1st Capital Bancorp Announces Second Quarter 2021 Financial Results

SALINAS, CA / ACCESSWIRE / July 30, 2021 / 1st Capital Bancorp (the “Company”), (OTCQX:FISB), the $951 million asset bank holding company and parent company of 1st Capital Bank (the “Bank”), today reported unaudited net income of $1.95 million for the three months ended June 30, 2021, an increase of 26.8% compared to net income of $1.54 million in the first quarter of 2021, and an increase of 44.4% compared to net income of $1.35 million in the second quarter of 2020. Earnings per share were $0.34 (diluted) for the second quarter of 2021, compared to $0.27 (diluted) for the prior quarter, and $0.24 (diluted) for the second quarter of 2020.

Financial Highlights

Performance highlights for the quarter ended June 30, 2021, as compared to quarter ending June 30, 2020, and the quarter ending March 31, 2021:

  • For the quarter ended June 30, 2021, the Company’s return on average equity was 10.36%, as compared to 7.74% and 8.29% for the quarter ended June 30, 2020 and March 31, 2021, respectively.
  • For the quarter ended June 30, 2021, the Company’s return on average assets was 0.89%, as compared to 0.75% and 0.77% for the quarter ended June 30, 2020 and March 31, 2021, respectively.
  • For the quarter ended June 30, 2021, the Company’s net interest margin was 3.54%, as compared to 3.65% and 3.55% for the three months ended June 30, 2020 and March 31, 2021, respectively.
  • For the quarter ended June 30, 2021, the Company’s efficiency ratio was 64.79%, as compared to 60.79% and 69.69% for the three months ended June 30, 2020 and March 31, 2021, respectively.
  • For the quarter ended June 30, 2021, the Company’s provision expense for loan losses was $0, as compared to $650 thousand and $0 for the three months ended June 30, 2020 and March 31, 2021, respectively.
  • As of June 30, 2021, the Company’s nonperforming assets to total assets was 0.23%, as compared to 0.07% and 0.35% for the three months ended June 30, 2020 and March 31, 2021, respectively.
  • As of June 30, 2021, the Company reported total assets, total deposits, and total loans of $950.7 million, $853.6 million, and $608.1 million, respectively.

“We are pleased to report solid second quarter results,” said Samuel D. Jimenez, chief executive officer. “The quarter can be characterized by continuing core deposit growth in conjunction with substantial inflows from Paycheck Protection Program (PPP) forgiveness, and prepaying residential mortgage loans. While organic core loan demand remains solid, we strategically invested the majority of these inflows in bond purchases and a consumer loan pool. With these balance sheet actions along with the previously announced subordinated debt issuance, we are well positioned for continued growth for the remainder of 2021 and beyond.”

1ST CAPITAL BANCORP
CONDENSED FINANCIAL DATA – UNAUDITED
($000s, except per share data)
 
  For the Three Months Ended     For the Six Months Ended  
Operating Results Data
  6/30/2021     6/30/2020     Change     6/30/2021     6/30/2020     Change  
                                                 
Interest income
  $ 7,800     $ 6,562     $ 1,238     $ 14,908     $ 12,750     $ 2,158  
Interest expense
    295       240       55       537       563       (26 )
Net interest income
    7,505       6,322       1,183       14,371       12,187       2,184  
Provision for loan losses
          650       (650 )           1,475       (1,475 )
Noninterest income
    191       181       10       381       469       (88 )
Noninterest expenses
    4,986       3,953       1,033       9,902       8,448       1,454  
Income before provision for income taxes
    2,710       1,900       810       4,850       2,733       2,117  
Provision for income taxes
    760       550       210       1,363       775       588  
Net income
  $ 1,950     $ 1,350     $ 600     $ 3,487     $ 1,958     $ 1,529  
                                                 
Assets
  6/30/2021     3/31/2021     12/31/2020     9/30/2020  
Cash and due from banks
  $ 17,876     $ 11,497     $ 9,304     $ 6,966  
Funds held at the Federal Reserve Bank
    43,615       47,158       97,462       38,715  
Available-for-sale securities, at fair value
    264,572       181,201       106,214       59,649  
Loans
    608,101       619,436       605,154       628,640  
Allowance for loan losses
    (8,840 )     (8,828 )     (8,816 )     (8,804 )
Net loans
    599,261       610,608       596,338       619,836  
Other Assets
    25,379       24,003       23,233       23,856  
Total assets
  $ 950,703     $ 874,467     $ 832,551     $ 749,022  
 
