First Home Bancorp, Inc. Reports Record Earnings for Third Quarter of 2020

First Home Bancorp, Inc. Reports Record Earnings for Third Quarter of 2020

ST. PETERSBURG, Fla.–(BUSINESS WIRE)–
First Home Bancorp, Inc. (OTCQX: FHBI) (“FHBI” or the “Company”), parent company of First Home Bank (“First Home” or the “Bank”) reported record earnings for the third quarter of 2020, driven by mortgage banking income, as well as loan origination fees and net interest income associated with the Paycheck Protection Program (“PPP”). The Company reported net income for the third quarter 2020 of $5.25 million, or $2.20 per basic common share, compared to net income of $2.35 million, or $0.95 per basic common per share in the second quarter 2020, and $1.28 million, or $0.60 per basic common share in the third quarter of 2019. Year-to-date net income through the September 30, 2020 was $7.10 million, an increase of $3.78 million or 114% over year-to-date net income through September 30, 2019 of $3.32 million. The third quarter’s earnings contributed to an increase in tangible book value to $21.85 per basic common share.

FHBI Chief Executive Officer Anthony N. Leo stated: “Our efforts over the prior three years to diversify revenue through the expansion of our mortgage banking operations were key to the Company’s record performance in the third quarter of 2020. In addition, as a leading nationwide SBA lender, we were well positioned to be among the region’s foremost producers of PPP loans, driving revenue through origination fees and net interest income. At the same time, we strengthened our balance sheet substantially in the third quarter with the provision of $7 million to the allowance for loan and lease losses should we experience deterioration in credit quality resulting from adverse economic conditions.”

Net Income and Performance Ratios

Key components of the Company’s net income in the third quarter of 2020 include:

  • The Bank’s Residential Mortgage Division produced a record volume of loan originations, with production of $598 million during the third quarter of 2020, reaching $1.28 billion in production year-to-date.
  • PPP net loan origination fee income of $4.30 million was recognized in the third quarter of 2020, compared to $3.87 million recognized in the second quarter of 2020. There remains $19.53 million of PPP net loan origination fees on the balance sheet as of September 30, 2020, which will be recognized over the remaining estimated lives of the loans.
  • Interest income on PPP loans in the third quarter of 2020 was $2.27 million compared to $1.17 million in the second quarter 2020. PPP loans have been funded almost entirely by the Federal Reserve’s PPP Liquidity Facility (“PPPLF”) at a rate of 35 bps.
  • The Company’s record earnings were achieved while recognizing no gain on sale of SBA guaranteed loans. In consideration of strong revenue from other sources, no SBA guaranteed loans were sold in the third quarter, advancing the Company’s strategy of increasing recurring revenue through holding government guaranteed loans.
  • The Company recorded provision for loan losses of $7.00 million during the quarter, compared to $3.00 million in the second quarter of 2020 and $2.30 million in the same quarter of 2019.

The Company’s return on average common equity equaled 43.23% for the quarter, bringing year-to-date return on average common equity to 19.73%. Return on average assets for the quarter equaled 1.44%, bringing year-to-date return on average assets to 0.87%. The Company’s return on assets ratios were impacted by $880 million in net PPP loans on the Company’s balance sheet, thereby increasing average assets for the period significantly above normalized levels.

Balance Sheet Highlights

Total assets increased by $31.32 million or 2.13% during the third quarter of 2020 to $1.50 billion, mainly due to increases in residential loans held for sale and PPP loans, offset partially by a decline in cash as the Company utilized on balance sheet liquidity and the PPPLF to fund PPP loans. Total assets increased $994.05 million or 195.89% from the third quarter of 2019, mainly due to the addition of $879.51 PPP loans, net of origination fees, during the second and third quarters of 2020, as well as increases in residential loans held for sale, conventional loans, and SBA loans. Further balance sheet details for the third quarter of 2020 are as follows:

  • Gross loans, excluding loans held for sale and PPP loans, increased by $30.13 million or 8.44% during the third quarter of 2020 to $387.24 million due to an increase in conventional community bank loans, as well as the resumption in mid-July of SBA 7(a) lending. Traditional SBA production was largely halted during the second quarter of 2020 as a result of the COVID-19 Pandemic and related focus on PPP loans.
  • PPP loans, net of deferred origination fees, increased by $69.37 million or 8.56% in the third quarter of 2020 to $879.51 million.
  • Deposits decreased by $66.10 million or 11.47% during the third quarter of 2020 to $510.14 million, with the majority of the decrease coming from a decline in time deposits of $77.04 million, offset by a net increase in other types of deposits, mainly money market accounts.
  • Deposits increased $97.77 million, or 23.71% over the third quarter of 2019, with time deposits declining by $82.78 million year over year, offset by increases in transaction accounts and money market and savings accounts.

