1st Colonial Bancorp, Inc. Reports Fourth Quarter and Full Year 2020 Results and Announces Stock Repurchase Program

  • Fourth quarter net income up 288% from same period in 2019.
  • Fourth quarter return on average assets was 1.37%, up 248% from same period in 2019.
  • Fourth quarter efficiency ratio improved to 53%, down 11% from same period in 2019.
  • Full year 2020 net income grew 47% over 2019 results.
  • Full year 2020 diluted earnings per share up 48% over 2019.
  • Tangible book value increased 12%.
  • Asset quality metrics improved with non-performing assets decreasing 19% to $4.8 million and 0.75% of total assets.
  • Plan to repurchase up to 3% of outstanding common shares.

CHERRY HILL, N.J.--()--1st Colonial Bancorp, Inc. (FCOB), holding company of 1st Colonial Community Bank, today reported net income of $2.2 million, or $0.44 per diluted share, for the three months ended December 31, 2020, compared to net income of $569 thousand, or $0.11 per diluted share, for the three months ended December 31, 2019. For the year ended December 31, 2020, net income was $4.8 million, or $0.95 per diluted share, compared to $3.2 million, or $0.64 per diluted share, for the same period in 2019. The 2019 earnings per diluted share were adjusted to give effect to the 5% stock dividend distributed to shareholders on April 15, 2020.

Fourth Quarter 2020 Highlights

  • Compared to fourth quarter of 2019:
    • Revenues were $7.2 million, an increase of 31.5%.
    • Net interest income was $5.0 million, an increase of 10.2%.
    • Non-interest income was $2.1 million, an increase of 144%.
    • Net income was $2.2 million, an increase of 288.4%.
    • Diluted earnings per share of $0.44, increased 300%.
  • Compared to third quarter of 2020:
    • Revenues increased 13%.
    • Net interest income increased 9.2%.
    • Net interest margin was 3.23% compared to 3.11%.
    • Non-interest income increased 22.2%.
    • Net income increased 65%.
    • Diluted earnings per share increased 65%.

Full Year Highlights

  • Revenues were $24.3 million, an increase of 12.9%.
  • Net income was $4.8 million, an increase of 47.5%.
  • Diluted earnings per share of $0.95, increased 48.4%.
  • Efficiency ratio was 65%.
  • Total assets were $636.1 million and grew 10.6%.
  • Total deposits were $565.8 million and grew 8.3%.
  • Non-performing assets were $4.8 million and declined 18.6%.
  • Tangible book value per share was $10.82, an increase of 11.5%.
  • Raised $10.75 million in subordinated debt.
  • The Bank’s leverage ratio and total risk-based capital ratio improved by 16% and 21%, respectively.

Robert White, President and Chief Executive Officer, commented, “We are pleased with our performance in the fourth quarter as well as on a full year basis. This past year was both transitional and transformational for our company. The COVID-19 pandemic caused significant economic strain, creating financial hardship in our communities. Our team members worked tirelessly to provide the support our customers and communities needed through participation in the Small Business Administration’s Paycheck Protection Program, or PPP, and through loan payment deferrals. We will continue to work with and support our customers through this difficult time.”

“In 2020 we identified organizational changes needed to execute our strategic priorities and improve our financial performance. As a result of the changes, we have been very successful attracting top talent in the market. We onboarded proven revenue producers and added highly experienced individuals to fill needs within the organization that will support our growth plan. We saw significant operational improvement and expansion in our residential lending group. Their fee income on gains from the sale of mortgage loans increased 95% on a 65% increase in originations from 2019. Our commercial pipeline continues to expand, with the primary focus on high quality loans that demonstrate sustainable cash flow and verifiable liquidity to be able to endure continued economic stress. Our credit quality remains strong and non-performing and criticized assets have declined from their levels at December 31, 2019. We remain optimistic that our portfolio will withstand the impact of continued economic stress related to the COVID-19 pandemic.”

Share Repurchase Plan

The Company also announced today that it has adopted a stock repurchase program, effective February 1, 2021. Under the stock repurchase program, management is authorized to repurchase up to 3% of the Company’s outstanding shares of common stock, with a total cost not to exceed $1.4 million. As of today, the Company had 4,961,987 shares of common stock outstanding. The stock repurchase program does not obligate the Company to acquire any particular amount of common stock, and it may be limited, suspended or terminated at any time without prior notice. The Company also announced that, as a result of the adoption of the stock repurchase program, the Company will not declare a stock dividend in 2021.

