1st Colonial Bancorp, Inc. Reports Second Quarter 2021 Results

1st Colonial Bancorp, Inc. (FCOB), holding company of 1st Colonial Community Bank, today reported net income of $1.7 million, or $0.34 per diluted share, for the three months ended June 30, 2021, compared to net income of $1.2 million, or $0.24 per diluted share, for the three months ended June 30, 2020. For the six months ended June 30, 2021, net income was $3.4 million, or $0.67 per diluted share, compared to $1.2 million, or $0.24 per diluted share, for the same period in 2020.

Robert White, President and Chief Executive Officer, commented, “We are pleased with our second quarter results and operating performance. Our focus continues to be on generating and maintaining high quality relationships, which is reflective in our loan and deposit growth for the quarter. We continue to see steady production on the commercial side as we strive to diversify our asset mix. Our Small Business Administration (“SBA”) lending activities have increased considerably during 2021 and are expected to be a steady source of future revenue growth. Residential loan origination continues to be robust, with our new business mix being more heavily weighted towards purchase transactions rather than refinance activity.

“We continue to focus on technology upgrades and enhancements to support our digital strategy, and creating a platform that supports our clients when, where, and how they choose to do their banking. Key infrastructure investments will continue to help us further improve our efficiency and delivery of our products and services in our key markets.”

Operating Results

Net Interest Income

Net interest income for the three months ended June 30, 2021 and 2020 was $5.0 million and $4.1 million, respectively. The $907 thousand increase in net interest income was primarily attributable to a $664 thousand increase in interest income coupled with a $243 thousand decrease in interest expense. Interest income on average loans increased $675 thousand quarter over quarter. For the second quarter of 2020, net interest income was negatively affected by $628 thousand in deferred interest payments related to the pandemic. Interest expense was impacted by a $435 thousand decline in interest expense related to average interest-bearing deposits and a $192 thousand increase in interest expense on average borrowings. An increase in non-interest bearing and lower cost deposit products coupled with interest rate reductions led to the improvement in deposit interest expense. Interest on average borrowings grew due to the subordinated debt issued by the Company in the third quarter of 2020.

For the first six months of 2021, net interest income grew $1.1 million, or 12.6%, to $9.8 million from $8.7 million for the same period in 2020. The increase in net interest income was primarily attributable to a $329 thousand increase in interest income accompanied with a $770 thousand decrease in interest expense. For 2021, interest income on average loans increased $443 thousand while interest income on average cash and cash equivalents declined $181 thousand. Average outstanding loan balances grew but at a reduced yield, primarily related to the 1% coupon associated with the Bank’s Paycheck Protection Program (“PPP”) loans. Interest expense was affected by a $1.2 million decline in interest expense related to average interest-bearing deposits and a $381 thousand increase in interest expense on average borrowings due to the subordinated debt.

PPP loan origination income increased $144 thousand quarter over quarter and $439 thousand year over year. Approximately $2.3 million in PPP origination fees remains to be recognized over the contractual term, which is predominately 60 months. The earnout period may be accelerated based on the timing of the forgiveness of the PPP loans by the SBA.

The net interest margin was 3.09% for the second quarter of 2021 compared to 2.84% for the second quarter of 2020, and was 3.11% for the six months ended June 30, 2021 compared to 3.03% for the six months ended June 30, 2020. The improvement in net interest margin was mostly related to the decline in interest expense. The average rate paid on liabilities declined from 0.99% for the first six months of 2020 to 0.61% for the first six months of 2021.

Loan Loss Provision

For the three and six months ended June 30, 2021, we recorded provisions to the allowance for loan losses (“allowance”) of $175 thousand and $415 thousand, respectively, compared to $222 thousand and $1.5 million for the three and six months ended June 30, 2020, respectively. The 2020 provision was related to an increase in qualitative reserve factors due to the uncertainties related to the pandemic and an increase in the historical loss rates. Net recoveries were $203 thousand for the first half of 2021 compared to $2.1 million in net charge-offs for the same period in 2020. The net charge-offs for 2020 included $1.8 million in specific reserves on impaired loans. The allowance as a percentage of total loans was 1.26% as of June 30, 2021 compared to 1.33% as of December 31, 2020 and 1.36% as of June 30, 2020. Mary Kay Shea, Executive Vice President and Chief Financial Officer, stated, “The credit outlook remains positive with asset quality metrics remaining stable or improving. We continue to closely manage one legacy residential construction loan for $2.1 million that was classified as non-performing in the third quarter of 2020.”

Non-interest Income

Non-interest income for the second quarter of 2021 was $2.3 million, an increase of $1.1 million, or 82.4%, from $1.2 million for the second quarter of 2020. During the second quarter of 2021 we earned $616 thousand in gains on the sale of SBA loans. There were no such gains on the sale of SBA loans in the comparable 2020 period. Income from the origination and sales of residential mortgages increased $458 thousand, or 49.0%, to $1.4 million for the second quarter in 2021 due to a $13.4 million increase in the volume of loans sold during the 2021 period.

