CONTACT:
Robert F. Mangano
Stephen J. Gilhooly
 
President & Chief Executive Officer
Sr. Vice President & Chief Financial Officer
 
(609) 655-4500
(609) 655-4500
        
PRESS RELEASE - FOR IMMEDIATE RELEASE

1ST CONSTITUTION BANCORP
REPORTS RECORD THIRD QUARTER 2018 RESULTS
AND INCREASES QUARTERLY DIVIDEND TO $0.075

Cranbury NJ - October 19, 2018 -- 1ST Constitution Bancorp (NASDAQ: FCCY), the holding company (the “Company”) for 1ST Constitution Bank (the “Bank”), today reported net income of $4.0 million, an increase of 61.4% compared to net income of $2.5 million for the three months ended September 30, 2017. Diluted earnings per share were $0.46 for the three months ended September 30, 2018 compared to diluted earnings per share of $0.30 for the three months ended September 30, 2017.

The Board of Directors declared a quarterly cash dividend of $0.075 per share of common stock that will be paid on November 22, 2018 to shareholders of record on November 9, 2018. This dividend represents a 25% increase over the dividend per share paid on August 23, 2018.


THIRD QUARTER 2018 HIGHLIGHTS
Return on average assets and return on average equity were 1.34% and 12.89%, respectively.
Book value per share and tangible book value per share were $14.73 and $13.26, respectively, at September 30, 2018.
Net interest income was $11.4 million and the net interest margin was 4.09% on a tax equivalent basis.
A provision for loan losses of $225,000 and net charge-offs of $458,000 were recorded.
Total loans were $881.5 million at September 30, 2018 and included $68.9 million of loans acquired in the merger of New Jersey Community Bank (“NJCB”) with and into the Bank. Commercial business, commercial real estate and construction loans totaled $622.1 million and included $56. million of loans acquired in the NJCB merger. Excluding the loans acquired in the NJCB merger, commercial business, commercial real estate and construction loans totaled $565.8 million and increased $27.6 million, or 5.1%, compared to $538.2 million at December 31, 2017 and increased $52.8 million, or 10.3%, compared to $513.0 million at September 30, 2017.
There were no merger related expenses incurred in the third quarter of 2018.
Non-performing assets were $9.3 million, or 0.78% of assets, and included $2.5 million of OREO at September 30, 2018.
       
On April 11, 2018, the Company completed the NJCB merger. As a result of the NJCB merger, merger related expenses of $2.1 million were incurred primarily in the second quarter of 2018 and the after-tax effect of the merger expenses reduced net income for the nine months ended September 30, 2018 by $1.6 million. The acquisition method of accounting for the business combination resulted in the recognition of a gain from the bargain purchase of $184,000 and no goodwill.

For the nine months ended September 30, 2018, net income was $8.7 million and Adjusted Net Income, which is net income excluding the after-tax effect of the merger expenses and the gain from the bargain purchase, was $10.1 million compared to net income of $6.4 million for the nine months ended September 30, 2017. There were no merger related expenses incurred for the nine months ended September 30, 2017. For the nine months ended September 30, 2018, diluted earnings per share were $1.02 and Adjusted Net


        

Income per diluted share was $1.18 compared to diluted earnings per share of $0.76 for the nine months ended September 30, 2017.

Adjusted Net Income, Adjusted Net Income per diluted share, Adjusted return on average assets and Adjusted return on average equity are non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to, but not as a substitute for, the Company’s GAAP financial results. A reconciliation of these non-GAAP financial measures to the GAAP financial results is attached to this press release. Management believes that the presentation of these non-GAAP financial measures of the Company in this press release may be helpful to readers in understanding the Company’s financial performance without including the financial impact of the NJCB merger when comparing the Company’s income statement for the three and nine-month periods ended September 30, 2018 and 2017.

Robert F. Mangano, President and Chief Executive Officer, stated, “Our strong third quarter results reflected our sound operating fundamentals that were driven by the growth of our loan portfolio. The financial benefit of the higher short-term interest rate environment and our asset sensitive interest rate position is continuing to have a positive effect on net interest income and our net interest margin.” Mr. Mangano added, “The acquisition of New Jersey Community Bank, the conversion of its core operating system and achievement of our anticipated operating synergies through the integration of its operations during the second quarter and our continued focus on operating expense containment also contributed to our performance in the third quarter.”

Discussion of Financial Results
Net income was $4.0 million, or $0.46 per diluted share, for the third quarter of 2018 compared to $2.5 million, or $0.30 per diluted share, for the third quarter of 2017. For the three months ended September 30, 2018, net interest income was $11.4 million, compared to $9.4 million for the three months ended September 30, 2017. The increase in interest-earning assets and the higher yield on loans were the primary drivers of the $2.0 million increase in net interest income. Non-interest expenses were $7.9 million for the third quarter of 2018 compared to $7.6 million for the third quarter of 2017.

