FRBA - First Bank Reports First Quarter 2021 Net Income of $9.7 Million

Record Quarterly Net Income and EPS

For the First Quarter 2021: Strong Revenue and Earnings Growth, Stable and Solid Asset Quality Metrics Continued Effective Expense Management with an Improved Efficiency Ratio

HAMILTON, N.J., April 26, 2021 (GLOBE NEWSWIRE) -- First Bank (Nasdaq Global Market: FRBA) today announced results for the first quarter of 2021. Net income for first quarter 2021 was $9.7 million, or $0.49 per diluted share, compared to $3.2 million, or $0.16 per diluted share, for the first quarter of 2020. Return on average assets, return on average equity and return on average tangible equity ⁱ for the first quarter of 2021 were 1.66%, 16.21% and 17.52%, respectively, compared to first quarter 2020 return on average assets, return on average equity and return on average tangible equity of 0.63%, 5.69% and 6.19%, respectively.

First Quarter 2021 Performance Highlights:

• Total net revenue (net interest income plus non-interest income) of $22.3 million for the first quarter of 2021 grew $5.3 million, or 30.8%, compared to the prior year quarter.
• Total loans were $2.02 billion at March 31, 2021, an increase of $263.8 million, or 15.0%, compared with March 31, 2020, and a decrease of $25.4 million, or 1.2%, compared to December 31, 2020.
• Total deposits of $1.97 billion at March 31, 2021 increased $244.9 million, or 14.2%, from March 31, 2020, and increased $66.9 million, or 3.5%, from December 31, 2020. Non-interest-bearing deposits at March 31, 2021 of $500.0 million, increased $208.1 million, or 71.3%, from March 31, 2020, and increased $75.9 million, or 17.9%, from December 31, 2020.
• Continued effective non-interest expense management was reflected in the first quarter 2021 efficiency ratio ⁱⁱ of 47.66%, compared to 58.03% for first quarter 2020 and 52.54% for the fourth quarter of 2020.
• Asset quality metrics remained solid and stable during the quarter, despite the ongoing economic uncertainty associated with the COVID-19 pandemic, with net recoveries of $5,000 for first quarter 2021 and nonperforming loans of $10.7 million at March 31, 2021, or 0.53% of total loans at quarter-end.
• First quarter 2021 tax equivalent net interest margin of 3.60% increased by 30 basis points compared to first quarter 2020 and 4 basis points compared to the fourth quarter of 2020.

“The effort and focus of our team produced strong results for first quarter 2021, with record quarterly earnings of nearly $9.7 million, along with best ever return on assets and return on tangible common equity,” said Patrick L. Ryan, President and Chief Executive Officer. “Total net revenue was up more than 30% compared to first quarter 2020, reflecting strong growth in net interest income and non-interest income. While we had modest growth in interest and dividend income as a result of downward pressure on interest rates for interest earning assets, we were able to successfully manage a significant reduction in interest expense compared to first quarter 2020, resulting in a 30-basis point improvement in our net interest margin year-over-year.”

“We continued to actively participate in the Paycheck Protection Program (PPP) to support local businesses. In addition to supporting existing customers, we found PPP to be an effective platform for attracting new customers and introducing them to the quality and strength of our relationship banking model. New PPP loans originated during first quarter 2021 totaled more than $100 million, and our ending balance was $193.9 million at March 31, 2021. While first quarter year-over-year loan growth was a very solid 15%, loan balances declined by $25.4 million, or 1.2%, compared to December 31, 2020, primarily a result of paydowns on loans in our commercial real estate investor portfolio. While core loan balances were down on a linked-quarter basis, we have a strong backlog in our pipeline and we expect to experience healthy loan growth over the next few quarters. As you may recall, Q4 2020 saw stronger than expected loan growth, and we see the modest decline in Q1 as largely a timing issue, not a sign of reduced demand in our markets.”

“Our focus on gathering lower cost deposits remains an operating strength, as illustrated by our ability to grow non-interest bearing deposits by $75.9 million during the first quarter and $208.1 million year-over-year. In addition, we have effectively managed the pricing of our interest bearing deposits. During the last 12 months, our average rate for these deposits dropped by 105 basis points to 0.51%, with most of the reduction coming in the form of lower rates for time and money market deposits. Better access to reasonably priced deposits has been another positive offshoot of our decision to actively participate in the PPP. With our continued success attracting new deposits, our balance sheet is highly liquid, enabling us to fund organic growth activities as appropriate.”

“During the first quarter we consolidated our Mercerville and Hamilton Square branches into other nearby locations and we also reduced leased corporate office space. While this action contributed to higher occupancy and equipment expense during the first quarter, it will benefit our non-interest expense line moving forward.”

