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 three and nine months ended September
30, 2013 of $803,000 and $6.6 million, respectively, compared to
$687,000 and $2.0 million for the same periods last year. Pre-tax,
pre-provision earnings for the three and nine months ended
September 30, 2013 was $1.0 million and $3.2 million, respectively,
compared to $712,000 and $2.1 million 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 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 proud to announce our third
quarter financial results. Core earnings growth remains
encouraging and for the first time in our history, we've exceeded
the $500 million threshold in total assets. Our asset growth
is being driven by a combination of quality loan demand and an
increase in our deposit relationships. During the current
year-to-date period, loans have increased by 34%, while
non-interest bearing deposits have grown by 15%."
Jason P. DiNapoli, President and Chief Operating Officer of the
Company added, "Over the past three quarters, we've seen our loan
portfolio grow by over $90 million, while our non-performing assets
continue to decline. Since the beginning of this year, our
ratio of non-performing assets to total assets has declined by
almost 60%. In addition, our business development team has
done an outstanding job of generating new customer relationships,
which has helped increase both deposit and loan levels. We've
always believed that our core deposit relationships would
ultimately lead to increased loan opportunities, and the results
from this quarter, as well as the year-to-date period, further
support this strategy."
2013 3rd Quarter
Highlights
- The Bank's total risk-based capital ratio was 14.05% at
September 30, 2013, 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.
- For the three and nine months ended September 30, 2013, the
Company recorded net income of $803,000, or $0.09 per diluted
share, and $6.6 million, or $0.74 per diluted share,
respectively. During the same periods last year, the Company
reported net income of $687,000, or $0.08 per diluted share, and
$2.0 million, or $0.23 per diluted share, respectively. The
increase in net income during the three months ended September 30,
2013 as compared to the same period last year was primarily due to
a $583,000 increase in net interest income, partially offset by a
$200,000 increase in provision for loan losses and a $273,000
increase in non-interest expenses. The increase in net income
for the nine months ended September 30, 2013, as compared to the
same period last year, is primarily related to increases in net
interest income and non-interest income of $1.7 million and
$341,000, respectively, as well as a reduction of provision for
loan losses of $300,000 and the reversal of our deferred tax
valuation allowance, which resulted in an income tax benefit of
approximately $3.2 million. These increases were partially
offset by an increase in non-interest expenses of $916,000.
- At September 30, 2013 and 2012, the Company's book value per
share was $5.87 and $5.33, respectively, representing an increase
of 10.1% during the twelve month period.
- Net interest margin was 3.08% and 3.17% for the three and nine
months ended September 30, 2013, respectively, compared to 2.95%
and 3.07% for the same periods last year. The increase in net
interest margin during the quarter is primarily due to an increase
in the average balance of loans relative to total earning assets as
compared to the same period last year. The increase in net
interest margin during the nine months ended September 30, 2013, is
primarily attributable to the recovery of $294,000 in deferred
interest income from the repayment of non-accrual and previously
charged off loan balances. The increases in net interest
margin during both the three and nine months ended September 30,
2013 were also positively impacted by a decline in the cost of our
interest bearing liabilities as compared to the same periods last
year, and negatively impacted by a general decline in loan
yields.
- Loans increased to $356.7 million at September 30, 2013,
compared to $266.7 million at December 31, 2012. Loan originations
were $74.8 million and $182.2 million during the three and nine
months ended September 30, 2013, respectively, compared to $23.7
million and $70.6 million during the same periods last year.
- Non-performing loans declined to $743,000, or 0.21% of total
loans, at September 30, 2013, compared to $1.9 million, or 0.70% of
total loans, at December 31, 2012.
- Non-performing assets as a percentage of total assets declined
to 0.16% at September 30, 2013, compared to 0.39% at December 31,
2012.
- Net loan recoveries were $16,000 and $1.1 million during the
three and nine months ended September 30, 2013, respectively,
compared to net recoveries of $15,000 during the three months ended
September 30, 2012 and net charge-offs of $403,000 during the nine
months ended September 30, 2012.
- As of September 30, 2013, the allowance for loan losses ("ALL")
was $6.8 million, or 1.92% of total loans, compared to $6.0
million, or 2.26% of total loans, at December 31, 2012. The ALL to
non-performing loans was 919.98% and 324.36% at September 30, 2013
and December 31, 2012, respectively.
- Investment securities declined to $124.1 million at September
30, 2013, representing 23.3% of our total assets, compared to
$181.2 million, or 36.3% of our total assets, at December 31,
2012. During the three and nine months ended September 30,
2013, the Company sold $8.6 million and $19.4 million,
respectively, of investment securities, recognizing gains of
$170,000 and $705,000, respectively, in connection with these
sales. In addition, the unrealized gain on investment
securities declined to $847,000 at September 30, 2013, compared to
$4.1 million at December 31, 2012.
