Highlights
- Net income of $3.4 million, or $0.47 per diluted share
- Annualized return on average assets and average equity was 1.48% and 12.51%, respectively
- Total gross loans of $787.2 million at June 30, 2018, a decline of 0.81% from prior quarter
- Average net loans of $801.3 million, an increase of 3.49% from prior quarter
- Total deposits of $785.0 million at June 30, 2018, an increase of 3.45% from prior quarter
- The Company was added to the Russell 3000® Index and the Russell 2000® Index when Russell investments reconstituted its comprehensive set of U.S. and global equity indexes after the market close on June 22, 2018
- Quarterly cash dividend of $0.20 declared
- Acquisition of Pacific Commerce Bancorp completed on July 31, 2018
Cerritos, CA, Aug. 01, 2018 (GLOBE NEWSWIRE) -- First Choice Bancorp, (“First Choice” or the “Company”) (NASDAQ: FCBP), the holding company of First Choice Bank (the “Bank”), today reported financial results for the second quarter ended June 30, 2018.
For the second quarter of 2018, net income was $3.4 million, or $0.47 per diluted share, compared to net income of $2.4 million, or $0.33 per diluted share, for the first quarter of 2018, and net income of $2.3 million, or $0.32 per diluted share, for the second quarter of 2017.
On July 26, 2018, the Company also declared a cash dividend of $0.20 per share. The dividend is payable on September 10, 2018 to shareholders of record on August 27, 2018.
“We delivered strong year-over-year growth in earnings, driven by higher net interest income, improved efficiencies and stable asset quality,” said Robert M. Franko, President and CEO of First Choice Bancorp. “Our end-of-period loan growth in the second quarter was impacted by fluctuations in commercial line utilization from one large commercial customer. Our average net loans increased 3.49% compared to the first quarter of 2018, which is more reflective of the growth trends we are experiencing. Our loan pipeline remains healthy and we expect to see a consistent level of organic loan growth over the second half of the year."
“As announced today, we completed our acquisition of Pacific Commerce Bancorp and we are very excited to welcome our new customers and colleagues to the First Choice family. The combination of our two banks creates the 16th largest publicly traded bank in Southern California and significantly improves our competitive positioning. Our top priority for the remainder of 2018 is managing the integration of Pacific Commerce and realizing all of the synergies we project for this transaction. We continue to expect the acquisition to be approximately 15% accretive to earnings per share in 2019, significantly improving our earnings power and the level of returns that we generate for our shareholders,” said Mr. Franko.
Operating Results for the Second Quarter 2018
Net Interest Income
Net interest income for the second quarter of 2018 was $10.8 million, an increase of 13.26% from $9.6 million for the first quarter of 2018. The increase in net interest income from the first quarter was primarily attributable to higher average loan balances and early payoffs in the purchased SBA loan portfolio, which resulted in the accelerated recognition of income from the unamortized loan discounts.
Net Interest Margin
Net interest margin for the second quarter of 2018 was 4.73%, an increase from 4.38% for the first quarter of 2018. The net interest margin was positively impacted by an increase in accretion income on acquired loans due to an increase in payoffs.
Excluding the impact of accretion income on acquired loans, the net interest margin decreased 5 basis points compared to the first quarter of 2018. The decrease was attributable to a 2 basis points decrease in dividend income from FHLB and other bank stocks, and an 18 basis points increase in the average cost of funds, attributed in large part to a deposit promotion program in the second quarter which ended on June 30, 2018, and partially offset by a 15 basis points increase in the average loan yield.
Non-interest Income
Non-interest income for the second quarter of 2018 was $0.8 million, an increase of 38.37% from $0.6 million for the first quarter of 2018. The increase was primarily the result of an increase in the gain on sale of SBA loans. During the second quarter of 2018, the Company sold $5.8 million in SBA loans, resulting in a gain on sale of $0.4 million. During the first quarter of 2018, the Company sold $2.7 million in SBA loans, resulting in a gain on sale of $0.2 million.
Non-interest Expense
Non-interest expense for the second quarter of 2018 was $6.3 million, a decrease of 5.39% from $6.7 million for the first quarter of 2018. The decrease was primarily attributable to a decrease in the salary and benefits and customer service costs. Non-interest expense for the second quarter of 2018 included approximately $0.4 million in merger-related and public company registration expense related to the Company’s Nasdaq listing and the pending acquisition of Pacific Commerce Bancorp.
The Company’s operating efficiency ratio was 54.47% in the second quarter of 2018, compared with 66.01% in the first quarter of 2018.
Excluding the impact of accretion income on acquired loans and the merger-related and public company registration expense, the Company's operating efficiency ratio was 55.75% in the second quarter of 2018, compared with 62.31% in the first quarter of 2018. The improvement in operating efficiency was due to an increase in operating income, and decrease in non-interest expense in the second quarter of 2018.
