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Increasing Non-Interest Expenses Hurt 1st Constitution

Once these most recent quarterly results are finalized, they will be run through Ratings' model and our ratings will be adjusted accordingly. To keep up to date on all of our ratings, visit Ratings Screener.

On May 1, 2009, 1st Constitution Bancorp (FCCY - Get Report) reported that its Q1 FY09 earnings plunged 64.1%, hurt by an increase in non-interest expenses and higher provision for loan losses. Net income declined to $288,000 or $0.07 per share from $802,000 or $0.19 per share in Q1 FY08. The latest quarterly earnings missed the consensus estimate of $0.10 per share.

Total interest income during Q1 FY09 grew 3.4% to $7.41 million from $7.17 million in the prior-year quarter, while interest expense inched up 1.6% to $3.21 million from $3.16 million a year ago. As a result, net interest income rose 4.9% to $4.20 million from $4.00 million in the same quarter of the last year. Subsequently, net interest margin (on a tax-equivalent basis) contracted 58 basis points to 3.30% from 3.88% in the same quarter of the last year. On the flip side, non-interest income increased 7.8% to $847,000 from $786,000, while non-interest expense swelled 17.8% to $4.02 million from $3.41 million a year ago. Meanwhile, income before income tax shrunk 53.4% to $564,000 million from $1.21 million in the year-ago quarter.

The bank's provision for loan losses more than doubled to $463,000 from $165,000 a year ago. Furthermore, FCCY's efficiency ratio deteriorated, as it rose to 79.7% from 71.3%, while net charge-offs were $18,000 as of March 31, 2009 compared to zero at the end of Q1 FY08, mainly led by an increase in provision for loan losses. Moreover, non-performing loans as a percentage of total loans advanced to 1.18% from 0.95%, while allowance for loan losses to total loans came down marginally to 1.01% from 1.02%. Finally, as of March 31, 2008, total loans grew 17.9% to $422.37 million, while total deposits climbed 25.3% to $474.65 million. Additionally, the bank paid a 5.0% stock dividend to the common shareholders.

The bank continued to be well-capitalized, as its total risk-based capital and Tier I capital were at 16.38% and 15.49%, respectively, at March 31, 2009.

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