Market Overview

First Choice Bancorp Reports Second Quarter 2018 Financial Results and Declares Quarterly Dividend

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Highlights

  • Net income of $3.4 million, or $0.47 per diluted share
  • Annualized return on average assets and average equity was 1.48% and 12.51%, respectively
  • Total gross loans of $787.2 million at June 30, 2018, a decline of 0.81% from prior quarter
  • Average net loans of $801.3 million, an increase of 3.49% from prior quarter
  • Total deposits of $785.0 million at June 30, 2018, an increase of 3.45% from prior quarter
  • The Company was added to the Russell 3000® Index and the Russell 2000® Index when Russell investments reconstituted its comprehensive set of U.S. and global equity indexes after the market close on June 22, 2018
  • Quarterly cash dividend of $0.20 declared
  • Acquisition of Pacific Commerce Bancorp completed on July 31, 2018

Cerritos, CA, Aug. 01, 2018 (GLOBE NEWSWIRE) -- First Choice Bancorp, ("First Choice" or the "Company") (NASDAQ:FCBP), the holding company of First Choice Bank (the "Bank"), today reported financial results for the second quarter ended June 30, 2018.

For the second quarter of 2018, net income was $3.4 million, or $0.47 per diluted share, compared to net income of $2.4 million, or $0.33 per diluted share, for the first quarter of 2018, and net income of $2.3 million, or $0.32 per diluted share, for the second quarter of 2017.

On July 26, 2018, the Company also declared a cash dividend of $0.20 per share. The dividend is payable on September 10, 2018 to shareholders of record on August 27, 2018.

"We delivered strong year-over-year growth in earnings, driven by higher net interest income, improved efficiencies and stable asset quality," said Robert M. Franko, President and CEO of First Choice Bancorp. "Our end-of-period loan growth in the second quarter was impacted by fluctuations in commercial line utilization from one large commercial customer. Our average net loans increased 3.49% compared to the first quarter of 2018, which is more reflective of the growth trends we are experiencing. Our loan pipeline remains healthy and we expect to see a consistent level of organic loan growth over the second half of the year."

"As announced today, we completed our acquisition of Pacific Commerce Bancorp and we are very excited to welcome our new customers and colleagues to the First Choice family. The combination of our two banks creates the 16th largest publicly traded bank in Southern California and significantly improves our competitive positioning. Our top priority for the remainder of 2018 is managing the integration of Pacific Commerce and realizing all of the synergies we project for this transaction. We continue to expect the acquisition to be approximately 15% accretive to earnings per share in 2019, significantly improving our earnings power and the level of returns that we generate for our shareholders," said Mr. Franko.

Operating Results for the Second Quarter 2018

Net Interest Income

Net interest income for the second quarter of 2018 was $10.8 million, an increase of 13.26% from $9.6 million for the first quarter of 2018. The increase in net interest income from the first quarter was primarily attributable to higher average loan balances and early payoffs in the purchased SBA loan portfolio, which resulted in the accelerated recognition of income from the unamortized loan discounts.

Net Interest Margin

Net interest margin for the second quarter of 2018 was 4.73%, an increase from 4.38% for the first quarter of 2018. The net interest margin was positively impacted by an increase in accretion income on acquired loans due to an increase in payoffs.

Excluding the impact of accretion income on acquired loans, the net interest margin decreased 5 basis points compared to the first quarter of 2018. The decrease was attributable to a 2 basis points decrease in dividend income from FHLB and other bank stocks, and an 18 basis points increase in the average cost of funds, attributed in large part to a deposit promotion program in the second quarter which ended on June 30, 2018, and partially offset by a 15 basis points increase in the average loan yield.

Non-interest Income

Non-interest income for the second quarter of 2018 was $0.8 million, an increase of 38.37% from $0.6 million for the first quarter of 2018. The increase was primarily the result of an increase in the gain on sale of SBA loans. During the second quarter of 2018, the Company sold $5.8 million in SBA loans, resulting in a gain on sale of $0.4 million. During the first quarter of 2018, the Company sold $2.7 million in SBA loans, resulting in a gain on sale of $0.2 million.

