Current Quarter Highlights
- Net income of $7.0 million, or $0.59 per diluted share
- Net interest margin increases to 5.50%
- Return on average assets and average equity of 1.8% and 11.3%
- Total loans held for investment increased $22.6 million, or 7.2% annualized
- Noninterest-bearing deposits at 44.1% of total deposits
- Second quarter of 2019 cash dividend of $0.20 per share declared
- Received regulatory approval to consolidate two branch locations effective at the close of business on May 17, 2019
Cerritos, CA, April 29, 2019 (GLOBE NEWSWIRE) -- First Choice Bancorp (NASDAQ: FCBP), (the "Company"), the holding company of First Choice Bank (the "Bank"), today reported net income for the first quarter of 2019 of $7.0 million, or $0.59 per diluted share, compared to net income of $6.7 million, or $0.56 per diluted share, for the fourth quarter of 2018.
“Our first quarter results represent another record level of profitability for the Company,” said Peter Hui, Chairman of the Board of the Company. “Our consistent performance and strong financial position enable us to continue to return capital to shareholders through dividends and stock buybacks.”
“We are pleased that we were able to continue to deliver a higher level of earnings as we generate organic balance sheet growth and begin to realize the synergies from the Pacific Commerce Bancorp acquisition,” said Robert M. Franko, President and CEO of the Company. “Despite the first quarter being a seasonally lighter period for loan demand, we were able to generate 7% annualized growth in our loan portfolio and produce a strong quarter of income from the sale of SBA loans. Our balance sheet continues to be well positioned in this interest rate sensitive environment and we saw further expansion in our net interest margin in the first quarter. Our loan pipeline remains relatively healthy and we continue to see good trends in asset quality.”
STATEMENT OF INCOME
Operating Results for the First Quarter 2019
Net Interest Income
Net interest income for the first quarter of 2019 was $19.2 million, a decrease of $310 thousand, from $19.5 million for the fourth quarter of 2018 due primarily to lower interest income of $246 thousand and higher interest expense of $64 thousand. The decrease in interest income was due primarily to there being two less days in the first quarter compared to the fourth quarter of 2018, lower interest income on correspondent bank balances, lower dividend income from the FHLB, and lower net discount accretion on acquired loans. Interest income was positively impacted by higher average loan balances and loan yields. The increase in interest expense includes higher borrowing costs of $251 thousand due primarily to higher average balances and rates offset by lower deposit costs of $187 thousand due to lower average interest-bearing deposits balances.
Net Interest Margin
Net interest margin for the first quarter of 2019 increased 16 basis points to 5.50% from 5.34% for the fourth quarter of 2018.
The increase in the net interest margin is due primarily to higher loan yields offset partly by higher funding costs. The loan yield for the first quarter of 2019 increased 13 basis points to 6.62% from 6.49% for the fourth quarter of 2018. The higher loan yield was driven by higher market rates on new loan production and loan repricing and was partially offset by lower accretion of net discounts on acquired loans.
Scheduled and accelerated accretion of net discounts on loans acquired in the acquisition of Pacific Commerce Bancorp ("PCB") contributed $1.3 million, or 38 basis points to the first quarter of 2019 net interest margin, compared to $1.6 million, or 43 basis points in the fourth quarter of 2018. The fourth quarter of 2018 also benefited from a special $100 thousand FHLB dividend which increased the net interest margin by 3 basis points. There was no special FHLB dividend in the first quarter of 2019. The following chart shows the impact of scheduled accretion from acquired loans, accelerated discount accretion due primarily to early loan payoffs and prepayment penalties, and the special FHLB dividend on net interest income and the net interest margin for the periods indicated:
| Three Months Ended | ||||||||||||||||||||||||
| March 31, 2019 | December 31, 2018 | Variance | ||||||||||||||||||||||
| Interest Income | Yield | Interest Income | Yield | Interest Income | Yield | |||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||
| Net interest margin | $ | 19,192 | 5.50 | % | $ | 19,502 | 5.34 | % | $ | (310 | ) | 0.16 | % | |||||||||||
| Less: | ||||||||||||||||||||||||
| Scheduled accretion income | 526 | 0.15 | % | 807 | 0.22 | % | (281 | ) | (0.07 | )% | ||||||||||||||
| Accelerated accretion and prepayment penalties | 783 | 0.23 | % | 774 | 0.21 | % | 9 | 0.02 | % | |||||||||||||||
| FHLB special dividend income | — | — | % | 100 | 0.03 | % | (100 | ) | (0.03 | )% | ||||||||||||||
| Core net interest margin | $ | 17,883 | 5.12 | % | $ | 17,821 | 4.88 | % | $ | 62 | 0.24 | % | ||||||||||||
Cost of funds increased 7 basis points to 85 basis points for the first quarter of 2019 compared to 78 basis points for the fourth quarter of 2018 due primarily to average borrowings representing a higher percentage of total funding sources. Average total borrowings increased $35.0 million in the first quarter of 2019 while average interest bearing deposits decreased $70.7 million. Average noninterest-bearing deposits decreased $4.4 million during the first quarter to $561.9 million from $566.3 million for the fourth quarter of 2018. Average noninterest-bearing deposits represented 46.1% of total deposits for the first quarter of 2019 compared to 43.8% for the fourth quarter of 2018.
