1st Capital Bancorp Announces Third Quarter 2023 Financial Results
October 30, 2023 at 03:56 pm EDT
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SALINAS, Calif., Oct. 30, 2023 (GLOBE NEWSWIRE) -- 1st Capital Bancorp (the “Company”), (OTCQX: FISB), the $984.1 million asset bank holding company and parent company of 1st Capital Bank (the “Bank”), today reported unaudited net income of $1.19 million for the quarter ended September 30, 2023, an increase of 96.2% compared to net income of $609 thousand for the quarter ended June 30, 2023, and a decrease of 55.1% compared to net income of $2.66 million for the quarter ended September 30, 2022.
Deposit balances have increased $26.7 million, or 3.0%, in the quarter ended September 30, 2023 compared to June 30, 2023. Loan demand remained strong in the third quarter as the Company’s core loans increased $21.6 million, or 3.7%, at September 30, 2023 compared to June 30, 2023. This growth was partially offset by a $5.8 million decline in wholesale loan balances. Loan yields expanded 12 basis points (bps) to 5.07% for the quarter ended September 30, 2023 compared to 4.95% for the quarter ended June 30, 2023. Nonperforming assets to total assets was 0.22% as of September 30, 2023 versus 0.07% for the period ending June 30, 2023, with the increase being centered in the wholesale loan portfolio.
"We remain highly focused on leveraging the strength of our balance sheet and our exceptional team of bankers to continue serving our clients along the Central Coast," said Sam Jimenez, Chief Executive Officer. This quarter's results highlighted by healthy organic growth in our loan and deposit portfolios reflects those efforts and positions us to improve our net interest margin and equity returns going forward."
Financial Highlights Performance highlights for the quarter ended September 30, 2023, as compared to the quarter ended June 30, 2023, and the quarter ended September 30, 2022:
Earnings per share (diluted) were $0.22 for the third quarter of 2023, as compared to $0.11 and $0.48 for the quarters ended June 30, 2023, and September 30, 2022, respectively.
Pretax, pre-provision income for the quarter ended September 30, 2023 totaled $2.8 million, as compared to $1.8 million and $3.7 million for the quarters ended June 30, 2023, and September 30, 2022, respectively.
For the quarter ended September 30, 2023, the Company's return on average equity was 8.06%, as compared to 4.13% and 16.44% for the quarters ended June 30, 2023, and September 30, 2022, respectively.
For the quarter ended September 30, 2023, the Company’s return on average assets was 0.48% as compared to 0.25% and 1.04% for the quarters ended June 30, 2023, and September 30, 2022, respectively.
For the quarter ended September 30, 2023, the Company’s net interest margin was 3.37% as compared to 3.20% and 3.46% for the quarters ended June 30, 2023, and September 30, 2022, respectively.
For the quarter ended September 30, 2023, the Company’s efficiency ratio was 67.77%, as compared to 77.32% and 59.54% for the quarters ended June 30, 2023 and September 30, 2022, respectively.
The Company recorded provision for loan loss expense of $1.16 million and $1.05 million respectively for the quarters ended September 30, 2023, and June 30, 2023. There was no provision expense recorded for the quarter ended September 30, 2022.
As of September 30, 2023, the Company’s nonperforming assets to total assets was 0.22%, as compared to 0.07% and 0.04% for June 30, 2023, and September 30, 2022, respectively.
As of September 30, 2023, the Company reported total assets, total deposits, and total loans of $984.1 million, $906.1 million, and $600.9 million, respectively.
Federal regulatory capital ratios for the quarters ended September 30, 2023, June 30, 2023, and September 30, 2022, exceed well capitalized thresholds.
At September 30, 2023, the Company has $395.1 million in available liquidity from secured and unsecured borrowing lines, which represents 40.2% of total assets.
Net Interest Income and Net Interest Margin The Company's third quarter 2023 net interest income increased $607 thousand, or 8.0%, to $8.24 million as compared with $7.63 million for the quarter ended June 30, 2023, as earning asset yields outpaced expansion in funding costs. Loan interest income increased $316 thousand, or 4.4%, to $7.54 million for the quarter ended September 30, 2023, compared to $7.22 million for the quarter ended June 30, 2023. Interest income on investment securities remained stable at $1.94 million and $1.93 million, respectively, for the quarters ended September 30, 2023 and June 30, 2023. Other interest income increased $235 thousand, or 53.2%, to $677 thousand for the quarter ended September 30, 2023 compared to $442 thousand for the quarter ended June 30, 2023, due to higher yields on higher average cash balances. Interest expense declined $34 thousand, or 1.7%, to $2.01 million for the quarter ended September 30, 2023, compared to $2.04 million for the quarter ended June 30, 2023, due to the retirement of wholesale borrowings and brokered CDs in the third quarter. Interest expense for each of the quarters presented includes $169 thousand related to subordinated debt.
