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1ST Constitution Bancorp Reports Record Third Quarter 2018 Results and Increases Quarterly Dividend to $0.075

CRANBURY, N.J., Oct. 19, 2018 (GLOBE NEWSWIRE) -- 1ST Constitution Bancorp (NASDAQ: FCCY), the holding company (the “Company”) for 1ST Constitution Bank (the “Bank”), today reported net income of $4.0 million, an increase of 61.4% compared to net income of $2.5 million for the three months ended September 30, 2017. Diluted earnings per share were $0.46 for the three months ended September 30, 2018 compared to diluted earnings per share of $0.30 for the three months ended September 30, 2017.

The Board of Directors declared a quarterly cash dividend of $0.075 per share of common stock that will be paid on November 22, 2018 to shareholders of record on November 9, 2018. This dividend represents a 25% increase over the dividend per share paid on August 23, 2018.

THIRD QUARTER 2018 HIGHLIGHTS

  • Return on average assets and return on average equity were 1.34% and 12.89%, respectively.

  • Book value per share and tangible book value per share were $14.73 and $13.26, respectively, at September 30, 2018.

  • Net interest income was $11.4 million and the net interest margin was 4.09% on a tax equivalent basis.

  • A provision for loan losses of $225,000 and net charge-offs of $458,000 were recorded.

  • Total loans were $881.5 million at September 30, 2018 and included $68.9 million of loans acquired in the merger of New Jersey Community Bank (“NJCB”) with and into the Bank. Commercial business, commercial real estate and construction loans totaled $622.1 million and included $56. million of loans acquired in the NJCB merger. Excluding the loans acquired in the NJCB merger, commercial business, commercial real estate and construction loans totaled $565.8 million and increased $27.6 million, or 5.1%, compared to $538.2 million at December 31, 2017 and increased $52.8 million, or 10.3%, compared to $513.0 million at September 30, 2017.

  • There were no merger related expenses incurred in the third quarter of 2018.

  • Non-performing assets were $9.3 million, or 0.78% of assets, and included $2.5 million of OREO at September 30, 2018.

/EIN News/ --        
On April 11, 2018, the Company completed the NJCB merger. As a result of the NJCB merger, merger related expenses of $2.1 million were incurred primarily in the second quarter of 2018 and the after-tax effect of the merger expenses reduced net income for the nine months ended September 30, 2018 by $1.6 million. The acquisition method of accounting for the business combination resulted in the recognition of a gain from the bargain purchase of $184,000 and no goodwill.

For the nine months ended September 30, 2018, net income was $8.7 million and Adjusted Net Income, which is net income excluding the after-tax effect of the merger expenses and the gain from the bargain purchase, was $10.1 million compared to net income of $6.4 million for the nine months ended September 30, 2017. There were no merger related expenses incurred for the nine months ended September 30, 2017. For the nine months ended September 30, 2018, diluted earnings per share were $1.02 and Adjusted Net Income per diluted share was $1.18 compared to diluted earnings per share of $0.76 for the nine months ended September 30, 2017.

Adjusted Net Income, Adjusted Net Income per diluted share, Adjusted return on average assets and Adjusted return on average equity are non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to, but not as a substitute for, the Company’s GAAP financial results. A reconciliation of these non-GAAP financial measures to the GAAP financial results is attached to this press release. Management believes that the presentation of these non-GAAP financial measures of the Company in this press release may be helpful to readers in understanding the Company’s financial performance without including the financial impact of the NJCB merger when comparing the Company’s income statement for the three and nine-month periods ended September 30, 2018 and 2017.

Robert F. Mangano, President and Chief Executive Officer, stated, “Our strong third quarter results reflected our sound operating fundamentals that were driven by the growth of our loan portfolio. The financial benefit of the higher short-term interest rate environment and our asset sensitive interest rate position is continuing to have a positive effect on net interest income and our net interest margin.” Mr. Mangano added, “The acquisition of New Jersey Community Bank, the conversion of its core operating system and achievement of our anticipated operating synergies through the integration of its operations during the second quarter and our continued focus on operating expense containment also contributed to our performance in the third quarter.”