Noninterest Income
Noninterest income for the first quarter of 2019 was $2.1 million, an increase of $553 thousand from $1.6 million for the fourth quarter of 2018 due primarily to higher gains on sale of SBA loans, service charges and fees on deposit accounts, and other income. SBA loans sold totaled $18.6 million, resulting in a gain on sale of $928 thousand in the first quarter of 2019 compared to $13.3 million in SBA loans sold, resulting in a gain on sale of $639 thousand in the fourth quarter of 2018. Service charges and fees on deposit accounts increased $103 thousand in the first quarter of 2019 due to waiving deposit fees for PCB customers for one month in the prior quarter in recognition of the system integration work completed during 2018. Other income for the first quarter of 2019 included an annual Bank Enterprise Award of $233 thousand from the U.S. Treasury’s Community Development Financial Institutions Fund to recognize the Company's efforts in providing affordable housing development and small business loans within distressed communities; there was no similar income in the prior quarter. Conversely, the fourth quarter of 2018 included a $92 thousand cash return from an equity investment for which there was no similar income in the first quarter of 2019.
Noninterest Expense
Noninterest expense for the first quarter of 2019 decreased $139 thousand to $10.7 million from $10.8 million for the fourth quarter of 2018. The decrease was primarily attributable to an $859 thousand decrease in merger, integration and public company registration costs in the first quarter of 2019 which was partially offset by a $400 thousand impairment charge related to the right-of-use assets for operating leases and fixed assets for the anticipated branch consolidations. Salaries and employee benefits increased $693 thousand due primarily to seasonally higher first quarter payroll taxes and lower deferral of loan origination costs.
Effective May 17, 2019, the Company will be consolidating two branch offices in an effort to further streamline our operations following the PCB acquisition. The Little Tokyo branch will be closed and consolidated with the 6th and Figueroa branch and the San Diego branch operations will be consolidated into our Carlsbad branch. The San Diego location will remain as a loan production office. The Company expects the consolidation of these branches to result in a one-time charges of approximately $400 thousand and annualized cost savings of $300 thousand starting in the second quarter of 2019.
The operating efficiency ratio was 50.2% in the first quarter of 2019, compared with 51.4% in the fourth quarter of 2018. Excluding the impact of the merger, integration and public company registration costs, the operating efficiency ratio was 47.3% in the fourth quarter of 2018.
Income Taxes
Income tax expense was $3.3 million for the first quarter of 2019, compared to $3.1 million for the fourth quarter of 2018. The effective tax rate remained at 31.7% for the first quarter of 2019 and the fourth quarter of 2018. The effective tax rate for the full year of 2019 is expected to be approximately 30%.
STATEMENT OF FINANCIAL CONDITION
Loan Portfolio
Total loans held for investment increased $22.6 million, or 1.8%, to $1.27 billion at March 31, 2019. The increase was due primarily to organic growth across most of the Company’s major lending areas. During the first quarter of 2019, new loan commitments totaled $79.1 million, including $40.0 million in construction and commercial real estate loans, $4.5 million in SBA loans, and $34.6 million in commercial and industrial loans. The Company originates SBA loans, some of which are retained in the Company’s portfolio, and some of which are sold in the secondary market. Total loans held for sale decreased
$9.9 million during the first quarter to $18.1 million at March 31, 2019.
Deposits
Total deposits decreased $37.2 million, or 3.0%, to $1.22 billion at March 31, 2019. Non-maturity deposits decreased $52.7 million offset by an increase in time deposits of $15.6 million. The decrease in non-maturity deposits, including noninterest-bearing deposits, is attributed primarily to our deposit customers' seasonal cash needs. The increase in time deposits includes a $36.9 million increase in wholesale time deposits offset by a $21.3 million decrease in retail time deposits due to maturities that were not renewed at our current offer rates. Noninterest-bearing deposits totaled $535.9 million and represented 44.1% of total deposits at March 31, 2019 compared to $546.7 million and 43.7% at December 31, 2018.
