SOURCE: 1st Capital Bank

1st Capital Bank

April 29, 2016 16:15 ET

1st Capital Bank Announces First Quarter 2016 Financial Results; Record Net Interest Income, Deposits, Assets, and Equity

MONTEREY, CA--(Marketwired - Apr 29, 2016) -  1st Capital Bank (OTC PINK: FISB) reported net income of $704 thousand for the three months ended March 31, 2016, an increase of 0.4% compared to net income of $701 thousand in the first quarter of 2015 (which included non-recurring, non-taxable bank-owned life insurance benefits of $249 thousand) and an increase of 4.4% compared to income of $674 thousand in the fourth quarter of 2015, the immediately preceding quarter. Earnings per share were $0.17 (diluted), compared to $0.16 (diluted) for the prior quarter.

Total assets grew $40 million in the first quarter, to $554 million at March 31, 2016, compared to $514 million at December 31, 2015 as a result of growth in deposits of $39 million, or 8.3%, from $468 million at December 31, 2015 to $507 million at March 31, 2016. Core deposits likewise increased $52 million, or 12.0%. Net loans increased $3 million during the first quarter, from $371 million at December 31, 2015 to $374 million at March 31, 2016. Growth was concentrated in the multi-family residential real estate portfolio, which organically grew $7 million, or 20.3%, in the first quarter. Commercial and industrial loans increased $274 thousand, or 0.6%, while most other loan categories experienced normal amortization. Because of favorable changes in the loan portfolio mix, no provision for loan losses was required, compared to a provision of $200 thousand in the first quarter of 2015 and no provision during the fourth quarter of 2015.

Net interest income before provision for loan losses increased $135 thousand, or 3.4%, to $4.15 million, compared to $4.02 million in the prior quarter. Net interest margin declined from 3.21% in the fourth quarter of 2015 to 3.20% in the first quarter of 2016, reflecting greater on-balance sheet liquidity driven by the robust growth in deposits.

The Bank's efficiency ratio improved from 72.0% in the fourth quarter of 2015 to 71.8% in the first quarter of 2016, as revenue growth outpaced the increase in expenses, which was centered in salaries and benefits.

"We are pleased to report record net interest income for the first quarter, which is a reflection of the success our team of community-based bankers has achieved in building our portfolios of core loans and deposits in recent months," said Thomas E. Meyer, President and Chief Executive Officer. "We continue to build our presence in Monterey and San Luis Obispo Counties and expand into contiguous markets. I am happy to announce the appointment of Steven Martin as Regional President for the Salinas Valley, joining Stuart Tripp in Monterey and Mark Andino in San Luis Obispo in leading our experienced banking teams."

"The Bank experienced very strong core deposit growth among its largest customers beginning in the second half of February, as well as high prepayment speeds on its mortgage-backed securities portfolio," said Michael J. Winiarski, Chief Financial Officer. "We have taken action to reduce the level of rate-sensitive certificates of deposit in our portfolio, and continue to explore approaches to investing our excess liquidity, controlling our cost of funds, and enhancing our leverage ratio."

FIRST QUARTER HIGHLIGHTS

  • Net interest income before provision for credit losses was $4.15 million for the first quarter of 2016, compared to $4.02 million for the fourth quarter of 2015 and $3.55 million for the first quarter of 2015. Average earning assets increased from $468 million in the first quarter of 2015 to $496 million in the fourth quarter of 2015 and to $522 million in the first quarter of 2016. Net interest margin increased from 3.07% in the first quarter of 2015 to 3.21% in the fourth quarter of 2015, but declined slightly to 3.20% in the first quarter of 2016.
  • There was no provision for credit losses in the first quarter of 2016 or the fourth quarter of 2015, compared to $200 thousand provision in the first quarter of 2015.
  • The allowance for loan losses decreased from 1.59% of gross loans outstanding at March 31, 2015 to 1.57% of gross loans outstanding at December 31, 2015 and 1.56% of gross loans outstanding at March 31, 2016, reflecting the proportion of the portfolio comprising single-family and multi-family residential loans, which require smaller allowance levels in the portfolio.
  • Deposits increased $39 million, or 8.3%, to $507 million at March 31, 2016 from $468 million at December 31, 2015 and increased $70 million, or 16.1% from $437 million at March 31, 2015. 
  • Demand deposit accounts made up 38.1% of deposits at March 31, 2016, compared to 43.7% at December 31, 2015 and 36.8% at March 31, 2015.

