1st Capital Bancorp Announces Second Quarter 2024 Financial Results

Rhea-AI Summary

On July 29, 2024, 1st Capital Bancorp (OTCQX: FISB) announced unaudited financial results for Q2 2024. The company reported a net income of $894K, or $0.16 per diluted share, compared to $901K in the prior quarter and $609K a year ago. For H1 2024, net income rose by $128K to $1.8M. The merger with Santa Cruz County Bank is set for Q4 2024, pending regulatory approvals. Merger-related expenses were $282K and affected ROA and ROE. Total assets increased to $1.0B, while core loans grew to $602.5M. However, deposits excluding brokered deposits declined by $32.8M. The company’s quarterly net interest margin was 3.29%, with the cost of funds rising to 1.56%. Non-interest expenses increased primarily due to merger costs. The efficiency ratio was 76.65%, impacted by merger costs. Provision for credit loss expense was reduced to $774K. Non-performing assets rose to 0.15% of total assets. The company maintains strong liquidity with $349.3M in available borrowing lines.

Positive

• Net income for H1 2024 increased by $128K to $1.8M.
• Total assets rose by $27.9M to $1.0B.
• Core loans grew by $43.5M to $602.5M.
• Quarterly net interest income increased by $236K to $7.9M.
• Loan interest income increased by $617K to $8.8M.

Negative

• Merger-related expenses of $282K negatively impacted ROA and ROE.
• Total deposits excluding brokered deposits decreased by $32.8M.
• Non-performing assets increased to 0.15% of total assets.
• The cost of funds rose to 1.56%.
• Non-interest expenses increased by $693K primarily due to merger costs.

SALINAS, Calif., July 29, 2024 (GLOBE NEWSWIRE) -- 1st Capital Bancorp (the “Company”), (OTCQX: FISB), the parent company of 1st Capital Bank (the “Bank”), today reported unaudited net income of $894 thousand, or $0.16 per diluted share, for the second quarter of 2024, compared to $901 thousand, or $0.16 per diluted share, in the preceding quarter and $609 thousand, or $0.11 per diluted share, for the second quarter of 2023. Net income for the first six months of 2024 was $1.8 million, an increase of $128 thousand, or 7.7%, compared to $1.7 million over the first six months of last year.

“The combined effects of continued growth in loan portfolio, repricing of cash flows, and interest rate hedges are beginning to provide the net interest margin and profitability benefits as anticipated,” said President and Chief Executive Officer Sam Jimenez. “Separately, I want to highlight and acknowledge the professionalism and commitment of the 1st Capital team who ensure our clients and communities remain the focal point of our relationship and community-focused model. As we prepare to integrate our company with Santa Cruz County Bank, the combined lending power and geographic footprint will drive opportunities for business expansion, agriculture, entrepreneurship, and economic growth.”

1^st Capital Bancorp and West Coast Community Bancorp (OTCQX: SCZC), the holding company for Santa Cruz County Bank, jointly announced an agreement and plan of reorganization and merger during the second quarter of 2024. Regulatory applications have been submitted and are pending approval. The merger is anticipated to close during the fourth quarter of 2024, subject to regulatory and shareholder approvals and satisfaction of all other closing conditions.

Expenses related to the pending merger totaled $282 thousand during the second quarter of 2024. The expenses negatively impacted return on average assets by 8 basis points in the quarter and 4 basis points on a year-to-date basis and return on average equity by 122 basis points in the quarter and 62 basis points on a year-to-date basis.

At June 30, 2024, the Company, on a consolidated basis, had $1.0 billion in assets, $658.4 million in net loans and $892.3 million in deposits.

Financial Highlights
Performance highlights as of and for the quarter ended June 30, 2024, included the following:

• Quarterly net income of $894 thousand for the second quarter of 2024, compared to $901 thousand in the preceding quarter and $609 thousand in the second quarter a year ago. Excluding merger-related costs, quarterly net income would have been $1.1 million for the second quarter of 2024.
  
• Diluted earnings per share were $0.16 for the second quarter ended June 30, 2024, as compared to $0.16 and $0.11 for the quarters ended March 31, 2024, and June 30, 2023, respectively. Merger expenses affected second quarter 2024 diluted earnings per share by $0.03. Basic and diluted earnings per share in the first six months of 2024 both improved by $0.06 and $0.05 respectively compared to first six months of 2023.
  