Credit Quality
Non-performing loans totaled $1.7 million at March 31, 2019 and December 31, 2018, and represented 0.10% and 0.11% of total assets, respectively. Net recoveries for the first quarter of 2019 were $20 thousand, or 0.01% of average loans on an annualized basis, compared to net charge-offs of zero for the fourth quarter of 2018.
Loan delinquencies (30-89 days) totaled $2.6 million, or 0.20% of total loans held for investment at March 31, 2019, compared to $484 thousand, or 0.04% of total loans held for investment at December 31, 2018.
The Company recorded a provision for loan losses of $350 thousand for the first quarter of 2019. The provision for loan losses relates primarily to net growth in the loan portfolio. The allowance for loan losses represented 0.90% of total loans held for investment and 684.6% of nonperforming loans at March 31, 2019, compared with 0.88% and 642.0% at December 31, 2018. At March 31, 2019, the net carrying value of loans acquired through the PCB acquisition totaled
$339.5 million and included a remaining net discount of $8.7 million. Such discount is available to absorb losses on the acquired loans and represented 0.68% of total gross loans held for investment.
Operating Leases
With the adoption of the new lease accounting standard (ASC 842) effective January 1, 2019, the Company recognized operating lease right-of-use assets and operating lease liabilities on the balance sheet. At March 31, 2019, the balance of operating lease right-of-use assets and operating lease liabilities totaled $5.3 million and $5.6 million, respectively. Prior to January 1, 2019, operating leases were not recorded on the Company’s balance sheet.
CAPITAL POSITION
Capital Ratios
At March 31, 2019, the Bank exceeded all regulatory capital requirements under Basel III and was considered to be a ‘‘well-capitalized’’ financial institution.
| Bank Only | March 31, 2019 | December 31, 2018 | ||||||
| Total Capital (to Risk-Weighted Assets) | 14.45 | % | 14.18 | % | ||||
| Tier 1 Capital (to Risk-Weighted Assets) | 13.51 | % | 13.26 | % | ||||
| CET1 Capital (to Risk-Weighted Assets) | 13.51 | % | 13.26 | % | ||||
| Tier 1 Capital (to Average Assets) | 12.73 | % | 12.03 | % | ||||
Stock Repurchase Program
During the first quarter of 2019, the Company repurchased 315,946 shares at an average price of $21.55 and a total cost of $6.8 million under the stock repurchase program announced in December 2018. The remaining number of shares authorized to be repurchased under this program was 847,771 shares at March 31, 2019.
Quarterly Cash Dividend Declared
On April 25, 2019, the Company declared a cash dividend of $0.20 per share payable on or about May 23, 2019 to shareholders of record on May 9, 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 March 31, 2019, First Choice Bancorp had total consolidated assets of $1.65 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 11 full service branches, and 1 lending office 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, tax rates and the impact of the acquisition of Pacific Commerce Bancorp and Pacific Commerce Bank. 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.
