FRBA - First Bank Reports Third Quarter 2021 Net Income of $9.0 Million

For the Third Quarter of 2021: Strong Revenue and Income Growth, Continued Solid

Asset Quality Metrics, Effective Management of Non-Interest Expense

HAMILTON, N.J., Oct. 26, 2021 (GLOBE NEWSWIRE) -- First Bank (Nasdaq Global Market: FRBA) today announced results for the three and nine months ended September 30, 2021. Net income for the third quarter of 2021 was $9.0 million, or $0.46 per diluted share, compared to $5.9 million, or $0.30 per diluted share, for the third quarter of 2020. Return on average assets, return on average equity and return on average tangible equity ⁱ for the third quarter of 2021 were 1.46%, 13.86% and 14.90%, respectively, compared to 1.03%, 10.20% and 11.08%, respectively, for the third quarter of 2020. Net income for the first nine months of 2021 was $27.6 million, an increase of $14.3 million, or 108.2%, compared to $13.3 million for the same period in 2020. Diluted earnings per share for the year-to-date period ended September 30, 2021 were $1.39, an increase of $0.73, or 109.5%, compared to $0.66 per diluted share for the comparable period in 2020.

Third Quarter and Year-to-Date 2021 Performance Highlights:

• Total net revenue (net interest income plus non-interest income) of $22.7 million for the quarter increased $3.1 million, or 15.9%, compared to $19.6 million for the prior year quarter and was up $919,000, or 4.2%, compared to the linked second quarter of 2021.
• Total loans of $2.00 billion at September 30, 2021 decreased $49.6 million, or 2.4%, from the end of the linked second quarter of 2021, and were down $43.3 from December 31, 2020. Paycheck Protection Program (PPP) loans decreased $62.2 million and $59.4 million, respectively, during the three and nine months ended September 30, 2021. PPP loans outstanding at September 30, 2021 were $77.8 million.
• Total deposits of $2.05 billion at September 30, 2021 increased $142.3 million, or 7.5%, from December 31, 2020 and $9.7 million, or 0.5%, from June 30, 2021. Non-interest bearing demand deposits increased to 26.3% of total deposits at September 30, 2021 compared to 22.3% at December 31, 2020 while time deposits decreased from 27.5% of total deposits at December 31, 2020 to 20.6% at September 30, 2021.
• Asset quality metrics remained solid during the quarter, with net recoveries of $121,000 during the third quarter of 2021, compared to net charge-offs of $633,000 during the third quarter of 2020. Nonperforming loans were $11.5 million at September 30, 2021, $12.7 million on September 30, 2020, and $9.6 million on June 30, 2021. The ratio of nonperforming loans to total loans was 0.57% at September 30, 2021, down six basis points from 0.63% at September 30, 2020, and up 10 basis points from 0.47% at June 30, 2021.
• Continued effective non-interest expense management was reflected in the third quarter 2021 efficiency ratio ⁱⁱ of 45.75%, improved from 49.31% for third quarter 2020, and 46.66% for the linked second quarter of 2021.
  

“We’re pleased that the positive trends that were evident at mid-year carried through the third quarter, driving continued strong performance for First Bank,” said Patrick L. Ryan, President and Chief Executive Officer. “Our funding cost continued to trend lower, enabling us to maintain a stable net interest margin. Throughout 2021, we have continued to grow lower cost core deposits while reducing higher cost time deposits. Our credit metrics remained solid as evidenced by net recoveries for the three and nine months ended September 30, 2021.”

Mr. Ryan continued, “we maintained our focus on successfully managing non-interest expense and, as a result, reported an efficiency ratio below 50% for the third consecutive quarter. Effective expense control is an important element of our strategy to drive stronger profitability on a continuous basis.”

“We are encouraged by our robust lending pipeline and anticipate stronger loan growth in the fourth quarter of 2021. We also believe that the acquisition of two additional branches, which is expected to close in December 2021, will introduce us to new customers that will help to drive our future growth. Our ability to grow First Bank has been driven by our focus on business banking and commercial lending and our commitment to servicing this sector remains very strong. Our U.S. Small Business Administration loan activity continues to be very active, reflecting the steps we have taken to expand this line of business that we enhanced through our Grand Bank acquisition.”

