1st Capital Bancorp Announces Fourth Quarter 2023 Financial Results
February 01, 2024 at 07:31 pm IST
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SALINAS, Calif., Feb. 01, 2024 (GLOBE NEWSWIRE) -- 1st Capital Bancorp (the “Company”), (OTCQX: FISB), the $989.1 million asset bank holding company and parent company of 1st Capital Bank (the “Bank”), today reported unaudited net income of $677 thousand, or $0.12 per diluted share, for the quarter ended December 31, 2023, compared to net income of $1.19 million, or $0.22 per diluted share, for the quarter ended September 30, 2023, and $1.31 million, or $0.24 per diluted share, for the quarter ended December 31, 2022. For the twelve months ended December 31, 2023, net income was $3.5 million, or $0.64 per diluted share, compared to $8.6 million, or $1.55 per diluted share for the prior twelve months ended December 31, 2022.
Loan demand remained strong in the fourth quarter as the Company’s core loans increased $19.9 million, or 3.3%, at December 31, 2023, compared to September 30, 2023. Loan yields expanded 18 basis points (bps) to 5.24% for the quarter ended December 31, 2023, compared to 5.07% for the quarter ended September 30, 2023. Nonperforming assets to total assets was 0.18% as of December 31, 2023, versus 0.22% as of September 30, 2023, with the decrease driven by lower overall balances in the wholesale loan portfolio. Deposit balances decreased $15.1 million, or 1.7%, in the quarter ended December 31, 2023, compared to September 30, 2023, driven by tax payments, estate planning, and year-end distributions by clients. Operating expenses were negatively impacted in Q4 due to one-time severance costs related to the retirement of an executive.
“We expect continuing core loan growth to drive solid net interest margin expansion in the year ahead, despite the near-term funding expense pressure. We are especially pleased with our core loan growth which exceeded 12% for the year,” said Sam Jimenez, Chief Executive Officer. “Although 2023 operating performance was disappointing, our strong regulatory capital position, strong credit quality, and solid liquidity allows us to remain focused on serving our clients and communities along the Central Coast.”
Financial Highlights Performance highlights for the quarter ended December 31, 2023, as compared to the quarter ended September 30, 2023, and the quarter ended December 31, 2022:
Earnings per share (diluted) were $0.12 for the fourth quarter of 2023, as compared to $0.22 and $0.24 for the quarters ended September 30, 2023, and December 31, 2022, respectively.
Pretax, pre-provision income for the quarter ended December 31, 2023, totaled $2.4 million, as compared to $2.8 million and $2.2 million for the quarters ended September 30, 2023, and December 31, 2022, respectively.
Return on average equity was 4.81% for the fourth quarter, as compared to 8.06% and 10.47% for the quarters ended September 30, 2023, and December 31, 2022, respectively.
Return on average assets was 0.27% for the fourth quarter as compared to 0.48% and 0.53% for the quarters ended September 30, 2023, and December 31, 2022, respectively.
Net interest margin was 3.40% for the fourth quarter as compared to 3.37% and 3.63% for the quarters ended September 30, 2023, and December 31, 2022, respectively.
The Company’s efficiency ratio was 72.71% for the fourth quarter, as compared to 67.77% and 72.26% for the quarters ended September 30, 2023, and December 31, 2022, respectively.
The Company recorded provision for credit loss expense of $1.47 million for the fourth quarter compared to $1.16 million and $523 thousand for the quarters ended September 30, 2023, and December 31, 2022, respectively.
As of December 31, 2023, the Company’s nonperforming assets to total assets was 0.18%, as compared to 0.22% and 0.06% for September 30, 2023, and December 31, 2022, respectively.
The Company reported total assets, total deposits, and total loans as of December 31, 2023, of $989.1 million, $890.9 million, and $620.8 million, respectively.
Federal regulatory capital ratios for the quarters ended December 31, 2023, September 30, 2023, and December 31, 2022, exceed well capitalized thresholds.
At December 31, 2023, the Company has $391.2 million in available liquidity from secured and unsecured borrowing lines, which represents 39.5% of total assets.
