CERRITOS, Calif.--(BUSINESS WIRE)--First Choice Bank, the “Bank” (OTCQX: FCBK), announced earnings of $2.2 million and $4.4 million for the second quarter of 2017, and the first six months ending June 30, 2017, respectively.
Earnings were especially strong year over year at $2.2 million for the quarter, the fifteenth quarter in a row where the Bank earned over $1 million since the fourth quarter of 2013, and the fifth quarter in a row where the Bank earned over $2 million since the second quarter of 2016. In the second quarter of 2016, the Bank earned $2.1 million, so the year-over-year increase in earnings for the second quarter was 8.0%.
“This second quarter was one of the busiest ever for the Bank. While we experienced a significant number of expected payoffs on construction loans, we also booked a number of new credits. Based on the solid earnings in the quarter and the year to date, the Board will be considering a resolution to make its third quarterly dividend payment at our meeting on July 27, 2017,” said Peter Hui, Founder & Chairman of First Choice Bank.
Capital ratios remained strong at the quarter-end, with Tier 1 risk-based capital and total risk-based ratios at 13.0% and 14.3%, comparing favorably to the well capitalized requirements of 8% and 10%, respectively.
The gross loans balance, at $739.3 million at June 30, 2017, was up from $689.8 million a year ago at June 30, 2016, and represented a year over year increase of 7.2%. Compared to the balance of $704.3 million at December 31, 2016, gross loans grew by 5.0% in the first six months of 2017. During the first six months of 2017, the Bank originated in total over $285 million in new loan commitments and purchased a $5 million residential mortgage portfolio. Total unfunded commitments at the quarter end were about $241 million.
Asset quality measures remained strong at June 30, 2017. There was no provision for loan losses for the second quarter of 2017. The Allowance for Loan and Lease Losses (the “ALLL”) stood at $11.3 million, or 1.5% of total gross loans, and 485.5% of all non-performing assets as of June 30, 2017. There were no past due loans for the second quarter of 2017. Nonperforming assets decreased to $2.3 million or 0.26% of total assets as of June 30, 2017, compared to $2.6 million or 0.28% of total assets as of March 31, 2017. The decrease in nonperforming assets was due to a non-accrual loan charge off of $188 thousand in the quarter.
At quarter-end, there were five non-accrual loans in the amount of $2.3 million. Included in the non-accrual loans were five loans classified as Troubled Debt Restructured (“TDR”), which amounted to $2.3 million. There was no Other Real Estate Owned.
SBA Loan production remained strong in the second quarter of 2017. In addition, the Bank was ranked in the top 100 most active SBA 7(a) Lenders in the United States in the SBA’s fiscal year 2016. Gain on sale of loans amounted to $2.1 million for the first six months of 2017, primarily related to the sale of the guaranteed portions of SBA 7a loans. This represented an increase of 49.7% from the $1.4 million gain on sale of loans realized in June 30, 2016.
Total assets were $913.3 million, a year over year increase of 10.4%, compared to the balance at June 30, 2016. In addition, total deposits were $756.7 million, a year over year increase of 8.1% compared to the balance at June 30, 2016.
Robert M. Franko, President and CEO of the Bank, further commented, “So far in these first six months, we have been very pleased with the strength of the local economy. While there was a meaningful increase in scheduled loan payoffs, as construction loans matured and properties were sold or permanently financed, and the Bank continued to manage its commercial real estate concentrations with loan sales and participations, new loan commitments in the second quarter were particularly robust. Nevertheless, the Bank’s net loan levels ended the second quarter almost level with the end of the first quarter. We expect that many of those new loan commitments originated in the second quarter will translate into funded loans in subsequent periods. In addition, deposit levels were also nearly flat compared to the March 2017 quarter-end, however, this was after a demand deposit from a real estate 1031 transaction of nearly $40 million was withdrawn before the end of the second quarter. Net of that 1031 account, overall deposit growth was positive. Finally, profitability was ahead of last year and on course for what we had projected for the year to this point. We are blessed to have some of the finest bankers in the Southern California market working diligently every day.”
