1st Colonial Bancorp, Inc. (FCOB), holding company of 1st Colonial Community Bank, today reported net income of $2.2 million, or $0.44 per diluted share, for the three months ended December 31, 2020, compared to net income of $569 thousand, or $0.11 per diluted share, for the three months ended December 31, 2019. For the year ended December 31, 2020, net income was $4.8 million, or $0.95 per diluted share, compared to $3.2 million, or $0.64 per diluted share, for the same period in 2019. The 2019 earnings per diluted share were adjusted to give effect to the 5% stock dividend distributed to shareholders on April 15, 2020.
Fourth Quarter 2020 Highlights
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Compared to fourth quarter of 2019:
- Revenues were $7.2 million, an increase of 31.5%.
- Net interest income was $5.0 million, an increase of 10.2%.
- Non-interest income was $2.1 million, an increase of 144%.
- Net income was $2.2 million, an increase of 288.4%.
- Diluted earnings per share of $0.44, increased 300%.
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Compared to third quarter of 2020:
- Revenues increased 13%.
- Net interest income increased 9.2%.
- Net interest margin was 3.23% compared to 3.11%.
- Non-interest income increased 22.2%.
- Net income increased 65%.
- Diluted earnings per share increased 65%.
Full Year Highlights
- Revenues were $24.3 million, an increase of 12.9%.
- Net income was $4.8 million, an increase of 47.5%.
- Diluted earnings per share of $0.95, increased 48.4%.
- Efficiency ratio was 65%.
- Total assets were $636.1 million and grew 10.6%.
- Total deposits were $565.8 million and grew 8.3%.
- Non-performing assets were $4.8 million and declined 18.6%.
- Tangible book value per share was $10.82, an increase of 11.5%.
- Raised $10.75 million in subordinated debt.
- The Bank’s leverage ratio and total risk-based capital ratio improved by 16% and 21%, respectively.
Robert White, President and Chief Executive Officer, commented, “We are pleased with our performance in the fourth quarter as well as on a full year basis. This past year was both transitional and transformational for our company. The COVID-19 pandemic caused significant economic strain, creating financial hardship in our communities. Our team members worked tirelessly to provide the support our customers and communities needed through participation in the Small Business Administration’s Paycheck Protection Program, or PPP, and through loan payment deferrals. We will continue to work with and support our customers through this difficult time.”
“In 2020 we identified organizational changes needed to execute our strategic priorities and improve our financial performance. As a result of the changes, we have been very successful attracting top talent in the market. We onboarded proven revenue producers and added highly experienced individuals to fill needs within the organization that will support our growth plan. We saw significant operational improvement and expansion in our residential lending group. Their fee income on gains from the sale of mortgage loans increased 95% on a 65% increase in originations from 2019. Our commercial pipeline continues to expand, with the primary focus on high quality loans that demonstrate sustainable cash flow and verifiable liquidity to be able to endure continued economic stress. Our credit quality remains strong and non-performing and criticized assets have declined from their levels at December 31, 2019. We remain optimistic that our portfolio will withstand the impact of continued economic stress related to the COVID-19 pandemic.”
Share Repurchase Plan
The Company also announced today that it has adopted a stock repurchase program, effective February 1, 2021. Under the stock repurchase program, management is authorized to repurchase up to 3% of the Company’s outstanding shares of common stock, with a total cost not to exceed $1.4 million. As of today, the Company had 4,961,987 shares of common stock outstanding. The stock repurchase program does not obligate the Company to acquire any particular amount of common stock, and it may be limited, suspended or terminated at any time without prior notice. The Company also announced that, as a result of the adoption of the stock repurchase program, the Company will not declare a stock dividend in 2021.
Mr. White noted, “The announcement of our stock buyback plan reflects our confidence in our future. As with many other financial institutions, our current stock price is trading below our tangible book value and our intent is to maximize shareholder value as we continue to focus on profitable growth of the company.”
