1st Century Bancshares, Inc. (the "Company") (Nasdaq:FCTY), the
holding company for 1st Century Bank, N.A. (the "Bank"), today
reported net income for the quarter and year ended December 31,
2012 of $912,000 and $2.9 million, respectively, compared to
$432,000 and $1.0 million, respectively, for the same periods last
year. Pre-tax, pre-provision earnings for the quarter and year
ended December 31, 2012 were $963,000 and $3.1 million,
respectively, compared to $503,000 and $1.4 million, respectively,
for the same periods last year.
Pre-tax, pre-provision earnings, a non-GAAP financial measure,
is presented because management believes adjusting the Company's
results to exclude taxes and loan loss provisions provides
stockholders with a useful metric for evaluating the core
profitability of the Company. A schedule reconciling our GAAP net
income to pre-tax, pre-provision earnings is provided in the table
below.
Alan I. Rothenberg, Chairman of the Board and Chief Executive
Officer of the Company stated, "I'm pleased to announce our
financial results for this year. Net income for the current
year increased to $2.9 million and exceeded the prior year results
by over 187%. We've also experienced robust growth in our
balance sheet primarily resulting from a 25% increase in our
deposit balances compared to the previous year. At the end of
this year, total assets were $499 million, which is the largest
reported asset size in our Company's history. In addition, I'm
further encouraged by the decline in our non-performing assets,
which have declined to $1.9 million compared to $7.6 million at the
end of last year. Our non-performing assets are at the lowest
level since 2008, when the economic recession
started. Highlights for the year end include:
- Growth in total assets from $405 million at December 31, 2011
to $499 million at December 31, 2012;
- Growth in total deposits from $332 million at December 31, 2011
to $417 million at December 31, 2012, while reducing our cost of
deposits from 27 basis points during the prior year to 17 basis
points during the current year;
- Continued improvement in our credit quality, with
non-performing assets being reduced to $1.9 million at December 31,
2012, compared to $7.6 million at December 31, 2011;
- Growth in total investments from $130 million at December 31,
2011 to $181 million at December 31, 2012;
- Improved net interest income of $14.1 million for the year
ended December 31, 2012, respectively, compared to $11.3 million
for the same period last year, despite a decrease in our net
interest margin; and
- Improved diluted earnings per share, increasing to $0.33 per
share for the year ended December 31, 2012, compared to $0.11 per
share during the same period last year."
Jason P. DiNapoli, President and Chief Operating Officer of the
Company stated, "I'm encouraged by our financial results for this
year and I'm cautiously optimistic that we're well positioned to
benefit as economic conditions improve. The progress this year
in developing our franchise is primarily attributable to our strong
team and their efforts to establish our Bank as the premier
community bank serving the Westside of Los Angeles. In
addition, our credit strategy to aggressively identify and address
problem assets has allowed us to focus our attention on future
opportunities, as opposed to dealing with credit issues stemming
from the recession."
2012 4th Quarter and Year End Highlights
- The Bank's total risk-based capital ratio was 15.29% at
December 31, 2012, compared to the requirement of 10.00% to
generally be considered a "well capitalized" financial institution
for regulatory purposes. The Bank's equity is comprised solely
of common stock, and does not include any capital received in
connection with TARP, or other forms of capital such as trust
preferred securities, convertible preferred stock or other equity
or debt instruments.
- Total assets increased 23.2%, or $93.9 million, to $499.2
million at December 31, 2012, from $405.3 million at December 31,
2011.
- Total core deposits, which include non-interest bearing demand
deposits, interest bearing demand deposits, and money market
deposits and savings, were $371.4 million and $285.6 million at
December 31, 2012 and 2011, respectively, representing an increase
of $85.7 million, or 30.0%.
- Net interest margin was 3.24% and 3.12% for the quarter and
year ended December 31, 2012, respectively, compared to 3.07% and
3.21% for the same periods last year.
- Cost of funds were 20 and 24 basis points for the quarter and
year ended December 31, 2012, respectively, compared to 26 and 30
basis points for the same periods last year.
- Investment securities were $181.2 million at December 31, 2012,
representing 36.3% of our total assets, compared to $129.9 million,
or 32.1% of our total assets at December 31, 2011.
- Loans were $266.7 million at December 31, 2012, compared to
$233.0 million at December 31, 2011. Loan originations were
$52.4 million and $123.1 million during the quarter and year ended
December 31, 2012, respectively, compared to $58.7 million and
$117.1 million during the same periods last year.
