1ST Constitution Bancorp (NASDAQ: FCCY), the holding company (the
“Company”) for 1ST Constitution Bank (the “Bank”), today reported
net income of $5.4 million and diluted earnings per share of $0.53
for the three months ended September 30, 2021 compared to net
income of $4.9 million and diluted earnings per share of $0.48 for
the three months ended September 30, 2020.
The Company's Board of Directors declared a
quarterly cash dividend of $0.10 per share of common stock that
will be payable on November 24, 2021 to shareholders of record on
November 12, 2021.
On July 11, 2021, the Company and Lakeland
Bancorp, Inc. (NASDAQ: LBAI), the holding company (“Lakeland”) for
Lakeland Bank, entered into an Agreement and Plan of Merger,
pursuant to which the Company will merge with and into Lakeland,
with Lakeland continuing as the surviving entity (the “Merger”),
and the Bank will merge with and into Lakeland Bank. Expenses of
$737,000 related to this pending transaction were incurred in the
three-month period ended September 30, 2021.
Adjusted net income increased 24.5% to $6.1
million for the third quarter of 2021 compared to adjusted net
income of $4.9 million for the third quarter of 2020. Adjusted net
income per diluted share increased 22.9% to $0.59 for the third
quarter of 2021 compared to adjusted net income per diluted share
of $0.48 for the third quarter of 2020.
For the nine months ended September 30, 2021,
net income was $15.5 million, or $1.51 per diluted share, compared
to net income of $12.0 million, or $1.17 per diluted share, for the
nine months ended September 30, 2020. Net income and diluted
earnings per share increased 29.0% and 29.1%, respectively, for the
first nine months of 2021 compared to the first nine months of
2020. For the nine months ended September 30, 2021, adjusted net
income was $16.5 million, or $1.61 per diluted share, compared to
adjusted net income of $12.1 million, or $1.18 per diluted share,
for the nine months ended September 30, 2020.
Adjusted net income and adjusted net income per
diluted share, which are referred to above, and certain other
adjusted results used in this press release, are non-GAAP financial
measures and 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, along with an explanation of these measures and
why they may be useful to investors, is attached to this press
release.
Robert F. Mangano, President and Chief Executive
Officer of the Company, stated, “We are very pleased with our
earnings for the three and nine months ended September 30, 2021.
During the quarter our residential mortgage banking and SBA loan
operations generated substantial gain from sales of loans. Our
performance metrics continue to be strong and we remain focused on
prudent and disciplined lending, improving the net interest margin
and controlling non-interest expense.”
“As I reported last quarter in respect to us
partnering with Lakeland, the merger is proceeding as planned and
expected to close in January 2022. The integration planning
meetings are in progress and we expect a smooth transition. We are
very excited about the combination and are looking forward to
serving our customer base with a much broader array of products and
services.”
THIRD QUARTER 2021 HIGHLIGHTS
- Return on average total assets and
return on average shareholders' equity were 1.16% and 10.94%,
respectively. Adjusted return on average total assets and adjusted
return on average shareholders' equity were 1.31% and 12.33%,
respectively. Adjusted return on average total assets and adjusted
return on average shareholders’ equity are non-GAAP
measures. See the reconciliation of non-GAAP measures
attached to this press release.
- Net interest income was $14.8
million and the net interest margin was 3.42% on a tax-equivalent
basis.
- A provision for loan losses of
$600,000 was recorded and net charge-offs were $365,000.
- Total loans were $1.2 billion at
September 30, 2021 and decreased $37.0 million from June 30, 2021.
During the third quarter of 2021, commercial business loans
decreased $20.4 million to $139.7 million due primarily to the
forgiveness and pay-off of the Small Business Administration
(“SBA”) Paycheck Protection Program (“PPP”) loans. Mortgage
warehouse lines decreased $5.9 million due to the lower volume of
funding than in the second quarter of 2021. Residential real estate
loans held in the portfolio decreased $5.3 million due to pay-offs
of loans. All other components of the loan portfolio decreased a
combined $5.4 million.
- Non-interest income was $3.9
million for the third quarter of 2021, as residential mortgage
banking and SBA lending operations generated $1.5 million and $1.1
million gain on sales of loans, respectively.
- Non-interest-bearing demand
deposits increased $45.1 million, savings and interest-bearing
transaction accounts increased $62.4 million and certificates of
deposit declined $15.0 million during the third quarter of
2021.
- Non-performing loans were $9.5
million, or 0.80% of total loans at September 30, 2021,
representing a decrease of $2.5 million from June 30, 2021. Other
real estate owned (“OREO”) was $48,000. One non-performing
commercial real estate loan for $3.1 million was transferred to
loans held for sale and was charged down $334,000 to its estimated
fair value of $2.7 million.
COVID-19 Impact and Response
As the Company conducts its daily operations,
the health and safety of our employees and customers remains our
primary concern and we continue to maintain the same measures and
protective procedures that we implemented in 2020.
During the first nine months of 2021, the
Company continued working with customers impacted by the economic
disruption resulting from the COVID-19 pandemic. To support our
loan and deposit customers and the communities we serve, we
continue to provide access to additional credit and forbearance on
loan interest and or principal payments for up to 90 days where
management has determined that it is warranted.
- All loans except for two that had
previously received deferrals were no longer deferred at September
30, 2021. The two loans consisted of one hotel loan for $3.1
million that was placed on non-accrual in the third quarter of 2020
and one residential mortgage loan for $871,000 that was placed on
non-accrual in the first quarter of 2021.
- As a long-standing SBA preferred
lender, we actively participated in the SBA’s PPP lending program
established under the Coronavirus Aid, Relief and Economic Security
Act (the “CARES Act”). In 2020, we funded 467 SBA PPP loans
totaling $75.6 million, $75.2 million of which had been forgiven by
the SBA and paid off through the end of the third quarter of
2021.
- The Economic Aid to Hard-Hit Small
Business, Not for Profits and Venues Act (“Economic Aid Act”) was
enacted in December 2020 in further response to the COVID-19
pandemic. Among other things, the Economic Aid Act provided relief
to borrowers to access additional credit through a second round of
the SBA’s PPP. We actively participated in the second round PPP and
funded loans totaling $35.3 million, $12.7 million of which had
been forgiven by the SBA and paid off through the end of the third
quarter of 2021.
Allowance for Loan Losses
Management reviewed the loan portfolio at
September 30, 2021 in connection with the evaluation of the
adequacy of the allowance for loan losses. As part of this review,
management reviewed substantially all of the $132.1 million of
commercial business and commercial real estate loans that had been
modified to defer interest and or principal for up to 90 days
either in 2020 or 2021. Loans with balances of less than $250,000
were generally excluded from management’s review.
At September 30, 2021, the allowance for loan
losses included $348,000 for loans that were rated Pass-Watch and
had received a deferral. This reflects management’s previously
reported determination that “Pass-Watch” credit rated loans with
modifications or deferrals suggest a weaker financial strength of
the borrower than “Pass” credit rated loans, thereby warranting a
higher allowance for loan losses than would ordinarily be reserved
for “Pass-Watch” credit rated loans.
Within the loan portfolio, hotel and
restaurant-food service industries have been adversely impacted by
the economic disruption caused by the COVID-19 pandemic. At
September 30, 2021, loans to borrowers in the hotel and
restaurant-food service industries were $62.2 million and $53.3
million, respectively. Management reviewed over 90% of the hotel
loans and over 96% of the restaurant-food service loans. At
September 30, 2021, management continued to maintain the additional
allowance for loan losses of 75 basis points, or $357,000,
attributable to restaurant-food service loans and 25 basis points,
or $148,000, attributable to hotel loans due to the challenging
operating environment for these businesses as a result of the
COVID-19 pandemic.