• Pre-tax, pre-provision income for the quarter ended June 30, 2024, totaled $1.9 million, as compared to $2.4 million and $1.8 million for the quarters ended March 31, 2024, and June 30, 2023, respectively. Excluding merger-related costs, pre-tax, pre-provision income for the quarter ended June 30, 2024 would have been $2.2 million.
  
• Total assets increased $27.9 million, or 2.7%, to $1.0 billion at June 30, 2024, compared to $1.0 billion at March 31, 2024 and increased $81.5 million, or 8.5%, compared to $960.9 million at June 30, 2023.
  
• Core loans increased $43.5 million, or 7.8%, to $602.5 million at June 30, 2024, compared to $559.1 million at March 31, 2024, and increased $115.0 million, or 23.6%, compared to $487.6 million at June 30, 2023.
  
• Total deposits excluding brokered deposits decreased $32.8 million, or 4.0%, at June 30, 2024, compared to March 31, 2024, and are $84.6 million, or 9.8%, lower than the quarter ended June 30, 2023.
  
• Return on average equity was 5.51% for the second quarter of 2024, as compared to 5.70% and 4.13% for the quarters ended March 31, 2024, and June 30, 2023, respectively. For the six months ended June 30, 2024 and June 30, 2023, return on average equity was 5.60% and 5.78% respectively. See above for the impact of merger-related expenses.
  
• Return on average assets was 0.35% for the second quarter of 2024 as compared to 0.37% and 0.25% for the quarters ended March 31, 2024, and June 30, 2023, respectively. For the six months ended June 30, 2024 and June 30, 2023, return on average assets was 0.36% and 0.35% respectively. See above for the impact of merger-related expenses.
  
• Net interest margin was 3.29% for the second quarter as compared to 3.28% and 3.32% for the quarters ended March 31, 2024, and June 30, 2023, respectively. For the six months ended June 30, 2024 and June 30, 2023, net interest margin was 3.28% and 3.43%, respectively.
  
• The Company’s efficiency ratio was 76.65% for the second quarter of 2024, as compared to 70.43% and 77.32% for the quarters ended March 31, 2024, and June 30, 2023, respectively. The efficiency ratio was 73.59% and 75.84% for the first six months of 2024 and 2023, respectively. Merger-related costs impacted the efficiency ratio by 342 basis points in the second quarter of 2024 and 174 basis points year-to-date.
  
• The Company recorded provision for credit loss expense of $774 thousand for the second quarter compared to $1.2 million and $1.1 million for the quarters ended March 31, 2024, and June 30, 2023, respectively. The reduction in provision expense was driven by reduced charge-offs in the purchased lease and consumer pools partially offset by growth in the core loan portfolio.
  
• As of June 30, 2024, the Company’s nonperforming assets to total assets was 0.15%, as compared to 0.09% and 0.07% for March 31, 2024, and June 30, 2023, respectively.
  
• Federal regulatory capital ratios for the quarters ended June 30, 2024, March 31, 2024, and June 30, 2023, exceed well capitalized thresholds.
  
• At June 30, 2024, the Company has $349.3 million in available liquidity from secured and unsecured borrowing lines, which represents 33.5% of total assets.
  

Net Interest Income and Net Interest Margin
The Company's second quarter 2024 net interest income increased $236 thousand, or 3.1%, to $7.9 million as compared with $7.7 million for the quarter ended March 31, 2024, and $7.6 million for the quarter ended June 30, 2023 due to higher yields on earnings assets partially offset by the impact of continued pressure on funding costs. For the first six months of 2024, net interest income increased $86 thousand, or 0.6%, to $15.6 million compared to the first six months of 2023.

Loan interest income increased $617 thousand, or 7.5%, to $8.8 million for the quarter ended June 30, 2024, compared to $8.2 million for the quarter ended March 31, 2024, and increased $1.6 million, or 21.8%, compared to $7.2 million for the quarter ended June 30, 2023. Interest income on investment securities was $2.3 million for the quarter ended June 30, 2024, compared to $2.1 million in the preceding quarter, and $1.9 million in the second quarter a year ago. Interest income on interest-bearing deposits was $388 thousand in the second quarter of 2024, compared to $414 thousand in the preceding quarter, and $442 thousand in the second quarter a year ago.