Income Taxes
The Company recorded income tax expense of $1.5 million for the second quarter of 2018, representing an effective tax rate of 30.76%, compared to 26.53% reported for the first quarter of 2018. The increase in the effective tax rate reflects a lower tax benefit from stock-based compensation in the second quarter of 2018.
Loan Portfolio
Total gross loans, excluding loans held for sale, were $787.2 million at June 30, 2018, a decrease of 0.81% from $793.6 million at March 31, 2018. The decrease was primarily attributable to the paydown of one large commercial line of credit.
During the second quarter of 2018, the Company originated $88.1 million in new loan commitments, the majority of the growth during the quarter occurred in construction and commercial real estate loans, $52.7 million, or 59.84% of total new loan commitments, and in commercial and industrial loans, $25.3 million, or 28.69% of total new loan commitments.
Deposits
Total deposits were $785.0 million at June 30, 2018, an increase of 3.45% from $758.8 million at March 31, 2018. The increase in noninterest bearing demand, money market, time deposits and brokered deposits was $14.1 million, $52.5 million, $21.0 million and $4.0 million, respectively, as depositors are shifting balances to higher yielding accounts. Offsetting these increases were reductions in interest checking and savings accounts of $47.3 million and $18.2 million, respectively.
Credit Quality
Non-performing assets totaled $1.6 million, or 0.16% of total assets, at June 30, 2018, compared with $1.1 million, or 0.11% of total assets, at March 31, 2018. The increase in non-performing assets was primarily attributable to two SBA loans placed on non-accrual status.
The Company recorded net recoveries of $46 thousand in the second quarter.
The Company recorded a provision for loan losses of $0.3 million for the second quarter of 2018, which was primarily attributable to the increase in non-performing assets.
The Company’s allowance for loan losses was 1.32% of total gross loans and 657.54% of non-performing assets at June 30, 2018, compared with 1.26% and 943.45%, respectively, at March 31, 2018.
Capital Ratios
At June 30, 2018, the Bank exceeded all regulatory capital requirements under Basel III and was considered to be a ‘‘well-capitalized’’ financial institution.
| Bank Only | June 30, 2018 | March 31, 2018 | December 31, 2017 |
| Total Capital (to Risk-Weighted Assets) | 14.73% | 14.26% | 14.72% |
| Tier 1 Capital (to Risk-Weighted Assets) | 13.48% | 13.01% | 13.46% |
| CET1 Capital (to Risk-Weighted Assets) | 13.48% | 13.01% | 13.46% |
| Tier 1 Capital (to Average Assets) | 12.16% | 12.19% | 11.75% |
ABOUT FIRST CHOICE BANCORP
First Choice Bancorp is a community-based bank holding company headquartered in Cerritos, California, and it is the sole shareholder of First Choice Bank. As of July 31, 2018, the First Choice had total assets of approximately $1.5 billion. First Choice Bank, headquartered in Cerritos, California is a community-focused financial institution, serving diverse consumers and commercial clients and specializing in loans to small businesses, private banking clients, commercial and industrial (C&I) loans, and commercial real estate loans with a niche in providing financing for the hospitality industry. First Choice Bank is a Preferred Small Business Administration (SBA) Lender. Founded in 2005, First Choice Bank has quickly become a leading provider of financial services that enable our customers to grow, maintain strength, and achieve their business objectives. We strive to surpass our clients’ expectations through our efficiency and professionalism and are committed to being “First in Speed, Service, and Solutions.” First Choice Bancorp stock is traded on the Nasdaq Capital Market under the ticker symbol “FCBP.”
First Choice Bank’s website is www.FirstChoiceBankCA.com.
Disclosure
This press release contains certain non-GAAP financial disclosures for tangible common equity and tangible assets and adjusted earnings. The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company's operational performance and to enhance investors' overall understanding of such financial performance.
