SOURCE: First Bank

First Bank

January 30, 2017 16:38 ET

First Bank Reports Fourth Quarter 2016 Net Income of $1.8 Million, an Increase of 163% From 2015

2016 Net Income is up 65% to $6.4 Million; For the 4th Quarter and Full Year Strong Loan and Deposit Growth, Non-Interest Expenses Well Managed and Stable and Favorable Asset Quality Metrics

HAMILTON, NJ--(Marketwired - January 30, 2017) - First Bank (NASDAQ: FRBA) today announced improved fourth quarter and full year 2016 results. Net income for the quarter was $1.8 million or $0.16 per diluted share, compared to $686,000 or $0.07 per diluted share for the fourth quarter of 2015. Diluted earnings per share increased by $0.09, or 129%, despite a 2.12 million share increase in weighted average diluted shares outstanding from December 2015. The increase in fourth quarter net income was driven by net interest income growth of 27.9%, which reflected continued strong loan generation, along with effective management of the Bank's non-interest expense. Net income for 2016 was $6.4 million, an increase of $2.5 million, or 64.8%, compared to 2015. The increase in net income for the full year was also driven by 21.3% net interest income growth coupled with managed expense growth of only 3.4%.

2016 Performance Highlights:

  • Total net revenue (net interest income + non-interest income) for the fourth quarter increased by 31.2%, or $2.0 million, to $8.4 million, compared to the prior year quarter.
  • Total loans of $898.4 million at December 31, 2016 were up $208.5 million, or 30.2%, from December 31, 2015.
  • Total deposits of $894.9 million at December 31, 2016 were up $155.9 million, or 21.1%, compared to December 31, 2015.
  • Asset quality metrics continued to be strong, with net loan charge-offs to average loans of just 0.10% for 2016 compared to 0.11% in 2015. Nonperforming loans to total loans of 0.66% at December 31, 2016, were relatively consistent compared to 0.45% at September 30, 2016, and 0.57% at December 31, 2015
  • The Bank's efficiency ratio improved to 58.23% for the fourth quarter, down from 73.79% for fourth quarter 2015, and from 62.04% for third quarter 2016.

"2016 was a transformative year for First Bank as we surpassed the $1 billion threshold for total assets, realized strong double-digit growth in loans and booked record profits for the year," said Patrick L. Ryan, President and Chief Executive Officer. "In addition," said Mr. Ryan, "we conducted a successful capital raise in June which elevated institutional investor interest and ownership in First Bank, and in November our Board initiated the payment of a cash dividend, payable in the first quarter of 2017. We finished the year with strong capital levels which reflected both our capital raise and a strong increase in retained earnings for the twelve month period. Despite our very strong loan generation during 2016, our asset quality metrics remained strong and stable at year end. We entered 2017 in a very good place with a strong competitive posture in our banking service area, growing brand awareness and improving operating efficiency. The loan pipeline at year end remained strong and we expect to see this activity reflected in our results in 2017. The substantive growth we realized in 2016, and our improved competitive positioning going forward, couldn't have happened without the dedicated efforts of our entire team, which is poised and energized to continue this progress throughout 2017 and beyond."

Income Statement

The Bank's net interest income for fourth quarter 2016 was $7.8 million, an increase of $1.7 million, or 27.9%, compared to $6.1 million in the fourth quarter of 2015. This growth was driven by a 24.9% increase in interest and dividend income primarily a result of a $212.0 million increase in average loan balances compared with the fourth quarter of 2015. This was somewhat offset by increased interest expense of $337,000 for the comparative quarters, which reflected average balance increases for both time deposits and transaction accounts.

Full year net interest income totaled $28.9 million, an increase of $5.1 million, or 21.3%, compared to $23.8 million for 2015. The increase in 2016 net interest income was also driven by the same strong growth in average loans which increased by $207.8 million from the prior year period.

The fourth quarter 2016 net interest margin was 3.12%, an increase of seven basis points compared to the prior year quarter, and a decrease of four basis points compared to the linked third quarter of 2016. The increase compared to fourth quarter 2015 was primarily the result of higher average interest-earning assets and an eight basis point drop in the rate paid on interest-bearing liabilities.

