SOURCE: 1st Capital Bank

1st Capital Bank

October 30, 2015 16:15 ET

1st Capital Bank Announces: Third Quarter and Year to Date 2015 Financial Results; Record Loans, Deposits, and Equity; Assets Exceed $500 Million

MONTEREY, CA--(Marketwired - Oct 30, 2015) - 1st Capital Bank (OTC PINK: FISB) reported net income of $405 thousand for the three months ended September 30, 2015, a decrease of 14.6% compared to net income of $470 thousand in the third quarter of 2014 and a decrease of 32.4% compared to income of $601 thousand in the second quarter of 2015, the immediately preceding quarter. Earnings per share were $0.10 (diluted), a decrease of 16% compared to $0.12 (diluted) for the same period a year ago.

 Year-to-date earnings were $1.71 million, or $0.42 per share (diluted), for the nine months ended September 30, 2015, an increase of 28.1% compared to $1.33 million, or $0.34 per share (diluted), for the nine months ended September 30, 2014.

Total assets grew $21 million in the third quarter, to $502 million at September 30, 2015, compared to $481 million at June 30, 2015. Net loans increased $39 million during the third quarter, from $342 million at June 30, 2015 to $381 million at September 30, 2014 through a combination of loan pool purchases totaling $28 million and organic growth in the portfolio. Consequently, the Bank increased its allowance for loan losses from $5.5 million at June 30, 2015 to $5.9 million at September 30, 2015 through a provision for credit losses of $365 thousand recognized in third quarter earnings, compared to no provision in the second quarter of 2015. Core deposits increased modestly, by $1 million or 0.4%, during the third quarter of 2015, from $407 million at June 30, 2015 to $408 million at September 30, 2015.

"Strong growth in our loan portfolio positions the Bank for increased net interest income and net interest margin in upcoming quarters," said Thomas E. Meyer, President and Chief Executive Officer. "I am particularly pleased with the performance of our lending team, which funded more than $33 million in new commitments in the third quarter in the course of building our core commercial & industrial and commercial real estate portfolios by more than $15 million."

"In the third quarter, the Bank's asset mix shifted away from lower yielding cash and investments and into higher yielding real estate and commercial and industrial loans," said Michael J. Winiarski, Chief Financial Officer. "At quarter end, the Bank's loan-to-deposit ratio was 86.9%, and earning assets totaled $496 million. This positions the Bank well for strong spread income in the fourth quarter."

"We believe we have the strategy and management in place to capitalize on growth opportunities in our primary market areas," said Kurt Gollnick, Chairman of the Board, "This will allow 1st Capital to increase its net interest margin through continued focus on commercial lending opportunities in our core markets."

The Bank's Board of Directors declared a 5.00% stock dividend on the Bank's outstanding common stock outstanding, payable on September 30, 2015 to shareholders of record on September 9, 2015. This is the Bank's third stock dividend, following a 2.00% stock dividend paid in April 2012 and a 5.00% stock dividend paid in June 2014.

THIRD QUARTER HIGHLIGHTS

  • Net interest income before provision for credit losses was $3.78 million for the third quarter of 2015, compared to $3.70 million for the second quarter of 2015 and $3.34 million for the third quarter of 2014. These results reflect increases in average earning assets from $438 million in the third quarter of 2014 to $474 million in the second quarter of 2015 and to $480 million in the third quarter of 2015. Net interest margin increased from 3.03% in the third quarter of 2014 to 3.13% in the second quarter of 2015 and declined to 3.12% in the third quarter of 2015.
  • Loans receivable increased $60 million, or 20.4%, to $387 million at September 30, 2015 from $327 million at December 31, 2014.
  • Non-performing loans increased from $773 thousand at December 31, 2014 and $92 thousand at June 30, 2015 to $1.9 million at September 30, 2015. Loans over 90 days past due increased $21 thousand, from $0 at December 31, 2014 and June 30, 2015 to $21 thousand at September 30, 2015, all of which was accounted for as non-performing.
  • The provision for credit losses was $365 thousand in the third quarter of 2015, compared to $250 thousand in the third quarter of 2014 and $0 in the second quarter of 2015.
  • The allowance for loan losses decreased from 1.63% of gross loans outstanding at December 31, 2014 to 1.53% at September 30, 2015, reflecting the greater proportion of single-family and multi-family residential loans in the portfolio at September 30, 2015.
  • Investments available for sale decreased $9.7 million in the third quarter, from $98 million at June 30, 2015 to $89 million at September 30, 2015, freeing up funds for additional lending.
  • Deposits increased $15 million, or 3.7%, to $438 million at September 30, 2015 from $423 million at December 31, 2015.
  • Non-interest income was $107 thousand for the third quarter of 2015, compared to $112 thousand for the second quarter of 2015 and $182 thousand (including $116 thousand gain on sale of securities) in the third quarter of 2014.
  • Non-interest expenses for the third quarter of 2015 were $2.84 million, an increase of $13 thousand sequentially from $2.82 million for the second quarter of 2015 and an increase of $387 thousand from $2.46 million recognized in the third quarter of 2014.

