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,
2014 of $554,000 and $2.4 million, respectively, compared to
$217,000 and $6.9 million for the same periods last year. The net
income variance during the year ended December 31, 2014, compared
to the same period last year, was primarily attributable to a $5.0
million increase in income tax provisions. This increase was
related to an income tax benefit of approximately $3.1 million
recognized during the year ended December 31, 2013 in connection
with the reversal of our deferred tax valuation allowance, as
compared to $1.9 million of income tax provisions recognized during
the year ended December 31, 2014. Pre-tax, pre-provision earnings
for the quarter and year ended December 31, 2014 was $1.1 million
and $4.4 million, respectively, compared to $736,000 and $3.9
million for the same periods last year. Included in net income for
the quarter and year ended December 31, 2014 are gains in
connection with the sale of securities of $196,000 and $1.2
million, respectively, compared to $117,000 and $822,000 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 proud to announce our
financial results for the year ended December 31, 2014. During the
year, our loans and deposits have grown by over 15% and 11%,
respectively, and despite the current low interest rate
environment, our pre-tax, pre-provision earnings improved to $4.4
million and our net interest margin increased by 9 basis points, to
3.28%. In addition, asset quality remains strong with total
non-performing assets to total assets at 11 basis points at the end
of the year. We also sold $59.9 million of investment
securities during the year, recognizing a gain of $1.2
million. In addition to being a source of interest income for
the Company, our investment portfolio has recently generated
realized gains as a result of favorable changes in market
conditions."
Jason P. DiNapoli, President and Chief Operating Officer of the
Company, added, "During the past 12 months, we've continued to
establish and expand our presence on the Westside of Los
Angeles. With the addition of our new Beverly Hills office,
complemented by the strength of our current relationship management
team, I believe that we're well positioned to make 2015 the most
successful year in our Company's history."
2014 4th
Quarter Highlights
- The Bank's total risk-based capital ratio was 13.13% at
December 31, 2014, 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 from trust
preferred securities, convertible preferred stock or other equity
or debt instruments.
- For the quarter and year ended December 31, 2014, the Company
recorded net income of $554,000, or $0.06 per diluted share, and
$2.4 million, or $0.24 per diluted share, respectively. During
the same periods last year, the Company reported net income of
$217,000, or $0.02 per diluted share, and $6.9 million, or $0.76
per diluted share, respectively. The increase in net income
during the three months ended December 31, 2014 as compared to the
same period last year was primarily due to a $508,000 increase in
net interest income, a $400,000 decline in provision for loan
losses and a $143,000 increase in non-interest income, partially
offset by a $456,000 increase in income tax provisions and a
$258,000 increase in non-interest expenses. The decline in net
income during the year ended December 31, 2014 as compared to the
same period last year was primarily due to a $5.0 million increase
in income tax provision and a $1.7 million increase in non-interest
expenses. The increase in income tax provision was primarily
attributable to the $3.1 million income tax benefit recorded in
connection with the reversal of our deferred tax valuation
allowance during the year ended December 31, 2013. These items
were partially offset by a $2.3 million increase in net interest
income during the year ended December 31, 2014 as compared to the
same period last year. In addition to the items discussed
above, diluted earnings per share was impacted by an increase in
diluted shares outstanding of 718,851 and 661,606 during the
quarter and year ended December 31, 2014, respectively, as compared
to the same periods last year.
- At December 31, 2014 and 2013, the Company's book value per
share was $6.08 and $5.84, respectively. The $0.24 increase in
book value per share during the year was primarily attributable to
net income of $2.4 million and stock based compensation of $3.8
million, partially offset by an increase in common shares
outstanding of 659,633. Stock based compensation includes the
exercise and tax related benefits of stock options, as well as the
amortization and vesting of restricted stock awards and related tax
benefits, partially offset by shares surrendered by plan
participants to pay for taxes.