The Company's net interest margin increased 17 basis points (bps) to 3.37% for the quarter ended September 30, 2023 from 3.20% when compared to the quarter ended June 30, 2023. This increase was primarily driven by the increase in earning asset yields. The 12 bps expansion of loan yields from 4.95% for the quarter ended June 30, 2023 to 5.07% for the quarter ended September 30, 2023 outpaced funding costs. The Company’s cost of funds declined 5 bps from 0.92% for the quarter ended June 30, 2023 to 0.87% for the quarter ended September 30, 2023.
Allowance for Credit Losses The Company adopted Accounting Standards Update (ASU) 2016-13, more commonly referred to as the Current Expected Credit Loss (CECL) method on January 1, 2023, using the modified retrospective method with no adjustments to prior period comparative financial statements for all financial assets measured at amortized cost and off-balance sheet credit exposure as well as held to maturity securities, which resulted in a $127 thousand increase to the allowance for credit losses, a $3 thousand reserve for held-to-maturity securities and a $26 thousand increase to the reserve for unfunded commitments. The impact to retained earnings, net of taxes, was $111 thousand. Reporting periods beginning after January 1, 2023 are presented under ASU 2016-13 while prior period amounts continue to be reported in accordance with previously applicable Generally Accepted Accounting Principles in the United States.
Provision expense of $1.16 million was recorded in the quarter ended September 30, 2023, compared to $1.05 million in the quarter ended June 30, 2023. The provision expense was driven by overall loan growth and charge offs within the wholesale loan pool portfolios.
Noninterest Expenses The Company's total non-interest expense decreased $334 thousand, or 5.50%, to $5.8 million in the quarter ended September 30, 2023, compared to $6.1 million for the quarter ended June 30, 2023. This decrease is primarily due to a decline in Salaries & Benefits expense during the period.
Balance Sheet Summary The Company's total assets at September 30, 2023 increased $23.2 million, or 2.4%, to $984.1 million as compared to $960.9 million at June 30, 2023.
Cash and due from banks increased $14.5 million, or 32.7%, to $58.8 million at September 30, 2023 compared to $44.3 million at June 30, 2023.
Total loans outstanding were $600.9 million as of September 30, 2023, representing a $15.8 million, or 2.7%, increase from the June 30, 2023 outstanding balance of $585.1 million. Growth was balanced across all core loan sectors, with Residential 1-4 units and Investor CRE experiencing the greatest dollar growth within the quarterly period. This growth was partially offset by declines in wholesale consumer and lease pools which continue to pay down.
Loan type (dollars in thousands)
9/30/2023
% of Total Loans
6/30/2023
% of Total Loans
9/30/2022
% of Total Loans
Construction / land (including farmland)
$
27,671
4.6
%
$
24,212
4.1
%
$
12,403
2.1
%
Residential 1 to 4 units
63,038
10.5
%
58,952
10.1
%
56,592
9.7
%
Home equity lines of credit
3,535
0.6
%
3,643
0.6
%
4,909
0.8
%
Multifamily
84,157
14.0
%
80,796
13.8
%
82,936
14.1
%
Owner occupied commercial real estate
125,664
20.9
%
123,545
21.1
%
111,097
18.9
%
Investor commercial real estate
194,087
32.3
%
189,216
32.3
%
188,930
32.2
%
Commercial and industrial
46,743
7.8
%
42,949
7.4
%
39,804
6.8
%
Paycheck Protection Program
--
0.0
%
--
0.0
%
--
0.0
%
Leases
30,113
5.0
%
33,618
5.8
%
45,049
7.7
%
Consumer
15,837
2.6
%
18,882
3.2
%
30,902
5.3
%
Other loans
10,030
1.7
%
9,258
1.6
%
14,176
2.4
%
Total loans
600,875
100.0
%
585,071
100.0
%
586,798
100.0
%
Allowance for credit losses
(6,918
)
(6,746
)
(7,560
)
Net loans held for investment
$
593,957
$
578,325
$
579,238
The investment portfolio decreased $10.3 million to $282.8 million from a balance of $293.1 million at June 30, 2023. The decline is reflective of paydowns and a $7.1 million increase in unrealized losses associated with the Company’s available-for-sale investment security portfolio; unrealized losses totaled $45.7 million at September 30, 2023 compared to $38.6 million at June 30, 2023. The increase in unrealized losses was driven by changes in the treasury yield curve that negatively impacted the portfolio’s valuation. At September 30, 2023 and June 30, 2023, $70.8 million and $70.5 million, respectively, of the investment portfolio were classified as held-to-maturity. As of September 30, 2023, investments classified as held-to-maturity comprise approximately 25% of the portfolio.