Mr. White noted, “The announcement of our stock buyback plan reflects our confidence in our future. As with many other financial institutions, our current stock price is trading below our tangible book value and our intent is to maximize shareholder value as we continue to focus on profitable growth of the company.”

Under the stock repurchase program, the Company may repurchase shares of common stock from time to time in open market transactions or in privately negotiated transactions as permitted under applicable rules and regulations. Open market repurchases will be conducted in accordance with the limitations set forth in Rule 10b-18 under the Securities Exchange Act of 1934 (the “Exchange Act”), and applicable legal requirements. The timing, volume and nature of such purchases will be determined at the sole discretion of the Company’s management at prices the Company considers attractive and in the best interests of the Company, subject to the availability of stock, general market conditions, trading price, alternate uses for capital, the Company’s financial performance, and applicable securities laws. No assurance can be given that any particular amount of common stock will be repurchased. Repurchases may also be made pursuant to a trading plan under Rule 10b5-1 under the Exchange Act, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so because of self-imposed trading blackout periods or other regulatory restrictions. This repurchase program may be modified, extended or terminated by the Board of Directors at any time.

Operating Results

Net Interest Income

Net interest income for the three months ended December 31, 2020 and 2019 was $5.0 million and $4.6 million, respectively. The increase in net interest income was primarily attributable to a 35.1% decline in interest expense. A shift in our deposit composition to non-interest bearing and lower cost deposit products coupled with interest rate reductions led to the improvement in interest expense. For the fourth quarter of 2020, average interest checking, money market and savings account balances increased $76.7 million and average certificates of deposits (“CD”) declined $50.2 million from the fourth quarter of 2019.

For 2020, net interest income declined $194 thousand, or 1.0%, to $18.4 million from $18.6 million for 2019. The decline in net interest income was primarily related to a $1.1 million decrease in interest income on loans and in the average yield earned on average interest-earning assets. The 75-basis point decrease in the fed funds rate in the second half of 2019 and the subsequent 150-basis point decrease in the fed funds rate in March 2020 had a negative impact on our variable rate loans indexed to the Wall Street Journal Prime Rate. Interest income for 2020 was also negatively impacted by $588 thousand in net deferred interest payments related to the pandemic. This deferred interest income will be recognized when the loans are paid in full at maturity or sooner. Average outstanding loan balances grew $18.7 million but at a reduced yield, primarily related to the 1% coupon associated with the PPP loans.

Lessening the impact of the loan interest income deferral was the recognition of $908 thousand in PPP loan origination fees during 2020. We originated $47.1 million in PPP loans and are earning approximately $1.4 million in origination fees over the contractual term, which is predominately 24 months. The earnout period has been accelerated based on the forgiveness payments received from the SBA. As of December 31, 2020, approximately 41% of our PPP loans have been forgiven.

The net interest margin was 3.23% for the fourth quarter of 2020 compared to 3.26% for the fourth quarter of 2019 and was 3.10% for 2020 compared to 3.43% for 2019. The decrease in net interest margin was mostly related to lower loan interest income in combination with an elevated level in the average balance of interest-earning cash, which is a lower yielding asset. Our total cost of deposits improved 57 basis points from 1.06% for the fourth quarter of 2019 to 0.49% for the fourth quarter of 2020. Total cost of deposits for 2020 was 0.71% compared to 1.07% for 2019.

Loan Loss Provision

For the three and twelve months ended December 31, 2020, we recorded provisions to the allowance for loan losses (“allowance”) of $340 thousand and $2.1 million, respectively, compared to $1.4 million and $3.2 million for the three and twelve months ended December 31, 2019. The 2020 provision was related to an increase in qualitative reserve factors due to uncertainties related to the pandemic and an increase in the historical loss rates. The 2019 provision was largely related to specific reserves on impaired assets and increases in the historical loss rates. Net charge-offs were $3.2 million for 2020 compared to $2.1 million for 2019. The net charge-offs for 2020 included $1.9 million in specific reserves on impaired loans, which were previously recorded in the allowance.

Our loan payment deferral programs have been successful in providing the needed relief to borrowers who were experiencing financial hardship as a result of the pandemic. We are seeing favorable trends as a vast majority of customers who requested loan deferrals due to COVID-19 issues have returned to their regular payment schedules. As of December 31, 2020, six loans totaling $807 thousand had principal only deferments. At the height of our COVID-19 deferral program, we had 373 loans totaling $69.5 million with payment deferral modifications.