- Net interest margin was 3.26% and 3.28% for the quarter and
year ended December 31, 2014, respectively, compared to 3.23% and
3.19% for the same periods last year. The improvement in our
net interest margin was primarily due to an increase in the average
balance of loans relative to total earning assets as compared to
the same periods last year. During the quarter and year ended
December 31, 2014 the average balance of loans relative to total
earning assets was 71.5% and 71.7%, respectively, compared to 68.2%
and 63.2% for the same periods last year.
- Loans increased to $442.9 million at December 31, 2014,
compared to $383.5 million at December 31, 2013 and $418.7 million
at September 30, 2014. Loan originations were $55.5 million and
$226.3 million during the quarter and year ended December 31, 2014,
compared to $50.3 million and $232.5 million during the same
periods last year.
- Non-performing loans were $632,000, or 0.14% of total loans, at
December 31, 2014, compared to $735,000, or 0.19% of total loans,
at December 31, 2013, and $655,000, or 0.16% of total loans, at
September 30, 2014.
- Non-performing assets as a percentage of total assets were
0.11%, 0.15% and 0.11% at December 31, 2014, December 31, 2013 and
September 30, 2014, respectively.
- Net loan recoveries were $22,000 and $263,000 during the
quarter and year ended December 31, 2014, respectively, compared to
$1,000 and $1.1 million during the same periods last year.
- As of December 31, 2014, the allowance for loan losses ("ALL")
was $7.6 million, or 1.72% of total loans, compared to $7.2
million, or 1.89% of total loans, at December 31, 2013, and $7.6
million, or 1.81% of total loans, at September 30, 2014. The ALL to
non-performing loans was 1,203.03% and 984.26% at December 31, 2014
and 2013, respectively.
- Investment securities declined to $79.7 million at December 31,
2014, representing 13.6% of our total assets, compared to $106.3
million, or 19.7% of our total assets, at December 31, 2013, and
$71.4 million, or 12.2% of total assets, at September 30,
2014. During the quarter and year ended December 31, 2014, the
Company sold investment securities with an amortized cost of $5.0
million and $59.9 million, respectively, recognizing gains of
$196,000 and $1.2 million, respectively. 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.
- Total core deposits, which include non-interest bearing demand
deposits, interest bearing demand deposits, and money market
deposits and savings, were $462.4 million, $409.8 million and
$454.1 million at December 31, 2014, December 31, 2013 and
September 30, 2014, respectively. Non-interest bearing
deposits represent 56.1% of total deposits at December 31, 2014,
compared to 52.3% at December 31, 2013, and 55.8% at September 30,
2014.
- Cost of funds declined to 14 basis points and 15 basis points
for the quarter and year ended December 31, 2014, respectively,
compared to 16 and 18 basis points for the same periods last
year.
Capital Adequacy
At December 31, 2014, the Company's stockholders' equity totaled
$61.7 million compared to $55.4 million at December 31, 2013.
The $6.3 million increase in stockholders' equity during the
year ended December 31, 2014 was primarily attributable to net
income of $2.4 million and stock based compensation items and
related tax benefits of $3.8 million. Stock based compensation
items include the exercise and tax related benefits of stock
options, as well as the amortization and vesting of restricted
stock awards and related tax benefits, partially offset by shares
surrendered by plan participants to pay for taxes. At December
31, 2014, the Bank's total risk-based capital ratio, tier 1
risk-based capital ratio, and tier 1 leverage ratio were 13.13%,
11.87%, and 9.40%, 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, 2014 were $585.2 million,
representing an increase of $47.1 million, or 8.7%, from $538.1
million at December 31, 2013. Cash and cash equivalents at December
31, 2014 were $58.5 million, representing an increase of $13.8
million, or 30.8%, from $44.7 million at December 31, 2013.