NET INTEREST INCOME BEFORE PROVISION FOR CREDIT LOSSES

Net interest income before provision for credit losses was $3.78 million for the third quarter of 2015, an increase of $80 thousand, or 2.1%, compared to $3.70 million for the second quarter of 2015, and an increase of $436 thousand, or 13.0%, compared to the third quarter of 2014.

Average earning assets were $480 million during the third quarter of 2015, an increase of 1.3% compared to $474 million in the second quarter of 2015. The yield on earning assets was 3.26% in the third quarter, compared to 3.27% in the second quarter. The average balance of the Bank's loan portfolio was $356 million in the third quarter of 2015, compared to $345 million in the second quarter, and the yield on the loan portfolio was 4.14% and 4.15% in the third and second quarters, respectively. In the third quarter of 2015, the average balance of investments available for sale declined $4.4 million, from $101 million in the second quarter of 2015 to $97 million in the third quarter of 2015. The yield on AFS investments was 0.61% in both the third and second quarters of 2015. The cost of interest-bearing liabilities was 0.24% in both the third and second quarters of 2015, and the average balance of interest-bearing liabilities declined slightly, from $275 million in the second quarter of 2015 to $274 million in the third quarter of 2015.

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 probable incurred losses in the loan portfolio in light of losses historically incurred by the Bank and adjusted for qualitative factors associated with the loan portfolio. The provision for losses was $365 thousand in the third quarter of 2015, compared to $0 in the second quarter of 2015 and $250 thousand in the third quarter of 2014. The increase in the provision reflects growth in the total amount of principal outstanding, which increased from $347 million at June 30, 2015 to $387 million at September 30, 2015. It also reflects 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 $9.4 million at September 30, 2015, compared to $9.2 million at June 30, 2015 and $8.6 million at December 31, 2014.

At September 30, 2015, non-performing loans as a percentage of the total loan portfolio were 0.49%, compared to 0.03% at June 30, 2015 and 0.24% at December 31, 2014. At September 30, 2015, the allowance for loan losses was 1.53% of outstanding loans, compared to 1.60% and 1.63% at June 30, 2015 and December 31, 2014, respectively, reflecting the increasing proportion of single-family mortgages in the loan portfolio.

NON-INTEREST INCOME

Non-interest income recognized in the third quarter of 2015 was $107 thousand, a decrease of $5 thousand, or 4.5%, from $112 thousand in the second quarter of 2015, and a decrease of $75 thousand from the third quarter of 2014. Gain on sales of Small Business Administration guaranteed loans declined $13 thousand, from $51 thousand in the second quarter of 2015 to $38 thousand in the third quarter of 2015. In the third quarter of 2014, the Bank recognized gains on sales of available-for-sale securities of $116 thousand; there were no comparable sales in the third quarter of 2015.

NON-INTEREST EXPENSES

Non-interest expenses increased $13 thousand, or 0.5%, to $2.84 million for the third quarter of 2015, compared to $2.82 million for the second quarter of 2015, and increased $377 thousand, or 15.3%, compared to the third quarter of 2014. Salaries and benefits decreased $42 thousand, or 2.4%, from $1.74 million in the second quarter of 2015 to $1.70 million in the third quarter of 2015. Compared to the prior quarter, base salaries increased $45 thousand, while stock-based compensation expense decreased $34 thousand as a result of employee turnover, and capitalized direct loan origination costs increased $73 thousand because of the increase in lending volume. Occupancy costs increased $24 thousand, or 12.4%, from $198 thousand in the second quarter of 2015 to $224 thousand in the third quarter of 2015 as a result of the opening of the Bank's San Luis Obispo branch.