First Choice Bancorp and Subsidiary
Financial Highlights and Selected Ratios (unaudited):
| At or for the three months ended | ||||||||||||
| March 31, 2019 | December 31, 2018 | March 31, 2018 | ||||||||||
| (dollars in thousands, except per share amounts) | ||||||||||||
| Total interest income | $ | 21,839 | $ | 22,085 | $ | 11,189 | ||||||
| Total interest expense | 2,647 | 2,583 | 1,637 | |||||||||
| Net interest income | 19,192 | 19,502 | 9,552 | |||||||||
| Provision for loan losses | 350 | 400 | 200 | |||||||||
| Net interest income after provision for loan losses | 18,842 | 19,102 | 9,352 | |||||||||
| Total noninterest income | 2,116 | 1,563 | 563 | |||||||||
| Total noninterest expense | 10,694 | 10,833 | 6,677 | |||||||||
| Income before taxes | 10,264 | 9,832 | 3,238 | |||||||||
| Income taxes | 3,256 | 3,119 | 859 | |||||||||
| NET INCOME | $ | 7,008 | $ | 6,713 | $ | 2,379 | ||||||
| Total assets | $ | 1,649,759 | $ | 1,622,501 | $ | 947,676 | ||||||
| Total loans held for investment | 1,273,577 | 1,250,981 | 789,430 | |||||||||
| Total deposits | 1,215,170 | 1,252,339 | 758,801 | |||||||||
| Noninterest-bearing deposits | 535,867 | 546,713 | 197,503 | |||||||||
| Selected financial highlights and ratios: | ||||||||||||
| Dividends declared per common share | $ | 0.20 | $ | 0.20 | $ | 0.20 | ||||||
| Net income per share-diluted | $ | 0.59 | $ | 0.56 | $ | 0.33 | ||||||
| Return on average assets (annualized) | 1.8 | % | 1.7 | % | 1.1 | % | ||||||
| Return on average equity (annualized) | 11.3 | % | 10.8 | % | 8.9 | % | ||||||
| Return on tangible equity (1) (annualized) | 16.7 | % | 16.0 | % | 8.9 | % | ||||||
| Net interest margin | 5.50 | % | 5.34 | % | 4.38 | % | ||||||
| Cost of deposits | 0.8 | % | 0.7 | % | 0.8 | % | ||||||
| Cost of funds | 0.9 | % | 0.8 | % | 0.9 | % | ||||||
| Efficiency ratio (1) | 50.2 | % | 51.4 | % | 66.0 | % | ||||||
| Noninterest-bearing deposits to total deposits | 44.1 | % | 43.7 | % | 26.0 | % | ||||||
| Equity to assets ratio | 15.0 | % | 15.3 | % | 11.2 | % | ||||||
| Tangible common equity ratio (1) | 10.7 | % | 10.9 | % | 11.2 | % | ||||||
| Book value per share | $ | 21.30 | $ | 21.16 | $ | 14.68 | ||||||
| Tangible book value per share (1) | $ | 14.45 | $ | 14.33 | $ | 14.68 | ||||||
- Non-GAAP measure. See GAAP to non-GAAP reconciliation.
First Choice Bancorp and Subsidiary
Condensed Consolidated Balance Sheets (unaudited)
| March 31, 2019 | December 31, 2018 | |||||||
| (dollars in thousands, except per share amounts) | ||||||||
| ASSETS | ||||||||
| Cash and due from banks | $ | 10,352 | $ | 17,874 | ||||
| Interest-bearing deposits at other banks | 197,330 | 176,502 | ||||||
| Federal funds sold | 3,000 | 3,000 | ||||||
| Total cash and cash equivalents | 210,682 | 197,376 | ||||||
| Investment securities, available-for-sale | 29,064 | 29,543 | ||||||
| Investment securities, held-to-maturity | 5,311 | 5,322 | ||||||
| Equity securities, at fair value | 2,590 | 2,538 | ||||||
| Restricted stock investments, at cost | 12,867 | 12,855 | ||||||
| Loans held for sale | 18,147 | 28,022 | ||||||
| Total loans held for investment | 1,273,577 | 1,250,981 | ||||||
| Allowance for loan losses | (11,426 | ) | (11,056 | ) | ||||
| Total loans held for investment, net | 1,262,151 | 1,239,925 | ||||||
| Accrued interest receivable | 5,560 | 5,069 | ||||||
| Premises and equipment | 1,673 | 1,973 | ||||||
| Operating leases right-of-use assets, net | 5,338 | — | ||||||
| Servicing asset | 3,351 | 3,186 | ||||||
| Deferred taxes | 6,875 | 8,666 | ||||||
| Goodwill | 73,425 | 73,425 | ||||||
| Core deposit intangible | 6,380 | 6,576 | ||||||
| Other assets | 6,345 | 8,025 | ||||||
| TOTAL ASSETS | $ | 1,649,759 | $ | 1,622,501 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Deposits: | ||||||||
