CRANBURY, N.J., Oct. 19, 2018 (GLOBE NEWSWIRE) -- 1^ST Constitution Bancorp (NASDAQ: FCCY), the holding company (the “Company”) for 1^ST 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 CET1, total risk-based capital, Tier 1 capital and leverage ratios were 12.10%, 12.86%, 12.10% and 11.19%, respectively, at September 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 1^ST Constitution Bancorp

1^ST Constitution Bancorp, through its primary subsidiary, 1^ST Constitution Bank, operates 20 branch banking offices in Cranbury (2), Asbury Park, Fort Lee, Freehold, Hamilton, Hightstown, Hillsborough, Hopewell, Jamesburg, Lawrenceville, Little Silver, Neptune City, Perth Amboy, Plainsboro, Princeton, Rocky Hill, Rumson, Fair Haven and Shrewsbury, New Jersey.

1^ST 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. 1^ST 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 at period end										14.73				13.83
Tangible book value per common share at 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										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, 2018				December 31, 2017
Loan portfolio composition:
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 (charge-offs) recoveries	$	(458	)		$	(55	)		$	(423	)		$	(142	)
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	%
1 The tax equivalent adjustment was $131 and $254 for the three months ended September 30, 2018 and 2017, respectively,
The tax equivalent adjustment was $404 and $781 for the nine months ended September 30, 2018 and 2017, respectively,
2 Represents net interest income on a tax-equivalent basis as a percent of average interest-earning assets.
3 Represents non-interest expenses divided by the sum of net interest income on a tax-equivalent basis and
non-interest income.

 

1st Constitution Bancorp
Consolidated Statements of Condition
(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				-
Goodwill and intangible assets					12,294				12,496
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
Overnight borrowings					99,475				20,500
Federal Home Loan Bank advances					-				-
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					79,256				72,935
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.
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 September 30,						Nine Months Ended September 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 from 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 EXPENSES
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 expense				-			-			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)
					Average					Average			Average					Average
					Balance			Interest		Yield			Balance			Interest		Yield
(Dollars in thousands)
Assets:
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 investment securities			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 non-interest-earning assets				67,906								56,929
			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				1,064,102								938,647
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 income and net interest margin 4								$	11,527	4.09	%					$	9,617	3.85	%
1 Tax equivalent basis, using federal tax rates of 21% 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)
	Average					Average			Average					Average
	Balance			Interest		Yield			Balance			Interest		Yield
(Dollars in thousands)
Assets:
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 investment securities		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 non-interest-earning assets		62,348
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 federal tax rates of 21% 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 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 return on average equity
	Adjusted Net Income							$	10,124			$	6,353
	Average equity								117,484				107,871
	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.

 

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