1st Colonial Bancorp, Inc. Reports Second Quarter 2024 Results

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1st Colonial Bancorp, Inc. Reports Second Quarter 2024 Results

July 23, 2024

MOUNT LAUREL, N.J.--(BUSINESS WIRE)-- 1st Colonial Bancorp, Inc. (FCOB), holding company of 1^st Colonial Community Bank, today reported net income of $2.0 million, or $0.40 per diluted share, for the three months ended June 30, 2024, compared to net income of $2.0 million, or $0.41 per diluted share, for the three months ended June 30, 2023. For the six months ended June 30, 2024, net income was $3.5 million, or $0.72 per diluted share, compared to $3.5 million, or $0.72 per diluted share, for the same period in 2023.

Robert White, President and Chief Executive Officer, commented, "We are pleased to report our second quarter results, which reflect our continued financial resiliency in this prolonged higher interest rate environment. The continued pressure on deposit rates has caused a decrease in our net interest margin. We remain focused on managing our operating costs to account for the anticipated and ongoing pressure on our funding costs. Our team remains committed to delivering high quality, value-added products and services to our clients. Our asset quality and overall portfolio performance remains strong, which we attribute to our disciplined underwriting practices."

Operating Results

Net Interest Income

Net interest income for the three months ended June 30, 2024 and 2023 was $5.9 million and $6.9 million, respectively. The $1 million decline in net interest income was primarily attributable to a $1.5 million increase in interest paid on average interest-bearing liabilities that was partially offset by a $486 thousand increase in interest income earned on average interest-earning assets. For the second quarter of 2024, average loan balances increased $10.8 million to $632.5 million from $621.7 million for the second quarter of 2023. Average residential mortgages, and home equity loans and lines outstanding increased $29.8 million and $5.4 million, respectively. Average outstanding constructions loans, which have higher interest rates based on the Wall Street Journal (WSJ) prime rate, declined $21.8 million for the second quarter of 2024 compared to the same period in 2023. When compared to the first quarter of 2024, net interest income declined by $394 thousand.

For the first six months of 2024, net interest income decreased $1.2 million, or 9%, to $12.2 million from $13.4 million for the same period in 2023. The decline in net interest income was primarily attributable to a $3.1 million increase in interest paid on average interest-bearing liabilities and was partially mitigated by a $1.9 million increase in interest income earned on average interest-earning assets. During the first six months of 2024, interest income on average loans and average investments increased $1.4 million and $323 thousand, respectively. Our average outstanding loan balance grew $20.9 million.

For the second quarter of 2024, interest expense was $4.4 million, an increase of $1.5 million from $2.9 million for the second quarter of 2023. For the second quarter of 2024, average interest-bearing deposits increased $6.4 million from the second quarter of 2023. Average brokered certificates of deposit (CDs) increased $50.2 million due to declines in average interest checking, savings and money market and retail CD balances of $24.5 million, $8.9 million and $10.4 million, respectively. As a result of the prolonged higher interest rates, we have increased our deposit rates over the last year. The increase in deposit rates combined with the increase in the average balance of higher cost brokered CDs led to an increase of $1.6 million in deposit interest expense in the second quarter of 2024 compared to the second quarter of 2023. When compared to the first quarter of 2024, total interest expense increased $186 thousand from $4.2 million. The average rate paid on interest bearing liabilities was 2.74% for the second quarter of 2024 compared to 2.61% for the first quarter of 2024 and 1.78% for the second quarter of 2023.

For the first six months of 2024, interest expense was $8.6 million, an increase of $3.1 million from $5.5 million for the first six months of 2023. For the first six months of 2024, average interest-bearing deposits increased $18.9 million from the average balance for the comparable 2023 period. Average brokered CD balances increased $46.3 million while average interest checking, savings and money market and retail CD balances declined $6.2 million, $15.4 million, and $5.8 million, respectively. The increase in deposit rates combined with the increase in average brokered CD balances led to an increase of $3.3 million in deposit interest expense for the first two quarters of 2024 compared to the same period in 2023. Average borrowings decreased $9.0 million during the first six months of 2024 compared to the same period in 2023.