- Total core deposits, which include non-interest bearing demand
deposits, interest bearing demand deposits, and money market
deposits and savings, were $405.3 million and $371.4 million at
September 30, 2013 and December 31, 2012,
respectively. Non-interest bearing deposits represent 50.2% of
total deposit at September 30, 2013, compared to 47.0% at December
31, 2012.
- Cost of funds declined to 17 and 18 basis points for the three
and nine months ended September 30, 2013, respectively, compared to
23 and 25 basis points for the same periods last year.
Capital Adequacy
At September 30, 2013, the Company's stockholders' equity
totaled $54.4 million compared to $49.2 million at December 31,
2012. At September 30, 2013, the Bank's total risk-based
capital ratio, tier 1 risk-based capital ratio, and tier 1 leverage
ratio were 14.05%, 12.80%, and 9.78%, 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 September 30, 2013 were $532.3 million,
representing an increase of $33.2 million, or 6.6%, from $499.2
million at December 31, 2012. Cash and cash equivalents at
September 30, 2013 were $47.7 million, representing a decrease of
$2.8 million, or 5.6%, from $50.6 million at December 31, 2012.
Loans increased by $90.0 million, from $266.7 million at December
31, 2012 to $356.7 million at September 30, 2013. The majority
of growth within our loan portfolio related to increases of $40.6
million in commercial real estate loans, $23.7 million in our
single-family loans, and $14.6 million in construction and land
development loans. Loan originations were $74.8 million and $182.2
million during the three and nine months ended September 30, 2013,
compared to $23.7 million and $70.6 million during the same periods
last year. Prepayment speeds for the three and nine months
ended September 30, 2013 were 5.6% and 13.0%, respectively,
compared to 19.4% and 21.9% for the same periods last
year. Investment securities were $124.1 million at September
30, 2013, compared to $181.2 million at December 31, 2012,
representing a decrease of $57.2 million, or 31.6%. The weighted
average life of our investment securities was 2.66 years and 2.80
years at September 30, 2013 and December 31, 2012,
respectively.
Total liabilities at September 30, 2013 increased by $27.9
million, or 6.2%, to $477.9 million compared to $450.0 million at
December 31, 2012. This increase is primarily due to a $31.6
million increase in deposits. Total core deposits, which includes
non-interest bearing demand deposits, interest bearing demand
deposits and money market deposits and savings, were $405.3 million
and $371.4 million at September 30, 2013 and December 31, 2012,
respectively, representing an increase of $33.9 million, or
9.1%.
Credit Quality
Allowance and Provision for Loan Losses
The ALL was $6.8 million, or 1.92% of our total loan portfolio,
at September 30, 2013, compared to $6.0 million, or 2.26% of our
total loan portfolio, at December 31, 2012. At September 30, 2013
and December 31, 2012, our non-performing loans were $743,000 and
$1.9 million, respectively. The decline in non-performing loans
during the nine months ended September 30, 2013 was primarily
related to the full repayment of two loans that had been classified
as non-performing at December 31, 2012. The ratio of our ALL
to non-performing loans was 919.98% and 324.36% at September 30,
2013 and December 31, 2012, respectively. In addition, our
ratio of non-performing loans to total loans was 0.21% and 0.70% at
September 30, 2013 and December 31, 2012, 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. During the three
months ended September 30, 2013, we recorded provision for loan
losses of $200,000. During the nine months ended September 30,
2013, we reversed $300,000 of provision for loan losses. There
was no provision for loan losses recorded during the three and nine
months ended September 30, 2012. The provision for loan
losses recorded during the three months ended September 30, 2013
was primarily recorded to supplement the Bank's ALL as a result of
loan growth experienced during the current quarter. During
the three months ended September 30, 2013, total loans increased by
$44.4 million, compared to June 30, 2013. The reversal in
provision for loan losses during the nine months ended September
30, 2013, is primarily due to the loan recoveries discussed above,
as well as the continued improvement in the level of our criticized
and classified loans. These declines were partially offset by
additional provisions required for the $90.0 million increase in
our loan portfolio during the nine months ended September 30, 2013.
Criticized and classified loans generally consist of special
mention, substandard and doubtful loans. Special mention,
substandard and doubtful loans were $3.1 million, $2.0 million and
none, respectively, at September 30, 2013, compared to $888,000,
$8.1 million and none, respectively, at September 30, 2012.
We had net recoveries of $16,000 and $1.1 million during the
three and nine months ended September 30, 2013, respectively,
compared to net recoveries of $15,000 during the three months ended
September 30, 2012 and net charge-offs of $403,000 during the nine
months ended September 30, 2012. At September 30, 2013, the
ALL to total loans was 1.92% compared to 2.26% at December 31,
2012. The decline in this ratio is primarily due to the $90.0
million increase in loans during the nine months ended September
31, 2013, as well as the favorable loan trends discussed
above. The risks associated with the adequacy of our ALL and
the decline in this ratio may have increased as a result of our
loan growth. Management will continue to closely monitor the
adequacy of the ALL and will make adjustments as warranted.
