1st Century Bancshares, Inc. (the "Company") (Nasdaq:FCTY), the
holding company for 1st Century Bank, N.A. (the "Bank"), today
reported net income for the quarter and year ended December 31,
2013 of $217,000 and $6.9 million, respectively, compared to
$912,000 and $2.9 million for the same periods last year. Pre-tax,
pre-provision earnings for the quarter and year ended December 31,
2013 was $736,000 and $3.9 million, respectively, compared to
$963,000 and $3.1 million, respectively, for the same periods last
year.
Pre-tax, pre-provision earnings, a non-GAAP financial measure,
is presented because management believes adjusting the Company's
results to exclude taxes and loan loss provisions provides
stockholders with a useful metric for evaluating the profitability
of the Company. A schedule reconciling our GAAP net income to
pre-tax, pre-provision earnings is provided in the table below.
Alan I. Rothenberg, Chairman of the Board and Chief Executive
Officer of the Company stated, "I'm pleased by our financial
results for the year. Despite a challenging interest rate
environment, net interest income increased by over 15% during the
year and loans were up by over 40% compared to the end of last
year. As a result of this growth, our net interest margin
stabilized at 3.19% during the year, but is still at a historically
low level. In addition, asset quality has continued its improving
trend during the year with total non-performing assets declining to
0.15% of total assets by the end of 2013."
Jason P. DiNapoli, President and Chief Operating Officer of the
Company added, "Looking forward, I continue to believe that our
market offers great opportunities for a community business bank
like ours that's focused on the customer experience and
relationship banking. We plan to further invest in building upon
our strong relationship teams and focus on drilling deeper into our
current market. We continue to see customers migrating away
from larger money center banks as they recognize the quality of our
customer service and the benefits of our relationship banking
model."
2013 4th Quarter
Highlights
- The Bank's total risk-based capital ratio was 13.69% at
December 31, 2013, compared to the requirement of 10.00% to
generally be considered a "well capitalized" financial institution
for regulatory purposes. The Bank's equity is comprised solely of
common stock and does not include any capital received in
connection with TARP, or other forms of capital such as trust
preferred securities, convertible preferred stock or other equity
or debt instruments.
- For the quarter and year ended December 31, 2013, the Company
recorded net income of $217,000, or $0.02 per diluted share, and
$6.9 million, or $0.76 per diluted share, respectively. During
the same periods last year, the Company reported net income of
$912,000, or $0.10 per diluted share, and $2.9 million, or $0.33
per diluted share, respectively. The decline in net income
during the three months ended December 31, 2013 as compared to the
same period last year was primarily due to a $400,000 increase in
provision for loan losses and a $534,000 decline in non-interest
income, partially offset by a $482,000 increase in net interest
income. The increase in net income for the year ended
December 31, 2013, as compared to the same period last year, is
primarily related to an increase in net interest income of $2.1
million and the reversal of our deferred tax valuation allowance,
which resulted in an income tax benefit of approximately $3.1
million. These increases were partially offset by an increase
in non-interest expenses of $1.1 million.
- At December 31, 2013 and 2012, the Company's book value per
share was $5.84 and $5.38, respectively, representing an increase
of 8.6% during the current year.
- Net interest margin was 3.23% and 3.19% for the quarter and
year ended December 31, 2013, respectively, compared to 3.24% and
3.12% for the same periods last year. The decline in net
interest margin during the quarter is primarily due to the recovery
of a non-accrual loan during the quarter ended December 31, 2012,
which resulted in the recognition of $396,000 in additional
interest income during that period. The increase in net
interest margin during the year ended December 31, 2013, is
primarily due to an increase in the average balance of loans
relative to total average earning assets as compared to the same
period last year and a decline in the cost of our interest bearing
liabilities as compared to the same period last year. This
improvement in net interest margin was partially offset by a
general decline in the loan yields.
- Loans increased to $383.5 million at December 31, 2013,
compared to $266.7 million at December 31, 2012. Loan originations
were $50.3 million and $232.5 million during the quarter and year
ended December 31, 2013, respectively, compared to $52.4 million
and $123.1 million during the same periods last year.
- Non-performing loans declined to $735,000, or 0.19% of total
loans, at December 31, 2013, compared to $1.9 million, or 0.70% of
total loans, at December 31, 2012.
- Non-performing assets as a percentage of total assets declined
to 0.15% at December 31, 2013, compared to 0.39% at December 31,
2012.
