1st Capital Bancorp Announces Third Quarter 2022 Financial Results
October 28, 2022 at 04:00 pm EDT
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SALINAS, Calif., Oct. 28, 2022 (GLOBE NEWSWIRE) -- 1st Capital Bancorp (the “Company”), (OTCQX: FISB), the $994.6 million asset bank holding company and parent company of 1st Capital Bank (the “Bank”), today reported unaudited net income of $2.66 million for the quarter ended September 30, 2022, a 18.0% increase compared to net income of $2.26 million for the quarter ended September 30, 2021, and a 5.6% increase compared to net income of $2.52 million for the quarter ended June 30, 2022.
Financial Highlights Performance highlights for the quarter ended September 30, 2022, as compared to the quarter ended September 30, 2021, and the quarter ended June 30, 2022:
Earnings per share (diluted) were $0.48 for the third quarter of 2022, as compared to $0.40 and $0.45 for the quarters ended September 30, 2021 and June 30, 2022, respectively.
For the quarter ended September 30, 2022, the Company's return on average equity was 16.44%, as compared to 11.35% and 14.82% for the quarters ended September 30, 2021 and June 30, 2022, respectively.
For the quarter ended September 30, 2022, the Company’s return on average assets was 1.04%, as compared to 0.92% and 0.98% for the quarters ended September 30, 2021 and June 30, 2022, respectively.
For the quarter ended September 30, 2022, the Company’s net interest margin was 3.46%, as compared to 3.26% and 3.58% for the quarters ended September 30, 2021 and June 30, 2022 and, respectively.
Pretax, pre-provision income for the quarter ended September 30, 2022 totaled $3.7 million, as compared to $3.2 million and $3.5 million for the quarters ended September 30, 2021 and June 30, 2022, respectively.
For the quarter ended September 30, 2022, the Company’s efficiency ratio was 59.54%, as compared to 60.58% and 61.89% for the quarters ended September 30, 2021 and June 30, 2022, respectively.
The Company recorded no provision expense for the quarters ended September 30, 2022, September 30, 2021 and June 30, 2022.
As of September 30, 2022, the Company’s nonperforming assets to total assets was 0.04%, as compared to 0.11% and 0.01% for the quarters ended September 30, 2021 and June 30, 2022, respectively.
As of September 30, 2022, the Company reported total assets, total deposits, and total loans of $994.6 million, $922.2 million, and $579.2 million, respectively.
Federal regulatory capital ratios for the quarters ended September 30, 2022, June 30, 2022 and September 30, 2021 exceed well capitalized thresholds.
“We are pleased with the continuing positive trends in our Company's operating performance,” commented Sam Jimenez, chief executive officer. “While the economic outlook remains uncertain, the Company is well positioned with strong asset quality and liquidity positions, reflecting a relatively low risk profile.”
Net Interest Income and Net Interest Margin
The Company's third quarter 2022 net interest income decreased $253 thousand, or 2.86%, to $8.59 million as compared with $8.84 million for the quarter ended June 30, 2022. Loan interest income, excluding PPP income, increased $45 thousand, or 0.65%, to $6.96 million for the quarter ended September 30, 2022 compared to $6.91 million for the quarter ended June 30, 2022. Interest and fee income related to PPP loans decreased $292 thousand to $52 thousand for the quarter ended September 30, 2022, compared to $344 thousand for the quarter ended June 30, 2022. PPP loans have been fully forgiven in the third quarter 2022.
The Company's net interest margin increased by 20 basis points (bps), or 6.03%, to 3.46% when compared to 3.26% for the quarter ended September 30, 2021. The increase was primarily driven by the Company’s mix of average interest earning assets as cash was deployed into higher yielding loans and leases and investment securities. Interest expense increased $173 thousand, or 34.93%, to $669 thousand for the quarter ended September 30, 2022 compared to $496 thousand for the quarter ended September 30, 2021 due to an increase in average balances of interest-bearing deposits and interest expense associated with the cap corridor. Interest expense includes $169 thousand of interest expense associated with subordinated debt recognized in each period.
Provision for Loan Losses
Stable credit quality resulted in no loan loss provision in the quarters ended September 30, 2022, September 30, 2021 and June 30, 2022.
Noninterest Expenses
The Company's total non-interest expense increased $525 thousand, or 10.81%, to $5.38 million in the quarter ended September 30, 2022, compared to $4.85 million for the quarter ended September 30, 2021. The increase reflects the salary and benefit costs of senior leadership positions filled in the fourth quarter of 2021.