The net interest margin was 3.11% for the second quarter of 2024 compared to 3.66% for the second quarter of 2023. The average yield on interest-earning assets grew 26 basis points from 5.17% for the quarter ended June 30, 2023 to 5.43% for the quarter ended June 30, 2024. The average rate paid on average interest-bearing liabilities increased 96 basis points from 1.78% for the second quarter of 2023 to 2.74% for the second quarter of 2024. When compared to the first quarter of 2024, the second quarter 2024 net interest margin declined 20 basis points from 3.31% and was mainly related to an 8 basis point decrease in the average yield on average interest-earning assets coupled with a 12 basis point increase in the average rate paid on average interest bearing deposits. Net interest margin was 3.21% for the six months ended June 30, 2024 compared to 3.60% for the six months ended June 30, 2023.

Provision for Credit Losses

For the three months ended June 30, 2024, the provision for credit losses was a net release of $439 thousand and included $380 thousand for loans and $59 thousand for off balance sheet ("OBS") commitments. The release was mainly due to a planned sale of $15 million in home equity lines of credit in June 2024. As a result of the sale, we were able to expand our ability to originate new lines of credit without increasing our concentration in single family residential mortgages. For the three months ended June 30, 2023, the provision for credit losses was $170 thousand and included $251 thousand for loans and ($81) thousand for OBS commitments. For the second quarter of 2024 net charge-offs were $208 thousand compared to $150 thousand for the second quarter of 2023 and net recoveries of $116 thousand for the first quarter of 2024.

For the six months ended June 30, 2024, the provision for credit losses was a net release of $284 thousand and included $260 thousand for loans and $24 thousand for OBS commitments. For the six months ended June 30, 2023, the provision for credit losses was a net release of $4 thousand and included $54 thousand for loans and ($58) thousand for OBS commitments. Net charge-offs were $92 thousand for the first half of 2024 compared to $118 thousand for the same period in 2023.

Noninterest Income

Noninterest income for the second quarter of 2024 was $969 thousand, an increase of $270 thousand, or 39%, from $699 thousand for the second quarter of 2023. Income from the origination and sales of residential mortgages grew $315 thousand, or 99%, from the second quarter in 2023. While mortgage originations grew $7.0 million, or 27%, we sold 92% of the originations in the second quarter of 2024 compared to 58% in the second quarter of 2023. We also recorded a $35 thousand gain on the sale of $15 million in home equity lines of credit. Gains on the sale of SBA loans were $21 thousand for the second quarter of 2024 compared to $118 thousand for the comparable 2023 period. When compared to the first quarter of 2024, non-interest income for the second quarter of 2024 increased $248 thousand, or 34%, from $721 thousand.

For the six months ended June 30, 2024, noninterest income was $1.7 million, an increase of $537 thousand, or 47%, from $1.2 million for the same period in 2023. Income from the origination and sales of residential mortgages grew $568 thousand, or 112%, from $508 thousand for the first two quarters of 2023 to $1.1 million for the first two quarters in 2024. For the first half of 2024, we sold $49.1 million, or 88%, of the $55.9 million in mortgage loan originations compared to sales of $25.8 million, or 52%, of the $49.4 million in mortgage loan originations for the first half of 2023. For the first six months of 2024 gains on the sale of SBA loans were $21 thousand and declined $110 thousand from $131 thousand for the same period in 2023.

Noninterest Expense

Noninterest expense was $4.8 million for the three months ended June 30, 2024, and decreased $82 thousand, or 2%, from $4.9 million for the comparable period in 2023. Salaries and benefits and FDIC assessment expenses decreased $84 thousand and $61 thousand and were partially offset by an increase in audit expenses of $75 thousand. When compared to the first quarter of 2024, non-interest expense for the second quarter of 2024 increased $29 thousand.

Noninterest expense was $9.6 million for the six months ended June 30, 2024 and decreased $173 thousand from $9.7 million for the same period in 2023. Salaries and benefits decreased $369 thousand, or 6%, mainly due to the recognition of severance that was negotiated with a former executive in 2023. Audit fees and legal expenses increased $157 thousand and $71 thousand, respectively. The increase in audit expenses was mostly related to optional targeted testing of operational areas and the increase in legal fees was related to the workout and disposition of nonaccrual assets.

Income Taxes

For the three and six months ended June 30, 2024, income tax expenses were $556 thousand and $1.1 million, respectively, compared to $634 thousand and $1.4 million for the three and six months ended June 30, 2023, respectively. Income taxes were favorably impacted by an increase in non-taxable income and a reduction in the New Jersey corporate surtax rate.

