• 1ST Constitution Bancorp Reports Second Quarter 2018 Results, Successful Integration of New Jersey Community Bank and Quarterly Dividend of $0.06

    Source: Nasdaq GlobeNewswire / 20 Jul 2018 09:15:08   America/New_York

    CRANBURY N.J., July 20, 2018 (GLOBE NEWSWIRE) -- 1ST Constitution Bancorp (NASDAQ:FCCY), the holding company (the “Company”) for 1ST Constitution Bank (the “Bank”), today reported net income of $1.9 million and diluted earnings per share of $0.22 for the three months ended June 30, 2018. For the six months ended June 30, 2018, net income was $4.7 million and diluted earnings per share were $0.56.

    The Board of Directors declared a quarterly cash dividend of $0.06 per share of common stock that will be paid on August 23, 2018 to shareholders of record on August 10, 2018.

    On April 11, 2018, the Company completed the merger of New Jersey Community Bank (“NJCB”) with and into the Bank. The shareholders of NJCB received total consideration of $8.6 million, which was comprised of 249,785 shares of common stock of the Company with a market value of $5.5 million and cash of $3.1 million of which $401,000 was placed in escrow to cover costs and expenses, including settlement costs, if any, that the Company may incur after closing the merger as a result of a certain litigation matter. As a result of the merger, merger related expenses of $2.0 million were incurred and the after-tax effect of the merger expenses reduced net income for the second quarter by $1.4 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.

    Net income, excluding the after-tax effect of the merger expenses and the gain from the bargain purchase (“Adjusted net income”), was $3.1 million, or $0.36 per diluted share for the second quarter of 2018 and increased $1.2 million, or 62.7%, compared to net income for the three months ended June 30, 2017 of $1.9 million, or $0.23 per diluted share.

    For the six months ended June 30, 2018, Adjusted net income was $6.1 million, or $0.72 per diluted share, compared to $3.9 million, or $0.47 per diluted share. The after-tax effect of merger expenses was $1.6 million for the six months ended June 30, 2018.

    SECOND QUARTER 2018 HIGHLIGHTS

    • Return on average assets and Adjusted return on average assets were 0.65% and 1.09%, respectively, and Return on average equity and Adjusted return on average equity were 6.36% and 10.61%, respectively, for the three months ended June 30, 2018.
    • Book value per share and tangible book value per share were $14.42 and $12.94, respectively, at June 30, 2018.
    • Net interest income was $11.0 million and the net interest margin was 4.13% on a tax equivalent basis.
    • Non-interest income increased $277,000 from the comparable period in the prior year to $2.0 million, which reflected primarily the gain from the bargain purchase of $184,000.
    • A provision for loan losses of $225,000 and net charge-offs of $24,000 were recorded.
    • Total loans were $899.9 million at June 30, 2018 and included $72.7 million of loans acquired in the NJCB merger. Commercial business, commercial real estate and construction loans totaled $623.5 million and included $59.5 million of loans acquired in the NJCB merger at June 30, 2018. Excluding the acquired NJCB loans, commercial business, commercial real estate and construction loans increased $25.8 million, or 4.8%, compared to $538.2 million at December 31, 2017 and increased $67.4 million, or 13.6%, compared to $496.6 million at June 30, 2017.
    • The acquisition of NJCB included loans and deposits of $72.7 million and $90.9 million, respectively, at June 30, 2018.
    • Non-performing assets were $10.1 million, or 0.82% of assets, and included $1.2 million of OREO at June 30, 2018, which resulted primarily from the acquisition of NJCB.

    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 six-month periods ended June 30, 2018 and the three- and six-month periods ended June 30, 2017.

    Robert F. Mangano, President and Chief Executive Officer, stated “We completed the acquisition of New Jersey Community Bank, the conversion of its core operating system and achieved our expected operating synergies through the integration of its operations during the second quarter.” Mr. Mangano added, “Our second quarter results, excluding the impact of merger expenses and acquisition accounting, reflected our sound operating fundamentals 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 continued, “We are pleased to welcome the shareholders, employees and customers of New Jersey Community Bank to 1ST Constitution Bank. We look forward to building on all of our existing customer relationships and continuing to expand our presence in Freehold, Neptune and Monmouth County."