Forward-Looking Statements
Certain matters set forth herein (including the exhibits hereto) constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including forward-looking statements relating to the Company's current business plans and expectations and our future financial position and operating results. These forward-looking statements are subject to risks and uncertainties that could cause actual results, performance and/or achievements to differ materially from those projected. These risks and uncertainties include, but are not limited to, local, regional, national and international economic and market conditions and events and the impact they may have on us, our customers and our assets and liabilities; our ability to attract deposits and other sources of funding or liquidity; supply and demand for real estate and periodic deterioration in real estate prices and/or values in California or other states where we lend, including both residential and commercial real estate; a prolonged slowdown or decline in real estate construction, sales or leasing activities; changes in the financial performance and/or condition of our borrowers, depositors or key vendors or counterparties; changes in our levels of delinquent loans, nonperforming assets, allowance for loan losses and charge-offs; the costs or effects of acquisitions or dispositions we may make, whether we are able to obtain any required governmental approvals in connection with any such acquisitions or dispositions, and/or our ability to realize the contemplated financial or business benefits associated with any such acquisitions or dispositions; the effect of changes in laws, regulations and applicable judicial decisions (including laws, regulations and judicial decisions concerning financial reforms, taxes, banking capital levels, consumer, commercial or secured lending, securities and securities trading and hedging, compliance, employment, executive compensation, insurance, vendor management and information security) with which we and our subsidiaries must comply or believe we should comply; changes in estimates of future reserve requirements and minimum capital requirements based upon the periodic review thereof under relevant regulatory and accounting requirements, including changes in the Basel Committee framework establishing capital standards for credit, operations and market risk; inflation, interest rate, securities market and monetary fluctuations; changes in government interest rates or monetary policies; changes in the amount and availability of deposit insurance; cyber-security threats, including loss of system functionality or theft or loss of Company or customer data or money; political instability; acts of war or terrorism, or natural disasters, such as earthquakes, drought, or the effects of pandemic diseases; the timely development and acceptance of new banking products and services and the perceived overall value of these products and services by our customers and potential customers; the Company's relationships with and reliance upon vendors with respect to the operation of certain of the Company's key internal and external systems and applications; changes in commercial or consumer spending, borrowing and savings preferences or behaviors; technological changes and the expanding use of technology in banking (including the adoption of mobile banking and funds transfer applications); the ability to retain and increase market share, retain and grow customers and control expenses; changes in the competitive and regulatory environment among financial and bank holding companies, banks and other financial service providers; volatility in the credit and equity markets and its effect on the general economy or local or regional business conditions; fluctuations in the price of the Company's common stock or other securities; and the resulting impact on the Company's ability to raise capital or make acquisitions, the effect of changes in accounting policies and practices, as may be adopted from time-to-time by our regulatory agencies, as well as by the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard-setters; changes in our organization, management, compensation and benefit plans, and our ability to retain or expand our workforce, management team and/or our board of directors; the costs and effects of legal, compliance and regulatory actions, changes and developments, including the initiation and resolution of legal proceedings (such as securities, consumer or employee class action litigation), regulatory or other governmental inquiries or investigations, and/or the results of regulatory examinations or reviews; our ongoing relations with our various federal and state regulators, including the SEC, FDIC, FRB and California DBO; our success at managing the risks involved in the foregoing items and all other factors set forth in the Company's public reports, including its registration statements as filed under Form S-4 and Form 8-A, and particularly the discussion of risk factors within that document. The Company does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements except as required by law. Any statements about future operating results, such as those concerning accretion and dilution to the Company's earnings or shareholders, are for illustrative purposes only, are not forecasts, and actual results may differ.
Income statement highlights and selected ratios (unaudited):
(dollars in thousands, except per share amounts)
| For the three months ended | For the six months ended | ||||||||||||||
| June 30, 2018 | March 31, 2018 | June 30, 2017 (restated) | June 30, 2018 | June 30, 2017 (restated) | |||||||||||
| Total interest income | $ | 12,915 | $ | 11,189 | $ | 9,634 | $ | 24,104 | $ | 18,698 | |||||
| Total interest expense | 2,096 | 1,637 | 1,441 | 3,733 | 2,877 | ||||||||||
| Net interest income | 10,819 | 9,552 | 8,193 | 20,371 | 15,821 | ||||||||||
| Provision for loan losses | 320 | 200 | — | 520 | — | ||||||||||
| Net interest income after provision for loan losses | 10,499 | 9,352 | 8,193 | 19,851 | 15,821 | ||||||||||
| Total noninterest income | 779 | 563 | 1,222 | 1,342 | 2,693 | ||||||||||
| Total noninterest expense | 6,317 | 6,677 | 5,573 | 12,994 | 11,080 | ||||||||||
| Income before taxes | 4,961 | 3,238 | 3,842 | 8,199 | 7,434 | ||||||||||
| Income taxes | 1,526 | 859 | 1,560 | 2,385 | 3,026 | ||||||||||
| NET INCOME | $ | 3,435 | $ | 2,379 | $ | 2,282 | $ | 5,814 | $ | 4,408 | |||||
| Selected financial and ratios: | |||||||||||||||
| Dividends declared per common share | $ | 0.20 | $ | 0.20 | $ | 0.20 | $ | 0.40 | $ | 0.40 | |||||
| Net income per share-basic | 0.47 | 0.33 | 0.32 | 0.80 | 0.61 | ||||||||||
| Net income per share-diluted 1 | 0.47 | 0.33 | 0.32 | 0.80 | 0.61 | ||||||||||
| Weighted average shares - basic | 7,172,020 | 7,160,938 | 7,102,653 | 7,166,509 | 7,092,068 | ||||||||||
| Weighted average shares - diluted 1 | 7,214,473 | 7,200,057 | 7,137,163 | 7,207,295 | 7,127,549 | ||||||||||
| Return on assets (annualized) | 1.48% | 1.06% | 1.06% | 1.28% | 1.02% | ||||||||||
| Return on equity (annualized) | 12.51% | 8.86% | 8.69% | 10.71% | 8.45% | ||||||||||
| Net interest margin | 4.73% | 4.38% | 3.86% | 4.56% | 3.74% | ||||||||||
| Cost of Deposits | 0.98% | 0.79% | 0.77% | 0.89% | 0.77% | ||||||||||
| Cost of Funds | 1.03% | 0.85% | 0.77% | 0.94% | 0.77% | ||||||||||
| Efficiency ratio | 54.47% | 66.01% | 59.19% | 59.84% | 59.85% | ||||||||||
(1) Diluted shares are calculated using the two class method.