Asset Quality

Over the past five years, the Company’s loan losses have been incurred primarily in its SBA unguaranteed loan portfolio, particularly loans originated under the SBA 7(a) Small Loan Program. The Small Loan Program represents loans of $350,000 or less and carry an SBA guaranty of 75% to 85% of the loan, depending on the original principal balance. The default rate on loans originated in the SBA 7(a) Small Loan Program is significantly higher than the Bank’s other SBA 7(a) loans, conventional commercial loans, or residential mortgage loans.

Net charge-offs for the third quarter 2020 were $967 thousand, a decrease of $593 thousand from $1.56 million for the second quarter 2020. Net charge-offs as a percentage of average loans, excluding PPP loans, were 0.26% for the third quarter 2020, a decrease from 0.45% in the second quarter. Non-performing assets to total assets were 0.25% as of September 30, 2020, a slight increase from 0.23% as of June 30, 2020, and a significant decrease from 0.91% as of September 30, 2019. Since the majority of the Company’s loan portfolio consists of SBA loans, most of which received principal and interest payments under Section 1112 of the CARES Act, asset quality trends may appear more favorable than they otherwise would without the CARES Act support.

As of September 30, 2020, a total of 37 loans with principal balances totaling $3.09 million were under payment deferral. Of these, 31 are SBA loans totaling $1.99 million in outstanding unguaranteed balance. We expect the level of SBA loans on deferral to increase with the expiration of the Section 1112 payment support afforded under the CARES Act.

Although the Company’s asset quality trends indicate minimal stress on the portfolio, management believes it is prudent to be proactive in increasing the allowance for loan losses using qualitative measures. The ratio of the allowance for loan losses to total loans, excluding SBA guaranteed loans, residential loans held for sale, and loans whereby the Fair Value Option was elected, was 6.86% as of September 30, 2020, an increase from 4.98% as of June 30, 2020.

Capital Strength

The Bank’s Tier 1 leverage ratio increased to 10.85% as of September 30, 2020. The Tier 1 leverage ratio temporarily dropped to 6.77% at June 30, 2020 due to excess short-term cash held to ensure funding for PPP loans, as well as a timing difference between the funding of PPP loans as their pledge to the PPPLF. The CET 1 and Tier 1 capital ratio to risk-weighted assets increased to 15.33% as of September 30, 2020 from 15.14% as of June 30, 2020, and the total capital to risk-weighted assets ratio increased to 16.75% as of September 30, 2020 from 16.55% as of June 30, 2020.

In addition, the Company raised approximately $3.8 million of 8% Series B Cumulative Convertible Preferred Stock in the third quarter, of which $2.5 million was downstreamed to the Bank subsidiary to provide additional capital strength.

About the Company

First Home Bancorp, Inc. is the parent company of First Home Bank, a Florida state-chartered banking institution and Federal Reserve member. The Company is headquartered in St. Petersburg, Florida with 6 full-service banking centers in the Tampa Bay area as of September 30, 2020. In addition to traditional community banking services, the Company specializes in providing lending services to small businesses nationwide guaranteed by the Small Business Administration (“SBA”). The Company also derives a significant portion of its earnings and loan production from a nationwide residential mortgage lending division with 28 residential loan production offices across the country.

This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “project,” “is confident that” and similar expressions are intended to identify these forward-looking statements. These forward-looking statements involve risk and uncertainty and a variety of factors could cause our actual results and experience to differ materially from the anticipated results or other expectations expressed in these forward-looking statements. First Home Bancorp, Inc. does not have a policy of updating or revising forward-looking statements except as otherwise required by law, and silence by management over time should not be construed to mean that actual events are occurring as estimated in such forward-looking statements.

First Home Bancorp, Inc.
Consolidated Statements of Income (Unaudited)
 
QUARTERLY YEAR-TO-DATE
9/30/2020 6/30/2020 9/30/2019 9/30/2020 9/30/2019
Interest Income:
Loans, including fees, except for PPP

$

5,979,901

 

$

5,206,678

 

$

6,614,969

 

 

$

17,630,693

 

$

18,167,062

 

PPP loan interest income

 

2,267,589

 

 

1,173,413

 

 

 

 

 

3,441,002

 

 

 

PPP origination fee income

 

4,302,284

 

 

3,872,901

 

 

 

 

 

8,175,185

 

 

 

Interest-bearing deposits in banks and other

 

71,590

 

 

137,756

 

 

304,871

 

 

 

571,088

 

 

890,813

 

Total interest income

 

12,621,364

 

 

10,390,748

 

 

6,919,840

 

 

 

29,817,968

 

 

19,057,875

 

 

 

 

 

 

 

 

 

 

Interest Expense:

 

 

 

 

 

 

 

 

 

Deposits

 

1,539,272

 

 

2,359,675

 

 

1,918,602

 

 

 