All construction loans are closely monitored on
a quarterly basis and are reviewed to assess the progress of
construction relative to the plan and budget and lease-up or sales
of units.
Management also reviewed loans to schools that
are private educational institutions that are generally sponsored
or affiliated with religious organizations. These loans totaled
$24.4 million at September 30, 2021, and all of these loans were
reviewed.
As a result of management’s review of the loan
portfolio at September 30, 2021, a provision for loan losses of
$600,000 was recorded for the third quarter of 2021 and the
allowance for loan losses was $17.2 million at September 30, 2021.
The provision for loan losses reflected primarily the net
charge-offs of $365,000 and changes in the size, mix and risk
elements of the loan portfolio at September 30, 2021. The allowance
for loan losses at September 30, 2021 included $1.4 million of
allowance that was attributable to management's qualitative factors
related to the COVID-19 pandemic and specific reserves of $3.2
million for impaired loans. The increase in the allowance for loan
losses year-over-year is due primarily to the $1.7 million increase
in specific reserves for impaired loans, higher charge-offs in 2021
compared to 2020 and the concomitant increase in the historical
loss factors, additional allowance due to changes in loan credit
risk ratings in 2021, changes in the mix of loans in the loan
portfolio and the risk factors related to the economic uncertainty
due to the COVID-19 pandemic continuing to adversely impact
borrowers’ business operations and financial results.
Acquisition accounting for the merger with Shore
Community Bank (“Shore”) in 2019 and the merger with New Jersey
Community Bank (“NJCB”) in 2018 resulted in the Shore and NJCB
loans being recorded at their fair value and no allowance for loan
losses as of the effective time of the respective mergers. The
unaccreted general credit fair value discounts related to the
former Shore and NJCB loans were approximately $1.1 million and
$317,000 at September 30, 2021, respectively. In addition, at
September 30, 2021, there were $23.1 million of SBA PPP loans,
which are 100% guaranteed by the SBA and, accordingly, no allowance
was provided.
Discussion of Financial Results
Net income was $5.4 million, or $0.53 per
diluted share, for the third quarter of 2021 compared to net income
of $4.9 million, or $0.48 per diluted share, for the third quarter
of 2020. For the three months ended September 30, 2021, net
interest income decreased $544,000 compared to the three months
ended September 30, 2020, driven primarily by the decrease in total
loans, which resulted in the decline in the yield of
interest-earning assets. The provision for loan losses was $600,000
for the third quarter of 2021 compared to $2.3 million for the
third quarter of 2020. The decrease in the provision year-over-year
reflected the generally improved economic conditions, the decline
in the size of the loan portfolio in 2021 and the stable credit
quality of the loan portfolio. Gain on sales of loans for the third
quarter of 2021 decreased $764,000 compared to the third quarter of
2020 due primarily to the lower volume of residential mortgage loan
originations and sales of loans. Non-interest expenses were $10.8
million for the third quarter of 2021, which included $737,000 of
merger-related expenses, and decreased $121,000 compared to $11.0
million for the third quarter of 2020.
Net interest income was $14.8 million for the
third quarter of 2021 and decreased $544,000 compared to net
interest income of $15.4 million for the third quarter of 2020.
Total interest income was $16.1 million for the three months ended
September 30, 2021 compared to $17.7 million for the three months
ended September 30, 2020. The decrease in total interest income was
primarily due to a significant decline in the average balance of
total loans that resulted in a lower yield on average
interest-earning assets for the third quarter of 2021 compared to
the third quarter of 2020. Average interest-earning assets were
$1.7 billion, with a tax-equivalent yield of 3.71%, for the third
quarter of 2021 compared to average interest-earning assets of $1.7
billion, with a tax-equivalent yield of 4.23%, for the third
quarter of 2020. Total average loans were 69.8% of total average
earning assets for the third quarter of 2021 compared to 85.3% for
the third quarter of 2020. The Federal Reserve reduced the targeted
federal funds rate 150 basis points in March 2020 in response to
the economic uncertainty resulting from the COVID-19 pandemic. As a
result of the reductions in the targeted federal funds rate, the
prime rate declined to 3.25% in March 2020 and was unchanged
through the third quarter of 2021. The low interest rate
environment continued through September 30, 2021. The Bank had
approximately $421.3 million of loans with an interest rate tied to
the prime rate and approximately $45.2 million of loans with an
interest rate tied to either 1- or 3-month LIBOR at September 30,
2021. Unearned fees, net of deferred costs, related to the SBA PPP
loans were $736,000 at September 30, 2021.
Interest expense on average interest-bearing
liabilities was $1.3 million, with an interest cost of 0.46%, for
the third quarter of 2021, compared to $1.4 million, with an
interest cost of 0.52%, for the second quarter of 2021 and $2.4
million, with an interest cost of 0.79%, for the third quarter of
2020. Interest expense declined $1.1 million for the third quarter
of 2021 compared to the third quarter of 2020 due primarily to the
decline in interest rates paid on deposits as a direct result of
the low interest rate environment. The average cost of
interest-bearing deposits was 0.44% for the third quarter of 2021,
0.50% for the second quarter of 2021 and 0.81% for the third
quarter of 2020. The interest rates paid on deposits generally do
not adjust quickly to rapid changes in market interest rates and
decline over time in a falling interest rate environment.
Management will continue to monitor and adjust the interest rates
paid on deposits to reflect the then current interest rate
environment and competitive factors.
The net interest margin on a tax-equivalent
basis was 3.42% for the third quarter of 2021 compared to 3.67% for
the third quarter of 2020. The net interest margin for the third
quarter of 2021 was negatively impacted by the $262.0 million
increase in the average balance of federal funds sold/short-term
investments, which was driven in part by a $223.9 million decrease
in average total loans which had a significant impact on net
interest income. The reinvestment of proceeds from maturing and
called investment securities and the purchase of new investment
securities at the current lower interest rates also contributed to
the decline in net interest income. Interest income for the third
quarter of 2021 included $451,000 of fee income related to PPP
loans that were forgiven and paid off by the SBA. Excluding the
effect of the higher average balance of federal funds
sold/short-term investments due to the increase in average
deposits, the net interest margin was approximately 3.62% for the
third quarter of 2021.
The Company recorded a provision for loan losses
of $600,000 for the third quarter of 2021 compared to a provision
for loan losses of $2.3 million for the third quarter of 2020 which
included a specific reserve of $1.5 million for impaired loans. The
provision for loan losses for the third quarter of 2021 reflected
the decline in the size of the loan portfolio, net charge-offs of
$365,000 and changes in risk elements and mix of the loan portfolio
at September 30, 2021. At September 30, 2021, total loans were $1.2
billion and the allowance for loan losses was $17.2 million, or
1.43% of total loans, compared to total loans of $1.5 billion and
an allowance for loan losses of $14.5 million, or 0.99% of total
loans, at September 30, 2020. The increase in the allowance for
loan losses year- over-year is due primarily to the $1.7 million
increase in specific reserves for impaired loans, higher
charge-offs in 2021 compared to 2020 and the concomitant increase
in the historical loss factors, additional allowance due to changes
in loan credit risk ratings in 2021, changes in the mix of loans in
the loan portfolio and risk factors related to the economic
uncertainty due to the COVID-19 pandemic continuing to adversely
impact borrowers’ business operations and financial results. The
allowance for loan losses, excluding the allocated reserve for
mortgage warehouse lines, was $16.1 million, or 1.67% of total
loans excluding mortgage warehouse lines at September 30, 2021. In
addition, at September 30, 2021, there were $23.1 million of SBA
PPP loans, which are 100% guaranteed by the SBA and, accordingly,
no allowance was provided.