NET INTEREST INCOME BEFORE PROVISION FOR CREDIT LOSSES

Net interest income before provision for credit losses was $4.15 million for the first quarter of 2016, an increase of $135 thousand, or 3.4%, compared to $4.02 million for the fourth quarter of 2015, and an increase of $604 thousand, or 17.0%, compared to the first quarter of 2015.

Average earning assets were $522 million during the first quarter of 2016, an increase of 5.3% compared to $496 million in the fourth quarter of 2015. The yield on earning assets was 3.33% in the first quarter, compared to 3.34% in the fourth quarter of 2015. The average balance of the loan portfolio moderately grew $3 million, or 0.8% (3.1% annualized), to $380 million, compared to the fourth quarter's average balance of $377 million; and, more importantly, the yield on the loan portfolio increased from 4.14% in the fourth quarter of 2015 to 4.24% in the first quarter of 2016. The average balance of investments available for sale ("AFS") declined $8 million sequentially, from $87 million in the fourth quarter of 2016 to $79 million in the first quarter of 2016, as the Bank experienced a high level of prepayments on its portfolio of mortgage-backed securities. The yield on AFS investments increased 23 basis points from 0.73% in the fourth quarter of 2015 to 0.96% in the first quarter of 2016. A $32 million increase in average interest-bearing cash balances, bearing interest at 0.24%, counteracted the increases in yield on the loan and investments portfolios and caused the yield on average interest-earning assets to fall one basis point.

The cost of interest-bearing liabilities increased from 0.24% in the fourth quarter of 2015 to 0.26% in the first quarter of 2016, while the average balance of interest-bearing liabilities increased from $274 million in the fourth quarter of 2015 to $280 million in the first quarter of 2016. The average balance of noninterest-bearing demand deposit accounts ("DDAs") increased $12 million, or 6.6%, from $184 million in the fourth quarter of 2015 to $196 million in the first quarter of 2016, limiting the increase in the Bank's cost of funds to one basis point, from 0.14% in the fourth quarter of 2015 to 0.15% in the first quarter of 2016.

Gross loans receivable increased $3 million, or 0.8%, to $380 million at March 31, 2016 from $377 million at December 31, 2015 and increased $31 million, or 9.0%, from $348 million outstanding at March 31, 2015. During the first quarter of 2016, the Bank's commercial real estate portfolio increased 4.9%, from $176 million to $185 million. Within the commercial real estate portfolio, loans on multi-family residential properties increased $7 million, from $37 million at December 31, 2015 to $44 million at March 31, 2016. Single-family residential loans, all of which were acquired or originated in prior quarters primarily through loan pool purchases, decreased $4 million, or 2.7%, as a result of normal amortization and prepayments of $2 million, as well as a $1 million decrease in outstanding balances on home equity lines of credit. Commercial and industrial loans outstanding increased slightly, with $43 million outstanding at December 31, 2015 and March 31, 2016. Undrawn credit lines increased from $70 million at December 31, 2015 to $78 million at March 31, 2016, largely as a result of the very strong operating results of local agricultural and agriculture-related companies.

Non-performing loans were virtually unchanged at $1.7 million at December 31, 2015 and March 31, 2016. Loans over 90 days past due (all of which were on non-performing status) were $0 and $91 thousand at December 31, 2015 and March 31, 2016, respectively

PROVISION FOR CREDIT LOSSES

The provision for credit losses is a charge against current earnings in an amount determined by management to be necessary to maintain the allowance for loan losses at a level sufficient to absorb estimated probable losses inherent in the loan portfolio in light of losses historically incurred by the Bank and adjusted for qualitative factors associated with the loan portfolio. The Bank did not record a provision for losses in the first quarter of 2016 or the fourth quarter of 2015, while the provision was $200 thousand in the first quarter of 2015. The decrease in the provision reflects the payment history of the portfolio (which included one loan with outstanding principal of $92 thousand 90 days or more past due at March 31, 2016), changes in the mix of loan types within the portfolio and their respective loss histories, as well as management's assessment of the amounts expected to be realized from certain loans identified as impaired. Impaired loans totaled $9.6 million at March 31, 2016, compared to $9.1 million at December 31, 2015, and $9.2 million at March 31, 2015.