“We’re pleased that despite the many challenges our customers have faced because of the COVID-19 pandemic, asset quality has remained solid. Although it’s premature to declare the effects of the pandemic over, we’re excited about the opportunities for a great 2021 and beyond. Obviously, we got off to a great start this quarter.”

Income Statement

Net interest income for first quarter 2021 was $20.0 million, an increase of $4.2 million, or 26.3%, compared to $15.9 million in the first quarter of 2020. This increase was primarily the result of a $3.5 million decrease in total interest expense compared to first quarter 2020, coupled with an increase of $637,000 in interest and dividend income. The decrease in total interest expense for first quarter 2021 was driven by a lower cost of interest bearing deposits across all interest bearing deposit types in a significantly lower interest rate environment. Primarily contributing to the decline in interest expense was a $151.8 million decrease in average time deposits combined with a 123-basis-point reduction in the interest rate paid on these deposits, along with a 99-basis point decline in the rate paid on money market deposits. First quarter 2021 interest income on loans increased by $994,000, compared to first quarter 2020, reflecting an increase in the average loan balance of $294.5 million, partially offset by a 47-basis point decline in the average yield. The yield on the loan portfolio during the first quarter of 2021 was negatively impacted by a lower interest rate environment and lower rates paid on Paycheck Protection Program (“PPP”) loans, partially offset by a comparatively higher amount of prepayment fees received on the early pay-off of loans and the amortization of deferred PPP loan fees.

The first quarter 2021 tax equivalent net interest margin of 3.60% increased by 30 basis points compared to 3.30% for the prior-year quarter and increased by 4 basis points from the linked fourth quarter 2021.

The increase in the 2021 first quarter margin compared to the 2020 first quarter was primarily the result of lower average rates paid for interest-bearing liabilities, comprised primarily of time and money market deposits, in addition to a significant decline in the average balance of higher-cost time deposits. The increase in the net interest margin compared to fourth quarter 2020 was a result of a $19.8 million increase in average loan balances, along with a 13-basis point decline in the cost of interest-bearing liabilities.

First Bank reported a credit to the provision for loan losses of $1.1 million in the first quarter of 2021, compared to a loan loss provision of $2.9 million in the first quarter of 2020, and a loan loss provision of $1.6 million during the fourth quarter of 2020. The provision credit for the quarter ended March 31, 2021 was reflective of continued stable and solid asset quality metrics, along with elevated loan prepayment activity which occurred during the quarter. The elevated level of loan prepayment activity contributed to the decline in the Bank’s loan portfolio of $82.1 million, excluding PPP loan activity, during the first quarter of 2021. As loans declined in the quarter, so did the levels of reserves, but it should be noted that the overall level of reserves to total loans remained relatively stable.

First quarter 2021 non-interest income was $2.3 million, an increase of $1.1 million compared to $1.2 million in first quarter 2020. The increase was primarily the result of a $436,000 increase in gains on sale of loans, primarily U.S. Small Business Administration (“SBA”) loans, a $415,000 increase in loan fees (primarily loan swap fees), as well as a $189,000 increase in gains on recovery of acquired loans. The increase in SBA loan fees was directly related to a strategic initiative to increase SBA lending through the creation of a centralized SBA Lending Team.

Non-interest expense for first quarter 2021 totaled $10.7 million, an increase of $735,000 compared to $9.9 million for the prior-year quarter and a decrease of $402,000 compared to the fourth quarter of 2020. The increase in non-interest expense, compared to first quarter 2020, was primarily a result of increased occupancy and equipment fees, and salaries and employee benefits. Higher occupancy and equipment costs were impacted by a $312,000 write off of leasehold improvements remaining from the administrative office space which was closed during the first quarter of 2021. Salaries and employee benefits also contributed to the rise in non-interest expense, reflecting higher employee benefit costs and merit-based salary and bonus increases.

The Bank’s efficiency ratio for the first quarter of 2021 was 47.66%, significantly improved in comparison to 58.03% in the first quarter of 2020 and 52.54% for the fourth quarter of 2020. The improvement in the efficiency ratio is due to a combination of increases in net interest income and non-interest income and effectively managed increases in non-interest expense.

Income tax expense for the three months ended March 31, 2021 was $3.1 million with an effective tax rate of 24.2%, compared to $1.0 million and an effective tax rate of 23.7% for the first quarter of 2020 and $2.2 million with an effective tax rate of 25.8% for the fourth quarter of 2020.

