First Choice Bancorp Announces Third Quarter 2019 Financial Results

Tuesday, 22. October 2019 15:00

Current Quarter Highlights

 Record Net income of $8.1 million or $0.68 per diluted share
 Net interest margin of 5.52%
 Return on average assets and average equity of 1.98% and 12.45%
 Noninterest-bearing demand deposits increased $118.8 million and represented 49.7% of total deposits at September 30, 2019

Cerritos, CA, Oct. 22, 2019 (GLOBE NEWSWIRE) -- First Choice Bancorp (NASDAQ: FCBP) (the “Company”), the holding company of First Choice Bank (the “Bank”), today reported net income of $8.1 million for the third quarter of 2019, or $0.68 per diluted share, compared to net income of $6.8 million, or $0.58 per diluted share, for the second quarter of 2019.

“In addition to delivering another strong quarter for our shareholders, we are very pleased to be recently recognized as one of the Best Banks to Work For in 2019 by the American Banker,” said Peter Hui, Chairman of the Board. “This is the second consecutive year that First Choice Bank has been the only Southern California bank to be named to this prestigious list. This underscores our commitment to creating a rewarding workplace environment that attracts talented bankers and keeps turnover low, which has strengthened our franchise and has enabled us to generate strong performance for our shareholders.”

“Our third quarter results reflect the attractive deposit franchise that we continue to build,” said Robert M. Franko, President and CEO of the Company. “Our investment in experienced bankers, focusing on deposit-rich industries and treasury management solutions has enabled us to successfully attract clients who appreciate our expertise and the quality of our technology. We have steadily expanded those relationships over time, and we are committed to building upon this success. Growing our low-cost deposit base provides an excellent foundation for continuing to generate strong returns for our shareholders and to further enhance the value of our franchise.”

STATEMENT OF INCOME

Net Interest Income

Net interest income for the third quarter of 2019 totaled $21.0 million, an increase of $2.2 million from $18.8 million for the second quarter of 2019 due to higher interest income of $2.1 million, coupled with lower interest expense of $66 thousand. The increase in interest income was due mostly to $1.9 million in higher accelerated discount accretion from loan payoffs and one additional day in the third quarter compared to the second quarter of 2019. The third quarter of 2019 included $1.6 million of accelerated discount accretion related to the early repayment of one purchased credit impaired loan. The decrease in interest expense for the third quarter of 2019 is due primarily to lower average borrowings and the cost of such funds, offset by higher deposit costs in the third quarter. Interest expense on borrowings decreased $237 thousand which was partially offset by higher deposit interest expense of $171 thousand.

Net Interest Margin

Net interest margin for the third quarter of 2019 increased 38 basis points to 5.52% from 5.14% for the second quarter of 2019. The increase in the net interest margin is due primarily to a 51 basis point increase from higher loan yields, including fees and discounts, and a 5 basis points decrease from lower funding costs, offset by a 14 basis point decrease from lower yields on other earning assets, and a 4 basis point decrease from the change in the earning assets mix. The increase in the loan yield is due primarily to higher income from accelerated discount accretion of 57 basis points. The cost of funds decreased to 0.98% for the third quarter of 2019, compared to 1.03% for the second quarter of 2019 due primarily to the change in the funding mix with a lower percentage of borrowings and higher percentage of noninterest-bearing demand deposits. Average borrowings decreased $29.2 million to $48.3 million and the cost of such funds decreased 43 basis points to 2.08%. Average noninterest-bearing demand deposits increased $56.0 million to $590.2 million and represented 45.8% of total average deposits for the third quarter of 2019, compared to $534.2 million, or 43.6% of total average deposits, for the second quarter of 2019. The total cost of deposits remained flat at 0.89%.

The core net interest margin (non-GAAP) decreased 11 basis points to 4.85% for the third quarter of 2019 compared to 4.96% for the second quarter of 2019. The core average loan yield decreased 6 basis points to 6.17% for the third quarter of 2019 compared to 6.23% for the second quarter of 2019. The decrease in the core net interest margin was due in part to the Federal Reserve reducing the target federal funds rate by 50 basis points during the third quarter and the mix of average earnings assets. The following tables show how the net interest margin and average loan yield were impacted by scheduled discount accretion on acquired loans and accelerated accretion and prepayment penalties from early loan payoffs for the periods indicated:

  Three Months Ended 
  September 30, 2019  June 30, 2019  Variance 
Net interest income and net interest margin Net Interest
Income
  Net Interest Margin  Net Interest
Income
  Net Interest Margin  Net Interest
Income
  Net Interest Margin 
  (dollars in thousands) 
As reported $21,026   5.52% $18,836   5.14% $2,190   0.38%
Less: scheduled accretion income  510   0.14%  499   0.14%  11   %
Less: accelerated accretion and prepayment penalties  2,028   0.53%  155   0.04%  1,873   0.49%
Core (non-GAAP) $18,488   4.85% $18,182   4.96% $306   (0.11)%