Total Capital at the quarter-end was $104.0 million, a year over year increase of 7.3% compared to June 30, 2016. The Bank’s common book value per share (BV) and tangible book value per share (TBV) were $14.44 and $14.44 respectively at quarter-end, following the second quarterly distribution of $0.20 cash dividend in the quarter. This compared with $14.28 (BV) and $14.28 (TBV) at March 31, 2017, and $13.64 (BV) and $13.64 (TBV) in the year-ago period. Common book value per share at June 30, 2017, as compared to March 31, 2017 and June 30, 2016 was attributable to net income and stock issued for 2016 bonuses and options that were exercised, with an offset for the 2017 cash dividends.
The Bank’s total investment portfolio at quarter-end stood at $41.7 million, including $5.3 million in the Bank’s held-to-maturity portfolio that was pledged as collateral for the Federal Reserve Bank discount window. Cash and due from banks was $122.3 million, including Agreement to resell of $1.6 million.
As of June 30, 2017, total deposits were $756.7 million, of which $160.1 million, 21.2% of total deposits was in non-interest bearing checking accounts. The Bank’s Net Loan to Deposit ratio was 96.2% at June 30, 2017. Federal Home Loan Bank of San Francisco advances totaled $45 million as of June 30, 2017.
Net interest income for the second quarter of 2017 was $8.2 million, a 7.4% increase from $7.6 million for the first quarter of 2017. Net interest margin stood at 3.86% for the second quarter of 2017, an increase of 25 basis points from 3.61% for the first quarter of 2017. Both increases were driven primarily by the positive impact of recent federal fund rate increases, and the growth in our loan portfolio. Average loan balance was $717.8 million for the second quarter of 2017, a 2.4% increase from $701.0 million for the first quarter of 2017.
Net interest income for the first six months of 2017 was $15.8 million, a 1.7% increase from $15.6 million for the first six months of 2016. Net interest margin stood at 3.74% for the first six months of 2017, a decrease of 12 basis points from 3.86% for the first six months of 2016. The decrease in net interest margin was primarily due to early payoffs in our residential mortgage loan portfolio, which resulted in the immediate amortization of purchase premium.
Non-interest income totaled $2.7 million for the six months ended June 30, 2017. Gain on the sale of loans, primarily the guaranteed portions of SBA loans, accounted for $2.1 million of the non-interest income. Non-interest expense continued to be well-controlled, and was $11.1 million for the six months of 2017, compared to $10.1 million in the prior year. The increase was driven by higher commissions associated with strong loan and deposit production in the second quarter, higher customer service expenses associated with the increase in our average deposit balances, and higher advertising and marketing costs associated with our new Carlsbad branch to be opened in the third quarter of 2017. For the six months of 2017, the Bank’s efficiency ratio was 60.2% at quarter-end, compared to 57.0% for the same period in 2016.
Selected Financial Highlights for the quarter ending June 30, 2017:
Net after Tax Income of $2.2 million.
Pre-Tax, Pre-Provision Income of $3.8 million.
Return on average assets annualized at 1.0%.
Return on average tangible common equity annualized at 8.6%.
Allowance for Loan and Lease Losses at 1.53% of total loans, and 485.5% of all non-performing assets.
Earnings Per Share for the quarter at $0.32 (basic) and $0.31 (diluted).
Earnings Per Share Trailing 12 Months at $1.27 (basic) and $1.26 (diluted).
Book Value and Tangible Book Value Per Share at $14.44 (BV) and $14.44 (TBV), respectively.
Tier 1 Leverage Ratio, Common Equity Tier 1, Tier 1 Risk-Based Capital and total Risk-Based Ratios at 12.1%, 13.0%, 13.0% and 14.3%, compare very favorably to 5%, 6.5%, 8% and 10%, which are the respective minimum required ratios for a bank to be deemed “Well-Capitalized” by the FDIC. Capital conservation buffer was 6.3%, well above the dividend payout restriction of 1.25% and 2.5% requirements in the 2017 transition period and the 2019 fully effective limit.
ABOUT FIRST CHOICE BANK
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 finance for the hospitality industry. The 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 reach unprecedented levels of success. 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 Bank stock is traded on the Over the Counter (OTCQX); our Ticker Symbol is FCBK.
The Bank’s web site is www.FirstChoiceBankCA.com.