6,110,751

 

 

5,144,421

 

PPP Liquidity Facility (PPPLF)

 

793,834

 

 

391,443

 

 

 

 

 

1,185,277

 

 

 

Other

 

204,794

 

 

201,908

 

 

242,070

 

 

 

642,115

 

 

705,933

 

Total interest expense

 

2,537,900

 

 

2,953,026

 

 

2,160,672

 

 

 

7,938,143

 

 

5,850,354

 

 

 

 

 

 

 

 

 

 

Net interest income before provision for loan losses

 

10,083,464

 

 

7,437,722

 

 

4,759,168

 

 

 

21,879,825

 

 

13,207,521

 

Provision for loan losses

 

7,000,000

 

 

3,000,000

 

 

2,300,000

 

 

 

11,900,000

 

 

7,669,230

 

Net interest income after provision for loan losses

 

3,083,464

 

 

4,437,722

 

 

2,459,168

 

 

 

9,979,825

 

 

5,538,291

 

 

 

 

 

 

 

 

 

 

Noninterest Income:

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

251,399

 

 

196,663

 

 

253,167

 

 

 

710,040

 

 

743,792

 

Bank Owned Life Insurance income

 

81,354

 

 

17,559

 

 

 

 

 

98,913

 

 

 

Residential loan fee income

 

31,226,113

 

 

20,261,044

 

 

9,662,120

 

 

 

61,888,150

 

 

21,596,571

 

Gain on sale of SBA loans

 

 

 

64,151

 

 

3,630,995

 

 

 

1,276,319

 

 

11,621,073

 

SBA loan servicing right gain

 

 

 

 

 

1,669,708

 

 

 

530,000

 

 

5,484,838

 

Loss on sale of unguaranteed loan amounts

 

 

 

 

 

 

 

 

 

 

(216,222

)

SBA servicing income, net

 

565,316

 

 

727,796

 

 

438,743

 

 

 

1,752,909

 

 

972,517

 

Other SBA noninterest income

 

67,423

 

 

98,917

 

 

(307,546

)

 

 

61,340

 

 

(929,263

)

Total noninterest income

 

32,191,605

 

 

21,366,130

 

 

15,347,187

 

 

 

66,317,671

 

 

39,273,306

 

 

 

 

 

 

 

 

 

 

Noninterest Expense:

 

 

 

 

 

 

 

 

 

Salaries and benefits

 

8,875,345

 

 

8,315,857

 

 

6,419,410

 

 

 

24,496,663

 

 

18,437,260

 

Commissions

 

9,725,240

 

 

6,004,209

 

 

3,445,661

 

 

 

19,410,670

 

 

6,029,884

 

Bonus and incentives

 

2,193,604

 

 

2,006,157

 

 

749,753

 

 

 

4,476,297

 

 

2,258,314

 

Occupancy and equipment expense

 

1,182,547

 

 

1,099,281

 

 

840,870

 

 

 

3,314,363

 

 

2,434,536

 

Data processing

 

1,163,263

 

 

879,836

 

 

416,822

 

 

 

3,086,228

 

 

1,192,772

 

Professional services

 

877,920

 

 

875,175

 

 

828,181

 

 

 

2,342,956

 

 

1,534,998

 

Mortgage lead generation

 

379,665

 

 

397,563

 

 

415,295

 

 

 

1,241,440

 

 

1,065,525

 

Marketing and business development

 

337,251

 

 

354,508

 

 

569,557

 

 

 

1,008,149

 

 

1,273,817

 

Mortgage banking expense

 

1,620,411

 

 

1,174,734

 

 

729,692

 

 

 

3,645,420

 

 

1,648,163

 

Regulatory assessments

 

144,494

 

 

172,992

 

 

64,767

 

 

 

417,986

 

 

326,717

 

ATM and interchange expense

 

42,699

 

 

87,510

 

 

63,400

 

 

 

193,941

 

 

205,964

 

Telecommunications expense

 

135,504

 

 

143,180

 

 

167,907

 

 

 

427,091

 

 

487,609

 

Employee recruiting and development

 

244,607

 

 

313,964

 

 

353,854

 

 

 

1,134,800

 

 

1,093,724

 

Loan origination and collection

 

907,667

 

 

430,560

 

 

450,664

 

 

 

1,771,090

 

 

1,187,952

 

Other expenses

 

377,379

 

 

375,333

 

 

326,936

 

 

 

1,027,871

 

 

947,681

 

Total noninterest expense

 

28,207,596

 

 

22,630,859

 

 

15,842,769

 

 

 

67,994,965

 

 

40,124,916

 

 

 

 

 

 

 

 

 

 

Income (loss) before taxes

 

7,067,473

 

 

3,172,993

 

 

1,963,586

 

 

 

8,302,531

 

 

4,686,681

 

Income tax expense (benefit)