Non-interest income was $3.9 million for the
third quarter of 2021 and decreased $833,000 compared to $4.7
million for the third quarter of 2020. The decrease in non-interest
income was due primarily to a $764,000 decrease in gain on sales of
loans. In the third quarter of 2021, $8.3 million of SBA loans were
sold and gains of $1.1 million were recorded compared to $5.1
million of SBA loans sold and gains of $463,000 recorded for the
third quarter of 2020. In the third quarter of 2021, residential
mortgage banking operations originated $51.0 million of residential
mortgages, sold $54.0 million of residential mortgages and recorded
a $1.5 million gain on sales of loans compared to approximately
$118.0 million of residential mortgages originated, $97.5 million
of residential mortgage loans sold and a $2.9 million gain on sales
of loans recorded for the third quarter of 2020. Income from
bank-owned life insurance increased $191,000 for the third quarter
of 2021 compared to the third quarter of 2020, due primarily to
$200,000 of income from a death benefit. Other income decreased
$173,000 for the third quarter of 2021 compared to the third
quarter of 2020, which included an interest rate swap fee of
$172,000.
Non-interest expenses were $10.8 million for the
third quarter of 2021 and decreased $121,000 compared to $11.0
million for the third quarter of 2020. Adjusted non-interest
expenses, which excludes the $737,000 of merger-related expenses
incurred in the third quarter of 2021 in connection with the
pending Merger, decreased $858,000 compared to the third quarter of
2020. Adjusted non-interest expenses is a non-GAAP measure that
excludes merger-related expenses and should be considered in
addition to, but not as a substitute for, the Company’s GAAP
financial results. A reconciliation of this non-GAAP financial
measure to the GAAP financial results is attached to this press
release. Salaries and employee benefits expense decreased $483,000
for the third quarter of 2021 compared to the third quarter of 2020
due primarily to a $855,000 decrease in mortgage commissions and a
$68,000 decrease in overtime expense, partially offset by a $62,000
increase in temporary staffing costs and a $336,000 increase in
incentive compensation. FDIC insurance expense decreased $117,000
due to a decrease in the FDIC assessment rate for the third quarter
of 2021 compared to the assessment rate for the third quarter of
2020. Other operating expenses decreased $212,000 for the third
quarter of 2021 compared to the third quarter of 2020, resulting
primarily from a decrease of $144,000 in legal and consulting fees
and net decreases in various components of other operating
expenses.
Income tax expense was $1.8 million for the
third quarter of 2021, resulting in an effective tax rate of 25.3%,
compared to income tax expense of $1.9 million, which resulted in
an effective tax rate of 27.9% for the third quarter of 2020. The
lower effective tax rate in the third quarter of 2021 reflected
primarily the lower state tax rate due to tax planning initiatives
that reduced the effective tax rate and the tax benefit from higher
deductions for stock based compensation in the third quarter of
2021 compared to the third quarter of 2020.
Total assets were $1.91 billion at September 30,
2021 compared to $1.81 billion at December 31, 2020. Total cash and
cash equivalents increased $252.0 million and total investment
securities increased $111.4 million from December 31, 2020 to
September 30, 2021, which amounts were partially offset by
decreases of $235.3 million in total portfolio loans and $23.0
million in loans held for sale. Total portfolio loans at September
30, 2021 were $1.20 billion, compared to $1.43 billion at December
31, 2020. The $235.3 million decrease in portfolio loans was due
primarily to a decrease of $152.5 million in mortgage warehouse
lines as a result of lower funding volume in the third quarter of
2021 compared to the fourth quarter of 2020, a decrease of $49.1
million in commercial business loans as a result of the forgiveness
and pay-offs of SBA PPP loans, a decrease of $25.0 million in
residential real estate loans due to pay-offs and a $6.2 million
decrease in commercial real estate loans. Loans held for sale
decreased $23.0 million due to loan sales in excess of originations
in the first nine months of 2021 and the lower level of residential
mortgage loan originations in the third quarter of 2021. In
response to the higher level of liquidity driven by the significant
increase in deposits in the third quarter of 2021, purchases of
investment securities were $115.1 million. The purchases were
primarily bonds with maturities between one and three years. Total
investment securities increased $114.4 million to $329.1 million at
September 30, 2021 compared to $217.7 million at December 31, 2020.
Investment securities available for sale increased $78.7 million
and investment securities held to maturity increased $32.7 million
at September 30, 2021 from December 31, 2020.
Total deposits were $1.64 billion at September
30, 2021, representing an increase of $75.7 million from December
31, 2020. There was a significant change in the composition of
total deposits as non-interest-bearing demand deposits increased
$109.2 million due in part to the funding of the second round of
SBA PPP loans and additional financial assistance received by
customers from the Restaurant Revitalization Fund and Closed Venue
Fund provided under the Economic Aid Act, while interest-bearing
deposits decreased $33.5 million from December 31, 2020 to
September 30, 2021. Of the total decrease in interest-bearing
deposits, certificates of deposit decreased $202.0 million due
primarily to the maturity of approximately $149.9 million of
short-term internet listing service certificates of deposit. Funds
from a portion of maturing certificates of deposit were also
deposited by customers into non-maturity deposits. Due to the low
interest rate environment, customers generally chose to deposit
funds to non-maturity deposit accounts such as NOW and savings
accounts, which resulted in a $117.1 million increase in savings
deposits and a $51.4 million increase in interest-bearing demand
deposits. There were no short-term borrowings at September 30, 2021
compared to $9.8 million in short-term borrowings at December 31,
2020.
Regulatory capital ratios for the Company and
the Bank continue to reflect a strong capital position. Under
applicable regulatory capital standards, the Company’s estimated
common equity Tier 1 to risk-based assets (“CET1”), total
risk-based capital, Tier 1 capital, and leverage ratios were
11.79%, 14.34%, 13.09% and 9.95%, respectively, at September 30,
2021. The Bank’s estimated CET1, total risk-based capital, Tier 1
capital and leverage ratios were 13.08%, 14.32%, 13.08% and 9.94%,
respectively, at September 30, 2021. The Company and the Bank are
considered “well capitalized” under these capital standards.
Asset Quality
Non-accrual loans were $9.5 million at September
30, 2021 compared to $16.4 million at December 31, 2020. During the
first nine months of 2021, $1.8 million of loans were placed on
non-accrual status that consisted of a $90,000 home equity loan, an
$871,000 residential mortgage loan, a $216,000 construction loan
and a $625,000 commercial real estate loan. During the first nine
months of 2021, $4.9 million of non-performing loans were resolved
as a result of pay-downs and pay-offs, which included $883,000 of
purchased credit impaired loans. A non-performing commercial real
estate loan for $3.1 million was charged down $334,000 to its
estimated fair value and transferred to loans held for sale. Other
charge-offs totaled $747,000.
Non-performing loans represented 0.80% of total
loans and non-performing assets represented 0.50% of total assets
at September 30, 2021 compared to 1.20% and 0.96%, respectively, at
December 31, 2020.
OREO decreased $44,000 to $48,000 at September
30, 2021 compared to $92,000 at December 31, 2020, due to the
write-down of the asset. The asset consisted of one parcel of
land.