Discussion of Financial Results

Net income was $4.0 million, or $0.46 per diluted share, for the third quarter of 2018 compared to $2.5 million, or $0.30 per diluted share, for the third quarter of 2017. For the three months ended September 30, 2018, net interest income was $11.4 million, compared to $9.4 million for the three months ended September 30, 2017. The increase in interest-earning assets and the higher yield on loans were the primary drivers of the $2.0 million increase in net interest income. Non-interest expenses were $7.9 million for the third quarter of 2018 compared to $7.6 million for the third quarter of 2017.

Net interest income was $11.4 million for the quarter ended September 30, 2018 and increased $2.0 million, or 21.7%, compared to net interest income of $9.4 million for the third quarter of 2017. Total interest income was $13.8 million for the three months ended September 30, 2018 compared to $10.8 million for the three months ended September 30, 2017. This increase was due primarily to the $134.7 million increase in average loans, reflecting growth primarily of commercial real estate, mortgage warehouse lines, construction loans and commercial business loans. The growth in average loans included loans of approximately $70.7 million from the NJCB merger. Average interest-earning assets were $1.12 billion with a tax-equivalent yield of 4.88% for the third quarter of 2018 compared to $992.0 million with a tax-equivalent yield of 4.39% for the third quarter of 2017. The higher yield on average interest-earning assets for the third quarter of 2018 reflected primarily the higher yield earned on the loan portfolio. The 100 basis point increase in the Federal Reserve’s targeted federal funds rate and the corresponding increase in the Prime Rate since September of 2017 have had a positive effect on the yields of construction, commercial business, home equity and warehouse loans with variable interest rate terms in the third quarter of 2018. Approximately $157,000 of interest income was recognized through the net accretion of discount in the third quarter of 2018 on loans acquired in the NJCB merger due to acquisition accounting.

Interest expense on average interest-bearing liabilities was $2.4 million, with an interest cost of 1.12%, for the third quarter of 2018 compared to $1.5 million, with an interest cost of 0.78%, for the third quarter of 2017. The $936,000 increase in interest expense on interest-bearing liabilities for the third quarter of 2018 reflected primarily higher interest costs due to higher short-term market interest rates in the third quarter of 2018 compared to the third quarter of 2017 and an increase of $107.2 million in average interest-bearing liabilities. The increase in average interest-bearing liabilities was comprised primarily of increases in certificates of deposit and short-term borrowings, which generally have higher interest cost than other types of interest-bearing deposits.

The net interest margin increased to 4.09% for the third quarter of 2018 compared to 3.85% for the third quarter of 2017 due primarily to the higher yield on average interest-earning assets, which more than offset the increase in the average cost of interest-bearing liabilities.

The Company recorded a higher provision for loan losses of $225,000 for the third quarter of 2018 compared to a provision for loan losses of $150,000 for the third quarter of 2017 due primarily to the growth of the loan portfolio and the change in the mix of loans in the loan portfolio.

At September 30, 2018, total loans were $881.5 million and the allowance for loan losses was $8.3 million, or 0.94% of total loans, compared to total loans of $772.0 million and an allowance for loan losses of $7.8 million, or 1.01% of total loans, at September 30, 2017. Management believes that the current economic conditions in New Jersey and operating conditions for the Company are generally positive, which were also considered in management’s evaluation of the adequacy of the allowance for loan losses.

Non-interest income was $2.2 million for the third quarter of 2018, an increase of $38,000 compared to $2.1 million for the third quarter of 2017. Other income increased $47,000 due primarily to higher debit card interchange income and customer service fees. Gains on the sale of loans declined $37,000. In the third quarter of 2018, $25.0 million of residential mortgages were sold and $702,000 of gains were recorded compared to $28.9 million of residential mortgage loans sold and $809,000 of gains recorded in the third quarter of 2017. Management believes that the decrease in residential mortgage loans sold was due primarily to lower residential mortgage lending activity as the result of higher mortgage interest rates in 2018 compared to 2017. In the third quarter of 2018, $7.6 million of SBA loans were sold and gains of $590,000 were recorded compared to $5.8 million of SBA loans sold and gains of $520,000 recorded in the third quarter of 2017. SBA guaranteed commercial lending activity and loan sales vary from period to period and the level of activity is due primarily to the timing of loan originations.