Total deposits were $906.1 million at September 30, 2023 representing a $26.7 million, or 3.0%, increase compared to total deposits of $879.4 million at June 30, 2023. Third quarter deposit growth originated from both new and existing relationships. Noninterest-bearing balances continue to comprise nearly half of total deposits at September 30, 2023 (45.7%).
Deposit type (dollars in thousands)
9/30/2023
% of Total Deposits
6/30/2023
% of Total Deposits
9/30/2022
% of Total Deposits
Interest- bearing checking accounts
$
56,535
6.2
%
$
47,483
5.4
%
$
69,258
7.5
%
Money market
289,700
32.0
%
287,148
32.6
%
308,722
33.5
%
Savings
115,583
12.8
%
116,582
13.3
%
109,653
11.9
%
Time
29,775
3.3
%
33,044
3.8
%
10,256
1.1
%
Total interest-bearing deposits
491,593
54.3
%
484,257
55.1
%
497,889
54.0
%
Noninterest-bearing
414,470
45.7
%
395,132
44.9
%
424,312
46.0
%
Total deposits
$
906,063
100.0
%
$
879,389
100.0
%
$
922,201
100.0
%
Uninsured deposits represent $355.3 million, or 49%, of total deposits at September 30, 2023. The Company maintains borrowing capacity of $395.1 million in secured and unsecured funding sources at September 30, 2023 covering 111.2% of uninsured balances.
Subordinated debt balances totaled $14.8 million at September 30, 2023 and June 30, 2023. No other borrowings were outstanding at September 30, 2023 and June 30, 2023, as deposit growth and cash flows generated by the loan and bond portfolios provided sufficient liquidity for operations.
Shareholder’s equity totaled $54.1 million at September 30, 2023, a decrease of $3.7 million, or 6.4%, compared to $57.8 million at June 30, 2023. The decrease is reflective of the increase in unrealized losses on the available-for-sale investment security portfolio, the impact of which flows through accumulated other comprehensive income (AOCI), a component of equity, partially offset by an increase in the fair value of the cap corridor and fair value hedges which positively impacted AOCI. The negative AOCI impact in the third quarter was partially offset by $1.2 million in net income contribution. The unrealized loss position on the held-to-maturity investment securities was captured at the date of transfer and amortizes over the remaining life of the bonds with market value movements having no future impact on the unrealized loss position of these bonds.
Asset Quality At September 30, 2023, nonperforming assets were 0.22% of the Company’s total assets, compared with 0.07% at June 30, 2023. The allowance for credit losses was 1.15% of outstanding loans at September 30, 2023, unchanged from 1.15% at June 30, 2023. The Company had $138 thousand in nonaccrual loans at both September 30, 2023 and June 30, 2023, representing 0.02% of total loans in each period. The Company recorded net charge-offs of $992 thousand in the quarter ended September 30, 2023, compared to $1.7 million in the quarter ended June 30, 2023. Charge-offs for the periods ended September 30, 2023 and June 30, 2023 were all within the purchased consumer and lease pools, with the exception of a $46 thousand charge off of the unguaranteed portion of an SBA loan in the second quarter.