Net interest income was $11.4 million for the quarter ended September 30, 2018 and increased $2.0 million, or 21.7%, compared to net interest income of $9.4 million for the third quarter of 2017. Total interest income was $13.8 million for the three months ended September 30, 2018 compared to $10.8 million for the three months ended September 30, 2017. This increase was due primarily to the $134.7 million increase in average loans, reflecting growth primarily of commercial real estate, mortgage warehouse lines, construction loans and commercial business loans. The growth in average loans included loans of approximately $70.7 million from the NJCB merger. Average interest-earning assets were $1.12 billion with a tax-equivalent yield of 4.88% for the third quarter of 2018 compared to $992.0 million with a tax-equivalent yield of 4.39% for the third quarter of 2017. The higher yield on average interest-earning assets for the third quarter of 2018 reflected primarily the higher yield earned on the loan portfolio. The 100 basis point increase in the Federal Reserve’s targeted federal funds rate and the corresponding increase in the Prime Rate since September of 2017 have had a positive effect on the yields of construction, commercial business, home equity and warehouse loans with variable interest rate terms in the third quarter of 2018. Approximately $157,000 of interest income was recognized through the net accretion of discount in the third quarter of 2018 on loans acquired in the NJCB merger due to acquisition accounting.
Interest expense on average interest-bearing liabilities was $2.4 million, with an interest cost of 1.12%, for the third quarter of 2018 compared to $1.5 million, with an interest cost of 0.78%, for the third quarter of 2017. The $936,000 increase in interest expense on interest-bearing liabilities for the third quarter of 2018 reflected primarily higher interest costs due to higher short-term market interest rates in the third quarter of 2018 compared to the third quarter of 2017 and an increase of $107.2 million in average interest-bearing


        

liabilities. The increase in average interest-bearing liabilities was comprised primarily of increases in certificates of deposit and short-term borrowings, which generally have higher interest cost than other types of interest-bearing deposits.
The net interest margin increased to 4.09% for the third quarter of 2018 compared to 3.85% for the third quarter of 2017 due primarily to the higher yield on average interest-earning assets, which more than offset the increase in the average cost of interest-bearing liabilities.
The Company recorded a higher provision for loan losses of $225,000 for the third quarter of 2018 compared to a provision for loan losses of $150,000 for the third quarter of 2017 due primarily to the growth of the loan portfolio and the change in the mix of loans in the loan portfolio.
At September 30, 2018, total loans were $881.5 million and the allowance for loan losses was $8.3 million, or 0.94% of total loans, compared to total loans of $772.0 million and an allowance for loan losses of $7.8 million, or 1.01% of total loans, at September 30, 2017. Management believes that the current economic conditions in New Jersey and operating conditions for the Company are generally positive, which were also considered in management’s evaluation of the adequacy of the allowance for loan losses.
Non-interest income was $2.2 million for the third quarter of 2018, an increase of $38,000 compared to $2.1 million for the third quarter of 2017. Other income increased $47,000 due primarily to higher debit card interchange income and customer service fees. Gains on the sale of loans declined $37,000. In the third quarter of 2018, $25.0 million of residential mortgages were sold and $702,000 of gains were recorded compared to $28.9 million of residential mortgage loans sold and $809,000 of gains recorded in the third quarter of 2017. Management believes that the decrease in residential mortgage loans sold was due primarily to lower residential mortgage lending activity as the result of higher mortgage interest rates in 2018 compared to 2017. In the third quarter of 2018, $7.6 million of SBA loans were sold and gains of $590,000 were recorded compared to $5.8 million of SBA loans sold and gains of $520,000 recorded in the third quarter of 2017. SBA guaranteed commercial lending activity and loan sales vary from period to period and the level of activity is due primarily to the timing of loan originations.
Non-interest expenses were $7.9 million for the third quarter of 2018, which was an increase of $277,000, or 3.6%, compared to $7.6 million for the third quarter of 2017. Salaries and employee benefits expense increased $283,000, or 6.1%, in the third quarter of 2018 due primarily to salaries for former NJCB employees who joined the Company, merit increases and increases in employee benefit expenses. Occupancy costs increased $42,000, or 4.9%, due primarily to the addition of the two former NJCB branch offices in the second quarter of 2018. FDIC insurance expense increased $10,000, or 10.5%, due to the internal growth of loans and assets and the acquisition of NJCB. Other real estate owned expenses increased $62,000 to $73,000 for the third quarter of 2018 due primarily to ownership costs for property insurance and other maintenance expenses associated with a commercial real estate property that was foreclosed in the third quarter of 2018. Other operating expenses decreased $113,000 due primarily to decreases in loan expenses, ATM expenses, business development and marketing expenses.
Income tax expense was $1.4 million for the third quarter of 2018, resulting in an effective tax rate of 26.2%, compared to income tax expense of $1.2 million, which resulted in an effective tax rate of 33.1%, for the third quarter of 2017. The effective tax rate decreased in the third quarter of 2018 due primarily to the decrease in the maximum federal corporate income tax rate from 35% to 21% beginning in 2018 as a result of the enactment of the Tax Cuts and Jobs Act (the “Tax Act”) in December 2017. Partially offsetting the lower federal corporate income tax rate was the enactment of legislation by the State of New Jersey in July of 2018, which increased the corporate income tax rate to 11.5% from 9% for taxable income of $1.0 million or more effective January 1, 2018 and resulted in a 2% higher effective tax rate in the third quarter of 2018.