About 1ST Constitution Bancorp
1ST Constitution Bancorp, through its primary
subsidiary, 1ST Constitution Bank, operates 25 branch
banking offices in Asbury Park, Cranbury (2), Fair Haven, Fort
Lee, Freehold, Hamilton, Hightstown, Hillsborough, Hopewell,
Jackson, Jamesburg, Lawrenceville, Little Silver, Long Branch,
Manahawkin, Neptune City, Perth Amboy, Plainsboro, Princeton, Rocky
Hill, Rumson, Shrewsbury and Toms River (2), 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
Cautionary Language Concerning Forward-Looking
Statements
This press release contains “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995 relating to, without limitation, our future
economic performance, plans and objectives for future operations,
projections of revenues and other financial items that are based on
our beliefs, the Merger and the merger of the Bank into Lakeland
Bank (the “Bank Merger”) and the timing of the consummation of the
Merger and the Bank Merger, as well as assumptions made by and
information currently available to us. The words “may,” “will,”
“anticipate,” “should,” “would,” “believe,” “contemplate,” “could,”
“project,” “predict,” “expect,” “estimate,” “continue,” and
“intend,” as well as other similar words and expressions of the
future, are intended to identify forward-looking statements.
These forward-looking statements are based upon
our opinions and estimates as of the date they are made and are not
guarantees of future performance. Although we believe that the
expectations reflected in these forward-looking statements are
reasonable, such forward-looking statements are subject to known
and unknown risks and uncertainties that may be beyond our control,
which could cause actual results, performance and achievements to
differ materially from results, performance and achievements
projected, expected, expressed or implied by the forward-looking
statements.
Examples of factors or events that could cause
actual results to differ materially from historical results or
those anticipated, expressed or implied include, without
limitation, changes in the overall economy and interest rate
changes; inflation, market and monetary fluctuations; the ability
of our customers to repay their obligations; the accuracy of our
financial statement estimates and assumptions, including the
adequacy of the estimates made in connection with determining the
adequacy of the allowance for loan losses; increased competition
and its effect on the availability and pricing of deposits and
loans; significant changes in accounting, tax or regulatory
practices and requirements; changes in deposit flows, loan demand
or real estate values; the enactment of legislation or regulatory
changes; changes in monetary and fiscal policies of the U.S.
government; changes to the method that LIBOR rates are determined
and to the phasing out of LIBOR after 2021; changes in loan
delinquency rates or in our levels of non-performing assets; our
ability to declare and pay dividends; changes in the economic
climate in the market areas in which we operate; the frequency and
magnitude of foreclosure of our loans; changes in consumer spending
and saving habits; the effects of the health and soundness of other
financial institutions, including the need of the FDIC to increase
the Deposit Insurance Fund assessments; technological changes; the
effects of climate change and harsh weather conditions, including
hurricanes and man-made disasters; the economic impact of any
future terrorist threats and attacks, acts of war or threats
thereof and the response of the United States to any such threats
and attacks; failure to consummate the Merger or the Bank Merger
for any reason, including the failure to obtain necessary
regulatory approvals (and the risk that such approvals may result
in the imposition of conditions that could adversely affect the
combined company), failure to obtain shareholder approvals or
failure to satisfy any of the other closing conditions in a timely
basis or at all; the diversion of management’s time from ongoing
business operations due to issues relating to the Merger; the
occurrence of any event, change or other circumstances that could
give rise to the right of one or both of the parties to terminate
the Merger Agreement; the outcome of any legal proceedings that may
be instituted against Lakeland or the Company; potential adverse
reactions or changes to business or employee relationships,
including those resulting from the announcement or completion of
the transaction; other risks described from time to time in our
filings with the Securities and Exchange Commission (the “SEC”);
and our ability to manage the risks involved in the foregoing.
Further, the foregoing factors may be exacerbated by the ultimate
impact of the COVID-19 pandemic, which is unknown at this time.
In addition, statements about the COVID-19
pandemic and the potential effects and impacts of the COVID-19
pandemic on the Company’s business, financial condition, liquidity
and results of operations may constitute forward-looking statements
and are subject to the risk that actual results may differ,
possibly materially, from what is reflected in such forward-looking
statements due to factors and future developments that are
uncertain, unpredictable and, in many cases, beyond our control,
including the scope, duration and extent of the pandemic, actions
taken by governmental authorities in response to the pandemic and
the direct and indirect impact of the pandemic on our employees,
customers, business and third-parties with which we conduct
business.
Although management has taken certain steps to
mitigate any negative effect of the aforementioned factors,
significant unfavorable changes could severely impact the
assumptions used and have an adverse effect on profitability. Any
forward-looking statements made by us or on our behalf speak only
as of the date they are made, and we do not undertake any
obligation to update any forward-looking statement to reflect the
impact of subsequent events or circumstances, except as required by
law.
Additional Information and Where to Find It
This communication does not constitute an offer
to sell or the solicitation of an offer to buy any securities or a
solicitation of any vote or approval. In connection with the
proposed Merger, Lakeland filed with the SEC a registration
statement that includes a joint proxy statement of Lakeland and the
Company that also constitutes a prospectus of Lakeland. INVESTORS
AND SECURITY HOLDERS ARE ADVISED TO READ THE JOINT PROXY
STATEMENT/PROSPECTUS AND ANY FUTURE AMENDMENTS OR SUPPLEMENTS TO
SUCH MATERIALS, BECAUSE THESE MATERIALS CONTAIN (OR WILL CONTAIN)
IMPORTANT INFORMATION. Investors and security holders may obtain a
free copy of the registration statement (and any future amendments
or supplements, when available) and other documents filed by
Lakeland and the Company with the SEC at the SEC’s web site at
www.sec.gov. These documents may be accessed and downloaded for
free at Lakeland’s website at www.lakelandbank.com or by directing
a request to Investor Relations, Lakeland Bancorp, Inc., 250 Oak
Ridge Road, Oak Ridge, New Jersey 07438 (973-697-2000). The
Company’s documents may be accessed and downloaded for free at the
Company’s website at www.1STCONSTITUTION.com or by directing a
request to Investor Relations, 1ST Constitution Bancorp, 2650
Route 130, P.O. Box 634, Cranbury, New Jersey 08512
(609-655-4500).
Participants in the Solicitation
Lakeland, the Company and their respective
directors and executive officers may be deemed to be participants
in the solicitation of proxies from Lakeland’s and the Company’s
shareholders in respect of the proposed Merger. Information
regarding the directors and executive officers of Lakeland may be
found in its definitive proxy statement relating to its 2021 Annual
Meeting of Shareholders, which was filed with the SEC on April 9,
2021 and can be obtained free of charge from Lakeland’s website.
Information regarding the directors and executive officers of the
Company may be found in its definitive proxy statement relating to
its 2021 Annual Meeting of Shareholders, which was filed with the
SEC on April 22, 2021 and can be obtained free of charge from the
Company’s website. Other information regarding the participants in
the proxy solicitation and a description of their direct and
indirect interest, by security holdings or otherwise, is contained
in the joint proxy statement/prospectus and other relevant
materials filed or to be filed with the SEC, when available.