Non-interest Expense

Non-interest expense for the second quarter of 2018 was $6.3 million, a decrease of 5.39% from $6.7 million for the first quarter of 2018. The decrease was primarily attributable to a decrease in the salary and benefits and customer service costs. Non-interest expense for the second quarter of 2018 included approximately $0.4 million in merger-related and public company registration expense related to the Company's Nasdaq listing and the pending acquisition of Pacific Commerce Bancorp.

The Company's operating efficiency ratio was 54.47% in the second quarter of 2018, compared with 66.01% in the first quarter of 2018.

Excluding the impact of accretion income on acquired loans and the merger-related and public company registration expense, the Company's operating efficiency ratio was 55.75% in the second quarter of 2018, compared with 62.31% in the first quarter of 2018. The improvement in operating efficiency was due to an increase in operating income, and decrease in non-interest expense in the second quarter of 2018.

Income Taxes

The Company recorded income tax expense of $1.5 million for the second quarter of 2018, representing an effective tax rate of 30.76%, compared to 26.53% reported for the first quarter of 2018. The increase in the effective tax rate reflects a lower tax benefit from stock-based compensation in the second quarter of 2018.

Loan Portfolio

Total gross loans, excluding loans held for sale, were $787.2 million at June 30, 2018, a decrease of 0.81% from $793.6 million at March 31, 2018. The decrease was primarily attributable to the paydown of one large commercial line of credit.

During the second quarter of 2018, the Company originated $88.1 million in new loan commitments, the majority of the growth during the quarter occurred in construction and commercial real estate loans, $52.7 million, or 59.84% of total new loan commitments, and in commercial and industrial loans, $25.3 million, or 28.69% of total new loan commitments.

Deposits

Total deposits were $785.0 million at June 30, 2018, an increase of 3.45% from $758.8 million at March 31, 2018. The increase in noninterest bearing demand, money market, time deposits and brokered deposits was $14.1 million, $52.5 million, $21.0 million and $4.0 million, respectively, as depositors are shifting balances to higher yielding accounts.  Offsetting these increases were reductions in interest checking and savings accounts of $47.3 million and $18.2 million, respectively.

Credit Quality

Non-performing assets totaled $1.6 million, or 0.16% of total assets, at June 30, 2018, compared with $1.1 million, or 0.11% of total assets, at March 31, 2018. The increase in non-performing assets was primarily attributable to two SBA loans placed on non-accrual status.

The Company recorded net recoveries of $46 thousand in the second quarter.

The Company recorded a provision for loan losses of $0.3 million for the second quarter of 2018, which was primarily attributable to the increase in non-performing assets.

The Company's allowance for loan losses was 1.32% of total gross loans and 657.54% of non-performing assets at June 30, 2018, compared with 1.26% and 943.45%, respectively, at March 31, 2018.

Capital Ratios

At June 30, 2018, the Bank exceeded all regulatory capital requirements under Basel III and was considered to be a ‘‘well-capitalized'' financial institution.

Bank Only June 30, 2018 March 31, 2018 December 31, 2017
Total Capital (to Risk-Weighted Assets) 14.73% 14.26% 14.72%
Tier 1 Capital (to Risk-Weighted Assets) 13.48% 13.01% 13.46%
CET1 Capital (to Risk-Weighted Assets) 13.48% 13.01% 13.46%
Tier 1 Capital (to Average Assets) 12.16% 12.19% 11.75%

ABOUT FIRST CHOICE BANCORP

First Choice Bancorp is a community-based bank holding company headquartered in Cerritos, California, and it is the sole shareholder of First Choice Bank. As of July 31, 2018, the First Choice had total assets of approximately $1.5 billion. First Choice Bank, headquartered in Cerritos, California is a community-focused financial institution, serving diverse consumers and commercial clients and specializing in loans to small businesses, private banking clients, commercial and industrial (C&I) loans, and commercial real estate loans with a niche in providing financing for the hospitality industry. First Choice Bank is a Preferred Small Business Administration (SBA) Lender. 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 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.

Disclosure

This press release contains certain non-GAAP financial disclosures for tangible common equity and tangible assets and adjusted earnings. 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.