Balance Sheet

Total assets at March 31, 2021 were $2.41 billion, an increase of $313.1 million, or 15.0%, compared to $2.09 billion at March 31, 2020, primarily due to the origination of PPP loans and commercial real estate loan growth. Total assets grew $59.3 million, or 2.5%, from year end 2020 due primarily to an increase in interest bearing deposits with banks. Total loans were $2.02 billion at March 31, 2021, an increase of $263.8 million, or 15.0%, compared to $1.76 billion at March 31, 2020, and a decrease of $25.4 million, or 1.2%, from $2.05 billion at end of the linked fourth quarter of 2020. First Bank originated $101.3 million in new PPP loans during the first quarter, while $44.6 million in PPP loans were forgiven. At March 31, 2021 PPP loans outstanding totaled $193.9 million. Early commercial real estate loan payoff activity, coupled with normal loan principal amortization, reduced non-PPP loan balances by approximately $82.1 million in the first quarter of 2021.

Total deposits were $1.97 billion at March 31, 2021, an increase of $66.9 million, or 3.5%, compared to $1.90 billion at December 31, 2020. Non-interest-bearing deposits totaled $500.0 million at March 31, 2021, an increase of $75.9 million, or 17.9%, from December 31, 2020, primarily a result of the Bank’s participation in the PPP and continued growth from commercial banking relationships. Borrowings at March 31, 2021 were $141.6 million, a decrease of $19.5 million, or 12.1%, compared to year end 2020. During the first quarter of 2021 we paid off PPP Liquidity Facility (“PPPLF”) borrowings of $15.3 million with the remaining reduction in borrowings due to the payoff of certain FHLB advances. At March 31, 2021 we had no borrowings from the PPPLF outstanding. Projected liquidity is expected to support commercial loan growth over the next several months. Compared to the first quarter of 2020, total deposits grew $244.9 million, or 14.2%.

Stockholders’ equity was $246.0 million at March 31, 2021, compared to $238.1 million at December 31, 2020. The increase in stockholders’ equity of $7.9 million was primarily due to net income of $9.7 million, partially offset by shares purchased under First Bank’s stock repurchase program of $1.0 million and cash dividends paid of $588,000 during the first quarter.

Asset Quality and Capital Ratios

During the first quarter 2021 First Bank realized $5,000 in net recoveries, compared to net charge-offs of $699,000 for first quarter 2020 and net charge-offs of $465,000 for the fourth quarter of 2020. Net recoveries as an annualized percentage of average loans were 0.00% in first quarter 2021 compared to net charge-offs as an annualized percentage of average loans of 0.16% for first quarter 2020 and 0.09% for the linked fourth quarter 2020. Nonperforming loans as a percentage of total loans at March 31, 2021 were 0.53%, compared with 0.79% at March 31, 2020 and 0.50% at December 31, 2020. The allowance for loan losses to nonperforming loans was 214.74% at March 31, 2021, compared with 140.99% at March 31, 2020 and 234.26% at December 31, 2020. The allowance for loan losses to total loans (excluding PPP loans) was 1.24% at 3/31/21. The number increases to 1.59% if you add back purchase accounting credit marks on acquired loans.

As of March 31, 2021, the Bank exceeded all regulatory capital requirements to be considered well capitalized, with a Tier 1 Leverage ratio of 9.67%, a Tier 1 Risk-Based capital ratio of 10.98%, a Common Equity Tier 1 Capital ratio of 10.98%, and a Total Risk-Based capital ratio of 13.58%.

COVID-19 Response

First Bank participated in the PPP, established by the Coronavirus Aid, Relief, and Economic Securities Act (CARES Act), during 2020 and the first quarter of 2021. The PPP is a specialized low-interest loan program funded by the U.S. Treasury Department and administered by the SBA. The PPP provides borrower guarantees for lenders, as well as loan forgiveness incentives for borrowers that utilize the loan proceeds to cover compensation-related business operating costs. As of March 31, 2021, First Bank had 1,200 PPP loans with a balance of $193.9 million. During the first quarter of 2021, First Bank originated 645 new PPP loans totaling $101.3 million and PPP loans totaling $44.6 million were forgiven. During the first quarter of 2021, the Bank realized $1.6 million in fee income on these loans as any deferred fees remaining on the forgiven loans were accelerated. As of March 31, 2021, the Bank had $4.8 million in remaining unamortized fees associated with these loans.

First Bank continues to monitor and analyze its COVID-19 related financial hardship payment deferrals (COVID-19 deferrals) based on asset class and borrower type. As of March 31, 2021, the Bank’s population of COVID-19 deferrals was $22.1 million, or 1.1% of total loans, down from $35.9 million at December 31, 2020, or 1.8% of total loans.

Cash Dividend Declared

On April 20, 2021, the Board of Directors declared a quarterly cash dividend of $0.03 per share to common stockholders of record at the close of business on May 7, 2021, payable on May 21, 2021.