Management believes that the ALL as of September 30, 2013 and
December 31, 2012 was adequate to absorb known and inherent risks
in the loan portfolio.
Non-Performing Assets
Non-performing assets totaled $833,000 and $1.9 million at
September 30, 2013 and December 31, 2012, respectively. Non-accrual
loans totaled $743,000 and $1.9 million at September 30, 2013 and
December 31, 2012, respectively. At September 30, 2013, non-accrual
loans consisted of two commercial loans totaling $714,000 and one
consumer loan totaling $29,000. At December 31, 2012,
non-accrual loans consisted of three commercial loans totaling $1.5
million and one consumer loan totaling $345,000. At September
30, 2013 and December 31, 2012, other real estate owned ("OREO")
consisted of one undeveloped land property totaling
$90,000. As a percentage of total assets, the amount of
non-performing assets was 0.16% and 0.39% at September 30, 2013 and
December 31, 2012, respectively.
Net Interest Income and Margin
During the three and nine months ended September 30, 2013, net
interest income was $4.0 million and $11.8 million, respectively,
compared to $3.4 million and $10.1 million for the same periods
last year. The average balances of our loan portfolio were
$330.5 million and $304.2 million during the three and nine months
ended September 30, 2013, respectively, compared to $229.7 million
and $230.9 million for the same periods last year. In
addition, during the nine months ended September 30, 2013, the
Company recognized $294,000 of interest income in connection with
the pay-off of non-accrual and previously charged off loans.
The Company's net interest margin (net interest income divided
by average interest earning assets) was 3.08% for the three months
ended September 30, 2013, compared to 2.95% for the same period
last year. The 13 basis point improvement in net interest
margin is primarily due to a $100.7 million increase in the average
balance of loans as compared to the same period last year. Net
interest margin during the three months ended September 30, 2013
was also positively impacted by a decline in the cost of our
interest bearing liabilities as compared to the same period last
year, and negatively impacted by a general decline in loan
yields. The decline in the 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 0.31% during the three months
ended September 30, 2013 compared to 0.38% for the same period last
year. The decline in loan yield was primarily 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.
The Company's net interest margin was 3.17% for the nine months
ended September 30, 2013, compared to 3.07% for the same period
last year. The 10 basis point improvement in net interest
margin is primarily due to the interest income recognized as a part
of the pay-offs discussed above. Excluding the impact of
these pay-offs, our net interest margin would have declined, as
compared to the same period last year. This decline was
primarily due to a decrease in loan yield, partially offset by an
increase in the average balance of loans relative to total earning
assets as compared to the same period last year, and a decline in
the cost of our interest bearing liabilities. As discussed
above, the decline in loan yield was 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. The decline in the 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 0.32% and 0.39% during the nine
months ended September 30, 2013 and 2012, respectively.
Non-Interest Income
Non-interest income was $405,000 and $1.6 million for the three
and nine months ended September 30, 2013, respectively, compared to
$424,000 and $1.3 million for the same periods last year.
During the three and nine months ended September 30, 2013,
the Company sold $8.6 million and $19.4 million, respectively, of
investment securities, recognizing gains of $170,000 and $705,000,
respectively. With the exception of such gains, non-interest
income primarily consists of loan arrangement fees earned in
connection with our college loan funding program and customer
related fee income. During the first quarter of 2013, the
Company terminated this program.
Non-Interest Expense
Non-interest expense was $3.4 million and $10.2 million for the
three and nine months ended September 30, 2013, compared to $3.1
million and $9.3 million for the same periods last year. The
increases in non-interest expense during the three and nine months
ended September 30, 2013 as compared to the same periods last year
is primarily due to the costs incurred to expand the Bank's
business development and related operational support teams, as well
as the additional costs incurred to address regulatory compliance
matters.
Income Tax Provision
During the nine months ended September 30, 2013, we recorded a
tax benefit of approximately $3.2 million. The tax benefit
recognized was related to the reversal of the Company's deferred
tax valuation allowance that had been previously established during
the year ended December 31, 2009. In making this
determination, management analyzed, among other things, our recent
history of earnings and cash flows, forecasts of future earnings,
improvements in the credit quality of the Company's loan portfolio,
the nature and timing of future deductions and benefits represented
by the deferred tax assets and our cumulative earnings for the 12
quarters preceding the reversal of this valuation
allowance. No tax provision was recorded during the three
months ended September 30, 2013. Beginning in January 2014,
the Company will begin recording tax provisions at its estimated
effective tax rate of approximately 42%. During the three and
nine months ended September 30, 2012, we recorded a tax expense of
$25,000 and $60,000, respectively.