Forward-Looking Statements

Certain matters set forth herein (including the exhibits hereto) constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including forward-looking statements relating to the Company's current business plans and expectations and our future financial position and operating results. These forward-looking statements are subject to risks and uncertainties that could cause actual results, performance and/or achievements to differ materially from those projected. These risks and uncertainties include, but are not limited to, local, regional, national and international economic and market conditions and events and the impact they may have on us, our customers and our assets and liabilities; our ability to attract deposits and other sources of funding or liquidity; supply and demand for real estate and periodic deterioration in real estate prices and/or values in California or other states where we lend, including both residential and commercial real estate; a prolonged slowdown or decline in real estate construction, sales or leasing activities; changes in the financial performance and/or condition of our borrowers, depositors or key vendors or counterparties; changes in our levels of delinquent loans, nonperforming assets, allowance for loan losses and charge-offs; the costs or effects of acquisitions or dispositions we may make, whether we are able to obtain any required governmental approvals in connection with any such acquisitions or dispositions, and/or our ability to realize the contemplated financial or business benefits associated with any such acquisitions or dispositions; the effect of changes in laws, regulations and applicable judicial decisions (including laws, regulations and judicial decisions concerning financial reforms, taxes, banking capital levels, consumer, commercial or secured lending, securities and securities trading and hedging, compliance, employment, executive compensation, insurance, vendor management and information security) with which we and our subsidiaries must comply or believe we should comply; changes in estimates of future reserve requirements and minimum capital requirements based upon the periodic review thereof under relevant regulatory and accounting requirements, including changes in the Basel Committee framework establishing capital standards for credit, operations and market risk; inflation, interest rate, securities market and monetary fluctuations; changes in government interest rates or monetary policies; changes in the amount and availability of deposit insurance; cyber-security threats, including loss of system functionality or theft or loss of Company or customer data or money; political instability; acts of war or terrorism, or natural disasters, such as earthquakes, drought, or the effects of pandemic diseases; the timely development and acceptance of new banking products and services and the perceived overall value of these products and services by our customers and potential customers; the Company's relationships with and reliance upon vendors with respect to the operation of certain of the Company's key internal and external systems and applications; changes in commercial or consumer spending, borrowing and savings preferences or behaviors; technological changes and the expanding use of technology in banking (including the adoption of mobile banking and funds transfer applications); the ability to retain and increase market share, retain and grow customers and control expenses; changes in the competitive and regulatory environment among financial and bank holding companies, banks and other financial service providers; volatility in the credit and equity markets and its effect on the general economy or local or regional business conditions; fluctuations in the price of the Company's common stock or other securities; and the resulting impact on the Company's ability to raise capital or make acquisitions, the effect of changes in accounting policies and practices, as may be adopted from time-to-time by our regulatory agencies, as well as by the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard-setters; changes in our organization, management, compensation and benefit plans, and our ability to retain or expand our workforce, management team and/or our board of directors; the costs and effects of legal, compliance and regulatory actions, changes and developments, including the initiation and resolution of legal proceedings (such as securities, consumer or employee class action litigation), regulatory or other governmental inquiries or investigations, and/or the results of regulatory examinations or reviews; our ongoing relations with our various federal and state regulators, including the SEC, FDIC, FRB and California DBO; our success at managing the risks involved in the foregoing items and all other factors set forth in the Company's public reports, including its registration statements as filed under Form S-4 and Form 8-A, and particularly the discussion of risk factors within that document. 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.

Income statement highlights and selected ratios (unaudited):
(dollars in thousands, except per share amounts)

    For the three months ended   For the six months ended
    June 30, 2018   March 31, 2018   June 30, 2017 (restated)    June 30, 2018   June 30, 2017 (restated)
                     
Total interest income   $ 12,915   $ 11,189   $ 9,634   $ 24,104   $ 18,698
Total interest expense   2,096   1,637   1,441   3,733   2,877
Net interest income   10,819   9,552   8,193   20,371   15,821
Provision for loan losses   320   200     520  
Net interest income after provision for loan losses   10,499   9,352   8,193   19,851   15,821
Total noninterest income   779   563   1,222   1,342   2,693
Total noninterest expense   6,317   6,677   5,573   12,994   11,080
Income before taxes   4,961   3,238   3,842   8,199   7,434
Income taxes   1,526   859   1,560   2,385   3,026
NET INCOME   $ 3,435   $ 2,379   $ 2,282   $ 5,814   $ 4,408
                     