Asset Quality (dollars in thousands)
9/30/2023
6/30/2023
9/30/2022
Loans past due 90 days or more and accruing interest
$
2,069
$
487
$
409
Other nonaccrual loans
138
138
--
Other real estate owned
--
--
--
Total nonperforming assets
$
2,207
$
625
$
409
Allowance for credit losses to total loans
1.15
%
1.15
%
1.29
%
Allowance for credit losses to nonperforming loans
313.46
%
1079.36
%
1848.34
%
Nonaccrual loans to total loans
0.02
%
0.02
%
0.00
%
Nonperforming assets to total assets
0.22
%
0.07
%
0.04
%
1ST CAPITAL BANCORP
CONDENSED FINANCIAL DATA – UNAUDITED
($ in 000s, except per share data)
Assets
9/30/2023
6/30/2023
9/30/2022
Cash and due from banks
$
58,826
$
44,320
$
41,842
Investment securities available-for-sale
212,075
222,662
259,472
Investment securities held-to-maturity
70,756
70,468
72,818
Loans and leases held for investment
600,875
585,071
586,798
Allowance for credit losses
(6,918
)
(6,746
)
(7,560
)
Net loans and leases held for investment
593,957
578,325
579,238
Other Assets
48,480
45,129
41,241
Total assets
$
984,094
$
960,904
$
994,611
Liabilities and Shareholders' Equity
Deposits:
Non-interest-bearing
$
414,470
$
395,132
$
424,312
Interest-bearing
491,593
484,257
497,889
Total deposits
906,063
879,389
922,201
Subordinated debentures
14,795
14,776
14,719
Other borrowings
--
--
--
Other liabilities
9,099
8,915
9,415
Shareholders' equity
54,137
57,824
48,276
Total liabilities and shareholders' equity
$
984,094
$
960,904
$
994,611
Shares outstanding
5,529,805
5,518,996
5,476,092
Earnings per share basic
$
0.22
$
0.11
$
0.49
Earnings per share diluted
$
0.22
$
0.11
$
0.48
Nominal and tangible book value per share
$
9.79
$
10.48
$
8.82
1ST CAPITAL BANCORP
CONDENSED FINANCIAL DATA – UNAUDITED
($ in 000s)
Three Months Ended
Operating Results Data
9/30/2023
6/30/2023
9/30/2022
Interest and dividend income
Loans
$
7,538
$
7,222
$
7,011
Investment securities
1,936
1,929
2,055
Federal Home Loan Bank stock
93
78
62
Other income
677
442
126
Total interest and dividend income
10,244
9,671
9,254
Interest expense
2,008
2,042
669
Net interest income
8,236
7,629
8,585
Provision for credit losses
1,164
1,052
--
Net interest income after provision for credit losses
7,072
6,577
8,585
Noninterest income
314
297
395
Net gain (loss) on sales/calls of investment securities
--
--
51
Noninterest expenses
Salaries and benefits expense
3,386
3,615
3,243
Occupancy expense
459
463
451
Data and item processing
325
328
279
Furniture and equipment
113
101
127
Professional services
248
279
168
Other
1,263
1,342
1,109
Total noninterest expenses
5,794
6,128
5,377
Income before provision for income taxes
1,592
746
3,654
Provision for income taxes
398
137
992
Net income
$
1,194
$
609
$
2,662
Three Months Ended
Selected Average Balances
9/30/2023
6/30/2023
9/30/2022
Gross loans
$
590,030
$
584,939
$
594,624
Investment securities
332,185
333,844
352,564
Federal Home Loan Bank stock
4,381
4,314
4,058
Other interest earning assets
54,550
43,581
34,162
Total interest earning assets
981,146
966,678
985,408
Total assets
980,038
962,808
1,018,730
Interest-bearing checking accounts
46,713
49,082
65,171
Money market
299,139
260,482
303,802
Savings
117,881
124,088
126,511
Time deposits
30,262
28,375
12,376
Total interest- bearing deposits
493,995
462,027
507,860
Noninterest bearing demand deposits
396,871
386,503
423,166
Total deposits
890,866
848,530
931,026
Subordinated debentures and other borrowings
20,163
45,308
15,055
Shareholders' equity
$
58,772
$
59,145
$
64,227
1ST CAPITAL BANCORP CONDENSED FINANCIAL DATA – UNAUDITED ($ in 000s)
Three Months Ended
Selected Financial Ratios
9/30/2023
6/30/2023
9/30/2022
Return on average total assets
0.48
%
0.25
%
1.04
%
Return on average shareholders' equity
8.06
%
4.13
%
16.44
%
Net interest margin
3.37
%
3.20
%
3.46
%
Net interest income to average total assets
3.33
%
3.18
%
3.34
%
Efficiency ratio
67.77
%
77.32
%
59.54
%
1ST CAPITAL BANCORP
CONDENSED FINANCIAL DATA – UNAUDITED
($ in 000s)
Nine Months Ended
Operating Results Data
9/30/2023
9/30/2022
Interest and dividend income
Loans
$
21,478
$
21,165
Investment securities
5,809
5,650
Federal Home Loan Bank stock
241
179
Other income
1,430
195
Total interest and dividend income
28,958
27,189
Interest expense
5,238
1,772
Net interest income
23,720
25,417
Provision for credit losses
2,906
--
Net interest income after provision for credit losses
20,814
25,417
Noninterest income
984
1,003
Net gain (loss) on sales/calls of investment securities
(134
)
51
Noninterest expenses
Salaries and benefits expense
10,748
10,145
Occupancy expense
1,336
1,348
Data and item processing
962
807
Furniture and equipment
331
417
Professional services
795
451
Other
3,771
3,324
Total noninterest expenses
17,943
16,492
Income before provision for income taxes
3,721
9,979