The provision for loan losses for the fourth quarter of 2016 totaled $954,000, an increase of $4,000 compared to the fourth quarter of 2015, and an increase of $663,000 compared to $291,000 for the linked third quarter of 2016. The increase in the provision, compared to third quarter 2016, reflected comparatively stronger commercial loan growth for the fourth quarter. The provision for loan losses for 2016 and for 2015 totaled $2.7 million. The full year provision is reflective of the Bank's continued strong loan growth in 2016, as well as its stable asset quality metrics.

Fourth quarter 2016 non-interest income increased $288,000, to $570,000, compared to $282,000 in fourth quarter 2015, primarily a result of higher gains on recovery of acquired loans of $212,000 and additional income from bank owned life insurance of $53,000, compared to fourth quarter 2015. Full year non-interest income totaled $1.6 million for both 2016 and 2015.

Non-interest expense for fourth quarter 2016 totaled $4.72 million, an increase of $52,000, compared to $4.67 million for the prior year quarter. The higher non-interest expense compared to fourth quarter 2015 was primarily a result of increased regulatory and professional fees, and increased occupancy and equipment cost, partially offset by lower other real estate owned expense, net. Non-interest expense for 2016 totaled $18.3 million, an increase of $607,000 or 3.4% compared to $17.7 million for the same period in 2015. The increase was primarily a result of increased salaries and employee benefits, occupancy and equipment costs, regulatory fees, and data processing costs, partially offset by lower other real estate owned expense, net. The increases in non-interest expense were mainly the result of the significant growth during 2016.

Pre-provision net revenue[1] for the fourth quarter of 2016 was $3.4 million, an increase of $1.4 million, or 68.6%, compared to the fourth quarter of 2015, and an increase of $450,000, or 15.3%, compared to $2.9 million in the linked third quarter of 2016.

[1] A non-U.S. GAAP metric defined by SNL Financial as net interest income before provision for loan losses plus non-interest income excluding non-ordinary items (e.g. gains on sale of investment securities, gains on recovery of acquired loans, and bargain purchase gains) minus non-interest expense excluding non-ordinary items (e.g. merger related expenses and other one-time, non-ordinary costs).

Income tax expense for the fourth quarter of 2016 was $891,000, a decrease of $64,000 compared to $955,000 for third quarter 2016. The fourth quarter effective income tax rate was 33.0%, compared to 34.7% for third quarter 2016.

Balance Sheet

Total assets at December 31, 2016 were $1.1 billion, an increase of $217.2 million or 25.4% compared to December 31, 2015. Total loans were $898.4 million at year end, an increase of $208.5 million or 30.2% compared to December 31, 2015. Total loans increased $71.3 million compared to the linked third quarter of 2016. The growth during the fourth quarter came from all of the Bank's commercial loan segments.

Total deposits were $894.9 million at December 31, 2016, an increase of $155.9 million or 21.1% compared to December 31, 2015, and were up $20.8 million from the linked third quarter of 2016. Non-interest bearing deposits totaled $118.6 million at December 31, 2016, an increase of $18.6 million, or 18.6% from December 31, 2015, reflective of expanded commercial lending relationships. Average time deposits for fourth quarter 2016 were down $9.6 million in comparison to the linked third quarter of 2016.

Stockholders' equity increased to $88.8 million at December 31, 2016, up $20.0 million or 29.1% compared to December 31, 2015, primarily a result of the capital offering completed in June 2016, which raised $13.4 million in net new capital, and $6.2 million of growth in retained earnings.

Asset Quality

First Bank's asset quality metrics remained stable during the fourth quarter and compare favorably to peer and industry averages, reflective of disciplined risk management and underwriting standards. Net charge-offs were $424,000 for the fourth quarter of 2016, compared to $170,000 for fourth quarter 2015 and $30,000 for the third quarter of 2016. Net charge-offs as an annualized percentage of average loans were 0.20% in fourth quarter 2016, compared to 0.01% in the linked third quarter and 0.11% in fourth quarter 2015. Nonperforming loans as a percentage of total loans at December 31, 2016 were 0.66%, compared with 0.45% on September 30, 2016 and 0.57% at December 31, 2015. The allowance for loan losses to nonperforming loans was 164.67% at December 31, 2016, compared with 252.40% at the end of third quarter 2016, and 203.43% at December 31, 2015.

