1st Colonial Bancorp, Inc. Reports Second Quarter 2024 Results

Income Statement Highlights include:

• Net income was $2.0 million for the second quarter of 2024 consistent with the same quarter in 2023 and a $371 thousand increase from the first quarter of 2024.
• Net interest income for the quarter ended June 30, 2024 was $5.9 million, a decrease of $1 million, or 15% from the same period in 2023.
• Net interest margin for the quarter ended June 30, 2024 was 3.11%, a 15% decrease from the same period in 2023, and a 6% decrease from the quarter ended March 31, 2024.
• Provision for credit losses was a net release of $439 thousand for the second quarter of 2024 and was mainly related to a planned loan sale. The provision for credit losses was $170 thousand for the second quarter of 2023 and $155 thousand for the first quarter of 2024.
• The allowance for credit losses was 1.50% of total loans as of June 30, 2024 compared to 1.56% as of March 31, 2024 and 1.52% as of December 31, 2023.
• Noninterest income for the quarter ended June 30, 2024 was $969 thousand, an increase of 39%, from the comparable quarter in 2023 and up 34% from the first quarter of 2024.
• Noninterest expense for the quarter ended June 30, 2024 was $4.8 million, a decrease of 2% from the same period in 2023 and was the same as the first quarter of 2024.
• Annualized return on average assets for the second quarters of 2024 and 2023, was 1.00%, compared to 0.80% for the first quarter of 2024.
• Diluted earnings per share was $0.40 for the quarter ended June 30, 2024 compared to $0.41 for the quarter ended June 30, 2023.

Balance Sheet Highlights include:

• Total assets declined $14.4 million, or 2%, to $811.2 million as of June 30, 2024 from $825.6 million as of December 31, 2023.
• Total loans declined $14.3 million, or 2%, to $622.7 million as of June 30, 2024 from $637.0 million as of December 31, 2023.
• Total deposits declined $35.5 million, or 5%, from $687.4 million as of December 31, 2023 to $651.9 million as of June 30, 2024.
• For the second quarter of 2024, annualized return on average equity was 11.10% compared to 12.70% for the same period in 2023 and 9.23% for the first quarter of 2024.
• Book value per share increased 14% to $15.09 as of June 30, 2024 from $13.23 as of December 31, 2023.
• Leverage ratio for the Bank grew to 10.55% as of June 30, 2024 from 10.02% as of December 31, 2023.

1st Colonial Bancorp, Inc. (FCOB), holding company of 1^st Colonial Community Bank, today reported net income of $2.0 million, or $0.40 per diluted share, for the three months ended June 30, 2024, compared to net income of $2.0 million, or $0.41 per diluted share, for the three months ended June 30, 2023. For the six months ended June 30, 2024, net income was $3.5 million, or $0.72 per diluted share, compared to $3.5 million, or $0.72 per diluted share, for the same period in 2023.

Robert White, President and Chief Executive Officer, commented, “We are pleased to report our second quarter results, which reflect our continued financial resiliency in this prolonged higher interest rate environment. The continued pressure on deposit rates has caused a decrease in our net interest margin. We remain focused on managing our operating costs to account for the anticipated and ongoing pressure on our funding costs. Our team remains committed to delivering high quality, value-added products and services to our clients. Our asset quality and overall portfolio performance remains strong, which we attribute to our disciplined underwriting practices.”

Operating Results

Net Interest Income

Net interest income for the three months ended June 30, 2024 and 2023 was $5.9 million and $6.9 million, respectively. The $1 million decline in net interest income was primarily attributable to a $1.5 million increase in interest paid on average interest-bearing liabilities that was partially offset by a $486 thousand increase in interest income earned on average interest-earning assets. For the second quarter of 2024, average loan balances increased $10.8 million to $632.5 million from $621.7 million for the second quarter of 2023. Average residential mortgages, and home equity loans and lines outstanding increased $29.8 million and $5.4 million, respectively. Average outstanding constructions loans, which have higher interest rates based on the Wall Street Journal (WSJ) prime rate, declined $21.8 million for the second quarter of 2024 compared to the same period in 2023. When compared to the first quarter of 2024, net interest income declined by $394 thousand.

