Shares of Auburn-based Community 1st Bancorp rose 10.5 percent Tuesday, as the bank holding company announced it sold $3 million in notes for further growth.
Community 1st Bancorp (OTC: CFBN) is the holding company of Community 1st Bank, which is based in Auburn and has branches in Roseville and Sacramento.
The $3 million was raised through the sale of 10-year notes to investors.
The purpose of the transaction is to give the bank more capital to make more loans without issuing more shares and diluting the equity of existing shareholders, said James Kim, CEO of the bank. Under regulatory capital requirements, the $3 million in new capital will allow Community 1st to make about $30 million more in loans, according to Kim.
The bank did the same type of transaction at the beginning of 2016, when it raised $5 million in trust subordinated notes.
“We just grew a lot faster in 2016 that we thought,” Kim said. “We used up that $5 million in capital, so we did it again.”
He said the local economy is growing, and the bank’s customers are growing.
“Businesses are taking advantage of growth, and as their bankers, we are taking that next step with them,” he said. Last June, the bank expanded its loan production office in Sacramento into a full-service branch. Much of the bank’s growth has come from Sacramento, Kim said.
Atlanta-based FIG Partners advised Community 1st in the transaction.
This is the second time in two weeks that a local bank has raised more capital for growth. Sacramento’s Five Star Bank last week completed a $12.5 million capital raise to support growth.
Through the first three quarters of 2016, Community 1st earned $902,000 on assets of $351 million, compared to earning $950,000 on assets of $243 million in the same period in 2015. That period saw the bank’s assets grow 44 percent year over year. The bank had loans of $186 million on its books at Sept. 30, 2016, up 22 percent from loans of $152 million at Sept. 30, 2015. Kim said the bank also had strong loan production in the fourth quarter of 2016.
On Tuesday, Community 1st shares rose 50 cents to $5.25 after the bank announced the new financing.