SALINAS, Calif., April 28, 2023 (GLOBE NEWSWIRE) -- 1st Capital Bancorp (the “Company”), (OTCQX: FISB), the $954.5 million asset bank holding company and parent company of 1st Capital Bank (the “Bank”), today reported unaudited net income of $1.06 million for the quarter ended March 31, 2023, a decrease of 18.9% compared to net income of $1.31 million for the quarter ended December 31, 2022, and a decrease of 49.4% compared to net income of $2.09 million for the quarter ended March 31, 2022.

Financial Highlights
Performance highlights for the quarter ended March 31, 2023, as compared to the quarter ended December 31, 2022, and the quarter ended March 31, 2022:

“Our bankers did an extraordinary job in proactively reaching out to our clients to alleviate potential concerns following the recent high profile bank closures,” commented Sam Jimenez, chief executive officer. “While our balance sheet and accompanying first quarter operating performance was not immune to the effects of the industry turmoil, our business is stable, and reflects a strong liquidity and capital position.”

Net Interest Income and Net Interest Margin
The Company's first quarter 2023 net interest income decreased $620 thousand, or 7.31%, to $7.86 million as compared with $8.48 million for the quarter ended December 31, 2022. Loan interest income decreased $245 thousand, or 3.52%, to $6.72 million for the quarter ended March 31, 2023, compared to $6.96 million for the quarter ended December 31, 2022, due to a decline in average loan balances. Interest income on investment securities declined $110 thousand, or 5.37%, to $1.94 million in first quarter 2023 compared to $2.05 million in fourth quarter 2022 primarily due to the $25 million bond sale executed in December 2022. Other interest income increased $61 thousand, or 24.3%, to $311 thousand for the first quarter 2023 compared to $250 thousand for the quarter ended December 31, 2022, due to increases in average cash balances. Interest expense increased $314 thousand, or 36.0%, to $1.19 million for the quarter ended March 31, 2023, compared to $874 thousand for the quarter ended December 31, 2022, due to deposit rate increases and the cost of first quarter borrowings. Interest expense for each of the quarters presented includes $169 thousand related to subordinated debt.

The Company's net interest margin declined by 24 basis points (bps) to 3.39% from 3.63% when compared to the quarter ended December 31, 2022. This decrease was primarily driven by the increase in funding costs. The Company’s cost of funds increased from 0.39% in the fourth quarter of 2022 to 0.56% in the first quarter of 2023.

Allowance for Credit Losses
The Company adopted Accounting Standards Update (ASU) 2016-13, more commonly referred to as the Current Expected Credit Loss (CECL) method on January 1, 2023, using the modified retrospective method with no adjustments to prior period comparative financial statements for all financial assets measured at amortized cost and off-balance sheet credit exposure as well as held to maturity securities, which resulted in a $127 thousand increase to the allowance for credit losses, a $3 thousand reserve for held-to-maturity securities and a $26 thousand increase to the reserve for unfunded commitments. The impact to retained earnings, net of taxes, was $111 thousand. Reporting periods beginning after January 1, 2023 are presented under ASU 2016-13 while prior period amounts continue to be reported in accordance with previously applicable Generally Accepted Accounting Principles in the United States.

Provision expense of $690 thousand was recorded in the quarter ended March 31, 2023, compared to $523 thousand in the quarter ended December 31, 2022. The provision expense was driven by loan growth.

Noninterest Expenses
The Company's total non-interest expense increased $316 thousand, or 5.55%, to $6.0 million in the quarter ended March 31, 2023, compared to $5.70 million for the quarter ended December 31, 2022. This increase is attributed to a rise in salaries and benefits due to increased benefit costs, seasonal increases to payroll taxes and higher vacation accruals accompanied by a decrease in capitalized personnel costs associated with loan originations.

Balance Sheet Summary
The Company's total assets at March 31, 2023 increased $11.1 million, or 1.18%, to $954.5 million as compared to $943.4 million at December 31, 2022.

Cash and due from banks increased $7.6 million, or 19.9%, to $45.6 million at March 31, 2023 compared to $38.0 million at December 31, 2022 as on-balance sheet liquidity was proactively increased in response to the recent volatility in the banking industry.