Financial Condition

Assets

As of June 30, 2024, total assets were $811.1 million and decreased $7.0 million, or 1%, from $818.1 million as of March 31, 2024. Total assets were $825.6 million as of December 31, 2023.

Total loans were $622.7 million as of June 30, 2024, a decrease of $14.4 million, or 2%, from $637.2 million as of March 31, 2024. Total loans declined $14.3 million, or 2%, from $637.0 million as of December 31, 2023. Home equity loans and lines of credit declined $15.3 million in the second quarter and $4.8 million during the first half of 2024 as a result of the loan sale. Commercial loans, including commercial real estate and construction loans, increased $2.0 million in the second quarter and declined $7.8 million during the six months ended June 30, 2024. As of June 30, 2024, loans held for sale were $11.4 million and increased $5.9 million and $7.8 million from $5.5 million as of March 31, 2024 and $3.6 million as of December 31, 2024, respectively.

Investments decreased $2.9 million, or 3%, to $108.6 million as of June 30, 2024 from $111.5 million as of March 31, 2024. Investments were $107.6 million as of December 31, 2023. During 2024 we received $3.2 million in principal paydowns and reinvested the proceeds in short-term municipal bond anticipation notes. The unrealized loss was $5.8 million as of June 30, 2024 compared to $6.2 million as of December 31, 2023.

Asset Quality

As of June 30, 2024, the allowance for credit losses ("ACL") for loans was $9.3 million, or 1.50%, of total loans compared to $9.9 million, or 1.56%, of total loans as of March 31, 2024. The ACL was $9.7 million, or 1.52% of total loans, as of December 31, 2023. As of June 30, 2024, non-performing assets were $1.7 million compared to $1.6 million as of March 31, 2024 and $4.9 million as of December 31, 2023. During the second quarter we foreclosed on the commercial real estate collateral for a commercial mortgage and transferred the net realizable value of $258 thousand from a nonaccrual loan to other real estate owned. The ACL to non-accrual loans was 641.4% as of June 30, 2024 compared to 631.5% as of March 31, 2024 and 199.0% as of December 31, 2023. As of June 30, 2024, the ratio of non-performing assets to total assets was 0.28% compared to 0.25% as of March 31, 2024 and 0.76% as of December 31, 2023.

Liabilities

Total deposits were $651.9 million as of June 30, 2024, a decrease of $17.0 million, or 3%, from $669.0 million as of March 31, 2024. For the first six months of 2024, total deposits declined $35.5 million, or 5%, from $687.4 million as of December 31, 2023. Municipal interest checking accounts, retail CDs, interest checking deposits, and money market accounts decreased $29.2 million, $20.0 million, $5.7 million and $3.3 million, respectively, while savings accounts increased $8.5 million. Brokered CDs increased $15.0 million to replace the reduction in deposit balances. The current interest rate environment has made it highly competitive in retaining and growing our deposit customers.

As of June 30, 2024, short-term borrowings were $70.8 million and increased $8.1 million from March 31, 2024 and $17.2 million from December 31, 2023. The increase in short-term borrowings was to supplement funding requirements.

Shareholder's Equity

Total shareholders' equity was $72.0 million as of June 30, 2024, compared to $69.7 million as of March 31, 2024 and $67.9 million as of December 31, 2023. The accumulated comprehensive loss was $4.3 million as of June 30, 2024 compared to $4.5 million for March 31, 2024 and December 31, 2023. The accumulated comprehensive loss is related to the unrealized loss in our investment portfolio. Tangible book value per share increased $0.44 from $14.65 as of March 31, 2024 to $15.09 as of June 30, 2024. Tangible book value per share was $14.31 as of December 31, 2023.

Consolidated Financial Statements and Other Highlights:

1st COLONIAL BANCORP, INC.
CONSOLIDATED INCOME STATEMENTS
(Unaudited, dollars in thousands, except per share data)
For the three months ended		For the six months
June 30,		March 31,		June 30,		ended June 30,
2024			2024		2023		2024			2023
Interest income	$	10,292		$	10,500	$	9,806	$	20,792		$	18,885
Interest expense		4,389			4,203		2,865		8,592			5,453
Net Interest Income		5,903			6,297		6,941		12,200			13,432
Provision for (release of) credit losses		(439)		155		170		(284)			(4)
Net interest income after provision for credit losses		6,342			6,142		6,771		12,484			13,436
Non-interest income		969			721		699		1,690			1,153
Non-interest expense		4,802			4,773		4,884		9,575			9,748
Income before taxes		2,509			2,090		2,586		4,599			4,841
Income tax expense		556			508		634		1,064			1,360
Net Income	$	1,953		$	1,582	$	1,952	$	3,535		$	3,481
Earnings Per Share - Basic	$	0.41		$	0.33	$	0.42	$	0.74		$	0.74
Earnings Per Share - Diluted	$	0.40		$	0.32	$	0.41	$	0.72		$	0.72