    Discussion of Financial Results

    Net income was $1.9 million, or $0.22 per diluted share, for the second quarter of 2018 compared to $1.9 million, or $0.23 per diluted share, for the second quarter of 2017. Adjusted net income and Adjusted net income per diluted share were $3.1 million and $0.36, respectively, for the second quarter of 2018. For the three months ended June 30, 2018, net interest income was $11.0 million, compared to $8.8 million for the three months ended June 30, 2017. The increase in earning assets and the yield on loans were the primary drivers of the $2.2 million increase in net interest income. Non-interest expenses were $10.3 million for the second quarter of 2018 compared to $7.7 million for the second quarter of 2017 and included merger related expenses of $2.0 million.

    Net interest income was $11.0 million for the quarter ended June 30, 2018 and increased $2.2 million, or 24.8%, compared to net interest income of $8.8 million for the second quarter of 2017. Total interest income was $12.9 million for the three months ended June 30, 2018 compared to $10.2 million for the three months ended June 30, 2017. This increase was due primarily to the $160.3 million increase in average loans, reflecting growth primarily of commercial real estate, mortgage warehouse and construction loans. The growth of average loans included average loans of approximately $64 million from the acquisition of NJCB. Average interest-earning assets were $1.08 billion with a yield of 4.77% for the second quarter of 2018 compared to $961.7 million with a yield of 4.35% for the second quarter of 2017. The higher yield on average interest-earning assets for the second quarter of 2018 reflected primarily the higher yield earned on the loan portfolio. The 75 basis point increase in the Federal Reserve’s targeted federal funds rate and the corresponding increase in the Prime Rate since June 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 second quarter of 2018.

    Interest expense on average interest-bearing liabilities was $1.9 million, with an interest cost of 0.91%, for the second quarter of 2018 compared to $1.3 million, with an interest cost of 0.74%, for the second quarter of 2017. The $523,000 increase in interest expense on interest-bearing liabilities for the second quarter of 2018 reflected primarily higher deposit interest costs due to higher short-term market interest rates in the second quarter of 2018 compared to the second quarter of 2017 and an increase of $98.5 million in average interest-bearing liabilities.

    The net interest margin increased to 4.13% for the second quarter of 2018 compared to 3.79% for the second quarter of 2017 due primarily to the higher yield on average interest-earning assets. Net interest income for the second quarter of 2018 included $143,000 of prepayment fees due to the early repayment of loans, which increased the net interest margin by approximately 4 basis points. There were no prepayment fees received in the second quarter of 2017.

    The Company recorded a higher provision for loan losses of $225,000 for the second quarter of 2018 compared to a provision for loan losses of $150,000 for the second 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 June 30, 2018, total loans were $899.9 million and the allowance for loan losses was $8.5 million, or 0.94% of total loans, compared to total loans of $762.6 million and an allowance for loan losses of $7.7 million, or 1.01% of total loans, at June 30, 2017. Included in loans at June 30, 2018 were $72.7 million of loans that were acquired in the NJCB merger. The decrease in the allowance as a percentage of loans was due primarily to the NJCB acquisition accounting, which resulted in the NJCB loans being recorded at their fair value which included a credit risk adjustment discount of approximately $1.6 million. 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 $2.0 million for the second quarter of 2018, an increase of $277,000, compared to $1.8 million for the second quarter of 2017. This increase was due primarily to the $184,000 gain from the bargain purchase related to the acquisition of NJCB. In addition, other income increased $86,000 due primarily to higher debit card interchange income and customer service fees. Gains on the sale of loans declined $34,000. In the second quarter of 2018, $21.2 million of residential mortgages were sold and $672,000 of gains were recorded compared to $24.9 million of residential mortgage loans sold and $820,000 of gains recorded in the second quarter of 2017. 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 second quarter of 2018, $3.9 million of SBA loans were sold and gains of $312,000 were recorded compared to $2.1 million of SBA loans sold and gains of $198,000 recorded in the second quarter of 2017. SBA guaranteed commercial lending activity and loan sales vary from period to period.