Under the stock repurchase program, the Company may repurchase shares of common stock from time to time in open market transactions or in privately negotiated transactions as permitted under applicable rules and regulations. Open market repurchases will be conducted in accordance with the limitations set forth in Rule 10b-18 under the Securities Exchange Act of 1934 (the “Exchange Act”), and applicable legal requirements. The timing, volume and nature of such purchases will be determined at the sole discretion of the Company’s management at prices the Company considers attractive and in the best interests of the Company, subject to the availability of stock, general market conditions, trading price, alternate uses for capital, the Company’s financial performance, and applicable securities laws. No assurance can be given that any particular amount of common stock will be repurchased. Repurchases may also be made pursuant to a trading plan under Rule 10b5-1 under the Exchange Act, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so because of self-imposed trading blackout periods or other regulatory restrictions. This repurchase program may be modified, extended or terminated by the Board of Directors at any time.
Operating Results
Net Interest Income
Net interest income for the three months ended December 31, 2020 and 2019 was $5.0 million and $4.6 million, respectively. The increase in net interest income was primarily attributable to a 35.1% decline in interest expense. A shift in our deposit composition to non-interest bearing and lower cost deposit products coupled with interest rate reductions led to the improvement in interest expense. For the fourth quarter of 2020, average interest checking, money market and savings account balances increased $76.7 million and average certificates of deposits (“CD”) declined $50.2 million from the fourth quarter of 2019.
For 2020, net interest income declined $194 thousand, or 1.0%, to $18.4 million from $18.6 million for 2019. The decline in net interest income was primarily related to a $1.1 million decrease in interest income on loans and in the average yield earned on average interest-earning assets. The 75-basis point decrease in the fed funds rate in the second half of 2019 and the subsequent 150-basis point decrease in the fed funds rate in March 2020 had a negative impact on our variable rate loans indexed to the Wall Street Journal Prime Rate. Interest income for 2020 was also negatively impacted by $588 thousand in net deferred interest payments related to the pandemic. This deferred interest income will be recognized when the loans are paid in full at maturity or sooner. Average outstanding loan balances grew $18.7 million but at a reduced yield, primarily related to the 1% coupon associated with the PPP loans.
Lessening the impact of the loan interest income deferral was the recognition of $908 thousand in PPP loan origination fees during 2020. We originated $47.1 million in PPP loans and are earning approximately $1.4 million in origination fees over the contractual term, which is predominately 24 months. The earnout period has been accelerated based on the forgiveness payments received from the SBA. As of December 31, 2020, approximately 41% of our PPP loans have been forgiven.
The net interest margin was 3.23% for the fourth quarter of 2020 compared to 3.26% for the fourth quarter of 2019 and was 3.10% for 2020 compared to 3.43% for 2019. The decrease in net interest margin was mostly related to lower loan interest income in combination with an elevated level in the average balance of interest-earning cash, which is a lower yielding asset. Our total cost of deposits improved 57 basis points from 1.06% for the fourth quarter of 2019 to 0.49% for the fourth quarter of 2020. Total cost of deposits for 2020 was 0.71% compared to 1.07% for 2019.
Loan Loss Provision
For the three and twelve months ended December 31, 2020, we recorded provisions to the allowance for loan losses (“allowance”) of $340 thousand and $2.1 million, respectively, compared to $1.4 million and $3.2 million for the three and twelve months ended December 31, 2019. The 2020 provision was related to an increase in qualitative reserve factors due to uncertainties related to the pandemic and an increase in the historical loss rates. The 2019 provision was largely related to specific reserves on impaired assets and increases in the historical loss rates. Net charge-offs were $3.2 million for 2020 compared to $2.1 million for 2019. The net charge-offs for 2020 included $1.9 million in specific reserves on impaired loans, which were previously recorded in the allowance.
Our loan payment deferral programs have been successful in providing the needed relief to borrowers who were experiencing financial hardship as a result of the pandemic. We are seeing favorable trends as a vast majority of customers who requested loan deferrals due to COVID-19 issues have returned to their regular payment schedules. As of December 31, 2020, six loans totaling $807 thousand had principal only deferments. At the height of our COVID-19 deferral program, we had 373 loans totaling $69.5 million with payment deferral modifications.