                               
Liabilities and Shareholders’ Equity
  6/30/2021     3/31/2021     12/31/2020     9/30/2020  
Noninterest bearing demand deposits
  $ 412,108     $ 401,123     $ 386,711     $ 356,730  
Interest bearing checking accounts
    57,421       58,612       65,686       54,228  
Money market
    241,164       185,841       159,509       128,039  
Savings
    129,176       127,940       121,148       105,431  
Time
    13,761       14,317       15,284       17,147  
Interest bearing deposits
    441,522       386,710       361,627       304,845  
Total deposits
    853,630       787,833       748,338       661,575  
Other liabilities
    19,779       12,249       9,880       15,059  
Shareholders’ equity
    77,294       74,385       74,333       72,388  
Total liabilities and shareholders’ equity
  $ 950,703     $ 874,467     $ 832,551     $ 749,022  
 
                               
Shares outstanding
    5,581,848       5,571,545       5,570,021       5,543,393  
Earnings per share basic
  $ 0.35     $ 0.28     $ 0.29     $ 0.17  
Earnings per share diluted
  $ 0.34     $ 0.27     $ 0.28     $ 0.17  
Nominal and tangible book value per share
  $ 13.85     $ 13.35     $ 13.35     $ 13.06  
                                 

Net Interest Income and Net Interest Margin
The Company’s second quarter 2021 net interest income increased $1.18 million or 18.71% as compared with the quarter ending June 30, 2020 and $639 thousand or 9.31%, compared with the quarter ending March 31, 2021. The increase from the same period a year ago was driven by higher investment income, income generated by a $25 million consumer loan purchase, and increased revenue recognition from the Paycheck Protection Program (PPP) loans. The increase over the trailing quarter was primarily driven by income generated by the $25 million consumer loan purchase, and by higher investment income.

The Company’s net interest margin decreased by 11 basis points (bps) or 3.01% when compared to the quarter ending June 30, 2020, and was generally flat relative to the quarter ending March 31, 2021. The 11 bps decrease compared to the same period a year ago was driven by the Company’s rate and mix of its earning assets.

In general terms, prepaying and repricing higher yielding loans have been substantially replaced and supplemented with lower yielding investment securities purchased in the current year. The negative impact has been partially offset by higher yields resulting from fee recognition on PPP loan forgiveness, and to a lesser extent, the impact of the higher yielding consumer loans purchased during the recent quarter.

Provision for Loan Losses
The Company did not make any provisions for loan losses in the quarter ending June 30, 2021, as compared to $650 thousand and $0 in the quarter ending June 30, 2020, and March 31, 2021, respectively. Uncertainty surrounding COVID-19, and the potential negative impact on our clients and asset quality dictated the provisions made in the same period a year ago. Improving economic conditions and diminished concern with the Company’s asset quality eliminated the need for any additional loan loss provisions for the previous sequential four quarters.

Noninterest Expenses
The Company’s second quarter 2021 non-interest expenses increased $1.03 million, or 26.1%, to $4.99 million in the second quarter of 2021, compared to $3.95 million for the second quarter of 2020, and increased $68 thousand, or 1.4%, compared to $4.92 million recognized in the first quarter of 2021.

The increase, as compared to the prior year comparative period is centered in salaries and benefits. In regards to the same period ending June 30, 2020, the addition of 11 employees, including a team of Relationship Managers in our San Luis Obispo market, and the opening of our Santa Cruz branch largely accounted for the increased level. In addition, severance costs associated with the departure of two senior officers materially contributed to the comparative period increase. Absent the severance costs, the Company’s Efficiency Ratio would have been reported at 62.33% for the three months ended June 30, 2021.

Balance Sheet Summary
The Company’s total assets increased $76.2 million or 8.72% to $950.7 million as compared to $874.5 million at March 31, 2021.

Total loans outstanding were $608.1 million as of June 30, 2021. This represents an $16.1 million decrease or 2.58% from the June 30, 2020 outstanding balance of $624.2 million. The decrease in loan level reflected payoff activity in the purchased residential loan portfolio and PPP loan forgiveness, offset by higher originated commercial real estate core loans, and the purchase of a $25 million consumer loan pool on May 12, 2021.

The pool purchase represents approximately 1,600 unsecured personal loans, primarily debt consolidation, with an average FICO of 709, an average interest rate of approximately 16%, and an average remaining life of approximately 40 months.

PPP loans outstanding were $84.9 million as of June 30, 2021, and included a deferred fee balance of $2.2 million. At June 30, 2020, PPP loans outstanding were $100.7 million and included a deferred fee balance of $2.8 million.

The investment portfolio increased $202.1 million to $264.6 million from an outstanding balance of $62.5 million as of June 30, 2020. Incoming cashflows from deposit growth and prepaying earning assets were significantly deployed in bonds. The majority of the investments were made in mortgage-backed securities, floating rate securities, and municipal securities.

