Market Overview

1st Colonial Bancorp, Inc. Reports Second Quarter 2018 Net Income of $1.3 Million

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1st Colonial Bancorp, Inc. (FCOB), holding company of 1st
Colonial Community Bank, today reported net income of $1.3 million, or
$0.29 per diluted share, for the three months ended June 30, 2018
compared to net income of $1.0 million, or $0.22 per diluted share, for
the three months ended June 30, 2017. For the six months ended June 30,
2018, net income was $2.4 million, or $0.55 per diluted share, compared
to $2.0 million, or $0.47 per diluted share for the same period in 2017.
The 2017 earnings per diluted share were adjusted to give effect to the
5% stock dividend distributed to shareholders on April 16, 2018.

Gerry Banmiller, President and Chief Executive Officer, commented, "With
the increase in short-term interest rates, we have been able to
prudently manage our loan growth and overall product pricing.
This
sensible approach resulted in a 9% increase in net interest income,
which is a fundamental component of our earnings."

Highlights for the three and six months ended June 30, 2018, included:

Balance Sheet Trends:

  • At June 30, 2018, total assets were $553.4 million and grew $13.3
    million, or 2.5% from $540.1 million at December 31, 2017.
  • Total loans were $397.0 million at June 30, 2018, an increase of $20.5
    million, or 5.4%, from $376.5 million at December 31, 2017. During the
    first six months of 2018, commercial mortgage loans and construction
    loans grew $11.3 million and $3.9 million, respectively.
  • Total deposits were $508.1 million at June 30, 2018, an increase of
    $11.3 million, or 2.3%, from $496.8 million at December 31, 2017.
    During the second quarter of 2018, we ran a successful certificates of
    deposit promotion which helped grow such deposits by $23.9 million, or
    23.1%. Municipal deposits and brokered deposits declined $17.5 million
    and $5.7 million, respectively.
  • Total shareholders' equity was $40.6 million at June 30, 2018, an
    increase of $2.2 million, or 5.8%, from $38.4 million at December 31,
    2017.
  • 1st Colonial's non-performing assets at June 30, 2018 were
    $2.5 million compared to $2.3 million at December 31, 2017.
    Non-performing assets to total assets at June 30, 2018 were 0.45%
    compared to 0.43% at December 31, 2017.

Income Statement and Other Highlights:

  • Net interest income for the three months ended June 30, 2018 increased
    $307 thousand, or 7.3%, to $4.5 million from $4.2 million for the
    three months ended June 30, 2017. For the first six months of 2018,
    net interest income grew $741 thousand, or 9.0%, to $8.9 million from
    $8.2 million for the same period in 2017. The growth in net interest
    income was primarily related to an increase in interest income on
    loans and in the average yield earned on average interest-earning
    assets. The 75 basis point increase in the fed funds rate since June
    2017 has had a positive impact on our variable rate loans and our
    interest-earning deposits. The improvement in interest income was
    partially offset by an increase in the interest paid on certificates
    of deposit, NOW accounts and money market accounts.
  • The net interest margin was 3.45% for the second quarter of 2018
    compared to 3.38% for the second quarter of 2017, and was 3.44% for
    the six months ended June 30, 2018 compared to 3.35% for the six
    months ended June 30, 2017. The increase in net interest margin was
    directly related to an increase in the yield on average
    interest-earning assets.
  • For the three and six months ended June 30, 2018, we recorded a
    provision to the allowance for loan losses of $311 thousand and $589
    thousand, respectively, compared to $279 thousand and $379 thousand
    for the three and six months ended June 30, 2017. The increase in the
    2018 provision was related to an increase in specific reserves
    required on impaired loans. The allowance for loan losses as a
    percentage of total loans was 1.32% at June 30, 2018 compared to 1.29%
    at December 31, 2017.
  • Non-interest income for the second quarter of 2018 was $1.0 million, a
    decrease of $59 thousand, or 5.5%, from $1.1 million for the second
    quarter of 2017. Gains on the sale of small business administration
    ("SBA") loans increased $118 thousand while the gains on the sale of
    residential mortgages declined $182 thousand, due to a decline in the
    volume of mortgage loans sold. Additionally, in the second quarter of
    2017, we sold an investment security and recorded a gain of $25
    thousand as a result of the sale. There were no such sales in the
    second quarter of 2018.
  • Non-interest income for the first two quarters of 2018 was $1.7
    million, a decrease of $292 thousand, or 14.9%, from $2.0 million for
    the first two quarters of 2017. Gains on the sale of residential
    mortgages and the sale of SBA loans and declined $245 thousand and $41
    thousand, respectively, due to a decline in the volume of loans sold.
    As interest rates have started to increase, residential mortgage
    originations have become increasingly competitive.
  • Non-interest expense was $3.5 million for the three months ended June
    30, 2018 and increased $127 thousand, or 3.8%, from $3.4 million for
    the comparable period in 2017. Contributing to the increase in
    non-interest expense for the second quarter of 2018 was a $98 thousand
    increase in salaries and benefits related to an increase in headcount
    in the lending support and compliance functions. Data processing and
    occupancy and equipment expenses increased $72 thousand and $45
    thousand, respectively. During the fourth quarter of 2017 we leased
    additional office space at our operations and administration center in
    Cherry Hill, New Jersey.
  • Non-interest expense was $6.8 million for the six months ended June
    30, 2018 and increased $220 thousand, or 3.3%, from $6.6 million for
    the comparable period in 2017. Contributing to the increase in
    non-interest expense for 2018 was a $193 thousand increase in salaries
    and benefits related to the planned increase in headcount in the
    lending support and compliance functions. Data processing and
    occupancy and equipment expenses increased $142 thousand and $74
    thousand respectively. Partially offsetting these increases in
    non-interest expense was a decline in professional fees and
    advertising expenses of $47 thousand and $44 thousand, respectively.
  • For the three and six months ended June 30, 2018, income tax expense
    was $412 thousand and $800 thousand, respectively, compared to $613
    thousand and $1.2 million for the three and six months ended June 30,
    2017, respectively. The $383 thousand decrease in tax expense
    year-over-year was related to H.R.1 (originally known as the "Tax Cuts
    and Jobs Act") which was enacted on December 22, 2017. H.R.1 lowered
    the maximum federal corporate tax rate to 21% from 35%.

