1st Colonial Bancorp, Inc. Reports Second Quarter 2018 Net Income of $1.3 Million

COLLINGSWOOD, N.J.--(BUSINESS WIRE)--1st Colonial Bancorp, Inc. (FCOB), holding company of 1^st Colonial Community Bank, today reported net income of $1.3 million, or $0.29 per diluted share, for the three months ended June 30, 2018 compared to net income of $1.0 million, or $0.22 per diluted share, for the three months ended June 30, 2017. For the six months ended June 30, 2018, net income was $2.4 million, or $0.55 per diluted share, compared to $2.0 million, or $0.47 per diluted share for the same period in 2017. The 2017 earnings per diluted share were adjusted to give effect to the 5% stock dividend distributed to shareholders on April 16, 2018.

Gerry Banmiller, President and Chief Executive Officer, commented, “With the increase in short-term interest rates, we have been able to prudently manage our loan growth and overall product pricing. This sensible approach resulted in a 9% increase in net interest income, which is a fundamental component of our earnings.”

Highlights for the three and six months ended June 30, 2018, included:

Balance Sheet Trends:

• At June 30, 2018, total assets were $553.4 million and grew $13.3 million, or 2.5% from $540.1 million at December 31, 2017.
• Total loans were $397.0 million at June 30, 2018, an increase of $20.5 million, or 5.4%, from $376.5 million at December 31, 2017. During the first six months of 2018, commercial mortgage loans and construction loans grew $11.3 million and $3.9 million, respectively.
• Total deposits were $508.1 million at June 30, 2018, an increase of $11.3 million, or 2.3%, from $496.8 million at December 31, 2017. During the second quarter of 2018, we ran a successful certificates of deposit promotion which helped grow such deposits by $23.9 million, or 23.1%. Municipal deposits and brokered deposits declined $17.5 million and $5.7 million, respectively.
• Total shareholders’ equity was $40.6 million at June 30, 2018, an increase of $2.2 million, or 5.8%, from $38.4 million at December 31, 2017.
• 1^st Colonial's non-performing assets at June 30, 2018 were $2.5 million compared to $2.3 million at December 31, 2017. Non-performing assets to total assets at June 30, 2018 were 0.45% compared to 0.43% at December 31, 2017.

Income Statement and Other Highlights:

• Net interest income for the three months ended June 30, 2018 increased $307 thousand, or 7.3%, to $4.5 million from $4.2 million for the three months ended June 30, 2017. For the first six months of 2018, net interest income grew $741 thousand, or 9.0%, to $8.9 million from $8.2 million for the same period in 2017. The growth in net interest income was primarily related to an increase in interest income on loans and in the average yield earned on average interest-earning assets. The 75 basis point increase in the fed funds rate since June 2017 has had a positive impact on our variable rate loans and our interest-earning deposits. The improvement in interest income was partially offset by an increase in the interest paid on certificates of deposit, NOW accounts and money market accounts.
• The net interest margin was 3.45% for the second quarter of 2018 compared to 3.38% for the second quarter of 2017, and was 3.44% for the six months ended June 30, 2018 compared to 3.35% for the six months ended June 30, 2017. The increase in net interest margin was directly related to an increase in the yield on average interest-earning assets.
• For the three and six months ended June 30, 2018, we recorded a provision to the allowance for loan losses of $311 thousand and $589 thousand, respectively, compared to $279 thousand and $379 thousand for the three and six months ended June 30, 2017. The increase in the 2018 provision was related to an increase in specific reserves required on impaired loans. The allowance for loan losses as a percentage of total loans was 1.32% at June 30, 2018 compared to 1.29% at December 31, 2017.
• Non-interest income for the second quarter of 2018 was $1.0 million, a decrease of $59 thousand, or 5.5%, from $1.1 million for the second quarter of 2017. Gains on the sale of small business administration (“SBA”) loans increased $118 thousand while the gains on the sale of residential mortgages declined $182 thousand, due to a decline in the volume of mortgage loans sold. Additionally, in the second quarter of 2017, we sold an investment security and recorded a gain of $25 thousand as a result of the sale. There were no such sales in the second quarter of 2018.
• Non-interest income for the first two quarters of 2018 was $1.7 million, a decrease of $292 thousand, or 14.9%, from $2.0 million for the first two quarters of 2017. Gains on the sale of residential mortgages and the sale of SBA loans and declined $245 thousand and $41 thousand, respectively, due to a decline in the volume of loans sold. As interest rates have started to increase, residential mortgage originations have become increasingly competitive.
• Non-interest expense was $3.5 million for the three months ended June 30, 2018 and increased $127 thousand, or 3.8%, from $3.4 million for the comparable period in 2017. Contributing to the increase in non-interest expense for the second quarter of 2018 was a $98 thousand increase in salaries and benefits related to an increase in headcount in the lending support and compliance functions. Data processing and occupancy and equipment expenses increased $72 thousand and $45 thousand, respectively. During the fourth quarter of 2017 we leased additional office space at our operations and administration center in Cherry Hill, New Jersey.
• Non-interest expense was $6.8 million for the six months ended June 30, 2018 and increased $220 thousand, or 3.3%, from $6.6 million for the comparable period in 2017. Contributing to the increase in non-interest expense for 2018 was a $193 thousand increase in salaries and benefits related to the planned increase in headcount in the lending support and compliance functions. Data processing and occupancy and equipment expenses increased $142 thousand and $74 thousand respectively. Partially offsetting these increases in non-interest expense was a decline in professional fees and advertising expenses of $47 thousand and $44 thousand, respectively.
• For the three and six months ended June 30, 2018, income tax expense was $412 thousand and $800 thousand, respectively, compared to $613 thousand and $1.2 million for the three and six months ended June 30, 2017, respectively. The $383 thousand decrease in tax expense year-over-year was related to H.R.1 (originally known as the “Tax Cuts and Jobs Act”) which was enacted on December 22, 2017. H.R.1 lowered the maximum federal corporate tax rate to 21% from 35%.

Highlights as of June 30, 2018 and 2017, and a comparison of the three and six months ended June 30, 2018 to the three and six months ended June 30, 2017 include the following:

1^st COLONIAL BANCORP, INC.
CONSOLIDATED INCOME STATEMENTS
(Unaudited, dollars in thousands, except per share data)
	For the three months				For the six months
	ended June 30,				ended June 30,
	2018		2017		2018		2017
Interest income	$	5,521	$	4,831	$	10,728	$	9,341
Interest expense		989		606		1,782		1,136
Net Interest Income		4,532		4,225		8,946		8,205
Provision for loan losses		311		279		589		379
Net interest income after provision for loan losses		4,221		3,946		8,357		7,826
Non-interest income		1,021		1,080		1,666		1,958
Non-interest expense		3,493		3,366		6,797		6,577
Income before taxes		1,749		1,660		3,226		3,207
Income tax expense		412		613		800		1,183
Net Income	$	1,337	$	1,047	$	2,426	$	2,024
Earnings Per Share – Basic ^(1)	$	0.30	$	0.24	$	0.55	$	0.47
Earnings Per Share – Diluted ^(1)	$	0.29	$	0.22	$	0.53	$	0.44

SELECTED PERFORMANCE RATIOS:
	For the three months ended June 30,				For the six months ended June 30,
	2018		2017		2018		2017
Return on Average Assets		0.99%		0.82%		0.91%		0.81%
Return on Average Equity		13.42%		11.62%		12.39%		11.51%
Book value per share ^(1)	$	9.25	$	8.41	$	9.25	$	8.41

	At June 30, 2018	At December 31, 2017
Capital ratios:
Tier 1 Leverage	7.54%	7.07%
Total Risk Based Capital	12.69%	12.36%
Common Equity Tier 1	11.43%	11.11%

(1)	Adjusted to give effect to the 5% stock dividend distributed to shareholders on April 16, 2018.

