1st Colonial Bancorp, Inc. Reports Third Quarter 2024 Results

Income Statement Highlights include:

• Net income was $1.8 million for the third quarter of 2024 consistent with the same quarter in 2023 and a $115 thousand decrease from the second quarter of 2024.
• Net interest income for the quarter ended September 30, 2024 was $6.2 million, a decrease of $447 thousand, or 7% from the same period in 2023.
• Net interest margin for the quarter ended September 30, 2024 was 3.16%, an 8% decrease from the same period in 2023, and a 2% increase from the quarter ended June 30, 2024.
• Provision for credit losses was $82 thousand for the third quarter of 2024 compared to $126 thousand for the third quarter of 2023. The provision for credit losses was a net release of $439 thousand for the second quarter of 2024.
• The allowance for credit losses was 1.47% of total loans as of September 30, 2024 compared to 1.50% as of June 30, 2024 and 1.52% as of December 31, 2023.
• Noninterest income for the quarter ended September 30, 2024 was $944 thousand, a 3% increase from the comparable quarter in 2023 and a 3% decrease from the second quarter of 2024.
• Noninterest expense for the quarter ended September 30, 2024 was $4.6 million, a decrease of 7% from the same period in 2023 and a 3% decrease from the second quarter of 2024.
• Diluted earnings per share was $0.37 for the quarter ended September 30, 2024 compared to $0.38 for the quarter ended September 30, 2023.
• Annualized return on average assets for the third quarter of 2024 was 0.91% compared to 0.92% for the same period in 2023 and 1.00% for the second quarter of 2024.

Balance Sheet Highlights include:

• Total assets declined $10.3 million, or 1%, to $815.3 million as of September 30, 2024 from $825.6 million as of December 31, 2023.
• Total loans declined $12.9 million, or 2%, to $624.1 million as of September 30, 2024 from $637.0 million as of December 31, 2023.
• Total deposits grew $11.7 million, or 2%, from $687.4 million as of December 31, 2023 to $699.1 million as of September 30, 2024.
• For the third quarter of 2024, annualized return on average equity was 9.91% compared to 11.45% for the same period in 2023 and 11.10% for the second quarter of 2024.
• Book value per share increased 10% to $15.76 as of September 30, 2024 from $14.31 as of December 31, 2023.
• Leverage ratio for the Bank grew to 10.68% as of September 30, 2024 from 10.02% as of December 31, 2023.

1st Colonial Bancorp, Inc. (FCOB), holding company of 1^st Colonial Community Bank, today reported net income of $1.8 million, or $0.37 per diluted share, for the three months ended September 30, 2024, compared to net income of $1.8 million, or $0.38 per diluted share, for the three months ended September 30, 2023. For the nine months ended September 30, 2024, net income was $5.4 million, or $1.09 per diluted share, compared to $5.3 million, or $1.10 per diluted share, for the same period in 2023.

Robert White, President and Chief Executive Officer, commented, “We are pleased to report our third quarter and nine month results, which reflect continued stability in our operating results. Our net interest margin improved during the quarter, which we believe will continue for the balance of the year, as the yield curve continues to widen. Our residential mortgage business revenue improved for the quarter and we have solid momentum given the increase in housing inventory in our markets. Our credit discipline and strong portfolio management practices continue to deliver strong asset quality metrics. We remain focused on delivering high quality products and services to our growing client base, as well as continuing to closely manage operating expenses as we proceed through the final quarter of 2024.”

Operating Results

Net Interest Income

The net interest margin was 3.16% for the third quarter of 2024 compared to 3.11% for the second quarter of 2024 and 3.43% for the third quarter of 2023. The average yield on interest-earning assets grew 22 basis points from 5.30% for the quarter ended September 30, 2023 to 5.52% for the quarter ended September 30, 2024. The average rate paid on average interest-bearing liabilities increased 57 basis points from 2.23% for the third quarter of 2023 to 2.80% for the third quarter of 2024. Net interest margin was 3.19% for the nine months ended September 30, 2024 compared to 3.52% for the nine months ended September 30, 2023.