Non-interest Income
Non-interest income for the fourth quarter of 2020 was $2.1 million, an increase of $1.2 million, or 144%, from $865 thousand for the fourth quarter of 2019. Gains on the sale of residential mortgage loans increased $1.0 million, or 158%, to $1.7 million for the fourth quarter in 2020 due to a $31.6 million increase in the volume of loans sold during the 2020 period when compared to the 2019 period. The fourth quarter of 2020 benefited from $164 thousand in gains on the sale of SBA loans.
For 2020, non-interest income was $6.0 million, an increase of $3.0 million, or 100%, over 2019 results. Gains on the sale of residential mortgage loans grew $2.2 million, or 94.7%, over 2019 due to growth of $67.8 million in the volume of loans sold during 2020. During 2020, gains on the sales of investment securities increased $180 thousand over 2019. We also realized $243 thousand in gains on the sale of SBA loans. There were no such gains on the sale of SBA loans in 2019. During 2019 we recorded a $169 thousand loss on the sale of seven other real estate owned (“OREO”) properties. There were no net losses on OREO in 2020.
Non-interest Expense
Non-interest expense was $3.8 million for the three months ended December 31, 2020, an increase of $314 thousand, or 8.9%, for the comparable period in 2019. The increase was mainly due to a $781 thousand increase in salaries and benefits. During 2020, we have made key investments in highly experienced revenue producers and operational team members as we executed upon our strategic plan. Additionally, the rise in volume of sold residential mortgages led to an increase in paid commissions to our mortgage lending team members.
Non-interest expense was $15.8 million for 2020, an increase of $1.5 million, or 10.7%, over 2019 results. The increase was mainly due to an increase in salaries and benefits primarily for the reasons cited above and the recognition of incentive pay to our team members. Also contributing to the increase in non-interest expense for 2020 was $562 thousand in one-time expenses related to the executive transition and management of previously identified troubled legacy credits.
Income Taxes
For the fourth quarter of 2020, income tax expense was $780 thousand compared to an income tax benefit of $17 thousand for the fourth quarter of 2019. Income tax expense was $1.6 million for 2020 compared to $853 thousand for 2019.
Financial Condition
Assets
At December 31, 2020, total assets were $636.1 million compared to $575.2 million at December 31, 2019.
Total loans were $423.1 million at December 31, 2020, an increase of $3.3 million, or 0.8%, over full year 2019 levels. During 2020, loan growth mainly came from PPP loan originations. Commercial loans, including commercial real estate and construction, declined $8.9 million while home equity loans and lines of credit declined $14.1 million. Residential mortgages held for sale grew to $21.9 million at December 31, 2020, from $4.4 million at December 31, 2019. With the local economy slowly re-opening, we have seen an increase in our commercial pipeline activity. Commercial loan originations in the fourth quarter increased 157% from their level in the third quarter of 2020. Our investment portfolio increased $43.0 million to $137.0 million at December 31, 2020 as we invested our excess liquidity.
Liabilities
Total deposits were $565.8 million at December 31, 2020, an increase of $43.6 million, or 8.34%, over same period 2019 levels. Savings, demand deposits, money market, and interest checking accounts increased $46.4 million, $20.5 million, $17.3 million, and $3.7 million, respectively, while CDs and brokered deposits decreased $28.9 million and $15.4 million, respectively. We continue to be focused on full relationship banking, evidenced by our deposit growth sourced through new PPP loan customers.
In 2020 we successfully raised $10.75 million in subordinated debt, which provides the necessary capital to support the growth outlined in our strategic plan, without any dilution to our shareholders. The subordinated notes have been structured to qualify as Tier 2 capital at the holding company level for regulatory purposes. A substantial portion of the net proceeds were contributed to the Bank as Tier 1 capital.