    Non-interest expenses were $10.3 million for the second quarter of 2018, an increase of $2.6 million, or 33.4%, compared to $7.7 million for the second quarter of 2017. The increase was due primarily to $2.0 million of merger related expenses that were incurred in the second quarter of 2018 for termination of contracts, legal and financial advisory fees, severance and other expenses. Salaries and employee benefits expense increased $384,000, or 8.2%, in the second quarter of 2018 due primarily to salaries for former NJCB employees joining the Company, merit increases and increases in employee benefit expenses. Occupancy costs increased $65,000, or 7.9%, due primarily to the addition of the two former NJCB branch offices in the second quarter of 2018. Data processing expenses increased to $369,000 in the second quarter of 2018 compared to $326,000 for the second quarter of 2017 due primarily to the separate NJCB data processing costs incurred from the date of the closing of the merger to the date of core operating system integration on June 15, 2018. FDIC insurance expense increased $66,000, or 82.5%, due to the internal growth of assets and the acquisition of NJCB. Other operating expenses increased $41,000 due primarily to increases in supplies, postage, telephone, business development and marketing expenses.

    Income tax expense was $714,000 for the second quarter of 2018, resulting in an effective tax rate of 27.6%, compared to income tax expense of $841,000, which resulted in an effective tax rate of 30.5%, for the second quarter of 2017. Income tax expense and the effective tax rate decreased in the second 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 of 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. The higher New Jersey corporate income tax rate for 2018 increased the Company’s effective tax rate for 2018 by approximately 2%.

    At June 30, 2018, the allowance for loan losses was $8.5 million compared to $8.0 million at December 31, 2017. As a percentage of total loans, the allowance was 0.94% at June 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 NJCB loans being recorded at their fair value and the elimination of the NJCB allowance for loan losses.

    Total assets increased $150.2 million to $1.23 billion at June 30, 2018 from $1.08 billion at December 31, 2017 due primarily to a $110.0 million increase in total loans and an increase of $9.7 million in investment securities. The increase in assets was funded primarily by a $34.8 million increase in deposits and a $97.7 million increase in overnight borrowings. Total portfolio loans at June 30, 2018 were $899.9 million compared to $789.9 million at December 31, 2017. The increase in loans was due primarily to an increase of $68.0 million in commercial real estate loans, a $14.9 million increase in mortgage warehouse loans and a $15.5 million increase in commercial business loans. The acquisition of NJCB contributed $72.7 million to the increase of loans at June 30, 2018.

    Total deposits at June 30, 2018 were $956.8 million compared to $922.0 million at December 31, 2017. The acquisition of NJCB contributed $90.9 million of deposits at June 30, 2018, which were comprised of $13.0 million of non-interest bearing deposits, $21.1 million of interest bearing demand deposits, $3.3 million of savings accounts and $53.5 million of certificates of deposit. Total deposits, excluding the NJCB deposits, declined $56.2 million during the first six months of 2018. Municipal deposits, primarily interest bearing demand deposits and savings accounts, declined approximately $37.2 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 six months of 2018, their deposit balances declined from the levels at December 31, 2017. Management estimates that there were approximately $15 to $20 million of municipal deposits, primarily interest bearing demand accounts and savings accounts, at June 30, 2018 that are likely to flow out of the Bank during the third quarter of 2018 as the municipal customers expend these additional funds to support their operations. Management believes that the Bank’s liquidity resources are adequate to meet this projected outflow of deposits during this period. 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 10.16%, 12.57%, 11.80% and 11.45%, respectively, at June 30, 2018. The Bank’s CET1, total risk-based capital, Tier 1 capital and leverage ratios were 11.60%, 12.37%, 11.60% and 11.25%, respectively, at June 30, 2018. The Company and the Bank are considered “well capitalized” under these capital standards.

    Asset Quality

    Non-performing loans were $8.9 million at June 30, 2018 compared to $7.1 million at December 31, 2017 and $6.1 million at June 30 2017. During the second quarter of 2018, $446,000 of non-performing loans were resolved. Principal payments of $313,000 on non-accrual loans were recorded in the second quarter of 2018 and loans totaling $1.6 million were placed on non-accrual status. Charge-offs of loans were $40,000 and recoveries were $16,000 for the second quarter of 2018. The allowance for loan losses was 95% of non-performing loans at June 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 0.99% and non-performing assets to total assets of 0.82% at June 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 June 30, 2018 was $1.2 million and consisted of one residential real estate property acquired in the NJCB acquisition and land fair valued at $93,000 that was foreclosed in the second quarter.