First Choice Bancorp and Subsidiaries
Condensed Consolidated Balance Sheet (unaudited)
(dollars in thousands, except share and per share amounts)
| June 30, 2018 | March 31, 2018 | December 31, 2017 | ||||||||||
| ASSETS | ||||||||||||
| Cash and due from banks | $ | 5,837 | $ | 6,840 | $ | 5,405 | ||||||
| Interest-bearing deposits at other banks | 115,317 | 93,225 | 97,727 | |||||||||
| Securities purchased under agreements to resell | — | — | — | |||||||||
| Total cash and cash equivalents | 121,154 | 100,065 | 103,132 | |||||||||
| Investment securities, available-for-sale | 29,732 | 31,045 | 35,002 | |||||||||
| Investment securities, held-to-maturity | 5,344 | 5,292 | 5,300 | |||||||||
| Loans held for sale | 11,466 | 11,525 | 10,599 | |||||||||
| Gross loans | 787,175 | 793,582 | 745,887 | |||||||||
| Unearned fees and costs | (3,688 | ) | (4,152 | ) | (4,174 | ) | ||||||
| Allowance for loan losses | (10,376 | ) | (10,010 | ) | (10,497 | ) | ||||||
| Loans receivable, net | 773,111 | 779,420 | 731,216 | |||||||||
| Federal Home Loan Bank, at cost | 3,866 | 3,640 | 3,640 | |||||||||
| Equity securities, at fair value | 2,506 | 2,508 | — | |||||||||
| Accrued interest receivable | 3,274 | 3,358 | 3,108 | |||||||||
| Premises and equipment | 1,242 | 1,055 | 1,035 | |||||||||
| Servicing assets | 2,448 | 2,508 | 2,618 | |||||||||
| Other assets | 8,543 | 7,260 | 8,145 | |||||||||
| TOTAL ASSETS | $ | 962,686 | $ | 947,676 | $ | 903,795 | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
| Deposits: | ||||||||||||
| Noninterest-bearing demand | $ | 211,611 | $ | 197,503 | $ | 235,584 | ||||||
| Money market, interest checking and savings | 339,639 | 352,958 | 372,699 | |||||||||
| Time deposits | 233,707 | 208,340 | 164,396 | |||||||||
| Total deposits | 784,957 | 758,801 | 772,679 | |||||||||
| Federal Home Loan Bank borrowings | 60,000 | 57,000 | 20,000 | |||||||||
| Federal funds purchased | — | 18,000 | — | |||||||||
| Senior Secured Debt | 4,150 | 2,550 | 350 | |||||||||
| Accrued interest payable | 200 | 165 | 114 | |||||||||
| Other liabilities | 4,560 | 4,679 | 4,958 | |||||||||
| Total liabilities | 853,867 | 841,195 | 798,101 | |||||||||
| Total shareholders’ equity | 108,819 | 106,481 | 105,694 | |||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 962,686 | $ | 947,676 | $ | 903,795 | ||||||
| Book value and tangible book value per share | $ | 15.00 | $ | 14.68 | $ | 14.56 | ||||||
First Choice Bancorp and Subsidiaries
Condensed Consolidated Statement of Income (unaudited)
(dollars in thousands)
| For the Three Months Ended | For the Six Months Ended June 30, | ||||||||||||||||||
| June 30, 2018 | March 31, 2018 | June 30, 2017 (restated(1)) | 2018 | 2017 (restated(1)) | |||||||||||||||
| INTEREST INCOME | |||||||||||||||||||
| Interest and fees on loans | $ | 12,320 | $ | 10,621 | $ | 9,122 | $ | 22,941 | $ | 17,596 | |||||||||
| Interest on investment securities | 233 | 239 | 245 | 472 | 500 | ||||||||||||||
| Dividends on FHLB and other stock | 68 | 69 | 59 | 137 | 148 | ||||||||||||||
| Other interest income | 294 | 260 | 208 | 554 | 454 | ||||||||||||||
| Total interest income | 12,915 | 11,189 | 9,634 | 24,104 | 18,698 | ||||||||||||||
| INTEREST EXPENSE | |||||||||||||||||||
| Interest on savings, interest checking and money market accounts | 969 | 819 | 1,002 | 1,788 | 2,028 | ||||||||||||||
| Interest on time deposits | 919 | 616 | 389 | 1,535 | 797 | ||||||||||||||
| Interest on borrowings | 208 | 202 | 50 | 410 | 52 | ||||||||||||||
| Total interest expense | 2,096 | 1,637 | 1,441 | 3,733 | 2,877 | ||||||||||||||
| Net interest income | 10,819 | 9,552 | 8,193 | 20,371 | 15,821 | ||||||||||||||
| Provision for loan losses | 320 | 200 | — | 520 | — | ||||||||||||||
