1st Capital Bancorp Announces Second Quarter 2022 Financial Results
July 29, 2022 at 04:01 pm
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SALINAS, Calif., July 29, 2022 (GLOBE NEWSWIRE) -- 1st Capital Bancorp (the “Company”), (OTCQX: FISB), the $990.1 million asset bank holding company and parent company of 1st Capital Bank (the “Bank”), today reported unaudited net income of $2.52 million for the quarter ended June 30, 2022, an increase of 20.49% compared to net income of $2.09 million for the quarter ended March 31, 2022, and an increase of 29.25% compared to net income of $1.95 million for the quarter ended June 30, 2021.
Financial Highlights Performance highlights for the quarter ended June 30, 2022, as compared to the quarter ended June 30, 2021 and the quarter ended March 31, 2022:
Earnings per share (diluted) were $0.45 for the second quarter of 2022, as compared to $0.34 and $0.37 for the quarters ended June 30, 2021 and March 31, 2022, respectively.
For the quarter ended June 30, 2022, the Company's return on average equity was 14.82%, as compared to 10.36% and 10.59% for the quarters ended June 30, 2021 and March 31, 2022, respectively.
For the quarter ended June 30, 2022, the Company’s return on average assets was 0.98%, as compared to 0.89% and 0.85% for the quarters ended June 30, 2021 and March 31, 2022, respectively.
For the quarter ended June 30, 2022, the Company’s net interest margin was 3.58%, as compared to 3.54% and 3.40% for the quarters ended June 30, 2021 and March 31, 2022, respectively.
Pre-tax, pre-provision income for the quarter ended June 30, 2022 totaled $3.5 million, as compared to $2.7 million and $2.8 million for the quarters ended June 30, 2021 and March 31, 2022, respectively.
For the quarter ended June 30, 2022, the Company’s efficiency ratio was 61.89%, as compared to 64.79% and 65.75% for the quarters ended June 30, 2021 and March 31, 2022, respectively.
The Company recorded no provision expense for the quarters ended June 30, 2022, June 30, 2021, and March 31, 2022.
As of June 30, 2022, the Company’s nonperforming assets to total assets was .01%, as compared to 0.23% and 0.01% for the quarters ended June 30, 2021 and March 31, 2022, respectively.
As of June 30, 2022, the Company reported total assets, total deposits, and total loans of $990.1 million, $928.3 million, and $586.1 million, respectively.
“Our second quarter results continue to reflect our expectations of positive operating trends including strong growth in net interest income, net income, and earnings per share,” commented Sam Jimenez, Chief Executive Officer. “While the yield curve paints a picture of economic uncertainty on the horizon, we anticipate continuing solid financial results, and maintain a strong capital position with a Common Equity Tier 1 ratio of 13.01%.”
Net Interest Income and Net Interest Margin The Company's second quarter 2022 net interest income increased $1.3 million, or 17.8%, to $8.84 million as compared with $7.51 million for the quarter ending June 30, 2021 and $844 thousand or 10.6% compared with the $7.99 million for the quarter ending March 31, 2022. Loan interest income in the second quarter of 2022, excluding PPP income, increased $959 thousand, or 16.1%, to $6.91 million compared to $5.96 million for the quarter ending June 30, 2021. Interest and fee income related to PPP loans decreased $677 thousand to $344 thousand for the quarter ended June 30, 2022, compared to $1.02 million for the quarter ended June 30, 2021, a year over year decrease of 66.3%.
The Company's net interest margin increased by 4 basis points (bps), or 1.1%, to 3.58% when compared to 3.54% for the quarter ended June 30, 2021. This increase was primarily driven by the Company’s mix of average earning assets as cash was deployed into higher yielding loans and leases, and investment securities. Interest expense increased $278 thousand for the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021 primarily related to interest expense associated with subordinated debt.
Provision for Loan Losses Strong credit quality resulted in no loan loss provision in the quarters ended June 30, 2022, June 30, 2021, March 31, 2022.
Noninterest Expenses The Company's total non-interest expense increased $663 thousand, or 13.3%, to $5.65 million in the quarter ended June 30, 2022, compared to $4.99 million for the quarter ended June 30, 2021. This increase is attributed to a rise in salaries and benefits, software, community relations and business development costs.
Balance Sheet Summary The Company's total assets increased $39.4 million, or 4.1%, to $990.1 million as compared to $950.7 million at June 30, 2021.