  Three Months Ended 
  September 30, 2019  June 30, 2019  Variance 
Loan interest income and loan yield Loan Interest Income  Loan Yield  Loan Interest Income  Loan Yield  Loan Interest Income  Loan Yield 
  (dollars in thousands) 
As reported $23,206   6.93% $21,344   6.42% $1,862   0.51%
Less: scheduled accretion income  510   0.15%  499   0.15%  11   %
Less: accelerated accretion and prepayment penalties  2,028   0.61%  155   0.04%  1,873   0.57%
Core (non-GAAP) $20,668   6.17% $20,690   6.23% $(22)  (0.06)%

Noninterest Income

Noninterest income for the third quarter of 2019 was $1.7 million, a decrease of $649 thousand from $2.3 million for the second quarter of 2019 due mostly to lower gains on sale of SBA loans of $743 thousand, partially offset by higher other income of $228 thousand. SBA loans sold totaled $9.7 million resulting in a gain on sale of $528 thousand in the third quarter of 2019 compared to $16.4 million in SBA loans sold and a gain on sale of $1.3 million in the second quarter of 2019. Other income for the third quarter of 2019 included a Bank Enterprise Award of $233 thousand from the U.S. Treasury’s Community Development Financial Institutions Fund to recognize the Bank for providing affordable housing development and small business loans within distressed communities; there was no similar income in the second quarter of 2019.

Noninterest Expense

Noninterest expense increased $46 thousand to $10.7 million for the third quarter of 2019 from $10.6 million for the second quarter of 2019. This increase was due primarily to higher occupancy and equipment, data processing, loan related, and customer service related expenses, offset partially by lower salaries and employee benefits expenses and deposit insurance and regulatory assessments.

The $110 thousand increase in occupancy and equipment expense was due mostly to a $42 thousand refund in common area charges received in the prior quarter; there was no such credit in the current quarter. The $79 thousand increase in data processing was partially due to higher software amortization of new and upgraded technology. The $173 thousand increase in loan related expenses was due to a $59 thousand protective advance for one defaulted loan in the third quarter and higher reimbursements for loan related expenses in the second quarter due to the timing and recovery of these costs. The $164 thousand increase in customer service related expenses was due to higher average demand deposits during the third quarter.
The $385 thousand decrease in salaries and employee benefits was due to lower commissions and incentives and seasonally lower payroll taxes in the third quarter, in addition to higher severance costs in the prior quarter. The $90 thousand decrease in deposit insurance and regulatory assessments was due primarily to the Small Bank Assessment Credits received from the FDIC in the third quarter.

The operating efficiency ratio was 46.9% in the third quarter of 2019, compared to 50.1% in the second quarter of 2019. The lower efficiency ratio was favorably impacted by higher accelerated accretion from loan payoffs in the third quarter versus the second quarter.

Income Taxes

Income tax expense was $3.3 million for the third quarter of 2019, compared to $3.2 million for the second quarter of 2019. The effective tax rate was at 28.9% for the third quarter of 2019 and 31.9% for the second quarter of 2019. The effective tax rate for the full year of 2019 is expected to be approximately 31.0%.

STATEMENT OF FINANCIAL CONDITION

Loan Portfolio

Total loans held for investment decreased $19.4 million, or 1.45%, to $1.32 billion at September 30, 2019. The net decrease was attributed to lower net utilization of existing lines of credit and a lower amount of advances related to the new loan commitments made in the third quarter.

New loan commitments totaled $144.2 million for the third quarter, which compared to $139.9 million for the second quarter. The third quarter commitments included $79.2 million in construction and commercial real estate loans, $49.2 million in commercial and industrial loans, $8.4 million in SBA loans held for investment and $7.4 million of SBA loans held for sale. Total unfunded commitments increased $50.4 million to $395.2 million from $344.8 million at June 30, 2019 due to the lower utilization of existing lines of credit combined with a lower amount of advances related to the current quarter’s new loan commitments.

Deposits

Total deposits increased $83.7 million from the prior quarter to $1.34 billion at September 30, 2019 due to higher noninterest-bearing demand deposits of $118.8 million and higher interest-bearing non maturity deposits of $3.6 million, offset by lower time deposits of $38.8 million. The increase in demand deposits related to both new business development and business activity for our current customers. Brokered time deposits decreased $24.0 million to $128.3 million, of which $118.3 million are callable or mature within six months. Noninterest-bearing deposits totaled $666.3 million and represented 49.7% of total deposits at September 30, 2019 compared to $547.4 million and 43.6% of total deposits at June 30, 2019.