For the first six months of 2024, net interest income decreased $1.2 million, or 9%, to $12.2 million from $13.4 million for the same period in 2023. The decline in net interest income was primarily attributable to a $3.1 million increase in interest paid on average interest-bearing liabilities and was partially mitigated by a $1.9 million increase in interest income earned on average interest-earning assets. During the first six months of 2024, interest income on average loans and average investments increased $1.4 million and $323 thousand, respectively. Our average outstanding loan balance grew $20.9 million.

For the second quarter of 2024, interest expense was $4.4 million, an increase of $1.5 million from $2.9 million for the second quarter of 2023. For the second quarter of 2024, average interest-bearing deposits increased $6.4 million from the second quarter of 2023. Average brokered certificates of deposit (CDs) increased $50.2 million due to declines in average interest checking, savings and money market and retail CD balances of $24.5 million, $8.9 million and $10.4 million, respectively. As a result of the prolonged higher interest rates, we have increased our deposit rates over the last year. The increase in deposit rates combined with the increase in the average balance of higher cost brokered CDs led to an increase of $1.6 million in deposit interest expense in the second quarter of 2024 compared to the second quarter of 2023. When compared to the first quarter of 2024, total interest expense increased $186 thousand from $4.2 million. The average rate paid on interest bearing liabilities was 2.74% for the second quarter of 2024 compared to 2.61% for the first quarter of 2024 and 1.78% for the second quarter of 2023.

For the first six months of 2024, interest expense was $8.6 million, an increase of $3.1 million from $5.5 million for the first six months of 2023. For the first six months of 2024, average interest-bearing deposits increased $18.9 million from the average balance for the comparable 2023 period. Average brokered CD balances increased $46.3 million while average interest checking, savings and money market and retail CD balances declined $6.2 million, $15.4 million, and $5.8 million, respectively. The increase in deposit rates combined with the increase in average brokered CD balances led to an increase of $3.3 million in deposit interest expense for the first two quarters of 2024 compared to the same period in 2023. Average borrowings decreased $9.0 million during the first six months of 2024 compared to the same period in 2023.

The net interest margin was 3.11% for the second quarter of 2024 compared to 3.66% for the second quarter of 2023. The average yield on interest-earning assets grew 26 basis points from 5.17% for the quarter ended June 30, 2023 to 5.43% for the quarter ended June 30, 2024. The average rate paid on average interest-bearing liabilities increased 96 basis points from 1.78% for the second quarter of 2023 to 2.74% for the second quarter of 2024. When compared to the first quarter of 2024, the second quarter 2024 net interest margin declined 20 basis points from 3.31% and was mainly related to an 8 basis point decrease in the average yield on average interest-earning assets coupled with a 12 basis point increase in the average rate paid on average interest bearing deposits. Net interest margin was 3.21% for the six months ended June 30, 2024 compared to 3.60% for the six months ended June 30, 2023.

Provision for Credit Losses

For the three months ended June 30, 2024, the provision for credit losses was a net release of $439 thousand and included $380 thousand for loans and $59 thousand for off balance sheet (“OBS”) commitments. The release was mainly due to a planned sale of $15 million in home equity lines of credit in June 2024. As a result of the sale, we were able to expand our ability to originate new lines of credit without increasing our concentration in single family residential mortgages. For the three months ended June 30, 2023, the provision for credit losses was $170 thousand and included $251 thousand for loans and ($81) thousand for OBS commitments. For the second quarter of 2024 net charge-offs were $208 thousand compared to $150 thousand for the second quarter of 2023 and net recoveries of $116 thousand for the first quarter of 2024.

For the six months ended June 30, 2024, the provision for credit losses was a net release of $284 thousand and included $260 thousand for loans and $24 thousand for OBS commitments. For the six months ended June 30, 2023, the provision for credit losses was a net release of $4 thousand and included $54 thousand for loans and ($58) thousand for OBS commitments. Net charge-offs were $92 thousand for the first half of 2024 compared to $118 thousand for the same period in 2023.