| Net interest income after provision for loan losses | 10,499 | 9,352 | 8,193 | 19,851 | 15,821 | ||||||||||||||
| NONINTEREST INCOME | |||||||||||||||||||
| Gain on sale of loans | 448 | 247 | 898 | 695 | 2,087 | ||||||||||||||
| Service charges and fees on deposit accounts | 208 | 215 | 64 | 423 | 130 | ||||||||||||||
| Net servicing fees | 126 | 153 | 189 | 279 | 360 | ||||||||||||||
| Other (loss) income | (3 | ) | (52 | ) | 71 | (55 | ) | 116 | |||||||||||
| Total noninterest income | 779 | 563 | 1,222 | 1,342 | 2,693 | ||||||||||||||
| NONINTEREST EXPENSE | |||||||||||||||||||
| Salaries and employee benefits | 3,578 | 4,116 | 3,698 | 7,694 | 7,343 | ||||||||||||||
| Occupancy expenses | 361 | 348 | 316 | 709 | 617 | ||||||||||||||
| Professional fees | 378 | 304 | 119 | 682 | 198 | ||||||||||||||
| Data processing | 448 | 421 | 357 | 869 | 687 | ||||||||||||||
| Equipment expenses | 206 | 172 | 173 | 378 | 353 | ||||||||||||||
| Office expenses | 193 | 192 | 160 | 385 | 321 | ||||||||||||||
| Deposit insurance and regulatory assessments | 86 | 111 | 112 | 197 | 219 | ||||||||||||||
| Loan related expenses | 101 | 84 | 19 | 185 | 158 | ||||||||||||||
| Customer service expenses | 101 | 140 | 119 | 241 | 263 | ||||||||||||||
| Merger-related and public company registration expenses | 356 | 374 | — | 730 | — | ||||||||||||||
| Provision for credit losses - off-balance sheet | — | 53 | 142 | 53 | 214 | ||||||||||||||
| Other expenses | 509 | 362 | 358 | 871 | 707 | ||||||||||||||
| Total noninterest expense | 6,317 | 6,677 | 5,573 | 12,994 | 11,080 | ||||||||||||||
| Income before taxes | 4,961 | 3,238 | 3,842 | 8,199 | 7,434 | ||||||||||||||
| Income taxes | 1,526 | 859 | 1,560 | 2,385 | 3,026 | ||||||||||||||
| Net income | $ | 3,435 | $ | 2,379 | $ | 2,282 | $ | 5,814 | $ | 4,408 | |||||||||
(1) Certain amounts have been restated to reflect adjustments related to the correction of an error.
Average Balance Sheets
| Three Months Ended | |||||||||||||||||||||||||||||
| June 30, 2018 | March 31, 2018 | June 30, 2017 | |||||||||||||||||||||||||||
| Average Balance | Interest Income / Expense | Yield / Cost | Average Balance | Interest Income / Expense | Yield / Cost | Average Balance | Interest Income / Expense | Yield / Cost | |||||||||||||||||||||
| Interest-earning assets: | (in thousands) | ||||||||||||||||||||||||||||
| Due from banks | $ | 74,325 | $ | 294 | 1.59% | $ | 67,059 | $ | 260 | 1.57% | $ | 82,830 | $ | 200 | 0.96% | ||||||||||||||
| Federal funds sold/resale agreements | — | — | N/A | — | — | N/A | 1,834 | 8 | 1.75% | ||||||||||||||||||||
| Investment securities | 38,153 | 233 | 2.45% | 39,505 | 239 | 2.46% | 44,806 | 245 | 2.20% | ||||||||||||||||||||
| Loans (1) | 801,342 | 12,320 | 6.17% | 774,292 | 10,621 | 5.56% | 717,784 | 9,122 | 5.10% | ||||||||||||||||||||
| FHLB and other bank stock | 4,071 | 68 | 6.70% | 3,933 | 69 | 7.10% | 3,890 | 59 | 6.19% | ||||||||||||||||||||
| Total interest-earning assets | 917,891 | 12,915 | 5.64% | 884,789 | 11,189 | 5.13% | 851,144 | 9,634 | 4.54% | ||||||||||||||||||||
| Noninterest-earning assets: | |||||||||||||||||||||||||||||
| Cash and cash equivalents | 7,014 | 6,538 | 4,403 | ||||||||||||||||||||||||||
| Allowance for loan losses | (10,037 | ) | (10,395 | ) | (11,502 | ) | |||||||||||||||||||||||
| Other assets | 14,119 | 13,525 | 14,412 | ||||||||||||||||||||||||||
| Total assets | $ | 928,987 | $ | 894,457 | $ | 858,457 | |||||||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||||||||
| Interest checking | $ | 141,598 | $ | 407 | 1.15% | $ | 191,281 | $ | 504 | 1.07% | $ | 252,025 | $ | 681 | 1.08% | ||||||||||||||
| Money market accounts | 151,248 | 455 | 1.21% | 91,144 | 164 | 0.73% | 70,825 | 113 | 0.64% | ||||||||||||||||||||