Selected financial and ratios:                    
Dividends declared per common share   $ 0.20   $ 0.20   $ 0.20   $ 0.40   $ 0.40
Net income per share-basic   0.47   0.33   0.32   0.80   0.61
Net income per share-diluted 1   0.47   0.33   0.32   0.80   0.61
Weighted average shares - basic   7,172,020   7,160,938   7,102,653   7,166,509   7,092,068
Weighted average shares - diluted 1   7,214,473   7,200,057   7,137,163   7,207,295   7,127,549
Return on assets (annualized)   1.48%   1.06%   1.06%   1.28%   1.02%
Return on equity (annualized)   12.51%   8.86%   8.69%   10.71%   8.45%
Net interest margin   4.73%   4.38%   3.86%   4.56%   3.74%
Cost of Deposits   0.98%   0.79%   0.77%   0.89%   0.77%
Cost of Funds   1.03%   0.85%   0.77%   0.94%   0.77%
Efficiency ratio   54.47%   66.01%   59.19%   59.84%   59.85%

(1) Diluted shares are calculated using the two class method.

First Choice Bancorp and Subsidiaries
Condensed Consolidated Balance Sheet (unaudited)
(dollars in thousands, except share and per share amounts)

    June 30, 2018   March 31, 2018   December 31, 2017
             
ASSETS            
Cash and due from banks   $ 5,837     $ 6,840     $ 5,405  
Interest-bearing deposits at other banks   115,317     93,225     97,727  
Securities purchased under agreements to resell            
Total cash and cash equivalents   121,154     100,065     103,132  
Investment securities, available-for-sale   29,732     31,045     35,002  
Investment securities, held-to-maturity   5,344     5,292     5,300  
Loans held for sale   11,466     11,525     10,599  
Gross loans   787,175     793,582     745,887  
Unearned fees and costs   (3,688 )   (4,152 )   (4,174 )
Allowance for loan losses   (10,376 )   (10,010 )   (10,497 )
Loans receivable, net   773,111     779,420     731,216  
Federal Home Loan Bank, at cost   3,866     3,640     3,640  
Equity securities, at fair value   2,506     2,508      
Accrued interest receivable   3,274     3,358     3,108  
Premises and equipment   1,242     1,055     1,035  
Servicing assets   2,448     2,508     2,618  
Other assets   8,543     7,260     8,145  
TOTAL ASSETS   $ 962,686     $ 947,676     $ 903,795  
             
LIABILITIES AND SHAREHOLDERS' EQUITY            
Deposits:            
Noninterest-bearing demand   $ 211,611     $ 197,503     $ 235,584  
Money market, interest checking and savings   339,639     352,958     372,699  
Time deposits   233,707     208,340     164,396  
Total deposits   784,957     758,801     772,679  
Federal Home Loan Bank borrowings   60,000     57,000     20,000  
Federal funds purchased       18,000      
Senior Secured Debt   4,150     2,550     350  
Accrued interest payable   200     165     114  
Other liabilities   4,560     4,679     4,958  
Total liabilities   853,867     841,195     798,101  
Total shareholders' equity   108,819     106,481     105,694  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 962,686     $ 947,676     $ 903,795  
             
Book value and tangible book value per share   $ 15.00     $ 14.68     $ 14.56  

First Choice Bancorp and Subsidiaries
Condensed Consolidated Statement of Income (unaudited)
(dollars in thousands)

  For the Three Months Ended   For the Six Months Ended June 30,
  June 30, 2018   March 31, 2018   June 30, 2017 (restated(1))   2018   2017 (restated(1))
   