Loans increased by $59.3 million, from $383.5 million at
December 31, 2013 to $442.9 million at December 31, 2014. Loan
originations were $55.5 million and $226.3 million during the
quarter and year ended December 31, 2014, respectively, compared to
$50.3 million and $232.5 million during the same periods last
year. Prepayment speeds for the quarter and year ended
December 31, 2014 were 14.7% and 16.7%, compared to 13.4% and 13.2%
for the same periods last year. Investment securities were
$79.7 million at December 31, 2014, compared to $106.3 million at
December 31, 2013, representing a decline of $26.6 million, or
25.0%. During the quarter and year ended December 31, 2014,
the Company sold investment securities with an amortized cost of
$5.0 million and $59.9 million, respectively, recognizing gains of
$196,000 and $1.2 million, respectively. 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. The
weighted average life of our investment securities was 4.02 years
and 3.78 years at December 31, 2014 and December 31, 2013,
respectively.
Total liabilities at December 31, 2014 increased by $40.8
million, or 8.4%, to $523.5 million compared to $482.8 million at
December 31, 2013. This increase is primarily due to a $50.4
million increase in deposits, partially offset by a $10.0 million
decline in other borrowings. Total core deposits, which
includes non-interest bearing demand deposits, interest bearing
demand deposits and money market deposits and savings, were $462.4
million and $409.8 million at December 31, 2014 and December 31,
2013, respectively, representing an increase of $52.6 million, or
12.8%.
Credit Quality
Allowance and Provision for Loan Losses
The ALL was $7.6 million, or 1.72% of our total loan portfolio,
at December 31, 2014, compared to $7.2 million, or 1.89% of our
total loan portfolio, at December 31, 2013. At December 31, 2014
and 2013, our non-performing loans were $632,000 and $735,000,
respectively. The ratio of our ALL to non-performing loans was
1,203.03% and 984.26% at December 31, 2014 and December 31, 2013,
respectively. In addition, our ratio of non-performing loans to
total loans was 0.14% and 0.19% at December 31, 2014 and 2013,
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, 2014, we recorded a provision for loan
losses of none and $100,000, respectively, compared to $400,000 and
$100,000 for the same periods last year. The decrease in our
provision for loan losses during the quarter ended December 31,
2014 compared to the same period last year was primarily
attributable to the decline in the growth rate of our loan
portfolio during the current year. During the years ended
December 31, 2014 and 2013, the Bank's loan portfolio increased by
15.5% and 43.8%, respectively.
Criticized and classified loans generally consist of special
mention, substandard and doubtful loans. Special mention,
substandard and doubtful loans were $180,000, $1.9 million and
none, respectively, at December 31, 2014, compared to $4.7 million,
$2.1 million and none, respectively, at December 31, 2013. We
had net recoveries of $22,000 and $263,000 during the quarter and
year ended December 31, 2014, respectively, compared to $1,000 and
$1.1 million for the same periods last year. At December 31, 2014,
the ALL to total loans was 1.72% compared to 1.89% at December 31,
2013. 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, 2014 and 2013 was adequate to
absorb probable and inherent risks in the loan portfolio.
Non-Performing Assets
Non-performing assets totaled $632,000 and $825,000 at December
31, 2014 and 2013. Non-accrual loans totaled $632,000 and
$735,000 at December 31, 2014 and 2013, respectively. During
the year ended December 31, 2014, the Bank disposed of its other
real estate owned ("OREO") for approximately $137,000, recognizing
a gain of $47,000 in connection with this disposition. At
December 31, 2013, OREO consisted of one undeveloped land property
totaling $90,000. As a percentage of total assets, the amount
of non-performing assets was 0.11% and 0.15% at December 31, 2014
and 2013, respectively.
Net Interest Income and Margin
During the quarter and year ended December 31, 2014, net
interest income was $5.0 million and $18.5 million, respectively,
compared to $4.4 million and $16.2 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, 2014 as
compared to the same periods last year, partially offset by
declines in the average balance of our investment portfolio during
the same periods. The average balances of our loan portfolio
were $431.6 million and $404.3 million during the quarter and year
ended December 31, 2014, respectively, compared to $373.1 million
and $321.6 million for the same periods last year. The average
balances of our investment portfolio were $71.1 million and $87.1
million during the quarter and year ended December 31, 2014,
respectively, compared to $116.6 million and $146.3 million for the
same periods last year.
