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1st Colonial Bancorp, Inc. Reports First Quarter 2023 Net Income
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1st Colonial Bancorp, Inc. (FCOB) reported net income of $1.5 million for Q1 2023, a decrease from $1.7 million in Q1 2022. Diluted earnings per share fell to $0.31 from $0.34 year-over-year. Net interest income rose 12% to $6.5 million, attributed to a significant rise in interest income from loans. However, the net interest margin declined to 3.53% from 3.92% in Q4 2022. Total assets grew by 2% to $800.9 million, while total loans increased by 3% to $619.4 million. Non-interest income saw a substantial drop of 58% to $454 thousand due to decreased activity in residential mortgage sales. Notably, total deposits decreased by 1% to $662.3 million. The company adopted CECL accounting standards, which led to an increase in the allowance for credit losses. Despite these challenges, the book value per share increased by 2% to $13.01.
Positive
Net interest income increased by 12%, reaching $6.5 million.
Total assets grew by 2% to $800.9 million.
Total loans increased by 3% to $619.4 million.
Book value per share rose by 2% to $13.01.
Negative
Net income declined to $1.5 million from $1.7 million year-over-year.
Diluted earnings per share decreased from $0.34 to $0.31.
Non-interest income dropped 58% to $454 thousand.
Total deposits fell by 1% to $662.3 million.
Income Statement Highlights include:
Net income was $1.5 million, for the first quarter of 2023 compared to net income of $1.7 million for the first quarter of 2022.
Net interest income for the quarter ended March 31, 2023 was $6.5 million, an increase of $720 thousand, or 12%, from the same period in 2022.
Net interest margin for the quarter ended March 31, 2023 was 3.53%, a 2% increase over the same period in 2022, and down from 3.92% for the quarter ended December 31, 2022.
Provision for credit losses for loans was ($197) thousand for the first quarter of 2023, compared to $350 thousand in the fourth quarter of 2022. The first quarter 2023 net recovery was related to the payoff of a non-performing commercial loan.
Non-interest expense for the quarter ended March 31, 2023 was $4.9 million, as compared to $4.8 million for the quarter ended December 31, 2022 and includes $0.3 million of one-time expenses due to the separation of employment with a former executive.
For the first quarter of 2023, diluted earnings per share was $0.31, compared to $0.34 per diluted share for the first quarter of 2022.
Balance Sheet Highlights include:
Total assets grew $18.9 million, or 2%, to $800.9 million as of March 31, 2023 from $782.0 million as of December 31, 2022.
Total loans grew $15.8 million, or 3%, to $619.4 million as of March 31, 2023 from $603.6 million as of December 31, 2022.
Total deposits declined $8.8 million, or 1%, from $671.1 million as of December 31, 2022 to $662.3 million as of March 31, 2023, which reflects normal and anticipated cyclical changes in client balances.
Book value per share increased 2% to $13.01 as of March 31, 2023 from $12.76 as of December 31, 2022.
MOUNT LAUREL, N.J.--(BUSINESS WIRE)--
1st Colonial Bancorp, Inc. (FCOB), holding company of 1stColonial Community Bank, today reported net income of $1.5 million, or $0.31 per diluted share, for the three months ended March 31, 2023, compared to net income of $1.7 million, or $0.34 per diluted share, for the three months ended March 31, 2022.
Robert White, President and Chief Executive Officer, commented, “We are pleased to report our first quarter results, which reflect our continued financial strength and resilience during challenging times in the banking industry. We continue to deliver upon our commitment to be a leading provider of deposit interest pricing for all interest-bearing accounts. We anticipated and planned for the impact of rising rates on our interest margin and we continue to remain focused on delivering high quality, value added products and services to our clients.”