INTEREST INCOME                  
Interest and fees on loans $ 12,320     $ 10,621     $ 9,122     $ 22,941     $ 17,596  
Interest on investment securities 233     239     245     472     500  
Dividends on FHLB and other stock 68     69     59     137     148  
Other interest income 294     260     208     554     454  
Total interest income 12,915     11,189     9,634     24,104     18,698  
INTEREST EXPENSE                  
Interest on savings, interest checking and money market accounts 969     819     1,002     1,788     2,028  
Interest on time deposits 919     616     389     1,535     797  
Interest on borrowings 208     202     50     410     52  
Total interest expense 2,096     1,637     1,441     3,733     2,877  
Net interest income 10,819     9,552     8,193     20,371     15,821  
Provision for loan losses 320     200         520      
Net interest income after provision for loan losses 10,499     9,352     8,193     19,851     15,821  
NONINTEREST INCOME                  
Gain on sale of loans 448     247     898     695     2,087  
Service charges and fees on deposit accounts 208     215     64     423     130  
Net servicing fees 126     153     189     279     360  
Other (loss) income (3 )   (52 )   71     (55 )   116  
Total noninterest income 779     563     1,222     1,342     2,693  
NONINTEREST EXPENSE                  
Salaries and employee benefits 3,578     4,116     3,698     7,694     7,343  
Occupancy expenses 361     348     316     709     617  
Professional fees 378     304     119     682     198  
Data processing 448     421     357     869     687  
Equipment expenses 206     172     173     378     353  
Office expenses 193     192     160     385     321  
Deposit insurance and regulatory assessments 86     111     112     197     219  
Loan related expenses 101     84     19     185     158  
Customer service expenses 101     140     119     241     263  
Merger-related and public company registration expenses 356     374         730      
Provision for credit losses - off-balance sheet     53     142     53     214  
Other expenses 509     362     358     871     707  
Total noninterest expense 6,317     6,677     5,573     12,994     11,080  
Income before taxes 4,961     3,238     3,842     8,199     7,434  
Income taxes 1,526     859     1,560     2,385     3,026  
Net income $ 3,435     $ 2,379     $ 2,282     $ 5,814     $ 4,408  

 (1) Certain amounts have been restated to reflect adjustments related to the correction of an error.

Average Balance Sheets

  Three Months Ended
  June 30, 2018   March 31, 2018   June 30, 2017
  Average
Balance
  Interest
Income / Expense
  Yield / Cost   Average
Balance
  Interest
Income / Expense
  Yield / Cost   Average
Balance
  Interest
Income / Expense
  Yield / Cost
Interest-earning assets: (in thousands)
Due from banks $ 74,325     $ 294     1.59%   $ 67,059     $ 260     1.57%   $ 82,830     $ 200     0.96%
Federal funds sold/resale agreements         N/A           N/A   1,834     8     1.75%
Investment securities 38,153     233     2.45%   39,505     239     2.46%   44,806     245     2.20%
Loans (1) 801,342     12,320     6.17%   774,292     10,621     5.56%   717,784     9,122     5.10%
FHLB and other bank stock 4,071     68     6.70%   3,933     69     7.10%   3,890     59     6.19%
Total interest-earning assets 917,891     12,915     5.64%   884,789     11,189     5.13%   851,144     9,634     4.54%
                                   
Noninterest-earning assets:                                  
Cash and cash equivalents 7,014             6,538             4,403          
Allowance for loan losses (10,037 )           (10,395 )           (11,502 )        
Other assets 14,119             13,525             14,412          
Total assets $ 928,987             $ 894,457             $ 858,457          
                                   
Interest-bearing liabilities:                                  
Interest checking $ 141,598     $ 407     1.15%   $ 191,281     $ 504     1.07%   $ 252,025     $ 681     1.08%
Money market accounts 151,248     455     1.21%   91,144     164     0.73%   70,825     113     0.64%
Savings accounts 50,978     107     0.84%   69,611     151     0.88%   88,443     208     0.94%
Time deposits 170,148     738     1.74%   123,182     448     1.48%   98,654     275     1.12%
Brokered time deposits 52,801     181     1.37%   52,406     168     1.30%   38,129     114     1.2%
Total interest-bearing deposits 566,773     1,888     1.34%   527,624     1,435     1.10%   548,076     1,391     1.02%
FHLB borrowings 35,429     166     1.88%   47,378     186     1.58%   20,440     49     0.96%
Federal funds purchased 264     1     1.52%   400     2     2.37%           —%
Senior secured notes 3,218     41     5.11%   1,122     13     4.77%           —%
Other borrowings 31         —%   36     1     7.80%   52     1     7.71%
Total interest-bearing liabilities 605,715     2,096     1.39%   576,560     1,637     1.15%   568,568     1,441     1.02%
                                   
Noninterest-bearing liabilities:                                  
Demand deposits 209,009             206,752             180,454          
Other liabilities 4,450             3,756             4,422          
Shareholders' equity 109,813             107,389             105,013          
                                   
Total liabilities and shareholders' equity $ 928,987             $ 894,457             $ 858,457          
                                   
Net interest spread     $ 10,819     4.26%       $ 9,552     3.98%       $ 8,193     3.52%
Net interest margin         4.73%           4.38%           3.86%

 (1) Average loans include net discounts and deferred costs. Interest income on loans includes $142 thousand and $170 thousand related to the accretion of net deferred loans fees and $815 thousand and $(413) thousand related to accretion (amortization) of discounts (premiums) for the three months ended June 30, 2018 and 2017, respectively.

