1st Colonial Bancorp, Inc. Reports Earnings of $2.2 Million for the Third Quarter of 2021, a 67% Increase Over the Same Period In 2020

Income Statement Highlights include:

• Net interest income was $6.0 million for the third quarter of 2021, an increase of 31% over the same period in 2020.
• Net interest margin for the quarter ended September 30, 2021 was 3.56%, an increase of 46 basis points, or 15%, over the same period in 2020.
• Third quarter revenues were $8.5 million, an increase of $2.2 million, or 34%, from the same period in 2020.
• Non-interest income grew 45% to $2.5 million for the quarter ended September 30, 2021, compared to $1.7 million for the same period in 2020.
• For the quarter ended September 30, 2021, diluted earnings per share were $0.44, an increase of 64% over the same period in 2020.
• Pre-tax, pre-loan loss provision earnings for the third quarter of 2021 were $3.5 million, an increase of $1.3 million, or 61%, from $2.2 million for the third quarter of 2020.
• The efficiency ratio for the third quarter of 2021 improved to 59% from 65% for the third quarter of 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 September 30, 2021 grew $48.1 million to $684.2 million from $636.1 million as of December 31, 2020.
• Total loans as of September 30, 2021 increased $90.1 million to $513.2 million from $423.1 million as of December 31, 2020.
• Total deposits as of September 30, 2021 grew $45.1 million to $610.9 million from $565.8 million as of December 31, 2020.
• Tangible book value per share increased 15% to $11.88 as of September 30, 2021 from $10.35 as of September 30, 2020. Tangible book value per share was $10.82 as of December 31, 2020.
• For the third quarter of 2021, annualized return on average assets was 1.24% and annualized return on average equity was 15.36%
• Non-performing assets declined 17% to $4.0 million as of September 30, 2021 compared to $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 $2.2 million, or $0.44 per diluted share, for the three months ended September 30, 2021, compared to net income of $1.3 million, or $0.27 per diluted share, for the three months ended September 30, 2020. For the nine months ended September 30, 2021, net income was $5.5 million, or $1.11 per diluted share, compared to $2.5 million, or $0.51 per diluted share, for the same period in 2020.

Robert White, President and Chief Executive Officer, commented, “We are pleased to announce solid financial results for the quarter, reflecting our team’s commitment to growing and expanding client relationships. This was evident in our non-PPP loan growth of $86.1 million and deposit growth of $45.1 million, which helped us achieve our quarterly results. We continue to see momentum in our residential and commercial pipelines, including SBA lending activities, which significantly contributed to our quarterly performance.

“Our continued investment in our Company has fueled the growth in our team, as well as significant technology enhancements, which support our long-term growth strategy.”

Operating Results

Net Interest Income

Net interest income for the three months ended September 30, 2021 and 2020 was $6.0 million and $4.6 million, respectively. The $1.4 million increase in net interest income was primarily attributable to a $1.2 million increase in interest income coupled with a $208 thousand decrease in interest expense. Interest income on average loans increased $1.3 million quarter over quarter. The growth in interest income included an $829 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 $320 thousand decline in interest expense related to average interest-bearing deposits and a $112 thousand increase in interest expense on average borrowings. An increase in non-interest bearing and lower cost deposit products coupled with interest rate reductions led to the improvement in deposit interest expense. Interest on average borrowings grew due to the subordinated debt issued by the Company in the third quarter of 2020.

For the first nine months of 2021, net interest income grew $2.5 million, or 18.9%, to $15.8 million from $13.3 million for the same period in 2020. The increase in net interest income was primarily attributable to a $1.5 million increase in interest income accompanied by a $977 thousand decrease in interest expense. For 2021, interest income from average loans increased $1.8 million while interest income from average cash and cash equivalents and average investments declined $181 thousand and $156 thousand, respectively. PPP loan origination income increased $1.3 million year over year. Average outstanding loan balances grew $42.3 million, or 9.9%. Total interest expense was affected by a $1.5 million decline in interest expense related to average interest-bearing deposits and a $494 thousand increase in interest expense on average borrowings due to the subordinated debt.

Approximately $1.4 million in net PPP origination fees remains to be recognized over the contractual term, which is predominately 60 months. 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 3.56% for the third quarter of 2021 compared to 3.11% for the third quarter of 2020, and was 3.27% for the nine months ended September 30, 2021, compared to 3.06% for the nine months ended September 30, 2020. The improvement in net interest margin year-over-year was mostly related to the 11.5% growth in interest-earning assets. Additionally, the average rate paid on liabilities declined from 0.92% for the first nine months of 2020 to 0.59% for the first nine months of 2021.

Loan Loss Provision

For the three and nine months ended September 30, 2021, we recorded provision to the allowance for loan losses (“allowance”) of $600 thousand and $1.0 million, respectively, compared to $341 thousand and $1.8 million for the three and nine months ended September 30, 2020, respectively. For the nine months ended September 30, 2021, net charge-offs were $266 thousand compared to $2.6 million in net charge-offs for the same period in 2020. The net charge-offs for 2020 included $1.8 million in specific reserves on impaired loans. The allowance as a percentage of total loans was 1.24% as of September 30, 2021 compared to 1.33% as of December 31, 2020 and 1.34% as of September 30, 2020.