| Savings accounts | 50,978 | 107 | 0.84% | 69,611 | 151 | 0.88% | 88,443 | 208 | 0.94% | ||||||||||||||||||||
| Time deposits | 170,148 | 738 | 1.74% | 123,182 | 448 | 1.48% | 98,654 | 275 | 1.12% | ||||||||||||||||||||
| Brokered time deposits | 52,801 | 181 | 1.37% | 52,406 | 168 | 1.30% | 38,129 | 114 | 1.2% | ||||||||||||||||||||
| Total interest-bearing deposits | 566,773 | 1,888 | 1.34% | 527,624 | 1,435 | 1.10% | 548,076 | 1,391 | 1.02% | ||||||||||||||||||||
| FHLB borrowings | 35,429 | 166 | 1.88% | 47,378 | 186 | 1.58% | 20,440 | 49 | 0.96% | ||||||||||||||||||||
| Federal funds purchased | 264 | 1 | 1.52% | 400 | 2 | 2.37% | — | — | —% | ||||||||||||||||||||
| Senior secured notes | 3,218 | 41 | 5.11% | 1,122 | 13 | 4.77% | — | — | —% | ||||||||||||||||||||
| Other borrowings | 31 | — | —% | 36 | 1 | 7.80% | 52 | 1 | 7.71% | ||||||||||||||||||||
| Total interest-bearing liabilities | 605,715 | 2,096 | 1.39% | 576,560 | 1,637 | 1.15% | 568,568 | 1,441 | 1.02% | ||||||||||||||||||||
| Noninterest-bearing liabilities: | |||||||||||||||||||||||||||||
| Demand deposits | 209,009 | 206,752 | 180,454 | ||||||||||||||||||||||||||
| Other liabilities | 4,450 | 3,756 | 4,422 | ||||||||||||||||||||||||||
| Shareholders’ equity | 109,813 | 107,389 | 105,013 | ||||||||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 928,987 | $ | 894,457 | $ | 858,457 | |||||||||||||||||||||||
| Net interest spread | $ | 10,819 | 4.26% | $ | 9,552 | 3.98% | $ | 8,193 | 3.52% | ||||||||||||||||||||
| Net interest margin | 4.73% | 4.38% | 3.86% | ||||||||||||||||||||||||||
(1) Average loans include net discounts and deferred costs. Interest income on loans includes $142 thousand and $170 thousand related to the accretion of net deferred loans fees and $815 thousand and $(413) thousand related to accretion (amortization) of discounts (premiums) for the three months ended June 30, 2018 and 2017, respectively.
Average Balance Sheets (continued)
| Six Months Ended June 30, | |||||||||||||||||||
| 2018 | 2017 | ||||||||||||||||||
| Average Balance | Interest Income / Expense | Yield / Cost | Average Balance | Interest Income / Expense | Yield / Cost | ||||||||||||||
| Interest-earning assets: | (in thousands) | ||||||||||||||||||
| Due from banks | $ | 70,712 | $ | 554 | 1.58% | $ | 91,995 | $ | 422 | 0.93% | |||||||||
| Federal funds sold/resale agreements | — | — | N/A | 4,190 | 32 | 1.54% | |||||||||||||
| Investment securities | 38,826 | 472 | 2.45% | 44,682 | 500 | 2.26% | |||||||||||||
| Loans (1) | 787,892 | 22,941 | 5.87% | 709,460 | 17,596 | 5.00% | |||||||||||||
| FHLB and other bank stock | 4,002 | 137 | 6.90% | 3,828 | 148 | 7.80% | |||||||||||||
| Total interest-earning assets | 901,432 | 24,104 | 5.39% | 854,155 | 18,698 | 4.41% | |||||||||||||
| Noninterest-earning assets: | |||||||||||||||||||
| Cash and cash equivalents | 6,777 | 5,242 | |||||||||||||||||
| Allowance for loan losses | (10,215 | ) | (11,575 | ) | |||||||||||||||
| Other assets | 13,824 | 14,159 | |||||||||||||||||
| Total assets | $ | 911,818 | $ | 861,981 | |||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||
| Interest checking | $ | 166,302 | $ | 912 | 1.11% | $ | 253,968 | $ | 1,367 | 1.09% | |||||||||
| Money market accounts | 121,362 | 619 | 1.03% | 75,001 | 241 | 0.65% | |||||||||||||
| Savings accounts | 60,243 | 257 | 0.86% | 89,846 | 420 | 0.94% | |||||||||||||
| Time deposits | 146,795 | 1,186 | 1.63% | 104,227 | 576 | 1.11% | |||||||||||||
| Brokered time deposits | 52,604 | 349 | 1.34% | 37,051 | 221 | 1.20% | |||||||||||||
| Total interest-bearing deposits | 547,306 | 3,323 | 1.22% | 560,093 | 2,825 | 1.02% | |||||||||||||
| FHLB borrowings | 41,370 | 351 | 1.71% | 10,497 | 50 | 0.96% | |||||||||||||