Net Interest Income and Net Interest Margin The Company's fourth quarter 2023 net interest income increased $192 thousand, or 2.3%, to $8.43 million as compared with $8.24 million for the quarter ended September 30, 2023, as earning asset yields outpaced expansion in funding costs. Loan interest income increased $526 thousand, or 7.0%, to $8.06 million for the quarter ended December 31, 2023, compared to $7.54 million for the quarter ended September 30, 2023. Interest income on investment securities remained stable at $1.92 million and $1.94 million, respectively, for the quarters ended December 31, 2023, and September 30, 2023. Other interest income increased $92 thousand, or 13.6%, to $769 thousand for the quarter ended December 31, 2023, compared to $677 thousand for the quarter ended September 30, 2023, due to higher yields on average cash balances. Interest expense increased $408 thousand, or 20.3%, to $2.42 million for the quarter ended December 31, 2023, compared to $2.01 million for the quarter ended September 30, 2023, due to the increased utilization of wholesale borrowings and brokered CDs in the fourth quarter to manage seasonal deposit flows associated with Agriculture-related depositors and tax payments. Interest expense for each of the quarters presented includes $169 thousand related to subordinated debt.
The Company's net interest margin increased 3 basis points to 3.40% for the quarter ended December 31, 2023, from 3.37% when compared to the quarter ended September 30, 2023. This increase was primarily driven by the increase in earning asset yields. The 18 basis point expansion of loan yields from 5.07% for the quarter ended September 30, 2023, to 5.24% for the quarter ended December 31, 2023, outpaced higher overall funding costs. The Company’s cost of funds increased 17 basis points from 0.87% for the quarter ended September 30, 2023, to 1.04% for the quarter ended December 31, 2023.
Allowance for Credit Losses The Company adopted Accounting Standards Update (ASU) 2016-13, more commonly referred to as the Current Expected Credit Loss (CECL) method on January 1, 2023, using the modified retrospective method with no adjustments to prior period comparative financial statements for all financial assets measured at amortized cost and off-balance sheet credit exposure as well as held to maturity securities, which resulted in a $127 thousand increase to the allowance for credit losses, a $3 thousand reserve for held-to-maturity securities and a $26 thousand increase to the reserve for unfunded commitments. The impact to retained earnings, net of taxes, was $111 thousand. Reporting periods beginning after January 1, 2023, are presented under ASU 2016-13 while prior period amounts continue to be reported in accordance with previously applicable Generally Accepted Accounting Principles in the United States.
Provision expense of $1.47 million was recorded in the quarter ended December 31, 2023, compared to $1.16 million in the quarter ended September 30, 2023. The provision expense was driven by overall loan growth and charge offs within the wholesale loan pool portfolios.
Noninterest Expenses The Company's total non-interest expense increased $554 thousand, or 9.6%, to $6.3 million in the quarter ended December 31, 2023, compared to $5.8 million for the quarter ended September 30, 2023. This increase was primarily associated with severance costs related to the retirement of an executive.
Balance Sheet Summary Total assets increased $5.3 million, or 0.5%, to $989.4 million at December 31, 2023, compared to $984.1 million at September 30, 2023. Cash and due from banks decreased $20.6 million, or 34.9%, to $38.3 million at December 31, 2023, compared to $58.8 million at September 30, 2023.
The investment portfolio increased $8.4 million to $291.2 million from a balance of $282.8 million at September 30, 2023. The increase was driven by a $12.0 million decrease in unrealized losses associated with the Company’s available-for-sale investment security portfolio offset by paydowns; unrealized losses totaled $35.4 million at December 31, 2023 compared to $47.4 million at September 30, 2023. The decrease in unrealized losses was driven by changes in the treasury yield curve that positively impacted the portfolio’s valuation. At December 31, 2023 and September 30, 2023, $70.1 million and $70.8 million, respectively, of the investment portfolio were classified as held-to-maturity. As of December 31, 2023, investments classified as held-to-maturity comprise approximately 24% of the portfolio.