The Company's net interest margin (net interest income divided
by average interest earning assets) was 3.26% for the three months
ended December 31, 2014, compared to 3.23% for the same period last
year. The 3 basis point increase in net interest margin 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, partially offset by an increase in the average
balance of lower yielding interest earning deposits at other
financial institutions during the same period. The percentage of
average loans to total average earning assets increased to 71.5%
during the quarter ended December 31, 2014, compared to 68.2%
during the same period last year. The percentage of average
interest earning deposits at other financial institutions to total
average earning assets increased to 15.9% during the quarter ended
December 31, 2014, compared to 9.3% during the same period last
year.
The Company's net interest margin was 3.28% for the year ended
December 31, 2014, compared to 3.19% for the same period last
year. As discussed above, the improvement in our net interest
margin is primarily due to an increase in the average balance of
loans relative to total earning assets as compared to the same
period last year, partially offset by an increase in the average
balance of lower yielding interest earning deposits at other
financial institutions during the same period. The percentage
of average loans to total average earning assets increased to 71.7%
during the year ended December 31, 2014, compared to 63.2% during
the same period last year. The percentage of average interest
earning deposits at other financial institutions to total average
earning assets increased to 12.0% during the year ended December
31, 2014, compared to 7.1% during the same period last
year. Net interest margin was also impacted by a general
decline in the loan yields during the year and a recovery of
$294,000 in deferred interest income from the repayment of
non-accrual and previously charged off loan balances during the
year ended December 31, 2013. 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 continue
to compress loan yields.
Non-Interest Income
Non-interest income was $335,000 and $1.7 million for the
quarter and year ended December 31, 2014, compared to $192,000 and
$1.8 million for the same periods last year. During the quarter and
year ended December 31, 2014, the Company sold investment
securities with an amortized cost of $5.0 million and $59.9
million, respectively, recognizing gains of $196,000 and $1.2
million, respectively. In addition, the Company recognized a
gain of $47,000 in connection with the disposition of its OREO
during the year ended December 31, 2014. With the exception of
these gains, non-interest income during the quarter and year ended
December 31, 2014 primarily consists of customer related fee
income. 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 for the quarter and year ended December 31, 2013, primarily
consists of loan arrangement fees earned in connection with our
college loan funding program. During 2013, the Company terminated
this program and did not report any material loan arrangement fee
earnings subsequent to the second quarter of 2013.
Non-Interest Expense
Non-interest expense was $4.2 million and $15.8 million for the
quarter and year ended December 31, 2014, compared to $3.9 million
and $14.1 million for the same periods last year. The increases in
non-interest expense during the quarter and year ended December 31,
2014 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, the additional costs incurred to
address regulatory compliance matters, as well as the supplemental
costs associated with the Bank's Beverly Hills expansion.
Income Tax Provision
During the quarter and year ended December 31, 2014, we recorded
a tax provision of $575,000 and $1.9 million, respectively,
compared to a tax provision (benefit) of $119,000 and ($3.1
million) during the quarter and year ended December 31, 2013,
respectively. The tax benefit recognized during the year ended
December 31, 2013 was related to the full 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. At
December 31, 2013, no further deferred tax valuation allowance
remained.
Net Income
For the quarter and year ended December 31, 2014, the Company
recorded net income of $554,000, or $0.06 per diluted share, and
$2.4 million, or $0.24 per diluted share, compared to $217,000, or
$0.02 per diluted share, and $6.9 million, or $0.76 per diluted
share, for the same periods last year. Included in net income for
the quarter and year ended December 31, 2014 are gains in
connection with the sale of securities of $196,000 and $1.2
million, respectively, compared to $117,000 and $822,000 for the
same periods last year.
Subsequent Event
On February 23, 2015, the Board of Directors of the Bank was
notified by the Office of the Comptroller of the Currency (the
"OCC") that the OCC is terminating its Consent Order with the Bank,
dated September 11, 2013, effective immediately. The Consent
Order required the Bank to take corrective action to enhance its
program and procedures for compliance with the Bank Secrecy Act and
other anti-money laundering statutes and regulations.