- As of December 31, 2012, the allowance for loan losses ("ALL")
was $6.0 million, or 2.26% of total loans, compared to $5.3
million, or 2.27% of total loans, at December 31, 2011. The
ALL to non-performing loans was 324.36% and 69.47% at December 31,
2012 and 2011, respectively.
- Non-performing loans to total loans was 0.70% and 3.26% at
December 31, 2012 and 2011, respectively.
- Non-performing assets as a percentage of total assets declined
to 0.39% at December 31, 2012, compared to 1.88% at December 31,
2011.
- For the quarter and year ended December 31, 2012, the Company
recorded net income of $912,000, or $0.10 per diluted share, and
$2.9 million, or $0.33 per diluted share, respectively. During
the same periods last year, the Company reported net income of
$432,000, or $0.05 per diluted share, and $1.0 million, or $0.11
per diluted share, respectively.
Capital Adequacy
At December 31, 2012, the Company's stockholders' equity totaled
$49.2 million compared to $45.1 million at December 31,
2011. At December 31, 2012, the Bank's total risk-based
capital ratio, tier 1 risk-based capital ratio, and tier 1 leverage
ratio were 15.29%, 14.03%, and 9.22%, respectively, compared to the
requirements of 10.00%, 6.00%, and 5.00%, respectively, to
generally be considered a "well capitalized" financial institution
for regulatory purposes.
Balance Sheet
Total assets at December 31, 2012 were $499.2 million,
representing an increase of approximately $93.9 million, or 23.2%,
from $405.3 million at December 31, 2011. The increase in
total assets is primarily attributable to growth in our deposit
portfolio. Cash and cash equivalents at December 31, 2012 were
$50.6 million, representing an increase of $8.6 million, or 20.6%,
from $41.9 million at December 31, 2011. Investment securities
were $181.2 million at December 31, 2012, compared to $129.9
million at December 31, 2011, representing an increase of $51.3
million, or 39.5%. The increase in our investment portfolio is
primarily attributable to the purchase of agency mortgage-backed
securities and investment grade corporate notes of $62.3 million
and $28.4 million, respectively, during the year ended December 31,
2012. The weighted average life of our investment securities
was 2.80 years and 3.50 years at December 31, 2012 and 2011,
respectively. Loans were $266.7 million and $233.0 million at
December 31, 2012 and December 31, 2011, respectively. The
majority of growth within our loan portfolio primarily related to
an increase in our commercial real estate loans. Commercial
real estate loans were $110.0 million at December 31, 2012,
compared to $70.3 million at December 31, 2011. Prepayment
speeds for the quarter and year ended December 31, 2012 were 27.0%
and 23.2%, respectively, compared to 18.5% and 20.7% for the same
periods last year.
Total liabilities at December 31, 2012 increased by $89.8
million, or 24.9%, to $450.0 million, compared to $360.2 million at
December 31, 2011. This increase is primarily due to growth
within our non-interest bearing deposits of $73.2 million, and is
primarily due to our continued core deposit gathering
efforts. Total core deposits, which includes non-interest
bearing demand deposits, interest bearing demand deposits and money
market deposits and savings, were $371.4 million and $285.6 million
at December 31, 2012 and 2011, respectively, representing an
increase of $85.7 million, or 30.0%.
Credit Quality
Allowance and Provision for Loan Losses
The ALL was $6.0 million, or 2.26% of our total loan portfolio,
at December 31, 2012, compared to $5.3 million, or 2.27%, at
December 31, 2011. At December 31, 2012 and 2011, our
non-performing loans were $1.9 million and $7.6 million,
respectively. The ratio of our ALL to non-performing loans was
324.36% and 69.47% at December 31, 2012 and 2011,
respectively. In addition, our ratio of non-performing loans
to total loans was 0.70% and 3.26% at December 31, 2012 and 2011,
respectively.
The ALL is impacted by inherent risk in the loan portfolio,
including the level of our non-performing loans, as well as
specific reserves and charge-off activities. There was no
provision for loan losses for the quarter and year ended December
31, 2012. There was no provision for loan losses for the
quarter ended December 31, 2011 and a $275,000 provision for loan
losses for the year ended December 31, 2011. The decline in
provision for loan losses recorded during the year ended December
31, 2012, compared to the same period last year, is primarily due
to the improvement in the level of our criticized and classified
loans, as well as an increase in our ALL during the current year
resulting from net recoveries recognized on previously charged-off
loans. These declines were partially offset by the provision
needed for the $33.7 million increase in our loan portfolio during
the current year as compared to the same period last
year. Criticized and classified loans generally consist of
special mention, substandard and doubtful loans. Special
mention, substandard and doubtful loans were $6.6 million, $3.5
million and none, respectively, at December 31, 2012, compared to
$3.7 million, $11.0 million, and none, respectively, at December
31, 2011. We had net recoveries of $1.1 million and $731,000
during the quarter and year ended December 31, 2012, respectively,
compared to net recoveries (charge-offs) of $38,000 and ($274,000)
during the same periods last year. Management believes that
the ALL as of December 31, 2012 and 2011 was adequate to absorb
known and inherent risks in the loan portfolio.
