1st Colonial Bancorp, Inc. Reports Record Earnings of $7.3 Million for 2021, a 53% Increase Over 2020

Income Statement Highlights include:

• Net interest income was $6.1 million for the fourth quarter of 2021, an increase of 20% over the same period in 2020.
• Net interest margin for the quarter ended December 31, 2021 was 3.51%, a 9% increase over the same period in 2020.
• Fourth quarter revenues were $8.2 million, an increase of $1.0 million, or 15%, from the same period in 2020.
• Non-interest income grew 59% to $9.5 million for 2021 compared to $6.0 million for 2020.
• For 2021, diluted earnings per share were $1.47, an increase of 54% over 2020.
• Pre-tax, pre-loan loss provision earnings for 2021 were $11.8 million, an increase of $3.3 million, or 38%, from $8.5 million for 2020.
• The efficiency ratio for 2021 improved to 62.5% from 65.0% for 2020. The efficiency ratio represents the ratio of non-interest expenses divided by the sum of net-interest income and non-interest income.

Balance Sheet Highlights include:

• Total assets as of December 31, 2021 grew $46.8 million to $682.8 million from $636.1 million as of December 31, 2020.
• Total loans as of December 31, 2021 increased $78.7 million to $501.9 million from $423.1 million as of December 31, 2020.
• Total deposits as of December 31, 2021 grew $44.7 million to $610.5 million from $565.8 million as of December 31, 2020.
• Tangible book value per share increased 13% to $12.23 as of December 31, 2021 from $10.82 as of December 31, 2020.
• For 2021, return on average assets was 1.07% and return on average equity was 13.14% compared to 0.78% and 9.52%, respectively, for 2020.
• Non-performing assets declined 26% to $3.5 million as of December 31, 2021 from $4.8 million as of December 31, 2020.

1st Colonial Bancorp, Inc. (FCOB), holding company of 1^st Colonial Community Bank, today reported net income of $1.7 million, or $0.35 per diluted share, for the three months ended December 31, 2021, compared to net income of $2.2 million, or $0.44 per diluted share, for the three months ended December 31, 2020. For the year ended December 31, 2021, net income was $7.3 million, or $1.47 per diluted share, compared to $4.8 million, or $0.95 per diluted share, for the same period in 2020.

Robert White, President and Chief Executive Officer, commented, “We are pleased to announce our financial results for 2021, the highest annual earnings in the Company’s history, reflecting our team’s commitment to growing and expanding client relationships. I’m incredibly proud of what our team has accomplished as we continue to improve our financial performance. In just two years since I joined 1^st Colonial, we have made significant changes to our team, as well as focused on culture and team member engagement. We were voted a “2021 Top Work Place” company, creating an environment that focuses on mutual respect, empowerment, and creating a very positive future for our company.”

“Our continued investment in our people, as well as technology, will enable us to execute upon our long-term strategy, delivering exceptional products and services through multiple distribution channels.”

Operating Results

Net Interest Income

Net interest income for the three months ended December 31, 2021 and 2020 was $6.1 million and $5.0 million, respectively. The $1.0 million increase in net interest income was primarily attributable to a $847 thousand increase in interest income coupled with a $176 thousand decrease in interest expense. Interest income on average loans increased $966 thousand quarter over quarter. The growth in interest income included a $266 thousand increase in loan origination income from the SBA’s Paycheck Protection Program (“PPP”) and was due to accelerated loan forgiveness payments. Interest expense was impacted by a $172 thousand decline in interest expense on average deposits. An increase in non-interest bearing deposits coupled with interest rate reductions led to the improvement in deposit interest expense.

For 2021, net interest income grew $3.5 million, or 19.3%, to $21.9 million from $18.4 million for 2020. The increase in net interest income was attributable to a $2.4 million increase in interest income accompanied by a $1.1 million decrease in interest expense. For 2021, interest income from average loans increased $2.7 million while interest income from average cash and cash equivalents and average investments declined $174 thousand and $259 thousand, respectively. PPP loan origination income increased $1.5 million year over year. Average outstanding loan balances grew $51.3 million, or 12.0%. Total interest expense was affected by a $1.6 million decline in interest expense on average deposits and a $489 thousand increase in interest expense on average borrowings.

As of December 31, 2021, PPP loans outstanding were $14.0 million with approximately $548 thousand in net origination fees remaining to be recognized over the contractual term. The earnout period may be accelerated based on the timing of the forgiveness of the PPP loans by the SBA. No new PPP loans may be made, as the program ended on May 31, 2021.