“In August, the Kroll Bond Rating Agency (KBRA) again affirmed our investment grade credit ratings. Their report cited the continued successful execution of our strategic plan, which is focused on building scale within our footprint through a combination of organic and acquisitive growth and enhancing the core deposit franchise, two strategies that have tremendously improved our earnings capacity. We believe KBRA’s expectation that our bottom-line results will remain favorable in the near-term provides additional validation of our approach to building franchise value for our shareholders. We remain focused on opportunities to provide additional value to our shareholders and we believe the recently announced dividend increase and share repurchase program meet this objective.”

“Our team continues to provide quality customer service and we proved throughout the pandemic that we would go the extra mile to help our customers through a very challenging time. That commitment is attracting new customers to First Bank and helping us expand relationships, which, in turn, has been the catalyst for increased revenue and earnings during 2021. Our very strong 2021 profitability is up substantially from prior years and provides a solid foundation on which we can build in the fourth quarter and into 2022.”

Income Statement

First Bank’s net interest income for the third quarter of 2021 was $20.8 million, an increase of $3.2 million, or 17.9%, compared to $17.6 million in the third quarter of 2020. This increase was driven by a $2.1 million decrease in total interest expense, along with a $1.0 million increase in interest and dividend income. The reduction in interest expense was primarily a result of a 98-basis point reduction in the average rates paid on time deposits, along with a decrease of $130.4 million in the average balance of time deposits. As a result of a significantly lower interest rate environment, interest expense on all other interest bearing deposits also declined for the comparative period. Interest income increased primarily due to a $40.8 million increase in average loans compared with the third quarter of 2020, along with a 10-basis point increase in the average yield on the loan portfolio. Interest income from loans was enhanced by $1.8 million in PPP loan fee income during the third quarter of 2021 compared to $1.3 million in third quarter 2020, and $1.3 million in the second quarter of 2021. Also impacting loan interest income was prepayment penalty income of $166,000 for the quarter ended September 30, 2021 compared to $184,000 for the quarter ended September 30, 2020 and $730,000 in the second quarter of 2021.

Nine-month 2021 net interest income totaled $61.2 million, an increase of $11.4 million, or 22.9%, compared to $49.8 million for the same period in 2020. The increase in the 2021 year-to-date net interest income was also primarily a result of lower interest paid on interest bearing deposits, primarily time deposits. The average rate for time deposits declined by 116 basis points, and the average balance declined by $144.7 million compared to the same period in 2020. Interest and dividend income for the nine-month period increased by $2.5 million, driven by solid growth in average loans, which increased by $157.9 million, or 8.4%, from the prior year period, partially offset by a 16-basis-point decrease in the average yield on loans.

The third quarter 2021 tax equivalent net interest margin was 3.54%, an increase of 31 basis points compared to the prior year quarter and a decrease of three basis points compared to the linked second quarter of 2021. The increase compared to third quarter 2020 was primarily the result of a 58-basis-point reduction in the average interest rate paid on interest bearing deposits. The decrease in the average cost of interest bearing deposits is reflective of the continued repricing of interest bearing deposits in the current lower interest rate environment. Additionally, our deposit mix has improved with non-interest bearing deposits 26.3% of total deposits at September 30, 2021 while higher cost time deposits represent only 20.6% of total deposits. The modest decline in the margin compared to the second quarter of 2021 was primarily a result of an eight-basis-point decrease in interest earning asset yields, partially offset by a seven-basis-point decrease in the average cost of interest bearing liabilities, primarily interest bearing deposits. The year-to-date 2021 tax equivalent net interest margin was 3.57%, an increase of 38 basis points compared to the prior year period. The increase in the nine-month net interest margin was principally a result of the lower cost of interest bearing deposits, partially offset by a 24-basis point decline in interest earning asset yields.

First Bank reported a provision for loan losses of $158,000 for the third quarter of 2021, compared to a provision for loan losses of $2.0 million in the third quarter of 2020. The provision for the quarter ended September 30, 2021 was reflective of a continued improvement in the economic outlook combined with continued stable asset quality metrics. For the year-to-date period, the Bank reported a credit to the provision for loan losses of $1.1 million, compared to provision expense of $7.9 million for the same period in 2020. The difference in the nine-month provision for loan losses for 2021 was primarily due to the same factors as discussed for the three-month period.