| Federal funds purchased | 331 | 4 | 2.44% | — | — | —% | |||||||||||||
| Senior secured notes | 2,176 | 54 | 5.00% | — | — | —% | |||||||||||||
| Other borrowings | 34 | 1 | 5.93% | 55 | 2 | 7.33% | |||||||||||||
| Total interest-bearing liabilities | 591,217 | 3,733 | 1.27% | 570,645 | 2,877 | 1.02% | |||||||||||||
| Noninterest-bearing liabilities: | |||||||||||||||||||
| Demand deposits | 207,887 | 183,293 | |||||||||||||||||
| Other liabilities | 4,105 | 3,737 | |||||||||||||||||
| Shareholders’ equity | 108,609 | 104,306 | |||||||||||||||||
| Total liabilities and shareholders' equity | $ | 911,818 | $ | 861,981 | |||||||||||||||
| Net interest spread | $ | 20,371 | 4.12% | $ | 15,821 | 3.39% | |||||||||||||
| Net interest margin | 4.56% | 3.74% | |||||||||||||||||
(1) Average loans include net discounts and deferred costs. Interest income on loans includes $172 thousand and $195 thousand related to the accretion of net deferred loans fees and $757 thousand and $(847) thousand related to accretion (amortization) of discounts (premiums) for the six months ended June 30, 2018 and 2017, respectively.
Rate/Volume Analysis
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| June 30, 2018 vs. March 31, 2018 | June 30, 2018 vs. June 30, 2017 | June 30, 2017 vs. June 30, 2016 | |||||||||||||||||||||||||||||||||
| Change Attributable to | Change Attributable to | Change Attributable to | |||||||||||||||||||||||||||||||||
| Volume | Rate | Total Change | Volume | Rate | Total Change | Volume | Rate | Total Change | |||||||||||||||||||||||||||
| Interest income: | (in thousands) | ||||||||||||||||||||||||||||||||||
| Interest and fees on loans | $ | 459 | $ | 1,240 | $ | 1,699 | $ | 2,302 | $ | 896 | $ | 3,198 | $ | 2,045 | $ | 680 | $ | 2,725 | |||||||||||||||||
| Interest on investment securities | (5 | ) | (1 | ) | (6 | ) | (33 | ) | 21 | (12 | ) | (38 | ) | 18 | (20 | ) | |||||||||||||||||||
| Dividends on FHLB and other stock | 3 | (4 | ) | (1 | ) | 4 | 5 | 9 | 3 | 4 | 7 | ||||||||||||||||||||||||
| Other interest income | 31 | 3 | 34 | (27 | ) | 113 | 86 | (26 | ) | 100 | 74 | ||||||||||||||||||||||||
| Change in interest income | 488 | 1,238 | 1,726 | 2,246 | 1,035 | 3,281 | 1,984 | 802 | 2,786 | ||||||||||||||||||||||||||
| Interest expense: | |||||||||||||||||||||||||||||||||||
| Savings, interest checking and money market accounts | (28 | ) | 178 | 150 | (205 | ) | 172 | (33 | ) | (203 | ) | 172 | (31 | ) | |||||||||||||||||||||
| Time deposits | 198 | 105 | 303 | 310 | 220 | 530 | 310 | 219 | 529 | ||||||||||||||||||||||||||
| Borrowings | (24 | ) | 30 | 6 | 93 | 65 | 158 | 117 | 59 | 176 | |||||||||||||||||||||||||
| Change in interest expense | 146 | 313 | 459 | 198 | 457 | 655 | 224 | 450 | 674 | ||||||||||||||||||||||||||
| Change in net interest income | $ | 342 | $ | 925 | $ | 1,267 | $ | 2,048 | $ | 578 | $ | 2,626 | $ | 1,760 | $ | 352 | $ | 2,112 | |||||||||||||||||
| Six Months Ended June 30, | |||||||||||||||||||||||
| 2018 | 2017 | ||||||||||||||||||||||
| Change Attributable to | Change Attributable to | ||||||||||||||||||||||
| Volume | Rate | Total Change | Volume | Rate | Total Change | ||||||||||||||||||
| Interest income: | (in thousands) | ||||||||||||||||||||||
| Interest and fees on loans | $ | 3,260 | $ | 2,085 | $ | 5,345 | $ | 2,880 | $ | 1,997 | $ | 4,877 | |||||||||||
| Interest on investment securities | 11 | (39 | ) | (28 | ) | (4 | ) | (30 | ) | (34 | ) | ||||||||||||
| Dividends on FHLB and other stock | (22 | ) | 11 | (11 | ) | (23 | ) | 11 | (12 | ) | |||||||||||||
| Other interest income | 308 | (208 | ) | 100 | 301 | (215 | ) | 86 | |||||||||||||||
| Change in interest income | 3,557 | 1,849 | 5,406 | 3,154 | 1,763 | 4,917 | |||||||||||||||||
| Interest expense: | |||||||||||||||||||||||