        

At September 30, 2018, the allowance for loan losses was $8.3 million compared to $8.0 million at December 31, 2017. As a percentage of total loans, the allowance was 0.94% at September 30, 2018 compared to 1.01% at December 31, 2017. The decrease in the allowance as a percentage of loans was due primarily to the NJCB acquisition accounting, which resulted in the elimination of the NJCB allowance for loan losses and the NJCB loans being recorded at their fair value. Included in the fair value of the loans at the date of acquisition was a credit risk adjustment discount of approximately $1.6 million.
Total assets increased $113.2 million to $1.19 billion at September 30, 2018 from $1.08 billion at December 31, 2017 due primarily to a $91.6 million increase in total loans and an increase of $6.8 million in investment securities. The increase in assets was funded primarily by a $19.7 million increase in deposits and a $79.0 million increase in overnight borrowings. Total portfolio loans at September 30, 2018 were $881.5 million compared to $789.9 million at December 31, 2017. The increase in loans was due primarily to an increase of $76.6 million in commercial real estate loans, a $8.2 million increase in construction loans and a $7.1 million increase in residential real estate loans. The NJCB merger contributed $68.9 million to the increase of loans at September 30, 2018.

Total deposits were $941.7 million at September 30, 2018 compared to $922.0 million at December 31, 2017. The acquisition of NJCB contributed $82.7 million of deposits at September 30, 2018. Total deposits, excluding the NJCB deposits, declined $63.0 million during the first nine months of 2018. Municipal deposits, primarily interest-bearing demand deposits and savings accounts, declined approximately $43.2 million from the end of 2017. As a result of the Tax Act, a number of the Bank’s municipal customers experienced significant advanced payments in December 2017 for real estate taxes that were due in 2018. This was due to income tax planning considerations by individuals. As the Bank’s municipal customers expended these additional funds in the first nine months of 2018, their deposit balances declined from the levels at December 31, 2017. The balance of the outflow of interest-bearing demand accounts and savings accounts was due to the routine movement of customers’ funds.


Regulatory capital ratios for the Company and the Bank continue to reflect a strong capital position. Under current regulatory capital standards, the Company’s common equity Tier 1 to risk-based assets (“CET1”), total risk-based capital, Tier I capital, and leverage ratios were 10.43%, 12.84%, 12.08% and 11.19%, respectively, at September 30, 2018. The Bank’s common equity Tier 1, total risk-based capital, Tier 1 capital and leverage ratios were 12.10%, 12.86%, 12.10% and 11.19%, respectively, at June 30, 2018. The Company and the Bank are considered “well capitalized” under these capital standards.

Asset Quality

Non-performing loans were $6.8 million at September 30, 2018 compared to $7.1 million at December 31, 2017 and $6.5 million at September 30, 2017. During the third quarter of 2018, $2.2 million of non-performing loans were resolved. Principal payments of $508,000 on non-accrual loans were recorded in the third quarter of 2018 and loans totaling $108,000 were placed on non-accrual status. One commercial real estate loan with a balance of $1.3 million was foreclosed and transferred to OREO. Charge-offs of loans were $458,000 and no recoveries of loans previously charged-off were recorded for the third quarter of 2018. The allowance for loan losses was 122% of non-performing loans at September 30, 2018 compared to 113% of non-performing loans at December 31, 2017.

Overall, management observed generally stable trends in loan quality, with non-performing loans to total loans of 0.77% and non-performing assets to total assets of 0.78% at September 30, 2018 compared to non-performing loans to total loans of 0.90% and non-performing assets to total assets of 0.66% at December 31, 2017.


        


OREO at September 30, 2018 was $2.5 million and consisted of one residential real estate property acquired in the NJCB merger with a carrying value of $1.1 million, land with a carrying value of $93,000 that was foreclosed in the second quarter of 2018 and a commercial real estate property that was foreclosed in the third quarter of 2018 with a fair value of $1.3 million.