The net interest margin was 3.51% for the fourth quarter of 2021 compared to 3.23% for the fourth quarter of 2020, and was 3.33% for the year ended December 31, 2021, compared to 3.10% for the year ended December 31, 2020. The improvement in net interest margin year-over-year was mostly related to the 12% growth in average loans coupled with the $1.5 million increase in net PPP origination fees. Additionally, the average rate paid on liabilities declined from 0.87% for 2020 to 0.57% for 2021.

Loan Loss Provision

For the three months and year ended December 31, 2021, we recorded provisions to the allowance for loan losses (“allowance”) of $700 thousand and $1.7 million, respectively, compared to $340 thousand and $2.1 million for the three months and year ended December 31, 2020, respectively. For 2021, net charge-offs were $432 thousand compared to $3.2 million for 2020. The net charge-offs for 2020 included $1.9 million in specific reserves on impaired loans. The allowance as a percentage of total loans was 1.38% as of December 31, 2021 compared to 1.33% as of December 31, 2020.

Non-interest Income

Non-interest income for the fourth quarters of 2021 and 2020 was $2.1 million. During the fourth quarter of 2021, we earned $696 thousand in gains on the sale of SBA loans, an increase of $532 thousand, from $164 thousand for the fourth quarter of 2020. Income from the origination and sales of residential mortgages was $1.2 million for the fourth quarter in 2021 and declined $472 thousand from $1.7 million for the same period in 2020. During the quarter ended December 31, 2021, we chose to retain in our loan portfolio $17.0 million in new mortgage originations compared to $2.9 million for the same period in 2020.

For the year ended December 31, 2021, non-interest income was $9.5 million, an increase of $3.5 million, or 59.3%, from $6.0 million for 2020. Income from the origination and sales of residential mortgages grew $1.2 million, or 27.6%, from $4.6 million for 2020 to $5.8 million for 2021 due to growth of $34.6 million in the volume of loans sold during the 2021 period. In 2021, we earned $2.3 million in gains on the sale of SBA loans compared to $243 thousand for 2020. Additionally, in 2021 we recorded a non-taxable BOLI death benefit of $385 thousand.

Non-interest Expense

Non-interest expense was $5.1 million for the three months ended December 31, 2021, an increase of $1.3 million or 33.4%, from $3.8 million for the comparable period in 2020. Personnel expenses increased $362 thousand, or 13.5%, during this period. Throughout 2021, we made key investments in highly experienced revenue producers and operational team members as we executed upon our strategic plan. On March 29, 2021, we expanded into southeastern Pennsylvania when we opened a new full-service branch in Limerick. Loan expenses, professional fees and data processing and software expenses increased $314 thousand, $152 thousand, and $94 thousand, respectively, quarter over quarter. These increases reflect continued investments in our company to support our growth strategy.

Non-interest expense was $19.6 million for 2021, an increase of $3.8 million, or 24.1%, from $15.8 million for 2020. The increase was mainly related to planned growth in personnel expenses of $2.7 million, primarily attributable to our market expansion. Additionally, loan expenses, occupancy and equipment expenses, and data processing and software expenses increased $379 thousand, $300 thousand, and $169 thousand, respectively.

Income Taxes

For the three and twelve months ended December 31, 2021, income tax expense was $671 thousand and $2.8 million, respectively, compared to $780 thousand and $1.6 million for the three and twelve months ended December 31, 2020, respectively.

Financial Condition

Assets

As of December 31, 2021, total assets were $682.8 million and grew $46.8 million, or 7.4%, from $636.1 million as of December 31, 2020.

Total loans were $501.9 million as of December 31, 2021, an increase of $78.7 million, or 18.6%, from $423.1 million as of December 31, 2020. We used cash flows from the investment portfolio to partly fund our loan growth. During 2021, commercial loans, excluding PPP loans, grew $43.2 million, or 18.2%, and residential mortgages and consumer loans grew $49.2 million, or 31%. Loans held for sale were $10.0 million as of December 31, 2021, compared to $21.9 million as of December 31, 2020.

During 2021, we originated $48.3 million in new PPP loans. As of December 31, 2021, PPP loans outstanding were $14.0 million, a decrease of $13.6 million from $27.6 million as of December 31, 2020. Throughout 2021, we assisted our borrowers with the SBA PPP forgiveness process to have these loans paydown.