Total loans outstanding were $572.8 million as of March 31, 2023, representing a $8.37 million, or 1.48%, increase from the December 31, 2022 outstanding balance of $564.4 million. Commercial real estate originations and Construction and Single Family secured real estate loan purchases in the first quarter were partially offset by paydowns on the purchased consumer and lease pools.

Loan type (dollars in thousands)3/31/2023% of Total
Loans		 3/31/2022% of Total
Loans		 12/31/2022% of Total
Loans
Construction / land (including farmland)$21,605 3.8% $17,738 3.1% $14,290 2.5%
Residential 1 to 4 units 60,754 10.6%  58,191 10.0%  54,608 9.7%
Home equity lines of credit 4,214 0.7%  5,555 1.0%  4,690 0.8%
Multifamily 78,103 13.6%  78,291 13.5%  79,227 14.0%
Owner occupied commercial real estate 112,600 19.7%  111,580 19.2%  108,140 19.2%
Investor commercial real estate 188,220 32.9%  193,426 33.3%  188,374 33.4%
Commercial and industrial 40,498 7.1%  41,859 7.2%  39,247 7.0%
Paycheck Protection Program -- 0.0%  13,342 2.3%  -- 0.0%
Leases 38,059 6.6%  17,597 3.0%  41,380 7.3%
Consumer 22,410 3.9%  31,488 5.4%  26,423 4.7%
Other loans 6,347 1.1%  11,143 1.9%  8,059 1.4%
Total loans 572,810 100.0%  580,210 100.0%  564,438 100.0%
Allowance for credit losses (7,374)   (8,424)   (7,347) 
Net loans held for investment$565,436   $571,786   $557,091  
               

The investment portfolio decreased $4.9 million to $299.7 million from a balance of $304.6 million at December 31, 2022. The decline is reflective of paydowns and a $1.2 million decrease in unrealized losses associated with the Company’s available-for-sale investment security portfolio which totaled $35.5 million at March 31, 2023 compared to $36.7 million at December 31, 2022. The decline in unrealized losses was driven by changes in the treasury yield curve that positively impacted the portfolio valuation. At both March 31, 2023, and December 31, 2022, $71.0 million, or approximately 24%, of the investment portfolio is classified as held-to-maturity.

Total deposits were $817.4 million at March 31, 2023 representing a $45.3 million, or 5.3%, decline compared to total deposits of $862.7 million at December 31, 2022. The decline was primarily due to competitive pricing pressures and clients moving balances to alternative higher yielding investments along with the banking industry volatility created as a result of the March 2023 bank failures. Deposit outflows experienced in March appear to have stabilized with modest inflows beginning in April. Noninterest-bearing balances continue to comprise nearly half of total deposits at March 31, 2023.

Deposit type (dollars in thousands)3/31/2023% of Total
Deposits		 3/31/2022% of Total
Deposits		 12/31/2022% of Total
Deposits
Interest- bearing checking accounts$51,631 6.3% $59,456 6.4% $75,242 8.7%
Money market 233,666 28.6%  250,595 27.2%  214,293 24.8%
Savings 126,513 15.5%  161,720 17.5%  147,161 17.1%
Time 15,937 1.9%  11,520 1.2%  10,745 1.2%
Total interest-bearing deposits 427,747 52.3%  483,291 52.4%  447,441 51.9%
Noninterest-bearing 389,623 47.7%  438,914 47.6%  415,256 48.1%
Total deposits$817,370 100.0% $922,205 100.0% $862,697 100.0%
                  

Subordinated debt balances totaled $14.8 million and $14.7 million at March 31, 2023 and December 31, 2022, respectively. Other borrowings totaled $55.0 million at March 31, 2023 compared to $0 at December 31, 2022. Other borrowings include $15.0 million in Federal Home Loan Bank overnight advances and $40.0 million of advances under the Bank Term Funding Program of the Federal Reserve Bank (FRB), which provided funding at a favorable cost as compared to other wholesale funding sources.