Total loans outstanding were $586.1 million as of June 30, 2022, representing a $20.2 million, or 3.3%, decrease from the June 30, 2021 outstanding balance of $606.3 million. Excluding the $82.9 million decline in PPP loan balances, loans increased $62.6 million, or 12.0% at June 30, 2022 compared to June 30, 2021. In the second quarter of 2022, the Company purchased an $11.0 million pool of consumer loans and a $18.7 million pool of leases.
PPP loans outstanding were $1.99 million as of June 30, 2022, and included a deferred fee balance of $51 thousand. At June 30, 2021, PPP loans outstanding were $84.9 million and included a deferred fee balance of $2.2 million.
Loan type (dollars in thousands)
6/30/2022
% of Total Loans
3/31/2022
% of Total Loans
6/30/2021
% of Total Loans
Construction / land (including farmland)
$
18,502
3.2
%
$
17,738
3.1
%
$
22,091
3.6
%
Residential 1 to 4 units
57,381
9.8
%
58,191
10.0
%
75,906
12.5
%
Home equity lines of credit
5,392
0.9
%
5,555
1.0
%
6,669
1.1
%
Multifamily
76,168
13.0
%
78,291
13.5
%
77,183
12.7
%
Owner occupied commercial real estate
111,283
19.0
%
111,580
19.2
%
83,763
13.8
%
Investor commercial real estate
186,448
31.8
%
193,426
33.3
%
172,776
28.3
%
Commercial and industrial
43,652
7.4
%
41,859
7.2
%
49,147
8.1
%
Paycheck Protection Program
1,986
0.3
%
13,342
2.3
%
84,866
14.0
%
Leases
34,095
5.8
%
17,597
3.0
%
-
0.0
%
Consumer
36,372
6.2
%
31,488
5.4
%
23,380
3.9
%
Other loans
14,784
2.6
%
11,143
2.0
%
12,320
2.0
%
Total loans
586,063
100.0
%
580,210
100.0
%
606,310
100.0
%
Allowance for loan losses
(8,066
)
(8,424
)
(8,840
)
Net loans held for investment
$
577,997
$
571,786
$
597,470
The investment portfolio increased $79.1 million, or 29.9%, to $343.7 million from $264.6 million at June 30, 2021. The unrealized loss associated with the Company’s available-for-sale investment security portfolio increased from $23.6 million at March 31, 2022 to $38.2 million at June 30, 2022 as market yields rose in the second quarter of driving down market values. Investment securities with book values of $60 million and unrealized losses of $7.7 million were transferred from available-for-sale to held-to-maturity in the second quarter of 2022.
Total deposits were $928.3 million as of June 30, 2022. This represents a $74.7 million, or 8.7% increase from the June 30, 2021 balance of $853.6 million. Growth in money market and savings balances of $48.9 million and $14.0 million, respectively, drove deposit growth. Noninterest-bearing balances comprised 45.1% and 48.3% of total deposit balances at June 30, 2022 and June 30, 2021, respectively.
Deposit type (dollars in thousands)
6/30/2022
% of Total Deposits
3/31/2022
% of Total Deposits
6/30/2021
% of Total Deposits
Interest bearing checking accounts
$
62,779
6.8
%
$
59,455
6.4
%
$
57,422
6.7
%
Money market
290,106
31.3
%
250,596
27.2
%
241,163
28.3
%
Savings
143,215
15.4
%
161,720
17.5
%
129,176
15.1
%
Time
13,509
1.5
%
11,520
1.2
%
13,761
1.6
%
Total interest-bearing deposits
509,609
54.9
%
483,291
52.4
%
441,522
51.7
%
Noninterest-bearing
418,692
45.1
%
438,914
47.6
%
412,108
48.3
%
Total deposits
$
928,301
100.0
%
$
922,205
100.0
%
$
853,630
100.0
%
Shareholder’s equity totaled $38.7 million at June 30, 2022, a decline of $38.6 million, or 49.9%, compared to $77.3 million at June 30, 2021. The decrease is driven by the increase in unrealized losses on the investment security portfolio, the impact of which flows through accumulated other comprehensive income (AOCI), a component of equity. The Company transferred approximately 20% of the book value of the investment portfolio from available-for-sale to held-to-maturity to mitigate the impact of future market rate increases on unrealized losses and AOCI.
In the second quarter of 2022, the Company entered into a cap corridor transaction with a $100 million notional amount. The cap corridor is designed to hedge a portion of interest expenses associated with deposits and to partially mitigate the future investment portfolio valuation impact of increasing interest rates. The corridor qualifies for hedge accounting treatment and is carried at fair value on the balance sheet with changes in fair value flowing through AOCI.
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. The stock repurchase program is currently paused.