1ST
Constitution BancorpSelected Consolidated
Financial Data(Dollars in thousands, except per
share data)(Unaudited)
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Per share
data: |
|
|
|
|
|
|
|
Earnings per share - basic |
$ |
0.53 |
|
|
$ |
0.48 |
|
|
$ |
1.51 |
|
|
$ |
1.18 |
|
Earnings per share - diluted |
0.53 |
|
|
0.48 |
|
|
1.51 |
|
|
1.17 |
|
Book value per share at end of period |
|
|
|
|
19.37 |
|
|
17.78 |
|
Tangible book value per common share at end of period(1) |
|
|
|
|
15.91 |
|
|
14.22 |
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic |
10,289,434 |
|
|
10,230,488 |
|
|
10,274,787 |
|
|
10,213,601 |
|
Weighted average shares outstanding - diluted |
10,319,637 |
|
|
10,268,951 |
|
|
10,299,029 |
|
|
10,260,477 |
|
Shares outstanding at end of period |
|
|
|
|
10,318,907 |
|
|
10,237,520 |
|
Performance
ratios/data: |
|
|
|
|
|
|
|
Return on average total assets |
1.16 |
% |
|
1.08 |
% |
|
1.14 |
% |
|
0.96 |
% |
Return on average shareholders’ equity |
10.94 |
% |
|
10.92 |
% |
|
10.76 |
% |
|
9.17 |
% |
Net interest income (tax-equivalent basis)(2) |
$ |
14,929 |
|
|
$ |
15,486 |
|
|
$ |
44,896 |
|
|
$ |
42,519 |
|
Net interest margin (tax-equivalent basis)(3) |
3.42 |
% |
|
3.67 |
% |
|
3.52 |
% |
|
3.66 |
% |
Efficiency ratio (tax-equivalent basis)(4) |
57.57 |
% |
|
54.21 |
% |
|
57.36 |
% |
|
57.93 |
% |
|
|
|
|
|
|
|
|
Loan portfolio
composition: |
|
|
|
|
September 30, 2021 |
|
December 31, 2020 |
Commercial real estate |
|
|
|
|
$ |
612,827 |
|
|
$ |
618,978 |
|
Mortgage warehouse lines |
|
|
|
|
235,897 |
|
|
388,366 |
|
Construction loans |
|
|
|
|
129,636 |
|
|
129,245 |
|
Commercial business |
|
|
|
|
139,654 |
|
|
188,728 |
|
Residential real estate |
|
|
|
|
63,223 |
|
|
88,261 |
|
Loans to individuals |
|
|
|
|
17,945 |
|
|
21,269 |
|
Other loans |
|
|
|
|
93 |
|
|
113 |
|
Gross loans |
|
|
|
|
1,199,275 |
|
|
1,434,960 |
|
Deferred fees, net |
|
|
|
|
(820 |
) |
|
(1,254 |
) |
Total loans |
|
|
|
|
$ |
1,198,455 |
|
|
$ |
1,433,706 |
|
Asset quality
data: |
|
|
|
|
|
|
|
Loans past due over 90 days and still accruing |
|
|
|
|
$ |
— |
|
|
$ |
871 |
|
Non-accrual loans |
|
|
|
|
9,537 |
|
|
16,361 |
|
OREO property |
|
|
|
|
48 |
|
|
92 |
|
Total non-performing
assets |
|
|
|
|
$ |
9,585 |
|
|
$ |
17,324 |
|
|
|
|
|
|
|
|
|
Net charge-offs |
$ |
(365 |
) |
|
$ |
5 |
|
|
$ |
(1,081 |
) |
|
$ |
(328 |
) |
Allowance for loan losses to
total loans |
|
|
|
|
1.43 |
% |
|
1.09 |
% |
Allowance for loan losses to
total loans excluding mortgage warehouse lines and related
allowance |
|
|
|
|
1.67 |
% |
|
1.32 |
% |
Allowance for loan losses to
non-performing loans |
|
|
|
|
179.93 |
% |
|
90.77 |
% |
Non-performing loans to total
loans |
|
|
|
|
0.80 |
% |
|
1.20 |
% |
Non-performing assets to total
assets |
|
|
|
|
0.50 |
% |
|
0.96 |
% |
Capital
ratios: |
|
|
|
|
|
|
|
1ST Constitution
Bancorp |
|
|
|
|
|
|
|
Common equity tier 1 capital to risk-weighted assets |
|
|
|
|
11.79 |
% |
|
9.92 |
% |
Total capital to risk-weighted assets |
|
|
|
|
14.34 |
% |
|
12.16 |
% |
Tier 1 capital to risk-weighted assets |
|
|
|
|
13.09 |
% |
|
11.12 |
% |
Tier 1 leverage ratio |
|
|
|
|
9.95 |
% |
|
9.41 |
% |
1ST Constitution
Bank |
|
|
|
|
|
|
|
Common equity tier 1 capital to risk-weighted assets |
|
|
|
|
13.08 |
% |
|
11.11 |
% |
Total capital to risk-weighted assets |
|
|
|
|
14.32 |
% |
|
12.15 |
% |
Tier 1 capital to risk-weighted assets |
|
|
|
|
13.08 |
% |
|
11.11 |
% |
Tier 1 leverage ratio |
|
|
|
|
9.94 |
% |
|
9.40 |
% |
|
|
|
|
|
|
|
|
|
|
(1) Tangible book value per common share is a non-GAAP financial
measure and is calculated by subtracting goodwill and other
intangible assets from shareholders’ equity and dividing it by
common shares outstanding. See the reconciliation of non-GAAP
financial measures attached to this press release.(2) The
tax-equivalent adjustment was $121 and $134 for the three months
ended September 30, 2021 and 2020, respectively, and the
tax-equivalent adjustment was $370 and $383 for the nine months
ended September 30, 2021 and 2020, respectively.(3) Represents net
interest income on a tax-equivalent basis as a percent of average
interest-earning assets.(4) Represents non-interest expenses
divided by the sum of net interest income on a tax-equivalent basis
and non-interest income.
1ST
Constitution BancorpConsolidated Balance
Sheets(Dollars in
thousands)(Unaudited)
|
September 30, 2021 |
|
December 31, 2020 |
ASSETS |
|
|
|
Cash and due from banks |
$ |
14,956 |
|
|
$ |
3,661 |
|
Interest-earning deposits |
258,990 |
|
|
18,334 |
|
Total cash and cash equivalents |
273,946 |
|
|
21,995 |
|
Investment securities: |
|
|
|
Available for sale, at fair
value |
203,940 |
|
|
125,197 |
|
Held to maturity (fair value
of $127,234 and $95,640 at September 30, 2021 and December 31,
2020, respectively) |
125,198 |
|
|
92,552 |
|
Total investment securities |
329,138 |
|
|
217,749 |
|
Loans held for sale |
6,768 |
|
|
29,782 |
|
Loans |
1,198,455 |
|
|
1,433,706 |
|
Less: allowance for loan losses |
(17,160 |
) |
|
(15,641 |
) |
Net loans |
1,181,295 |
|
|
1,418,065 |
|
Premises and equipment,
net |
13,835 |
|
|
14,345 |
|
Right-of-use assets |
15,282 |
|
|
16,548 |
|
Accrued interest
receivable |
4,379 |
|
|
5,273 |
|
Bank-owned life insurance |
37,398 |
|
|
37,316 |
|
Other real estate owned |
48 |
|
|
92 |
|
Goodwill and intangible
assets |
35,765 |