| Noninterest-bearing demand | $ | 535,867 | $ | 546,713 | ||||
| Money market, interest checking and savings | 423,220 | 465,123 | ||||||
| Time deposits | 256,083 | 240,503 | ||||||
| Total deposits | 1,215,170 | 1,252,339 | ||||||
| Short term borrowings | 160,000 | 104,998 | ||||||
| Senior secured debt | 14,200 | 8,450 | ||||||
| Operating lease liabilities | 5,633 | — | ||||||
| Other liabilities | 6,621 | 8,645 | ||||||
| Total liabilities | 1,401,624 | 1,374,432 | ||||||
| Total shareholders’ equity | 248,135 | 248,069 | ||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 1,649,759 | $ | 1,622,501 | ||||
| Shares outstanding | 11,650,020 | 11,726,074 | ||||||
| Book value per share | $ | 21.30 | $ | 21.16 | ||||
| Tangible book value per share | $ | 14.45 | $ | 14.33 | ||||
Condensed Consolidated Statements of Income (unaudited)
| For the Three Months Ended | ||||||||||||
| March 31, 2019 | December 31, 2018 | March 31, 2018 | ||||||||||
| (dollars in thousands, except per share amounts) | ||||||||||||
| INTEREST INCOME | ||||||||||||
| Interest and fees on loans | $ | 20,916 | $ | 20,838 | $ | 10,621 | ||||||
| Interest on investment securities | 236 | 224 | 239 | |||||||||
| Interest on deposits in financial institutions | 445 | 697 | 260 | |||||||||
| Dividends on FHLB and other stock | 242 | 326 | 69 | |||||||||
| Total interest income | 21,839 | 22,085 | 11,189 | |||||||||
| INTEREST EXPENSE | ||||||||||||
| Interest on savings, interest checking and money market accounts | 1,239 | 1,353 | 819 | |||||||||
| Interest on time deposits | 1,005 | 1,078 | 616 | |||||||||
| Interest on borrowings | 403 | 152 | 202 | |||||||||
| Total interest expense | 2,647 | 2,583 | 1,637 | |||||||||
| Net interest income | 19,192 | 19,502 | 9,552 | |||||||||
| Provision for loan losses | 350 | 400 | 200 | |||||||||
| Net interest income after provision for credit losses | 18,842 | 19,102 | 9,352 | |||||||||
| NONINTEREST INCOME | ||||||||||||
| Gain on sale of loans | 928 | 639 | 247 | |||||||||
| Service charges and fees on deposit accounts | 540 | 437 | 215 | |||||||||
| Net servicing fees | 234 | 191 | 153 | |||||||||
| Other income | 414 | 296 | (52 | ) | ||||||||
| Total noninterest income | 2,116 | 1,563 | 563 | |||||||||
| NONINTEREST EXPENSE | ||||||||||||
| Salaries and employee benefits | 6,223 | 5,530 | 4,020 | |||||||||
| Occupancy and equipment | 1,423 | 1,070 | 520 | |||||||||
| Professional fees | 419 | 515 | 304 | |||||||||
| Data processing | 604 | 757 | 421 | |||||||||
| Office, postage and telecommunications | 272 | 297 | 192 | |||||||||
| Deposit insurance and regulatory assessments | 195 | 121 | 111 | |||||||||
| Loan related | 214 | 155 | 84 | |||||||||
| Customer service related | 477 | 416 | 140 | |||||||||
| Merger, integration and public company registration costs | — | 859 | 374 | |||||||||
| Amortization of core deposit intangible | 196 | 199 | — | |||||||||
| Other expenses | 671 | 914 | 511 | |||||||||
| Total noninterest expense | 10,694 | 10,833 | 6,677 | |||||||||
| Income before taxes | 10,264 | 9,832 | 3,238 | |||||||||
| Income taxes | 3,256 | 3,119 | 859 | |||||||||
| Net income | $ | 7,008 | $ | 6,713 | $ | 2,379 | ||||||
| Net income per share-diluted | $ | 0.59 | $ | 0.56 | $ | 0.33 | ||||||
| Weighted average shares - diluted | 11,813,018 | 11,880,163 | 7,200,057 | |||||||||
First Choice Bancorp and Subsidiary
Average Balance Sheets and Yield Analysis
| Three Months Ended | ||||||||||||||||||||||||||||||||||||
| March 31, 2019 | December 31, 2018 | March 31, 2018 | ||||||||||||||||||||||||||||||||||
| Average Balance | Interest Income / Expense | Yield / Cost | Average Balance | Interest Income / Expense | Yield / Cost | Average Balance | Interest Income / Expense | Yield / Cost | ||||||||||||||||||||||||||||