“Our non-interest income was down in the first quarter as a result of lower loan sale activity in our residential lending unit. The lack of inventory in the housing market and rising interest rates are having an impact on new loan volume, which is likely to continue in the near term. Commercial loan demand has leveled off, as the rise in debt costs has caused many companies to re-evaluate growth plans and capital expenditures. In addition, we have made some organizational changes to support our sales efforts and to ensure that our sound credit discipline is maintained for new credits and our portfolio management practices. We continue to remain focused on our asset quality metrics and continue to look for early signs of distress within our customer base. We are also closely monitoring and managing our operating costs to account for the expected increase in funding costs, along with the continued impact of high inflation on our bottom line.”
“Our team is committed to executing our strategic priorities and delivering exceptional products and services through multiple distribution channels to support the ongoing needs of our customers.”
Operating Results
Net Interest Income
Net interest income for the three months ended March 31, 2023 and 2022 was $6.5 million and $5.8 million, respectively. The increase in net interest income was primarily attributable to a $2.4 million increase in interest income on average loans outstanding. For the first quarter of 2023, average loan balances increased $90.3 million to $604.1 million from $513.8 million for the first quarter of 2022. Additionally, approximately 27% of the loan portfolio is tied to the Wall Street Journal (“WSJ”) prime rate and re-prices at various times when that rate changes. The 450 basis point increase in the WSJ prime rate over the last twelve months has had a positive impact on interest income. When compared to the fourth quarter of 2022, net interest income declined $760 thousand from $7.3 million and was related to a $1.2 million increase in interest expense.
For the first quarter of 2023, interest expense was $2.6 million, an increase of $1.9 million from $650 thousand for the first quarter of 2022. For the first quarter of 2023, average interest-bearing deposits increased $51.1 million from the first quarter of 2022 and included $32 million in average municipal interest-checking balances. As a result of the cumulative increases in the Federal Funds Rate during 2022, we began increasing our deposit rates in the third quarter of 2022, which resulted in an increase of $1.6 million in deposit interest expense in the first quarter of 2023 compared to the first quarter of 2022. To fund our interest-earning asset growth, our average borrowings increased $30.3 million in the first quarter of 2023 compared to the same period in 2022 and contributed $368 thousand to the overall increase in interest expense of $1.9 million in the first quarter of 2023. When compared to the fourth quarter of 2022, interest expense increased $1.2 million from $1.4 million.
The net interest margin was 3.53% for the first quarter of 2023 compared to 3.46% for the first quarter of 2022. The average yield on interest-earning assets grew 109 basis points from 3.85% for the quarter ended March 31, 2022 to 4.94% for the quarter ended March 31, 2023. The average rate paid on average interest-bearing liabilities increased 119 basis points from 0.48% for the first quarter of 2022 to 1.67% for the first quarter of 2023. When compared to the fourth quarter of 2022, the first quarter 2023 net interest margin declined 39 basis points from 3.92% and was mainly related to a 75 basis point increase in the average rate paid on average interest-bearing liabilities.
Provision for Credit Losses
For the three months ended March 31, 2023, the provision for credit losses was ($174) thousand. In the first quarter of 2023 we adopted Accounting Standards Update 2016-13 “Financial Instruments-Credit Losses” (“CECL”). With the adoption of CECL the 2023 provision includes ($197) thousand for loans and $23 thousand for off balance sheet (“OBS”) commitments. Prior to the adoption of CECL, the provision for OBS commitments was included in non-interest expense. The provision for loan losses was $300 thousand for the three months ended March 31, 2022. The 2023 decline in provision for loans was due to a $445 thousand decrease in specific reserves on impaired loans due to a loan payoff. The loan loss provision was $350 thousand for the fourth quarter of 2022. Net recoveries were $32 thousand for the first quarter of 2023 compared to $137 thousand for the first quarter of 2022.