Non-interest expenses were $7.9 million for the third quarter of 2018, which was an increase of $277,000, or 3.6%, compared to $7.6 million for the third quarter of 2017. Salaries and employee benefits expense increased $283,000, or 6.1%, in the third quarter of 2018 due primarily to salaries for former NJCB employees who joined the Company, merit increases and increases in employee benefit expenses. Occupancy costs increased $42,000, or 4.9%, due primarily to the addition of the two former NJCB branch offices in the second quarter of 2018. FDIC insurance expense increased $10,000, or 10.5%, due to the internal growth of loans and assets and the acquisition of NJCB. Other real estate owned expenses increased $62,000 to $73,000 for the third quarter of 2018 due primarily to ownership costs for property insurance and other maintenance expenses associated with a commercial real estate property that was foreclosed in the third quarter of 2018. Other operating expenses decreased $113,000 due primarily to decreases in loan expenses, ATM expenses, business development and marketing expenses.

Income tax expense was $1.4 million for the third quarter of 2018, resulting in an effective tax rate of 26.2%, compared to income tax expense of $1.2 million, which resulted in an effective tax rate of 33.1%, for the third quarter of 2017. The effective tax rate decreased in the third quarter of 2018 due primarily to the decrease in the maximum federal corporate income tax rate from 35% to 21% beginning in 2018 as a result of the enactment of the Tax Cuts and Jobs Act (the “Tax Act”) in December 2017. Partially offsetting the lower federal corporate income tax rate was the enactment of legislation by the State of New Jersey in July of 2018, which increased the corporate income tax rate to 11.5% from 9% for taxable income of $1.0 million or more effective January 1, 2018 and resulted in a 2% higher effective tax rate in the third quarter of 2018.

At September 30, 2018, the allowance for loan losses was $8.3 million compared to $8.0 million at December 31, 2017. As a percentage of total loans, the allowance was 0.94% at September 30, 2018 compared to 1.01% at December 31, 2017. The decrease in the allowance as a percentage of loans was due primarily to the NJCB acquisition accounting, which resulted in the elimination of the NJCB allowance for loan losses and the NJCB loans being recorded at their fair value. Included in the fair value of the loans at the date of acquisition was a credit risk adjustment discount of approximately $1.6 million.

Total assets increased $113.2 million to $1.19 billion at September 30, 2018 from $1.08 billion at December 31, 2017 due primarily to a $91.6 million increase in total loans and an increase of $6.8 million in investment securities. The increase in assets was funded primarily by a $19.7 million increase in deposits and a $79.0 million increase in overnight borrowings. Total portfolio loans at September 30, 2018 were $881.5 million compared to $789.9 million at December 31, 2017. The increase in loans was due primarily to an increase of $76.6 million in commercial real estate loans, a $8.2 million increase in construction loans and a $7.1 million increase in residential real estate loans. The NJCB merger contributed $68.9 million to the increase of loans at September 30, 2018.

Total deposits were $941.7 million at September 30, 2018 compared to $922.0 million at December 31, 2017. The acquisition of NJCB contributed $82.7 million of deposits at September 30, 2018. Total deposits, excluding the NJCB deposits, declined $63.0 million during the first nine months of 2018. Municipal deposits, primarily interest-bearing demand deposits and savings accounts, declined approximately $43.2 million from the end of 2017. As a result of the Tax Act, a number of the Bank’s municipal customers experienced significant advanced payments in December 2017 for real estate taxes that were due in 2018. This was due to income tax planning considerations by individuals. As the Bank’s municipal customers expended these additional funds in the first nine months of 2018, their deposit balances declined from the levels at December 31, 2017. The balance of the outflow of interest-bearing demand accounts and savings accounts was due to the routine movement of customers’ funds.

Regulatory capital ratios for the Company and the Bank continue to reflect a strong capital position. Under current regulatory capital standards, the Company’s common equity Tier 1 to risk-based assets (“CET1”), total risk-based capital, Tier I capital, and leverage ratios were 10.43%, 12.84%, 12.08% and 11.19%, respectively, at September 30, 2018. The Bank’s CET1, total risk-based capital, Tier 1 capital and leverage ratios were 12.10%, 12.86%, 12.10% and 11.19%, respectively, at September 30, 2018. The Company and the Bank are considered “well capitalized” under these capital standards.