Balance Sheet Summary
The Company's total assets decreased $12.90 million, or 1.3%, to $994.6 million as compared to $1.01 billion at September 30, 2021.
Total loans outstanding were $586.8 million as of September 30, 2022, representing a $21.8 million, or 3.9%, increase from the September 30, 2021 outstanding balance of $565.0 million. Excluding the $42.4 million decline in PPP loan balances, loans increased $64.2 million, or 12.3%, at September 30, 2022 compared to September 30, 2021. The increase includes purchased lease pools with outstanding balances of $45.0 million and a $10 million increase in consumer loan pool balances, along with growth in commercial real estate loan originations, partially offset by declines in construction and residential loans outstanding.
PPP loans outstanding were $0 as of September 30, 2022, compared to $42.4 million at September 30, 2021.
Loan type (dollars in thousands)
9/30/2022
% of Total Loans
6/30/2022
% of Total Loans
9/30/2021
% of Total Loans
Construction / land (including farmland)
$
12,403
2.1
%
$
18,502
3.2
%
$
25,476
4.5
%
Residential 1 to 4 units
56,592
9.6
%
57,381
9.8
%
68,438
12.1
%
Home equity lines of credit
4,909
0.8
%
5,392
0.9
%
7,601
1.3
%
Multifamily
82,936
14.1
%
76,168
13.0
%
81,268
14.4
%
Owner occupied commercial real estate
111,097
18.9
%
111,283
19.0
%
80,166
14.2
%
Investor commercial real estate
188,930
32.2
%
186,448
31.8
%
185,001
32.7
%
Commercial and industrial
39,804
6.8
%
43,652
7.4
%
40,719
7.2
%
Paycheck Protection Program
-
0.0
%
1,986
0.3
%
42,414
7.5
%
Leases
45,049
7.7
%
34,095
5.8
%
-
0.0
%
Consumer
30,902
5.3
%
36,372
6.2
%
20,581
3.6
%
Other loans
14,176
2.4
%
14,784
2.6
%
13,366
2.4
%
Total loans
586,798
100.0
%
586,063
100.0
%
565,030
100.0
%
Allowance for loan losses
(7,560
)
(8,066
)
(8,830
)
Net loans held for investment
$
579,238
$
577,997
$
556,200
The investment portfolio increased $34.8 million, or 11.7%, to $332.3 million from $297.5 million at September 30, 2021. The unrealized loss associated with the Company’s available-for-sale investment security portfolio increased from $38.2 million at June 30, 2022 to $40.1 million at September 30, 2022 as market yields continued to negatively impact portfolio valuation.
Total deposits were $922.2 million as of September 30, 2022. This represents a $10.5 million, or 1.1% increase from the September 30, 2021 balance of $911.7 million. Growth in money market balances of $56.5 million drove deposit growth, offset by noninterest bearing balances declining $14.1 million. Noninterest bearing balances comprised 46.0% and 48.1% of total deposit balances at September 30, 2022 and September 30, 2021, respectively.
Deposit type (dollars in thousands)
9/30/2022
% of Total Deposits
6/30/22
% of Total Deposits
9/30/2021
% of Total Deposits
Interest bearing checking accounts
$
69,258
7.5
%
$
62,780
6.8
%
$
72,867
8.0
%
Money market
308,772
33.5
%
290,106
31.3
%
252,257
27.7
%
Savings
109,653
11.9
%
143,215
15.4
%
135,736
14.9
%
Time
10,256
1.1
%
13,509
1.5
%
12,422
1.4
%
Total interest-bearing deposits
497,889
54.0
%
509,609
54.9
%
473,281
51.9
%
Noninterest-bearing
424,312
46.0
%
418,692
45.1
%
438,445
48.1
%
Total deposits
$
922,201
100.0
%
$
928,301
100.0
%
$
911,726
100.0
%
Shareholder’s equity totaled $48.3 million at September 30, 2022, a decline of $30.2 million, or 38.5%, compared to $78.5 million at September 30, 2021. This is reflective of the increase in unrealized losses on the investment security portfolio, the impact of which flows through accumulated other comprehensive income, a component of equity. At September 30, 2022 $72.8 million in bonds are classified as held-to-maturity, approximately 22% of the total investment portfolio. The unrealized losses on these held-to-maturity bonds are captured in AOCI at the transfer date and amortize over the life of the bonds, with interest rate environment changes having no further impact on the unrealized loss position of these bonds.