Third quarter 2021 non-interest income of $1.9 million was relatively flat compared to the third quarter 2020. The $45,000, or 2.3%, decrease between the periods was primarily the result of a $543,000 decrease in loan fees, comprised mostly of loan swap fees, and a $330,000 decrease in gains on recovery of acquired loans, partially offset by an increase of gains on sale of loans of $586,000 and other non-interest income of $180,000. Non-interest income totaled $5.5 million for the nine months ended September 30, 2021, compared to $5.0 million for the same period in 2020, an increase of $503,000, or 10.0%. This increase in non-interest income for the first nine months of 2021 was primarily a result of an increase of $1.3 million in gains on the sale of loans and higher other non-interest income of $288,000. For the three and nine months ended September 30, 2021 gain on sale of loans included increased income from our growing U.S. Small Business Administration (SBA) business, as well as gains on the sale of problem loan assets totaling $364,000. Other non-interest income included a $159,000 gain on the sale of a former branch facility for the three and nine months ended September 30, 2021.

Non-interest expense for third quarter 2021 of $10.5 million increased $869,000, or 9.0%, compared to $9.7 million for the prior year quarter. The higher non-interest expense compared to third quarter 2020 was primarily a result of increased salaries and employee benefits expense reflecting higher employee benefit cost, merit-based salary increases and increased expense associated with performance related compensation, along with merger-related expenses of $145,000 related to our pending acquisition of two OceanFirst Bank branches, partially offset by reduced occupancy and equipment costs.

On a linked quarter basis, third quarter 2021 non-interest expense increased $367,000 compared to $10.2 million for the second quarter of 2021. The higher non-interest expense compared to the second quarter of 2021 was due principally to an increase in performance-based compensation and merger-related costs associated with our upcoming branch acquisition.

Non-interest expense for the first nine months of 2021 totaled $31.3 million, an increase of $2.0 million, or 6.8%, compared to $29.3 million for the same period in 2020. The increase was primarily a result of increased salaries and employee benefits, data processing costs and marketing expense, partially offset by lower other expense.

Income tax expense for the three months ended September 30, 2021 was $3.0 million with an effective tax rate of 24.7%, compared to $2.0 million with an effective tax rate of 25.5% for the third quarter of 2020 and $2.9 million with an effective tax rate of 24.4% for the second quarter of 2021. Income tax expense for the nine months ended September 30, 2021 was $8.9 million with an effective tax rate of 24.5%, compared to $4.4 million for the first nine months of 2020 with an effective tax rate of 24.8%. The increase in the income tax expense is primarily due to higher pre-tax income for the current periods.

Balance Sheet

Total assets at September 30, 2021 were $2.44 billion, an increase of $128.1 million, or 5.5%, compared to $2.31 billion at September 30, 2020, and an increase of $91.8 million, or 3.9%, from December 31, 2020. Total loans were flat at $2.00 billion at September 30, 2021 compared to September 30, 2020, and decreased $43.3 million, or 2.1%, from December 31, 2020. Total loans as of September 30, 2021 decreased $49.6 million, or 2.4%, from $2.05 billion at June 30, 2021, reflecting organic, net non-PPP loan growth of $12.5 million, offset by a net decline in PPP loans of $62.2 million.

Total deposits were $2.05 billion at September 30, 2021, an increase of $9.7 million, or 0.5%, compared to $2.04 billion at June 30, 2021, and an increase of $142.3 million, or 7.5%, from December 31, 2020. Non-interest bearing deposits totaled $536.9 million at September 30, 2021, an increase of $2.4 million, or 0.5%, from June 30, 2021, reflective of continued growth in commercial deposits primarily related to expanded business banking relationships.

Stockholders’ equity was $260.2 million at September 30, 2021, compared to $238.1 million on December 31, 2020. The growth in stockholders’ equity was primarily a result of year-to-date net income of $27.6 million, partially offset by treasury stock repurchases of $4.1 million and cash dividends paid of $1.8 million during the nine months ended September 30, 2021.