Asset Quality

Non-performing loans were $6.8 million at September 30, 2018 compared to $7.1 million at December 31, 2017 and $6.5 million at September 30, 2017. During the third quarter of 2018, $2.2 million of non-performing loans were resolved. Principal payments of $508,000 on non-accrual loans were recorded in the third quarter of 2018 and loans totaling $108,000 were placed on non-accrual status. One commercial real estate loan with a balance of $1.3 million was foreclosed and transferred to OREO. Charge-offs of loans were $458,000 and no recoveries of loans previously charged-off were recorded for the third quarter of 2018. The allowance for loan losses was 122% of non-performing loans at September 30, 2018 compared to 113% of non-performing loans at December 31, 2017.

Overall, management observed generally stable trends in loan quality, with non-performing loans to total loans of 0.77% and non-performing assets to total assets of 0.78% at September 30, 2018 compared to non-performing loans to total loans of 0.90% and non-performing assets to total assets of 0.66% at December 31, 2017.

OREO at September 30, 2018 was $2.5 million and consisted of one residential real estate property acquired in the NJCB merger with a carrying value of $1.1 million, land with a carrying value of $93,000 that was foreclosed in the second quarter of 2018 and a commercial real estate property that was foreclosed in the third quarter of 2018 with a fair value of $1.3 million.

About 1ST Constitution Bancorp

1ST Constitution Bancorp, through its primary subsidiary, 1ST Constitution Bank, operates 20 branch banking offices in Cranbury (2), Asbury Park, Fort Lee, Freehold, Hamilton, Hightstown, Hillsborough, Hopewell, Jamesburg, Lawrenceville, Little Silver, Neptune City, Perth Amboy, Plainsboro, Princeton, Rocky Hill, Rumson, Fair Haven and Shrewsbury, New Jersey.

1ST Constitution Bancorp is traded on the Nasdaq Global Market under the trading symbol “FCCY” and information about the Company can be accessed through the Internet at www.1STCONSTITUTION.com

The foregoing contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not historical facts and include expressions about management’s confidence and strategies and management’s expectations about new and existing programs and products, relationships, opportunities, taxation, technology and market conditions. These statements may be identified by such forward-looking terminology as “expect,” “look,” “believe,” “anticipate,” “may,” “will,” or similar statements or variations of such terms. Actual results may differ materially from such forward-looking statements. Factors that may cause results to differ materially from such forward-looking statements include, but are not limited to, changes in the direction of the economy in New Jersey, the direction of interest rates, effective income tax rates, loan prepayment assumptions, continued levels of loan quality and origination volume, continued relationships with major customers including sources for loans, a higher level of net loan charge-offs and delinquencies than anticipated, bank regulatory rules, regulations or policies that restrict or direct certain actions, the adoption, interpretation and implementation of new or pre-existing accounting pronouncements, a change in legal and regulatory barriers including issues related to compliance with anti-money laundering and bank secrecy act laws, as well as the effects of general economic conditions and legal and regulatory barriers and structure. 1ST Constitution Bancorp assumes no obligation for updating any such forward-looking statements at any time, except as required by law.

   
1st Constitution Bancorp  
Selected Consolidated Financial Data  
(Dollars in thousands, except per share data)  
(Unaudited)  
   
  Three months ended   Nine months ended  
  September 30,   September 30,  
    2018       2017       2018       2017    
Per common share data:                
Earnings per common share:                
Basic $   0.48     $   0.31     $   1.05     $   0.79    
Diluted     0.46         0.30         1.02         0.76    
Book value at period end             14.73         13.83    
Tangible book value per common share at period end             13.26         12.27    
Average common shares outstanding:                
Basic     8,392,631         8,063,119         8,282,889         8,040,955    
Diluted     8,678,680         8,328,252         8,565,401         8,309,363    
Shares outstanding             8,404,292         8,069,560    
                 
Performance ratios/data:                
Return on average assets   1.34 %     0.94 %     1.03 %     0.83 %  
Return on average equity   12.89 %     8.94 %     9.94 %     7.87 %  
Net interest income (tax-equivalent basis) 1 $   11,527     $   9,617     $   32,497     $   27,173    
Net interest margin (tax-equivalent basis) 2   4.09 %     3.85 %     4.06 %     3.76 %  
Efficiency ratio (tax-equivalent basis) 3   57.71 %     64.92 %     66.85 %     68.61 %  
                 
