | |||||||||||||||||||||
Allowance for loan losses | (8,371 | ) | (7,873 | ) | |||||||||||||||||
Cash and due from bank | 5,039 | 5,777 | |||||||||||||||||||
Other assets | 70,394 | 59,966 | |||||||||||||||||||
Total assets | $ | 1,154,752 | $ | 1,062,232 | |||||||||||||||||
Liabilities and shareholders' equity: | |||||||||||||||||||||
Interest-bearing liabilities: | |||||||||||||||||||||
Money market and NOW accounts | $ | 341,649 | $ | 541 | 0.63 | % | $ | 358,273 | $ | 407 | 0.45 | % | |||||||||
Savings accounts | 189,576 | 388 | 0.81 | % | 212,228 | 340 | 0.64 | % | |||||||||||||
Certificates of deposit | 217,029 | 1,040 | 1.90 | % | 140,881 | 451 | 1.27 | % | |||||||||||||
Other borrowed funds | 37,220 | 260 | 2.77 | % | 23,052 | 81 | 1.39 | % | |||||||||||||
Redeemable subordinated debentures | 18,557 | 187 | 4.03 | % | 18,557 | 139 | 3.00 | % | |||||||||||||
Total interest-bearing liabilities | 804,031 | 2,416 | 1.19 | % | 752,991 | 1,418 | 0.75 | % | |||||||||||||
Non-interest-bearing liabilities: | |||||||||||||||||||||
Demand deposits | 216,018 | 190,243 | |||||||||||||||||||
Other liabilities | 7,954 | 6,944 | |||||||||||||||||||
Total liabilities | 223,972 | 197,187 | |||||||||||||||||||
Shareholders' equity | 126,749 | 112,054 | |||||||||||||||||||
Total liabilities and shareholders' equity | $ | 1,154,752 | $ | 1,062,232 | |||||||||||||||||
Net interest spread (3) | 3.83 | % | 3.74 | % | |||||||||||||||||
Net interest margin (4) | $ | 11,464 | 4.19 | % | $ | 10,055 | 3.98 | % | |||||||||||||
(1) Tax equivalent basis, using 21% federal tax rate in 2018 and 34% in 2017.
(2) 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.
(3) The net interest spread is the difference between the average yield on interest-earning assets and the average rate paid on interest-bearing liabilities.
(4) The net interest margin is equal to net interest income divided by average interest-earning assets.
1ST Constitution Bancorp
Net Interest Margin Analysis
(Unaudited)
Twelve months ended December 31, 2018 | Twelve months ended December 31, 2017 | ||||||||||||||||||||
(Dollars in thousands) | Average | Average | Average | Average | |||||||||||||||||
Assets | Balance | Interest | Yield | Balance | Interest | Yield | |||||||||||||||
Interest-earning assets: | |||||||||||||||||||||
Federal funds sold/short term investments | $ | 20,157 | $ | 258 | 1.28 | % | $ | 27,533 | $ | 230 | 0.84 | % | |||||||||
Investment securities: | |||||||||||||||||||||
Taxable | 146,631 | 4,024 | 2.74 | % | 140,431 | 3,326 | 2.37 | % | |||||||||||||
Tax-exempt (1) | 74,477 | 2,518 | 3.38 | % | 90,186 | 3,167 | 3.51 | % | |||||||||||||
Total | 221,108 | 6,542 | 2.96 | % | 230,617 | 6,493 | 2.82 | % | |||||||||||||
Loans (2): | |||||||||||||||||||||
Commercial real estate | 356,581 | 18,318 | 5.07 | % | 274,192 | 13,851 | 4.98 | % | |||||||||||||
Mortgage warehouse lines | 153,868 | 8,403 | 5.46 | % | 160,756 | 6,937 | 4.26 | % | |||||||||||||
Construction | 137,976 | 9,090 | 6.59 | % | 115,913 | 6,780 | 5.77 | % | |||||||||||||
Commercial business | 111,150 | 6,059 | 5.45 | % | 96,193 | 5,474 | 5.63 | % | |||||||||||||
Residential real estate | 46,301 | 2,085 | 4.44 | % | 41,898 | 1,777 | 4.24 | % | |||||||||||||
Loans to individuals | 23,155 | 1,083 | 4.61 | % | 22,171 | 903 | 4.07 | % | |||||||||||||
Loans held for sale | 2,738 | 123 | 4.49 | % | 4,197 | 202 | 4.81 | % | |||||||||||||
All other loans | 1,197 | 41 | 3.38 | % | 1,690 | 43 | 2.51 | % | |||||||||||||
Total Loans | 832,966 | 45,202 | 5.38 | % | 717,010 | 35,967 | 4.96 | % | |||||||||||||
Total interest earning assets | 1,074,231 | 52,002 | 4.81 | % | 975,160 | 42,690 | 4.33 | % | |||||||||||||
Non-interest-earning assets: | |||||||||||||||||||||
Allowance for loan losses | (8,314 | ) | (7,703 | ) | |||||||||||||||||
Cash and due from bank | 5,595 | 5,371 | |||||||||||||||||||
Other assets | 66,256 | 58,968 | |||||||||||||||||||
Total assets | $ | 1,137,768 | $ | 1,031,796 | |||||||||||||||||
Liabilities and shareholders' equity: | |||||||||||||||||||||
Interest-bearing liabilities: | |||||||||||||||||||||
Money market and NOW accounts | $ | 356,906 | $ | 1,978 | 0.55 | % | $ | 336,445 | $ | 1,440 | 0.43 | % | |||||||||
Savings accounts | 203,940 | 1,467 | 0.72 | % | 210,798 | 1,332 | 0.63 | % | |||||||||||||
Certificates of deposit | 189,521 | 3,066 | 1.62 | % | 145,539 | 1,778 | 1.22 | % | |||||||||||||