Non-interest Income
Non-interest income for the first quarter of 2023 was $454 thousand, a decrease of $628 thousand, or 58%, from $1.1 million for the first quarter of 2022. Income from the origination and sales of residential mortgages declined $306 thousand, or 62%, from the first quarter in 2022 due to a $27.4 million, or 54%, decline in originations. Mortgage activity has been challenging due to a drop in refinancing transactions and a lack of inventory in the purchase market. We have been originating adjustable-rate residential mortgages and have retained them in our loan portfolio. Retained mortgage loans accounted for 54% of the total residential mortgage originations in the first quarter of 2023 compared to 42% for the same period in 2022. During the first quarter of 2023, we earned $12 thousand in gains on the sale of SBA loans compared to $347 thousand for the comparable 2022 period. The higher interest rates have tempered new SBA loan origination volume.
When compared to the fourth quarter of 2022, non-interest income for the first quarter of 2023 declined $194 thousand from $648 thousand. Income from sales of residential mortgages and the sales of SBA loans declined $59 thousand and $54 thousand, respectively, from their amounts for the fourth quarter of 2022. Additionally, the fourth quarter of 2022 included a nontaxable bank owned life insurance (“BOLI”) death benefit of $98 thousand related to a former employee. There was no nontaxable death benefit in the first quarter of 2023.
Non-interest Expense
Non-interest expense was $4.9 million for the quarter ended March 31, 2023, and increased $677 thousand, or 16.2%, from $4.2 million for the quarter ended March 31, 2022. Salaries and benefits and data processing and technology expenses increased $330 thousand and $90 thousand, respectively, and were the main contributors to the increase in non-interest expense. The rise in salaries and benefits was mainly related to the recognition of severance that was negotiated with a former executive.
When compared to the fourth quarter of 2022, non-interest expense for the first quarter of 2023 increased $314 thousand from $4.6 million. Salaries and benefits increased $466 thousand and was related to the aforementioned negotiated severance with a former executive.
Income Taxes
For the first quarter of 2023, income tax expense was $726 thousand compared to $707 thousand for the first quarter of 2022 and $682 thousand for the fourth quarter of 2022. During the first quarter of 2023, we surrendered a low yielding BOLI policy and reinvested the proceeds at a significantly higher yield. As a result of the surrender, we recorded $113 thousand in tax expense which included a 10% penalty. We expect to earn back the $113 thousand in less than two years.
Financial Condition
Assets
As of March 31, 2023, total assets were $800.9 million and grew $18.9 million from $782.0 million as of December 31, 2022.
Total loans were $619.4 million as of March 31, 2023, an increase of $15.8 million, or 2.6%, from $603.6 million as of December 31, 2022. During the first quarter, residential mortgages and home equity loans and lines of credit increased $11.7 million and $5.7 million, respectively. Construction loans declined by $2.4 million. Loans held for sale were $2.0 million as of March 31, 2023, compared to $6.7 million as of December 31, 2022.
Investments decreased $1.9 million to $127.2 million as of March 31, 2023 from $129.1 million as of December 31, 2022. The unrealized loss improved $1.0 million from $8.1 million as of December 31, 2022 to $7.1 million as of March 31, 2023.
Asset Quality
As mentioned previously, we adopted CECL on January 1, 2023. This accounting standard requires that credit losses for financial assets and off-balance-sheet credit commitments be measured based on expected credit losses, rather than on incurred credit losses as in prior periods. As a result of the adoption of CECL, the allowance for credit losses (“ACL”) increased by $1.6 million and included $1.2 million for the ACL on loans and $436 thousand for the ACL on OBS commitments. As a result of the CECL adjustment, retained earnings decreased by $1.1 million.
As of March 31, 2023, the ACL for loans was $9.3 million, or 1.50% of total loans. Non-performing assets as of March 31, 2023, were $4.2 million compared to $4.6 million as of December 31, 2022. The ACL to non-accrual loans was 223.7% as of March 31, 2023, compared to the allowance for loan losses to non-accrual loans of 182.5% as of December 31, 2022. As of March 31, 2023, the ratio of non-performing assets to total assets was 0.52% compared to 0.58% as of December 31, 2022.