Non-Performing Assets
Non-performing assets totaled $1.9 million and $7.6 million at
December 31, 2012 and 2011, respectively. Non-accrual loans
totaled $1.9 million and $7.6 million at December 31, 2012 and
2011, respectively. At December 31, 2012, non-accrual loans
consisted of three commercial loans totaling $1.5 million and one
consumer related loan totaling $345,000. At December 31, 2011,
non-accrual loans consisted of four commercial loans totaling $2.2
million, two commercial real estate loans totaling $3.8 million,
one commercial land loan totaling $1.3 million and one consumer
related loan totaling $345,000. At December 31, 2012, other
real estate owned ("OREO") consisted of one undeveloped land
property totaling $90,000. There was no OREO outstanding at
December 31, 2011. As a percentage of total assets, the amount
of non-performing assets was 0.39% and 1.88% at December 31, 2012
and 2011, respectively.
Refer to "Subsequent Events" discussion below for further
details regarding the pay-off of a substandard non-accrual loan in
February 2013.
Net Interest Income and Margin
During the quarter and year ended December 31, 2012, net
interest income was $4.0 million and $14.1 million, respectively,
compared to $3.0 million and $11.3 million for the same periods
last year. These increases were primarily attributable to
additional interest earned in connection with our loan and
investment portfolios as compared to the same periods last year,
and were the result of increases in the average balances of these
portfolios during the current periods, partially offset by a
decline in yields earned. In addition, during the quarter
ended December 31, 2012, the Company recognized $396,000 of
interest income in connection with the pay-off of a non-accrual
loan.
The Company's net interest margin (net interest income divided
by average interest earning assets) was 3.24% for the quarter ended
December 31, 2012, compared to 3.07% for the same period last
year. This 17 basis point improvement in net interest margin
is primarily due to the interest income recognized as a part of the
pay-off of the non-accrual loan discussed above, and to a lesser
extent, the decline in the cost of interest bearing deposits and
borrowings. Excluding the impact of the pay-off of this
non-accrual loan, the yield on earning assets is decreasing due to
a decline in interest rates earned on these assets during the
quarter ended December 31, 2012, as compared to the same period
last year. These declines were caused by a general downward
trend in interest rates, as well as competitive loan pricing
conditions in our market, which have continued to compress loan
yields. During the quarter ended December 31, 2012 as compared
to the same period last year, the decline in our cost of interest
bearing deposits and borrowings is primarily attributable to a
decrease in interest rates paid on these accounts. The average
cost of interest bearing deposits and borrowings was 0.35% during
the quarter ended December 31, 2012 compared to 0.41% for the same
period last year.
The Company's net interest margin was 3.12% for the year ended
December 31, 2012, compared to 3.21% for the same period last
year. This 9 basis point decline in net interest margin is
primarily due to a decrease in the yield on earning assets,
partially offset by a decline in the cost of interest bearing
deposits and borrowings and the interest income recognized as a
part of the pay-off of a non-accrual loan. As discussed above,
the decrease in yield on earning assets is primarily attributable
to a decline in interest rates earned on these assets during the
year ended December 31, 2012, as compared to the same period last
year, and was caused by a general decline in interest rates, as
well as competitive loan pricing conditions in our market, which
have continued to compress loan yields. In addition, the
decline in our cost of interest bearing deposits and borrowings is
primarily attributable to a decrease in interest rates paid on
these accounts. The average cost of interest bearing deposits
and borrowings was 0.38% during the year ended December 31, 2012
compared to 0.46% for the same period last year.