Credit Quality

Non-performing loans totaled $7.4 million at September 30, 2019 and $2.7 million at June 30, 2019, and represented 0.45% and 0.15% of total assets, respectively. The increase in non-performing loans included seven SBA loans totaling $4.3 million and a commercial and industrial loan of $497 thousand all of which were placed on non-accrual status. Net charge-offs for the third quarter of 2019 were $413 thousand, or 0.12% of average loans on an annualized basis, compared to net recoveries of $77 thousand for the second quarter of 2019.

Loan delinquencies (30-89 days past due) totaled $4 thousand at September 30, 2019, compared to $909 thousand at June 30, 2019.

The Company recorded a provision for loan losses of $700 thousand for the third quarter of 2019. The provision for loan losses related primarily to the charge-off and specific reserves for one lending relationship, offset in part by the recapture of general reserves from risk rating changes and lower net loan portfolio growth. The allowance for loan losses represented 0.94% of total loans held for investment and 167% of nonperforming loans at September 30, 2019, compared with 0.90% and 450% at June 30, 2019, respectively. At September 30, 2019, the net carrying value of acquired loans totaled $279.2 million and included a remaining net discount of $7.6 million. The discount is available to absorb losses on the acquired loans and represented 0.57% of total gross loans held for investment.

CAPITAL POSITION

Capital Ratios

At September 30, 2019, the Bank exceeded all regulatory capital requirements under Basel III and was considered to be ‘‘well-capitalized’’.

Bank Only September 30, 2019 (1)  December 31, 2018 
Total Capital (to Risk-Weighted Assets)  14.27%  14.18%
Tier 1 Capital (to Risk-Weighted Assets)  13.32%  13.26%
CET1 Capital (to Risk-Weighted Assets)  13.32%  13.26%
Tier 1 Capital (to Average Assets)  12.56%  12.03%

(1) Preliminary.

Stock Repurchase Program

During the third quarter of 2019, the Company repurchased 87,500 shares of its common stock at an average price of $21.84 and a total cost of $1.9 million under the stock repurchase program announced in December 2018. For the nine months ended September 30, 2019, the Company repurchased 416,270 shares at an average price of $21.60 and a total cost of $9.0 million. The remaining number of shares authorized to be repurchased under this program was 747,447 shares at September 30, 2019.

About First Choice Bancorp

First Choice Bancorp, headquartered in Cerritos, California, is the sole shareholder of, and the registered bank holding company for, First Choice Bank. As of September 30, 2019, First Choice Bancorp had total consolidated assets of $1.66 billion. First Choice Bank, also headquartered in Cerritos, California, is a community-based financial institution that serves primarily commercial and consumer clients in diverse communities and specializes in loans to small- to medium-sized businesses and private banking clients, commercial and industrial loans, and commercial real estate loans with a specialization in providing financial solutions for the hospitality industry. First Choice Bank is a Preferred Small Business Administration (SBA) Lender. First Choice Bank conducts business through 9 full-service branches, and 2 lending offices located in Los Angeles, Orange and San Diego Counties. Founded in 2005, First Choice Bank has quickly become a leading provider of financial services that enable our customers to grow, maintain strength, and achieve their business objectives. We strive to surpass our clients’ expectations through our efficiency, personalized services and financial solutions and professionalism and are committed to being “First in Speed, Service, and Solutions.” First Choice Bancorp stock is traded on the Nasdaq Capital Market under the ticker symbol “FCBP.”

First Choice Bank’s website is www.FirstChoiceBankCA.com.

Non-GAAP Financial Measures

This press release contains certain non-GAAP financial measures in addition to results presented in accordance with GAAP. The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance, permit investors to effectively analyze financial trends of our business activities, and enhance comparability with peers across the financial services sector. These non-GAAP financial measures are not a substitute for GAAP measures and should be read in conjunction with the Company’s GAAP financial information. A reconciliation of non-GAAP financial measures to GAAP measures is included in the accompanying financial tables.

Forward-Looking Statements

The statements contained herein that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company including, without limitation, plans, strategies and goals, and statements about the Company’s expectations regarding revenue and asset growth, financial performance and profitability, loan and deposit growth, yields and returns, loan diversification and credit management, shareholder value creation and tax rates. There can be no assurance that future developments affecting the Company will be the same as those anticipated by management. Actual results may differ materially from those set forth in the forward-looking statements due to a variety of factors, including the risk factors described in documents filed by the Company with the Securities and Exchange Commission.

The Company does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements except as required by law. Any statements about future operating results, such as those concerning accretion and dilution to the Company’s earnings or shareholders, are for illustrative purposes only, are not forecasts, and actual results may differ.