For the six months ended June 30, 2021, non-interest income was $4.9 million, an increase of $2.7 million, or 129.2%, from $2.1 million for the same period in 2020. Income from the origination and sales of residential mortgages grew $1.8 million, or 112.3%, from $1.6 million for the first two quarters of 2020 to $3.4 million for the first two quarters in 2021 due to growth of $57.7 million in the volume of loans sold during the 2021 period. In 2021 we earned $951 thousand in gains on the sale of SBA loans. There were no such gains on the sale of SBA loans in the comparable 2020 period.

Non-interest Expense

Non-interest expense was $4.7 million for the three months ended June 30, 2021, an increase of $1.1 million, or 29.8%, from $3.6 million for the comparable period in 2020. Personnel expenses increased $909 thousand, or 43.0%, during this period. Approximately $294 thousand, or 32%, of the increase in personnel expenses was attributable to an increase in the commissions paid to our mortgage lending originators as a result of the growth in the volume originated. Throughout 2020, we made key investments in highly experienced revenue producers and operational team members as we executed upon our strategic plan. On March 29, 2021, we expanded into southeastern Pennsylvania when we opened a new full-service branch in Limerick.

Non-interest expense was $9.5 million for the six months ended June 30, 2021, an increase of $1.7 million, or 21.6%, from $7.8 million for the comparable period in 2020. The increase was mainly related to planned growth in personnel expenses, primarily attributable to our market expansion.

Income Taxes

For the three and six months ended June 30, 2021, income tax expense was $703 thousand and $1.4 million, respectively, compared to $312 thousand and $327 thousand for the three and six months ended June 30, 2020, respectively.

Financial Condition

Assets

As of June 30, 2021, total assets were $685.1 million and grew $49.0 million, or 7.7%, from $636.1 million as of December 31, 2020.

Total loans were $495.8 million as of June 30, 2021, an increase of $72.7 million, or 17.2%, from $423.1 million as of December 31, 2020. During the first half of 2021, we originated $48.3 million in new PPP loans, which grew from $27.6 million as of December 31, 2020 to $53.8 million as of June 30, 2021. Commercial loans grew $20.7 million and residential mortgages and consumer loans grew $25.8 million. Loans held for sale were $20.9 million as of June 30, 2021, compared to $21.9 million as of December 31, 2020. With the re-opening of the local economy, we have seen an increase in demand for commercial loans, including SBA loans.

Liabilities

Total deposits were $614.5 million as of June 30, 2021, an increase of $48.7 million, or 8.6%, from $565.8 million as of December 31, 2020. Certificates of deposit including brokered deposits, demand deposits, interest-checking, and money market accounts increased $43.5 million, $7.3 million, $6.3 million, and $1.1 million, respectively, while savings accounts decreased $9.6 million. Short-term borrowings declined $2.1 million relating to the termination of repurchase agreements.

Shareholder’s Equity

Total shareholders’ equity was $55.4 million as of June 30, 2021, an increase of $1.7 million, or 3.2%, from $53.7 million as of December 31, 2020. Tangible book value per share increased $0.65, or 6.0%, from $10.82 as of December 31, 2020, to $11.47 as of June 30, 2021.

During the first quarter of 2021, we announced the adoption of a stock repurchase program, which authorized management to repurchase up to 3% of the Company’s outstanding shares of common stock, with a total cost not to exceed $1.4 million. The repurchase program was completed during the second quarter. We repurchased 141,720 shares for a total cost of $1.4 million through a trading plan under Rule 10b5-1 under the Securities Exchange Act of 1934.

Asset Quality

1st Colonial's non-performing assets as of June 30, 2021, were $4.9 million and included $4.7 million in non-accrual loans and $187 thousand in other real estate owned (OREO). Non-performing assets were $4.8 million as of December 31, 2020, and were comprised of non-performing loans. The ratio of non-performing assets to total assets as of June 30, 2021, was 0.71% compared to 0.75% as of December 31, 2020. As of June 30, 2021, the allowance was $6.2 million, or 1.26% of total loans. The allowance was $5.6 million, or 1.33% of total loans as of December 31, 2020. The allowance to non-accrual loans was 132.6% as of June 30, 2021, compared to 117.3% as of December 31, 2020.

Income Statement and Other Highlights:

Highlights as of June 30, 2021 and 2020 and December 31, 2020 and a comparison of the three and six months ended June 30, 2021 to the three and six months ended June 30, 2020 include the following:

SELECTED PERFORMANCE RATIOS:

GAAP to NON-GAAP RECONCILIATION
(Unaudited, dollars in thousands, except per share data)

Pre-tax, pre-provision earnings are determined by methods other than in accordance with generally accepted accounting principles (“GAAP”) and is considered a non-GAAP financial measure. Management believes that this non-GAAP financial measure is useful because it enhances the ability of management and investors to evaluate and compare our operating results from period to period.

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 has branches in Westville, New Jersey and Limerick, Pennsylvania. The bank also has a loan production office in Haddonfield, New Jersey and administrative offices in Cherry Hill, New Jersey. To learn more, call (877) 785-8550 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.

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