As of September 30, 2021, the Bank continued to exceed all regulatory capital requirements to be considered well capitalized, with a Tier 1 Leverage ratio of 9.89%, a Tier 1 Risk-Based capital ratio of 11.15%, a Common Equity Tier 1 Capital ratio of 11.15%, and a Total Risk-Based capital ratio of 13.59%.

Asset Quality

First Bank’s asset quality metrics have remained stable and favorable during the past 12 months. Net recoveries were $121,000 for the third quarter of 2021, compared to net charge-offs of $633,000 for the third quarter of 2020 and net charge-offs of $116,000 for the second quarter of 2021. Net recoveries as an annualized percentage of average loans were 0.02% in third quarter 2021, compared to net charge-offs of 0.13% in third quarter 2020 and net charge-offs of 0.02% for the second quarter of 2021. Nonperforming loans as a percentage of total loans at September 30, 2021 were 0.57%, compared with 0.63% at September 30, 2020 and 0.47% at June 30, 2021. Nonperforming loans were $11.5 million at September 30, 2021, down from $12.7 million on September 30, 2020, and up from $9.6 million on June 30, 2021. The allowance for loan losses to nonperforming loans was 199.57% at September 30, 2021, compared with 179.66% at the end of third quarter 2020, and 236.95% at June 30, 2021.

COVID-19 Response

First Bank participated in the PPP, established by the Coronavirus Aid, Relief, and Economic Securities Act (CARES Act), during 2020 and 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 and other business-related operating costs. The PPP ended on May 31, 2021 but the PPP loan forgiveness process is ongoing. As of September 30, 2021, First Bank had 540 PPP loans with outstanding balances of $77.8 million. During 2021, prior to the end of the PPP on May 31, 2021, First Bank originated 783 new PPP loans totaling $107.9 million. During the first nine months of 2021, PPP loans totaling $167.3 million were forgiven. During the nine months ended September 30, 2021, the Bank realized $4.7 million in fee income on these loans as any deferred fees remaining on the forgiven loans were accelerated. As of September 30, 2021, the Bank had $2.8 million in remaining unamortized fees associated with outstanding balances of PPP 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 September 30, 2021, the Bank’s population of COVID-19 deferrals was $10.3 million, or 0.52% of total loans, down from $11.7 million, or 0.57% of total loans, at June 30, 2021.

Branch Acquisition

On August 4, 2021, First Bank announced that it had entered into a definitive agreement to acquire two New Jersey branch locations from OceanFirst Bank, including the owned premises and equipment, all deposits associated with the branches, which totaled approximately $124 million as of June 30, 2021, as well as selected performing loans totaling approximately $14 million as of June 30, 2021. First Bank has received the required regulatory approval and the closing of the acquisition and customer conversion is expected to take place in early December 2021.

Share Repurchase Program

On October 26, 2021, the Bank received regulatory approval for the repurchase of up to 1.3 million shares of First Bank common stock in the open market for an aggregate repurchase amount of up to $18.2 million. This new share repurchase program was also approved by the Bank’s Board of Directors and will expire on September 30, 2022. The Company purchased 218,000 shares during the third quarter 2021, for an aggregate purchase price of approximately $2.8 million, or an average share price of $13.03, under its preexisting share repurchase program that was approved in third quarter 2020 and ended on September 30, 2021.

Cash Dividend Declared

On October 19, 2021, First Bank’s Board of Directors declared a quarterly cash dividend of $0.06 per share to common stockholders of record at the close of business on November 5, 2021, payable on November 19, 2021. This reflects a 100% increase from the dividend declared during the linked and prior year quarters and represents an annualized yield of 1.57% based on upon the $15.25 closing price of the Bank’s stock on October 19, 2021.

Conference Call

First Bank will host its earnings call on Wednesday, October 27, 2021 at 9:00 AM eastern time. The direct dial toll free number for the live call is 1-844-200-6205 and the access code is 592319. For those unable to participate in the call, a replay will be available by dialing 1-866-813-9403 (access code 658656) from one hour after the end of the conference call until November 28, 2021. Replay information will also be available on First Bank’s website at www.firstbanknj.com under the “About Us” tab. Click on “Investor Relations” to access the replay of 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 $2.44 billion in assets as of September 30, 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, and 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.

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

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 less merger-related expenses by adjusted total 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.