Interest expense increased $526 thousand, or 16.9%, to $3.6 million for the quarter ended June 30, 2024, compared to $3.1 million for the quarter ended March 31, 2024, and $2.0 million in the second quarter a year ago due to higher utilization of wholesale borrowings and brokered CDs. Interest expense for each of the quarters presented also includes $169 thousand related to subordinated debt.

The Company's net interest margin increased 1 basis point to 3.29% for the quarter ended June 30, 2024, from 3.28% as compared to the quarter ended March 31, 2024 and 3.32% in the second quarter a year ago. The Company’s loan yields increased 14 basis points to 5.46% for the quarter ended June 30, 2024, compared to 5.32% for the quarter ended March 31, 2024, and 4.95% in the second quarter a year ago. The Company’s cost of funds increased 19 basis points to 1.56% for the quarter ended June 30, 2024, compared to 1.37% for the quarter ended March 31, 2024, and 0.92% in the second quarter a year ago. The increase in cost of funds is driven by an increase in average balances of higher costing FHLB advances and brokered deposits.

Noninterest Expenses
The Company's total non-interest expense increased $693 thousand, or 12.3%, to $6.3 million in the quarter ended June 30, 2024, compared to $5.6 million and $6.1 million for the quarters ended March 31, 2024, and June 30, 2023, respectively. The increase was primarily attributable to merger-related expenses and normalization of data and item processing expenses.

Balance Sheet Summary
Total assets increased $27.9 million, or 2.7%, to $1.0 billion at June 30, 2024, compared to $1.0 billion at March 31, 2024, and $960.9 million at June 30, 2023. Cash and due from banks increased $2.5 million, or 4.7%, to $56.0 million at June 30, 2024, compared to $53.5 million at March 31, 2024, and $44.3 million at June 30, 2023. The investment portfolio decreased to $283.4 million in the second quarter of 2024 from a balance of $291.8 million at March 31, 2024, and $293.1 million at June 30, 2023. At June 30, 2024 and March 31, 2024, $51.8 million and $69.5 million, respectively, of the investment portfolio were classified as held-to-maturity. As of June 30, 2024, investments classified as held-to-maturity comprise approximately 18.3% of the portfolio.

Total loans outstanding increased $34.8 million, or 5.5%, to $665.7 million as of June 30, 2024, compared to $630.9 million as of March 31, 2024, and $585.1 million at June 30, 2023. This is attributable to growth in the core loan portfolio of $43.5 million, or 7.8%, to $602.5 million at June 30, 2024, partially offset by a decrease of $8.7 million, or 12.1%, to $63.2 million in wholesale lease and consumer pools.

Loan type (dollars in thousands)	6/30/2024		% of Total Loans		3/31/2024		% of Total Loans		6/30/2023		% of Total Loans
Construction and land (including farmland)	$	23,502	3.5%		$	32,644	5.2%		$	24,212	4.1%
Residential 1 to 4 units	68,970		10.4%		68,879		10.9%		58,952		10.1%
Home equity lines of credit	4,058		0.6%		4,400		0.7%		3,643		0.6%
Multifamily	103,482		15.5%		92,178		14.6%		80,796		13.8%
Owner occupied commercial real estate	149,389		22.4%		137,172		21.7%		123,545		21.1%
Non owner-commercial real estate	230,383		34.7%		206,365		32.7%		189,216		32.3%
Commercial and industrial	55,351		8.3%		54,172		8.6%		49,360		8.5%
Consumer	8,852		1.3%		10,769		1.7%		18,887		3.2%
Leases and Other Loans	21,718		3.3%		24,330		3.9%		36,460		6.3%
Total loans	665,705		100.0%		630,909		100.0%		585,071		100.0%
Allowance for credit losses	(7,323)				(7,101)				(6,746)
Net loans held for investment	$	658,382			$	623,808			$	578,325

Total deposits were $892.3 million at June 30, 2024, representing a $6.6 million increase compared to total deposits of $885.7 million at March 31, 2024. The increase is primarily attributed to increase in use of brokered deposits offset by declines in interest-bearing checking and money market accounts. Noninterest-bearing balances comprised 43.1% of total deposits at June 30, 2024.