    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, 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 Six months ended
      June 30, June 30,
       2018   2017  2018   2017 
    Per Common Share Data:       
    Earnings per common share:       
     Basic$  0.22  $  0.24 $  0.57  $  0.48 
     Diluted   0.22     0.23    0.56     0.47 
    Tangible book value per common share at period end       12.94     11.95 
    Book value at period end       14.42     13.53 
    Average common shares outstanding:       
     Basic   8,341,459     8,033,299    8,227,109     8,029,690 
     Diluted   8,628,105     8,301,939    8,506,961     8,301,431 
    Shares Outstanding       8,379,342     8,046,197 
             
    Performance ratios/data:       
    Return on average assets 0.65%  0.760.86%     0.77%
    Return on average equity 6.36%  7.14%8.25%     7.31%
    Net interest income (tax-equivalent basis) (1)$   11,153  $9,093 $20,968     $17,552 
    Net interest margin (tax-equivalent basis) (2) 4.13%  3.79% 4.04%     3.72%
    Efficiency ratio (tax-equivalent basis) (3) 77.68%  70.78% 71.88%     70.58%
              
          June 30, 2018 December 31, 2017
    Loan portfolio composition:       
    Commercial real estate    $  378,997  $  297,843 
    Mortgage warehouse lines       204,359     189,412 
    Construction loans       138,144     136,412 
    Commercial business       106,359     103,987 
    Residential real estate       46,048     40,494 
    Loans to individuals       25,171     21,025 
    Other loans       583     183 
    Gross loans       899,661     789,356 
    Deferred costs, net       251     550 
    Total loans    $  899,912  $  789,906 
             
    Asset quality data:       
    Loans past due over 90 days and still accruing    $  -  $  - 
    Non-accrual loans       8,913     7,114 
    OREO property       1,223     - 
     Total non-performing assets    $  10,136  $  7,114 
             
    Net (charge-offs)/recoveries$  (24) $  7 $  35  $  (87)
             
    Allowance for loan losses to total loans     0.94% 1.01% 
    Allowance for loan losses to non-performing loans     95.34% 112.64% 
    Non-performing loans to total loans     0.99% 0.90% 
    Non-performing assets to total assets     0.82% 0.66% 
              
    Capital ratios:          
    1ST Constitution Bancorp          
     Common equity to risk weighted assets ("CET 1")     10.16% 10.19% 
     Total capital to risk weighted assets     12.57% 12.84% 
     Tier 1 capital to risk weighted assets     11.80% 12.02% 
     Tier 1 capital to average assets (leverage ratio)     11.45% 11.23% 
             
    1ST Constitution Bank       
     Common equity to risk weighted assets ("CET 1")     11.60% 11.74% 
     Total capital to risk weighted assets     12.37% 12.55% 
     Tier 1 capital to risk weighted assets     11.60% 11.74% 
     Tier 1 capital to average assets (leverage ratio)     11.25% 10.96% 
             
    (1)The tax equivalent adjustment was $135 and $263 for the three months ended June 30, 2018 and 2017, respectively,
     The tax equivalent adjustment was $271 and $528 for the six months ended June 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   
     June 30, 2018 December 31, 2017
    ASSETS   
    Cash and due from banks$  5,572  $  5,037 
    Interest-earning deposits   25,079     13,717 
      Total cash and cash equivalents   30,651     18,754 
    Investment securities:   
      Available for sale, at fair value   130,075     105,458 
      Held to maturity (fair value of $95,670 and $111,865 at June 30, 2018   
       and December 31, 2018)   95,322     110,267 
    Total securities   225,397     215,725 
        
    Loans held for sale   9,291      4,254 
        
    Loans   899,912     789,906 
      Less: allowance for loan losses   (8,498)     (8,013)
      Net loans   891,414      781,893 
        
    Premises and equipment, net   11,874     10,705 
    Accrued interest receivable   3,785     3,478 
    Bank owned life insurance   28,403     25,051 
    Other real estate owned   1,223     - 
    Goodwill and intangible assets   12,387     12,496 
    Other assets   15,087      6,918 
    Total assets$  1,229,512  $  1,079,274 
        