1^st COLONIAL BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)	At June 30, 2018			At December 31, 2017
Cash and cash equivalents	$	29,908		$	28,395
Total investments		109,775			118,547
Mortgage loans held for sale		6,554			7,169
Total loans		396,963			376,514
Less Allowance for loan losses		(5,247	)		(4,858	)
Loans and leases, net		391,716			371,656
Bank owned life insurance		8,553			8,434
Premises and equipment, net		885			864
Other real estate owned, net		238			244
Accrued interest receivable		1,794			1,505
Other assets		3,998			3,317
Total Assets	$	553,421		$	540,131
Total deposits	$	508,140		$	496,847
Other borrowings		3,167			3,166
Other liabilities		1,495			1,708
Total Shareholders’ Equity		40,619			38,410
Total Liabilities and Equity	$	553,421		$	540,131

1^st COLONIAL BANCORP, INC.
NET INTEREST INCOME AND MARGIN TABLES
(Unaudited, in thousands, except percentages)
	For the three months ended						For the three months ended
	June 30, 2018						June 30, 2017
	Average						Average
	Balance		Interest		Yield		Balance		Interest		Yield
Cash and cash equivalents	$	16,544	$	50	1.21	%	$	16,152	$	30	0.74	%
Investment securities		111,732		499	1.79	%		108,846		365	1.35	%
Mortgage loans held for sale		8,258		69	3.35	%		8,557		66	3.09	%
Loans		390,716		4,903	5.03	%		368,001		4,370	4.76	%
Total interest-earning assets		527,250		5,521	4.20	%		501,556		4,831	3.86	%
Non-interest earning assets		12,583						12,734
Total average assets	$	539,833					$	514,290
Interest-bearing deposits
Checking accounts	$	214,023	$	260	0.49	%	$	216,861	$	147	0.27	%
Money markets and Savings		71,061		80	0.45	%		86,288		98	0.46	%
Certificates of deposit		149,181		644	1.73	%		99,737		356	1.43	%
Total interest-bearing deposits		434,265		984	0.91	%		402,886		601	0.60	%
Borrowings		3,279		5	0.61	%		3,494		5	0.57	%
Total interest-bearing liabilities		437,544		989	0.91	%		406,380		606	0.60	%
Non-interest bearing deposits		61,142						70,667
Other liabilities		1,213						1,035
Shareholders' equity		39,934						36,208
Total average liabilities and equity	$	539,833					$	514,290
Net interest income			$	4,532					$	4,225
Net interest margin					3.45	%					3.38	%
Net interest spread					3.29	%					3.27	%

	For the six months ended						For the six months ended
	June 30, 2018						June 30, 2017
	Average						Average
	Balance		Interest		Yield		Balance		Interest		Yield
Cash and cash equivalents	$	19,560	$	126	1.29	%	$	16,238	$	54	0.67	%
Investment securities		114,010		1,011	1.79	%		110,682		747	1.36	%
Mortgage loans held for sale		7,044		116	3.32	%		6,996		104	3.00	%
Loans		384,051		9,475	4.98	%		360,455		8,436	4.72	%
Total interest-earning assets		524,755		10,728	4.12	%		494,371		9,341	3.81	%
Non-interest earning assets		12,530						12,480
Total average assets	$	537,285					$	506,851
Interest-bearing deposits
Checking accounts	$	231,001	$	460	0.40	%	$	242,408	$	350	0.29	%
Money markets and Savings		58,570		129	0.44	%		67,608		151	0.45	%
Certificates of deposit		141,041		1,184	1.69	%		92,022		627	1.37	%
Total interest-bearing deposits		430,612		1,773	0.83	%		402,038		1,128	0.57	%
Borrowings		3,303		9	0.55	%		3,527		8	0.46	%
Total interest-bearing liabilities		433,915		1,782	0.83	%		405,565		1.136	0.56	%
Non-interest bearing deposits		62,719						64,675
Other liabilities		1,169						1,152
Shareholders' equity		39,482						35,459
Total average liabilities and equity	$	537,285					$	506,851
Net interest income			$	8,946					$	8,205
Net interest margin					3.44	%					3.35	%
Net interest spread					3.29	%					3.25	%

1st Colonial Community Bank, the subsidiary of 1^st 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 [phone] 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 economic conditions; 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 or theft by employees, customers or outsiders, and the risk of interruptions in and breaches in security of our information systems; 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.