Highlights as of June 30, 2018 and 2017, and a comparison of the three
and six months ended June 30, 2018 to the three and six months ended
June 30, 2017 include the following:

   

1st COLONIAL BANCORP, INC.

CONSOLIDATED INCOME STATEMENTS
(Unaudited, dollars in thousands, except per share data)
 
For the three months For the six months
ended June 30, ended June 30,

2018

 

2017

2018

 

2017

Interest income

$

5,521

$ 4,831 $ 10,728 $ 9,341
Interest expense   989   606   1,782   1,136
Net Interest Income 4,532 4,225 8,946 8,205
Provision for loan losses   311   279   589   379
Net interest income after provision for loan losses 4,221 3,946 8,357 7,826
Non-interest income 1,021 1,080 1,666 1,958
Non-interest expense   3,493   3,366   6,797   6,577
Income before taxes 1,749 1,660 3,226 3,207
Income tax expense   412   613   800   1,183
Net Income

$

1,337

$ 1,047 $ 2,426 $ 2,024
Earnings Per Share – Basic (1)

$

0.30

$ 0.24 $ 0.55 $ 0.47
Earnings Per Share – Diluted (1)

$

0.29

$ 0.22 $ 0.53 $ 0.44
   

SELECTED PERFORMANCE RATIOS:

For the three months
ended June 30,

For the six months
ended June 30,

2018

 

2017

2018

 

2017

Return on Average Assets 0.99% 0.82% 0.91% 0.81%
Return on Average Equity 13.42% 11.62% 12.39% 11.51%
Book value per share (1) $ 9.25 $ 8.41 $ 9.25 $ 8.41
           
At June 30, 2018

At December 31, 2017

Capital ratios:
Tier 1 Leverage 7.54% 7.07%
Total Risk Based Capital 12.69% 12.36%
Common Equity Tier 1 11.43% 11.11%
 
(1) Adjusted to give effect to the 5% stock dividend distributed to
shareholders on April 16, 2018.
   

1st COLONIAL BANCORP, INC.

CONSOLIDATED BALANCE SHEETS
 
(Unaudited, in thousands) At June 30, 2018 At December 31, 2017
Cash and cash equivalents $ 29,908 $ 28,395
Total investments 109,775 118,547
Mortgage loans held for sale 6,554 7,169
Total loans 396,963 376,514
Less Allowance for loan losses   (5,247 )   (4,858 )
Loans and leases, net 391,716 371,656
Bank owned life insurance 8,553 8,434
Premises and equipment, net 885 864
Other real estate owned, net 238 244
Accrued interest receivable 1,794 1,505
Other assets   3,998     3,317  

Total Assets

$ 553,421   $ 540,131  
 
Total deposits $ 508,140 $ 496,847
Other borrowings 3,167 3,166
Other liabilities 1,495 1,708
Total Shareholders' Equity   40,619     38,410  
Total Liabilities and Equity $ 553,421   $ 540,131  
   

1st COLONIAL BANCORP, INC.