    LIABILITIES AND SHAREHOLDERS' EQUITY   
        
    LIABILITIES:   
    Deposits   
      Non-interest bearing$  216,087  $  196,509 
      Interest bearing   740,700     725,497 
      Total deposits   956,787     922,006 
        
    Short-term borrowings   118,225     20,500 
    Redeemable subordinated debentures   18,557     18,557 
    Accrued interest payable   850     804 
    Accrued expense and other liabilities   14,244     5,754 
    Total liabilities   1,108,663     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; 8,412,640 and
    8,116,201 shares issued and 8,379,342 and 8,082,903 shares outstanding as of
    June 30, 2018 and December 31, 2017, respectively
       79,003     72,935 
    Retained earnings   44,061     39,822 
    Treasury stock, 33,298 shares at June 30, 2018 and December 31, 2017   (368)    (368)
    Accumulated other comprehensive loss   (1,847)    (736)
                     Total shareholders' equity   120,849     111,653 
        
                                          Total liabilities and shareholders' equity$  1,229,512  $  1,079,274 


            
    1ST Constitution Bancorp       
    Consolidated Statements of Income       
    (Dollars in thousands, except per share data)      
    (Unaudited)       
     Three Months Ended June 30, Six Months Ended June 30,
      2018  2017   2018  2017
    INTEREST INCOME:       
        Loans, including fees$  11,349 $  8,697  $  20,885 $  16,740
        Securities:       
           Taxable   989    839     1,855    1,654
           Tax-exempt   509    548     1,024    1,101
        Federal funds sold and       
           short-term investments   34    86     172    158
               Total interest income   12,881    10,170     23,936    19,653
            
    INTEREST EXPENSE:       
        Deposits   1,469    1,104     2,688    2,147
        Borrowings   220    109     227    236
        Redeemable subordinated debentures   174    127     324    246
               Total interest expense   1,863    1,340     3,239    2,629
            
               Net interest income   11,018    8,830     20,697    17,024
            
    PROVISION FOR LOAN LOSSES   225    150     450    300
        Net interest income after provision       
             for loan losses   10,793    8,680     20,247    16,724
            
    NON-INTEREST INCOME:       
        Service charges on deposit accounts   153    149     303    303
        Gain on sales of loans   984    1,018     2,133    2,607
        Income on Bank-owned life insurance   159    130     273    260
        Gain from bargain purchase   184    -     184    -
        Gain on sales of securities   6    (2)    12    104
        Other income   557    471     1,023    905
             Total non-interest income 2,043  1,766   3,928  4,179
            
    NON-INTEREST EXPENSES:       
        Salaries and employee benefits   5,076    4,692     9,814    9,193
        Occupancy expense   885    820     1,697    1,658
        Data processing expenses   369    326     678    644
        FDIC insurance expense   146    80     276    160
        Other real estate owned expenses   -    11     2    15
        Merger-related expenses   1,977    -     2,141    -
        Other operating expenses   1,798    1,757     3,288    3,672
              Total non-interest expenses   10,251    7,686     17,896    15,342
            
      Income before income taxes   2,585    2,760     6,279    5,561
    INCOME TAXES   714    841     1,555    1,693
               Net Income$  1,871 $  1,919  $  4,724 $  3,868
            
    NET INCOME PER COMMON SHARE       
        Basic$  0.22 $  0.24  $  0.57 $  0.48
        Diluted   0.22    0.23     0.56    0.47
            
    WEIGHTED AVERAGE SHARES       
      OUTSTANDING       
        Basic   8,341,459    8,033,299     8,227,109    8,029,690
        Diluted   8,628,105    8,301,939     8,506,961    8,301,431


     
    1ST Constitution Bancorp
    Net Interest Margin Analysis
    (Dollars in thousands)
    (Unaudited)
                
     Three months ended June 30, 2018 Three months ended June 30, 2017
     Average   Average Average   Average
    (yields on a tax-equivalent basis)Balance Interest Yield Balance Interest Yield
                
    Assets           
    Federal funds sold/short term investments$  11,633  $  34 1.17% $  38,469  $  86 0.89%
    Investment securities:           
        Taxable 149,366     989 2.65%  144,790     839 2.32%
        Tax-exempt (4) 76,567     644 3.36%  93,415     811 3.47%
        Total 225,933   1,633 2.89%  238,205   1,650 2.77%
                