 

1,814,512

 

 

827,926

 

 

550,726

 

 

 

1,205,535

 

 

1,369,774

 

Net Income (Loss)

$

5,252,961

 

$

2,345,067

 

$

1,412,860

 

 

$

7,096,996

 

$

3,316,907

 

 

 

 

 

 

 

 

 

 

Preferred dividends

 

201,390

 

 

177,638

 

 

136,787

 

 

 

556,666

 

 

284,266

 

Net Income Available to Common Shareholders

$

5,051,571

 

$

2,167,429

 

$

1,276,073

 

 

$

7,219,000

 

$

3,032,641

 

First Home Bancorp, Inc.
Consolidated Balance Sheets (Unaudited)
 
 
ASSETS 9/30/2020 6/30/2020 9/30/2019
Cash and due from banks

$

2,707,048

 

$

2,605,669

 

$

5,945,298

 

Interest-bearing deposits in banks

 

31,769,546

 

 

154,779,058

 

 

97,258,900

 

Cash and cash equivalents

 

34,476,594

 

 

157,384,727

 

 

103,204,198

 

Certificates of deposit

 

2,381,000

 

 

2,381,000

 

 

2,381,000

 

Securities HTM and restricted equity securities

 

2,750,744

 

 

2,745,001

 

 

3,125,893

 

Residential loans held for sale

 

149,406,587

 

 

95,784,010

 

 

63,604,611

 

SBA loans sold, not yet settled

 

 

 

 

 

1,482,356

 

PPP loans, net of deferred fees and costs

 

879,509,575

 

 

810,136,858

 

 

 

Community bank loans

 

138,052,872

 

 

125,866,306

 

 

115,558,888

 

SBA loans

 

249,190,542

 

 

231,249,828

 

 

192,287,107

 

Total loans held for investment

 

1,266,752,989

 

 

1,167,252,992

 

 

307,845,995

 

Allowance for loan losses

 

(18,912,627

)

 

(11,440,799

)

 

(10,622,295

)

Loans, net

 

1,247,840,362

 

 

1,154,372,794

 

 

297,223,700

 

Accrued interest receivable

 

5,262,324

 

 

2,937,422

 

 

2,105,267

 

Premises and equipment, net

 

16,881,153

 

 

16,655,990

 

 

15,386,283

 

Loan servicing assets

 

9,169,119

 

 

10,033,962

 

 

11,103,207

 

Bank Owned Life Insurance

 

12,098,913

 

 

12,017,559

 

 

 

Other assets

 

21,249,043

 

 

15,886,449

 

 

7,848,797

 

Total assets

$

1,501,515,839

 

$

1,470,198,914

 

$

507,465,312

 

 
 
LIABILITIES
Noninterest-bearing transaction accounts

$

70,115,349

 

$

73,651,915

 

$

53,755,685

 

Interest-bearing transaction accounts

 

112,901,869

 

 

119,661,033

 

 

50,517,618

 

Savings and money market deposits

 

247,707,500

 

 

226,480,891

 

 

145,894,641

 

Time deposits

 

79,416,573

 

 

156,451,708

 

 

162,201,379

 

Total deposits

 

510,141,291

 

 

576,245,547

 

 

412,369,323

 

 
Federal Home Loan Bank advances

 

10,000,000

 

 

10,000,000

 

 

25,000,000

 

Subordinated debentures

 

6,942,980

 

 

6,939,848

 

 

7,412,172

 

Notes payable

 

3,868,229

 

 

3,981,993

 

 

4,656,722

 

PPP Liquidity Facility

 

889,769,683

 

 

803,171,434

 

 

 

Accrued expenses and other liabilities

 

18,639,755

 

 

16,553,309

 

 

10,290,355

 

Total liabilities

 

1,439,361,938

 

 

1,416,892,131

 

 

459,728,572

 

 
STOCKHOLDERS’ EQUITY
Preferred stock, series A

 

7,661,000

 

 

7,661,000

 

 

7,661,000

 

Preferred stock, series B

 

3,723,101

 

 

 

 

 

Common stock and additional paid-in capital

 

42,495,534

 

 

42,199,056

 

 

38,554,365

 

Deferred compensation – restricted stock

 

(46,874

)

 

(52,789

)

 

(175,258

)

Retained earnings

 

8,321,140

 

 

3,499,516

 

 

1,696,633

 

Total stockholders’ equity

 

62,153,901

 

 

53,306,783

 

 

47,736,740

 

 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

1,501,515,839

 

$

1,470,198,914

 

$

507,465,312

 

 

Anthony N. Leo

Chief Executive Officer

727.399.5678

Jeffrey M. Hunt

Chief Strategy Officer

727.399.5687

KEYWORDS: United States North America Florida

INDUSTRY KEYWORDS: Banking Professional Services Finance

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