          September 30, 2018   December 31, 2017  
Loan portfolio composition:                
Commercial real estate         $   374,400     $   297,843    
Mortgage warehouse lines             187,320         189,412    
Construction loans             144,601         136,412    
Commercial business             103,070         103,987    
Residential real estate             47,565         40,494    
Loans to individuals             23,290         21,025    
Other loans             957         183    
Gross loans             881,203         789,356    
Deferred costs, net             335         550    
Total loans         $   881,538     $   789,906    
                 
Asset quality data:                
Loans past due over 90 days and still accruing         $   -     $   -    
Non-accrual loans             6,761         7,114    
OREO property             2,515         -    
Total non-performing assets         $   9,276     $   7,114    
                 
Net (charge-offs) recoveries $   (458 )   $   (55 )   $   (423 )   $   (142 )  
                 
Allowance for loan losses to total loans           0.94 %     1.01 %  
Allowance for loan losses to non-performing loans           122.25 %     112.64 %  
Non-performing loans to total loans           0.77 %     0.90 %  
Non-performing assets to total assets           0.78 %     0.66 %  
                 
Capital ratios:                
1st Constitution Bancorp                
Common equity to risk weighted assets ("CET 1")           10.43 %     10.19 %  
Total capital to risk weighted assets           12.84 %     12.84 %  
Tier 1 capital to risk weighted assets           12.08 %     12.02 %  
Tier 1 capital to average assets (leverage ratio)           11.19 %     11.23 %  
                 
1st Constitution Bank                
Common equity to risk weighted assets ("CET 1")           12.10 %     11.74 %  
Total capital to risk weighted assets           12.86 %     12.55 %  
Tier 1 capital to risk weighted assets           12.10 %     11.74 %  
Tier 1 capital to average assets (leverage ratio)           11.19 %     10.96 %  
                 
1 The tax equivalent adjustment was $131 and $254 for the three months ended September 30, 2018 and 2017, respectively,  
  The tax equivalent adjustment was $404 and $781 for the nine months ended September 30, 2018 and 2017, respectively,  
2 Represents net interest income on a tax-equivalent basis as a percent of average interest-earning assets.      
3 Represents non-interest expenses divided by the sum of net interest income on a tax-equivalent basis and       
  non-interest income.                
                 

 

 
1st Constitution Bancorp
Consolidated Statements of Condition
(Dollars in thousands)
Unaudited
        September 30, 2018   December 31, 2017
ASSETS        
Cash and due from banks $   5,133     $   5,037  
Interest-earning deposits     14,131         13,717  
  Total cash and cash equivalents     19,264         18,754  
Investment securities:      
  Available for sale, at fair value     131,192         105,458  
  Held to maturity (fair value of $91,220 and $111,865 at       
  September 30, 2018 and December 31, 2017, respectively)     91,379         110,267  
Total securities     222,571         215,725  
             
Loans held for sale     4,362         4,254  
             
Loans         881,538         789,906  
  Less: allowance for loan losses     (8,265 )       (8,013 )
   Net loans     873,273         781,893  
             
Premises and equipment, net     11,768         10,705  
Accrued interest receivable     3,652         3,478  
Bank owned life insurance     28,555         25,051  
Other real estate owned     2,515         -  
Goodwill and intangible assets     12,294         12,496  
Other assets       14,228         6,918  
   Total assets $   1,192,482     $   1,079,274  
             
LIABILITIES AND SHAREHOLDERS' EQUITY      
             
LIABILITIES:      
Deposits        
    Non-interest bearing $   211,492     $   196,509  
    Interest bearing     730,185         725,497  
   Total deposits     941,677         922,006  
             
Overnight borrowings     99,475         20,500  
Federal Home Loan Bank advances     -         -  
Redeemable subordinated debentures     18,557         18,557  
Accrued interest payable     927         804  
Accrued expense and other liabilities     8,072         5,754  
  Total liabilities     1,068,708         967,621  
SHAREHOLDERS EQUITY:      
Preferred stock, no par value; 5,000,000 shares authorized:     -         -  
none issued        
Common stock, no par value; 30,000,000 shares authorized; 8,437,590      79,256         72,935  
and 8,116,201 shares issued and 8,404,292 and 8,082,903 shares       
outstanding as of September 30, 2018 and December 31, 2017, respectively.      
Retained earnings     47,067         39,822  
Treasury stock, 33,298 shares at September 30, 2018 and December 31, 2017     (368 )       (368 )
Accumulated other comprehensive loss     (2,181 )       (736 )
Total shareholders' equity      123,774         111,653  
             