Average Balance Sheets (continued)

  Six Months Ended June 30,
  2018   2017
  Average
Balance
  Interest
Income / Expense
  Yield / Cost   Average
Balance
  Interest
Income / Expense
  Yield / Cost
Interest-earning assets: (in thousands)
Due from banks $ 70,712     $ 554     1.58%   $ 91,995     $ 422     0.93%
Federal funds sold/resale agreements         N/A   4,190     32     1.54%
Investment securities 38,826     472     2.45%   44,682     500     2.26%
Loans (1) 787,892     22,941     5.87%   709,460     17,596     5.00%
FHLB and other bank stock 4,002     137     6.90%   3,828     148     7.80%
Total interest-earning assets 901,432     24,104     5.39%   854,155     18,698     4.41%
                       
Noninterest-earning assets:                      
Cash and cash equivalents 6,777             5,242          
Allowance for loan losses (10,215 )           (11,575 )        
Other assets 13,824             14,159          
Total assets $ 911,818             $ 861,981          
                       
Interest-bearing liabilities:                      
Interest checking $ 166,302     $ 912     1.11%   $ 253,968     $ 1,367     1.09%
Money market accounts 121,362     619     1.03%   75,001     241     0.65%
Savings accounts 60,243     257     0.86%   89,846     420     0.94%
Time deposits 146,795     1,186     1.63%   104,227     576     1.11%
Brokered time deposits 52,604     349     1.34%   37,051     221     1.20%
Total interest-bearing deposits 547,306     3,323     1.22%   560,093     2,825     1.02%
FHLB borrowings 41,370     351     1.71%   10,497     50     0.96%
Federal funds purchased 331     4     2.44%           —%
Senior secured notes 2,176     54     5.00%           —%
Other borrowings 34     1     5.93%   55     2     7.33%
Total interest-bearing liabilities 591,217     3,733     1.27%   570,645     2,877     1.02%
                       
Noninterest-bearing liabilities:                      
Demand deposits 207,887             183,293          
Other liabilities 4,105             3,737          
Shareholders' equity 108,609             104,306          
                       
Total liabilities and shareholders' equity $ 911,818             $ 861,981          
                       
Net interest spread     $ 20,371     4.12%       $ 15,821     3.39%
Net interest margin         4.56%           3.74%

(1) Average loans include net discounts and deferred costs. Interest income on loans includes $172 thousand and $195 thousand related to the accretion of net deferred loans fees and $757 thousand and $(847) thousand related to accretion (amortization) of discounts (premiums) for the six months ended June 30, 2018 and 2017, respectively.

Rate/Volume Analysis

  Three Months Ended
  June 30, 2018 vs. March 31, 2018   June 30, 2018 vs. June 30, 2017   June 30, 2017 vs. June 30, 2016
  Change Attributable to       Change Attributable to       Change Attributable to    
  Volume   Rate   Total Change   Volume   Rate   Total Change   Volume   Rate   Total Change
Interest income: (in thousands)
Interest and fees on loans $ 459     $ 1,240     $ 1,699     $ 2,302     $ 896     $ 3,198     $ 2,045     $ 680     $ 2,725  
Interest on investment securities (5 )   (1 )   (6 )   (33 )   21     (12 )   (38 )   18     (20 )
Dividends on FHLB and other stock 3     (4 )   (1 )   4     5     9     3     4     7  
Other interest income 31     3     34     (27 )   113     86     (26 )   100     74  
Change in interest income 488     1,238     1,726     2,246     1,035     3,281     1,984     802     2,786  
                                   
Interest expense:                                  
Savings, interest checking and money market accounts (28 )   178     150     (205 )   172     (33 )   (203 )   172     (31 )
Time deposits 198     105     303     310     220     530     310     219     529  
Borrowings (24 )   30     6     93     65     158     117     59     176  
Change in interest expense 146     313     459     198     457     655     224     450     674  
                                   