Deposit type (dollars in thousands)	6/30/2024		% of Total Deposits		3/31/2024		% of Total Deposits		6/30/2023		% of Total Deposits
Interest-bearing checking accounts	$	45,474	5.1%		$	61,797	7.0%		$	47,483	5.4%
Money market	209,099		23.5%		229,381		25.9%		287,148		32.7%
Savings	102,167		11.4%		106,731		12.1%		116,582		13.3%
Time	150,842		16.9%		112,829		12.7%		33,044		3.8%
Total interest-bearing deposits	507,582		56.9%		510,738		57.7%		484,257		55.1%
Noninterest-bearing	384,708		43.1%		374,944		42.3%		395,132		44.9%
Total deposits	$	892,290	100.0%		$	885,682	100.0%		$	879,389	100.0%

Other borrowings totaled $60.0 million at June 30, 2024, compared to $40.0 million at March 31, 2024, and zero at June 30, 2023. Subordinated debt balances totaled $14.8 million at June 30, 2024, March 31, 2024, and June 30, 2023, respectively.

Shareholder’s equity totaled $67.1 million at June 30, 2024, compared to $65.2 million at March 31, 2024, and $57.8 million in the second quarter a year ago.

Allowance for Credit Losses and Asset Quality
A provision for credit loss expense of $774 thousand was recorded in the quarter ended June 30, 2024, compared to $1.2 million in the quarter ended March 31, 2024, and $1.1 million in the second quarter a year ago. The provision expense continues to be driven by charge offs within the wholesale loan pool portfolio and overall loan growth.

The allowance for credit losses was 1.10% of outstanding loans at June 30, 2024, compared to 1.13% of outstanding loans at March 31, 2024 and 1.15% at June 30, 2023. Nonperforming assets were 0.15% of the Company’s total assets at June 30, 2024, compared with 0.09% at March 31, 2024, and 0.07% at June 30, 2023. The Company had $630 thousand in nonaccrual loans at June 30, 2024, representing 0.09% of total loans. The Company recorded net charge-offs of $552 thousand in the quarter ended June 30, 2024, compared to $1.2 million in the quarter ended March 31, 2024, and $1.7 million in the second quarter a year ago. Charge-offs for the quarters ended June 30, 2024, March 31, 2024, and June 30, 2023, were all within the purchased lease and consumer pools.

Asset Quality (dollars in thousands)	06/30/2024			03/31/2024			06/30/2023
Loans past due 90 days or more and accruing interest	$	901		$	434		$	487
Other nonaccrual loans		630			442			138
Other real estate owned		--			--			--
Total nonperforming assets	$	1,531		$	876		$	625
Allowance for credit losses to total loans		1.10%			1.13%			1.15%
Allowance for credit losses to nonperforming loans		478.31%			810.62%			1079.36%
Nonaccrual loans to total loans		0.09%			0.07%			0.02%
Nonperforming assets to total assets		0.15%			0.09%			0.07%
Net charge-offs to average total loans		0.34%			0.79%			1.15%

1ST CAPITAL BANCORP
CONDENSED FINANCIAL DATA – UNAUDITED
($ in 000s, except per share data)
Assets		06/30/2024			03/31/2024			06/30/2023
Cash and due from banks		$	55,976		$	53,480		$	44,320
Investment securities available-for-sale			231,628			222,272			222,662
Investment securities held-to-maturity			51,807			69,549			70,468
Loans and leases held for investment			665,705			630,909			585,071
Allowance for credit losses			(7,323	)		(7,101	)		(6,746	)
Net loans and leases held for investment			658,382			623,808			578,325
Other Assets			44,636			45,423			45,129
Total assets		$	1,042,429		$	1,014,532		$	960,904
Liabilities and Shareholders' Equity
Deposits:
Non-interest-bearing		$	384,708		$	374,944		$	395,132
Interest-bearing			507,582			510,738			484,257
Total deposits			892,290			885,682			879,389
Subordinated debentures			14,851			14,833			14,776
Other borrowings			60,000			40,000			--
Other liabilities			8,194			8,827			8,915
Shareholders' equity			67,094			65,190			57,824
Total liabilities and shareholders' equity		$	1,042,429		$	1,014,532		$	960,904
Shares outstanding			5,605,557			5,596,543			5,518,996
Earnings per share basic		$	0.16		$	0.16		$	0.11
Earnings per share diluted		$	0.16		$	0.16		$	0.11
Nominal and tangible book value per share		$	11.97		$	11.65		$	10.48