In the second quarter of 2022, the Company entered into a cap corridor transaction with a $100 million notional amount designed to hedge a portion of deposit interest expense and to partially mitigate the future investment portfolio valuation impact of increasing interest rates. The corridor qualifies for hedge accounting and is carried at fair value on the balance sheet with changes in fair value flowing through AOCI. The fair value of the hedge increased $1.0 million in the third quarter, positively impacting AOCI, and is carried on the balance sheet at a fair value of $3.1 million at September 30, 2022.
Stock Repurchase Activity
The Company announced a Stock Repurchase Program on December 3, 2021 and subsequently has repurchased a total of 181,589 shares to date at a weighted average price of $15.19. Repurchase activity has been suspended through the remainder of 2022.
Asset Quality
At September 30, 2022, non-performing assets were 0.04% of the Company’s total assets, compared with 0.11% at September 30, 2021. The allowance for loan losses was 1.29% of outstanding loans at September 30, 2022, compared to 1.56% at September 30, 2021. The Company had $0 and $921 thousand in nonaccrual loans at September 30, 2022 and September 30, 2021, respectively. The Company recorded net charge-offs of $506 thousand in the quarter ended September 30, 2022 compared to $10 thousand in the quarter ended September 30, 2021. Charge-offs were within the purchased consumer loan pools.
Asset Quality (dollars in thousands)
9/30/2022
6/30/2022
9/30/2021
Loans past due 90 days or more and accruing interest
$
409
$
145
$
146
Other nonaccrual loans
-
-
921
Other real estate owned
-
-
-
Total nonperforming assets
$
409
$
145
$
1,067
Allowance for loan losses to total loans
1.29
%
1.38
%
1.56
%
Allowance for loan losses to nonperforming loans
1848.34
%
5562.76
%
827.55
%
Nonaccrual loans to total loans
0.00
%
0.00
%
0.16
%
Nonperforming assets to total assets
0.04
%
0.01
%
0.11
%
As of September 30, 2022, the Company had no outstanding loan deferments or forbearances stemming from COVID-19.
1ST CAPITAL BANCORP CONDENSED FINANCIAL DATA - UNAUDITED ($ in 000s except per share data)
Assets
9/30/2022
6/30/2022
9/30/2021
Cash and due from banks
$
41,842
$
35,450
$
129,673
Investment securities available-for-sale
259,472
298,483
297,456
Investment securities held-to-maturity
72,818
45,223
--
Loans and leases held for investment
586,798
586,063
565,031
Allowance for loan and lease losses
(7,560
)
(8,066
)
(8,830
)
Net loans and leases held for investment
579,238
577,997
556,201
Other Assets
41,241
32,926
24,186
Total assets
$
994,611
$
990,079
$
1,007,516
Liabilities and Shareholders' Equity
Deposits:
Noninterest bearing demand deposits
$
424,312
$
418,692
$
438,445
Interest-bearing accounts
497,889
509,609
473,281
Total deposits
922,201
928,301
911,726
Subordinated debentures
14,719
14,701
14,644
Other borrowings
--
--
--
Other liabilities
9,415
8,386
2,665
Shareholders' equity
48,276
38,691
78,481
Total liabilities and shareholders' equity
$
994,611
$
990,079
$
1,007,516
Shares outstanding
5,476,092
5,467,966
5,587,878
Earnings per share basic
$
0.49
$
0.46
$
0.40
Earnings per share diluted
$
0.48
$
0.45
$
0.40
Nominal and tangible book value per share
$
8.82
$
7.08
$
14.04
Three Months Ended
Operating Results Data
9/30/2022
6/30/2022
9/30/2021
Interest and dividend income
Loans
$
7,011
$
7,258
$
7,121
Investment securities
2,055
2,038
1,000
Federal Home Loan Bank stock
62
59
60
Other income
126
56
29
Total interest and dividend income
9,254
9,411
8,210
Interest expense
669
573
495
Net interest income
8,585
8,838
7,715
Provision for loan losses
-
-
-
Net interest income after provision for loan losses
8,585
8,838
7,715
Noninterest income
446
290
294
Noninterest expenses