Total deposits were $853.6 million as of June 30, 2021. This represents a $202.8 million increase or 31.16% from June 30, 2020 outstanding balance of $650.8 million. A significant portion of this growth was associated with PPP loan proceeds deposited with the Bank. Growth in noninterest-bearing demand deposit accounts accounted $69.1 million or 34.07% of the total deposit growth over the 12 months ending on June 30, 2021. The balance of the deposit growth was distributed among interest-bearing deposit accounts with the exception of time deposits which decreased by approximately $5.3 million to $13.8 million.

During the quarter, the Company completed a private placement of $15 million in fixed-to-floating rate subordinated notes due June 30, 2031 to certain qualified buyers and accredited investors. The notes carry a fixed rate of 4.0% until June 30, 2026. Thereafter, the notes will pay interest at a floating rate, reset quarterly, equal to the then current three-month SOFR plus 339 basis points. The subordinated notes are redeemable by the Company at its option, in whole or in part, on or after June 30, 2026. The Company intends to use the net proceeds to support organic growth and for general corporate purposes.

Asset Quality
At June 30, 2021, non-performing assets were 0.23% of the Company’s total assets, compared with 0.35% at March 31, 2021. At June 30, 2021, the allowance for loan losses was 1.46% of outstanding loans, compared to 1.43% at March 31, 2021. The Bank recorded net recoveries of $12 thousand in each of the two quarters of 2021.

As of June 30, 2021, the Company does not have any outstanding loan deferments or forbearances stemming from COVID-19.

1ST CAPITAL BANCORP
CONDENSED FINANCIAL DATA – UNAUDITED
($ in 000s)
Assets
  6/30/2021     6/30/2020     3/31/2021     12/31/2020  
Cash and due from banks
  $ 17,876     $ 6,719     $ 11,497     $ 9,304  
Funds held at the Federal Reserve Bank
    43,615       29,056       47,158       97,462  
Available-for-sale securities, at fair value
    264,572       62,473       181,201       106,214  
Loans held for sale
    1,791       488              
Construction/land (including farmland)
    22,091       16,372       19,331       17,097  
Residential 1 to 4 units
    75,906       127,192       87,736       102,688  
Home equity lines of credit
    6,669       6,630       5,400       5,955  
Multifamily
    77,183       71,795       84,942       84,704  
Owner occupied commercial real estate
    81,972       70,478       68,189       72,427  
Investor commercial real estate
    172,776       172,219       176,709       174,437  
Commercial and industrial
    49,147       47,717       49,314       47,550  
Paycheck Protection Program
    84,866       100,652       118,381       90,382  
Other loans
    35,700       10,638       9,434       9,914  
Total loans held for investment
    606,310       623,693       619,436       605,154  
Allowance for loan losses
    (8,840 )     (8,093 )     (8,828 )     (8,816 )
Net loans held for investment
    597,470       615,600       610,608       596,338  
Other assets
    25,379       22,355       24,003       23,233  
Total assets
  $ 950,703     $ 736,691     $ 874,467     $ 832,551  
                                 
Liabilities and Shareholders’ Equity
  6/30/2021     6/30/2020     3/31/2021     12/31/2020  
Noninterest bearing demand deposits
  $ 412,108     $ 343,042     $ 401,123     $ 386,711  
Interest bearing checking accounts
    57,421       46,774       58,612       65,686  
Money market
    241,164       138,796       185,841       159,509  
Savings
    129,176       103,152       127,940       121,148  
Time
    13,761       19,031       14,317       15,284  
Interest bearing deposits
    441,522       307,753       386,710       361,627  
Total deposits
    853,630       650,795       787,833       748,338  
Other liabilities
    19,779       14,856       12,249       9,880  
Shareholders’ equity
    77,294       71,040       74,385       74,333  
Total liabilities and shareholders’ equity
  $ 950,703     $ 736,691     $ 874,467     $ 832,551  
                                 
1ST CAPITAL BANCORP
CONDENSED FINANCIAL DATA – UNAUDITED
($ in 000s)
 
  Three Months Ended     Six Months Ended  
Operating Results Data
  6/30/2021     6/30/2020     6/30/2021     6/30/2020  
Loans
  $ 6,976     $ 6,234     $ 13,577     $ 11,917  
Investment securities
    750       296       1,205       671  
Federal Home Loan Bank stock
    66       26       110       88  
Other income
    8       6       16       74  
Interest expense
    295       240       537       563  
Net interest income
    7,505       6,322       14,371       12,187  
Provision for loan losses
          650             1,475  
Noninterest income
    191       181       381       469  
 