Net Income
For the three and nine months ended September 30, 2013, the
Company recorded net income of $803,000, or $0.09 per diluted
share, and $6.6 million, or $0.74 per diluted share, compared to
$687,000, or $0.08 per diluted share, and $2.0 million, or $0.23
per diluted share, for the same periods last year.
Regulatory Matter
On September 11, 2013, the Board of Directors of the Bank
entered into a stipulation and consent to the issuance of a consent
order with the Office of the Comptroller of the Currency (the
"OCC") consenting to the issuance of a consent order (the "Consent
Order") by the OCC, effective as of that date. The Consent
Order requires the Bank to take corrective action to enhance its
program and procedures for compliance with the Bank Secrecy Act and
other anti-money laundering regulations.
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, (12) the possibility
that we will be unable to comply with the requirements set forth in
the OCC's Consent Order, which could result in restrictions on our
operations, and (13) 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):
|
September 30, 2013 |
December 31, 2012 |
September 30, 2012 |
Balance Sheet Results: |
(unaudited) |
|
(unaudited) |
Total Assets |
$532,327 |
$499,173 |
$474,363 |
Total Loans |
$356,706 |
$266,671 |
$241,320 |
Allowance for Loan Losses
("ALL") |
$6,835 |
$6,015 |
$4,881 |
Non-Performing Assets |
$833 |
$1,944 |
$6,499 |
Investment Securities-AFS, at
estimated fair value |
$124,055 |
$181,225 |
$194,659 |
Deposits: |
|
|
|
Non-Interest Bearing Demand
Deposits |
$225,001 |
$196,026 |
$170,568 |
Interest Bearing Demand
Deposits |
$19,323 |
$23,233 |
$28,014 |
Money Market Deposits and
Savings |
$161,007 |
$152,094 |
$152,185 |
Certificates of Deposit |
$42,922 |
$45,328 |
$46,115 |
Total Deposits |
$448,253 |
$416,681 |
$396,882 |
Total Stockholders' Equity |
$54,435 |
$49,173 |
$48,565 |
Gross Loans to Deposits |
79.58% |
63.99% |
60.79% |
Ending Book Value per
Share |
$5.87 |
$5.38 |
$5.33 |
|
|
|
|
|
Three Months Ended
September 30, |
|
Quarterly Operating Results (unaudited): |
2013 |
2012 |
|
Net Interest Income |
$4,009 |
$3,426 |
|
Provision for Loan Losses |
$200 |
$ -- |
|
Gain on Sale of AFS Investment
Securities |
$170 |
$ -- |
|
Other Non-Interest Income |
$405 |
$424 |
|
Non-Interest Expense |
$3,411 |
$3,138 |
|
Income Tax Provision |
$ -- |
25 |
|
Net Income |
$803 |
$687 |
|
Basic Earnings per Share |
$0.09 |
$0.08 |
|
Diluted Earnings per Share |
$0.09 |
$0.08 |
|
Quarterly Net Interest
Margin* |
3.08% |
2.95% |
|
|
|
|
|
Reconciliation of QTD Net Income to Pre-Tax,
Pre-Provision Earnings: |
|
|
|
Net Income |
$803 |
$687 |
|
Provision for Loan Losses |
200 |
-- |
|
Income Tax Provision |
-- |
25 |
|
Pre-Tax, Pre-Provision
Earnings |
$1,003 |
$712 |
|
|
|
|
|
|
Nine Months Ended
September 30, |
|
YTD Operating Results (unaudited): |
2013 |
2012 |
|
Net Interest Income |
$11,761 |
$10,108 |
|
Provision for (Reduction of)
Loan Losses |
$(300) |
$ -- |
|
Gain on Sale of AFS Investment
Securities |
$705 |
$ -- |
|
Other Non-Interest Income |
$1,601 |
$1,260 |
|
Non-Interest Expense |
$10,194 |
$9,278 |
|
Income Tax (Benefit)
Provision |
$(3,178) |
60 |
|
Net Income |
$6,646 |
$2,030 |
|
Basic Earnings per Share |
$0.77 |
$0.24 |
|
Diluted Earnings per Share |
$0.74 |
$0.23 |
|
YTD Net Interest Margin* |
3.17% |
3.07% |
|
|
|
|
|
Reconciliation of YTD Net Income to Pre-Tax,
Pre-Provision Earnings: |
|
|
|
Net Income |
$6,646 |
$2,030 |
|
Provision for (Reduction of)
Loan Losses |
(300) |
-- |
|
Income Tax (Benefit)
Provision |
(3,178) |
60 |
|
Pre-Tax, Pre-Provision
Earnings |
$3,168 |
$2,090 |
|
|
|
|
|
*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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