SELECTED PERFORMANCE RATIOS:
For the three months ended		For the six months
	June 30,		March 31,		June 30,		ended June 30,
	2024				2024				2023				2024				2023
Annualized Return on Average Assets		1.00	%		0.80	%		0.99	%		0.90	%		0.90	%
Annualized Return on Average Equity		11.10	%		9.23	%		12.70	%		10.18	%		11.63	%
Book value per share (1)	$	15.09		$	14.65		$	13.23		$	15.09		$	13.23

As of June 30, 2024	As of December 31, 2023
Bank Capital Ratios:
Tier 1 Leverage	10.55%	10.02%
Total Risk Based Capital	16.51%	15.55%
Common Equity Tier 1	15.26%	14.30%

1st COLONIAL BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)	As of June 30, 2024	As of December 31, 2023
Cash and cash equivalents	$	44,065	$	52,727
Total investments		108,557		107,577
Loans held for sale		11,419		3,619
Total loans		622,730		637,037
Less ACL-loans		(9,339)		(9,690)
Loans and leases, net		613,391		627,347
Bank owned life insurance		18,180		17,894
Premises and equipment, net		1,596		1,770
Other real estate owned ("OREO")		258			-
Accrued interest receivable		3,825		3,431
Other assets		9,871		11,279
Total Assets	$	811,162	$	825,644
Total deposits	$	651,924	$	687,444
Other borrowings		70,800		53,600
Subordinated debt		10,667		10,631
Other liabilities		5,725			6,046
Total Liabilities		739,116			757,721
Total Shareholders' Equity		72,046		67,923
Total Liabilities and Equity	$	811,162	$	825,644

1stCOLONIAL BANCORP, INC.
NET INTEREST INCOME AND MARGIN TABLES
(Unaudited, in thousands, except percentages)
	For the three months ended
	June 30, 2024	March 31, 2024	June 30, 2023
	Average Balance	Interest	Yield/ Rate	Average Balance	Interest	Yield/ Rate	Average Balance	Interest	Yield/ Rate
Cash and cash equivalents	$	13,650	$	157	4.63%	$	14,298	$	146	3.94%	$	18,021	$	212	4.72%
Investment securities		108,370		808	3.00%		111,182		806	2.91%		115,830		631	2.19%
Loans held for sale		8,294		131	6.35%		4,746		75	6.39%		4,653		42	3.60%
Loans		632,463		9,196	5.85%		635,318		9,473	6.00%		621,731		8,921	5.76%
Total interest-earning assets		762,777		10,292	5.43%		766,174		10,500	5.51%		760,235		9,806	5.17%
Non-interest earning assets		25,935				27,760			28,094
Total average assets	$	788,712			$	793,934		$	788,329
Interest-bearing deposits
Interest checking accounts	$	364,634	$	1,485	1.64%	$	373,812	$	1,413	1.52%	$	389,120	$	1,007	1.04%
Savings and money markets		69,478		334	1.93%		64,296		273	1.71%		78,356		228	1.17%
Certificates of deposit		73,253		744	4.08%		85,499		815	3.83%		83,675		422	2.02%
Brokered deposits		103,360		1,313	5.11%		94,625		1,239	5.27%		53,167		631	4.76%
Total interest-bearing deposits		610,725		3,876	2.55%		618,232		3,740	2.43%		604,318		2,288	1.52%
Borrowings		33,031		513	6.25%		29,182		463	6.37%		39,427		577	5.87%
Total interest-bearing liabilities		643,756		4,389	2.74%		647,414		4,203	2.61%		643,745		2,865	1.78%
Non-interest bearing deposits		68,668				71,677				76,400
Other liabilities		5,555				5,917			6,559
Total average liabilities		717,979				725,008				726,704
Shareholders' equity		70,733				68,926			61,625
Total average liabilities and equity	$	788,712			$	793,934		$	788,329
Net interest income		$	5,903			$	6,297			$	6,941
Net interest margin			3.11%	3.31%	3.66%
Net interest spread	2.68%	2.90%	3.39%

