• 1ST Constitution Bancorp Reports Record Third Quarter 2018 Results and Increases Quarterly Dividend to $0.075

    Source: Nasdaq GlobeNewswire / 19 Oct 2018 09:14:59   America/New_York

    CRANBURY, N.J., Oct. 19, 2018 (GLOBE NEWSWIRE) -- 1ST Constitution Bancorp (NASDAQ: FCCY), the holding company (the “Company”) for 1ST 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 1ST Constitution Bancorp

    1ST Constitution Bancorp, through its primary subsidiary, 1ST 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.

    1ST 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. 1ST 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 
         BalanceInterestYield BalanceInterestYield 
    (Dollars in thousands)        
    Assets:          
    Interest-earning assets:        
     Federal funds sold/short-term investments$  11,953 $  361.19% $  12,383 $  250.80% 
     Investment securities:        
      Taxable 151,115    1,0602.81%  142,353    8462.38% 
      Tax-exempt 1 73,621    6253.40%  89,034    7813.51% 
       Total investment securities 224,736  1,6853.00%  231,387  1,6272.81% 
     Loans: 2        
      Commercial real estate 377,719  4,9015.08%  272,548  3,5735.13% 
      Mortgage warehouse lines 180,430  2,5045.43%  174,610  1,9014.26% 
      Construction 142,365  2,4066.61%  123,822  1,8955.99% 
      Commercial business 106,717  1,4965.51%  107,158  1,3264.86% 
      Residential real estate 46,777  5304.53%  42,436  4454.19% 
      Loans to individuals 24,655  3064.92%  22,379  2284.04% 
      Loans held for sale 3,203  384.75%  3,715  373.98% 
      All other loans 1,061  124.43%  1,526  112.82% 
       Total loans 882,927  12,1935.41%  748,194  9,4164.93% 
        Total interest-earning assets   1,119,616 $  13,9144.88%    991,964 $  11,0684.39% 
    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  4990.58%  324,940  3580.44% 
     Savings accounts 194,223  3710.76%  208,548  3380.64% 
     Certificates of deposit 230,490  9841.69%  158,737  5081.27% 
     Other borrowed funds 63,429  3492.18%  27,533  1131.63% 
     Redeemable subordinated debentures 18,557  1843.97%  18,557  1342.89% 
      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
     BalanceInterestYield BalanceInterestYield
    (Dollars in thousands)       
    Assets:       
    Interest-earning assets:       
    Federal funds sold/short-term investments$  21,287 $  2081.31% $  30,199 $  1830.81%
    Investment securities:       
      Taxable 146,003    2,9152.66%  141,662    2,5002.35%
      Tax-exempt 1 76,872    1,9223.33%  92,341    2,4093.48%
      Total investment securities 222,875  4,8372.89%  234,003  4,9092.79%
    Loans: 2       
      Commercial real estate 349,423  13,3915.05%  253,793  10,0885.24%
      Mortgage warehouse lines 157,422  6,3185.35%  155,755  5,0144.29%
      Construction 135,049  6,5486.48%  111,436  4,8175.78%
      Commercial business 110,101  4,3915.33%  109,335  4,0064.90%
      Residential real estate 45,955  1,5174.35%  42,136  1,3354.18%
      Loans to individuals 23,386  7804.40%  22,428  7014.12%
      Loans held for sale 3,067  1014.39%  4,408  1654.99%
      All other loans 1,132  323.73%  1,828  352.52%
      Total loans 825,535  33,0785.31%  701,119  26,1614.94%
    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  1,4370.53%  329,089  1,0320.42%
      Savings accounts 208,780  1,0790.69%  210,056  9920.63%
      Certificates of deposit 180,250  2,0261.50%  147,109  1,3271.21%
      Other borrowed funds 36,407  5762.12%  20,494  3492.28%
      Redeemable subordinated debentures 18,557  5083.65%  18,557  3802.73%
    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  
              
    1The 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. 
    2Tax 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. 
    3There 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 OfficerSr. Vice President & Chief Financial Officer
     609) 655-4500     (609) 655-4500
       

     

     

    1stConstitutionBancorpColor

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