 


        

About 1ST Constitution Bancorp
1ST Constitution Bancorp, through its primary subsidiary, 1ST Constitution Bank, operates 20 branch banking offices in Cranbury (2), Asbury Park, Fort Lee, Freehold, Hamilton, Hightstown, Hillsborough, Hopewell, Jamesburg, Lawrenceville, Little Silver, Neptune, Perth Amboy, Plainsboro, Princeton, Rocky Hill, Rumson, Fair Haven and Shrewsbury, New Jersey.
1ST Constitution Bancorp is traded on the Nasdaq Global Market under the trading symbol “FCCY” and information about the Company can be accessed through the Internet at www.1STCONSTITUTION.com
The foregoing contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not historical facts and include expressions about management’s confidence and strategies and management’s expectations about new and existing programs and products, relationships, opportunities, taxation, technology and market conditions. These statements may be identified by such forward-looking terminology as “expect,” “look,” “believe,” “anticipate,” “may,” “will,” or similar statements or variations of such terms. Actual results may differ materially from such forward-looking statements. Factors that may cause results to differ materially from such forward-looking statements include, but are not limited to, changes in the direction of the economy in New Jersey, the direction of interest rates, effective income tax rates, loan prepayment assumptions, continued levels of loan quality and origination volume, continued relationships with major customers including sources for loans, a higher level of net loan charge-offs and delinquencies than anticipated, bank regulatory rules, regulations or policies that restrict or direct certain actions, the adoption, interpretation and implementation of new or pre-existing accounting pronouncements, a change in legal and regulatory barriers including issues related to compliance with anti-money laundering and bank secrecy act laws, as well as the effects of general economic conditions and legal and regulatory barriers and structure. 1ST Constitution Bancorp assumes no obligation for updating any such forward-looking statements at any time, except as required by law.
 
##############



        

1ST Constitution Bancorp
Selected Consolidated Financial Data
(Dollars in thousands, except per share data)
(Unaudited)
 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2018
 
2017
 
2018
 
2017
Per Common Share Data:
 
 
 
 
 
 
 
Earnings per common share:
 
 
 
 
 
 
 
Basic
$
0.48

 
$
0.31

 
$
1.05

 
$
0.79

Diluted
0.46

 
0.30

 
1.02

 
0.76

Book value per common share at the period-end
 
 
 
 
14.73

 
13.83

Tangible Book value per common share at the period-end
 
 
 
 
13.26

 
12.27

Average common shares outstanding:
 
 
 
 
 
 
 
Basic
8,392,631

 
8,063,119

 
8,282,889

 
8,040,955

Diluted
8,678,680

 
8,328,252

 
8,565,401

 
8,309,363

Shares Outstanding at end of period
 
 
 
 
8,404,292

 
8,069,560

Performance Ratios/Data:
 
 
 
 
 
 
 
Return on average assets
1.34
%
 
0.94
%
 
1.03
%
 
0.83
%
Return on average equity
12.89
%
 
8.94
%
 
9.94
%
 
7.87
%
Net interest income (tax-equivalent basis) 1
$
11,527

 
$
9,617

 
$
32,497

 
$
27,173

Net interest margin (tax-equivalent basis) 2
4.09
%
 
3.85
%
 
4.06
%
 
3.76
%
Efficiency ratio (tax-equivalent basis) 3
57.71
%
 
64.92
%
 
66.85
%
 
68.61
%
 
 
 
 
 
 
 
 
 
 
 
 
 
September 30,
 
December 31,
Loan Portfolio Composition:
 
 
 
 
2018
 
2017
Commercial real estate
 
 
 
 
$
374,400

 
$
297,843

Mortgage warehouse lines
 
 
 
 
187,320

 
189,412

Construction loans
 
 
 
 
144,601

 
136,412

Commercial business
 
 
 
 
103,070

 
103,987

Residential real estate
 
 
 
 
47,565

 
40,494

Loans to individuals
 
 
 
 
23,290

 
21,025

Other loans
 
 
 
 
957

 
183

Gross loans
 
 
 
 
881,203

 
789,356

Deferred costs, net
 
 
 
 
335

 
550

Total loans
 
 
 
 
$
881,538

 
$
789,906

Asset Quality Data:
 
 
 
 
 
 
 
Loans past due over 90 days and still accruing
 
 
 
 

 

Non-accrual loans
 
 
 
 
6,761

 
7,114

OREO property
 
 
 
 
2,515

 

Total non-performing assets
 
 
 
 
$
9,276

 
$
7,114

 
 
 
 
 
 
 
 
Net recoveries
$
(458
)
 
$
(55
)
 
$
(423
)
 
$
(87
)
Allowance for loan losses to total loans
 
 
 