At March 31, 2016, non-performing loans were 0.44% of the total loan portfolio, compared to 0.46% at December 31, 2015 and 0.03% at March 31, 2015. At March 31, 2016, the allowance for loan losses was 1.56% of outstanding loans, compared to 1.57% and 1.59% at December 31, 2015 and March 31, 2015, respectively, reflecting primarily the proportion of single- and multi-family mortgages in the loan portfolio. The Bank recorded recoveries of $19 thousand in the first quarter of 2016, compared to net charge-offs of $4 thousand, net of $17 thousand in recoveries, in the fourth quarter of 2015.

NON-INTEREST INCOME

Non-interest income recognized in the first quarter of 2016 was $69 thousand, a decrease of $5 thousand, or 7.6%, from $75 thousand in the fourth quarter of 2015, and a decrease of $248 thousand from the first quarter of 2015, when the Bank recognized $249 thousand of benefits from Bank-owned life insurance. The Bank has an active pipeline of loans that meet SBA parameters, but did not sell any such loans in the first quarter of 2016.

NON-INTEREST EXPENSES

Non-interest expenses increased $87 thousand, or 2.9%, to $3.03 million in the first quarter of 2016, compared to $2.95 million for the fourth quarter of 2015, and increased $374 thousand, or 14.1%, compared to the first quarter of 2015. Salaries and benefits increased $77 thousand, or 4.2%, from $1.82 million in the fourth quarter of 2015 to $1.89 million in the first quarter of 2016. Salaries and benefits, occupancy costs, and furniture/equipment expenses increased $269 thousand, $22 thousand, and $25 thousand, respectively, compared to the first quarter of 2015, reflecting the opening of the Bank's San Luis Obispo branch in 2015.

The efficiency ratio (non-interest expenses divided by the sum of net interest income before provision for loan losses and non-interest income) was 71.8% for the first quarter of 2015, compared to 72.0% for the fourth quarter of 2015 and 68.8% for the first quarter of 2015. Annualized non-interest expenses as a percent of average total assets were 2.29%, 2.33%, and 2.23% for the first quarter of 2016, the fourth quarter of 2015, and the first quarter of 2015, respectively. 

PROVISION FOR INCOME TAXES

The Bank's effective book tax rate was 40.7% in the first quarter of 2016, compared to 41.1% for the fourth quarter of 2015 and 30.4% for the first quarter of 2015. In the first quarter of 2015, the Bank realized and recognized $249 in tax-free bank-owned life insurance benefits, compared to no such benefits for the first quarter of 2016.

About 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 ("SBA") and the U.S. Department of Agriculture ("USDA"). A full suite of deposit accounts is also furnished, complemented by robust cash management services. The Bank operates full service branch offices in Monterey, Salinas, King City, and San Luis Obispo. The Bank's corporate offices are located at 5 Harris Court, Building N, Monterey, California 93940. The Bank's website is www.1stCapitalBank.com. The main telephone number is 831.264.4000. The primary facsimile number is 831.264.4001.

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 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.1stCapitalBank.com internet site for no charge.

   
   
1ST CAPITAL BANK  
CONDENSED FINANCIAL DATA  
(Unaudited)  
(Dollars in thousands, except share and per share data)  
                       
Financial Condition Data1 March 31,
2016
    December 31,
2015
    September 30,
2015
    March 31,
2015
 
Assets                              
  Cash and due from banks $ 4,300     $ 3,334     $ 3,380     $ 2,384  
  Funds held at the Federal Reserve Bank2   84,490       42,857       16,004       18,857  
  Time deposits at other financial institutions   4,233       2,241       2,241       2,739  
  Available-for-sale securities, at fair value   76,869       84,203       88,891       103,779  
  Loans held for sale   --       --       --       1,136  
  Loans receivable held for investment:                              
    Construction / land (including farmland)   16,403       17,499       17,814       21,585  
    Residential 1 to 4 units   122,437       124,741       129,564       114,688  
    Home equity lines of credit   7,342       8,594       9,636       8,352  
    Multifamily   44,360       36,862       35,202       18,148  
    Owner occupied commercial real estate   55,450       56,046       55,111       59,931  
    Investor commercial real estate   85,238       83,532       85,766       74,240  
    Commercial and industrial   42,802       42,528       45,584       43,715  
    Other loans   5,791       6,909       8,022       6,565  
      Total loans   379,823       376,711       386,699       347,224  
    Allowance for loan losses   (5,940 )     (5,921 )     (5,926 )     (5,537 )
  Net loans   373,883       370,790       380,773       341,687  
  Premises and equipment, net   1,537       1,612       1,679       1,529  
  Bank owned life insurance   2,365       2,350       2,335       2,441  
  Investment in FHLB3 stock, at cost   2,593       2,593       2,593       2,007  
  Accrued interest receivable and other assets   4,089       3,970       4,422       3,891  
Total assets $ 554,359     $ 513,950     $ 502,318     $ 480,450  
                               