Net interest income for the three months ended September 30, 2024 and 2023 was $6.2 million and $6.6 million, respectively. The $447 thousand decline in net interest income was primarily attributable to a $989 thousand increase in interest paid on average interest-bearing liabilities that was partially offset by a $542 thousand increase in interest income earned on average interest-earning assets. For the third quarter of 2024, average loan balances decreased $11.3 million to $623.2 million from $634.5 million for the third quarter of 2023. Average residential mortgages outstanding increased $18.3 million and average outstanding construction and commercial real estate loans and home equity lines of credit declined $12.0 million, $9.4 million, and $6.7 million, respectively. Interest income earned on average cash and investment balances increased $172 thousand and $239 thousand from the third quarter of 2023. When compared to the second quarter of 2024, net interest income increased $266 thousand.

For the nine months ended September 30, 2024, net interest income decreased $1.7 million, or 8%, to $18.4 million from $20.0 million for the same period in 2023. The decline in net interest income was primarily attributable to a $4.1 million increase in interest paid on average interest-bearing liabilities and was partially mitigated by a $2.4 million increase in interest income earned on average interest-earning assets. During the first nine months of 2024, interest income on average loans and average investments increased $1.6 million and $561 thousand, respectively. Our average outstanding loan balance grew $8.1 million. Average residential mortgages outstanding increased $29.2 million and average outstanding construction loans decreased $19.6 million.

For the quarter ended September 30, 2024, interest expense was $4.6 million, an increase of $989 thousand from $3.6 million for the third quarter of 2023. For the third quarter of 2024, average interest-bearing deposits increased $16.0 million from the third quarter of 2023. Average brokered certificates of deposit (CDs) increased $36.9 million due to declines in average retail CD and interest checking balances of $16.8 million and $8.3 million, respectively. As a result of the prolonged higher interest rates, we have increased our deposit rates over the last year. The increase in deposit rates combined with the increase in the average balance of higher cost brokered CDs led to an increase of $1.1 million in deposit interest expense in the third quarter of 2024 compared to the third quarter of 2023. When compared to the second quarter of 2024, total interest expense increased $197 thousand from $4.4 million. The average rate paid on interest bearing liabilities was 2.80% for the third quarter of 2024 compared to 2.74% for the second quarter of 2024 and 2.23% for the third quarter of 2023.

For the nine months ended September 30, 2024, interest expense was $13.2 million, an increase of $4.1 million from $9.1 million for the same period in 2023. For the first nine months of 2024, average interest-bearing deposits increased $17.9 million from the average balance for the comparable 2023 period. Average brokered CD balances increased $43.2 million while average interest checking, savings and money market and retail CD balances declined $6.9 million, $8.8 million, and $9.5 million, respectively. The increase in deposit rates combined with the increase in average brokered CD balances led to an increase of $4.4 million in deposit interest expense for the first three quarters of 2024 compared to the same period in 2023. Average borrowings decreased $7.7 million during the first three quarters of 2024 compared to the same period in 2023.

Provision for Credit Losses

For the three months ended September 30, 2024, the net provision for credit losses was $82 thousand and included $120 thousand for loans and a provision release of $38 thousand for off balance sheet (“OBS”) commitments. For the three months ended September 30, 2023, the provision for credit losses was $126 thousand and included $126 thousand for loans and $0 for OBS commitments. For the third quarter of 2024 net charge-offs were $291 thousand compared to net recoveries of $222 thousand for the third quarter of 2023 and net charge-offs of $208 thousand for the second quarter of 2024.

For the nine months ended September 30, 2024, the provision for credit losses was a net release of $202 thousand and included $140 thousand for loans and $62 thousand for OBS commitments. The release was mainly due to a planned sale of $15 million in home equity lines of credit which occurred in June 2024. As a result of the sale, we were able to expand our ability to originate new lines of credit without increasing our concentration in single family residential mortgages. For the nine months ended September 30, 2023, the provision for credit losses was $122 thousand and included $180 thousand for loans and a net release of $58 thousand for OBS commitments. Net charge-offs were $383 thousand for the first nine months of 2024 compared to net recoveries of $104 thousand for the same period in 2023. Annualized net charge-offs to average loans was 0.08% as of September 30, 2024 compared to annualized net recoveries of 0.02% as of September 30, 2023.