Total liabilities and shareholders' equity $   1,192,482     $   1,079,274  
             

 

1st Constitution Bancorp
Consolidated Statements of Income
(Dollars in thousands, except per share data)
(Unaudited)
                   
      Three Months Ended September 30,   Nine Months Ended September 30,
        2018     2017     2018     2017
INTEREST INCOME              
Loans, including fees $   12,193   $   9,416   $   33,078   $   26,161
Securities              
  Taxable     1,060       846       2,915       2,500
  Tax-exempt     494       527       1,518       1,628
Federal funds sold and short-term investments     36       25       208       183
    Total interest income     13,783       10,814       37,719       30,472
                   
INTEREST EXPENSE              
  Deposits     1,854       1,204       4,542       3,351
  Borrowings     349       113       576       349
  Redeemable subordinated debentures     184       134       508       380
    Total interest expense     2,387       1,451       5,626       4,080
                   
    Net interest income     11,396       9,363       32,093       26,392
                   
PROVISION FOR LOAN LOSSES     225       150       675       450
    Net interest income after provision              
    for loan losses     11,171       9,213       31,418       25,942
                   
NON-INTEREST INCOME              
Service charges on deposit accounts     173       142       476       445
Gain on sales of loans      1,292       1,329       3,425       3,936
Income on Bank-owned life insurance     152       131       425       391
Gain from bargain purchase     -       -       184       -
Gain on sales of securities     -       24       12       128
Other income     537       490       1,560       1,385
    Total non-interest income   2,154     2,116     6,082     6,285
                   
NON-INTEREST EXPENSES              
Salaries and employee benefits     4,900       4,617       14,714       13,882
Occupancy expense     907       865       2,604       2,604
Data processing expenses     331       338       1,009       983
FDIC insurance expense     105       95       381       255
Other real estate owned expenses     73       11       75       26
Merger-related expense     -       -       2,141       -
Other operating expenses     1,578       1,691       4,866       5,204
    Total non-interest expenses     7,894       7,617       25,790       22,954
                   
    Income before income taxes     5,431       3,712       11,710       9,273
INCOME TAXES     1,420       1,227       2,975       2,920
    Net Income $   4,011   $   2,485   $   8,735   $   6,353
                   
NET INCOME PER COMMON SHARE              
    Basic $   0.48   $   0.31   $   1.05   $   0.79
    Diluted     0.46       0.30       1.02       0.76
                   
WEIGHTED AVERAGE SHARES OUTSTANDING              
    Basic     8,392,631       8,063,119       8,282,889 #     8,040,955
    Diluted     8,678,680       8,328,252       8,565,401 #     8,309,363
                   

 

1st Constitution Bancorp  
Net Interest Margin Analysis  
(Unaudited)  
                         
                 
          Average   Average   Average   Average  
          Balance Interest Yield   Balance Interest Yield  
(Dollars in thousands)                
Assets:                    
Interest-earning assets:                
  Federal funds sold/short-term investments $   11,953   $   36 1.19 %   $   12,383   $   25 0.80 %  
  Investment securities:                
    Taxable   151,115       1,060 2.81 %     142,353       846 2.38 %  
    Tax-exempt 1   73,621       625 3.40 %     89,034       781 3.51 %  
      Total investment securities   224,736     1,685 3.00 %     231,387     1,627 2.81 %  
  Loans: 2                
    Commercial real estate   377,719     4,901 5.08 %     272,548     3,573 5.13 %  
    Mortgage warehouse lines   180,430     2,504 5.43 %     174,610     1,901 4.26 %  
    Construction   142,365     2,406 6.61 %     123,822     1,895 5.99 %  
    Commercial business   106,717     1,496 5.51 %     107,158     1,326 4.86 %  
    Residential real estate   46,777     530 4.53 %     42,436     445 4.19 %  
    Loans to individuals   24,655     306 4.92 %     22,379     228 4.04 %  
    Loans held for sale   3,203     38 4.75 %     3,715     37 3.98 %  
    All other loans   1,061     12 4.43 %     1,526     11 2.82 %  
      Total loans   882,927     12,193 5.41 %     748,194     9,416 4.93 %  
        Total interest-earning assets     1,119,616   $   13,914 4.88 %       991,964   $   11,068 4.39 %  
Non-interest-earning assets:                
  Allowance for loan losses   (8,388 )         (7,770 )      
  Cash and due from bank   5,767           5,371        
  Other assets   70,527           59,328        
    Total non-interest-earning assets   67,906           56,929        
      Total assets $    1,187,522         $    1,048,893        
                         