Contacts
First Choice Bancorp
Robert M. Franko, 562.345.9241
President & Chief Executive Officer
or
Lynn M. Hopkins, 562.263.8327
Executive Vice President & Chief Financial Officer

 
First Choice Bancorp and Subsidiary

Financial Highlights and Selected Ratios (unaudited):

  At or for the Three Months
Ended
  At or for the Nine Months
Ended
 
  September 30, 2019  June
30, 2019
  September 30, 2018  September 30, 2019  September 30, 2018 
  (dollars in thousands, except per share amounts) 
Total interest and dividend income $24,343  $22,219  $18,189  $68,401  $42,293 
Total interest expense  3,317   3,383   2,393   9,347   6,127 
Net interest income  21,026   18,836   15,796   59,054   36,166 
Provision for loan losses  700   550   600   1,600   1,120 
Net interest income after provision for loan losses  20,326   18,286   15,196   57,454   35,046 
Total noninterest income  1,673   2,322   712   6,117   2,068 
Total noninterest expense  10,651   10,605   12,372   31,956   25,380 
Income before taxes  11,348   10,003   3,536   31,615   11,734 
Income taxes  3,277   3,192   932   9,725   3,317 
NET INCOME $8,071  $6,811  $2,604  $21,890  $8,417 
                     
Total assets $1,655,595  $1,730,433  $1,587,356  $1,655,595  $1,587,356 
Total loans held for investment  1,316,620   1,336,015   1,225,376   1,316,620   1,225,376 
Total deposits  1,339,538   1,255,878   1,307,110   1,339,538   1,307,110 
Noninterest-bearing deposits  666,271   547,434   553,253   666,271   553,253 
Dividends declared per common share $0.20  $0.20  $0.20  $0.60  $0.60 
Net income per share-diluted $0.68  $0.58  $0.25  $1.85  $1.01 
Return on average assets  1.98%  1.73%  0.77%  1.86%  1.06%
Return on average equity  12.45%  10.86%  5.18%  11.60%  8.09%
Return on average tangible common equity (1)  18.03%  15.89%  7.07%  16.95%  9.28%
Net interest margin  5.52%  5.14%  4.97%  5.39%  4.73%
Core net interest margin (1)  4.85%  4.96%  4.60%  4.97%  4.45%
Average loan yield  6.93%  6.42%  6.32%  6.66%  6.06%
Core average loan yield (1)  6.17%  6.23%  5.90%  6.20%  5.74%
Cost of deposits  0.89%  0.89%  0.81%  0.84%  0.85%
Cost of funds  0.98%  1.03%  0.84%  0.95%  0.90%
Efficiency ratio (1)  46.9%  50.1%  74.9%  49.0%  66.4%
Noninterest-bearing deposits to total deposits  49.7%  43.6%  42.3%  49.7%  42.3%
Equity to assets ratio  15.62%  14.69%  15.33%  15.62%  15.33%
Tangible common equity ratio (1)  11.37%  10.57%  10.83%  11.37%  10.83%
Book value per share $22.20  $21.65  $20.76  $22.20  $20.76 
Tangible book value per share (1) $15.38  $14.87  $13.92  $15.38  $13.92 


(1)Non-GAAP measure. See GAAP to non-GAAP Reconciliation.


Condensed Consolidated Balance Sheets (unaudited)

  September 30, 2019  June 30, 2019  December 31, 2018 
  (dollars in thousands, except per share amounts) 
ASSETS            
Cash and due from banks $13,918  $9,340  $17,874 
Interest-bearing deposits at other banks  166,697   228,263   176,502 
Federal funds sold        3,000 
Total cash and cash equivalents  180,615   237,603   197,376 
Investment securities, available-for-sale  27,344   28,558   29,543 
Investment securities, held-to-maturity  5,066   5,076   5,322 
Equity securities, at fair value  2,681   2,647   2,538 
Restricted stock investments, at cost  12,970   12,927   12,855 
Loans held for sale  11,906   8,428   28,022 
Total loans held for investment  1,316,620   1,336,015   1,250,981 
Allowance for loan losses  (12,340)  (12,053)  (11,056)
Total loans held for investment, net  1,304,280   1,323,962   1,239,925 
Accrued interest receivable  5,477   5,643   5,069 
Premises and equipment  1,796   1,742   1,973 
Servicing asset  3,370   3,482   3,186 
Deferred taxes  6,397   6,625   8,666 
Goodwill  73,425   73,425   73,425 
Core deposit intangible  5,986   6,183   6,576 
Other assets  14,282   14,132   8,025 
TOTAL ASSETS $1,655,595  $1,730,433  $1,622,501 
             
LIABILITIES AND SHAREHOLDERS’ EQUITY            
Deposits:            
Noninterest-bearing demand $666,271  $547,434  $546,713 
Money market, interest checking and savings  404,518   400,943   465,123 
Time deposits  268,749   307,501   240,503 
Total deposits  1,339,538   1,255,878   1,252,339 
Borrowings  30,000   195,000   104,998 
Senior secured debt  13,100   12,800   8,450 
Accrued interest payable and other liabilities  14,287   12,634   8,645 
Total liabilities  1,396,925   1,476,312   1,374,432 
Total shareholders’ equity  258,670   254,121   248,069 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $1,655,595  $1,730,433  $1,622,501 
             
Shares outstanding  11,652,582   11,737,441   11,726,074 
Book value per share $22.20  $21.65  $21.16 
Tangible book value per share (1) $15.38  $14.87  $14.33 

(1) Non-GAAP measure. See GAAP to non-GAAP Reconciliation.