Noninterest Income

Noninterest income for the second quarter of 2024 was $969 thousand, an increase of $270 thousand, or 39%, from $699 thousand for the second quarter of 2023. Income from the origination and sales of residential mortgages grew $315 thousand, or 99%, from the second quarter in 2023. While mortgage originations grew $7.0 million, or 27%, we sold 92% of the originations in the second quarter of 2024 compared to 58% in the second quarter of 2023. We also recorded a $35 thousand gain on the sale of $15 million in home equity lines of credit. Gains on the sale of SBA loans were $21 thousand for the second quarter of 2024 compared to $118 thousand for the comparable 2023 period. When compared to the first quarter of 2024, non-interest income for the second quarter of 2024 increased $248 thousand, or 34%, from $721 thousand.

For the six months ended June 30, 2024, noninterest income was $1.7 million, an increase of $537 thousand, or 47%, from $1.2 million for the same period in 2023. Income from the origination and sales of residential mortgages grew $568 thousand, or 112%, from $508 thousand for the first two quarters of 2023 to $1.1 million for the first two quarters in 2024. For the first half of 2024, we sold $49.1 million, or 88%, of the $55.9 million in mortgage loan originations compared to sales of $25.8 million, or 52%, of the $49.4 million in mortgage loan originations for the first half of 2023. For the first six months of 2024 gains on the sale of SBA loans were $21 thousand and declined $110 thousand from $131 thousand for the same period in 2023.

Noninterest Expense

Noninterest expense was $4.8 million for the three months ended June 30, 2024, and decreased $82 thousand, or 2%, from $4.9 million for the comparable period in 2023. Salaries and benefits and FDIC assessment expenses decreased $84 thousand and $61 thousand and were partially offset by an increase in audit expenses of $75 thousand. When compared to the first quarter of 2024, non-interest expense for the second quarter of 2024 increased $29 thousand.

Noninterest expense was $9.6 million for the six months ended June 30, 2024 and decreased $173 thousand from $9.7 million for the same period in 2023. Salaries and benefits decreased $369 thousand, or 6%, mainly due to the recognition of severance that was negotiated with a former executive in 2023. Audit fees and legal expenses increased $157 thousand and $71 thousand, respectively. The increase in audit expenses was mostly related to optional targeted testing of operational areas and the increase in legal fees was related to the workout and disposition of nonaccrual assets.

Income Taxes

For the three and six months ended June 30, 2024, income tax expenses were $556 thousand and $1.1 million, respectively, compared to $634 thousand and $1.4 million for the three and six months ended June 30, 2023, respectively. Income taxes were favorably impacted by an increase in non-taxable income and a reduction in the New Jersey corporate surtax rate.

Financial Condition

Assets

As of June 30, 2024, total assets were $811.1 million and decreased $7.0 million, or 1%, from $818.1 million as of March 31, 2024. Total assets were $825.6 million as of December 31, 2023.

Total loans were $622.7 million as of June 30, 2024, a decrease of $14.4 million, or 2%, from $637.2 million as of March 31, 2024. Total loans declined $14.3 million, or 2%, from $637.0 million as of December 31, 2023. Home equity loans and lines of credit declined $15.3 million in the second quarter and $4.8 million during the first half of 2024 as a result of the loan sale. Commercial loans, including commercial real estate and construction loans, increased $2.0 million in the second quarter and declined $7.8 million during the six months ended June 30, 2024. As of June 30, 2024, loans held for sale were $11.4 million and increased $5.9 million and $7.8 million from $5.5 million as of March 31, 2024 and $3.6 million as of December 31, 2024, respectively.

Investments decreased $2.9 million, or 3%, to $108.6 million as of June 30, 2024 from $111.5 million as of March 31, 2024. Investments were $107.6 million as of December 31, 2023. During 2024 we received $3.2 million in principal paydowns and reinvested the proceeds in short-term municipal bond anticipation notes. The unrealized loss was $5.8 million as of June 30, 2024 compared to $6.2 million as of December 31, 2023.

Asset Quality

As of June 30, 2024, the allowance for credit losses (“ACL”) for loans was $9.3 million, or 1.50%, of total loans compared to $9.9 million, or 1.56%, of total loans as of March 31, 2024. The ACL was $9.7 million, or 1.52% of total loans, as of December 31, 2023. As of June 30, 2024, non-performing assets were $1.7 million compared to $1.6 million as of March 31, 2024 and $4.9 million as of December 31, 2023. During the second quarter we foreclosed on the commercial real estate collateral for a commercial mortgage and transferred the net realizable value of $258 thousand from a nonaccrual loan to other real estate owned. The ACL to non-accrual loans was 641.4% as of June 30, 2024 compared to 631.5% as of March 31, 2024 and 199.0% as of December 31, 2023. As of June 30, 2024, the ratio of non-performing assets to total assets was 0.28% compared to 0.25% as of March 31, 2024 and 0.76% as of December 31, 2023.