Change in net interest income $ 342     $ 925     $ 1,267     $ 2,048     $ 578     $ 2,626     $ 1,760     $ 352     $ 2,112  


  Six Months Ended June 30,
  2018   2017
  Change Attributable to       Change Attributable to    
  Volume   Rate   Total Change   Volume   Rate   Total Change
Interest income: (in thousands)
Interest and fees on loans $ 3,260     $ 2,085     $ 5,345     $ 2,880     $ 1,997     $ 4,877  
Interest on investment securities 11     (39 )   (28 )   (4 )   (30 )   (34 )
Dividends on FHLB and other stock (22 )   11     (11 )   (23 )   11     (12 )
Other interest income 308     (208 )   100     301     (215 )   86  
Change in interest income 3,557     1,849     5,406     3,154     1,763     4,917  
                       
Interest expense:                      
Savings, interest checking and money market accounts (281 )   41     (240 )   (283 )   41     (242 )
Time deposits 387     351     738     387     349     736  
Borrowings 295     63     358     319     59     378  
Change in interest expense 401     455     856     423     449     872  
                       
Change in net interest income $ 3,156     $ 1,394     $ 4,550     $ 2,731     $ 1,314     $ 4,045  

Loans Composition

    June 30, 2018   March 31, 2018   December 31, 2017
    (in thousands)
Construction and land development   $ 133,050   $ 113,481   $ 115,427
Real estate:            
 Residential   51,331   57,234   62,719
 Commercial real estate - owner occupied   59,696   63,832   53,106
 Commercial real estate - non-owner occupied   259,086   265,961   252,114
Commercial and industrial   191,969   200,339   169,184
SBA loans   92,043   91,887   92,509
Consumer     848   828
Gross loans   $ 787,175   $ 793,582   $ 745,887
Deferred loan fees, net of costs   (424   (469   (400
Net discounts   (3,264   (3,683   (3,774
Allowance for loan losses   (10,376   (10,010   (10,497
Loans receivable, net   $ 773,111   $ 779,420   $ 731,216
             
Allowance for loan losses as a percentage of total gross loans   1.32%   1.26%   1.41%
             

Allowance for Loan losses

    For the three months ended   For the six months ended
    June 30, 2018   March 31, 2018   June 30, 2017   June 30, 2018   June 30, 2017
    (in thousands)
Balance, beginning of period   $ 10,010     $ 10,497     $ 11,523     $ 10,497     $ 11,599  
Provision for loan losses   320     200         520      
Charge-offs   (21 )   (754 )   (190 )   (775 )   (266 )
Recoveries   67     67         134      
Net recoveries(charge-offs)   46     (687 )   (190 )   (641 )   (266 )
Balance, end of period   $ 10,376     $ 10,010     $ 11,333     $ 10,376     $ 11,333  
                     

Nonperforming loans

    June 30, 2018   March 31, 2018   December 31, 2017
    (in thousands)
Construction and land development   $     $     $  
Real estate:            
 Residential            
 Commercial real estate - owner occupied            
 Commercial real estate - non-owner occupied            
Commercial and industrial   108     111     634  
SBA loans   1,470     950     1,200  
Consumer            
Total nonperforming loans   $ 1,578     $ 1,061     $ 1,834  
             

Nonperforming assets 1

    June 30, 2018   March 31, 2018   December 31, 2017
    (in thousands)
Accruing loans past due 90 days or more   $   $   $
Non-accrual   910    
Troubled debt restructurings on non-accrual   668   1,061   1,834
Total nonperforming loans   1,578   1,061   1,834
Foreclosed assets      
Total nonperforming assets   $ 1,578   $ 1,061   $ 1,834
Troubled debt restructurings - on accrual   $ 363   $   $
             
Nonperforming loans as a percentage of gross loans   0.20%   0.13%   0.25%
Nonperforming assets as a percentage of total assets   0.16%   0.11%   0.20%
Allowance for loan losses as a percentage of nonperforming assets   657.54%   943.45%   572.36%

(1)Nonperforming assets include nonaccrual loans, loans past due 90 days or more and still accruing, and other real estate owned

Contacts
First Choice Bancorp
Robert M. Franko, 562.345.9241
President & Chief Executive Officer
or
Yvonne L. Chen, 562.345.9244
Chief Financial Officer

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