Liabilities
Total deposits were $662.3 million as of March 31, 2023, and declined $8.8 million, or 1.3%, from $671.1 million as of December 31, 2022. Municipal interest checking declined $30.9 million to $248.1 million as of March 31, 2023. During the first quarter of 2023, we consolidated and improved our business deposit products. Approximately $37.0 million migrated from business money market and savings products into business interest-checking products. Total interest-checking accounts increased $45.0 million, while money markets, savings, and demand accounts decreased $24.1 million, $12.7 million and $3.4 million, respectively. Brokered certificates of deposit increased $18.7 million. Short-term borrowings increased $25.8 million to supplement our funding requirements.
Shareholder’s Equity
Total shareholders’ equity was $60.9 million as of March 31, 2023, compared to $59.6 million as of December 31, 2022. During the first quarter of 2023, we recorded a charge to retained earnings of $1.1 million related to the adoption of CECL. Accumulated comprehensive loss improved from $5.9 million as of December 31, 2022 to $5.1 million as of March 31, 2023. The accumulated comprehensive loss is related to the unrealized loss in our investment portfolio. Tangible book value per share increased $0.26, or 2.0%, from $12.76 as of December 31, 2022 to $13.01 as of March 31, 2023.
Consolidated Financial Statements and Other Highlights:
1st COLONIAL BANCORP, INC.
CONSOLIDATED INCOME STATEMENTS
(Unaudited, dollars in thousands, except per share data)
For the three months ended
Mar 31,
Dec 31,
Mar 31,
2023
2022
2022
Interest income
$
9,079
$
8,666
$
6,421
Interest expense
2,588
1,415
650
Net Interest Income
6,491
7,251
5,771
Provision for credit losses
(174)
350
300
Net interest income after provision for credit losses
6,665
6,901
5,471
Non-interest income
454
648
1,082
Non-interest expense
4,864
4,550
4,187
Income before taxes
2,255
2,999
2,366
Income tax expense
726
682
707
Net Income
$
1,529
$
2,317
$
1,659
Earnings Per Share – Basic
$
0.33
$
0.50
$
0.35
Earnings Per Share – Diluted
$
0.31
$
0.48
$
0.34
SELECTED PERFORMANCE RATIOS:
For the three months ended
Mar 31,
Dec 31,
Mar 31,
2023
2022
2022
Return on Average Assets
0.80%
1.21%
0.96%
Return on Average Equity
10.49%
15.86%
11.69%
Book value per share
$
13.01
$
12.76
$
12.01
As of March 31, 2023
As of December 31, 2022
Bank Capital ratios:
Tier 1 Leverage
9.65%
9.75%
Total Risk Based Capital
13.97%
14.14%
Common Equity Tier 1
12.72%
12.89%
1st COLONIAL BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
As of March 31, 2023
As of December 31, 2022
Cash and cash equivalents
$
28,186
$
20,399
Total investments
127,171
129,131
Mortgage loans held for sale
1,954
6,710
Total loans
619,404
603,609
Less ACL-loans
(9,318)
(8,331)
Loans, net
610,086
595,278
Bank owned life insurance
17,488
14,458
Premises and equipment, net
1,838
1,845
Accrued interest receivable
3,076
2,779
Other assets
11,094
11,273
Total Assets
$
800,893
$
781,963
Total deposits
$
662,301
$
671,052
Other borrowings
60,600
34,788
Subordinated debt
10,577
10,559
Other liabilities
6,535
5,926
Total Liabilities
740,013
722,325
Total Shareholders’ Equity
60,880
59,638
Total Liabilities and Shareholders’ Equity
$
800,893
$
781,963
1st COLONIAL BANCORP, INC.