Shareholder’s equity totaled $58.3 million at March 31, 2023, an increase of $1.8 million, or 3.3%, compared to $56.5 million at December 31, 2022. The increase is reflective of the $1.1 million net income contribution for the first quarter along with the decrease in unrealized losses on the available-for-sale investment security portfolio, the impact of which flows through accumulated other comprehensive income (AOCI), a component of equity, partially offset by a decline in the fair value of the cap corridor hedge which negatively impacted AOCI. The unrealized losses on the held-to-maturity investment securities was captured at the date of transfer and amortizes over the remaining life of the bonds with market value movements having no future impact on the unrealized loss position of these bonds.

Asset Quality
At March 31, 2023, nonperforming assets were 0.16% of the Company’s total assets, compared with 0.06% at December 31, 2022. The allowance for credit losses was 1.29% of outstanding loans at March 31, 2023, compared to 1.30% at December 31, 2022. The Company had $665 thousand and $0 in nonaccrual loans at March 31, 2023 and December 31, 2022, respectively. The Company recorded net charge-offs of $789 thousand in the quarter ended March 31, 2023, compared to $736 thousand in the quarter ended December 31, 2022. Charge-offs were entirely within the purchased consumer and lease pools.   

Asset Quality (dollars in thousands)3/31/2023
 3/31/2022
 12/31/2022
Loans past due 90 days or more and accruing interest$891  $71  $539 
Other nonaccrual loans 665   --   -- 
Other real estate owned --   --   -- 
Total nonperforming assets$ 1,556   $ 71   $ 539  
    
Allowance for credit losses to total loans 1.29%  1.45%  1.30%
Allowance for credit losses to nonperforming loans 474.01%  11864.79%  1363.08%
Nonaccrual loans to total loans 0.12%  0.00%  0.00%
Nonperforming assets to total assets 0.16%  0.01%  0.06%


1ST CAPITAL BANCORP
CONDENSED FINANCIAL DATA - UNAUDITED
($ in 000s, except per share data)
 
Assets 3/31/20233/31/202212/31/2022
Cash and due from banks $45,567 $33,618 $38,015 
Investment securities available-for-sale  228,711  369,238  233,529 
Investment securities held-to-maturity  70,977  --  71,039 
Loans and leases held for investment  572,810  580,210  564,438 
Allowance for credit losses  (7,374) (8,424) (7,347)
Net loans and leases held for investment  565,436  571,786  557,091 
Other Assets  43,829  31,418  43,728 
Total assets $954,520 $1,006,060 $943,402 
     
Liabilities and Shareholders' Equity    
Deposits:    
Noninterest-bearing demand deposits $389,623 $438,914 $415,256 
Interest-bearing checking accounts  427,747  483,291  447,441 
Total deposits  817,370  922,205  862,697 
Subordinated debentures  14,757  14,682  14,738 
Other borrowings  55,000  --  -- 
Other liabilities  9,044  6,942  9,457 
Shareholders' equity  58,349  62,231  56,510 
Total liabilities and shareholders' equity $954,520 $1,006,060 $943,402 
     
Shares outstanding  5,509,429  5,503,555  5,499,937 
Earnings per share basic $0.19 $0.38 $0.24 
Earnings per share diluted $0.19 $0.37 $0.24 
Nominal and tangible book value per share $10.59 $11.31 $10.27 


1ST CAPITAL BANCORP
CONDENSED FINANCIAL DATA - UNAUDITED
($ in 000s)
  
 Three Months Ended
Operating Results Data3/31/20233/31/202212/31/2022
Interest and dividend income   
Loans$6,718 $6,896 $6,963 
Investment securities 1,944  1,557  2,054 
Federal Home Loan Bank stock 70  58  82 
Other income 311  13  250 
Total interest and dividend income 9,043  8,524  9,349 
Interest expense 1,188  530  874 
Net interest income 7,855  7,994  8,475 
Provision for credit losses 690  --  523 
Net interest income after provision for credit losses 7,165  7,994  7,952 
Noninterest income 373  319  620 
Net (loss) on sales/calls of investment securities (134) --  (1,201)
Noninterest expenses   
Salaries and benefits expense 3,747  3,445  3,345 
Occupancy expense 414  435  432 
Data and item processing 308  263  278 
Furniture and equipment 117  140  135 
Professional services 268  169  244 
Other 1,167  1,014  1,270 
Total noninterest expenses 6,021  5,466  5,704 
Income before provision for income taxes 1,383  2,847  1,667 
Provision for income taxes 325  755  362 
Net income$1,058 $2,092 $1,305 