- Net loan recoveries were $1,000 and $1.1 million during the
quarter and year ended December 31, 2013, respectively, compared to
net recoveries of $1.1 million and $731,000, respectively during
the same periods last year.
- As of December 31, 2013, the allowance for loan losses ("ALL")
was $7.2 million, or 1.89% of total loans, compared to $6.0
million, or 2.26% of total loans, at December 31, 2012. The ALL to
non-performing loans was 984.26% and 324.36% at December 31, 2013
and 2012, respectively.
- Investment securities declined to $106.3 million at December
31, 2013, representing 19.7% of our total assets, compared to
$181.2 million, or 36.3% of our total assets, at December 31,
2012. During the quarter and year ended December 31, 2013, the
Company sold $16.3 million and $35.1 million, respectively, of
investment securities, recognizing gains of $117,000 and $822,000,
respectively, in connection with these sales. Proceeds from
these sales were primarily utilized to fund our loan growth during
the year. In addition, the unrealized gain on investment
securities declined to $89,000 at December 31, 2013, compared to
$4.1 million at December 31, 2012.
- Total core deposits, which include non-interest bearing demand
deposits, interest bearing demand deposits, and money market
deposits and savings, were $409.8 million and $371.4 million at
December 31, 2013 and 2012, respectively. Non-interest bearing
deposits represent 52.3% of total deposits at December 31, 2013,
compared to 47.0% at December 31, 2012.
- Cost of funds declined to 16 and 18 basis points for the
quarter and year ended December 31, 2013, respectively, compared to
20 and 24 basis points for the same periods last year.
Capital Adequacy
At December 31, 2013, the Company's stockholders' equity totaled
$55.4 million compared to $49.2 million at December 31, 2012.
At December 31, 2013, the Bank's total risk-based capital
ratio, tier 1 risk-based capital ratio, and tier 1 leverage ratio
were 13.69%, 12.43%, and 9.32%, respectively, compared to the
requirements of 10.00%, 6.00%, and 5.00%, respectively, to
generally be considered a "well capitalized" financial institution
for regulatory purposes.
Balance
Sheet
Total assets at December 31, 2013 were $538.1 million,
representing an increase of $39.0 million, or 7.8%, from $499.2
million at December 31, 2012. Cash and cash equivalents at December
31, 2013 were $44.7 million, representing a decrease of $5.9
million, or 11.6%, from $50.6 million at December 31, 2012. Loans
increased by $116.9 million, from $266.7 million at December 31,
2012 to $383.5 million at December 31, 2013. The majority of
growth within our loan portfolio related to increases of $57.3
million in commercial real estate loans, $29.6 million in
residential loans, $17.6 million in commercial loans and $11.0
million in construction and land development loans. Loan
originations were $50.3 million and $232.5 million during the
quarter and year ended December 31, 2013, compared to $52.4 million
and $123.1 million during the same periods last
year. Prepayment speeds for the quarter and year ended
December 31, 2013 were 13.4% and 13.2%, respectively, compared to
27.0% and 23.2% for the same periods last year. Investment
securities were $106.3 million at December 31, 2013, compared to
$181.2 million at December 31, 2012, representing a decrease of
$75.0 million, or 41.4%. The decline in securities during the year
was primarily attributable to the sale of $35.1 million of
securities, which resulted in a gain of $822,000. Proceeds
from these sales were primarily utilized to fund our loan growth
during the current year. The weighted average life of our
investment securities was 3.78 years and 2.80 years at December 31,
2013 and 2012, respectively.
Total liabilities at December 31, 2013 increased by $32.8
million, or 7.3%, to $482.8 million compared to $450.0 million at
December 31, 2012. This increase is primarily due to a $36.1
million increase in deposits. Total core deposits, which
includes non-interest bearing demand deposits, interest bearing
demand deposits and money market deposits and savings, were $409.8
million and $371.4 million at December 31, 2013 and 2012,
respectively, representing an increase of $38.4 million, or
10.3%.
Credit Quality
Allowance and Provision for Loan Losses
The ALL was $7.2 million, or 1.89% of our total loan portfolio,
at December 31, 2013, compared to $6.0 million, or 2.26% of our
total loan portfolio, at December 31, 2012. At December 31,
2013 and 2012, our non-performing loans were $735,000 and $1.9
million, respectively. The decline in non-performing loans during
the year ended December 31, 2013 was primarily related to the full
repayment of two loans that had been classified as non-performing
at December 31, 2012. The ratio of our ALL to non-performing
loans was 984.26% and 324.36% at December 31, 2013 and 2012,
respectively. In addition, our ratio of non-performing loans
to total loans was 0.19% and 0.70% at December 31, 2013 and
December 31, 2012, respectively.