Total loans outstanding were $620.8 million as of December 31, 2023, representing a $19.9 million, or 3.3%, increase from the September 30, 2023, outstanding balance of $600.9 million. Growth was balanced across all core loan sectors, with Multifamily, Construction & Land, Residential 1-4 units and Investor CRE experiencing the greatest dollar growth within the quarterly period. This core loan portfolio growth was partially offset by declines in wholesale consumer and lease pools which continue to pay down.
Loan type (dollars in thousands)
12/31/2023
% of Total Loans
9/30/2023
% of Total Loans
12/31/2022
% of Total Loans
Construction / land (including farmland)
$
32,701
5.3
%
$
27,671
4.6
%
$
14,290
2.5
%
Residential 1 to 4 units
67,679
10.9
%
63,038
10.5
%
54,609
9.7
%
Home equity lines of credit
3,855
0.6
%
3,535
0.6
%
4,690
0.8
%
Multifamily
91,065
14.7
%
84,157
14.0
%
79,227
14.0
%
Owner occupied commercial real estate
128,520
20.7
%
125,664
20.9
%
108,140
19.2
%
Investor commercial real estate
198,411
32.0
%
194,087
32.3
%
188,374
33.4
%
Commercial and industrial
49,372
7.9
%
46,743
7.8
%
39,247
7.0
%
Paycheck Protection Program
-
0.0
%
-
0.0
%
-
0.0
%
Leases
26,636
4.3
%
30,113
5.0
%
41,380
7.3
%
Consumer
13,372
2.2
%
15,837
2.6
%
26,423
4.7
%
Other loans
9,207
1.4
%
10,030
1.7
%
8,058
1.4
%
Total loans
620,818
100.00
%
600,875
100.0
%
564,438
100.0
%
Allowance for credit losses
(7,119
)
(6,918
)
(7,347
)
Net loans held for investment
$
613,699
$
593,957
$
557,091
Total deposits were $890.9 million at December 31, 2023 representing a $15.1 million decrease compared to total deposits of $906.1 million at September 30, 2023. Noninterest-bearing balances continue to comprise nearly half of total deposits at December 31, 2023 (48.0%).
Deposit type (dollars in thousands)
12/31/2023
% of Total Deposits
9/30/2023
% of Total Deposits
12/31/2022
% of Total Deposits
Interest- bearing checking accounts
$
48,006
5.4
%
$
56,535
6.2
%
$
75,242
8.7
%
Money market
227,482
25.5
%
289,700
32.0
%
214,293
24.9
%
Savings
98,395
11.0
%
115,583
12.8
%
147,161
17.1
%
Time
89,901
10.1
%
29,775
3.3
%
10,745
1.2
%
Total interest-bearing deposits
463,784
52.0
%
491,593
54.3
%
447,441
51.9
%
Noninterest-bearing
427,150
48.0
%
414,470
45.7
%
415,256
48.1
%
Total deposits
$
890,934
100.0
%
$
906,063
100.0
%
$
862,697
100.0
%
Subordinated debt balances totaled $14.8 million at December 31, 2023 and September 30, 2023. Other borrowings totaled $10.0 million and $0 at December 31, 2023 and September 30, 2023, respectively.
Shareholder’s equity totaled $62.4 million at December 31, 2023 compared to $54.1 million at September 30, 2023, an increase of $8.3 million, or 15.2%. The increase is driven by the decrease in unrealized losses on the available-for-sale investment security portfolio, the impact of which flows through accumulated other comprehensive income (AOCI), a component of equity, partially offset by an increase in the fair value of the cap corridor and fair value hedges which positively impacted AOCI.
Asset Quality Nonperforming assets were 0.18% of the Company’s total assets at December 31, 2023, compared with 0.22% at September 30, 2023. The allowance for credit losses was 1.15% of outstanding loans at December 31, 2023, and September 30, 2023, respectively. The Company had $116 thousand in nonaccrual loans at December 31, 2023, representing 0.02% of total loans in each period. The Company recorded net charge-offs of $1.26 million in the quarter ended December 31, 2023, compared to $992 thousand in the quarter ended September 30, 2023. Charge-offs for the quarters ended December 31, 2023, and September 30, 2023, were all within the purchased consumer and lease pools.