 
0.94
%
 
1.01
%
Allowance for loan losses to non-performing loans
 
 
 
 
122.25
%
 
112.64
%
Non-performing loans to total loans
 
 
 
 
0.77
%
 
0.90
%
Non-performing assets to total assets
 
 
 
 
0.78
%
 
0.66
%
Capital Ratios:
 
 
 
 
 
 
 
1ST Constitution Bancorp
 
 
 
 
 
 
 
Common equity to risk weighted assets ("CET 1")


 


 
10.43
%
 
10.19
%
Total capital to risk weighted assets


 


 
12.84
%
 
12.84
%
Tier 1 capital to risk weighted assets


 


 
12.08
%
 
12.02
%
Tier 1 capital to average assets (leverage ratio)


 


 
11.19
%
 
11.23
%
1ST Constitution Bank
 
 
 
 
 
 
 
Common equity to risk weighted assets ("CET 1")


 


 
12.10
%
 
11.74
%
Total capital to risk weighted assets


 


 
12.86
%
 
12.55
%
Tier 1 capital to risk weighted assets


 


 
12.10
%
 
11.74
%
Tier 1 capital to average assets (leverage ratio)


 


 
11.19
%
 
10.96
%

1The tax equivalent adjustment was $135 and $263 for the three months ended June 30, 2018 and June 30, 2017, respectively.
The tax equivalent adjustment was $271 and $528 for the six months ended June 30, 2018 and June 30, 2017, respectively.
2Represents net interest income on a taxable equivalent basis as a percent of average interest-earning assets.
3Represents non-interest expenses divided by the sum of net interest income on a taxable equivalent basis and non-interest income.


        

1ST Constitution Bancorp
Consolidated Balance Sheets
(Dollars in thousands)
(Unaudited)
 
September 30, 2018
 
December 31, 2017
Assets
 
 
 
Cash and due from banks
$
5,133

 
$
5,037

Interest-earning deposits
14,131

 
13,717

    Total cash and cash equivalents
19,264

 
18,754

Investment securities
 
 
 
  Available for sale, at fair value
131,192

 
105,458

  Held to maturity (fair value of $91,220 and $111,865 at September 30, 2018 and December 31, 2017, respectively)
91,379

 
110,267

Total securities
222,571

 
215,725

 
 
 
 
Loans held for sale
4,362

 
4,254

Loans
881,538

 
789,906

  Less: allowance for loan losses
(8,265
)
 
(8,013
)
    Net loans
873,273

 
781,893

Premises and equipment, net
11,768

 
10,705

Accrued interest receivable
3,652

 
3,478

Bank owned life insurance
28,555

 
25,051

Other real estate owned
2,515

 
12,496

Goodwill and intangible assets
12,294

 

Other assets
14,228

 
6,918

Total assets
$
1,192,482

 
$
1,079,274

Liabilities and shareholders' equity
 
 
 
Liabilities
 
 
 
Deposits
 
 
 
  Non-interest bearing
$
211,492

 
$
196,509

  Interest bearing
730,185

 
725,497

    Total deposits
941,677

 
922,006

 
 
 
 
Short-term borrowings
99,475

 
20,500

Redeemable subordinated debentures
18,557

 
18,557

Accrued interest payable
927

 
804

Accrued expense and other liabilities
8,072

 
5,754

Total liabilities
1,068,708

 
967,621

Shareholders' equity
 
 
 
Preferred stock, no par value; 5,000,000 shares authorized; none issued

 

Common stock, no par value; 30,000,000 shares authorized; 8,437,590 and 8,116,201 shares issued and 8,404,292 and 8,082,903 shares outstanding as of September 30, 2018 and December 31, 2017, respectively
79,256

 
72,935

Retained earnings
47,067

 
39,822

Treasury stock, 33,298 shares at September 30, 2018 and December 31, 2017
(368
)
 
(368
)
Accumulated other comprehensive loss
(2,181
)
 
(736
)
Total shareholders' equity
123,774

 
111,653

Total liabilities and shareholders' equity
$
1,192,482

 
$
1,079,274



        

1ST Constitution Bancorp
Consolidated Statements of Income
(Dollars in thousands, except per share data)
(Unaudited)
 
Three Months Ended June 30,
 
Six Months Ended
June 30,
 
2018
 
2017
 
2018
 
2017
Interest income
 
 
 
 
 
 
 
     Loans, including fees
$
12,193

 
$
9,416

 
$
33,078

 
$
26,161

     Securities:
 
 
 
 
 
 
 
           Taxable
1,060

 
846

 
2,915

 
2,500

           Tax-exempt
494

 
527

 
1,518

 
1,628

     Federal funds sold and short-term investments
36

 
25

 
208

 
183

               Total interest income
13,783

 
10,814

 
37,719

 
30,472

Interest expense
 
 
 