Liabilities

Total deposits were $651.9 million as of June 30, 2024, a decrease of $17.0 million, or 3%, from $669.0 million as of March 31, 2024. For the first six months of 2024, total deposits declined $35.5 million, or 5%, from $687.4 million as of December 31, 2023. Municipal interest checking accounts, retail CDs, interest checking deposits, and money market accounts decreased $29.2 million, $20.0 million, $5.7 million and $3.3 million, respectively, while savings accounts increased $8.5 million. Brokered CDs increased $15.0 million to replace the reduction in deposit balances. The current interest rate environment has made it highly competitive in retaining and growing our deposit customers.

As of June 30, 2024, short-term borrowings were $70.8 million and increased $8.1 million from March 31, 2024 and $17.2 million from December 31, 2023. The increase in short-term borrowings was to supplement funding requirements.

Shareholder’s Equity

Total shareholders’ equity was $72.0 million as of June 30, 2024, compared to $69.7 million as of March 31, 2024 and $67.9 million as of December 31, 2023. The accumulated comprehensive loss was $4.3 million as of June 30, 2024 compared to $4.5 million for March 31, 2024 and December 31, 2023. The accumulated comprehensive loss is related to the unrealized loss in our investment portfolio. Tangible book value per share increased $0.44 from $14.65 as of March 31, 2024 to $15.09 as of June 30, 2024. Tangible book value per share was $14.31 as of December 31, 2023.

Consolidated Financial Statements and Other Highlights:

About 1^st Colonial Bancorp, Inc.

1st Colonial Bancorp, Inc, is a Pennsylvania corporation headquartered in Mount Laurel, New Jersey, and the parent company of 1st Colonial Community Bank (the “Bank”). The Bank provides a range of business and consumer financial services, placing emphasis on customer service and access to decision makers. Headquartered in Collingswood, New Jersey, the Bank has branches in Westville, New Jersey and Limerick, Pennsylvania. The bank also has administrative offices in Mount Laurel, New Jersey. To learn more, call (877) 785-8550 or visit www.1stcolonial.com.

“Safe Harbor” Statement

In addition to historical information, this press release may contain “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements with respect to 1st Colonial Bancorp, Inc.’s strategies, goals, beliefs, expectations, estimates, intentions, capital raising efforts, financial condition and results of operations, future performance, and business. Statements preceded by, followed by, or that include the words “may,” “could,” “should,” “pro forma,” “looking forward,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” or similar expressions generally indicate a forward-looking statement. These forward-looking statements involve risks and uncertainties that are subject to change based on various important factors (some of which, in whole or in part, are beyond 1st Colonial Bancorp, Inc.’s control). Numerous competitive, economic, regulatory, legal and technological factors, risks and uncertainties that could cause actual results to differ materially include, without limitation, the impact of the ongoing pandemic and government responses thereto; on the U.S. economy, including the markets in which we operate; actions that we and our customers take in response to these factors and the effects such actions have on our operations, products, services and customer relationships; increased competitive pressures; changes in the interest rate environment; changes in general economic conditions and conditions within the securities markets; legislative and regulatory changes; and the effects of inflation, a potential recession, among others, could cause 1st Colonial Bancorp, Inc.’s financial performance to differ materially from the goals, plans, objectives, intentions and expectations expressed in such forward-looking statements. 1st Colonial Bancorp, Inc. cautions that the foregoing factors are not exclusive, and neither such factors nor any such forward-looking statement takes into account the impact of any future events. All forward-looking statements and information set forth herein are based on management’s current beliefs and assumptions as of the date hereof and speak only as of the date they are made. 1st Colonial Bancorp, Inc. does not undertake to update any forward-looking statement whether written or oral, that may be made from time to time by 1st Colonial Bancorp, Inc. or by or on behalf of 1st Colonial Community Bank.

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