Asset Quality (dollars in thousands)
12/31/2023
9/30/2023
12/31/2022
Loans past due 90 days or more and accruing interest
$
1,668
$
2,069
$
539
Other nonaccrual loans
116
138
--
Other real estate owned
--
--
--
Total nonperforming assets
$
1,784
$
2,207
$
539
Allowance for credit losses to total loans
1.15
%
1.15
%
1.30
%
Allowance for credit losses to nonperforming loans
399.05
%
313.46
%
1363.08
%
Nonaccrual loans to total loans
0.02
%
0.02
%
0.00
%
Nonperforming assets to total assets
0.18
%
0.22
%
0.06
%
Net charge-offs to average total loans
0.82
%
0.67
%
0.51
%
1ST CAPITAL BANCORP
CONDENSED FINANCIAL DATA – UNAUDITED
($ in 000s, except per share data)
Assets
12/31/2023
9/30/2023
12/31/2022
Cash and due from banks
$
38,269
$
58,826
$
38,015
Investment securities available-for-sale
221,136
212,075
233,530
Investment securities held-to-maturity
70,081
70,756
71,039
Loans and leases held for investment
620,818
600,875
564,438
Allowance for credit losses
(7,119
)
(6,918
)
(7,347
)
Net loans and leases held for investment
613,699
593,957
557,091
Other Assets
45,876
48,480
43,727
Total assets
$
989,061
$
984,094
$
943,402
Liabilities and Shareholders' Equity
Deposits:
Non-interest-bearing
$
427,150
$
414,470
$
415,256
Interest-bearing
463,784
491,593
447,441
Total deposits
890,934
906,063
862,697
Subordinated debentures
14,814
14,795
14,738
Other borrowings
10,000
--
--
Other liabilities
10,925
9,099
9,457
Shareholders' equity
62,388
54,137
56,510
Total liabilities and shareholders' equity
$
989,061
$
984,094
$
943,402
Shares outstanding
5,568,746
5,529,805
5,499,937
Earnings per share basic
$
0.12
$
0.22
$
0.24
Earnings per share diluted
$
0.12
$
0.22
$
0.24
Nominal and tangible book value per share
$
11.20
$
9.79
$
10.27
1ST CAPITAL BANCORP
CONDENSED FINANCIAL DATA – UNAUDITED
($ in 000s)
Three Months Ended
Operating Results Data
12/31/2023
9/30/2023
12/31/2022
Interest and dividend income
Loans
$
8,064
$
7,538
$
6,963
Investment securities
1,916
1,936
2,054
Federal Home Loan Bank stock
95
93
82
Interest-bearing deposits
769
677
250
Total interest and dividend income
10,844
10,244
9,349
Interest expense
2,416
2,008
874
Net interest income
8,428
8,236
8,475
Provision for credit losses
1,465
1,164
523
Net interest income after provision for credit losses
6,963
7,072
7,952
Noninterest income
303
314
620
Net gain (loss) on sales/calls of investment securities
--
--
(1,201
)
Noninterest expenses
Salaries and benefits expense
4,044
3,386
3,345
Occupancy expense
483
459
432
Data and item processing
296
325
278
Furniture and equipment
103
113
135
Professional services
143
248
244
Other
1,279
1,263
1,270
Total noninterest expenses
6,348
5,794
5,704
Income before provision for income taxes
918
1,592
1,667
Provision for income taxes
241
398
362
Net income
$
677
$
1,194
$
1,305
Three Months Ended
Selected Average Balances
12/31/2023
9/30/2023
12/31/2022
Gross loans
$
610,034
$
590,030
$
575,696
Investment securities
328,862
332,185
326,875
Federal Home Loan Bank stock
4,381
4,381
4,058
Other interest earning assets
49,663
54,550
32,942
Total interest earning assets
992,940
981,146
939,571
Total assets
987,101
980,038
970,167
Interest-bearing checking accounts
49,002
46,713
68,216
Money market
278,125
299,139