Asset Quality At June 30, 2022, non-performing assets were 0.01% of the Company’s total assets, compared with 0.23% at June 30, 2021. The allowance for loan losses was 1.38% of outstanding loans at June 30, 2022, compared to 1.46% at June 30, 2021. The Company had $0 and $2.2 million in nonaccrual loans at June 30, 2022 and June 30, 2021, respectively. The Company recorded net charge-offs of $358 thousand in the quarter ended June 30, 2022 compared to $12 thousand of net recoveries for the quarter ended June 30, 2021 and net charge offs of $154 thousand in the quarter ended March 31, 2022. Charge-offs were within the purchased consumer loan pools.
Asset Quality
6/30/2022
3/31/2022
6/30/2021
Loans past due 90 days or more and accruing interest
$
145
$
71
$
-
Other nonaccrual loans
-
-
2,161
Other real estate owned
-
-
-
Total nonperforming assets
$
145
$
71
$
2,161
Allowance for loan losses to total loans
1.38
%
1.45
%
1.46
%
Allowance for loan losses to nonperforming loans
5562.76
%
11864.79
%
409.07
%
Nonaccrual loans to total loans
0.00
%
0.00
%
0.36
%
Nonperforming assets to total assets
0.01
%
0.01
%
0.23
%
As of June 30,2022, the Company had no outstanding loan deferments or forbearances stemming from COVID-19.
1ST CAPITAL BANCORP
CONDENSED FINANCIAL DATA - UNAUDITED
($ in 000s)
Three Months Ended
Operating Results Data
6/30/2022
3/31/2022
6/30/2021
Interest and dividend income
Loans
$
7,258
$
6,896
$
6,976
Investment securities
2,038
1,557
750
Federal Home Loan Bank stock
59
58
66
Other income
56
13
8
Total interest and dividend income
9,411
8,524
7,800
Interest expense
573
530
295
Net interest income
8,838
7,994
7,505
Provision for loan losses
-
-
-
Net interest income after provision for loan losses
8,838
7,994
7,505
Noninterest income
290
319
191
Noninterest expenses
Salaries and benefits expense
3,457
3,445
3,222
Occupancy expense
463
435
390
Data and item processing
265
263
265
Furniture and equipment
150
140
114
Professional services
114
169
162
Other
1,201
1,014
833
Total noninterest expenses
5,650
5,466
4,986
Income before provision for income taxes
3,478
2,847
2,710
Provision for income taxes
958
755
760
Net income
$
2,520
$
2,092
$
1,950
Three Months Ended
Selected Average Balances
6/30/2022
3/31/2022
6/30/2021
Gross loans
$
593,990
$
569,997
$
620,093
Investment securities
373,853
362,328
202,246
Federal Home Loan Bank stock
4,024
3,948
3,834
Other interest earning assets
31,158
31,744
30,287
Total interest earning assets
1,003,025
968,017
856,460
Total assets
1,027,269
996,632
881,495
Interest bearing checking accounts
64,988
65,753
59,503
Money market
278,646
221,071
200,199
Savings
149,930
158,988
127,046
Time deposits
12,350
11,572
14,279
Total interest- bearing deposits
505,914
457,384
401,027
Noninterest bearing demand deposits
427,351
438,394
398,007
Total deposits
933,265
895,778
799,034
Subordinated debentures and other borrowings
17,546
14,669
1,641
Shareholders' equity
$
68,227
$
80,143
$
75,481
1ST CAPITAL BANCORP CONDENSED FINANCIAL DATA – UNAUDITED ($ in 000s)
Three Months Ended
Selected Financial Ratios
6/30/2022
3/31/2022
6/30/2021
Return on average total assets
0.98
%
0.85
%
0.89
%
Return on average shareholders' equity
14.82
%
10.59
%
10.36
%
Net interest margin
3.58
%
3.40
%
3.54
%
Net interest income to average total assets
3.56
%
3.25
%
3.41
%
Efficiency ratio
61.89
%
65.75
%
64.79
%
1ST CAPITAL BANCORP CONDENSED FINANCIAL DATA – UNAUDITED ($ in 000s)
Six Months Ended
Operating Results Data
6/30/2022
6/30/2021
Interest and dividend income
Loans
$
14,154
$
13,577
Investment securities
3,595
1,205
Federal Home Loan Bank stock
117
110
Other income
69
16
Total interest and dividend income
17,935
14,908
Interest expense
1,103
537
Net interest income
16,832
14,371
Provision for loan losses
-
-
Net interest income after provision for loan losses
16,832
14,371
Noninterest income
609
381
Noninterest expenses
Salaries and benefits expense
6,902
6,365
Occupancy expense
897
808
Data and item processing
528
515
Furniture and equipment
290
231
Professional services
283
341
Other
2,215
1,642
Total noninterest expenses
11,115
9,902
Income before provision for income taxes
6,326
4,850
Provision for income taxes
1,714
1,363
Net income
$
4,612
$
3,487
Six Months Ended
Selected Average Balances
6/30/2022
6/30/2021
Gross loans
$
582,060
$
617,604
Investment securities
368,123
163,658
Federal Home Loan Bank stock
3,987
3,685
Other interest earning assets
35,207
37,811
Total interest earning assets