As of December 31, 2016, the Bank exceeded all regulatory capital requirements to be considered well capitalized with a Tier 1 Leverage ratio of 8.56%, a Tier 1 Risk-Based capital ratio of 8.78%, a Common Equity Tier 1 Capital ("CET1") ratio of 8.78%, and a Total Risk-Based capital ratio of 11.91%.

Cash Dividend Initiated

On November 16, 2016, the Company announced that the Board of Directors declared an initial quarterly cash dividend of $0.02 per share to common shareholders of record at the close of business on February 10, 2017, and payable on February 28, 2017. The First Bank Board believes that this dividend provides shareholders an added tangible benefit, and that it is appropriate given the Company's current financial performance, momentum and near-term prospects.

Conference Call

First Bank will host an earnings call on Tuesday, January 31, 2017 at 2:00 PM eastern time. The direct dial toll free number for the call is 1-844-825-9784. For those unable to participate in the call, a replay will be available by dialing 1-877-344-7529 from one hour after the end of the conference call until April 26, 2017. 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 of the conference call.

About First Bank

First Bank (www.firstbanknj.com) is a New Jersey state-chartered bank with ten full-service branches in Cranbury, Denville, Ewing, Flemington, Hamilton, Lawrence, Randolph, Somerset and Williamstown, New Jersey, and Trevose, Pennsylvania. With $1.1 billion in assets as of December 31, 2016, First Bank offers a traditional 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".

This news release contains certain forward-looking statements, either expressed or implied, which are provided to assist the reader in understanding anticipated future financial performance. These statements involve certain risks, uncertainties, estimates and assumptions made by management, which are subject to factors beyond First Bank's control and could impede its ability to achieve these goals. These factors include those listed in our Annual Report on Form 10K under the caption "Item 1A-Risk Factors", and general economic conditions, trends in interest rates, the ability of our borrowers to repay their loans, changes in laws and regulations and results of regulatory exams, among other factors.

   
FIRST BANK AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION  
(in thousands, except for share data, unaudited)  
   
          
   December 31,  
   2016   2015  
Assets           
Cash and due from banks  $6,078   $10,032  
Federal funds sold   5,000    -  
Interest bearing deposits in other banks   19,211    23,299  
 Cash and cash equivalents   30,289    33,331  
Interest bearing time deposits in other banks   7,440    4,125  
Investment securities available for sale   47,077    45,341  
Investment securities held to maturity (fair value of $53,358           
and $53,793 at December 31, 2016 and 2015, respectively)   53,473    53,262  
Restricted investment in bank stocks   3,890    1,862  
Other investments   5,000    5,000  
Loans, net of deferred fees and costs   898,429    689,887  
 Less: Allowance for loan losses   9,826    7,940  
  Net loans   888,603    681,947  
Premises and equipment, net   3,338    3,449  
Other real estate owned, net   1,292    1,557  
Accrued interest receivable   2,573    2,056  
Bank-owned life insurance   21,067    14,572  
Intangible assets, net   224    286  
Deferred income taxes   8,350    7,935  
Other assets   678    1,383  
  Total assets  $1,073,294   $856,106  
            