Liabilities and shareholders' equity:                
Interest-bearing liabilities:                
  Money market and NOW accounts   338,783     499 0.58 %     324,940     358 0.44 %  
  Savings accounts   194,223     371 0.76 %     208,548     338 0.64 %  
  Certificates of deposit   230,490     984 1.69 %     158,737     508 1.27 %  
  Other borrowed funds   63,429     349 2.18 %     27,533     113 1.63 %  
  Redeemable subordinated debentures   18,557     184 3.97 %     18,557     134 2.89 %  
    Total interest-bearing liabilities    845,482   $    2,387 1.12 %     738,315   $    1,451 0.78 %  
Non-interest-bearing liabilities:                
  Demand deposits   211,291           193,937        
  Other liabilities   7,329           6,395        
    Total liabilities     1,064,102             938,647        
Shareholders' equity   123,420           110,246        
  Total liabilities and shareholders' equity $    1,187,522         $    1,048,893        
Net interest spread 3     3.76 %       3.61 %  
Net interest income and net interest margin 4   $    11,527 4.09 %     $    9,617 3.85 %  
                         
1 Tax equivalent basis, using federal tax rates of 21% in 2018 and 34% in 2017.            
2 Loan origination fees are considered an adjustment to interest income. For the purpose of calculating loan yields, average loan balances  
  include non-accrual loans with no related interest income and the average balance of loans held for sale.      
3 The net interest spread is the difference between the average yield on interest-earning assets and the average rate paid on interest-  
  bearing liabilities.                
4 The net interest margin is equal to net interest income divided by average interest-earning assets.      
                         

 

1st Constitution Bancorp
Net Interest Margin Analysis
(Unaudited)
               
       
  Average   Average   Average   Average
  Balance Interest Yield   Balance Interest Yield
(Dollars in thousands)              
Assets:              
Interest-earning assets:              
Federal funds sold/short-term investments $   21,287   $   208 1.31 %   $   30,199   $   183 0.81 %
Investment securities:              
  Taxable   146,003       2,915 2.66 %     141,662       2,500 2.35 %
  Tax-exempt 1   76,872       1,922 3.33 %     92,341       2,409 3.48 %
  Total investment securities   222,875     4,837 2.89 %     234,003     4,909 2.79 %
Loans: 2              
  Commercial real estate   349,423     13,391 5.05 %     253,793     10,088 5.24 %
  Mortgage warehouse lines   157,422     6,318 5.35 %     155,755     5,014 4.29 %
  Construction   135,049     6,548 6.48 %     111,436     4,817 5.78 %
  Commercial business   110,101     4,391 5.33 %     109,335     4,006 4.90 %
  Residential real estate   45,955     1,517 4.35 %     42,136     1,335 4.18 %
  Loans to individuals   23,386     780 4.40 %     22,428     701 4.12 %
  Loans held for sale   3,067     101 4.39 %     4,408     165 4.99 %
  All other loans   1,132     32 3.73 %     1,828     35 2.52 %
  Total loans   825,535     33,078 5.31 %     701,119     26,161 4.94 %
Total interest-earning assets     1,069,697   $    38,123 4.73 %       965,321   $    31,253 4.29 %
Non-interest-earning assets:              
Allowance for loan losses   (8,295 )         (7,646 )    
Cash and due from bank   5,782           5,234      
Other assets   64,861           58,736      
Total non-interest-earning assets   62,348              
Total assets $    1,132,045         $    1,021,645      
               