NET INTEREST INCOME AND MARGIN
(Unaudited, in thousands, except percentages)
For the three months ended
March 31, 2023
December 31, 2022
March 31, 2022
Average
Balance
Interest
Yield/
Rate
Average
Balance
Interest
Yield/
Rate
Average
Balance
Interest
Yield/
Rate
Cash and cash equivalents
$
8,840
$
63
2.89%
$
10,204
$
65
2.52%
$
41,227
$
15
0.15%
Investment securities
127,843
659
2.09%
128,354
632
1.95%
110,342
378
1.39%
Loans held for sale
5,025
48
3.87%
5,496
52
3.79%
11,016
81
2.98%
Loans
604,088
8,309
5.58%
589,869
7,917
5.32%
513,770
5,947
4.69%
Total interest-earning assets
745,796
9,079
4.94%
733,923
8,666
4.68%
676,355
6,421
3.85%
Non-interest earning assets
27,616
25,809
22,633
Total average assets
$
773,412
$
759,732
$
698,988
Interest-bearing deposits
Interest checking accounts
$
361,598
$
900
1.01%
$
340,834
$
401
0.47%
$
283,404
$
86
0.12%
Savings and money markets
86,247
208
0.98%
127,839
222
0.69%
129,219
92
0.29%
Time deposits
138,825
915
2.67%
112,172
417
1.47%
122,900
275
0.91%
Total interest-bearing deposits
586,670
2,023
1.40%
580,845
1,040
0.71%
535,523
453
0.34%
Borrowings
40,851
565
5.61%
27,264
375
5.46%
10,535
197
7.58%
Total interest-bearing liabilities
627,521
2,588
1.67%
608,109
1,415
0.92%
546,058
650
0.48%
Non-interest bearing deposits
80,488
88,230
91,335
Other liabilities
6,275
5,433
4,026
Total average liabilities
714,284
701,772
641,419
Shareholders' equity
59,128
57,960
57,569
Total average liabilities and equity
$
773,412
$
759,732
$
698,988
Net interest income
$
6,491
$
7,251
$
5,771
Net interest margin
3.53%
3.92%
3.46%
Net interest spread
3.26%
3.76%
3.37%
1st Colonial Bancorp, Inc, is a Pennsylvania corporation headquartered in Mount Laurel, New Jersey, and the parent company of 1st Colonial Community Bank (the “Bank”). The Bank 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 administrative offices in Mount Laurel, New Jersey. To learn more, call (877) 785-8550 or visit www.1stcolonial.com.
In addition to historical information, this press release may contain “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements with respect to 1st Colonial Bancorp, Inc.’s strategies, goals, beliefs, expectations, estimates, intentions, capital raising efforts, financial condition and results of operations, future performance, and business. Statements preceded by, followed by, or that include the words “may,” “could,” “should,” “pro forma,” “looking forward,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” or similar expressions generally indicate a forward-looking statement. These forward-looking statements involve risks and uncertainties that are subject to change based on various important factors (some of which, in whole or in part, are beyond 1st Colonial Bancorp, Inc.’s control). Numerous competitive, economic, regulatory, legal and technological factors, risks and uncertainties that could cause actual results to differ materially include, without limitation, the impact of the ongoing pandemic and government responses thereto; on the U.S. economy, including the markets in which we operate; actions that we and our customers take in response to these factors and the effects such actions have on our operations, products, services and customer relationships; increased competitive pressures; changes in the interest rate environment; changes in general economic conditions and conditions within the securities markets; legislative and regulatory changes; and the effects of inflation, a potential recession, among others, could cause 1st Colonial Bancorp, Inc.’s financial performance to differ materially from the goals, plans, objectives, intentions and expectations expressed in such forward-looking statements. 1st Colonial Bancorp, Inc. cautions that the foregoing factors are not exclusive, and neither such factors nor any such forward-looking statement takes into account the impact of any future events. All forward-looking statements and information set forth herein are based on management’s current beliefs and assumptions as of the date hereof and speak only as of the date they are made. 1st Colonial Bancorp, Inc. does not undertake to update any forward-looking statement whether written or oral, that may be made from time to time by 1st Colonial Bancorp, Inc. or by or on behalf of 1st Colonial Community Bank.