Non-interest Income

Non-interest income for the fourth quarter of 2020 was $2.1 million, an increase of $1.2 million, or 144%, from $865 thousand for the fourth quarter of 2019. Gains on the sale of residential mortgage loans increased $1.0 million, or 158%, to $1.7 million for the fourth quarter in 2020 due to a $31.6 million increase in the volume of loans sold during the 2020 period when compared to the 2019 period. The fourth quarter of 2020 benefited from $164 thousand in gains on the sale of SBA loans.

For 2020, non-interest income was $6.0 million, an increase of $3.0 million, or 100%, over 2019 results. Gains on the sale of residential mortgage loans grew $2.2 million, or 94.7%, over 2019 due to growth of $67.8 million in the volume of loans sold during 2020. During 2020, gains on the sales of investment securities increased $180 thousand over 2019. We also realized $243 thousand in gains on the sale of SBA loans. There were no such gains on the sale of SBA loans in 2019. During 2019 we recorded a $169 thousand loss on the sale of seven other real estate owned (“OREO”) properties. There were no net losses on OREO in 2020.

Non-interest Expense

Non-interest expense was $3.8 million for the three months ended December 31, 2020, an increase of $314 thousand, or 8.9%, for the comparable period in 2019. The increase was mainly due to a $781 thousand increase in salaries and benefits. During 2020, we have made key investments in highly experienced revenue producers and operational team members as we executed upon our strategic plan. Additionally, the rise in volume of sold residential mortgages led to an increase in paid commissions to our mortgage lending team members.

Non-interest expense was $15.8 million for 2020, an increase of $1.5 million, or 10.7%, over 2019 results. The increase was mainly due to an increase in salaries and benefits primarily for the reasons cited above and the recognition of incentive pay to our team members. Also contributing to the increase in non-interest expense for 2020 was $562 thousand in one-time expenses related to the executive transition and management of previously identified troubled legacy credits.

Income Taxes

For the fourth quarter of 2020, income tax expense was $780 thousand compared to an income tax benefit of $17 thousand for the fourth quarter of 2019. Income tax expense was $1.6 million for 2020 compared to $853 thousand for 2019.

Financial Condition

Assets

At December 31, 2020, total assets were $636.1 million compared to $575.2 million at December 31, 2019.

Total loans were $423.1 million at December 31, 2020, an increase of $3.3 million, or 0.8%, over full year 2019 levels. During 2020, loan growth mainly came from PPP loan originations. Commercial loans, including commercial real estate and construction, declined $8.9 million while home equity loans and lines of credit declined $14.1 million. Residential mortgages held for sale grew to $21.9 million at December 31, 2020, from $4.4 million at December 31, 2019. With the local economy slowly re-opening, we have seen an increase in our commercial pipeline activity. Commercial loan originations in the fourth quarter increased 157% from their level in the third quarter of 2020. Our investment portfolio increased $43.0 million to $137.0 million at December 31, 2020 as we invested our excess liquidity.

Liabilities

Total deposits were $565.8 million at December 31, 2020, an increase of $43.6 million, or 8.34%, over same period 2019 levels. Savings, demand deposits, money market, and interest checking accounts increased $46.4 million, $20.5 million, $17.3 million, and $3.7 million, respectively, while CDs and brokered deposits decreased $28.9 million and $15.4 million, respectively. We continue to be focused on full relationship banking, evidenced by our deposit growth sourced through new PPP loan customers.

In 2020 we successfully raised $10.75 million in subordinated debt, which provides the necessary capital to support the growth outlined in our strategic plan, without any dilution to our shareholders. The subordinated notes have been structured to qualify as Tier 2 capital at the holding company level for regulatory purposes. A substantial portion of the net proceeds were contributed to the Bank as Tier 1 capital.

Shareholder’s Equity

Total shareholders’ equity was $53.7 million at December 31, 2020, an increase of $5.8 million, or 12.1%, from $47.9 million at December 31, 2019. Tangible book value increased $1.11, or 11.5%, from $9.71 at December 31, 2019 to $10.82 at December 31, 2020.

Asset Quality

1st Colonial's non-performing assets at December 31, 2020 were $4.8 million compared to $5.9 million at December 31, 2019. The ratio of non-performing assets to total assets at December 31, 2020 improved to 0.75% from 1.02% at December 31, 2019. We have been actively managing our criticized and classified assets with the goal of maximizing value and minimizing losses. At December 31, 2020, the allowance for loan losses was $5.6 million, or 1.33% of total loans. The allowance was $6.7 million, or 1.59% of total loans at December 31, 2019. We continue to closely monitor higher risk relationships and are optimistic that the portfolio will withstand any additional negative impact of the pandemic.