| Interest-earning assets: | (dollars in thousands) | |||||||||||||||||||||||||||||||||||
| Loans (1) | $ | 1,280,743 | $ | 20,916 | 6.62 | % | $ | 1,274,253 | $ | 20,838 | 6.49 | % | $ | 774,292 | $ | 10,621 | 5.56 | % | ||||||||||||||||||
| Investment securities | 37,094 | 236 | 2.58 | % | 35,890 | 224 | 2.48 | % | 39,505 | 239 | 2.46 | % | ||||||||||||||||||||||||
| Due from banks | 80,800 | 427 | 2.14 | % | 120,553 | 682 | 2.24 | % | 67,059 | 260 | 1.57 | % | ||||||||||||||||||||||||
| Federal funds sold/resale agreements | 3,000 | 18 | 2.43 | % | 3,000 | 15 | 1.98 | % | — | — | — | % | ||||||||||||||||||||||||
| FHLB and other bank stock | 13,891 | 242 | 7.07 | % | 13,890 | 326 | 9.31 | % | 3,933 | 69 | 7.10 | % | ||||||||||||||||||||||||
| Total interest-earning assets | 1,415,528 | 21,839 | 6.26 | % | 1,447,586 | 22,085 | 6.05 | % | 884,789 | 11,189 | 5.13 | % | ||||||||||||||||||||||||
| Noninterest-earning assets | 107,729 | 114,588 | 9,668 | |||||||||||||||||||||||||||||||||
| Total assets | $ | 1,523,257 | $ | 1,562,174 | $ | 894,457 | ||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||||
| Interest checking | $ | 118,882 | $ | 309 | 1.05 | % | $ | 148,935 | $ | 408 | 1.09 | % | $ | 191,281 | $ | 504 | 1.07 | % | ||||||||||||||||||
| Money market accounts | 271,980 | 868 | 1.29 | % | 281,829 | 873 | 1.23 | % | 91,144 | 164 | 0.73 | % | ||||||||||||||||||||||||
| Savings accounts | 34,357 | 62 | 0.73 | % | 41,358 | 72 | 0.69 | % | 69,611 | 151 | 0.88 | % | ||||||||||||||||||||||||
| Time deposits | 170,365 | 730 | 1.74 | % | 201,523 | 862 | 1.70 | % | 123,994 | 449 | 1.47 | % | ||||||||||||||||||||||||
| Brokered time deposits | 60,699 | 275 | 1.84 | % | 53,382 | 216 | 1.61 | % | 51,594 | 168 | 1.32 | % | ||||||||||||||||||||||||
| Total interest-bearing deposits | 656,283 | 2,244 | 1.39 | % | 727,027 | 2,431 | 1.33 | % | 527,624 | 1,436 | 1.10 | % | ||||||||||||||||||||||||
| Short term and other borrowings | 36,123 | 230 | 2.58 | % | 4,321 | 26 | 2.38 | % | 47,814 | 188 | 1.58 | % | ||||||||||||||||||||||||
| Senior secured notes | 11,894 | 173 | 5.90 | % | 8,727 | 126 | 5.73 | % | 1,122 | 13 | 4.77 | % | ||||||||||||||||||||||||
| Total interest-bearing liabilities | 704,300 | 2,647 | 1.52 | % | 740,075 | 2,583 | 1.38 | % | 576,560 | 1,637 | 1.15 | % | ||||||||||||||||||||||||
| Noninterest-bearing liabilities: | ||||||||||||||||||||||||||||||||||||
| Demand deposits | 561,868 | 566,276 | 206,752 | |||||||||||||||||||||||||||||||||
| Other liabilities | 8,921 | 8,297 | 3,756 | |||||||||||||||||||||||||||||||||
| Shareholders’ equity | 248,168 | 247,526 | 107,389 | |||||||||||||||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 1,523,257 | $ | 1,562,174 | $ | 894,457 | ||||||||||||||||||||||||||||||
| Net interest spread | $ | 19,192 | 4.74 | % | $ | 19,502 | 4.67 | % | $ | 9,552 | 3.98 | % | ||||||||||||||||||||||||
| Net interest margin | 5.50 | % | 5.34 | % | 4.38 | % | ||||||||||||||||||||||||||||||
| Total deposits | $ | 1,218,151 | $ | 2,244 | 0.75 | % | $ | 1,293,303 | $ | 2,431 | 0.75 | % | $ | 734,376 | $ | 1,436 | 0.79 | % | ||||||||||||||||||
| Total funding sources | $ | 1,266,168 | $ | 2,647 | 0.85 | % | $ | 1,306,351 | $ | 2,583 | 0.78 | % | $ | 783,312 | $ | 1,637 | 0.85 | % | ||||||||||||||||||
(1) Average loans include net discounts and net deferred fees. Interest income on loans includes $231 thousand, $154 thousand, and $31 thousand related to the accretion of net deferred loans fees and $984 thousand, $1.4 million, and $170 thousand related to accretion of discounts for the three months ended March 31, 2019, December 31, 2018, and March 31, 2018, respectively.