|
|
36,003 |
|
Other assets |
12,686 |
|
|
9,741 |
|
Total assets |
$ |
1,910,540 |
|
|
$ |
1,806,909 |
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
LIABILITIES |
|
|
|
Deposits |
|
|
|
Non-interest bearing |
$ |
534,436 |
|
|
$ |
425,210 |
|
Interest bearing |
1,104,125 |
|
|
1,137,629 |
|
Total deposits |
1,638,561 |
|
|
1,562,839 |
|
Short-term borrowings |
— |
|
|
9,825 |
|
Redeemable subordinated
debentures |
18,557 |
|
|
18,557 |
|
Accrued interest payable |
425 |
|
|
851 |
|
Lease liability |
16,216 |
|
|
17,387 |
|
Accrued expense and other
liabilities |
36,858 |
|
|
9,793 |
|
Total liabilities |
1,710,617 |
|
|
1,619,252 |
|
SHAREHOLDERS
EQUITY |
|
|
|
Preferred stock, no par value;
5,000,000 shares authorized; none issued |
— |
|
|
— |
|
Common stock, no par value;
30,000,000 shares authorized; 10,376,085 and 10,293,535 shares
issued and 10,318,907 and 10,245,826 shares outstanding as of
September 30, 2021 and December 31, 2020, respectively |
112,138 |
|
|
111,135 |
|
Retained earnings |
87,735 |
|
|
75,201 |
|
Treasury stock, 57,178 and
47,709 shares at September 30, 2021 and December 31,
2020, respectively |
(771 |
) |
|
(611 |
) |
Accumulated other
comprehensive income |
821 |
|
|
1,932 |
|
Total shareholders’ equity |
199,923 |
|
|
187,657 |
|
Total liabilities and shareholders’ equity |
$ |
1,910,540 |
|
|
$ |
1,806,909 |
|
|
|
|
|
|
|
|
|
1ST
Constitution Bancorp Consolidated
Statements of Income(Dollars in thousands, except
per share data)(Unaudited)
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
INTEREST
INCOME |
|
|
|
|
|
|
|
Loans, including fees |
$ |
14,995 |
|
|
$ |
16,477 |
|
|
$ |
45,765 |
|
|
$ |
46,656 |
|
Securities: |
|
|
|
|
|
|
|
Taxable |
545 |
|
|
725 |
|
|
1,569 |
|
|
2,633 |
|
Tax-exempt |
456 |
|
|
504 |
|
|
1,392 |
|
|
1,438 |
|
Federal funds sold and short-term investments |
108 |
|
|
2 |
|
|
203 |
|
|
95 |
|
Total interest income |
16,104 |
|
|
17,708 |
|
|
48,929 |
|
|
50,822 |
|
INTEREST
EXPENSE |
|
|
|
|
|
|
|
Deposits |
1,215 |
|
|
2,171 |
|
|
4,155 |
|
|
8,133 |
|
Borrowings |
— |
|
|
95 |
|
|
— |
|
|
205 |
|
Redeemable subordinated debentures |
81 |
|
|
90 |
|
|
248 |
|
|
348 |
|
Total interest expense |
1,296 |
|
|
2,356 |
|
|
4,403 |
|
|
8,686 |
|
Net interest income |
14,808 |
|
|
15,352 |
|
|
44,526 |
|
|
42,136 |
|
PROVISION FOR LOAN
LOSSES |
600 |
|
|
2,320 |
|
|
2,600 |
|
|
5,340 |
|
Net interest income after provision for loan losses |
14,208 |
|
|
13,032 |
|
|
41,926 |
|
|
36,796 |
|
NON-INTEREST
INCOME |
|
|
|
|
|
|
|
Service charges on deposit accounts |
116 |
|
|
126 |
|
|
340 |
|
|
471 |
|
Gain on sales of loans, net |
2,632 |
|
|
3,396 |
|
|
8,493 |
|
|
6,987 |
|
Income on bank-owned life insurance |
379 |
|
|
188 |
|
|
721 |
|
|
632 |
|
Gain on sales/calls of securities |
2 |
|
|
79 |
|
|
6 |
|
|
97 |
|
Other income |
774 |
|
|
947 |
|
|
2,156 |
|
|
2,105 |
|
Total non-interest income |
3,903 |
|
|
4,736 |
|
|
11,716 |
|
|
10,292 |
|
NON-INTEREST
EXPENSES |
|
|
|
|
|
|
|
Salaries and employee benefits |
6,623 |
|
|
7,106 |
|
|
20,034 |
|
|
19,276 |
|
Occupancy expense |
1,221 |
|
|
1,222 |
|
|
3,693 |
|
|
3,597 |
|
Data processing expenses |
490 |
|
|
486 |
|
|
1,486 |
|
|
1,402 |
|
FDIC insurance expense |
108 |
|
|
225 |
|
|
533 |
|
|
484 |
|
Other real estate owned expenses |
(22 |
) |
|
27 |
|
|
33 |
|
|
58 |
|
Merger-related expenses |
737 |
|
|
— |
|
|
1,184 |
|
|
64 |
|
Other operating expenses |
1,684 |
|
|
1,896 |
|
|
5,510 |
|
|
5,711 |
|
Total non-interest expenses |
10,841 |
|
|
10,962 |
|
|
32,473 |
|
|
30,592 |
|
Income before income taxes |
7,270 |
|
|
6,806 |
|
|
21,169 |
|
|
16,496 |
|
INCOME
TAXES |
1,840 |
|
|
1,896 |
|
|
5,658 |
|
|
4,475 |
|
Net income |
$ |
5,430 |
|
|
$ |
4,910 |
|
|
$ |
15,511 |
|
|
$ |
12,021 |
|
EARNINGS PER COMMON
SHARE |
|
|
|
|
|
|
|
Basic |
$ |
0.53 |
|
|
$ |
0.48 |
|
|
$ |
1.51 |
|
|
$ |
1.18 |
|
Diluted |
0.53 |
|
|
0.48 |
|
|
1.51 |
|
|
1.17 |
|
WEIGHTED AVERAGE
SHARES OUTSTANDING |
|
|
|
|
|
|
|
Basic |
10,289,434 |
|
|
10,230,488 |
|
|
10,274,787 |
|
|
10,213,601 |
|
Diluted |
10,319,637 |
|
|
10,268,951 |
|
|
10,299,029 |
|
|
10,260,477 |
|
|
|
|
|
|
|
|
|
|
|
|
|
1ST
Constitution Bancorp Net Interest Margin
Analysis(Unaudited)
|
Three Months Ended September 30, 2021 |
|
Three Months Ended September 30, 2020 |
(In thousands except
yield/cost information) |
Average |
|
|
|
Average |
|
Average |
|
|
|
Average |
Assets |
Balance |
|
Interest |
|
Yield/Cost |
|
Balance |
|
Interest |
|
Yield/Cost |
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
Federal funds sold/short term investments |
$ |
270,231 |
|
|
$ |
108 |
|
|
0.16 |
% |
|
$ |
8,027 |
|
|
$ |
2 |
|
|
0.10 |
% |
Investment securities: |
|
|
|
|
|
|
|
|
|
|
|
Taxable |
145,979 |
|
|
545 |
|
|
1.49 |
% |
|
155,242 |
|
|
725 |
|
|
1.87 |
% |
Tax-exempt (1) |
107,693 |
|
|
577 |
|
|
2.14 |
% |
|
83,461 |
|
|
638 |
|
|
3.06 |
% |
Total investment securities |
253,672 |
|
|
1,122 |
|
|
1.77 |
% |
|
238,703 |
|
|
1,363 |
|
|
2.28 |
% |
Loans: (2) |
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate |
612,067 |
|
|
8,008 |
|
|
5.12 |
% |
|
609,917 |
|
|
7,789 |
|
|
5.00 |
% |
Mortgage warehouse lines |
229,034 |
|
|
2,398 |
|
|
4.10 |
% |
|
333,461 |
|
|
3,383 |
|
|
4.06 |
% |
Construction |
127,567 |
|
|
1,837 |
|
|
5.63 |
% |
|
136,252 |
|
|
1,794 |
|
|
5.24 |
% |
Commercial business |
122,796 |
|
|
1,228 |
|