Non-interest Income

Non-interest income for the third quarter of 2021 was $2.5 million, an increase of $772 thousand, or 44.7%, from $1.7 million for the third quarter of 2020. During the third quarter of 2021 we earned $629 thousand in gains on the sale of SBA loans compared to $79 thousand for the third quarter of 2020. The third quarter of 2021 also includes a non-taxable bank owned life insurance (“BOLI”) death benefit of $387 thousand related to a former employee. Income from the origination and sales of residential mortgages was $1.2 million for the third quarter in 2021 and declined $74 thousand from $1.3 million for the same period in 2020. While residential mortgage originations increased 12% quarter over quarter, we chose to retain 17% more in our loan portfolio compared to the third quarter of 2020.

For the nine months ended September 30, 2021, non-interest income was $7.4 million, an increase of $3.5 million, or 91.3%, from $3.8 million for the same period in 2020. Income from the origination and sales of residential mortgages grew $1.7 million, or 60.5%, from $2.9 million for the first three quarters of 2020 to $4.6 million for the first three quarters in 2021 due to growth of $52.6 million in the volume of loans sold during the 2021 period. For the first nine months of 2021, we earned $1.6 million in gains on the sale of SBA loans compared to $79 thousand for the same period in 2020. As mentioned previously, in 2021 we recorded a non-taxable BOLI death benefit of $387 thousand.

Non-interest Expense

Non-interest expense was $5.0 million for the three months ended September 30, 2021, an increase of $850 thousand, or 20.5%, from $4.2 million for the comparable period in 2020. Personnel expenses increased $667 thousand, or 26.4%, 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.

Non-interest expense was $14.5 million for the nine months ended September 30, 2021, an increase of $2.5 million, or 21.2%, from $12.0 million for the comparable period in 2020. The increase was mainly related to planned growth in personnel expenses, primarily attributable to our market expansion.

Income Taxes

For the three and nine months ended September 30, 2021, income tax expense was $759 thousand and $2.1 million, respectively, compared to $513 thousand and $840 thousand for the three and nine months ended September 30, 2020, respectively.

Financial Condition

Assets

As of September 30, 2021, total assets were $684.2 million and grew $48.2 million, or 7.6%, from $636.1 million as of December 31, 2020.

Total loans were $513.2 million as of September 30, 2021, an increase of $90.0 million, or 21.3%, from $423.1 million as of December 31, 2020. We used cash flows from the investment portfolio to partly fund our loan growth. Commercial loans grew $39.6 million and residential mortgages and consumer loans grew $46.5 million. Loans held for sale were $21.9 million as of September 30, 2021 and December 31, 2020.

During 2021, we originated $48.3 million in new PPP loans. As of September 30, 2021, PPP loans outstanding were $31.5 million, an increase of $3.9 million from $27.6 million as of December 31, 2020. We have been successful in receiving the forgiveness payments from the SBA.

Liabilities

Total deposits were $610.9 million as of September 30, 2021, an increase of $45.1 million, or 8.0%, from $565.8 million as of December 31, 2020. Interest-checking accounts, certificates of deposit including brokered deposits, and demand deposits increased $28.2 million, $21.2 million, and $4.9 million, respectively, while savings accounts decreased $9.6 million. Short-term borrowings declined $2.3 million due to the termination of repurchase agreements.

Shareholder’s Equity

Total shareholders’ equity was $57.4 million as of September 30, 2021, an increase of $3.7 million, or 7.0%, from $53.7 million as of December 31, 2020. Tangible book value per share increased $1.06, or 9.8%, from $10.82 as of December 31, 2020, to $11.88 as of September 30, 2021.

During the first quarter of 2021, we announced the adoption of a stock repurchase program, which authorized management to repurchase up to 3% of the Company’s outstanding shares of common stock, with a total cost not to exceed $1.4 million. The 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.

Asset Quality

1^st Colonial's non-performing assets as of September 30, 2021, were $4.0 million and included $3.8 million in non-accrual loans and $125 thousand in other real estate owned (OREO). Non-performing assets were $4.8 million as of December 31, 2020 and were comprised of non-performing loans. During the third quarter non-accrual loans totaling $527 thousand paid off with no principal loss and we recorded a charge-off 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 early 2022.

The ratio of non-performing assets to total assets as of September 30, 2021, was 0.58% compared to 0.75% as of December 31, 2020. As of September 30, 2021, the allowance was $6.4 million, or 1.24% 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 166.2% as of September 30, 2021, compared to 117.3% as of December 31, 2020.

Income Statement and Other Highlights:

Highlights as of September 30, 2021 and 2020 and December 31, 2020 and a comparison of the three and nine months ended September 30, 2021 to the three and nine months ended September 30, 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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