Noninterest Income

Noninterest income for the third quarter of 2024 was $944 thousand, an increase of $27 thousand, or 3%, from $917 thousand for the third quarter of 2023. Income from the origination and sales of residential mortgages was $659 thousand and grew $191 thousand, or 41%, from the third quarter in 2023. While mortgage originations grew $2.2 million, or 8%, we sold 94% of the originations in the third quarter of 2024 compared to 73% in the third quarter of 2023. Gains on the sale of SBA loans were $9 thousand for the third quarter of 2024 compared to $104 thousand for the comparable 2023 period. When compared to the second quarter of 2024, non-interest income for the third quarter of 2024 decreased $25 thousand, or 3%, from $969 thousand.

For the nine months ended September 30, 2024, noninterest income was $2.6 million, an increase of $564 thousand, or 27%, from $2.1 million for the same period in 2023. Income from the origination and sales of residential mortgages grew $759 thousand, or 78%, from $976 thousand for the first three quarters of 2023 to $1.7 million for the first three quarters of 2024. For the first nine months of 2024, we sold $76.6 million, or 90%, of the $85.2 million in mortgage loan originations compared to sales of $45.4 million, or 59%, of the $76.5 million in mortgage loan originations for the first nine months of 2023. For the nine months ended September 30, 2024, gains on the sale of SBA loans were $31 thousand and declined $204 thousand from $235 thousand for the same period in 2023.

Noninterest Expense

Noninterest expense was $4.6 million for the three months ended September 30, 2024, and decreased $327 thousand, or 7%, from $4.9 million for the comparable period in 2023. Professional fees, which include audit and legal expenses, declined $115 thousand and loan expenses and FDIC assessment expenses decreased $48 thousand and $52 thousand, respectively. When compared to the second quarter of 2024, non-interest expense for the third quarter of 2024 decreased $164 thousand. Our efficiency ratio improved to 65.2% for the third quarter of 2024 compared to 65.9% for the same quarter in 2023 and 69.9% for the second quarter of 2024.

Noninterest expense was $14.2 million for the nine months ended September 30, 2024 and decreased $501 thousand from $14.7 million for the same period in 2023. Salaries and benefits decreased $399 thousand, or 5%, mainly due to the recognition of severance that was negotiated with a former executive in 2023. FDIC assessment expenses and loan expenses declined $98 thousand and $50 thousand, respectively. Professional fees increased $91 thousand and were mostly related to optional targeted testing of operational areas. Our efficiency ratio was 67.7% for the nine months ended September 30, 2024 compared to 66.5% for the same period in 2023.

Income Taxes

For the three and nine months ended September 30, 2024, income tax expenses were $555 thousand and $1.6 million, respectively, compared to $626 thousand and $2.0 million for the three and nine months ended September 30, 2023, respectively. Income taxes were favorably impacted by an increase in non-taxable income and a reduction in the New Jersey corporate surtax rate.

Financial Condition

Assets

As of September 30, 2024, total assets were $815.3 million and decreased $4.1 million, or 1%, from $811.1 million as of June 30, 2024. Total assets were $825.6 million as of December 31, 2023.

Total loans were $624.1 million as of September 30, 2024, an increase of $1.4 million from $622.7 million as of June 30, 2024. Total loans declined $12.9 million, or 2%, from $637.0 million as of December 31, 2023. During the nine months ended September 30, 2024, commercial loans, including commercial real estate and construction loans, declined $6.5 million and home equity loans and lines of credit declined $2.7 million. Additionally, nonaccrual loans declined $3.5 million during the same period. As of September 30, 2024, loans held for sale were $12.8 million and increased $1.4 million and $9.2 million from $11.4 million as of June 30, 2024 and $3.6 million as of December 31, 2023, respectively.

Investments increased $2.3 million, or 2%, to $110.8 million as of September 30, 2024 from $108.6 million as of June 30, 2024. Investments were $107.6 million as of December 31, 2023. During 2024 we received $4.8 million in principal paydowns and reinvested the proceeds in short-term municipal bond anticipation notes. The unrealized loss was $4.0 million as of September 30, 2024 compared to $6.2 million as of December 31, 2023.