|
3.97 |
% |
|
138,073 |
|
|
1,445 |
|
|
4.16 |
% |
SBA PPP loans |
28,734 |
|
|
566 |
|
|
7.81 |
% |
|
75,484 |
|
|
470 |
|
|
2.48 |
% |
Residential real estate |
65,587 |
|
|
730 |
|
|
4.45 |
% |
|
89,755 |
|
|
1,137 |
|
|
4.96 |
% |
Loans to individuals |
17,895 |
|
|
175 |
|
|
3.88 |
% |
|
27,284 |
|
|
293 |
|
|
4.20 |
% |
Loans held for sale |
5,927 |
|
|
47 |
|
|
3.17 |
% |
|
23,914 |
|
|
155 |
|
|
2.59 |
% |
All other loans |
486 |
|
|
6 |
|
|
4.83 |
% |
|
643 |
|
|
11 |
|
|
6.69 |
% |
Deferred (fees) costs, net |
(1,034 |
) |
|
— |
|
|
— |
% |
|
(1,736 |
) |
|
— |
|
|
— |
% |
Total loans |
1,209,059 |
|
|
14,995 |
|
|
4.92 |
% |
|
1,433,047 |
|
|
16,477 |
|
|
4.57 |
% |
Total interest-earning assets |
1,732,962 |
|
|
$ |
16,225 |
|
|
3.71 |
% |
|
1,679,777 |
|
|
$ |
17,842 |
|
|
4.23 |
% |
Non-interest-earning
assets: |
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses |
(17,302 |
) |
|
|
|
|
|
(12,348 |
) |
|
|
|
|
Cash and due from bank |
20,243 |
|
|
|
|
|
|
11,460 |
|
|
|
|
|
Other assets |
118,370 |
|
|
|
|
|
|
125,309 |
|
|
|
|
|
Total non-interest-earning assets |
121,311 |
|
|
|
|
|
|
124,421 |
|
|
|
|
|
Total assets |
$ |
1,854,273 |
|
|
|
|
|
|
$ |
1,804,198 |
|
|
|
|
|
Liabilities and
shareholders’ equity: |
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Money market and NOW accounts |
$ |
494,073 |
|
|
$ |
414 |
|
|
0.33 |
% |
|
$ |
425,401 |
|
|
$ |
542 |
|
|
0.51 |
% |
Savings accounts |
430,398 |
|
|
427 |
|
|
0.39 |
% |
|
290,055 |
|
|
461 |
|
|
0.63 |
% |
Certificates of deposit |
165,267 |
|
|
374 |
|
|
0.90 |
% |
|
350,654 |
|
|
1,168 |
|
|
1.33 |
% |
Federal Reserve Bank PPPLF borrowings |
— |
|
|
— |
|
|
— |
% |
|
35,296 |
|
|
33 |
|
|
0.37 |
% |
Short-term borrowings |
— |
|
|
— |
|
|
— |
% |
|
63,175 |
|
|
62 |
|
|
0.39 |
% |
Redeemable subordinated debentures |
18,557 |
|
|
81 |
|
|
1.71 |
% |
|
18,557 |
|
|
90 |
|
|
1.90 |
% |
Total interest-bearing liabilities |
1,108,295 |
|
|
$ |
1,296 |
|
|
0.46 |
% |
|
1,183,138 |
|
|
$ |
2,356 |
|
|
0.79 |
% |
Non-interest-bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Demand deposits |
516,527 |
|
|
|
|
|
|
413,350 |
|
|
|
|
|
Other liabilities |
32,613 |
|
|
|
|
|
|
28,764 |
|
|
|
|
|
Total non-interest-bearing liabilities |
549,140 |
|
|
|
|
|
|
442,114 |
|
|
|
|
|
Shareholders’ equity |
196,838 |
|
|
|
|
|
|
178,946 |
|
|
|
|
|
Total liabilities and shareholders’
equity |
$ |
1,854,273 |
|
|
|
|
|
|
$ |
1,804,198 |
|
|
|
|
|
Net interest spread (3) |
|
|
|
|
3.25 |
% |
|
|
|
|
|
3.44 |
% |
Net interest income and margin
(4) |
|
|
$ |
14,929 |
|
|
3.42 |
% |
|
|
|
$ |
15,486 |
|
|
3.67 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Tax-equivalent basis, using 21% federal tax rate in 2021 and
2020.(2) Loan origination fees and costs 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, 2021 |
|
Nine Months Ended September 30, 2020 |
(In thousands except
yield/cost information) |
Average |
|
|
|
Average |
|
Average |
|
|
|
Average |
Assets: |
Balance |
|
Interest |
|
Yield/Cost |
|
Balance |
|
Interest |
|
Yield/Cost |
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
Federal funds sold/short term investments |
$ |
210,127 |
|
|
$ |
203 |
|
|
0.13 |
% |
|
$ |
16,433 |
|
|
$ |
95 |
|
|
0.77 |
% |
Investment securities: |
|
|
|
|
|
|
|
|
|
|
|
Taxable |
135,665 |
|
|
1,569 |
|
|
1.54 |
% |
|
163,979 |
|
|
2,633 |
|
|
2.14 |
% |
Tax-exempt (1) |
96,173 |
|
|
1,762 |
|
|
2.44 |
% |
|
77,145 |
|
|
1,821 |
|
|
3.15 |
% |
Total investment securities |
231,838 |
|
|
3,331 |
|
|
1.92 |
% |
|
241,124 |
|
|
4,454 |
|
|
2.46 |
% |
Loans: (2) |
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate |
613,930 |
|
|
23,487 |
|
|
5.04 |
% |
|
588,145 |
|
|
22,935 |
|
|
5.12 |
% |
Mortgage warehouse lines |
243,168 |
|
|
7,486 |
|
|
4.06 |
% |
|
244,470 |
|
|
7,702 |
|
|
4.20 |
% |
Construction |
131,001 |
|
|
5,488 |
|
|
5.52 |
% |
|
141,428 |
|
|
5,965 |
|
|
5.63 |
% |
Commercial business |
126,508 |
|
|
3,726 |
|
|
3.94 |
% |
|
142,010 |
|
|
4,815 |
|
|
4.53 |
% |
SBA PPP loans |
48,062 |
|
|
2,292 |
|
|
6.38 |
% |
|
43,374 |
|
|
818 |
|
|
2.52 |
% |
Residential real estate |
72,525 |
|
|
2,412 |
|
|
4.43 |
% |
|
89,333 |
|
|
3,085 |
|
|
4.54 |
% |
Loans to individuals |
18,625 |
|
|
574 |
|
|
4.12 |
% |
|
28,857 |
|
|
1,001 |
|
|
4.56 |
% |
Loans held for sale |
11,750 |
|
|
282 |
|
|
3.20 |
% |
|
14,160 |
|
|
304 |
|
|
2.86 |
% |
All other loans |
632 |
|
|
18 |
|
|
3.76 |
% |
|
872 |
|
|
31 |
|
|
4.67 |
% |
Deferred (fees) costs, net |
(1,252 |
) |
|
— |
|
|
— |
% |
|
(345 |
) |
|
— |
|
|
— |
% |
Total loans |
1,264,949 |
|
|
45,765 |
|
|
4.84 |
% |
|
1,292,304 |
|
|
46,656 |
|
|
4.82 |
% |
Total interest-earning assets |
1,706,914 |
|
|
$ |
49,299 |
|
|
3.86 |
% |
|
1,549,861 |
|
|
$ |
51,205 |
|
|
4.41 |
% |
Non-interest-earning
assets: |
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses |
(16,826 |
) |
|
|
|
|
|
(10,684 |
) |
|
|
|
|
Cash and due from bank |
17,216 |
|
|
|
|
|
|
12,182 |
|
|
|
|
|
Other assets |
118,931 |
|
|
|
|
|
|
123,841 |
|
|
|
|
|
Total non-interest-earning assets |
119,321 |
|
|
|
|
|
|
125,339 |
|
|
|
|
|
Total assets |
$ |
1,826,235 |
|
|
|
|
|
|
$ |
1,675,200 |
|
|
|
|
|
Liabilities and
shareholders’ equity: |
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Money market and NOW accounts |
$ |
475,929 |
|
|
$ |
1,299 |
|
|
0.36 |
% |
|
$ |
417,557 |
|
|
$ |
1,913 |
|
|