Liabilities

Total deposits were $610.5 million as of December 31, 2021, an increase of $44.7 million, or 7.9%, from $565.8 million as of December 31, 2020. Money markets, certificates of deposit including brokered deposits, demand deposits, and interest-checking accounts, increased $13.7 million, $12.8 million, $11.1 million and $8.7 million, respectively, while savings accounts decreased $1.6 million. Short-term borrowings declined $2.3 million due to the termination of repurchase agreements.

Shareholder’s Equity

Total shareholders’ equity was $57.8 million as of December 31, 2021, an increase of $4.1 million, or 7.7%, from $53.7 million as of December 31, 2020. Tangible book value per share increased $1.41, or 13.0%, from $10.82 as of December 31, 2020, to $12.23 as of December 31, 2021.

During the 2021, we announced the adoption of two separate stock repurchase programs. As with many other financial institutions, our common stock has been trading at a price that is below our tangible book value per share, and our intent is to maximize shareholder value as we continue to focus on profitable growth. The first repurchase program was completed during the second quarter. We repurchased 141,720 shares for a total cost of $1.4 million through a trading plan under Rule 10b5-1 under the Securities Exchange Act of 1934.

The second stock repurchase program was announced in the fourth quarter and authorized management to repurchase up to an additional 4% of the Company’s outstanding shares of common stock, with a total cost not to exceed $2.0 million through a trading plan under Rule 10b5-1 under the Securities Exchange Act of 1934. As of December 31, 2021, we have repurchased 114,500 shares under this program for a total cost of $1.1 million.

Asset Quality

As of December 31, 2021, our non-performing assets were $3.5 million compared to $4.8 million as of December 31, 2020. During 2021, $847 thousand in outstanding loans were transferred to non-accrual and we received paydowns and payoffs of $1.1 million. We recognized $677 thousand in charge-offs in 2021, of which the majority was related to one legacy residential construction loan that was classified as non-performing in 2020. We continue to manage this credit through the legal process and believe we will see full resolution and disposition in 2022. During 2021, we transferred the collateral for one loan, initially valued at $187 thousand, to other real estate owned and recognized a $60 thousand loss upon disposition of the property.

The ratio of non-performing assets to total assets as of December 31, 2021, was 0.52% compared to 0.75% as of December 31, 2020. As of December 31, 2021, the allowance was $6.9 million, or 1.38% of total loans. The allowance was $5.6 million, or 1.33% of total loans as of December 31, 2020. The allowance to non-accrual loans was 195.9% as of December 31, 2021, compared to 117.3% as of December 31, 2020.

Income Statement and Other Highlights:

Highlights as of December 31, 2021 and December 31, 2020 and a comparison of the three and twelve months ended December 31, 2021 to the three and twelve months ended December 31, 2020 include the following:

SELECTED PERFORMANCE RATIOS:

GAAP to NON-GAAP RECONCILIATION

(Unaudited, dollars in thousands, except per share data)

Pre-tax, pre-loan loss provision earnings are determined by methods other than in accordance with generally accepted accounting principles (“GAAP”) and is considered a non-GAAP financial measure. Management believes that this non-GAAP financial measure is useful because it enhances the ability of management and investors to evaluate and compare our operating results from period to period.

1st Colonial Community Bank, the subsidiary of 1st Colonial Bancorp, provides a range of business and consumer financial services, placing emphasis on customer service and access to decision makers. Headquartered in Collingswood, New Jersey, the Bank has branches in Westville, New Jersey and Limerick, Pennsylvania. The bank also has a loan production office in Haddonfield, New Jersey and administrative offices in Cherry Hill, New Jersey. To learn more, call (877) 785-8550 or visit www.1stcolonial.com.

This release contains forward-looking statements that are not historical facts and include statements about management’s strategies and expectations about our business. There are risks and uncertainties that may cause our actual results and performance to be materially different from results indicated by these forward-looking statements. Factors that might cause a difference include the extent of the adverse impact of the current global coronavirus outbreak on our customers, prospects and business, as well as the impact of any future pandemics or other natural disasters; economic conditions; civil unrest, rioting, acts or threats of terrorism, or actions taken by the local, state and Federal governments in response to such events, which could impact business and economic conditions in our market area; unanticipated loan losses, inability to close loans in our pipeline, lack of liquidity; varying and unanticipated costs of collection with respect to nonperforming loans; an inability to dispose of real estate owned; changes in interest rates, changes in FDIC assessments, deposit flows, loan demand, and real estate values; changes in relationships with major customers; operational risks, including the risk of fraud by employees, customers or outsiders; competition; changes in accounting principles, policies or guidelines; changes in laws or regulations and in the manner in which the regulators enforce same; new technology and other factors affecting our operations, pricing, products and services.

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