The efficiency ratio (non-interest expenses divided by the sum of net interest income before provision for loan losses and non-interest income) was 73.0% for the third quarter of 2015, compared to 74.1% for the second quarter of 2015 and 69.8% for the third quarter of 2014. Non-interest expenses as a percent of average total assets were 2.32%, 2.36%, and 2.19% for the third quarter of 2015, the second quarter of 2015, and the third quarter of 2014, respectively. 

PROVISION FOR INCOME TAXES

The Bank's effective book tax rate increased from 39.2% for the second quarter of 2015 to 40.9% for the third quarter of 2015. The second quarter's provision reflects the Bank's settlement with the California Franchise Tax Board for certain Enterprise Zone deductions taken in 2009 and 2010.

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.

--- financial data follow ---

   
   
1ST CAPITAL BANK  
CONDENSED FINANCIAL DATA  
(Unaudited)  
(Dollars in thousands, except share and per share data)  
                         
Financial Condition Data1   September 30,
 2015
    June 30,
 2015
    December 31,
 2014
    September 30,
2014
 
Assets                                
  Cash and due from banks   $ 3,380     $ 3,261     $ 2,654     $ 2,393  
  Funds held at the Federal Reserve Bank2     16,004       23,759       31,598       8,693  
  Time deposits at other financial institutions     2,241       2,739       2,988       3,237  
  Available-for-sale securities, at fair value     88,891       98,672       96,807       101,625  
  Loans receivable held for investment:                                
    Construction / land (including farmland)     17,814       20,274       16,600       16,038  
    Residential 1 to 4 units     129,564       107,792       97,142       91,627  
    Home equity lines of credit     9,636       7,515       8,327       11,125  
    Multifamily     35,202       31,290       16,118       15,324  
    Owner occupied commercial real estate     55,111       53,848       60,064       53,278  
    Investor commercial real estate     85,766       75,210       73,095       77,873  
    Commercial and industrial     45,584       45,038       46,922       52,365  
    Other loans     8,022       6,264       8,233       5,506  
      Total loans     386,699       347,231       326,501       323,136  
    Allowance for loan losses     (5,926 )     (5,549 )     (5,325 )     (5,263 )
  Net loans     380,773       341,682       321,176       317,873  
  Premises and equipment, net     1,679       1,689       1,423       1,497  
  Bank owned life insurance     2,335       2,321       2,549       2,532  
  Investment in FHLB3 stock, at cost     2,593       2,593       2,007       2,007  
  Accrued interest receivable and other assets     4,422       3,950       3,661       3,752  
Total assets   $ 502,318     $ 480,666     $ 464,863     $ 443,609  
                                 
Liabilities and shareholders' equity                                
  Deposits:                                
    Noninterest bearing demand deposits   $ 175,958     $ 159,920     $ 181,939     $ 147,186  
    Interest bearing checking accounts     30,999       28,329       22,447       23,098  
    Money market deposits     104,876       120,449       103,804       109,367  
    Savings deposits     96,634       98,262       83,689       83,741  
    Time deposits     29,788       29,434       30,874       31,083  
      Total deposits     438,255       436,394       422,753       394,475  
  Borrowings     19,000       --       --       8,000  
  Accrued interest payable and other liabilities     1,336       1,056       929       857  
  Shareholders' equity     43,727       43,216       41,181       40,277  
Total liabilities and shareholders' equity   $ 502,318     $ 480,666     $ 464,863     $ 443,609  
                                 
Shares outstanding     4,035,417 4      3,842,905       3,779,039       3,738,784  
Nominal and tangible book value per share   $ 10.84 4    $ 11.25     $ 10.90     $ 10.77  
Ratio of net loans held for investment to total deposits     86.88 %     78.30 %     75.97 %     80.58 %
                                 
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 = September 30, 2015 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   September 30,
2015
  June 30,
2015
  December 31,
2014
  September 30,
2014
Interest and dividend income                        
  Loans   $ 3,718   $ 3,571   $ 3,566   $ 3,291
  Investment securities     149     155     148     151
  Federal Home Loan Bank stock     61     127     37     39
  Other     19     18     17     21
    Total interest and dividend income     3,947     3,871     3,768     3,502
Interest expense                        
  Interest bearing checking     3     2     6     6
  Money market deposits     77     88     73     76
  Savings deposits     73     68     61     61
  Time deposits     13     12     14     14
    Total interest expense on deposits     166     170     154     157
  Interest expense on borrowings     1     1     1     1
      Total interest expense     167     171     155     158
Net interest income     3,780     3,700     3,613     3,344
Provision for loan losses     365     --     50     250
Net interest income after provision for loan losses     3,415     3,700     3,563     3,094
                         