    Loans: (1)           
        Commercial real estate 368,850     4,794 5.14%  253,050     3,290 5.14%
        Mortgage warehouse lines 154,796     2,057 5.26%  140,469     1,530 4.31%
        Construction 133,679     2,178 6.45%  110,994     1,699 6.05%
        Commercial business 109,245     1,460 5.31%  110,772     1,441 5.15%
        Residential real estate 50,154     548 4.37%  41,275     460 4.46%
        Loans to individuals 24,990     275 4.41%  22,466     232 4.14%
        Loans held for sale 2,428     26 4.28%  4,303     39 3.64%
        All other loans 1,123     11 3.88%  1,677     6 1.47%
        Total 845,265   11,349 5.32%  685,006   8,697 5.09%
                
      Total interest-earning assets   1,082,831  $  13,016 4.77%    961,680  $  10,433 4.35%
                
    Allowance for loan losses (8,390)      (7,617)    
    Cash and due from bank 6,232       4,978     
    Other assets 65,721       58,346     
    Total assets$  1,146,394      $  1,017,387     
                
    Liabilities and shareholders' equity:           
    Interest-bearing liabilities:           
      Money market and NOW accounts 375,846  $  506 0.54% $  341,704  $  358 0.42%
      Savings accounts 208,755     361 0.69%  209,719     331 0.63%
      Certificates of deposit 174,107     602 1.39%  139,931     415 1.19%
      Other borrowed funds 43,464     220 2.03%  12,367     109 3.54%
      Trust preferred securities 18,557     174 3.75%  18,557     127 2.72%
      Total interest-bearing liabilities  820,729  $  1,863 0.91%  722,278  $  1,340 0.74%
                
    Net interest spread (2)    3.86%     3.61%
                
    Demand deposits 199,707       181,446     
    Other liabilities 7,978       5,901     
    Total liabilities   1,028,414         909,625     
                
    Shareholders' equity 117,980       107,762     
      Total liabilities and shareholders' equity$  1,146,394      $  1,017,387     
                
    Net interest income/Net interest margin (3)  $  11,153 4.13%   $  9,093 3.79%
                
    (1) 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.   
    (2) The net interest spread is the difference between the average yield on interest-earning assets and the average rate paid on 
    interest-bearing liabilities.           
    (3) The net interest margin is equal to net interest income divided by average interest-earning assets.    
    (4) Tax equivalent basis, using 21% federal tax rate in 2018 and 34% in 2017.        


     
    1ST Constitution Bancorp
    Net Interest Margin Analysis
    (Dollars in thousands)
    (Unaudited)
                
     Six months ended June 30, 2018 Six months ended June 30, 2017
     Average   Average Average   Average
    (yields on a tax-equivalent basis)Balance Interest Yield Balance Interest Yield
                
    Assets           
    Federal funds sold/short term investments$  26,031  $  172 1.33% $  38,917  $  158 0.82%
    Investment securities:           
      Taxable 143,405     1,855 2.59%  141,312     1,654 2.34%
      Tax-exempt (4) 78,524     1,295 3.30%  94,022     1,629 3.46%
      Total 221,929   3,150 2.84%  235,334   3,283 2.79%
                
    Loans: (1)           
      Commercial real estate 336,743     8,490 5.01%  245,921     6,278 5.08%
      Mortgage warehouse lines 145,728     3,813 5.23%  146,171     3,100 4.22%
      Construction 131,330     4,141 6.36%  105,140     3,140 5.94%
      Commercial business 110,118     2,895 5.30%  108,781     2,684 4.98%
      Residential real estate 45,537     988 4.32%  41,983     915 4.36%
      Loans to individuals 22,742     475 4.15%  22,452     477 4.29%
      Loans held for sale 2,997     63 4.20%  4,761     128 5.41%
      All other loans 1,168     20 3.41%  1,981     18 1.82%
      Total 796,363   20,885 5.24%  677,191   16,740 4.99%
                
      Total interest-earning assets    1,044,323  $   24,207 4.63%     951,442  $   20,181 4.27%
                