Condensed Consolidated Statements of Income (unaudited)

  Three Months Ended  Nine Months Ended September 30, 
  September
30, 2019
  June
30, 2019
  September
30, 2018
  2019  2018 
  (dollars in thousands, except per share amounts) 
INTEREST and DIVIDEND INCOME                    
Interest and fees on loans $23,206  $21,344  $17,296  $65,466  $40,237 
Interest on investment securities  208   215   226   659   698 
Interest on deposits at other financial institutions  701   454   621   1,600   1,176 
Dividends on FHLB and other stock  228   206   46   676   182 
Total interest and dividend income  24,343   22,219   18,189   68,401   42,293 
INTEREST EXPENSE                    
Interest on savings, interest checking and money market accounts  1,283   1,254   1,223   3,776   3,012 
Interest on time deposits  1,605   1,463   1,072   4,073   2,607 
Interest on borrowings  429   666   98   1,498   508 
Total interest expense  3,317   3,383   2,393   9,347   6,127 
Net interest income  21,026   18,836   15,796   59,054   36,166 
Provision for loan losses  700   550   600   1,600   1,120 
Net interest income after provision for loan losses  20,326   18,286   15,196   57,454   35,046 
NONINTEREST INCOME                    
Gain on sale of loans  528   1,271   171   2,727   866 
Service charges and fees on deposit accounts  475   564   380   1,579   803 
Net servicing fees  242   287   39   763   318 
Other income  428   200   122   1,048   81 
Total noninterest income  1,673   2,322   712   6,117   2,068 
NONINTEREST EXPENSE                    
Salaries and employee benefits  6,472   6,857   5,045   19,552   12,547 
Occupancy and equipment  1,097   987   898   3,513   1,999 
Data processing  718   639   666   1,961   1,536 
Professional fees  392   426   400   1,237   1,082 
Office, postage and telecommunications  253   255   256   780   641 
Deposit insurance and regulatory assessments  30   120   143   345   339 
Loan related  244   71   142   529   327 
Customer service related  437   273   208   1,187   448 
Merger, integration and public company registration costs        3,797      4,527 
Amortization of core deposit intangible  197   197   133   590   133 
Other expenses  811   780   684   2,262   1,801 
Total noninterest expense  10,651   10,605   12,372   31,956   25,380 
Income before taxes  11,348   10,003   3,536   31,615   11,734 
Income taxes  3,277   3,192   932   9,725   3,317 
Net income $8,071  $6,811  $2,604  $21,890  $8,417 
                     
Net income per share-diluted $0.68  $0.58  $0.25  $1.85  $1.01 
Weighted average shares - diluted  11,659,146   11,675,057   10,357,069   11,714,020   8,268,763 


Average Balance Sheets and Yield Analysis

  Three Months Ended 
  September 30, 2019  June 30, 2019  September 30, 2018 
  Average
Balance
  Interest
Income / Expense
  Yield / Cost  Average
Balance
  Interest
Income / Expense
  Yield / Cost  Average
Balance
  Interest
Income / Expense
  Yield / Cost 
  (dollars in thousands) 
Interest-earning assets:   
Loans (1) $1,328,088  $23,206   6.93% $1,334,188  $21,344   6.42% $1,085,572  $17,296   6.32%
Investment securities  35,651   208   2.31%  36,337   215   2.37%  37,064   226   2.42%
Deposits at other financial institutions  134,557   701   2.07%  83,183   442   2.13%  130,537   611   1.86%
Federal funds sold/resale agreements        %  2,018   12   2.39%  1,989   10   1.99%
FHLB and other bank stock  13,988   228   6.47%  13,932   206   5.93%  6,180   46   2.95%
Total interest-earning assets  1,512,284   24,343   6.39%  1,469,658   22,219   6.06%  1,261,342   18,189   5.72%
                                     
Noninterest-earning assets  108,520           110,082           81,222         
Total assets $1,620,804          $1,579,740          $1,342,564         
                                     
Interest-bearing liabilities:                                    
Interest checking $116,107  $337   1.15% $111,116  $298   1.08% $132,492  $361   1.08%
Money market accounts  267,493   890   1.32%  271,067   900   1.33%  260,468   781   1.19%
Savings accounts  29,070   56   0.76%  28,825   56   0.78%  43,465   81   0.74%
Time deposits  147,568   676   1.82%  150,601   674   1.80%  210,158   863   1.63%
Brokered time deposits  138,682   929   2.66%  128,555   789   2.46%  53,710   209   1.54%
Total interest-bearing deposits  698,920   2,888   1.64%  690,164   2,717   1.58%  700,293   2,295   1.30%
Borrowings  48,263   253   2.08%  77,442   484   2.51%  5,514   30   2.16%
Senior secured notes  12,267   176   5.69%  12,398   182   5.89%  5,018   68   5.38%
Total interest-bearing liabilities  759,450   3,317   1.73%  780,004   3,383   1.74%  710,825   2,393   1.34%
                                     