First Choice Bancorp and Subsidiary
Loan Composition
| March 31, 2019 | December 31, 2018 | |||||||||||||||
| Amount | Percentage of Total | Amount | Percentage of Total | |||||||||||||
| (dollars in thousands) | ||||||||||||||||
| Construction and land development | $ | 185,798 | 14.6 | % | $ | 184,177 | 14.7 | % | ||||||||
| Real estate: | ||||||||||||||||
| Residential | 54,841 | 4.3 | % | 57,443 | 4.6 | % | ||||||||||
| Commercial real estate - owner occupied | 186,696 | 14.7 | % | 179,494 | 14.3 | % | ||||||||||
| Commercial real estate - non-owner occupied | 382,115 | 30.0 | % | 401,665 | 32.2 | % | ||||||||||
| Commercial and industrial | 307,175 | 24.1 | % | 281,718 | 22.5 | % | ||||||||||
| SBA loans | 156,781 | 12.3 | % | 146,462 | 11.7 | % | ||||||||||
| Consumer | 163 | — | % | 159 | — | % | ||||||||||
| Total loans held for investment, net of discounts | $ | 1,273,569 | 100.0 | % | $ | 1,251,118 | 100.0 | % | ||||||||
| Net deferred loan costs(fees) | 8 | (137 | ) | |||||||||||||
| Total loans held for investment | $ | 1,273,577 | $ | 1,250,981 | ||||||||||||
| Allowance for loan losses | (11,426 | ) | (11,056 | ) | ||||||||||||
| Total loans held for investment, net | $ | 1,262,151 | $ | 1,239,925 | ||||||||||||
| March 31, 2019 | December 31, 2018 | |||||||
| (dollars in thousands) | ||||||||
| Gross loans held for investment (1) | $ | 1,285,699 | $ | 1,263,891 | ||||
| Unamortized net discounts(2) | (12,130 | ) | (12,773 | ) | ||||
| Net unamortized deferred origination costs(fees) | 8 | (137 | ) | |||||
| Total loans held for investment | $ | 1,273,577 | $ | 1,250,981 | ||||
- Gross loans includes purchased credit impaired loans with a net carrying value of $2.6 million, or 0.20% of gross loans at March 31, 2019, and $2.6 million, or 0.21% of gross loans at December 31, 2018.
- Unamortized net discounts includes discounts related to the retained portion of SBA loans and net discounts on acquired loans. At March 31, 2019, unamortized net discounts totaled $12.1 million of which $8.7 million was associated with loans acquired in the PCB acquisition and expected to be accreted into interest income over a weighted average life of 5.6 years.
First Choice Bancorp and Subsidiary
Allowance for Loan losses
| For the three months ended | ||||||||
| March 31, 2019 | December 31, 2018 | |||||||
| (dollars in thousands) | ||||||||
| Balance, beginning of period | $ | 11,056 | $ | 10,656 | ||||
| Provision for loan losses | 350 | 400 | ||||||
| Charge-offs | (2 | ) | (17 | ) | ||||
| Recoveries | 22 | 17 | ||||||
| Net recoveries | 20 | — | ||||||
| Balance, end of period | $ | 11,426 | $ | 11,056 | ||||
| Annualized net recoveries to average loans | 0.01 | % | — | % | ||||
Credit Quality (1)
| March 31, 2019 | December 31, 2018 | |||||||
| (dollars in thousands) | ||||||||
| Accruing loans past due 90 days or more | $ | — | $ | — | ||||
| Non-accrual loans | 1,090 | 1,130 | ||||||
| Troubled debt restructurings on non-accrual | 580 | 590 | ||||||
| Total nonperforming loans | 1,670 | 1,720 | ||||||
| Foreclosed assets | — | — | ||||||
| Total nonperforming assets | $ | 1,670 | $ | 1,720 | ||||
| Troubled debt restructurings - on accrual | $ | 326 | $ | 327 | ||||
| Nonperforming loans as a percentage of total loans held for investment | 0.13 | % | 0.14 | % | ||||
| Nonperforming loans as a percentage of total assets | 0.10 | % | 0.11 | % | ||||
| Allowance for loan losses as a percentage of total loans held for investment | 0.90 | % | 0.88 | % | ||||
| Allowance for loan losses as a percentage of nonperforming loans | 684.60 | % | 642.04 | % | ||||
| Accruing loans held for investment past due 30 - 89 days | $ | 2,602 | $ | 484 | ||||
(1) Excludes purchased credit impaired loans with a carrying value of $2.6 million at March 31, 2019 and December 31, 2018.