Asset Quality

As of September 30, 2024, the allowance for credit losses (“ACL”) for loans was $9.2 million, or 1.47%, of total loans compared to $9.3 million, or 1.50%, of total loans as of June 30, 2024. The ACL was $9.7 million, or 1.52% of total loans, as of December 31, 2023. As of September 30, 2024, non-performing assets were $1.7 million and included $1.4 million in nonaccrual loans and $258 thousand in other real estate owned. Non-performing assets were $1.7 million as of June 30, 2024 and $4.9 million as of December 31, 2023. The ACL to non-accrual loans was 653% as of September 30, 2024 compared to 641% as of June 30, 2024 and 199% as of December 31, 2023. As of September 30, 2024, the ratio of non-performing assets to total assets was 0.20% compared to 0.21% as of June 30, 2024 and 0.59% as of December 31, 2023.

Liabilities

Total deposits were $699.1 million as of September 30, 2024, an increase of $47.1 million, or 7%, from $651.9 million as of June 30, 2024. For the first nine months of 2024, total deposits increased $11.6 million, or 2%, from $687.4 million as of December 31, 2023. Municipal interest checking accounts and savings accounts increased $18.8 million and $16.1 million, respectively. Retail CDs, other checking deposits, and money market accounts decreased $26.0 million, $6.6 million and $2.5 million, respectively. Brokered CDs increased $11.8 million to partially replace the reduction in retail CD balances and to lower short-term borrowings. The current interest rate environment has made it highly competitive in retaining and growing our deposit customers.

As of September 30, 2024, short-term borrowings were $24.6 million and declined $46.2 million from $70.8 million as of June 30, 2024 and $29.0 million from $53.6 million as of December 31, 2023.

Shareholder’s Equity

Total shareholders’ equity was $75.5 million as of September 30, 2024, compared to $72.0 million as of June 30, 2024 and $67.9 million as of December 31, 2023. The accumulated comprehensive loss was $2.9 million as of September 30, 2024 compared to $4.3 million for June 30, 2024 and $4.5 million as of December 31, 2023. The accumulated comprehensive loss is related to the unrealized loss in our investment portfolio. Tangible book value per share increased $0.67 from $15.09 as of June 30, 2024 to $15.76 as of September 30, 2024. Tangible book value per share was $14.31 as of December 31, 2023.

Consolidated Financial Statements and Other Highlights:

About 1^st Colonial Bancorp, Inc.

1st Colonial Bancorp, Inc, is a Pennsylvania corporation headquartered in Mount Laurel, New Jersey, and the parent company of 1st Colonial Community Bank (the “Bank”). The Bank 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 administrative offices in Mount Laurel, New Jersey. To learn more, call (877) 785-8550 or visit www.1stcolonial.com.

“Safe Harbor” Statement

In addition to historical information, this press release may contain “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements with respect to 1st Colonial Bancorp, Inc.’s strategies, goals, beliefs, expectations, estimates, intentions, capital raising efforts, financial condition and results of operations, future performance, and business. Statements preceded by, followed by, or that include the words “may,” “could,” “should,” “pro forma,” “looking forward,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” or similar expressions generally indicate a forward-looking statement. These forward-looking statements involve risks and uncertainties that are subject to change based on various important factors (some of which, in whole or in part, are beyond 1st Colonial Bancorp, Inc.’s control). Numerous competitive, economic, regulatory, legal and technological factors, risks and uncertainties that could cause actual results to differ materially include, without limitation, the impact of the ongoing pandemic and government responses thereto; on the U.S. economy, including the markets in which we operate; actions that we and our customers take in response to these factors and the effects such actions have on our operations, products, services and customer relationships; increased competitive pressures; changes in the interest rate environment; changes in general economic conditions and conditions within the securities markets; legislative and regulatory changes; and the effects of inflation, a potential recession, among others, could cause 1st Colonial Bancorp, Inc.’s financial performance to differ materially from the goals, plans, objectives, intentions and expectations expressed in such forward-looking statements. 1st Colonial Bancorp, Inc. cautions that the foregoing factors are not exclusive, and neither such factors nor any such forward-looking statement takes into account the impact of any future events. All forward-looking statements and information set forth herein are based on management’s current beliefs and assumptions as of the date hereof and speak only as of the date they are made. 1st Colonial Bancorp, Inc. does not undertake to update any forward-looking statement whether written or oral, that may be made from time to time by 1st Colonial Bancorp, Inc. or by or on behalf of 1st Colonial Community Bank.

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