 Three Months Ended
Selected Average Balances3/31/20233/31/202212/31/2022
Gross loans$571,144 $569,997 $575,696 
Investment securities 303,034  362,328  326,875 
Federal Home Loan Bank stock 4,058  3,948  4,058 
Other interest earning assets 34,996  31,744  32,942 
Total interest earning assets 913,232  968,017  939,571 
Total assets 947,453  996,632  970,167 
Interest bearing checking accounts 66,480  65,753  68,216 
Money market 238,012  221,071  238,255 
Savings 138,031  158,988  151,478 
Time deposits 10,897  11,572  10,157 
Total interest- bearing deposits 453,420  457,384  468,106 
Noninterest bearing demand deposits 405,436  438,394  428,227 
Total deposits 858,856  895,778  896,333 
Subordinated debentures and other borrowings 21,261  14,669  14,733 
Shareholders' equity$57,148 $80,143 $49,477 
    
    
1ST CAPITAL BANCORP
CONDENSED FINANCIAL DATA – UNAUDITED
($ in 000s)
 Three Months Ended
Selected Financial Ratios3/31/20233/31/202212/31/2022
Return on average total assets 0.45% 0.85% 0.53%
Return on average shareholders' equity 7.51% 10.59% 10.47%
Net interest margin 3.39% 3.40% 3.63%
Net interest income to average total assets 3.36% 3.25% 3.47%
Efficiency ratio 74.38% 65.75% 72.26%


Regulatory Capital and Ratios3/31/20233/31/202212/31/2022
Common equity tier 1 capital$102,724 $83,272 $101,410 
Tier 1 regulatory capital$102,724 $83,272 $101,410 
Total regulatory capital$110,295 $91,877 $108,912 
Tier 1 leverage ratio 10.45% 8.36% 10.04%
Common equity tier 1 risk-based capital ratio 15.32% 11.49% 15.21%
Tier 1 capital ratio 15.32% 11.49% 15.21%
Total risk-based capital ratio 16.45% 12.67% 16.34%
          

About 1st Capital Bancorp

1st Capital Bancorp is the holding company for 1st Capital Bank. The Bank’s primary target markets are commercial enterprises, professionals, real estate investors, family business entities, and residents along the Central Coast region of California. The Bank provides a wide range of credit products, including loans under various government programs such as those provided through the U.S. Small Business Administration and the U.S. Department of Agriculture. A full suite of deposit accounts also is furnished, complemented by robust cash management services. The Bank operates full service branch offices in Monterey, Salinas, King City, San Luis Obispo and Santa Cruz. The Bank’s corporate offices are located at 150 Main Street, Suite 150, Salinas, California 93901. The Bank’s website is www.1stCapital.bank. The main telephone number is 831.264.4000.
Member FDIC / Equal Opportunity Lender / SBA Preferred Lender

Forward-Looking Statements
Certain of the statements contained herein that are not historical facts are “forward-looking statements” within the meaning of and subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may contain words or phrases including, but not limited, to: “believe,” “expect,” “anticipate,” “intend,” “estimate,” “target,” “plans,” “may increase,” “may fluctuate,” “may result in,” “are projected,” and variations of those words and similar expressions. All such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Factors that might cause such a difference include, among other matters, changes in interest rates; economic conditions including inflation and real estate values in California and the Bank’s market areas; governmental regulation and legislation; credit quality; competition affecting the Bank’s businesses generally; the risk of natural disasters and future catastrophic events including pandemics, terrorist related incidents and other factors beyond the Bank’s control; and other factors. The Bank does not undertake, and specifically disclaims any obligation, to update or revise any forward-looking statements, whether to reflect new information, future events, or otherwise, except as required by law.

This news release is available at the www.1stCapital.bank internet site for no charge.

For further information, please contact:

Samuel D. Jimenez Danelle Thomsen
Chief Executive Officer Chief Financial Officer
831.264.4057 office 831.264.4014 office
Sam.Jimenez@1stCapitalBank.com Danelle.Thomsen@1stCapitalBank.com