Other borrowed funds | 36,612 | 836 | 2.28 | % | 21,139 | 429 | 2.03 | % | |||||||||||||
Redeemable subordinated debentures | 18,557 | 694 | 3.74 | % | 18,557 | 519 | 2.80 | % | |||||||||||||
Total interest-bearing liabilities | 805,536 | 8,041 | 1.00 | % | 732,478 | 5,498 | 0.75 | % | |||||||||||||
Non-interest-bearing liabilities: | |||||||||||||||||||||
Demand deposits | 204,002 | 183,802 | |||||||||||||||||||
Other liabilities | 9,018 | 6,591 | |||||||||||||||||||
Total liabilities | 1,018,556 | 922,871 | |||||||||||||||||||
Shareholders' equity | 119,212 | 108,925 | |||||||||||||||||||
Total liabilities and shareholders' equity | $ | 1,137,768 | $ | 1,031,796 | |||||||||||||||||
Net interest spread (3) | 3.81 | % | 3.58 | % | |||||||||||||||||
Net interest margin (4) | $ | 43,961 | 4.09 | % | $ | 37,192 | 3.81 | % | |||||||||||||
(1) Tax equivalent basis, using 21% federal tax rate in 2018 and 34% in 2017.
(2) 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.
(3) The net interest spread is the difference between the average yield on interest-earning assets and the average rate paid on interest-bearing liabilities.
(4) The net interest margin is equal to net interest income divided by average interest-earning assets.
1ST Constitution Bancorp
Reconciliation of Non-GAAP Measures (1)
(Dollars in thousands, except per share data)
(Unaudited)
Three months ended | Twelve months ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Adjusted net income | ||||||||||||||||
Net income | $ | 3,313 | $ | 574 | $ | 12,048 | $ | 6,928 | ||||||||
Adjustments: | ||||||||||||||||
Merger-related expenses | — | 265 | 2,141 | 265 | ||||||||||||
Gain from bargain purchase | (46 | ) | — | (230 | ) | — | ||||||||||
Income tax effect of adjustments (2) | — | (77 | ) | (568 | ) | (77 | ) | |||||||||
Adjusted Net Income (3) | $ | 3,267 | $ | 2,474 | $ | 13,391 | $ | 8,828 | ||||||||
Adjusted net income per diluted share | ||||||||||||||||
Adjusted net income | $ | 3,267 | $ | 2,474 | $ | 13,391 | $ | 8,828 | ||||||||
Diluted shares outstanding | 8,680,778 | 8,340,318 | 8,593,509 | 8,312,784 | ||||||||||||
Adjusted net income per diluted share | $ | 0.38 | $ | 0.30 | $ | 1.56 | $ | 1.06 | ||||||||
Adjusted average return on average assets | ||||||||||||||||
Adjusted net income | $ | 3,267 | $ | 2,474 | $ | 13,391 | $ | 8,828 | ||||||||
Average assets | 1,154,752 | 1,062,232 | 1,137,768 | 1,031,796 | ||||||||||||
Adjusted return on average assets | 1.12 | % | 0.92 | % | 1.18 | % | 0.86 | % | ||||||||
Adjusted average return on average equity | ||||||||||||||||
Adjusted net income | $ | 3,267 | $ | 2,474 | $ | 13,391 | $ | 8,828 | ||||||||
Average equity | 126,749 | 112,054 | 119,212 | 108,925 | ||||||||||||
Adjusted return on average equity | 10.23 | % | 8.76 | % | 11.23 | % | 8.10 | % | ||||||||
Book value and tangible book value per share | ||||||||||||||||
Shareholders' equity | $ | 127,085 | $ | 111,653 | ||||||||||||
Less: goodwill and intangible assets | 12,258 | 12,496 | ||||||||||||||
Tangible shareholders' equity | 114,827 | 99,157 | ||||||||||||||
Shares outstanding | 8,605,978 | 8,082,903 | ||||||||||||||
Book value per share | $ | 14.77 | $ | 13.81 | ||||||||||||
Tangible book value per share | $ | 13.34 | $ | 12.27 | ||||||||||||
1 The Company used the non-GAAP financial measures, Adjusted Net Income, Adjusted Net Income per diluted share, Adjusted return on average assets and Adjusted return on average equity, because the Company believes that it is helpful to readers in understanding the Company's financial performance and the effect on net income of the revaluation of the deferred tax assets for 2017 and the merger-related expenses and the gain on bargain purchase recorded in connection with the NJCB merger. These non-GAAP measures improve the comparability of the current period results with the results of the prior periods. The Company cautions that the non-GAAP financial measures should be considered in addition to, but not as a substitute for, the Company's GAAP financial results.
2 Tax effected at an income tax rate of 30.09%, less the impact of non-deductible merger-related expenses and the non-taxable gain on bargain purchase for 2018 and tax effected at an income tax rate of 39.94%, less the impact of non-deductible merger-related expenses for 2017.