Noninterest-bearing liabilities:                                    
Demand deposits  590,212           534,192           425,842         
Other liabilities  13,984           13,882           6,627         
Shareholders’ equity  257,158           251,662           199,270         
                                     
Total liabilities and shareholders’ equity $1,620,804          $1,579,740          $1,342,564         
                                     
Net interest spread     $21,026   4.66%     $18,836   4.32%     $15,796   4.38%
Net interest margin          5.52%          5.14%          4.97%
                                     
Total deposits $1,289,132  $2,888   0.89% $1,224,356  $2,717   0.89% $1,126,135  $2,295   0.81%
Total funding sources $1,349,662  $3,317   0.98% $1,314,196  $3,383   1.03% $1,136,667  $2,393   0.84%

(1) Average loans include net discounts and deferred costs. Interest income on loans includes $254 thousand, $236 thousand and $143 thousand related to the accretion of net deferred loan fees, $834 thousand, $760 thousand and $1.2 million related to accretion of discounts for the quarters ended September 30, 2019, June 30, 2019 and September 30, 2018. In addition, interest income includes $1.7 million, $83 thousand and $43 thousand of accretion related to purchased impaired loans for the quarters ended September 30, 2019, June 30, 2019 and September 30, 2018.
  

  Nine Months Ended September 30, 
  2019  2018 
  Average
Balance
  Interest
Income / Expense
   Yield / Cost    Average
Balance
  Interest
Income / Expense
  Yield / Cost 
  (dollars in thousands) 
Interest-earning assets:   
Loans (1) $1,314,513  $65,466   6.66% $888,208  $40,237   6.06%
Investment securities  36,355   659   2.42%  38,232   698   2.44%
Deposits at other financial institutions  99,711   1,570   2.11%  90,874   1,166   1.72%
Federal funds sold/resale agreements  1,662   30   2.41%  670   10   2.00%
FHLB and other bank stock  13,937   676   6.48%  4,736   182   5.14%
Total interest-earning assets  1,466,178   68,401   6.24%  1,022,720   42,293   5.53%
                         
Noninterest-earning assets  108,782           34,251         
  $1,574,960          $1,056,971         
                         
Interest-bearing liabilities:                        
Interest checking $115,358  $944   1.09% $154,908  $1,273   1.10%
Money market accounts  270,163   2,658   1.32%  168,240   1,401   1.11%
Savings accounts  30,731   174   0.76%  54,589   338   0.83%
Time deposits  156,095   2,080   1.78%  168,416   2,049   1.63%
Brokered time deposits  109,598   1,993   2.43%  52,709   558   1.42%
Total interest-bearing deposits  681,945   7,849   1.54%  598,862   5,619   1.25%
Borrowings  53,987   967   2.39%  29,529   386   1.75%
Senior secured notes  12,190   531   5.82%  3,134   122   5.20%
Total interest-bearing liabilities  748,122   9,347   1.67%  631,525   6,127   1.30%
                         
Noninterest-bearing liabilities:                        
Demand deposits  562,195           281,337         
Other liabilities  12,281           4,946         
Shareholders’ equity  252,362           139,163         
                         
Total liabilities and shareholders’ equity $1,574,960          $1,056,971         
                         
Net interest spread     $59,054   4.57%     $36,166   4.23%
Net interest margin          5.39%          4.73%
                         
Total deposits $1,244,140  $7,849   0.84% $880,199  $5,619   0.85%
Total funding sources $1,310,317  $9,347   0.95% $912,862  $6,127   0.90%

(1) Average loans include net discounts and deferred costs. Interest income on loans includes $721 thousand and $315 thousand related to the accretion of net deferred loan fees, $2.6 million and $2.3 million related to accretion of discounts for the nine months ended September 30, 2019 and 2018. In addition, interest income includes $2.0 million and $43 thousand of accretion related to purchased impaired loans for the nine months ended September 30, 2019 and 2018.