Income Statement and Other Highlights:

Highlights as of December 31, 2020 and December 31, 2019 and a comparison of the three and twelve months ended December 31, 2020 to the three and twelve months ended December 31, 2019 include the following:

1st COLONIAL BANCORP, INC.

CONSOLIDATED INCOME STATEMENTS

(Unaudited, dollars in thousands, except per share data)

 

For the three months

For the years

ended December 31,

ended December 31,

2020

 

2019

 

2020

 

2019

Interest income

$

5,956

 

$

5,982

 

$

22,551

 

$

23,991

Interest expense

 

912

 

 

1,406

 

 

4,190

 

 

5,436

Net Interest Income

 

5,044

 

 

4,576

 

 

18,361

 

 

18,555

Provision for loan losses

 

340

 

 

1,378

 

 

2,140

 

 

3,184

Net interest income after provision for loan losses

 

4,704

 

 

3,198

 

 

16,221

 

 

15,371

Non-interest income

 

2,111

 

 

865

 

 

5,957

 

 

2,985

Non-interest expense

 

3,825

 

 

3,511

 

 

15,803

 

 

14,279

Income before taxes

 

2,990

 

 

552

 

 

6,375

 

 

4,077

Income tax expense

 

780

 

 

(17

)

 

1,620

 

 

853

Net Income

$

2,210

 

$

569

 

$

4,755

 

$

3,224

Earnings Per Share – Basic (1)

$

0.45

 

$

0.12

 

$

0.96

 

$

0.66

Earnings Per Share – Diluted (1)

$

0.44

 

$

0.11

 

$

0.95

 

$

0.64

SELECTED PERFORMANCE RATIOS:

 

For the three months
ended December 31,

 

For the years ended
December 31,

 

2020

 

2019

 

2020

 

2019

Return on Average Assets

 

 

1.37%

 

 

0.39%

 

 

0.78%

 

 

0.58%

Return on Average Equity

 

 

17.08%

 

 

4.75%

 

 

9.52%

 

 

6.99%

Book value per share (1)

 

$

10.82

 

$

9.71

 

$

10.82

 

$

9.71

 

 

At December 31, 2020

 

At December 31, 2019

Bank Capital Ratios (2):

   

Tier 1 Leverage

 

9.60%

 

8.25%

Total Risk Based Capital

 

17.54%

 

14.44%

Common Equity Tier 1

 

16.29%

 

13.19%

(1)   

Adjusted to give effect to the 5% stock dividend distributed to shareholders on April 15, 2020.

(2)   

The Bank’s capital ratios for 2020 were positively impacted by a $9.0 million capital contribution from the Company as a result of the issuance of $10.75 million of subordinated debt.

1st COLONIAL BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

   

(Unaudited, in thousands)

 

At December 31, 2020

At December 31, 2019

Cash and cash equivalents

 

$

37,040

$

46,357

Total investments

 

 

137,027

 

93,991

Mortgage loans held for sale

 

 

21,859

 

4,449

Total loans

 

 

423,147

 

419,798

Less Allowance for loan losses

 

 

(5,624)

 

(6,671)

Loans and leases, net

 

 

417,523

 

413,127

Bank owned life insurance

 

 

14,739

 

9,807

Premises and equipment, net

 

 

769

 

691

Other real estate owned, net

 

 

-

 

-

Accrued interest receivable

 

 

1,811

 

1,697

Other assets

 

 

5,288

 

5,084

Total Assets

 

$

636,056

$

575,203

   

Total deposits

 

$

565,820

$

522,252

Other borrowings

 

 

2,325

 

2,290

Subordinated debt

 

 

10,404

 

 

-

Other liabilities

 

 

3,821

 

2,755

Total Shareholders’ Equity

 

 

53,686

 

47,906

Total Liabilities and Equity

 

$

636,056

$

575,203

1st COLONIAL BANCORP, INC.