Liabilities and shareholders' equity                              
  Deposits:                              
    Noninterest bearing demand deposits $ 193,334     $ 204,624     $ 175,958     $ 160,688  
    Interest bearing checking accounts   30,154       29,838       30,999       25,638  
    Money market deposits   143,616       110,490       104,876       125,739  
    Savings deposits   124,759       94,315       96,634       94,603  
    Time deposits   15,511       29,121       29,788       30,307  
      Total deposits   507,374       468,388       438,255       436,975  
  Borrowings   --       --       19,000       --  
  Accrued interest payable and other liabilities   1,554       1,073       1,336       975  
  Shareholders' equity   45,431       44,489       43,727       42,500  
Total liabilities and shareholders' equity $ 554,359     $ 513,950     $ 502,318     $ 480,450  
                               
Shares outstanding4   4,090,186       4,064,485       4,035,417       4,027,373  
Nominal and tangible book value per share $ 11.11     $ 10.95     $ 10.84     $ 10.55  
Ratio of net loans held for investment to total deposits   73.69 %     76.16 %     86.88 %     78.19 %
                               
1 = Loans held for investment are presented according to definitions applicable to the regulatory Call Report.
2 = Includes cash letters in the process of collection settled through the Federal Reserve Bank.
3 = Federal Home Loan Bank
4 = Shares outstanding and book value per share reflect the 5% stock dividend declared July 29, 2015 and payable September 30, 2015.
   
   
1ST CAPITAL BANK
CONDENSED FINANCIAL DATA
(Unaudited)
(Dollars in thousands, except share and per share data)
 
  Three Months Ended
Operating Results Data1 March 31,
2016
  December 31,
2015
  September 30,
2015
  March 31,
2015
Interest and dividend income                      
  Loans $ 4,020   $ 3,938   $ 3,718   $ 3,505
  Investment securities   190     160     149     153
  Federal Home Loan Bank stock   52     58     61     33
  Other   70     23     19     22
      Total interest and dividend income   4,332     4,179     3,947     3,713
Interest expense                      
  Interest bearing checking   3     3     3     3
  Money market deposits   86     71     77     82
  Savings deposits   78     72     73     67
  Time deposits   13     14     13     13
    Total interest expense on deposits   180     160     166     165
  Interest expense on borrowings   --     2     1     --
      Total interest expense   180     162     167     165
Net interest income   4,152     4,017     3,780     3,548
Provision for loan losses   --     --     365     200
Net interest income after provision for loan losses   4,152     4,017     3,415     3,348
                       
Noninterest income                      
  Service charges on deposits   35     34     29     31
  BOLI dividend income   15     15     15     16
  BOLI benefits   --     --     --     249
  Gain on sale of loans   --     11     38     --
  Other   19     14     25     21
    Total noninterest income   69     74     107     317
                       
                       
1ST CAPITAL BANK
CONDENSED FINANCIAL DATA, continued
(Unaudited)
(Dollars in thousands, except share and per share data)
 
  Three Months Ended
  March 31,   December 31,   September 30,     March 31,
  2016   2015   2015     2015
Noninterest expenses                        
  Salaries and benefits   1,894     1,817     1,702       1,627
  Occupancy   222     219     224       200
  Data and item processing   148     149     161       142
  Professional services   82     132     137       112
  Furniture and equipment   123     127     127       98
  Provision for unfunded loan commitments   15     19     (6 )     8
  Other   549     483     492       471
    Total noninterest expenses   3,033     2,946     2,837       2,658
Income before provision for income taxes   1,188     1,145     685       1,007
Provision for income taxes   484     471     280       306
Net income $ 704   $ 674   $ 405     $ 701
                         
Common Share Data2                        
  Earnings per share                        
    Basic $ 0.17   $ 0.17   $ 0.10     $ 0.18
    Diluted $ 0.17   $ 0.16   $ 0.10     $ 0.17
                           
  Weighted average shares outstanding                        
    Basic   4,072,586     4,052,646     4,035,543       3,984,651
    Diluted   4,120,678     4,131,661     4,108,966       4,036,301
                         
1 = Certain reclassifications have been made to prior period financial statements to conform them to the current period presentation.
2 = Earnings per share and weighted average shares outstanding have been restated to reflect the effect of the 5% stock dividend declared July 29, 2015 and payable September 30, 2015.
   