1st COLONIAL BANCORP, INC.
NET INTEREST INCOME AND MARGIN TABLES - Continued
(Unaudited, in thousands, except percentages)
	For the six months ended		For the six months ended
	June 30, 2024		June 30, 2023
	Average Balance	Interest	Yield	Average Balance	Interest	Yield/Rate
Cash and cash equivalents	$	14,289	$	303	4.26%		$	13,456	$	275	4.12%
Investment securities		109,776		1,613	2.95%			121,803		1,290	2.14%
Loans held for sale		6,520		206	6.35%			4,838		90	3.74%
Loans		633,892		18,670	5.92%		612,958		17,230	5.67%
Total interest-earning assets		764,477		20,792	5.47%			753,055		18,885	5.06%
Non-interest earning assets		26,847				27,856
Total average assets	$	791,324				$	780,911
Interest-bearing deposits
Interest checking accounts	$	369,223	$	2,898	1.58%		$	375,435	$	1,907	1.02%
Savings and money market deposits		66,887		607	1.82%			82,280		436	1.07%
Certificates of deposit		79,376		1,559	3.95%			85,145		770	1.81%
Brokered deposits		98,993		2,552	5.18%		121,139		1,198	4.56%
Total interest-bearing deposits		614,479		7,616	2.49%			595,543		4,311	1.46%
Borrowings		31,107		976	6.31%		40,135		1,142	5.74%
Total interest-bearing liabilities		645,586		8,592	2.68%			635,678		5,453	1.73%
Non-interest bearing deposits		70,173					78,432
Other liabilities		5,735				6,418
Total average liabilities		721,494					720,528
Shareholders' equity		69,830				60,383
Total average liabilities and equity	$	791,324			$	780,911
Net interest income		$	12,200				$	13,432
Net interest margin			3.21%				3.60%
Net interest spread			2.79%				3.33%

About 1^st Colonial Bancorp, Inc.

1st Colonial Bancorp, Inc, is a Pennsylvania corporation headquartered in Mount Laurel, New Jersey, and the parent company of 1st Colonial Community Bank (the "Bank"). The Bank 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 has branches in Westville, New Jersey and Limerick, Pennsylvania. The bank also has administrative offices in Mount Laurel, New Jersey. To learn more, call (877) 785-8550 or visit www.1stcolonial.com.

"Safe Harbor" Statement

In addition to historical information, this press release may contain "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements with respect to 1st Colonial Bancorp, Inc.'s strategies, goals, beliefs, expectations, estimates, intentions, capital raising efforts, financial condition and results of operations, future performance, and business. Statements preceded by, followed by, or that include the words "may," "could," "should," "pro forma," "looking forward," "would," "believe," "expect," "anticipate," "estimate," "intend," "plan," or similar expressions generally indicate a forward-looking statement. These forward-looking statements involve risks and uncertainties that are subject to change based on various important factors (some of which, in whole or in part, are beyond 1st Colonial Bancorp, Inc.'s control). Numerous competitive, economic, regulatory, legal and technological factors, risks and uncertainties that could cause actual results to differ materially include, without limitation, the impact of the ongoing pandemic and government responses thereto; on the U.S. economy, including the markets in which we operate; actions that we and our customers take in response to these factors and the effects such actions have on our operations, products, services and customer relationships; increased competitive pressures; changes in the interest rate environment; changes in general economic conditions and conditions within the securities markets; legislative and regulatory changes; and the effects of inflation, a potential recession, among others, could cause 1st Colonial Bancorp, Inc.'s financial performance to differ materially from the goals, plans, objectives, intentions and expectations expressed in such forward-looking statements. 1st Colonial Bancorp, Inc. cautions that the foregoing factors are not exclusive, and neither such factors nor any such forward-looking statement takes into account the impact of any future events. All forward-looking statements and information set forth herein are based on management's current beliefs and assumptions as of the date hereof and speak only as of the date they are made. 1st Colonial Bancorp, Inc. does not undertake to update any forward-looking statement whether written or oral, that may be made from time to time by 1st Colonial Bancorp, Inc. or by or on behalf of 1st Colonial Community Bank.

Source: 1st Colonial Bancorp, Inc.

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