 
 
 
 
     Deposits
1,854

 
1,204

 
4,542

 
3,351

     Borrowings
349

 
113

 
576

 
349

     Redeemable subordinated debentures
184

 
134

 
508

 
380

Total interest expense
2,387

 
1,451

 
5,626

 
4,080

               Net interest income
11,396

 
9,363

 
32,093

 
26,392

Provision for loan losses
225

 
150

 
675

 
450

      Net interest income after provision for loan losses
11,171

 
9,213

 
31,418

 
25,942

Non-interest income
 
 
 
 
 
 
 
     Service charges on deposit accounts
173

 
142

 
476

 
445

     Gain on sales of loans
1,292

 
1,329

 
3,425

 
3,936

     Income on bank-owned life insurance
152

 
131

 
425

 
391

Gain on bargain purchase

 

 
184

 

     Gain on sales of securities

 
24

 
12

 
128

     Other income
537

 
490

 
1,560

 
1,385

Total non-interest income
2,154

 
2,116

 
6,082

 
6,285

Non-interest expense
 
 
 
 
 
 
 
     Salaries and employee benefits
4,900

 
4,617

 
14,714

 
13,882

     Occupancy expense
907

 
865

 
2,604

 
2,604

     Data processing expenses
331

 
338

 
1,009

 
983

     FDIC insurance expense
105

 
95

 
381

 
255

Other real estate owned expenses
73

 
11

 
75

 
26

     Merger-related expenses

 

 
2,141

 

     Other operating expenses
1,578

 
1,691

 
4,866

 
5,204

 Total non-interest expenses
7,894

 
7,617

 
25,790

 
22,954

                  Income before income taxes
5,431

 
3,712

 
11,710

 
9,273

Income taxes
1,420

 
1,227

 
2,975

 
2,920

                  Net Income
$
4,011

 
$
2,485

 
$
8,735

 
$
6,353

Net income per common share
 
 
 
 
 
 
 
          Basic
$
0.48

 
$
0.31

 
$
1.05

 
$
0.79

          Diluted
0.46

 
0.30

 
1.02

 
0.76

Weighted average shares outstanding
 
 
 
 
 
 
 
           Basic
8,392,631

 
8,063,119

 
8,282,889

 
8,040,955

           Diluted
8,678,680

 
8,328,252

 
8,565,401

 
8,309,363




        

1ST Constitution Bancorp
Net Interest Margin Analysis
(Unaudited)
 
Three months ended September 30, 2018
 
Three months ended September 30, 2017
(Dollars in thousands)
Average
 
 
 
Average
 
Average
 
 
 
Average
Assets
Balance
 
Interest
 
Yield
 
Balance
 
Interest
 
Yield
Interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
  Federal funds sold/short term investments
$
11,953

 
$
36

 
1.19
%
 
$
12,383

 
$
25

 
0.80
%
Investment securities:
 
 
 
 
 
 
 
 
 
 
 
    Taxable
151,115

 
1,060

 
2.81

 
142,353

 
846

 
2.38

    Tax-exempt (1)
73,621

 
625

 
3.40

 
89,034

 
781

 
3.51

    Total
224,736

 
1,685

 
3.00

 
231,387

 
1,627

 
2.81

Loans (2):
 
 
 
 
 
 
 
 
 
 
 
    Commercial real estate
377,719

 
4,901

 
5.08

 
272,548

 
3,573

 
5.13

    Mortgage warehouse lines
180,430

 
2,504

 
5.43

 
174,610

 
1,901

 
4.26

    Construction
142,365

 
2,406

 
6.61

 
123,822

 
1,895

 
5.99

    Commercial business
106,717

 
1,496

 
5.51

 
107,158

 
1,326

 
4.86

    Residential real estate
46,777

 
530

 
4.53

 
42,436

 
445

 
4.19

    Loans to individuals
24,655

 
306

 
4.92

 
22,379

 
228

 
4.04

    Loans held for sale
3,203

 
38

 
4.75

 
3,715

 
37

 
3.98

    All other loans
1,061

 
12

 
4.43

 
1,526

 
11

 
2.82

    Total Loans
882,927

 
12,193

 
5.41

 
748,194

 
9,416

 
4.93

Total interest earning assets
1,119,616

 
13,914

 
4.88
%
 
991,964

 
11,068

 
4.39
%
Non-interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
  Allowance for loan losses
(8,388
)
 
 
 
 
 
(7,770
)
 
 
 
 
  Cash and due from bank
5,767

 
 
 
 
 
5,371

 
 
 
 
  Other assets
70,527

 
 
 
 
 
59,328

 
 
 
 
Total assets
$
1,187,522

 
 
 
 
 
$
1,048,893

 
 
 
 