Shareholder’s Equity
Total shareholders’ equity was $53.7 million at December 31, 2020, an increase of $5.8 million, or 12.1%, from $47.9 million at December 31, 2019. Tangible book value increased $1.11, or 11.5%, from $9.71 at December 31, 2019 to $10.82 at December 31, 2020.
Asset Quality
1st Colonial's non-performing assets at December 31, 2020 were $4.8 million compared to $5.9 million at December 31, 2019. The ratio of non-performing assets to total assets at December 31, 2020 improved to 0.75% from 1.02% at December 31, 2019. We have been actively managing our criticized and classified assets with the goal of maximizing value and minimizing losses. At December 31, 2020, the allowance for loan losses was $5.6 million, or 1.33% of total loans. The allowance was $6.7 million, or 1.59% of total loans at December 31, 2019. We continue to closely monitor higher risk relationships and are optimistic that the portfolio will withstand any additional negative impact of the pandemic.
Income Statement and Other Highlights:
Highlights as of December 31, 2020 and December 31, 2019 and a comparison of the three and twelve months ended December 31, 2020 to the three and twelve months ended December 31, 2019 include the following:
1st COLONIAL BANCORP, INC. CONSOLIDATED INCOME STATEMENTS (Unaudited, dollars in thousands, except per share data) | |||||||||||
For the three months | For the years | ||||||||||
ended December 31, | ended December 31, | ||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||
Interest income | $ | 5,956 | $ | 5,982 | $ | 22,551 | $ | 23,991 | |||
Interest expense | 912 | 1,406 | 4,190 | 5,436 | |||||||
Net Interest Income | 5,044 | 4,576 | 18,361 | 18,555 | |||||||
Provision for loan losses | 340 | 1,378 | 2,140 | 3,184 | |||||||
Net interest income after provision for loan losses | 4,704 | 3,198 | 16,221 | 15,371 | |||||||
Non-interest income | 2,111 | 865 | 5,957 | 2,985 | |||||||
Non-interest expense | 3,825 | 3,511 | 15,803 | 14,279 | |||||||
Income before taxes | 2,990 | 552 | 6,375 | 4,077 | |||||||
Income tax expense | 780 | (17 | ) | 1,620 | 853 | ||||||
Net Income | $ | 2,210 | $ | 569 | $ | 4,755 | $ | 3,224 | |||
Earnings Per Share – Basic (1) | $ | 0.45 | $ | 0.12 | $ | 0.96 | $ | 0.66 | |||
Earnings Per Share – Diluted (1) | $ | 0.44 | $ | 0.11 | $ | 0.95 | $ | 0.64 | |||
SELECTED PERFORMANCE RATIOS:
For the three months
| For the years ended
| |||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||
Return on Average Assets | 1.37% | 0.39% | 0.78% | 0.58% | ||||||||
Return on Average Equity | 17.08% | 4.75% | 9.52% | 6.99% | ||||||||
Book value per share (1) | $ | 10.82 | $ | 9.71 | $ | 10.82 | $ | 9.71 | ||||
At December 31, 2020 | At December 31, 2019 | ||||
Bank Capital Ratios (2): | |||||
Tier 1 Leverage | 9.60% | 8.25% | |||
Total Risk Based Capital | 17.54% | 14.44% | |||
Common Equity Tier 1 | 16.29% | 13.19% | |||
| (1) | Adjusted to give effect to the 5% stock dividend distributed to shareholders on April 15, 2020. | |
| (2) | The Bank’s capital ratios for 2020 were positively impacted by a $9.0 million capital contribution from the Company as a result of the issuance of $10.75 million of subordinated debt. |
1st COLONIAL BANCORP, INC. CONSOLIDATED BALANCE SHEETS | ||||||
(Unaudited, in thousands) | At December 31, 2020 | At December 31, 2019 | ||||
Cash and cash equivalents | $ | 37,040 | $ | 46,357 | ||
Total investments | 137,027 | 93,991 | ||||