Liabilities and Stockholders' Equity           
Deposits:           
 Non-interest bearing  $118,569   $99,966  
 Interest bearing   776,365    639,055  
  Total deposits   894,934    739,021  
Borrowings   64,510    24,000  
Subordinated debentures   21,641    21,533  
Accrued interest payable   636    612  
Other liabilities   2,767    2,177  
  Total liabilities   984,488    787,343  
Stockholders' Equity:           
Preferred stock, par value $2 per share; 5,000,000 shares authorized;           
no shares issued and outstanding   -    -  
Common stock, par value $5 per share; 20,000,000 shares authorized;           
issued and outstanding 11,410,274 shares and 9,470,157 shares           
at December 31, 2016 and 2015, respectively   56,885    47,218  
Additional paid-in capital   18,779    14,510  
Retained earnings   13,611    7,433  
Accumulated other comprehensive loss   (469 )  (398 )
  Total stockholders' equity   88,806    68,763  
  Total liabilities and stockholders' equity  $1,073,294   $856,106  
            
 
FIRST BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except for share data, unaudited)
 
             
   Three Months Ended  Year Ended
   December 31,  December 31,
   2016  2015  2016  2015
Interest and Dividend Income                
Investment securities—taxable  $339  $375  $1,221  $1,423
Investment securities—tax-exempt   124   127   500   452
Interest bearing deposits in other banks,                
 Fed funds sold, and other   100   69   379   247
Loans, including fees   9,653   7,606   36,227   28,642
  Total interest and dividend income   10,216   8,177   38,327   30,764
                 
Interest Expense                
Deposits   1,958   1,628   7,624   5,658
Borrowings   62   55   207   218
Subordinated debentures   398   398   1,593   1,065
  Total interest expense   2,418   2,081   9,424   6,941
Net interest income   7,798   6,096   28,903   23,823
Provision for loan losses   954   950   2,697   2,669
Net interest income after provision for loan losses   6,844   5,146   26,206   21,154
                 
Non-Interest Income                
Service fees on deposit accounts   35   33   154   128
Loan fees   23   13   79   44
Income from bank-owned life insurance   159   106   496   425
Gains on sale of investment securities   -   -   25   11
Gains on recovery of acquired loans   268   56   556   744
Other non-interest income   85   74   320   291
  Total non-interest income   570   282   1,630   1,643
                 
Non-Interest Expense                
Salaries and employee benefits   2,433   2,449   9,618   9,221
Occupancy and equipment   656   585   2,652   2,372
Legal fees   72   95   287   336
Other professional fees   369   320   1,225   1,225
Regulatory fees   207   126   671   507
Directors' fees   117   100   457   429
Data processing   240   214   934   811
Marketing and advertising   127   123   502   503
Travel and entertainment   80   89   234   269
Insurance   49   50   209   196
Other real estate owned expense, net   72   220   432   801
Other expense   295   294   1,111   1,055
  Total non-interest expense   4,717   4,665   18,332   17,725
Income Before Income Taxes   2,697   763   9,504   5,072
Income tax expense   891   77   3,098   1,185
Net Income  $1,806  $686  $6,406  $3,887
                 
Basic earnings per share  $0.16  $0.07  $0.61  $0.41
Diluted earnings per share  $0.16  $0.07  $0.61  $0.41
                 
Basic weighted average common shares outstanding   11,367,277   9,443,657   10,420,622   9,423,029
Diluted weighted average common shares outstanding   11,650,329   9,529,389   10,580,040   9,492,289
                 
                 
 
FIRST BANK AND SUBSIDIARIES 
AVERAGE BALANCE SHEETS WITH INTEREST AND AVERAGE RATES 
(unaudited) 
                          
   Three Months Ended December 31,  
   2016   2015  
   Average       Average   Average       Average  
   Balance   Interest   Rate (5)   Balance   Interest   Rate (5)  
   (dollars in thousands)  
Interest earning assets                             
Investment securities (1) (2)  $96,237   $505   2.09 % $100,460   $545   2.15 %
Loans (3)   849,821    9,653   4.52 %  637,802    7,606   4.73 %
Interest bearing deposits in other banks and                             
 Federal funds sold   46,568    67   0.57 %  54,257    40   0.29 %
Restricted investment in bank stocks   2,283    15   2.61 %  1,422    13   3.63 %
Other investments   5,000    18   1.43 %  5,000    16   1.27 %
 Total interest earning assets (2)   999,909    10,258   4.08 %  798,941    8,220   4.08 %
Allowance for loan losses   (9,530 )           (7,399 )         
Non-interest earning assets   42,894             38,519           
 Total assets  $1,033,273            $830,061           
                              