Except for the historical information in this news release, the matters described herein contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially. Such risks and uncertainties include: the credit risks of lending activities, including changes in the level and trend of loan delinquencies and charge-offs, results of examinations by our banking regulators, our ability to maintain adequate levels of capital and liquidity, our ability to manage loan delinquency rates, our ability to price deposits to retain existing customers and achieve low-cost deposit growth, manage expenses and lower the efficiency ratio, expand or maintain the net interest margin, mitigate interest rate risk for changes in the interest rate environment, competitive pressures in the banking industry, access to available sources of credit to manage liquidity, the local and national economic environment, and other risks and uncertainties. Accordingly, undue reliance should not be placed on forward-looking statements. These forward-looking statements speak only as of the date of this release. First Choice Bank undertakes no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances after the date of this release or to reflect the occurrence of unanticipated events. Investors are encouraged to read the First Choice Bank annual reports which are available on our website.
|FIRST CHOICE BANK|
|SECOND QUARTER REPORT / JUNE 30, 2017|
|(all amounts in thousand dollars except share and per share information)|
|June 30, 2017||March 31, 2017||December 31, 2016||June 30, 2016|
|Cash and cash equivalents||$||122,266||$||119,762||$||110,032||$||97,328|
|Stock Investments, restricted||3,933||3,765||3,765||3,764|
|Less allowance for loan losses||(11,333||)||(11,523||)||(11,599||)||(12,895||)|
|Premises and equipment, net||906||975||1,036||1,212|
|LIABILITIES AND SHAREHOLDERS' EQUITY|
|Noninterest bearing deposits||$||160,081||$||197,672||$||150,764||$||115,724|
|Interest checking accounts||268,522||260,748||265,381||262,134|
|Money market accounts||76,990||78,659||92,309||104,631|
|Certificates of deposits||166,781||138,148||158,968||130,284|
|Federal Home Loan Bank borrowings||45,000||40,000||0||26,000|
|Total shareholders' equity||103,995||102,691||101,447||96,877|
|TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY||$||913,328||$||914,841||$||863,455||$||827,471|
|STATEMENT OF INCOME|
|For the three months ended||For the six months ended|
|June 30, 2017||March 31, 2017||June 30, 2016||June 30, 2017||June 30, 2016|
|Net interest income||8,192||7,628||7,902||15,820||15,550|
|Provision for loan losses||0||0||580||0||1,480|
|Net interest income after provision for loan losses||8,192||7,628||7,322||15,820||14,070|
|Income before income taxes||3,762||3,607||3,520||7,369||6,170|
|Provision for income taxes||1,528||1,472||1,452||3,000||2,546|
|Dividends declared per common share||$||0.20||$||0.20||4.00||%||$||0.40||4.00||%|
Net income per share-basic1
Net income per share-diluted1 2
Weighted average shares - basic1
Weighted average shares - diluted1 2
|Return on assets (annualized)||1.04||%||0.99||%||1.01||%||1.01||%||0.89||%|
|Return on equity (annualized)||8.60||%||8.33||%||8.63||%||8.46||%||7.64||%|
|Net interest margin||3.86||%||3.61||%||3.91||%||3.74||%||3.86||%|
|June 30, 2017||March 31, 2017||December 31, 2016||June 30, 2016|
Tangible book value3
|Allowance for loan losses as a percent of total gross loans||1.53||%||1.55||%||1.65||%||1.87||%|
Nonperforming assets as a percent of total assets4
|Allowance for loan losses as a percent of nonperforming assets||485.49||%||446.35||%||346.33||%||363.65||%|
|Net Loan to deposit ratio||96.20||%||95.35||%||91.57||%||96.69||%|
|Tier one leverage capital||12.13||%||11.88||%||12.42||%||11.85||%|
|Total risk based capital||14.27||%||14.54||%||15.33||%||14.54||%|
Per common share data has been adjusted for the 4% stock dividend issued to shareholders on the record of May 26, 2016.
Diluted shares are calculated using the treasury method since Q1 2015.
Tangible book value per share excludes goodwill and intangible assets.
Nonperforming assets include nonaccrual loans, loans past due 90 days or more and still accruing, and other real estate owned.