Mortgage loans held for sale | 21,859 | 4,449 | ||||
Total loans | 423,147 | 419,798 | ||||
Less Allowance for loan losses | (5,624) | (6,671) | ||||
Loans and leases, net | 417,523 | 413,127 | ||||
Bank owned life insurance | 14,739 | 9,807 | ||||
Premises and equipment, net | 769 | 691 | ||||
Other real estate owned, net | - | - | ||||
Accrued interest receivable | 1,811 | 1,697 | ||||
Other assets | 5,288 | 5,084 | ||||
Total Assets | $ | 636,056 | $ | 575,203 | ||
Total deposits | $ | 565,820 | $ | 522,252 | ||
Other borrowings | 2,325 | 2,290 | ||||
Subordinated debt | 10,404 | - | ||||
Other liabilities | 3,821 | 2,755 | ||||
Total Shareholders’ Equity | 53,686 | 47,906 | ||||
Total Liabilities and Equity | $ | 636,056 | $ | 575,203 | ||
1st COLONIAL BANCORP, INC. NET INTEREST INCOME AND MARGIN TABLES (Unaudited, in thousands, except percentages) | |||||||||||||||||||
For the three months ended | For the three months ended | ||||||||||||||||||
December 31, 2020 | December 31, 2019 | ||||||||||||||||||
Average | Average | ||||||||||||||||||
Balance | Interest | Yield | Balance | Interest | Yield | ||||||||||||||
Cash and cash equivalents | $ | 54,690 | $ | 12 | 0.09 | % | $ | 44,318 | $ | 148 | 1.32 | % | |||||||
Investment securities | 120,642 | 446 | 1.47 | % | 91,409 | 470 | 2.04 | % | |||||||||||
Mortgage loans held for sale | 20,874 | 129 | 2.46 | % | 8,071 | 60 | 2.95 | % | |||||||||||
Loans | 425,380 | 5,369 | 5.02 | % | 412,952 | 5,304 | 5.10 | % | |||||||||||
Total interest-earning assets | 621,586 | 5,956 | 3.81 | % | 556,750 | 5,982 | 4.26 | % | |||||||||||
Non-interest earning assets | 20,164 | 16,322 | |||||||||||||||||
Total average assets | $ | 641,750 | $ | 573,072 | |||||||||||||||
Interest-bearing deposits | |||||||||||||||||||
Interest-bearing checking | $ | 255,833 | $ | 186 | 0.29 | % | $ | 238,602 | $ | 458 | 0.76 | % | |||||||
Savings and money markets | 119,316 | 99 | 0.33 | % | 59,803 | 66 | 0.44 | % | |||||||||||
Certificates of deposit | 111,389 | 426 | 1.52 | % | 161,565 | 868 | 2.13 | % | |||||||||||
Total interest-bearing deposits | 486,538 | 711 | 0.58 | % | 459,970 | 1,392 | 1.20 | % | |||||||||||
Borrowings | 12,707 | 201 | 6.29 | % | 2,817 | 14 | 1.97 | % | |||||||||||
Total interest-bearing liabilities | 499,245 | 912 | 0.73 | % | 462,787 | 1,406 | 1.21 | % | |||||||||||
Non-interest bearing deposits | 86,373 | 60,636 | |||||||||||||||||
Other liabilities | 4,660 | 2,103 | |||||||||||||||||
Total average liabilities | 590,278 | 525,526 | |||||||||||||||||
Average shareholders' equity | 51,472 | 47,546 | |||||||||||||||||
Total average liabilities and equity | $ | 641,750 | $ | 573,072 | |||||||||||||||
Net interest income | $ | 5,044 | $ | 4,576 | |||||||||||||||
Net interest margin | 3.23 | % | 3.26 | % | |||||||||||||||
Net interest spread | 3.08 | % | 3.05 | % | |||||||||||||||
For the year ended | For the year ended | |||||||||||||||||||
December 31, 2020 | December 31, 2019 | |||||||||||||||||||
Average | Average | |||||||||||||||||||
Balance | Interest | Yield | Balance | Interest | Yield | |||||||||||||||
Cash and cash equivalents | $ | 49,454 | $ | 221 | 0.45 | % | $ | 21,678 | $ | 338 | 1.56 | % | ||||||||
Investment securities | 101,277 | 1,816 | 1.79 | % | 103,740 | 2,192 | 2.11 | % | ||||||||||||
Mortgage loans held for sale | 13,888 | 370 | 2.66 | % | 6,915 | 203 | 2.94 | % | ||||||||||||
Loans | 426,984 | 20,144 | 4.72 | % | 408,276 | 21,258 | 5.21 | % | ||||||||||||