The ALL is impacted by inherent risk in the loan portfolio,
including the level of our non-performing loans, as well as
specific reserves and charge-off activities. During the quarter and
year ended December 31, 2013, we recorded provision for loan losses
of $400,000 and $100,000, respectively. There was no provision
for loan losses recorded during the quarter and year ended December
31, 2012. The provision for loan losses recorded during the quarter
and year ended December 31, 2013 was primarily recorded to
supplement the Bank's ALL as a result of loan growth. The
provision for loan losses during the year ended December 31, 2013
was partially offset by loan recoveries, as well as the continued
improvement in the level of our criticized and classified loans.
During the year ended December 31, 2013, total loans increased by
$116.9 million compared to December 31, 2012. Criticized and
classified loans generally consist of special mention, substandard
and doubtful loans. Special mention, substandard and doubtful loans
were $4.7 million, $2.1 million and none, respectively, at December
31, 2013, compared to $6.6 million, $3.5 million and none,
respectively, at December 31, 2012. We had net recoveries of $1,000
and $1.1 million during the quarter and year ended December 31,
2013, respectively, compared to net recoveries of $1.1 million and
$731,000 during the same periods last year. At December 31,
2013, the ALL to total loans was 1.89% compared to 2.26% at
December 31, 2012. The risks associated with the adequacy of
our ALL and the decline in this ratio may have increased as a
result of our loan growth. Management will continue to
closely monitor the adequacy of the ALL and will make adjustments
as warranted. Management believes that the ALL as of December
31, 2013 and 2012 was adequate to absorb known and inherent risks
in the loan portfolio.
Non-Performing Assets
Non-performing assets totaled $825,000 and $1.9 million at
December 31, 2013 and 2012, respectively. Non-accrual loans
totaled $735,000 and $1.9 million at December 31, 2013 and 2012,
respectively. At December 31, 2013, non-accrual loans consisted of
two commercial loans totaling $706,000 and one consumer loan
totaling $29,000. At December 31, 2012, non-accrual loans consisted
of three commercial loans totaling $1.5 million and one consumer
loan totaling $345,000. At December 31, 2013 and 2012, other real
estate owned ("OREO") consisted of one undeveloped land property
totaling $90,000. As a percentage of total assets, the amount
of non-performing assets was 0.15% and 0.39% at December 31, 2013
and 2012, respectively.
Net Interest Income and Margin
During the quarter and year ended December 31, 2013, net
interest income was $4.4 million and $16.2 million, respectively,
compared to $4.0 million and $14.1 million for the same periods
last year. The improvement in net interest income was
primarily attributable to increases in the average balances of our
loan portfolio during the quarter and year ended December 31, 2013
as compared to the same periods last year. The average
balances of our loan portfolio were $373.1 million and $321.6
million during the quarter and year ended December 31, 2013,
respectively, compared to $246.6 million and $234.9 million for the
same periods last year.
The Company's net interest margin (net interest income divided
by average interest earning assets) was 3.23% for the quarter ended
December 31, 2013, compared to 3.24% for the same period last year.
The 1 basis point decline in net interest margin is primarily due
to the recovery of a non-accrual loan during the quarter ended
December 31, 2012, which resulted in the recognition of $396,000 in
additional interest income during that period. Net interest
margin during the quarter ended December 31, 2013 was positively
impacted by an increase in the average balance of loans relative to
total average earning assets as compared to the same period last
year and a decline in the cost of our interest bearing
liabilities. The percentage of average loans to total average
earning assets increased to 68.2% during the quarter ended December
31, 2013, compared to 50.6% during the same period last
year. The average cost of interest bearing deposits and
borrowings was 0.31% during the quarter ended December 31, 2013
compared to 0.35% for the same period last year. These factors
were partially offset by a general decline in the loan
yields. The decline in loan yield was primarily caused by a
general downward trend in interest rates, as well as competitive
loan pricing conditions in our market, which have continued to
compress loan yields.
The Company's net interest margin was 3.19% for the year ended
December 31, 2013, compared to 3.12% for the same period last
year. The 7 basis point improvement in net interest margin is
primarily due an increase in the average balance of loans relative
to total average earning assets as compared to the same period last
year, and a decline in the cost of our interest bearing
liabilities. The percentage of average loans to total average
earning assets increased to 63.2% during the year ended December
31, 2013, compared to 52.0% during the same period last
year. The decline in the cost of interest bearing deposits and
borrowings is primarily attributable to a decrease in interest
rates paid on these accounts. The average cost of interest
bearing deposits and borrowings was 0.32% and 0.38% during the year
ended December 31, 2013 and 2012, respectively. These factors
were partially offset by a general decline in the loan
yields. As discussed above, the decline in loan yield was
caused by a general downward trend in interest rates, as well as
competitive loan pricing conditions in our market, which have
continued to compress loan yields.