NET INTEREST INCOME AND MARGIN TABLES

(Unaudited, in thousands, except percentages)

 

For the three months ended

For the three months ended

December 31, 2020

December 31, 2019

Average

Average

 

Balance

Interest

Yield

Balance

Interest

Yield

 

Cash and cash equivalents

$

54,690

$

12

0.09

%

$

44,318

$

148

1.32

%

 

Investment securities

 

120,642

 

446

1.47

%

 

91,409

 

470

2.04

%

 

Mortgage loans held for sale

 

 

20,874

 

 

129

 

2.46

%

 

 

8,071

 

 

60

 

2.95

%

 

Loans

 

 

425,380

 

5,369

5.02

%

 

412,952

 

5,304

5.10

%

 

Total interest-earning assets

 

 

621,586

 

5,956

3.81

%

 

556,750

 

5,982

4.26

%

 

Non-interest earning assets

 

20,164

 

 

16,322

 

 

Total average assets

$

641,750

$

573,072

 

 

Interest-bearing deposits

 

Interest-bearing checking

$

255,833

$

186

0.29

%

$

238,602

$

458

0.76

%

 

Savings and money markets

 

119,316

 

99

0.33

%

 

59,803

 

66

0.44

%

 

Certificates of deposit

 

111,389

 

426

1.52

%

 

161,565

 

868

2.13

%

 

Total interest-bearing deposits

 

486,538

 

711

0.58

%

 

459,970

 

1,392

1.20

%

 

Borrowings

 

12,707

 

201

6.29

%

 

2,817

 

14

1.97

%

 

Total interest-bearing liabilities

 

499,245

 

912

0.73

%

 

462,787

 

1,406

1.21

%

 

Non-interest bearing deposits

 

86,373

 

60,636

 

Other liabilities

 

4,660

 

2,103

 

Total average liabilities

 

 

590,278

 

 

 

 

 

 

525,526

 

 

 

 

 

Average shareholders' equity

 

51,472

 

47,546

 

Total average liabilities and equity

$

641,750

$

573,072

 

Net interest income

$

5,044

$

4,576

 

Net interest margin

3.23

%

3.26

%

 

Net interest spread

3.08

%

3.05

%

 

For the year ended

 

For the year ended

December 31, 2020

 

December 31, 2019

Average

 

Average

 

Balance

Interest

Yield

 

Balance

Interest

Yield

 

Cash and cash equivalents

$

49,454

$

221

0.45

%

 

$

21,678

$

338

1.56

%

 

Investment securities

 

101,277

 

1,816

1.79

%

 

 

103,740

 

2,192

2.11

%

 

Mortgage loans held for sale

 

 

13,888

 

 

370

 

2.66

%

 

 

 

6,915

 

 

203

 

2.94

%

 

Loans

 

 

426,984

 

20,144

4.72

%

 

 

408,276

 

21,258

5.21

%

 

Total interest-earning assets

 

 

591,603

 

22,551

3.81

%

 

 

540,609

 

23,991

4.44

%

 

Non-interest earning assets

 

19,574

 

 

 

14,627

 

 

Total average assets

$

611,177

 

$

555,236

 

 

Interest-bearing deposits

 

 

Interest-bearing checking

$

244,578

$

1,206

0.49

%

 

$

222,816

$

1,697

0.76

%

 

Savings and money markets

 

102,907

 

382

0.37

%

 

 

62,871

 

279

0.44

%

 

Certificates of deposit

 

126,644

 

2,302

1.82

%

 

 

157,485

 

3,393

2.15

%

 

Total interest-bearing deposits

 

474,129

 

3,890

0.82

%

 

 

443,172

 

5,369

1.21

%

 

Borrowings

 

5,948

 

300

5.04

%

 

 

4,335

 

67

1.55

%

 

Total interest-bearing liabilities

 

480,077

 

4,190

0.87

%

 

 

447,507

 

5,436

1.21

%

 

Non-interest bearing deposits

 

77,267

 

 

59,709

 

Other liabilities

 

3,873

 

 

1,926

 

Average total liabilities

 

 

561,217

 

 

 

 

 

 

 

509,142

 

 

 

 

 

Shareholders' equity

 

49,960

 

 

46,094

 

Total average liabilities and equity

$

611,177

 

$

555,236

 

Net interest income

$

18,361

 

$

18,555

 

Net interest margin

3.10

%

 

3.43

%

 

Net interest spread

2.94

%

 

3.23

%

 

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 also has a branch in the New Jersey community of Westville and administrative offices in Cherry Hill, New Jersey. To learn more, call (856) 858-8402 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.

Contacts

Mary Kay Shea at 856‑885-2391

Contacts

Mary Kay Shea at 856‑885-2391