                               
Salaries and benefits expense
    3,222       2,393       6,365       5,217  
Occupancy expense
    390       353       808       716  
Data and item processing
    265       206       515       427  
Furniture and equipment
    114       189       231       380  
Professional services
    162       167       341       328  
Other
    833       645       1,642       1,380  
Total noninterest expenses
    4,986       3,953       9,902       8,448  
Income before provision for income taxes
    2,710       1,900       4,850       2,733  
Provision for income taxes
    760       550       1,363       775  
Net income
  $ 1,950     $ 1,350     $ 3,487     $ 1,958  
                                 
Asset Quality
  6/30/2021     3/31/2021     12/31/2020     9/30/2020  
Loans past due 90 days or more and accruing interest
  $     $     $     $  
Nonaccrual restructured loans
                       
Other nonaccrual loans
    2,161       3,100       1,299       1,535  
Other real estate owned
                       
Total nonperforming assets
  $ 2,161     $ 3,100     $ 1,299     $ 1,535  
 
                               
Allowance for loan losses to total loans
    1.46 %     1.43 %     1.46 %     1.40 %
Allowance for loan losses to nonperforming loans
    409.07 %     284.77 %     678.68 %     573.55 %
Nonaccrual loans to total loans
    0.36 %     0.50 %     0.21 %     0.24 %
Nonperforming assets to total assets
    0.23 %     0.35 %     0.16 %     0.20 %
                                 
1ST CAPITAL BANCORP
CONDENSED FINANCIAL DATA – UNAUDITED
($ in 000s)
 
  Three Months Ended     Six Months Ended  
Selected Average Balances
  6/30/2021     6/30/2020     6/30/2021     6/30/2020  
Gross loans
  $ 620,093     $ 608,076     $ 617,604     $ 563,772  
Investment securities
    202,246       63,034       163,658       64,099  
Federal Home Loan Bank stock
    3,834       3,525       3,685       3,513  
Other interest earning assets
    30,287       22,519       37,811       21,991  
Total interest earning assets
  $ 856,460     $ 697,154     $ 822,758     $ 653,375  
 
                               
Total assets
  $ 881,495     $ 721,907     $ 847,719     $ 677,765  
Interest bearing checking accounts
  $ 59,503     $ 43,774     $ 59,366     $ 42,933  
Money market
    200,199       152,748       179,197       142,555  
Savings
    127,046       101,291       125,701       102,224  
Time deposits
    14,279       19,247       14,483       19,307  
Total interest bearing deposits
    401,027       317,060       378,747       307,019  
Noninterest bearing demand deposits
    398,007       326,152       385,085       294,284  
Total deposits
  $ 799,034     $ 643,212     $ 763,832     $ 601,303  
Borrowings
  $ 1,641     $ 3,736     $ 3,311     $ 1,869  
Shareholders’ equity
  $ 75,481     $ 69,982     $ 75,352     $ 69,494  
 
                               
    Three Months Ended     Six Months Ended  
Selected Financial Ratios
  6/30/2021     6/30/2020     6/30/2021     6/30/2020  
Return on average total assets
    0.89 %     0.75 %     0.83 %     0.58 %
Return on average shareholders’ equity
    10.36 %     7.74 %     9.33 %     5.65 %
Net interest margin
    3.54 %     3.65 %     3.54 %     3.75 %
Net interest income to average total assets
    3.41 %     3.51 %     3.42 %     3.61 %
Efficiency ratio
    64.79 %     60.79 %     67.12 %     66.75 %
                                 
Regulatory Capital and Ratios
  6/30/2021     3/31/2021     12/31/2020     9/30/2020  
Common equity tier 1 capital
  $ 76,158     $ 74,132     $ 72,461     $ 70,831  
Tier 1 regulatory capital
  $ 76,158     $ 74,132     $ 72,461     $ 70,831  
Total regulatory capital
  $ 83,518     $ 80,863     $ 78,957     $ 77,117  
Tier 1 leverage ratio
    8.64 %     9.14 %     9.44 %     9.58 %
Common equity tier 1 risk based capital ratio
    12.99 %     13.83 %     14.01 %     14.16 %
Tier 1 capital ratio
    12.99 %     13.83 %     14.01 %     14.16 %
Total risk based capital ratio
    14.24 %     15.08 %     15.27 %     15.42 %
                                 

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.

For further information, please contact:
Samuel D. Jimenez
Chief Executive Officer
831.264.4057 office
Sam.Jimenez@1stCapitalBank.com

SOURCE: 1st Capital Bank

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