Non-Interest Income
Non-interest income was $192,000 and $1.8 million for the
quarter and year ended December 2013, respectively, compared to
$726,000 and $2.0 million for the same periods last year.
During the quarter and year ended December 31, 2013, the
Company sold $16.3 million and $35.1 million, respectively, of
investment securities, recognizing gains of $117,000 and $822,000,
respectively. With the exception of such gains, non-interest
income primarily consists of loan arrangement fees earned in
connection with our college loan funding program and customer
related fee income. During the first quarter of 2013, the
Company terminated the college loan funding program.
Non-Interest Expense
Non-interest expense was $3.9 million and $14.1 million for the
quarter and year ended December 31, 2013, compared to $3.7 million
and $13.0 million for the same periods last year. The
increases in non-interest expense during the quarter and year ended
December 31, 2013 as compared to the same periods last year is
primarily due to the costs incurred to expand the Bank's business
development and related operational support teams, as well as the
additional costs incurred to address regulatory compliance
matters.
Income Tax Provision
During the quarter and year ended December 31, 2013, we recorded
a tax provision (benefit) of $119,000 and ($3.1 million),
respectively. The tax benefit recognized was primarily
related to the reversal of the Company's deferred tax valuation
allowance that had been previously established during the year
ended December 31, 2009. In making this determination,
management analyzed, among other things, our recent history of
earnings and cash flows, forecasts of future earnings, improvements
in the credit quality of the Company's loan portfolio, the nature
and timing of future deductions and benefits represented by the
deferred tax assets and our cumulative earnings for the 12 quarters
preceding the reversal of this valuation allowance. During the
quarter and year ended December 31, 2012, we recorded a tax expense
of $51,000 and $111,000, respectively. Beginning in January
2014, the Company will begin recording tax provisions at its
estimated effective tax rate of approximately 42%. This
increase in our effective tax rate will have a substantial impact
on the Company's future net income and earnings per share relative
to prior periods that incurred a lower effective tax rate as a
result of the deferred tax valuation allowance.
Net Income
For the quarter and year ended December 31, 2013, the Company
recorded net income of $217,000, or $0.02 per diluted share, and
$6.9 million, or $0.76 per diluted share, compared to $912,000, or
$0.10 per diluted share, and $2.9 million, or $0.33 per diluted
share, for the same periods last year.
About 1st Century Bancshares, Inc.
1st Century Bancshares, Inc. is a publicly owned company traded
on the NASDAQ Capital Market under the symbol "FCTY." The Company's
wholly-owned subsidiary, 1st Century Bank, N.A., is headquartered
in the Century City area of Los Angeles, with a full service
business bank in Century City, CA, and a relationship office in
Santa Monica, CA. The Bank's primary focus is serving the specific
banking needs of entrepreneurs, professionals and small businesses
with the personal service of a traditional community bank, while
offering the technologies of a big money center bank. The Company
maintains a website at www.1cbank.com. By including the foregoing
website address link, the Company does not intend to and shall not
be deemed to incorporate by reference any material contained
therein.
Safe Harbor
Certain matters discussed in this press release may constitute
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. You can find many (but
not all) of these forward-looking statements by looking for words
such as "approximates," "believes," "expects," "anticipates,"
"estimates," "intends," "plans," "would," "may" or other similar
expressions in this press release. These statements are based upon
our management's current expectations and speak only as of the date
hereof. Forward-looking statements are subject to certain risks and
uncertainties that could cause our actual results, performance or
achievements to differ materially and adversely from those
expressed, suggested or implied herein. Accordingly, investors
should use caution in relying on forward-looking statements to
anticipate future results or trends. These risks and uncertainties
include, but are not limited to: (1) the impact of changes in
interest rates, (2) political instability, (3) changes in the
monetary policies of the U.S. Government, (4) a renewed decline in
economic conditions, (5) renewed deterioration in the value of
California real estate, both residential and commercial, (6) an
increase in the level of non-performing assets and charge-offs, (7)
further increased competition among financial institutions, (8) the
Company's ability to continue to attract interest bearing deposits
and quality loan customers, (9) further government regulation and
the implementation and costs associated with the same, (10)
internal and external fraud and cyber-security threats including
the loss of bank or customer funds, loss of system functionality or
the theft or loss of data, (11) management's ability to
successfully manage the Company's operations, (12) the possibility
that we will be unable to comply with the requirements set forth in
the OCC's Consent Order, which could result in restrictions on our
operations, and (13) the other risks set forth in the Company's
reports filed with the U.S. Securities and Exchange Commission. The
Company does not undertake, and specifically disclaims any
obligation to revise or update any forward-looking statements for
any reason.