Interest bearing liabilities                             
Interest bearing demand deposits  $110,468   $160   0.58 % $68,478   $122   0.71 %
Money market deposits   150,501    245   0.65 %  123,787    228   0.73 %
Savings deposits   70,278    88   0.50 %  80,959    103   0.50 %
Time deposits   438,955    1,465   1.33 %  349,899    1,175   1.33 %
Total interest bearing deposits   770,202    1,958   1.01 %  623,123    1,628   1.04 %
Borrowings   28,809    62   0.86 %  14,239    55   1.53 %
Subordinated debentures   21,626    398   7.36 %  21,521    398   7.40 %
 Total interest bearing liabilities   820,637    2,418   1.17 %  658,883    2,081   1.25 %
Non-interest bearing deposits   120,756             101,028           
Other liabilities   3,105             1,579           
Stockholders' equity   88,775             68,571           
 Total liabilities and stockholders' equity  $1,033,273            $830,061           
Net interest income/interest rate spread (2)        7,840   2.91 %       6,139   2.83 %
Net interest margin (2) (4)            3.12 %           3.05 %
Tax-equivalent adjustment (2)        (42 )           (43 )    
Net interest income       $7,798            $6,096      
                       
(1) Average balances of investment securities available for sale are based on amortized cost.
(2) Interest and average rates are tax equivalent using a federal income tax rate of 34 percent.
(3) Average balances of loans include loans on nonaccrual status.
(4) Net interest income divided by average total interest earning assets.
(5) Average rates are annualized.
 
   
FIRST BANK AND SUBSIDIARIES  
AVERAGE BALANCE SHEETS WITH INTEREST AND AVERAGE RATES  
(unaudited)  
                          
                          
   Year Ended December 31,  
   2016   2015  
   Average       Average   Average       Average  
   Balance   Interest   Rate   Balance   Interest   Rate  
   (dollars in thousands)  
Interest earning assets                             
Investment securities (1) (2)  $88,264   $1,891   2.14 % $94,773   $2,029   2.14 %
Loans (3)   794,396    36,227   4.56 %  586,574    28,642   4.88 %
Interest bearing deposits in other banks and                             
 Federal funds sold   43,956    238   0.54 %  44,980    130   0.29 %
Restricted investment in bank stocks   1,880    74   3.94 %  1,387    54   3.89 %
Other investments   5,000    67   1.34 %  5,000    63   1.26 %
 Total interest earning assets (2)   933,496    38,497   4.12 %  732,714    30,918   4.22 %
Allowance for loan losses   (8,930 )           (6,817 )         
Non-interest earning assets   38,882             38,503           
 Total assets  $963,448            $764,400           
                              
Interest bearing liabilities                             
Interest bearing demand deposits  $93,285   $576   0.62 % $52,971   $375   0.71 %
Money market deposits   129,769    875   0.67 %  112,504    766   0.68 %
Savings deposits   72,647    363   0.50 %  89,852    477   0.53 %
Time deposits   432,400    5,810   1.34 %  316,149    4,040   1.28 %
 Total interest bearing deposits   728,101    7,624   1.05 %  571,476    5,658   0.99 %
Borrowings   20,978    207   0.99 %  14,072    218   1.55 %
Subordinated debentures   21,586    1,593   7.38 %  14,506    1,065   7.34 %
 Total interest bearing liabilities   770,665    9,424   1.22 %  600,054    6,941   1.16 %
Non-interest bearing deposits   110,804             94,817           
Other liabilities   2,662             1,821           
Stockholders' equity   79,317             67,708           
 Total liabilities and stockholders' equity  $963,448            $764,400           
Net interest income/interest rate spread (2)        29,073   2.90 %       23,977   3.06 %
Net interest margin (2) (4)            3.11 %           3.27 %
Tax-equivalent adjustment (2)        (170 )           (154 )    
Net interest income       $28,903            $23,823      
                       