Liabilities and shareholders' equity:
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
    Money market and NOW accounts
$
338,783

 
$
499

 
0.58
%
 
$
324,940

 
$
358

 
0.44
%
    Savings accounts
194,223

 
371

 
0.76
%
 
208,548

 
338

 
0.64

    Certificates of deposit
230,490

 
984

 
1.69
%
 
158,737

 
508

 
1.27

    Other borrowed funds
63,429

 
349

 
2.18
%
 
27,533

 
113

 
1.63

    Redeemable subordinated debentures
18,557

 
184

 
3.97
%
 
18,557

 
134

 
2.89

 Total interest-bearing liabilities
845,482

 
2,387

 
1.12
%
 
738,315

 
1,451

 
0.78
%
Non-interest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
Demand deposits
211,291

 
 
 
 
 
193,937

 
 
 
 
Other liabilities
7,329

 
 
 
 
 
6,395

 

 
 
 Total liabilities
218,620

 
 
 
 
 
200,332

 
 
 
 
Shareholders' equity
123,420

 
 
 
 
 
110,246

 
 
 
 
Total liabilities and shareholders' equity
$
1,187,522

 
 
 
 
 
$
1,048,893

 
 
 
 
Net interest spread (3)
 
 
 
 
3.76
%
 
 
 
 
 
3.61
%
Net interest margin (4)
 
 
11,527

 
4.09
%
 
 
 
9,617

 
385
%

(1) Tax equivalent basis, using 21% federal tax rate in 2018 and 34% in 2017.
(2) Loan origination fees are considered an adjustment to interest income. For the purpose of calculating loan yields, average loan balances include non-accrual loans with no related interest income and the average balance of loans held for sale.
(3) The net interest spread is the difference between the average yield on interest-earning assets and the average rate paid on interest-bearing liabilities.
(4) The net interest margin is equal to net interest income divided by average interest-earning assets.

 



        

1ST Constitution Bancorp
Net Interest Margin Analysis
(Unaudited)
 
Nine months ended September 30, 2018
 
Nine months ended September 30, 2017
(Dollars in thousands)
Average
 
 
 
Average
 
Average
 
 
 
Average
Assets
Balance
 
Interest
 
Yield
 
Balance
 
Interest
 
Yield
Interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
  Federal funds sold/short term investments
$
21,287

 
$
208

 
1.31
%
 
$
30,199

 
$
183

 
0.81
%
Investment securities:
 
 
 
 
 
 
 
 
 
 
 
    Taxable
146,003

 
2,915

 
2.66

 
141,662

 
2,500

 
2.35

    Tax-exempt (1)
76,872

 
1,922

 
3.33

 
92,341

 
2,409

 
3.48

    Total
222,875

 
4,837

 
2.89

 
234,003

 
4,909

 
2.79

Loans (2):
 
 
 
 
 
 
 
 
 
 
 
    Commercial real estate
349,423

 
13,391

 
5.05

 
253,793

 
10,088

 
5.24

    Mortgage warehouse lines
157,422

 
6,318

 
5.35

 
155,755

 
5,014

 
4.29

    Construction
135,049

 
6,548

 
6.48

 
111,436

 
4,817

 
5.78

    Commercial business
110,101

 
4,391

 
5.33

 
109,335

 
4,006

 
4.90

    Residential real estate
45,955

 
1,517

 
4.35

 
42,136

 
1,335

 
4.18

    Loans to individuals
23,386

 
780

 
4.40

 
22,428

 
701

 
4.12

    Loans held for sale
3,067

 
101

 
4.39

 
4,408

 
165

 
4.99

    All other loans
1,132

 
32

 
3.73

 
1,828

 
35

 
2.52

    Total Loans
825,535

 
33,078

 
5.31

 
701,119

 
26,161

 
4.94

Total interest earning assets
1,069,697

 
38,123

 
4.73
%
 
965,321

 
31,253

 
4.29
%
Non-interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
  Allowance for loan losses
(8,295
)
 
 
 
 
 
(7,646
)
 
 
 
 
  Cash and due from bank
5,782

 
 
 
 
 
5,234

 
 
 
 
  Other assets
64,861

 
 
 
 
 
58,736

 
 
 
 
Total assets
$
1,132,045

 
 
 
 
 
$
1,021,645

 
 
 
 
Liabilities and shareholders' equity:
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
    Money market and NOW accounts
$
362,048

 
$
1,437

 
0.53
%
 
$
329,089

 
$
1,032

 
0.42
%
    Savings accounts
208,780

 
1,079

 
0.69
%
 
210,056

 
992

 
0.63

    Certificates of deposit
180,250

 
2,026

 
1.50
%
 
147,109

 
1,327

 
1.21

    Other borrowed funds
36,407

 
576

 
2.12
%
 
20,494

 
349

 
2.28

    Redeemable subordinated debentures
18,557

 
508

 
3.65
%
 
18,557

 
380

 
2.73

 Total interest-bearing liabilities
806,042

 
5,626

 
0.93
%
 
725,305

 
4,080

 
0.75
%
Non-interest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
  Demand deposits
199,953