| Savings, interest checking and money market accounts | (281 | ) | 41 | (240 | ) | (283 | ) | 41 | (242 | ) | |||||||||||||
| Time deposits | 387 | 351 | 738 | 387 | 349 | 736 | |||||||||||||||||
| Borrowings | 295 | 63 | 358 | 319 | 59 | 378 | |||||||||||||||||
| Change in interest expense | 401 | 455 | 856 | 423 | 449 | 872 | |||||||||||||||||
| Change in net interest income | $ | 3,156 | $ | 1,394 | $ | 4,550 | $ | 2,731 | $ | 1,314 | $ | 4,045 | |||||||||||
Loans Composition
| June 30, 2018 | March 31, 2018 | December 31, 2017 | |||||||
| (in thousands) | |||||||||
| Construction and land development | $ | 133,050 | $ | 113,481 | $ | 115,427 | |||
| Real estate: | |||||||||
| Residential | 51,331 | 57,234 | 62,719 | ||||||
| Commercial real estate - owner occupied | 59,696 | 63,832 | 53,106 | ||||||
| Commercial real estate - non-owner occupied | 259,086 | 265,961 | 252,114 | ||||||
| Commercial and industrial | 191,969 | 200,339 | 169,184 | ||||||
| SBA loans | 92,043 | 91,887 | 92,509 | ||||||
| Consumer | — | 848 | 828 | ||||||
| Gross loans | $ | 787,175 | $ | 793,582 | $ | 745,887 | |||
| Deferred loan fees, net of costs | (424 | (469 | (400 | ||||||
| Net discounts | (3,264 | (3,683 | (3,774 | ||||||
| Allowance for loan losses | (10,376 | (10,010 | (10,497 | ||||||
| Loans receivable, net | $ | 773,111 | $ | 779,420 | $ | 731,216 | |||
| Allowance for loan losses as a percentage of total gross loans | 1.32% | 1.26% | 1.41% | ||||||
Allowance for Loan losses
| For the three months ended | For the six months ended | |||||||||||||||||||
| June 30, 2018 | March 31, 2018 | June 30, 2017 | June 30, 2018 | June 30, 2017 | ||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Balance, beginning of period | $ | 10,010 | $ | 10,497 | $ | 11,523 | $ | 10,497 | $ | 11,599 | ||||||||||
| Provision for loan losses | 320 | 200 | — | 520 | — | |||||||||||||||
| Charge-offs | (21 | ) | (754 | ) | (190 | ) | (775 | ) | (266 | ) | ||||||||||
| Recoveries | 67 | 67 | — | 134 | — | |||||||||||||||
| Net recoveries(charge-offs) | 46 | (687 | ) | (190 | ) | (641 | ) | (266 | ) | |||||||||||
| Balance, end of period | $ | 10,376 | $ | 10,010 | $ | 11,333 | $ | 10,376 | $ | 11,333 | ||||||||||
Nonperforming loans
| June 30, 2018 | March 31, 2018 | December 31, 2017 | ||||||||||
| (in thousands) | ||||||||||||
| Construction and land development | $ | — | $ | — | $ | — | ||||||
| Real estate: | ||||||||||||
| Residential | — | — | — | |||||||||
| Commercial real estate - owner occupied | — | — | — | |||||||||
| Commercial real estate - non-owner occupied | — | — | — | |||||||||
| Commercial and industrial | 108 | 111 | 634 | |||||||||
| SBA loans | 1,470 | 950 | 1,200 | |||||||||
| Consumer | — | — | — | |||||||||
| Total nonperforming loans | $ | 1,578 | $ | 1,061 | $ | 1,834 | ||||||
Nonperforming assets 1
| June 30, 2018 | March 31, 2018 | December 31, 2017 | |||||||
| (in thousands) | |||||||||
| Accruing loans past due 90 days or more | $ | — | $ | — | $ | — | |||
| Non-accrual | 910 | — | — | ||||||
| Troubled debt restructurings on non-accrual | 668 | 1,061 | 1,834 | ||||||
| Total nonperforming loans | 1,578 | 1,061 | 1,834 | ||||||
| Foreclosed assets | — | — | — | ||||||
| Total nonperforming assets | $ | 1,578 | $ | 1,061 | $ | 1,834 | |||
| Troubled debt restructurings - on accrual | $ | 363 | $ | — | $ | — | |||
| Nonperforming loans as a percentage of gross loans | 0.20% | 0.13% | 0.25% | ||||||
| Nonperforming assets as a percentage of total assets | 0.16% | 0.11% | 0.20% | ||||||
| Allowance for loan losses as a percentage of nonperforming assets | 657.54% | 943.45% | 572.36% | ||||||
(1)Nonperforming assets include nonaccrual loans, loans past due 90 days or more and still accruing, and other real estate owned