Non-Interest Income
Non-interest income was $726,000 and $2.0 million for the
quarter and year ended December 31, 2012, respectively, compared to
$316,000 and $934,000 for the same periods last year. The
increase in non-interest income during the quarter and year ended
December 31, 2012, compared to the same period last year is
primarily attributable to an increase in loan arrangement fees
earned in connection with our college loan funding
program. The increase during the year ended December 31, 2012,
compared to the same period last year was due to the loan
arrangement fees, as well as, other income recognized on interest
rate swap transactions entered into during the year ended December
31, 2012. During the first quarter of 2013, the Company
terminated its college loan funding program. During the year
ended December 31, 2012, net earnings in connection with this
program was approximately $550,000, consisting of non-interest
income and non-interest expense of $1.5 million and $911,000,
respectively. Refer to "Subsequent Events" discussion below
for further details regarding the termination of the college loan
funding program.
Non-Interest Expense
Non-interest expense was $3.7 million and $13.0 million for the
quarter and year ended December 31, 2012, respectively, compared to
$2.9 million and $10.8 million for the same periods last
year. The increase in non-interest expense during the quarter
ended December 31, 2012, is primarily due to the additional costs
incurred related to expanding the Bank's business development team
and increased costs associated with our college loan funding
program. During the year ended December 31, 2012, this
increase was primarily due to the factors discussed above, as well
as expenses incurred related to interest rate swaps, as well as the
opening of our Santa Monica relationship office in the middle of
2011. As discussed above, the Company terminated its college
loan funding program during the first quarter of 2013. Refer
to "Subsequent Events" discussion below for further details
regarding the termination of the college loan funding
program.
Income Tax Provision
During the quarter and year ended December 31, 2012, we recorded
a tax expense of approximately $51,000 and $111,000, respectively,
compared to $71,000 for the same periods last year. The
Company does not anticipate owing any substantial taxes for Federal
or State purposes until the Company's net operating losses ("NOL")
are fully utilized. As of December 31, 2012, the Company had
federal and state NOL carryforwards of approximately $4.1 million
and $6.8 million, respectively. As of December 31, 2011, the
Company had federal and state NOL carryforwards of approximately
$8.1 million and $10.6 million, respectively. For federal and
California tax purposes, the Company's NOL carryforwards expire
beginning in 2029.
Net Income
For the quarter and year ended December 31, 2012, the Company
recorded net income of $912,000, or $0.10 per diluted share, and
$2.9 million, or $0.33 per diluted share, respectively, compared to
$432,000, or $0.05 per diluted share, and $1.0 million, or $0.11
per diluted share, for the same periods last year.
Subsequent Events
On February 19, 2013, the Company notified the student loan
provider that it partners with in connection with its college loan
funding program that the Company is terminating its participation
in this program. Consistent with its agreement, the Company's
involvement in the program will terminate 60 days from the date of
this notification.
On February 20, 2013, the Bank received a pay-off on a
commercial loan that was classified at December 31, 2012 as a
substandard non-accrual loan. The outstanding principal
balance at December 31, 2012 was $810,000. In addition to the
pay-off of the outstanding principal balance, this pay-off resulted
in a $1.0 million recovery, as well as the recognition of
approximately $220,000 of interest income that had been deferred
following the commercial loan's classification as a non-accrual
loan in December 2010. At December 31, 2012 and 2011, this
loan had a specific allowance for loan losses allocated to it of
$500,000 and $700,000, respectively. The pay-off,
corresponding recovery and previously deferred interest income were
all recognized at the time of pay-off during the quarter ending
March 31, 2013. In the ordinary course of business, management
will assess the adequacy of the allowance for loan losses taking
into consideration, among many other factors, the foregoing
event.
About 1st Century Bancshares, Inc.
1st Century Bancshares, Inc. is a publicly owned company traded
on the NASDAQ Capital Market under the symbol "FCTY." The
Company's wholly-owned subsidiary, 1st Century Bank, N.A., is
headquartered in the Century City area of Los Angeles, with a full
service business bank in Century City, CA, and a relationship
office in Santa Monica, CA. The Bank's primary focus is serving the
specific banking needs of entrepreneurs, professionals and small
businesses with the personal service of a traditional community
bank, while offering the technologies of a big money center
bank. The Company maintains a website at www.1cbank.com. By
including the foregoing website address link, the Company does not
intend to and shall not be deemed to incorporate by reference any
material contained therein.