989,377
822,758
Total assets
1,012,035
847,719
Interest bearing checking accounts
65,368
59,366
Money market
250,017
179,197
Savings
154,434
125,701
Time deposits
11,963
14,483
Total interest- bearing deposits
481,782
378,747
Noninterest bearing demand deposits
432,842
385,085
Total deposits
914,624
763,832
Subordinated debentures and other borrowings
16,116
3,311
Shareholders' equity
$
74,152
$
75,352
1ST CAPITAL BANCORP CONDENSED FINANCIAL DATA – UNAUDITED ($ in 000s)
Six Months Ended
Selected Financial Ratios
6/30/2022
6/30/2021
Return on average total assets
0.92
%
0.83
%
Return on average shareholders' equity
12.54
%
9.33
%
Net interest margin
3.51
%
3.54
%
Net interest income to average total assets
3.35
%
3.42
%
Efficiency ratio
63.73
%
67.12
%
Regulatory Capital and Ratios
6/30/2022
3/31/2022
6/30/2021
Common equity tier 1 capital
$
97,226
$
83,272
$
76,158
Tier 1 regulatory capital
$
97,226
$
83,272
$
76,158
Total regulatory capital
$
105,418
$
91,877
$
83,518
Tier 1 leverage ratio
9.62
%
8.36
%
8.64
%
Common equity tier 1 risk-based capital ratio
13.27
%
11.49
%
12.99
%
Tier 1 capital ratio
13.27
%
11.49
%
12.99
%
Total risk-based capital ratio
14.39
%
12.67
%
14.24
%
About 1st Capital Bancorp
1st Capital Bancorp is the holding company for 1st Capital Bank. The Bank’s primary target markets are commercial enterprises, professionals, real estate investors, family business entities, and residents along the Central Coast region of California. The Bank provides a wide range of credit products, including loans under various government programs such as those provided through the U.S. Small Business Administration and the U.S. Department of Agriculture. A full suite of deposit accounts also is furnished, complemented by robust cash management services. The Bank operates full service branch offices in Monterey, Salinas, King City, San Luis Obispo and Santa Cruz. The Bank’s corporate offices are located at 150 Main Street, Suite 150, Salinas, California 93901. The Bank’s website is www.1stCapital.bank. The main telephone number is 831.264.4000. Member FDIC / Equal Opportunity Lender / SBA Preferred Lender
Forward-Looking Statements Certain of the statements contained herein that are not historical facts are “forward-looking statements” within the meaning of and subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may contain words or phrases including, but not limited, to: “believe,” “expect,” “anticipate,” “intend,” “estimate,” “target,” “plans,” “may increase,” “may fluctuate,” “may result in,” “are projected,” and variations of those words and similar expressions. All such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Factors that might cause such a difference include, among other matters, changes in interest rates; economic conditions including inflation and real estate values in California and the Bank’s market areas; governmental regulation and legislation; credit quality; competition affecting the Bank’s businesses generally; the risk of natural disasters and future catastrophic events including pandemics, terrorist related incidents and other factors beyond the Bank’s control; and other factors. The Bank does not undertake, and specifically disclaims any obligation, to update or revise any forward-looking statements, whether to reflect new information, future events, or otherwise, except as required by law.
This news release is available at the www.1stCapital.bank internet site for no charge.
1st Capital Bancorp is a bank holding company. The Company conducts the operations through its wholly owned subsidiary, 1st Capital Bank (Bank), which is a locally owned and managed community bank. The Bank's primary business is offering checking, money market, savings, and certificate of deposit accounts through its branch facilities, remote branch deposit, and various electronic means, and investing such deposits and other available funds into loans, including real estate mortgages, commercial business loans, and construction loans. The Bank serves commercial enterprises, professionals, real estate investors, family business entities, and residents along the Central Coast region of California. In addition, the Bank invests in securities and utilizes various sources of wholesale borrowings. The Bank also provides a range of fee-based services, including an array of treasury management services. It operates branch offices in Monterey, Salinas, King City, San Luis Obispo and Santa Cruz.