Conference Call

First Bank will host an earnings conference call on Tuesday, April 27, 2021, at 9:00 a.m. Eastern Time. The direct dial toll free number for the call is 844-825-9784. For those unable to participate in the call, a replay will be available by dialing 877-344-7529 (access code 10154313) from one hour after the end of the conference call until July 28, 2021. Replay information will also be available on our website at www.firstbanknj.com under the “About Us” tab. Click on “Investor Relations” to access the replay information for the conference call.

About First Bank

First Bank is a New Jersey state-chartered bank with 16 full-service branches in Cinnaminson, Cranbury, Delanco, Denville, Ewing, Flemington, Hamilton, Lawrence, Pennington, Randolph, Somerset and Williamstown, New Jersey; and Doylestown, Trevose, Warminster and West Chester, Pennsylvania. With $2.4 billion in assets as of March 31, 2021, First Bank offers a full range of deposit and loan products to individuals and businesses throughout the New York City to Philadelphia corridor. First Bank's common stock is listed on the Nasdaq Global Market under the symbol “FRBA.”

Forward Looking Statements

This press release contains certain forward-looking statements, either express or implied, within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements include information regarding First Bank’s future financial performance, business and growth strategy, projected plans and objectives, and related transactions, integration of acquired businesses, ability to recognize anticipated operational efficiencies, and other projections based on macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact economic trends, and any such variations may be material.  Such forward-looking statements are based on various facts and derived utilizing important assumptions, current expectations, estimates and projections about First Bank, any of which may change over time and some of which may be beyond First Bank’s control. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could” are generally forward-looking in nature and not historical facts, although not all forward-looking statements include the foregoing. Further, certain factors that could affect our future results and cause actual results to differ materially from those expressed in the forward-looking statements include, but are not limited to: whether First Bank can: successfully implement its growth strategy, including identifying acquisition targets and consummating suitable acquisitions; continue to sustain its internal growth rate; provide competitive products and services that appeal to its customers and target markets; difficult market conditions and unfavorable economic trends in the United States generally, and particularly in the market areas in which First Bank operates and in which its loans are concentrated, including the effects of declines in housing market values; the impact of disease pandemics, including COVID-19, on First Bank, its operations and its customers and employees; an increase in unemployment levels and slowdowns in economic growth; First Bank's level of nonperforming assets and the costs associated with resolving any problem loans including litigation and other costs; changes in market interest rates may increase funding costs and reduce earning asset yields thus reducing margin; the impact of changes in interest rates and the credit quality and strength of underlying collateral and the effect of such changes on the market value of First Bank's investment securities portfolio; the extensive federal and state regulation, supervision and examination governing almost every aspect of First Bank's operations including changes in regulations affecting financial institutions, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations being issued in accordance with this statute and potential expenses associated with complying with such regulations; uncertainties in tax estimates and valuations, including due to changes in state and federal tax law; First Bank's ability to comply with applicable capital and liquidity requirements, including First Bank’s ability to generate liquidity internally or raise capital on favorable terms, including continued access to the debt and equity capital markets; possible changes in trade, monetary and fiscal policies, laws and regulations and other activities of governments, agencies, and similar organizations. For discussion of these and other risks that may cause actual results to differ from expectations, please refer to “Forward-Looking Statements” and “Risk Factors” in First Bank’s Annual Report on Form 10-K and any updates to those risk factors set forth in First Bank’s proxy statement, subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K. If one or more events related to these or other risks or uncertainties materialize, or if First Bank’s underlying assumptions prove to be incorrect, actual results may differ materially from what First Bank anticipates. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and First Bank does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. All forward-looking statements, expressed or implied, included in this communication are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that First Bank or persons acting on First Bank’s behalf may issue.

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ⁱ Return on average tangible equity is a non-U.S. GAAP financial measure and is calculated by dividing net income by average tangible equity (average equity minus average goodwill and other intangible assets). For a reconciliation of this non-U.S. GAAP financial measure, along with the other non-U.S. GAAP financial measures in this press release, to their comparable U.S. GAAP measures, see the financial reconciliations at the end of this press release.

ⁱⁱ The efficiency ratio is a non-U.S. GAAP financial measure and is calculated by dividing non-interest expense by total net revenue (net interest income plus non-interest income). For a reconciliation of this non-U.S. GAAP financial measure, along with the other non-U.S. GAAP financial measures in this press release, to their comparable U.S. GAAP measures, see the financial reconciliations at the end of this press release.

CONTACT: Patrick L. Ryan, President and CEO
(609) 643-0168, patrick.ryan@firstbanknj.com