Loan Composition

  September 30, 2019  June 30, 2019  December 31, 2018 
  Amount  Percentage of Total  Amount  Percentage of Total  Amount  Percentage of Total 
  (dollars in thousands) 
Construction and land development $221,857   16.8% $196,034   14.7% $184,177   14.7%
Real estate:                        
Residential  48,896   3.7%  51,512   3.9%  57,443   4.6%
Commercial real estate - owner occupied  171,360   13.0%  180,161   13.5%  179,494   14.3%
Commercial real estate - non-owner occupied  401,710   30.6%  404,177   30.2%  401,665   32.2%
Commercial and industrial  311,205   23.6%  332,709   24.9%  281,718   22.5%
SBA loans  161,608   12.3%  171,300   12.8%  146,462   11.7%
Consumer  424   %  159   %  159   %
Total loans held for investment, net of discounts $1,317,060   100.0% $1,336,052   100.0% $1,251,118   100.0%
Net deferred loan fees  (440)      (37)      (137)    
Total loans held for investment $1,316,620      $1,336,015      $1,250,981     
Allowance for loan losses  (12,340)      (12,053)      (11,056)    
Total loans held for investment, net $1,304,280      $1,323,962      $1,239,925     

Total loans held for investment

  September 30, 2019  June 30, 2019  December 31, 2018 
  (dollars in thousands) 
Gross loans held for investment (1) $1,328,031  $1,347,687  $1,263,891 
Unamortized net discounts(2)  (10,971)  (11,635)  (12,773)
Net unamortized deferred origination fees  (440)  (37)  (137)
Total loans held for investment $1,316,620  $1,336,015  $1,250,981 


 (1)Gross loans include purchased credit impaired (“PCI”) loans with a net carrying value of $1.2 million, or 0.09% of gross loans at September 30, 2019, $2.3 million, or 0.17% of gross loans at June 30, 2019, and $2.6 million, or 0.21% of gross loans at December 31, 2018.
   
 (2)Unamortized net discounts include discounts related to the retained portion of SBA loans and net discounts on Non-PCI acquired loans. At September 30, 2019, net discounts related to loans acquired in the PCB acquisition totaled $7.6 million that was expected to be accreted into interest income over a weighted average life of 5.1 years. At June 30, 2019 and December 31, 2018, net discounts related to loans acquired in the PCB acquisition totaled $8.1 million and $9.5 million.

Allowance for Loan losses

  For the Three Months
Ended
  For the Nine Months
Ended
 
  September
30, 2019
  June
30, 2019
  September
30, 2018
  September
30, 2019
  September
30, 2018
 
  (dollars in thousands) 
Balance, beginning of period $12,053  $11,426  $10,376  $11,056  $10,497 
Provision for loan losses  700   550   600   1,600   1,120 
Charge-offs  (437)  (122)  (358)  (561)  (1,133)
Recoveries  24   199   38   245   172 
Net (charge-offs) recoveries  (413)  77   (320)  (316)  (961)
Balance, end of period $12,340  $12,053  $10,656  $12,340  $10,656 
                     
Annualized net (charge-offs) recoveries to average loans  (0.12)%  0.02%  (0.12)%  (0.03)%  (0.14)%

Credit Quality (1)

  September 30, 2019  June 30, 2019  December 31, 2018 
  (dollars in thousands) 
Accruing loans past due 90 days or more $  $   $ 
Non-accrual loans  7,242    2,504   1,128 
Troubled debt restructurings on non-accrual  166    175   594 
Total nonperforming loans  7,408    2,679   1,722 
Foreclosed assets          
Total nonperforming assets $7,408  $$2,679  $1,722 
Troubled debt restructurings - on accrual $324  $ 720  $327 
             
Nonperforming loans as a percentage of total loans held for investment  0.56%   0.20%  0.14%
Nonperforming loans as a percentage of total assets  0.45%   0.15%  0.11%
Allowance for loan losses as a percentage of total loans held for investment  0.94%   0.90%  0.88%
Allowance for loan losses as a percentage of nonperforming loans  166.58%   449.91%  642.04%
Accruing loans held for investment past due 30 - 89 days $4  $ 909  $484 

(1) Excludes purchased credit impaired loans with a carrying value of $1.2 million, $2.3 million and $2.6 million at September 30, 2019, June 30, 2019 and December 31, 2018. There were no accruing loans past due 90 days or more and no foreclosed assets for any of the periods presented.
  
GAAP to Non-GAAP Reconciliation

This press release contains certain non-GAAP financial disclosures for: (1) efficiency ratio, (2) adjusted efficiency ratio, (3) core net interest income, (4) core net interest margin, (5) core loan interest income, (6) core average loan yield, (7) adjusted net income, (8) adjusted return on average assets, (9) adjusted return on average equity, (10) return on average tangible common equity, (11) adjusted return on average tangible common equity, (12) tangible common equity to tangible asset ratio, and (13) tangible book value per share. The Company believes the presentation of certain non-GAAP financial measures assists investors in evaluating our financial results. In particular, the use of return on average tangible common equity, tangible common equity to tangible asset ratio, and tangible book value per share is prevalent among banking regulators, investors and analysts. These non-GAAP measures should be taken together with the corresponding GAAP measures and should not be considered a substitute of the GAAP measures.