First Choice Bancorp and Subsidiary
GAAP to Non-GAAP Reconciliation
This press release contains certain non-GAAP financial disclosures for: (1) efficiency ratio, (2) adjusted efficiency ratio, (3) adjusted net income, (4) adjusted return on average assets, (5) adjusted return on average equity, (6) return on average tangible common equity, (7) adjusted return on average tangible common equity, (8) tangible common equity ratio, and (9) 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 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 | ||||||||||||
| March 31, | December 31, | March 31, | ||||||||||
| 2019 | 2018 | 2018 | ||||||||||
| Efficiency Ratio | (dollars in thousands) | |||||||||||
| Noninterest expense (numerator) | $ | 10,694 | $ | 10,833 | $ | 6,677 | ||||||
| Less: merger, integration and public company registration costs | — | 859 | 374 | |||||||||
| Noninterest expense without merger, integration and public company registration costs (numerator) | $ | 10,694 | $ | 9,974 | $ | 6,303 | ||||||
| Net interest income | $ | 19,192 | $ | 19,502 | $ | 9,552 | ||||||
| Plus: Noninterest income | 2,116 | 1,563 | 563 | |||||||||
| Total net interest income and noninterest income (denominator) | $ | 21,308 | $ | 21,065 | $ | 10,115 | ||||||
| Efficiency ratio | 50.2 | % | 51.4 | % | 66.0 | % | ||||||
| Adjusted efficiency ratio (excluding merger, integration and public company registration costs) | 50.2 | % | 47.3 | % | 62.3 | % | ||||||
| Return on Average Assets, Equity, Tangible Equity | ||||||||||||
| Net income | $ | 7,008 | $ | 6,713 | $ | 2,379 | ||||||
| Add: After-tax merger, integration and public company registration costs | — | 606 | 352 | |||||||||
| Adjusted net income | $ | 7,008 | $ | 7,319 | $ | 2,731 | ||||||
| Average assets | $ | 1,523,257 | $ | 1,562,174 | $ | 894,457 | ||||||
| Average shareholders’ equity | 248,168 | 247,526 | 107,389 | |||||||||
| Less: Average intangible assets | 79,928 | 80,125 | — | |||||||||
| Average tangible common equity | $ | 168,240 | $ | 167,401 | $ | 107,389 | ||||||
| Return on average assets | 1.8 | % | 1.7 | % | 1.1 | % | ||||||
| Adjusted return on average assets | 1.8 | % | 1.9 | % | 1.2 | % | ||||||
| Return on average equity | 11.3 | % | 10.8 | % | 8.9 | % | ||||||
| Adjusted return on average equity | 11.3 | % | 11.8 | % | 10.2 | % | ||||||
| Return on average tangible common equity | 16.7 | % | 16.0 | % | 8.9 | % | ||||||
| Adjusted return on average tangible common equity | 16.7 | % | 17.5 | % | 10.2 | % | ||||||
First Choice Bancorp and Subsidiary
GAAP to Non-GAAP Reconciliation (continued)
| Tangible Common Equity Ratio/ | March 31, | December 31, | March 31, | |||||||||
| Tangible Book Value Per Share | 2019 | 2018 | 2018 | |||||||||
| (dollars in thousands, except per share amounts) | ||||||||||||
| Shareholders’ equity | $ | 248,135 | $ | 248,069 | $ | 106,481 | ||||||
| Less: Intangible assets | 79,805 | 80,001 | — | |||||||||
| Tangible common equity | $ | 168,330 | $ | 168,068 | $ | 106,481 | ||||||
| Total assets | $ | 1,649,759 | $ | 1,622,501 | $ | 947,676 | ||||||
| Less: Intangible assets | 79,805 | 80,001 | — | |||||||||
| Tangible assets | $ | 1,569,954 | $ | 1,542,500 | $ | 947,676 | ||||||
| Equity to assets ratio | 15.0 | % | 15.3 | % | 11.2 | % | ||||||
| Tangible common equity ratio | 10.7 | % | 10.9 | % | 11.2 | % | ||||||
| Shares outstanding | 11,650,020 | 11,726,074 | 7,251,584 | |||||||||
| Book value per share | $ | 21.30 | $ | 21.16 | $ | 14.68 | ||||||
| Tangible book value per share | $ | 14.45 | $ | 14.33 | $ | 14.68 | ||||||
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