Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. 1ST CONSTITUTION BANCORP (1141807) 10-Q published on May 08, 2019 at 4:40 pm
Reporting Period: Mar 30, 2019
In March 2019, the FASB issued ASU No. 2019-01, “Leases (Topic 842): Codification Improvements.” ASU 2019-01 aligns the new leases guidance with existing guidance for fair value of the underlying asset by lessors that are not manufacturers or dealers, and clarifies an exemption for lessors and lessees from a certain interim disclosure requirement associated with adopting the FASB’s new lease accounting standard. Although this guidance is effective for years beginning after December 15, 2019, however. the Company adopted this guidance along with the adoption of ASU 2018-11, “Leases- Targeted Improvements,” and ASU 2016-02, “Leases.” The adoption of this guidance did have a material impact on the Company's financial statements. See the discussions regarding the adoptions of ASU 2018-11 and ASU 2016-02 below.
In January 2019, the Company granted 10,300 RSUs with a grant date fair value of $19.38. The RSUs will vest pro rata over 3 years subject to achievement of certain established performance metrics. The ultimate number of RSUs earned will depend on the performance measured. RSUs vesting may be more or less than the target award. The award could be in cash or shares of stock.
Interest expense on average interest-bearing liabilities was $2.7 million, with an interest cost of 1.33%, for the first quarter of 2019, compared to $1.4 million, with an interest cost of 0.74%, for the first quarter of 2018. The $1.3 million increase in interest expense on interest-bearing liabilities for the first quarter of 2019 reflected primarily higher market interest rates in the first quarter of 2019 compared to the first quarter of 2018 and an increase of $65.5 million in average interest-bearing liabilities. The increase in average interest-bearing liabilities was due primarily to increases in certificates of deposit and short-term borrowings, partially offset by declines in money market, NOW and savings accounts. As a result of the enactment of the Tax Cuts and Jobs Act in December 2017, a number of the Bank’s municipal customers experienced significant advanced payments in December 2017 for real estate taxes that were due in 2018, which increased municipal deposits by approximately $45.0 million at December 31, 2017. The Bank experienced a net outflow of $40.0 million in municipal NOW and savings deposits from the levels at March 31, 2018, as these funds were expended by the municipalities during the balance of 2018. At March 31, 2019, municipal NOW and savings deposits were approximately $35.0 million lower than at March 31, 2018.
Income tax expense was $1.3 million for the first quarter of 2019, resulting in an effective tax rate of 27.7%, compared to income tax expense of $841,000, which resulted in an effective tax rate of 22.8% for the first quarter of 2018. The $461,000 increase in income tax expense for the first quarter of 2019 was due primarily to the $1.0 million increase in pre-tax income, which resulted in an increase in income tax expense of approximately $300,000 based on a combined federal and state statutory tax rate of 30.0%. In addition, the enactment of legislation by the State of New Jersey in July 2018, which increased the corporate income tax rate to 11.5% from 9% for taxable income of $1.0 million or more effective January 1, 2018, resulted in an increase of approximately $94,000 in income tax expense for the first quarter of 2019.
the warehouse line of credit remains outstanding for a period of less than 30 days, with repayment coming directly from the sale of the loan into the secondary mortgage market. The Bank collects interest and a transaction fee at the time of repayment. The Bank funded $644.0 million of residential mortgages through customers’ warehouse lines of credit during the three months ended March 31, 2019 compared to $783.6 million during the three months ended March 31, 2018.