   
1ST CAPITAL BANK  
CONDENSED FINANCIAL DATA  
(Unaudited)  
(Dollars in thousands)  
   
  March 31,     December 31,     September 30,     March 31,  
Asset Quality 2016     2015     2015     2015  
  Loans past due 90 days or more and accruing interest $ --     $ --     $ --     $ --  
  Nonaccrual restructured loans   1,507       1,526       1,543       --  
  Other nonaccrual loans   183       205       358       100  
  Other real estate owned   --       --       --       --  
    $ 1,690     $ 1,731     $ 1,901     $ 100  
                                 
  Allowance for loan losses to total loans   1.56 %     1.57 %     1.53 %     1.59 %
  Allowance for loan losses to nonperforming loans   351.48 %     342.06 %     311.73 %     5,537.00 %
  Nonaccrual loans to total loans   0.44 %     0.46 %     0.49 %     0.03 %
  Nonperforming assets to total assets   0.30 %     0.34 %     0.38 %     0.02 %
                               
Regulatory Capital and Ratios                              
  Common equity tier 1 capital $ 45,230     $ 44,258     $ 43,437     $ 42,211  
  Tier 1 regulatory capital $ 45,230     $ 44,258     $ 43,437     $ 42,211  
  Total regulatory capital $ 49,423     $ 48,461     $ 47,745     $ 46,195  
  Tier 1 leverage ratio   8.58 %     8.82 %     8.94 %     8.91 %
  Common equity tier 1 risk based capital ratio   13.56 %     13.24 %     12.67 %     13.31 %
  Tier 1 risk based capital ratio   13.56 %     13.24 %     12.67 %     13.31 %
  Total risk based capital ratio   14.52 %     14.49 %     13.92 %     14.57 %
                                 
  Three Months Ended  
Selected Financial Ratios1 March 31,
2016
    December 31,
2015
    September 30,
2015
    March 31,
2015
 
  Return on average total assets 0.54 %   0.53 %   0.33 %   0.60 %
  Return on average shareholders' equity 6.24 %   6.04 %   3.68 %   6.79 %
  Net interest margin 3.20 %   3.21 %   3.12 %   3.07 %
  Net interest income to average total assets 3.17 %   3.17 %   3.08 %   3.04 %
  Efficiency ratio 71.86 %   72.03 %   72.99 %   68.77 %
                       
1 = All Selected Financial Ratios are annualized other than the Efficiency Ratio.
   
  Three Months Ended
Selected Average Balances March 31,
2016
  December 31,
2015
  September 30,
2015
  March 31,
2015
  Gross loans $ 379,982   $ 376,956   $ 355,960   $ 333,450
  Investment securities   79,454     86,974     97,070     101,339
  Federal Home Loan Bank stock   2,593     2,593     2,593     2,007
  Other interest earning assets   60,156     29,366     24,842     31,412
    Total interest earning assets $ 522,185   $ 495,889   $ 480,465   $ 468,208
  Total assets $ 527,468   $ 502,349   $ 486,149   $ 474,026
                         
  Interest bearing checking accounts $ 31,567   $ 31,352   $ 30,203   $ 23,030
  Money market deposits   123,018     114,281     113,377     120,559
  Savings deposits   109,319     96,740     97,353     90,414
  Time deposits   21,335     29,460     29,664     30,591
    Total interest bearing deposits   285,239     271,833     270,597     264,594
  Noninterest bearing demand deposits   195,684     183,569     166,990     166,608
    Total deposits $ 480,923   $ 455,402   $ 437,587   $ 431,202
  Borrowings $ --   $ 2,283   $ 3,742   $ --
  Shareholders' equity $ 45,405   $ 44,308   $ 43,697   $ 41,845
                         

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