Noninterest income                        
  Service charges on deposits     29     29     30     28
  BOLI dividend income     15     14     17     19
  Gain on sale of loans     38     51     19     --
  Gain on sale of securities     --     --     --     116
  Other     25     18     19     19
    Total noninterest income     107     112     85     182
                         
                         
1ST CAPITAL BANK
CONDENSED FINANCIAL DATA, continued
(Unaudited)
(Dollars in thousands, except share and per share data)
 
  Three Months Ended
  September 30,
2015
    June 30,
2015
  December 31,
2014
    September 30,
2014
Noninterest expenses                          
  Salaries and benefits   1,702       1,744     1,536       1,444
  Occupancy   224       198     206       188
  Data and item processing   161       144     138       166
  Professional services   137       151     130       142
  Furniture and equipment   127       107     97       88
  Provision for unfunded loan commitments   (6 )     10     (8 )     12
  Other   492       470     485       420
    Total noninterest expenses   2,837       2,824     2,584       2,460
Income before provision for income taxes   685       988     1,064       816
Provision for income taxes   280       387     437       346
Net income $ 405     $ 601   $ 627     $ 470
                           
Common Share Data2                          
  Earnings per share                          
    Basic $ 0.10     $ 0.15   $ 0.16     $ 0.12
    Diluted $ 0.10     $ 0.15   $ 0.16     $ 0.12
                             
  Weighted average shares outstanding                          
    Basic   4,035,543       4,028,844     3,950,347       3,911,511
    Diluted   4,108,966       4,085,410     4,015,706       3,997,438
                           
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, except share and per share data)
         
    9 Months Ended
Operating Results Data1   September 30,
2015
  September 30,
2014
Interest and dividend income            
  Loans   $ 10,794   $ 9,355
  Investment securities     457     532
  Federal Home Loan Bank stock     221     100
  Other     59     64
    Total interest and dividend income     11,531     10,051
Interest expense            
  Interest bearing checking     8     21
  Money market deposits     247     218
  Savings deposits     208     182
  Time deposits     38     44
    Total interest expense in deposits     501     465
  Interest expense on borrowings     2     1
      Total interest expense     503     466
Net interest income     11,028     9,585
Provision for loan losses     565     525
Net interest income after provision for loan losses     10,463     9,060
             
Noninterest income            
  Service charges on deposits     89     92
  BOLI dividend income     45     61
  BOLI benefits     249     --
  Gain on sale of loans     89     --
  Gain on sale of securities     --     162
  Other     64     64
    Total noninterest income     536     379
             
             
1ST CAPITAL BANK
CONDENSED FINANCIAL DATA
(Unaudited)
(Dollars in thousands, except share and per share data)
         
    9 Months Ended
    September 30,
2015
  September 30,
2014
Noninterest expenses            
  Salaries and benefits     5,073     4,322
  Occupancy     622     558
  Data and item processing     447     426
  Professional services     400     399
  Furniture and equipment     332     236
  Provision for unfunded loan commitments     12     5
  Other     1,433     1,228
    Total noninterest expenses     8,319     7,174
Income before provision for income taxes     2,680     2,265
Provision for income taxes     973     932
Net income   $ 1,707   $ 1,333
             
Common Share Data2            
  Earnings per share            
    Basic   $ 0.42   $ 0.34
    Diluted   $ 0.42   $ 0.34
               
  Weighted average shares outstanding      
    Basic     4,016,532     3,886,185
    Diluted     4,077,158     3,947,024
             
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)  
   
Asset Quality   September 30,
2015
    June 30,
2015
    December 31,
2014
    September 30,
2014
 
  Loans past due 90 days or more and accruing interest   $ --     $ --     $ --     $ --  
  Nonaccrual restructured loans     1,543       --       222       224  
  Other nonaccrual loans     358       92       551       560  
  Other real estate owned     --       --       --       --  
      $ 1,901     $ 92     $ 773     $ 784  
                                   
  Allowance for loan losses to total loans     1.53 %     1.60 %     1.63 %     1.63 %
  Allowance for loan losses to nonperforming loans     311.73 %     6,031.52 %     688.87 %     671.30 %
  Nonaccrual loans to total loans     0.49 %     0.03 %     0.24 %     0.24 %
  Nonperforming assets to total assets     0.38 %     0.02 %     0.17 %     0.18 %
                                 