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 relationship offices in
Santa Monica and Beverly Hills, 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, and (12) 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: |
2014 |
2013 |
Total Assets |
$ 585,218 |
$ 538,145 |
Total Loans |
$ 442,856 |
$ 383,548 |
Allowance for Loan Losses
("ALL") |
$ 7,599 |
$ 7,236 |
Non-Performing Assets |
$ 632 |
$ 825 |
Investment Securities-AFS, at
estimated fair value |
$ 79,689 |
$ 106,272 |
Deposits: |
|
|
Non-Interest Bearing Demand
Deposits |
$ 282,217 |
$ 236,869 |
Interest Bearing Demand
Deposits |
25,492 |
21,005 |
Money Market Deposits and
Savings |
154,706 |
151,879 |
Certificates of Deposit |
40,757 |
43,013 |
Total Deposits |
$ 503,172 |
$ 452,766 |
Total Stockholders' Equity |
$ 61,693 |
$ 55,388 |
Gross Loans to Deposits |
88.00% |
84.70% |
Ending Book Value per
Share |
$ 6.08 |
$ 5.84 |
Common Shares Outstanding |
10,140,441 |
9,480,808 |
|
|
|
|
Quarters Ended December
31, |
Quarterly Operating Results (unaudited): |
2014 |
2013 |
Net Interest Income |
$ 4,955 |
$ 4,447 |
Provision for Loan Losses |
$ — |
$ 400 |
Gain on Sale of AFS
Securities |
$ 196 |
$ 117 |
Non-Interest Income |
$ 139 |
$ 75 |
Non-Interest Expense |
$ 4,161 |
$ 3,903 |
Income Tax Provision |
$ 575 |
$ 119 |
Net Income |
$ 554 |
$ 217 |
Basic Earnings per Share |
$ 0.06 |
$ 0.02 |
Basic Shares Outstanding |
9,501,209 |
8,783,553 |
Diluted Earnings per Share |
$ 0.06 |
$ 0.02 |
Diluted Shares Outstanding |
9,228,840 |
8,509,989 |
Quarterly Net Interest
Margin* |
3.26% |
3.23% |
|
|
|
Reconciliation of QTD Net Income to
Pre-Tax, Pre-Provision Earnings: |
|
|
Net Income |
$ 554 |
$ 217 |
Provision for Loan Losses |
— |
400 |
Income Tax Provision |
575 |
119 |
Pre-Tax, Pre-Provision
Earnings |
$ 1,129 |
$ 736 |
|
|
|
|
Years Ended December
31, |
YTD Operating Results: |
2014 |
2013 |
Net Interest Income |
$ 18,459 |
$ 16,208 |
Provision for Loan Losses |
$ 100 |
$ 100 |
Gain on Sale of AFS
Securities |
$ 1,178 |
$ 822 |
Non-Interest Income |
$ 533 |
$ 971 |
Non-Interest Expense |
$ 15,806 |
$ 14,097 |
Income Tax Provision
(Benefit) |
$ 1,903 |
$ (3,059) |
Net Income |
$ 2,361 |
$ 6,863 |
Basic Earnings per Share |
$ 0.25 |
$ 0.79 |
Basic Shares Outstanding |
9,431,727 |
8,660,641 |
Diluted Earnings per Share |
$ 0.24 |
$ 0.76 |
Diluted Shares Outstanding |
9,741,248 |
9,079,642 |
YTD Net Interest Margin |
3.28% |
3.19% |
|
|
|
Reconciliation of YTD Net Income to
Pre-Tax, Pre-Provision Earnings: |
|
|
Net Income |
$ 2,361 |
$ 6,863 |
Provision for Loan Losses |
100 |
100 |
Income Tax Provision
(Benefit) |
1,903 |
(3,059) |
Pre-Tax, Pre-Provision
Earnings |
$ 4,364 |
$ 3,904 |
|
|
|
*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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