(1) Average balances of investment securities available for sale are based on amortized cost.             
(2) Interest and average rates are presented on a tax equivalent basis using a federal income tax rate of 34 percent.         
(3) Average balances of loans include loans on nonaccrual status.                     
(4) Net interest income divided by average total interest earning assets.                                         
 
  
FIRST BANK AND SUBSIDIARIES  
QUARTERLY FINANCIAL HIGHLIGHTS  
(in thousands, except share data, unaudited)  
                      
   4Q2016   3Q2016   2Q2016   1Q2016   4Q2015  
EARNINGS                          
 Net interest income  $7,798   $7,456   $6,880   $6,769   $6,096  
 Provision for loan losses   954    291    639    813    950  
 Non-interest income   570    384    316    360    282  
 Non-interest expense   4,717    4,793    4,453    4,369    4,665  
 Income tax expense   891    955    661    591    77  
 Net income   1,806    1,801    1,443    1,356    686  
                           
PER SHARE DATA                          
 Basic earnings per share  $0.16   $0.16   $0.15   $0.14   $0.07  
 Diluted earnings per share   0.16    0.16    0.15    0.14    0.07  
 Tangible book value (1)   7.76    7.66    7.49    7.39    7.23  
 Book value   7.78    7.68    7.51    7.42    7.26  
                           
PERFORMANCE RATIOS                          
 Return on average assets (2)   0.70 %  0.74 %  0.62 %  0.60 %  0.33 %
 Return on average equity (2)   8.10 %  8.25 %  8.09 %  7.83 %  3.97 %
 Net interest margin, tax equivalent basis (2)   3.12 %  3.16 %  3.04 %  3.14 %  3.05 %
 Efficiency ratio (1)   58.23 %  62.04 %  62.43 %  62.48 %  73.79 %
 Pre-provision net revenue (1)  $3,383   $2,933   $2,680   $2,624   $2,006  
                           
MARKET DATA (period-end)                          
 Market value per share  $11.60   $8.38   $6.94   $6.94   $6.61  
 Market value / book value   149.04 %  109.16 %  92.43 %  93.53 %  91.03 %
 Common shares outstanding   11,410,274    11,393,609    11,392,776    9,497,776    9,470,157  
 Market capitalization  $132,359   $95,478   $79,066   $65,805   $62,597  
                           
CAPITAL & LIQUIDITY                          
 Tangible equity / assets (1)   8.25 %  8.66 %  8.79 %  7.65 %  8.00 %
 Equity / assets   8.27 %  8.68 %  8.81 %  7.68 %  8.04 %
 Loans / deposits   100.39 %  94.62 %  94.04 %  94.89 %  93.35 %
                           
ASSET QUALITY                          
 Net charge offs (recoveries)  $424   $30   $63   $294   $170  
 Nonperforming loans   5,967    3,683    5,595    4,094    3,903  
 Nonperforming assets   7,289    4,895    7,270    5,793    5,489  
 Net charge offs (recoveries) / average loans (2)   0.20 %  0.01 %  0.03 %  0.16 %  0.11 %
 Nonperforming loans / total loans   0.66 %  0.45 %  0.70 %  0.54 %  0.57 %
 Nonperforming assets / total assets   0.68 %  0.49 %  0.75 %  0.63 %  0.64 %
 Allowance for loan losses / total loans   1.09 %  1.12 %  1.13 %  1.12 %  1.15 %
 Allowance for loan losses / nonperforming loans   164.67 %  252.40 %  161.48 %  206.62 %  203.43 %
                           
PERIOD-END DATA                          
 Total assets  $1,073,294   $1,007,685   $970,689   $917,441   $856,106  
 Total loans   898,429    827,161    801,421    758,131    689,887  
 Total deposits   894,934    874,149    852,230    798,985    739,021  
 Total stockholders' equity   88,806    87,463    85,540    70,474    68,763  
 Full-time equivalent employees   108    104    107    102    99  
                           
(1) Non-U.S. GAAP financial measure that we believe provides management and investors with information that is useful in understanding ourfinancial performance and condition.
(2) Annualized.
 

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