Provision for income taxes
861
2,705
Net income
$
2,860
$
7,274
Nine Months Ended
Selected Average Balances
9/30/2023
9/30/2022
Gross loans
$
582,107
$
586,294
Investment securities
335,227
362,879
Federal Home Loan Bank stock
4,252
4,011
Other interest earning assets
44,447
36,790
Total interest earning assets
966,033
989,974
Total assets
963,552
1,014,291
Interest bearing checking accounts
54,019
65,302
Money market
245,187
268,143
Savings
126,592
145,024
Time deposits
23,249
12,102
Total interest-bearing deposits
449,047
490,571
Noninterest-bearing demand deposits
417,154
429,581
Total deposits
866,201
920,152
Subordinated debentures and other borrowings
28,906
15,758
Shareholders' equity
$
58,361
$
70,808
1ST CAPITAL BANCORP
CONDENSED FINANCIAL DATA – UNAUDITED
($ in 000s)
Nine Months Ended
Selected Financial Ratios
9/30/2023
9/30/2022
Return on average total assets
0.40
%
0.96
%
Return on average shareholders' equity
6.55
%
13.74
%
Net interest margin
3.32
%
3.43
%
Net interest income to average total assets
3.29
%
3.35
%
Efficiency ratio
73.03
%
62.30
%
Regulatory Capital and Ratios
9/30/2023
6/30/2023
9/30/2022
Common equity tier 1 capital
$
105,099
$
103,412
$
100,148
Tier 1 regulatory capital
$
105,099
$
103,412
$
100,148
Total regulatory capital
$
112,208
$
110,312
$
107,855
Tier 1 leverage ratio
10.32
%
10.36
%
10.22
%
Common equity tier 1 risk-based capital ratio
15.01
%
15.26
%
14.44
%
Tier 1 capital ratio
15.01
%
15.26
%
14.44
%
Total risk-based capital ratio
16.03
%
16.28
%
15.55
%
About 1st Capital Bancorp
1st Capital Bancorp is the holding company for 1st Capital Bank. The Bank’s primary target markets are commercial enterprises, professionals, real estate investors, family business entities, and residents along the Central Coast region of California. The Bank provides a wide range of credit products, including loans under various government programs such as those provided through the U.S. Small Business Administration and the U.S. Department of Agriculture. A full suite of deposit accounts also is furnished, complemented by robust cash management services. The Bank operates full-service branch offices in Monterey, Salinas, King City, San Luis Obispo and Santa Cruz. The Bank’s corporate offices are located at 150 Main Street, Suite 150, Salinas, California 93901. The Bank’s website is www.1stCapital.bank. The main telephone number is 831.264.4000. Member FDIC / Equal Opportunity Lender / SBA Preferred Lender
Forward-Looking Statements Certain of the statements contained herein that are not historical facts are “forward-looking statements” within the meaning of and subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may contain words or phrases including, but not limited, to: “believe,” “expect,” “anticipate,” “intend,” “estimate,” “target,” “plans,” “may increase,” “may fluctuate,” “may result in,” “are projected,” and variations of those words and similar expressions. All such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Factors that might cause such a difference include, among other matters, changes in interest rates; economic conditions including inflation and real estate values in California and the Bank’s market areas; governmental regulation and legislation; credit quality; competition affecting the Bank’s businesses generally; the risk of natural disasters and future catastrophic events including pandemics, terrorist related incidents and other factors beyond the Bank’s control; and other factors. The Bank does not undertake, and specifically disclaims any obligation, to update or revise any forward-looking statements, whether to reflect new information, future events, or otherwise, except as required by law.
This news release is available at the www.1stCapital.bank internet site for no charge.
1st Capital Bancorp is a bank holding company. The Company conducts the operations through its wholly owned subsidiary, 1st Capital Bank (Bank), which is a locally owned and managed community bank. The Bank's primary business is offering checking, money market, savings, and certificate of deposit accounts through its branch facilities, remote branch deposit, and various electronic means, and investing such deposits and other available funds into loans, including real estate mortgages, commercial business loans, and construction loans. The Bank serves commercial enterprises, professionals, real estate investors, family business entities, and residents along the Central Coast region of California. In addition, the Bank invests in securities and utilizes various sources of wholesale borrowings. The Bank also provides a range of fee-based services, including an array of treasury management services. It operates branch offices in Monterey, Salinas, King City, San Luis Obispo and Santa Cruz.