0.61 |
% |
Savings accounts |
393,733 |
|
|
1,263 |
|
|
0.43 |
% |
|
275,679 |
|
|
1,612 |
|
|
0.78 |
% |
Certificates of deposit |
234,331 |
|
|
1,593 |
|
|
0.91 |
% |
|
354,551 |
|
|
4,608 |
|
|
1.74 |
% |
Federal Reserve Bank PPPLF borrowings |
— |
|
|
— |
|
|
— |
% |
|
13,169 |
|
|
36 |
|
|
0.37 |
% |
Short-term borrowings |
108 |
|
|
— |
|
|
— |
% |
|
39,344 |
|
|
169 |
|
|
0.58 |
% |
Redeemable subordinated debentures |
18,557 |
|
|
248 |
|
|
1.76 |
% |
|
18,557 |
|
|
348 |
|
|
2.46 |
% |
Total interest-bearing liabilities |
1,122,658 |
|
|
$ |
4,403 |
|
|
0.52 |
% |
|
1,118,857 |
|
|
$ |
8,686 |
|
|
1.04 |
% |
Non-interest-bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Demand deposits |
479,204 |
|
|
|
|
|
|
351,291 |
|
|
|
|
|
Other liabilities |
31,610 |
|
|
|
|
|
|
29,911 |
|
|
|
|
|
Total non-interest-bearing liabilities |
510,814 |
|
|
|
|
|
|
381,202 |
|
|
|
|
|
Shareholders' equity |
192,763 |
|
|
|
|
|
|
175,141 |
|
|
|
|
|
Total liabilities and shareholders’ equity |
$ |
1,826,235 |
|
|
|
|
|
|
$ |
1,675,200 |
|
|
|
|
|
Net interest spread (3) |
|
|
|
|
3.34 |
% |
|
|
|
|
|
3.37 |
% |
Net interest income and margin
(4) |
|
|
$ |
44,896 |
|
|
3.52 |
% |
|
|
|
$ |
42,519 |
|
|
3.66 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Tax-equivalent basis, using 21% federal tax rate in 2021 and
2020.(2) Loan origination fees and costs 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, |
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Adjusted net
income |
|
|
|
|
|
|
|
|
Net income |
|
$ |
5,430 |
|
|
$ |
4,910 |
|
|
$ |
15,511 |
|
|
$ |
12,021 |
|
Adjustments: |
|
|
|
|
|
|
|
|
Merger-related expenses |
|
737 |
|
|
— |
|
|
1,184 |
|
|
64 |
|
Income tax effect of adjustments |
|
(52 |
) |
|
— |
|
|
(150 |
) |
|
(19 |
) |
Adjusted net income |
|
$ |
6,115 |
|
|
$ |
4,910 |
|
|
$ |
16,545 |
|
|
$ |
12,066 |
|
|
|
|
|
|
|
|
|
|
Adjusted net income
per diluted share |
|
|
|
|
|
|
|
|
Adjusted net income |
|
$ |
6,115 |
|
|
$ |
4,910 |
|
|
$ |
16,545 |
|
|
$ |
12,066 |
|
Diluted shares outstanding |
|
10,319,637 |
|
|
10,268,951 |
|
|
10,299,029 |
|
|
10,260,477 |
|
Adjusted net income per diluted share |
|
$ |
0.59 |
|
|
$ |
0.48 |
|
|
$ |
1.61 |
|
|
$ |
1.18 |
|
|
|
|
|
|
|
|
|
|
Adjusted return on
average total assets |
|
|
|
|
|
|
|
|
Adjusted net income |
|
$ |
6,115 |
|
|
$ |
4,910 |
|
|
$ |
16,545 |
|
|
$ |
12,066 |
|
Average assets |
|
1,854,273 |
|
|
1,804,198 |
|
|
1,826,235 |
|
|
1,675,200 |
|
Adjusted return on average total assets |
|
1.31 |
% |
|
1.08 |
% |
|
1.21 |
% |
|
0.96 |
% |
|
|
|
|
|
|
|
|
|
Adjusted return on
average shareholders’ equity |
|
|
|
|
|
|
|
|
Adjusted net income |
|
$ |
6,115 |
|
|
$ |
4,910 |
|
|
$ |
16,545 |
|
|
$ |
12,066 |
|
Average equity |
|
196,838 |
|
|
178,946 |
|
|
192,763 |
|
|
175,141 |
|
Adjusted return on average shareholders’ equity |
|
12.33 |
% |
|
10.92 |
% |
|
11.48 |
% |
|
9.20 |
% |
|
|
|
|
|
|
|
|
|
Adjusted efficiency
ratio |
|
|
|
|
|
|
|
|
Adjusted non-interest expenses(2) |
|
$ |
10,104 |
|
|
$ |
10,962 |
|
|
$ |
31,289 |
|
|
$ |
30,528 |
|
Total revenue - tax-equivalent |
|
18,832 |
|
|
20,222 |
|
|
56,612 |
|
|
52,811 |
|
Adjusted efficiency ratio |
|
53.65 |
% |
|
54.21 |
% |
|
55.27 |
% |
|
57.81 |
% |
|
|
|
|
|
|
|
|
|
Book value and
tangible book value per common share |
|
|
|
|
|
|
|
|
Shareholders’ equity |
|
|
|
|
|
$ |
199,923 |
|
|
$ |
182,007 |
|
Less: goodwill and intangible assets |
|
|
|
|
|
35,765 |
|
|
36,471 |
|
Tangible shareholders’ equity |
|
|
|
|
|
164,158 |
|
|
145,536 |
|
Shares outstanding |
|
|
|
|
|
10,318,907 |
|
|
10,237,520 |
|
Book value per common share |
|
|
|
|
|
$ |
19.37 |
|
|
$ |
17.78 |
|
Tangible book value per common share |
|
|
|
|
|
$ |
15.91 |
|
|
$ |
14.22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) We use the non-GAAP financial measures of
adjusted net income, adjusted net income per diluted share,
adjusted return on average total assets, adjusted return on average
shareholders’ equity, tangible book value per common share,
adjusted non-interest expenses and adjusted efficiency ratio
because management believes that it is helpful to readers in
understanding the Company’s financial performance and the effect of
the expenses related to the pending Merger on its financial
statements. These non-GAAP financial 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) Adjusted non-interest expenses is calculated
by subtracting merger-related expenses from total non-interest
expenses. Accordingly, adjusted non-interest expenses for the three
and nine months ended September 30, 2021 is calculated as total
non-interest expenses of $10.8 million and $32.5 million for the
three- and nine-month periods ended September 30, 2021 less
$737,000 and $1.2 million for the three and nine months ended
September 30, 2021, respectively, and adjusted non-interest
expenses for the three and nine months ended September 30, 2020 is
calculated as total non-interest expenses of $11.0 million and
$30.6 million for the three- and nine-month periods ended September
30, 2020, respectively, less merger-related expenses of $64,000 for
the nine months ended September 30, 2020.
CONTACT: |
|
Robert F. ManganoPresident & Chief
Executive Officer(609) 655-4500 |
|
Stephen J. GilhoolySr. Vice President
& Chief Financial Officer(609)
655-4500 |
|
|
|
|
|
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