Liabilities and shareholders' equity:              
Interest-bearing liabilities:              
  Money market and NOW accounts   362,048     1,437 0.53 %     329,089     1,032 0.42 %
  Savings accounts   208,780     1,079 0.69 %     210,056     992 0.63 %
  Certificates of deposit   180,250     2,026 1.50 %     147,109     1,327 1.21 %
  Other borrowed funds   36,407     576 2.12 %     20,494     349 2.28 %
  Redeemable subordinated debentures   18,557     508 3.65 %     18,557     380 2.73 %
Total interest-bearing liabilities    806,042   $    5,626 0.93 %     725,305   $    4,080 0.75 %
               
Non-interest-bearing liabilities:              
Demand deposits   199,953           181,892      
Other liabilities   8,566           6,577      
Total liabilities     1,014,561             913,774      
Shareholders' equity   117,484           107,871      
Total liabilities and shareholders' equity $    1,132,045         $    1,021,645      
Net interest spread 3     3.80 %       3.54 %
Net interest margin 4   $    32,497 4.06 %     $    27,173 3.76 %
               
1 Tax equivalent basis, using federal tax rates of 21% in 2018 and 34% in 2017.          
2 Loan origination fees are considered an adjustment to interest income. For the purpose of calculating loan yields, average loan balances
include non-accrual loans with no related interest income and the average balance of loans held for sale.    
3 The net interest spread is the difference between the average yield on interest-earning assets and the average rate paid on  
interest-bearing liabilities.              
4 The net interest margin is equal to net interest income divided by average interest-earning assets.    
               

 

1st Constitution Bancorp    
Reconciliation of Non-GAAP Measures 1  
(Dollars in thousands, except per share data)  
(Unaudited)  
                   
    Three months ended   Nine months ended  
    September 30,   September 30,  
      2018     2017     2018       2017    
Adjusted Net Income                
  Net income $   4,011   $   2,485   $   8,735     $   6,353    
  Adjustments:                
    Merger-related expenses    -       -        2,141         -    
    Gain from bargain purchase    -       -        (184 )       -    
    Income tax effect of adjustments 2    -       -        (568 )       -    
  Adjusted Net Income 3 $   4,011   $   2,485   $   10,124     $   6,353    
                   
Adjusted Net Income per diluted share                 
  Adjusted Net Income         $   10,124     $   6,353    
  Diluted shares outstanding           8,565,401       8,309,363    
  Adjusted Net Income per diluted share         $ 1.18     $ 0.76    
                   
Adjusted return on average assets                
  Adjusted Net Income         $   10,124     $   6,353    
  Average assets           1,132,045         1,021,645    
  Adjusted return on average assets           1.20 %     0.83 %  
                   
Adjusted return on average equity                
  Adjusted Net Income         $   10,124     $   6,353    
  Average equity           117,484         107,871    
  Return on average equity           11.52 %     7.87 %  
                   
Book value and tangible book value per share                
  Shareholders' equity           123,774       111,610    
  Less: goodwill and intangible assets           12,294       12,591    
  Tangible shareholders' equity           111,480       99,019    
  Shares outstanding           8,404,292       8,069,560    
  Book value per share         $ 14.73     $ 13.83    
  Tangible book value per share         $ 13.26     $ 12.27    
                   
1 The Company used the non-GAAP financial measures, Adjusted Net Income, Adjusted Net Income per diluted share, adjusted return on average assets and adjusted return on average equity, because the Company believes that it is helpful to readers in understanding the Company's financial performance and the effect on net income of the merger-related expenses and the gain from the bargain purchase recorded in connection with the NJCB merger. These non-GAAP measures improve the comparability of the current period results with the results of the prior periods. The Company cautions that the non-GAAP financial measures should be considered in addition to, but not as a substitute for, the Company's GAAP financial results.  
2 Tax effected at an income tax rate of 30.09%, less the impact of non-deductible merger expenses and the non-taxable gain from the bargain purchase.  
3 There were no non-GAAP adjustments for the three months ended September 30, 2018 and the three and nine-month periods ended September 30, 2017.  

 

     
CONTACT: Robert F. Mangano    Stephen J. Gilhooly
  President & Chief Executive Officer Sr. Vice President & Chief Financial Officer
  609) 655-4500      (609) 655-4500
     

 

 

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