238,255
Savings
110,251
117,881
151,478
Time deposits
43,707
30,262
10,157
Total interest- bearing deposits
481,085
493,995
468,106
Noninterest bearing demand deposits
400,941
396,871
428,227
Total deposits
882,026
890,866
896,333
Subordinated debentures and other borrowings
39,259
20,163
14,733
Shareholders' equity
$
55,866
$
58,772
$
49,477
1ST CAPITAL BANCORP CONDENSED FINANCIAL DATA – UNAUDITED ($ in 000s)
Three Months Ended
Selected Financial Ratios
12/31/2023
9/30/2023
12/31/2022
Return on average total assets
0.27
%
0.48
%
0.53
%
Return on average shareholders' equity
4.81
%
8.06
%
10.47
%
Net interest margin
3.40
%
3.37
%
3.63
%
Net interest income to average total assets
3.39
%
3.33
%
3.47
%
Efficiency ratio
72.71
%
67.77
%
72.26
%
1ST CAPITAL BANCORP
CONDENSED FINANCIAL DATA – UNAUDITED
($ in 000s)
Twelve Months Ended
Operating Results Data
12/31/2023
12/31/2022
Interest and dividend income
Loans
$
29,542
$
28,128
Investment securities
7,725
7,703
Federal Home Loan Bank stock
336
261
Interest-bearing deposits
2,199
445
Total interest and dividend income
39,802
36,537
Interest expense
7,654
2,645
Net interest income
32,148
33,892
Provision for credit losses
4,371
523
Net interest income after provision for credit losses
27,777
33,369
Noninterest income
1,287
1,624
Net gain (loss) on sales/calls of investment securities
(134
)
(1,150
)
Noninterest expenses
Salaries and benefits expense
14,792
13,489
Occupancy expense
1,819
1,780
Data and item processing
1,257
1,085
Furniture and equipment
434
552
Professional services
938
696
Other
5,051
4,594
Total noninterest expenses
24,291
22,196
Income before provision for income taxes
4,638
11,647
Provision for income taxes
1,101
3,067
Net income
$
3,537
$
8,580
Twelve Months Ended
Selected Average Balances
12/31/2023
12/31/2022
Gross loans
$
589,146
$
583,623
Investment securities
333,622
353,804
Federal Home Loan Bank stock
4,285
4,023
Other interest earning assets
45,762
35,820
Total interest earning assets
972,815
977,270
Total assets
969,488
1,003,169
Interest bearing checking accounts
52,754
66,001
Money market
253,489
253,047
Savings
122,474
154,248
Time deposits
28,406
11,612
Total interest-bearing deposits
457,123
484,908
Noninterest-bearing demand deposits
413,067
429,240
Total deposits
870,190
914,148
Subordinated debentures and other borrowings
31,516
14,700
Shareholders' equity
$
57,732
$
65,431
1ST CAPITAL BANCORP CONDENSED FINANCIAL DATA – UNAUDITED ($ in 000s)
Twelve Months Ended
Selected Financial Ratios
12/31/2023
12/31/2022
Return on average total assets
0.36
%
0.86
%
Return on average shareholders' equity
6.13
%
13.11
%
Net interest margin
3.34
%
3.51
%
Net interest income to average total assets
3.32
%
3.38
%
Efficiency ratio
72.95
%
64.59
%
Regulatory Capital and Ratios
12/31/2023
9/30/2023
12/31/2022
Common equity tier 1 capital
$
104,620
$
105,099
$
101,409
Tier 1 regulatory capital
$
104,620
$
105,099
$
101,409
Total regulatory capital
$
111,935
$
112,208
$
108,911
Tier 1 leverage ratio
10.13
%
10.32
%
10.04
%
Common equity tier 1 risk-based capital ratio
14.66
%
15.01
%
15.21
%
Tier 1 capital ratio
14.66
%
15.01
%
15.21
%
Total risk-based capital ratio
15.68
%
16.03
%
16.34
%
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.