Safe Harbor
Certain matters discussed in this press release may constitute
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. You can find many (but
not all) of these forward-looking statements by looking for words
such as "approximates," "believes," "expects," "anticipates,"
"estimates," "intends," "plans," "would," "may" or other similar
expressions in this press release. These statements are based upon
our management's current expectations and speak only as of the date
hereof. Forward-looking statements are subject to certain
risks and uncertainties that could cause our actual results,
performance or achievements to differ materially and adversely from
those expressed, suggested or implied herein. Accordingly,
investors should use caution in relying on forward-looking
statements to anticipate future results or trends. These risks
and uncertainties include, but are not limited to: (1) the impact
of changes in interest rates, (2) political instability, (3)
changes in the monetary policies of the U.S. Government, (4) a
renewed decline in economic conditions, (5) continued deterioration
in the value of California real estate, both residential and
commercial, (6) an increase in the level of non-performing assets
and charge-offs, (7) further increased competition among financial
institutions, (8) the Company's ability to continue to attract
interest bearing deposits and quality loan customers, (9) further
government regulation and the implementation and costs associated
with the same, (10) internal and external fraud and cyber-security
threats including the loss of bank or customer funds, loss of
system functionality or the theft or loss of data, (11)
management's ability to successfully manage the Company's
operations, and (12) the other risks set forth in the Company's
reports filed with the U.S. Securities and Exchange Commission. The
Company does not undertake, and specifically disclaims, any
obligation to revise or update any forward-looking statements for
any reason.
(Tables follow)
SUMMARY FINANCIAL INFORMATION
The following tables present relevant financial data from the
Company's recent performance (dollars in thousands, except per
share data):
|
December 31, |
Balance Sheet Results: |
2012 |
2011 |
Total Assets |
$499,173 |
$405,274 |
Total Loans |
$266,671 |
$233,005 |
Allowance for Loan Losses
("ALL") |
$6,015 |
$5,284 |
Non-Performing Assets |
$1,944 |
$7,606 |
Investment Securities-AFS, at
estimated fair value |
$181,225 |
$129,906 |
Deposits: |
|
|
Non-Interest Bearing Demand
Deposits |
$196,026 |
$122,843 |
Interest Bearing Demand
Deposits |
23,233 |
20,739 |
Money Market Deposits and
Savings |
152,094 |
142,061 |
Certificates of Deposit |
45,328 |
46,811 |
Total Deposits |
$416,681 |
$332,454 |
Total Stockholders' Equity |
$49,173 |
$45,051 |
Gross Loans to Deposits |
63.99% |
70.08% |
Ending Book Value per
Share |
$5.38 |
$4.97 |
|
|
|
|
Quarters Ended December
31, |
Quarterly Operating Results (unaudited): |
2012 |
2011 |
Net Interest Income |
$3,965 |
$3,036 |
Provision for Loan Losses |
$ -- |
$-- |
Non-Interest Income |
$726 |
$316 |
Non-Interest Expense |
$3,728 |
$2,849 |
Income Tax Provision |
$51 |
$71 |
Net Income |
$912 |
$432 |
Basic Earnings per Share |
$0.11 |
$0.05 |
Diluted Earnings per Share |
$0.10 |
$0.05 |
Quarterly Net Interest
Margin* |
3.24% |
3.07% |
|
|
|
Reconciliation of QTD Net Income
to Pre-Tax, Pre-Provision Earnings: |
|
Net Income |
$912 |
$432 |
Provision for Loan Losses |
-- |
-- |
Income Tax Provision |
51 |
71 |
Pre-Tax, Pre-Provision
Earnings |
$963 |
$503 |
|
|
|
|
Years Ended December
31, |
YTD Operating Results: |
2012 |
2011 |
Net Interest Income |
$14,073 |
$11,281 |
Provision for Loan Losses |
$-- |
$275 |
Non-Interest Income |
$1,986 |
$934 |
Non-Interest Expense |
$13,006 |
$10,844 |
Income Tax Provision |
$111 |
$71 |
Net Income |
$2,942 |
$1,025 |
Basic Earnings per Share |
$0.35 |
$0.12 |
Diluted Earnings per Share |
$0.33 |
$0.11 |
YTD Net Interest Margin |
3.12% |
3.21% |
|
|
|
Reconciliation of YTD Net Income
to Pre-Tax, Pre-Provision Earnings: |
|
Net Income |
$2,942 |
$1,025 |
Provision for Loan Losses |
-- |
275 |
Income Tax Provision |
111 |
71 |
Pre-Tax, Pre-Provision
Earnings |
$3,053 |
$1,371 |
|
|
|
*Percentages are reported on an annualized
basis. |
|
|
CONTACT: Alan I. Rothenberg
Chairman/Chief Executive Officer
Phone: (310) 270-9501
Jason P. DiNapoli
President/Chief Operating Officer
Phone: (310) 270-9505
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