1ST CAPITAL BANCORP
CONDENSED FINANCIAL DATA – UNAUDITED
($ in 000s)
	Three Months Ended
Operating Results Data	06/30/2024		03/31/2024		06/30/2023
Interest and dividend income
Loans	$	8,793	$	8,176	$	7,222
Investment securities		2,260		2,090		1,929
Federal Home Loan Bank stock		102		101		78
Interest-bearing deposits		388		414		442
Total interest and dividend income		11,543		10,781		9,671
Interest expense		3,640		3,114		2,042
Net interest income		7,903		7,667		7,629
Provision for credit losses		774		1,199		1,052
Net interest income after provision for credit losses		7,129		6,468		6,577
Noninterest income		342		323		297
Net gain (loss) on sales/calls of investment securities		--		--		--
Noninterest expenses
Salaries and benefits expense		3,805		3,486		3,615
Occupancy expense		467		461		463
Data and item processing		312		20		328
Furniture and equipment		82		90		101
Professional services		109		249		279
Other		1,545		1,321		1,342
Total noninterest expenses		6,320		5,627		6,128
Income before provision for income taxes		1,151		1,164		746
Provision for income taxes		257		263		137
Net income	$	894	$	901	$	609

            

	Three Months Ended
Selected Average Balances	06/30/2024		03/31/2024		06/30/2023
Gross loans	$	648,015	$	617,976	$	584,939
Investment securities	286,194		290,294		298,298
Federal Home Loan Bank stock	4,612		4,381		4,314
Other interest earning assets	37,861		39,803		43,581
Total interest earning assets	976,682		952,254		931,132
Total assets	1,014,545		989,254		962,808
Interest-bearing checking accounts	52,676		51,223		49,082
Money market	218,794		233,988		260,482
Savings	97,829		99,401		124,088
Time deposits	130,794		84,808		28,375
Total interest- bearing deposits	500,093		469,420		462,027
Noninterest bearing demand deposits	373,624		378,834		386,503
Total deposits	873,717		848,254		848,530
Subordinated debentures and other borrowings	66,576		67,184		45,308
Shareholders' equity	$	65,315	$	63,558	$	59,145

1ST CAPITAL BANCORP CONDENSED FINANCIAL DATA – UNAUDITED ($ in 000s)
	Six Months Ended
Operating Results Data	6/30/2024		6/30/2023
Interest and dividend income
Loans	$	16,969	$	13,940
Investment securities		4,350		3,873
Federal Home Loan Bank stock		203		148
Other income		802		753
Total interest and dividend income		22,324		18,714
Interest expense		6,754		3,230
Net interest income		15,570		15,484
Provision for credit losses		1,973		1,742
Net interest income after provision for credit losses		13,597		13,742
Noninterest income		665		670
Net (loss) on sales/calls of investment securities		--		(134	)
Noninterest expenses
Salaries and benefits expense		7,291		7,363
Occupancy expense		928		877
Data and item processing		332		636
Furniture and equipment		172		218
Professional services		358		547
Other		2,866		2,508
Total noninterest expenses		11,947		12,149
Income before provision for income taxes		2,315		2,129
Provision for income taxes		520		462
Net income	$	1,795	$	1,667

	Six Months Ended
Selected Average Balances	6/30/2024		6/30/2023
Gross loans	$	632,996	$	578,080
Investment securities		288,244		300,653
Federal Home Loan Bank stock		4,497		4,187
Other interest earning assets		38,832		39,312
Total interest earning assets		964,569		922,232
Total assets		1,001,900		955,173
Interest bearing checking accounts		51,950		57,733
Money market		226,390		217,762
Savings		98,616		131,021
Time deposits		107,801		19,684
Total interest-bearing deposits		484,757		426,200
Noninterest-bearing demand deposits		376,229		427,464
Total deposits		860,986		853,664
Subordinated debentures and other borrowings		66,879		33,351
Shareholders' equity	$	64,436	$	58,152