    Allowance for loan losses (8,249)      (7,583)    
    Cash and due from bank 5,789       5,502     
    Other assets 61,980       58,275     
    Total assets$   1,103,843      $  1,007,636     
                
    Liabilities and shareholders' equity:           
    Interest-bearing liabilities:           
      Money market and NOW accounts 373,873  $  938 0.51% $   331,197  $  675 0.41%
      Savings accounts 216,180     708 0.66%  210,822     654 0.63%
      Certificates of deposit 154,814     1,042 1.36%  141,199     818 1.17%
      Other borrowed funds 22,673     227 2.02%  16,917     236 2.81%
      Trust preferred securities 18,557     324 3.49%  18,557     246 2.64%
      Total interest-bearing liabilities  786,097  $  3,239 0.83%  718,692  $   2,629 0.74%
                
    Net interest spread (2)    3.80%     3.53%
                
    Demand deposits 194,189       175,770     
    Other liabilities 8,121       6,511     
    Total liabilities   988,407          900,973     
                
    Shareholders' equity   115,436       106,663     
      Total liabilities and shareholders' equity$   1,103,843      $   1,007,636     
                
    Net interest income/Net interest margin (3)  $  20,968 4.04%   $  17,552 3.72%
                
                
    (1) 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.  
    (2) The net interest spread is the difference between the average yield on interest-earning assets and the average rate paid on
    interest-bearing liabilities.           
    (3) The net interest margin is equal to net interest income divided by average interest-earning assets.    
    (4) Tax equivalent basis, using 21% federal tax rate in 2018 and 34% in 2017.       


    1ST Constitution Bancorp 
    Reconciliation of Non-GAAP Measures (1) 
    (Dollars in thousands, except per share data) 
    (Unaudited) 
     Three months ended Six months ended
     June 30, June 30,
      2018   2017   2018   2017 
    Adjusted net income       
    Net income$  1,871  $  1,919  $  4,724  $  3,868 
    Adjustments:       
      Merger-related expenses   1,977     -     2,141     - 
      Gain from bargain purchase   (184)    -     (184)    - 
      Income tax effect of adjustments (2)   (542)    -     (568)    - 
    Adjusted net income$  3,122  $  1,919  $  6,113  $  3,868 
            
    Adjusted net income per diluted share       
    Adjusted net income$  3,122  $  1,919  $  6,113  $  3,868 
    Diluted shares outstanding    8,628,105      8,301,939    8,506,961    8,301,431 
    Adjusted net income per diluted share$  0.36  $  0.23  $  0.72  $  0.47 
            
    Adjusted return on average assets       
    Adjusted net income$  3,122  $  1,919  $  6,113  $  3,868 
    Average assets    1,146,394    1,017,387    1,103,843      1,007,636 
    Adjusted return on average assets 1.09%  0.76%  1.12%  0.77%
            
    Adjusted return on average equity       
    Adjusted net income$  3,122  $  1,919  $  6,113  $  3,868 
    Average equity    117,980      107,762      115,436      106,663 
    Return on average equity 10.61%  7.14%  10.68%  7.31%
            
    Book value and tangible book value per share       
    Shareholders' equity        120,849     108,848 
    Less: goodwill and intangible assets       12,387     12,687 
    Tangible shareholders' equity        108,462     96,161 
    Shares outstanding        8,379,342     8,046,197 
    Book value per share    $  14.42  $  13.53 
    Tangible book value per share    $  12.94  $  11.95 
            
    (1)  The Company used the non-GAAP financial measures, adjusted net income and adjusted net income per diluted share, 
    because the Company believes that it is useful for the users of the financial information to understand the effect on net 
    income of the merger-related expenses and the gain from the bargain purchase recorded in connection with the merger 
    of New Jersey Community Bank. These non-GAAP measures improve the comparability of the current period results 
    with the results of 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 results.     
    (2)  Tax effected at an income tax rate of 30.09%, less the impact of non-deductible merger expenses and the non- 
    taxable gain from the bargain purchase.       
            

    CONTACT:
    Robert F. Mangano
    President & Chief Executive Officer
    (609) 655-4500

    Stephen J. Gilhooly
    Sr. Vice President & Chief Financial Officer
    (609) 655-4500

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