Total interest-earning assets | 591,603 | 22,551 | 3.81 | % | 540,609 | 23,991 | 4.44 | % | ||||||||||||
Non-interest earning assets | 19,574 | 14,627 | ||||||||||||||||||
Total average assets | $ | 611,177 | $ | 555,236 | ||||||||||||||||
Interest-bearing deposits | ||||||||||||||||||||
Interest-bearing checking | $ | 244,578 | $ | 1,206 | 0.49 | % | $ | 222,816 | $ | 1,697 | 0.76 | % | ||||||||
Savings and money markets | 102,907 | 382 | 0.37 | % | 62,871 | 279 | 0.44 | % | ||||||||||||
Certificates of deposit | 126,644 | 2,302 | 1.82 | % | 157,485 | 3,393 | 2.15 | % | ||||||||||||
Total interest-bearing deposits | 474,129 | 3,890 | 0.82 | % | 443,172 | 5,369 | 1.21 | % | ||||||||||||
Borrowings | 5,948 | 300 | 5.04 | % | 4,335 | 67 | 1.55 | % | ||||||||||||
Total interest-bearing liabilities | 480,077 | 4,190 | 0.87 | % | 447,507 | 5,436 | 1.21 | % | ||||||||||||
Non-interest bearing deposits | 77,267 | 59,709 | ||||||||||||||||||
Other liabilities | 3,873 | 1,926 | ||||||||||||||||||
Average total liabilities | 561,217 | 509,142 | ||||||||||||||||||
Shareholders' equity | 49,960 | 46,094 | ||||||||||||||||||
Total average liabilities and equity | $ | 611,177 | $ | 555,236 | ||||||||||||||||
Net interest income | $ | 18,361 | $ | 18,555 | ||||||||||||||||
Net interest margin | 3.10 | % | 3.43 | % | ||||||||||||||||
Net interest spread | 2.94 | % | 3.23 | % | ||||||||||||||||
1st Colonial Community Bank, the subsidiary of 1st Colonial Bancorp, provides a range of business and consumer financial services, placing emphasis on customer service and access to decision makers. Headquartered in Collingswood, New Jersey, the Bank also has a branch in the New Jersey community of Westville and administrative offices in Cherry Hill, New Jersey. To learn more, call (856) 858-8402 or visit www.1stcolonial.com.
This release contains forward-looking statements that are not historical facts and include statements about management’s strategies and expectations about our business. There are risks and uncertainties that may cause our actual results and performance to be materially different from results indicated by these forward-looking statements. Factors that might cause a difference include the extent of the adverse impact of the current global coronavirus outbreak on our customers, prospects and business, as well as the impact of any future pandemics or other natural disasters; economic conditions; civil unrest, rioting, acts or threats of terrorism, or actions taken by the local, state and Federal governments in response to such events, which could impact business and economic conditions in our market area; unanticipated loan losses, inability to close loans in our pipeline, lack of liquidity; varying and unanticipated costs of collection with respect to nonperforming loans; an inability to dispose of real estate owned; changes in interest rates, changes in FDIC assessments, deposit flows, loan demand, and real estate values; changes in relationships with major customers; operational risks, including the risk of fraud by employees, customers or outsiders; competition; changes in accounting principles, policies or guidelines; changes in laws or regulations and in the manner in which the regulators enforce same; new technology and other factors affecting our operations, pricing, products and services.
View source version on businesswire.com: https://www.businesswire.com/news/home/20210125005849/en/
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