	Three Months Ended
Selected Financial Ratios	06/30/2024	03/31/2024	06/30/2023
Return on average total assets	0.35%	0.37%	0.25%
Return on average shareholders' equity	5.51%	5.70%	4.13%
Net interest margin	3.29%	3.28%	3.32%
Net interest income to average total assets	3.13%	3.12%	3.18%
Efficiency ratio	76.65%	70.43%	77.32%

	Six Months Ended
Selected Financial Ratios	6/30/2024	6/30/2023
Return on average total assets	0.36%	0.35%
Return on average shareholders' equity	5.60%	5.78%
Net interest margin	3.28%	3.43%
Net interest income to average total assets	3.13%	3.27%
Efficiency ratio	73.59%	75.84%

Regulatory Capital and Ratios	06/30/2024		03/31/2024		06/30/2023
Common equity tier 1 capital	$	107,932	$	106,894	$	103,412
Tier 1 regulatory capital	$	107,932	$	106,894	$	103,412
Total regulatory capital	$	115,445	$	114,192	$	110,312
Tier 1 leverage ratio		10.27%		10.44%		10.36%
Common equity tier 1 risk-based capital ratio		14.43%		14.80%		15.26%
Tier 1 capital ratio		14.43%		14.80%		15.26%
Total risk-based capital ratio		15.43%		15.81%		16.28%

About 1st Capital Bancorp

1^st Capital Bancorp is the holding company for 1^st Capital Bank. The Bank’s primary target markets are commercial enterprises, professionals, real estate investors, family business entities, and residents along the Central Coast region of California. The Bank provides a wide range of credit products, including loans under various government programs such as those provided through the U.S. Small Business Administration and the U.S. Department of Agriculture. A full suite of deposit accounts also is furnished, complemented by robust cash management services. The Bank operates full-service branch offices in Monterey, Salinas, King City, San Luis Obispo and Santa Cruz. The Bank’s corporate offices are located at 150 Main Street, Suite 150, Salinas, California 93901. The Bank’s website is www.1stCapital.bank. The main telephone number is 831.264.4000.

Member FDIC / Equal Opportunity Lender / SBA Preferred Lender

Forward-Looking Statements
Certain of the statements contained herein that are not historical facts are “forward-looking statements” within the meaning of and subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may contain words or phrases including, but not limited, to: “believe,” “expect,” “anticipate,” “intend,” “estimate,” “target,” “plans,” “may increase,” “may fluctuate,” “may result in,” “are projected,” and variations of those words and similar expressions. All such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Factors that might cause such a difference include, among other matters, changes in interest rates; economic conditions including inflation and real estate values in California and the Bank’s market areas; governmental regulation and legislation; credit quality; competition affecting the Bank’s businesses generally; the risk of natural disasters and future catastrophic events including pandemics, terrorist related incidents and other factors beyond the Bank’s control; and other factors. The Bank does not undertake, and specifically disclaims any obligation, to update or revise any forward-looking statements, whether to reflect new information, future events, or otherwise, except as required by law.

This news release is available at the www.1stCapital.bank internet site for no charge.

For further information, please contact:

Joel Keller		Samuel D. Jimenez
EVP / Chief Financial Officer		President & Chief Executive Officer
831.264.4014 office		831.264.4057 office
Joel.Keller@1stCapitalBank.com		Sam.Jimenez@1stCapitalBank.com

FAQ

What were 1st Capital Bancorp's earnings for Q2 2024?

The company reported a net income of $894K, or $0.16 per diluted share for Q2 2024.

How did 1st Capital Bancorp's net income for H1 2024 compare to last year?

Net income for H1 2024 increased by $128K, or 7.7%, to $1.8M compared to H1 2023.

What were the merger-related expenses for 1st Capital Bancorp in Q2 2024?

Merger-related expenses totaled $282K during Q2 2024.

What is the status of the merger between 1st Capital Bancorp and Santa Cruz County Bank?

The merger is anticipated to close in Q4 2024, pending regulatory and shareholder approvals.

What was 1st Capital Bancorp's net interest margin for Q2 2024?

The net interest margin for Q2 2024 was 3.29%.