(Tables follow)
SUMMARY FINANCIAL INFORMATION
The following tables present relevant financial data from the
Company's recent performance (dollars in thousands, except per
share data):
|
December 31, |
Balance Sheet Results: |
2013 |
2012 |
Total Assets |
$ 538,145 |
$ 499,173 |
Total Loans |
$ 383,548 |
$ 266,671 |
Allowance for Loan Losses
("ALL") |
$ 7,236 |
$ 6,015 |
Non-Performing Assets |
$ 825 |
$ 1,944 |
Investment Securities-AFS, at
estimated fair value |
$ 106,272 |
$ 181,225 |
Deposits: |
|
|
Non-Interest Bearing
Demand Deposits |
$ 236,869 |
$ 196,026 |
Interest Bearing Demand
Deposits |
21,005 |
23,233 |
Money Market Deposits and
Savings |
151,879 |
152,094 |
Certificates of
Deposit |
43,013 |
45,328 |
Total Deposits |
$ 452,766 |
$ 416,681 |
Total Stockholders' Equity |
$ 55,388 |
$ 49,173 |
Gross Loans to Deposits |
84.70% |
63.99% |
Ending Book Value per
Share |
$ 5.84 |
$ 5.38 |
|
|
|
|
Quarters Ended December
31, |
Quarterly Operating Results (unaudited): |
2013 |
2012 |
Net Interest Income |
$ 4,447 |
$ 3,965 |
Provision for Loan Losses |
$ 400 |
$ -- |
Gain on Sale of AFS Investment
Securities |
$ 117 |
$ -- |
Other Non-Interest Income |
$ 75 |
$ 726 |
Non-Interest Expense |
$ 3,903 |
$ 3,728 |
Income Tax Provision |
$ 119 |
$ 51 |
Net Income |
$ 217 |
$ 912 |
Basic Earnings per Share |
$ 0.02 |
$ 0.11 |
Diluted Earnings per Share |
$ 0.02 |
$ 0.10 |
Quarterly Net Interest
Margin* |
3.23% |
3.24% |
|
|
|
Reconciliation of QTD Net Income to Pre-Tax,
Pre-Provision Earnings: |
|
|
Net Income |
$ 217 |
$ 912 |
Provision for Loan Losses |
400 |
-- |
Income Tax Provision |
119 |
51 |
Pre-Tax, Pre-Provision
Earnings |
$ 736 |
$ 963 |
|
|
|
Years Ended December
31, |
YTD Operating Results: |
2013 |
2012 |
Net Interest Income |
$ 16,208 |
$ 14,073 |
Provision for Loan Losses |
$ 100 |
$ -- |
Gain on Sale of AFS Investment
Securities |
$ 822 |
$ -- |
Other Non-Interest Income |
$ 971 |
$ 1,986 |
Non-Interest Expense |
$ 14,097 |
$ 13,006 |
Income Tax (Benefit)
Provision |
$ (3,059) |
$ 111 |
Net Income |
$ 6,863 |
$ 2,942 |
Basic Earnings per Share |
$ 0.79 |
$ 0.35 |
Diluted Earnings per Share |
$ 0.76 |
$ 0.33 |
YTD Net Interest Margin |
3.19% |
3.12% |
|
|
|
Reconciliation of YTD Net Income to Pre-Tax,
Pre-Provision Earnings: |
|
|
Net Income |
$ 6,863 |
$ 2,942 |
Provision for Loan Losses |
100 |
-- |
Income Tax (Benefit)
Provision |
(3,059) |
111 |
Pre-Tax, Pre-Provision
Earnings |
$ 3,904 |
$ 3,053 |
|
|
|
|
|
|
*Percentages are reported on an
annualized basis. |
CONTACT: Alan I. Rothenberg
Chairman/Chief Executive Officer
Phone: (310) 270-9501
Jason P. DiNapoli
President/Chief Operating Officer
Phone: (310) 270-9505
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