Salaries and benefits expense
3,243
3,457
2,737
Occupancy expense
451
463
422
Data and item processing
279
265
288
Furniture and equipment
127
150
119
Professional services
168
114
148
Other
1,109
1,201
1,138
Total noninterest expenses
5,377
5,650
4,852
Income before provision for income taxes
3,654
3,478
3,157
Provision for income taxes
992
958
901
Net income
$
2,662
$
2,520
$
2,256
Three Months Ended
Selected Average Balances
9/30/2022
6/30/2022
9/30/2021
Gross loans
$
594,624
$
593,990
$
588,133
Investment securities
352,564
373,853
279,122
Federal Home Loan Bank stock
4,058
4,024
3,948
Other interest earning assets
34,162
31,158
80,909
Total interest earning assets
985,408
1,003,025
952,112
Total assets
1,018,730
1,027,269
977,147
Interest-bearing checking accounts
65,171
64,988
64,009
Money market
303,802
278,646
232,979
Savings
126,511
149,930
134,724
Time deposits
12,376
12,350
13,534
Total interest-bearing deposits
507,860
505,914
445,246
Noninterest bearing demand deposits
423,166
427,351
433,518
Total deposits
931,026
933,265
878,764
Subordinated debentures and other borrowings
15,055
17,546
14,646
Shareholders' equity
$
64,227
$
68,227
$
78,624
Three Months Ended
Selected Financial Ratios
9/30/2022
6/30/2022
9/30/2021
Return on average total assets
1.04
%
0.98
%
0.92
%
Return on average shareholders' equity
16.44
%
14.82
%
11.35
%
Net interest margin
3.46
%
3.58
%
3.26
%
Net interest income to average total assets
3.34
%
3.56
%
3.13
%
Efficiency ratio
59.54
%
61.89
%
60.58
%
Nine Months Ended
Operating Results Data
9/30/2022
9/30/2021
Interest and dividend income
Loans
$
21,165
$
20,698
Investment securities
5,650
2,205
Federal Home Loan Bank stock
179
169
Other income
195
47
Total interest and dividend income
27,188
23,119
Interest expense
1,772
1,033
Net interest income
25,417
22,086
Provision for loan losses
-
-
Net interest income after provision for loan losses
25,417
22,086
Noninterest income
1,054
675
Noninterest expenses
Salaries and benefits expense
10,144
9,103
Occupancy expense
1,348
1,230
Data and item processing
807
803
Furniture and equipment
417
349
Professional services
451
488
Other
3,324
2,782
Total noninterest expenses
16,492
14,755
Income before provision for income taxes
9,979
8,006
Provision for income taxes
2,705
2,263
Net income
$
7,274
$
5,743
Nine Months Ended
Selected Average Balances
9/30/2022
9/30/2021
Gross loans
$
586,294
$
607,673
Investment securities
362,879
202,569
Federal Home Loan Bank stock
4,011
3,773
Other interest earning assets
36,790
52,335
Total interest earning assets
989,974
866,350
Total assets
1,014,291
891,336
Interest bearing checking accounts
65,302
60,931
Money market
268,143
197,320
Savings
145,024
128,742
Time deposits
12,102
14,163
Total interest-bearing deposits
490,571
401,156
Noninterest bearing demand deposits
429,581
401,407
Total deposits
920,152
802,563
Subordinated debentures and other borrowings
15,758
7,131
Shareholders' equity
$
70,808
$
76,552
Nine Months Ended
Selected Financial Ratios
9/30/2022
9/30/2021
Return on average total assets
0.96
%
0.86
%
Return on average shareholders' equity
13.74
%
10.03
%
Net interest margin
3.43
%
3.44
%
Net interest income to average total assets
3.35
%
3.31
%
Efficiency ratio
62.30
%
64.82
%
Regulatory Capital and Ratios
9/30/2022
6/30/2022
9/30/2021
Common equity tier 1 capital
$
100,148
$
97,226
$
78,702
Tier 1 regulatory capital
$
100,148
$
97,226
$
78,702
Total regulatory capital
$
107,855
$
105,418
$
86,122
Tier 1 leverage ratio
10.22
%
9.62
%
8.07
%
Common equity tier 1 risk-based capital ratio
14.44
%
13.27
%
13.30
%
Tier 1 capital ratio
14.44
%
13.27
%
13.30
%
Total risk-based capital ratio
15.55
%
14.39
%
14.55
%
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.
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.