The tables below present the reconciliations of certain GAAP financial measures to the related non-GAAP financial measures:

  For the Three Months
Ended
  For the Nine Months
Ended
 
  September 30, 2019  June
30, 2019
  September 30, 2018  September 30, 2019  September 30, 2018 
  (dollars in thousands) 
Efficiency Ratio                    
Noninterest expense (numerator) $10,651  $10,605  $12,372  $31,956  $25,380 
Less: merger, integration and public company registration costs        3,797      4,527 
Adjusted noninterest expense (numerator) $10,651  $10,605  $8,575  $31,956  $20,853 
                     
Net interest income $21,026  $18,836  $15,796  $59,054  $36,166 
Plus: Noninterest income  1,673   2,322   712   6,117   2,068 
Total net interest income and noninterest income (denominator) $22,699  $21,158  $16,508  $65,171  $38,234 
Efficiency ratio (non-GAAP)  46.9%  50.1%  74.9%  49.0%  66.4%
Adjusted efficiency ratio (non-GAAP)  46.9%  50.1%  51.9%  49.0%  54.5%
                     
Net Interest Margin                    
Net interest income $21,026  $18,836  $15,796  $59,054  $36,166 
Less: scheduled accretion income  510   499   663   1,535   663 
Less: accelerated accretion and prepayment penalties  2,028   155   500   2,966   1,454 
Core net interest income (non-GAAP) $18,488  $18,182  $14,633  $54,553  $34,049 
                     
Average total interest-earning assets $1,512,284  $1,469,658  $1,261,342  $1,466,178  $1,022,720 
Net interest margin  5.52%  5.14%  4.97%  5.39%  4.73%
Core net interest margin (non-GAAP)  4.85%  4.96%  4.60%  4.97%  4.45%
                     
Average loan yield                    
Loan interest income $23,206  $21,344  $17,296  $65,466  $40,237 
Less: scheduled accretion income  510   499   663   1,535   663 
Less: accelerated accretion and prepayment penalties  2,028   155   500   2,966   1,454 
Core loan interest income (non-GAAP) $20,668  $20,690  $16,133  $60,965  $38,120 
                     
Average loan balance $1,328,088  $1,334,188  $1,085,572  $1,314,513  $888,208 
Average loan yield  6.93%  6.42%  6.32%  6.66%  6.06%
Core average loan yield (non-GAAP)  6.17%  6.23%  5.90%  6.20%  5.74%


  For the Three Months
Ended
  For the Nine Months
Ended
 
  September 30, 2019  June
30, 2019
  September 30, 2018  September 30, 2019  September 30, 2018 
  (dollars in thousands) 
Return on Average Assets, Equity, Tangible Equity                    
Net income $8,071  $6,811  $2,604  $21,890  $8,417 
Add: After-tax merger, integration and public company registration costs        2,716      3,424 
Adjusted net income (non-GAAP) $8,071  $6,811  $5,320  $21,890  $11,841 
                     
Average assets $1,620,804  $1,579,740  $1,342,564  $1,574,960  $1,056,971 
Average shareholders’ equity  257,158   251,662   199,270   252,362   139,163 
Less: Average intangible assets  79,535   79,731   53,078   79,730   17,887 
Average tangible common equity (non-GAAP) $177,623  $171,931  $146,192  $172,632  $121,276 
                     
Return on average assets  1.98%  1.73%  0.77%  1.86%  1.06%
Adjusted return on average assets (non-GAAP)  1.98%  1.73%  1.57%  1.86%  1.50%
                     
Return on average equity  12.45%  10.86%  5.18%  11.60%  8.09%
Adjusted return on average equity (non-GAAP)  12.45%  10.86%  10.59%  11.60%  11.38%
                     
Return on average tangible common equity (non-GAAP)  18.03%  15.89%  7.07%  16.95%  9.28%
Adjusted return on average tangible common equity (non-GAAP)  18.03%  15.89%  14.44%  16.95%  13.05%


  September 30, 2019  June 30, 2019  December 31, 2018 
  (dollars in thousands, except per share amounts) 
Tangible Common Equity Ratio/Tangible Book Value Per Share            
Shareholders’ equity $258,670  $254,121  $248,069 
Less: Intangible assets  79,411   79,608   80,001 
Tangible common equity (non-GAAP) $179,259  $174,513  $168,068 
             
Total assets $1,655,595  $1,730,433  $1,622,501 
Less: Intangible assets  79,411   79,608 80,001     
Tangible assets (non-GAAP) $1,576,184  $1,650,825  $1,542,500 
             
Equity to assets ratio  15.62%  14.69%  15.29%
Tangible common equity to tangible asset ratio (non-GAAP)  11.37%  10.57%  10.90%
             
Shares outstanding  11,652,582   11,737,441   11,726,074 
Book value per share $22.20  $21.65  $21.16 
Tangible book value per share (non-GAAP) $15.38  $14.87  $14.33 

Primary Logo

Related Links: 
Author:
Copyright GlobeNewswire, Inc. 2016. All rights reserved.
You can register yourself on the website to receive press releases directly via e-mail to your own e-mail account.