Regulatory Capital and Ratios                                
  Common equity tier 1 capital   $ 43,437     $ 42,941       NA       NA  
  Tier 1 regulatory capital   $ 43,437     $ 42,941     $ 40,924     $ 40,060  
  Total regulatory capital   $ 47,745     $ 46,919     $ 44,692     $ 43,789  
  Tier 1 leverage ratio     8.94 %     8.97 %     9.01 %     8.99 %
  Common equity tier 1 risk based capital ratio     12.67 %     13.57 %     NA       NA  
  Tier 1 risk based capital ratio     12.67 %     13.57 %     13.66 %     13.50 %
  Total risk based capital ratio     13.92 %     14.82 %     14.91 %     14.76 %
                                 
                                 
    Three Months Ended  
Selected Financial Ratios1   September 30,
2015
    June 30,
2015
    December 31,
2014
    September 30,
2014
 
  Return on average total assets   0.33 %   0.50 %   0.55 %   0.42 %
  Return on average shareholders' equity   3.68 %   5.60 %   6.09 %   4.66 %
  Net interest margin   3.12 %   3.13 %   3.19 %   3.03 %
  Net interest income to average total assets   3.08 %   3.10 %   3.15 %   2.98 %
  Efficiency ratio   72.99 %   74.08 %   69.88 %   69.77 %
                         
1 = All Selected Financial Ratios are annualized other than the Efficiency Ratio.
   
   
    Three Months Ended
Selected Average Balances   September 30,
2015
  June 30,
2015
  December 31,
2014
  September 30,
2014
  Gross loans   $ 355,960   $ 345,008   $ 326,795   $ 302,342
  Investment securities     97,070     101,475     99,588     106,885
  Federal Home Loan Bank stock     2,593     2,445     2,007     2,007
  Other interest earning assets     24,842     25,233     20,605     27,108
    Total interest earning assets   $ 480,465   $ 474,161   $ 448,995   $ 438,342
  Total assets   $ 486,149   $ 479,363   $ 454,480   $ 445,717
                           
  Interest bearing checking accounts   $ 30,203   $ 26,132   $ 22,480   $ 22,276
  Money market deposits     113,377     125,098     110,179     109,478
  Savings deposits     97,353     91,735     82,982     82,918
  Time deposits     29,664     29,775     30,701     31,486
    Total interest bearing deposits     270,597     272,740     246,342     246,158
  Noninterest bearing demand deposits     166,990     160,349     161,797     157,831
    Total deposits   $ 437,587   $ 433,089   $ 408,139   $ 403,989
  Borrowings   $ 3,742   $ 2,154   $ 4,435   $ 870
  Shareholders' equity   $ 43,697   $ 43,013   $ 40,857   $ 39,989
                         
                         
1ST CAPITAL BANK  
CONDENSED FINANCIAL DATA  
(Unaudited)  
(Dollars in thousands)  
    9 Months Ended  
Selected Financial Ratios1   September 30,
2015
    September 30,
2014
 
  Return on average total assets   0.48 %   0.42 %
  Return on average shareholders' equity   5.33 %   4.56 %
  Net interest margin   3.11 %   3.06 %
  Net interest income to average total assets   3.07 %   3.00 %
  Efficiency ratio   71.94 %   72.00 %
             
1 = All Selected Financial Ratios are annualized other than the Efficiency Ratio.
   
   
    9 Months Ended
Selected Average Balances1   September 30, 2015   September 30, 2014
  Gross loans   $ 344,889   $ 284,910
  Investment securities     99,946     104,554
  Federal Home Loan Bank stock     2,350     1,793
  Other interest earning assets     27,138     28,037
    Total interest earning assets   $ 474,323   $ 419,294
  Total assets   $ 479,890   $ 426,550
               
  Interest bearing checking accounts   $ 26,481   $ 22,299
  Money market deposits     119,652     104,863
  Savings deposits     93,193     81,403
  Time deposits     30,006     29,790
    Total interest bearing deposits     269,332     238,355
  Noninterest bearing demand deposits     164,650     147,618
    Total deposits   $ 433,982   $ 385,973
  Borrowings   $ 1,979   $ 643
  Shareholders' equity   $ 42,858   $ 39,050
             
1 = Certain reclassifications have been made to prior period financial statements to conform them to the current period presentation.
   

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