NET INTEREST INCOME AND MARGIN TABLES

(Unaudited, in thousands, except percentages)

 
For the three months ended For the three months ended
June 30, 2018 June 30, 2017
Average     Average    
Balance Interest Yield Balance Interest Yield
Cash and cash equivalents $ 16,544 $ 50 1.21 % $ 16,152 $ 30 0.74 %
Investment securities 111,732 499 1.79 % 108,846 365 1.35 %
Mortgage loans held for sale 8,258 69 3.35 % 8,557 66 3.09 %
Loans   390,716   4,903 5.03 %   368,001   4,370 4.76 %
Total interest-earning assets 527,250 5,521 4.20 % 501,556 4,831 3.86 %
Non-interest earning assets   12,583   12,734
Total average assets $ 539,833 $ 514,290

Interest-bearing deposits

Checking accounts $ 214,023 $ 260 0.49 % $ 216,861 $ 147 0.27 %
Money markets and Savings 71,061 80 0.45 % 86,288 98 0.46 %
Certificates of deposit   149,181   644 1.73 %   99,737   356 1.43 %
Total interest-bearing deposits 434,265 984 0.91 % 402,886 601 0.60 %
Borrowings   3,279   5 0.61 %   3,494   5 0.57 %
Total interest-bearing liabilities 437,544 989 0.91 % 406,380 606 0.60 %
Non-interest bearing deposits 61,142 70,667
Other liabilities 1,213 1,035
Shareholders' equity   39,934   36,208
Total average liabilities and equity $ 539,833 $ 514,290
Net interest income $ 4,532 $ 4,225
Net interest margin 3.45 % 3.38 %
Net interest spread 3.29 % 3.27 %
   
For the six months ended For the six months ended
June 30, 2018 June 30, 2017
Average     Average    
Balance Interest Yield Balance Interest Yield
Cash and cash equivalents $ 19,560 $ 126 1.29 % $ 16,238 $ 54 0.67 %
Investment securities 114,010 1,011 1.79 % 110,682 747 1.36 %
Mortgage loans held for sale 7,044 116 3.32 % 6,996 104 3.00 %
Loans   384,051   9,475 4.98 %   360,455   8,436 4.72 %
Total interest-earning assets 524,755 10,728 4.12 % 494,371 9,341 3.81 %
Non-interest earning assets   12,530   12,480
Total average assets $ 537,285 $ 506,851

Interest-bearing deposits

Checking accounts $ 231,001 $ 460 0.40 % $ 242,408 $ 350 0.29 %
Money markets and Savings 58,570 129 0.44 % 67,608 151 0.45 %
Certificates of deposit   141,041   1,184 1.69 %   92,022   627 1.37 %
Total interest-bearing deposits 430,612 1,773 0.83 % 402,038 1,128 0.57 %
Borrowings   3,303   9 0.55 %   3,527   8 0.46 %
Total interest-bearing liabilities 433,915 1,782 0.83 % 405,565 1.136 0.56 %
Non-interest bearing deposits 62,719 64,675
Other liabilities 1,169 1,152
Shareholders' equity   39,482   35,459
Total average liabilities and equity $ 537,285 $ 506,851
Net interest income $ 8,946 $ 8,205
Net interest margin 3.44 % 3.35 %
Net interest spread 3.29 % 3.25 %
 

1st Colonial Community Bank, the subsidiary of 1st Colonial
Bancorp, provides a range of business and consumer financial services,
placing emphasis on customer service and access to decision makers.
Headquartered in Collingswood, New Jersey, the Bank also has a branch in
the New Jersey community of Westville and administrative offices in
Cherry Hill, New Jersey. To learn more, call (856) 858-8402 or visit www.1stcolonial.com.

This release contains forward-looking statements that are not historical
facts and include statements about management's strategies and
expectations about our business. There are risks and uncertainties that
may cause our actual results and performance to be materially different
from results indicated by these forward-looking statements. Factors that
might cause a difference include economic conditions; unanticipated loan
losses, inability to close loans in our pipeline, lack of liquidity;
varying and unanticipated costs of collection with respect to
nonperforming loans; an inability to dispose of real estate owned;
changes in interest rates, changes in FDIC assessments, deposit flows,
loan demand, and real estate values; changes in relationships with major
customers; operational risks, including the risk of fraud or theft by
employees, customers or outsiders, and the risk of interruptions in and
breaches in security of our information systems; competition; changes in
accounting principles, policies or guidelines; changes in laws or
regulations and in the manner in which the regulators enforce same; new
technology and other factors affecting our operations, pricing, products
and services.

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