 
 
 
 
 
181,892

 
 
 
 
  Other liabilities
8,566

 
 
 
 
 
6,577

 
 
 
 
       Total liabilities
1,014,561

 
 
 
 
 
913,774

 
 
 
 
Shareholders' equity
117,484

 
 
 
 
 
107,871

 
 
 
 
Total liabilities and shareholders' equity
$
1,132,045

 
 
 
 
 
$
1,021,645

 
 
 
 
Net interest spread (3)
 
 
 
 
3.80
%
 
 
 
 
 
3.54
%
Net interest margin (4)
 
 
$
32,497

 
4.06
%
 
 
 
27,173

 
3.76
%
(1) Tax equivalent basis, using 21% federal tax rate in 2018 and 34% in 2017.
(2) Loan origination fees are considered an adjustment to interest income. For the purpose of calculating loan yields, average loan balances include non-accrual loans with no related interest income and the average balance of loans held for sale.
(3) The net interest spread is the difference between the average yield on interest-earning assets and the average rate paid on interest-bearing liabilities.
(4) The net interest margin is equal to net interest income divided by average interest-earning assets.


        

1ST Constitution Bancorp
Reconciliation of Non-GAAP Measures (1)
(Dollars in thousands, except per share data)
(Unaudited)
 
 
Three months ended
 
Nine months ended
 
 
September 30,
 
September 30,
 
 
2018
 
2017
 
2018
 
2017
Adjusted net income
 
 
 
 
 
 
 
 
Net income
 
$
4,011

 
$
2,485

 
$
8,735

 
$
6,353

Adjustments:
 
 
 
 
 
 
 
 
  Merger-related expenses
 

 

 
2,141

 

  Gain from bargain purchase
 

 

 
(184
)
 

  Income tax effect of adjustments (2)
 

 

 
(568
)
 

Adjusted Net Income (3)
 
$
4,011

 
$
2,485

 
$
10,124

 
$
6,353


 
 
 
 
 
 
 
 
Adjusted net income per diluted share
 
 
 
 
 
 
 
 
  Adjusted net income
 


 


 
$
10,124

 
$
6,353

  Diluted shares outstanding
 


 


 
8,565,401

 
8,309,363

  Adjusted net income per diluted share
 


 


 
$
1.18

 
$
0.76


 
 
 
 
 
 
 
 
Adjusted average return on average assets
 
 
 
 
 
 
 
 
  Adjusted net income
 


 


 
$
10,124

 
$
6,353

  Average assets
 


 


 
1,132,045

 
1,021,645

  Adjusted return on average assets
 


 


 
1.20
%
 
0.83
%

 
 
 
 
 
 
 
 
Adjusted average return on average equity
 
 
 
 
 
 
 
 
  Adjusted net income
 


 


 
$
10,124

 
$
6,353

  Average equity
 


 


 
117,484

 
107,871

  Adjusted return on average equity
 


 


 
11.52
%
 
7.87
%
 
 
 
 
 
 
 
 
 
Book value and tangible book value per share
 
 
 
 
 
 
 
 
  Shareholders' equity
 
 
 
 
 
$
123,774

 
$
111,610

  Less: goodwill and intangible assets
 
 
 
 
 
12,294

 
12,591

  Tangible shareholders' equity
 
 
 
 
 
111,480

 
99,019

  Shares outstanding
 
 
 
 
 
8,404,292

 
8,069,560

  Book value per share
 
 
 
 
 
$
14.73

 
$
13.83

  Tangible book value per share
 
 
 
 
 
$
13.26

 
$
12.27

 
 
 
 
 
 
 
 
 
(1) The Company used the non-GAAP financial measures, Adjusted Net Income, Adjusted Net Income per diluted share, adjusted return on average assets and adjusted return on average equity, because the Company believes that it is helpful to readers in understanding the Company's financial performance and the effect on net income of the merger-related expenses and the gain from the bargain purchase recorded in connection with the NJCB merger. These non-GAAP measures improve the comparability of the current period results with the results of the prior periods. The Company cautions that the non-GAAP financial measures should be considered in addition to, but not as a substitute for, the Company's GAAP financial results.
(2) Tax effected at an income tax rate of 30.09%, less the impact of non-deductible merger expenses and the non-taxable gain from the bargain purchase.
(3) There were no non-GAAP adjustments for the three months ended September 30, 2018 and the three and nine-month periods ended September 30, 2017.


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