SOURCE: First Bank

First Bank

October 28, 2014 18:37 ET

First Bank Reports Third Quarter 2014 Earnings of $1.1 Million; Total Assets Reach $643 Million

HAMILTON, NJ--(Marketwired - October 28, 2014) - First Bank (NASDAQ: FRBA) today announced third quarter 2014 results.  Net income for the quarter was $1.1 million or $0.12 per diluted share, compared to net income of $492,000 or $0.10 per diluted share for the third quarter of 2013 and $923,000 or $0.10 per diluted share for the second quarter of 2014. 

Third quarter results were primarily effected by three items: i) $116,000 in merger related expenses for our acquisition of Heritage Community Bank ("HCB"), ii) $857,000 in gains on recovery of acquired loans, and iii) a higher provision for loan losses of $977,000. The higher provision for loan losses in the third quarter was driven by strong loan growth late in the quarter and higher net loan charge offs. Book value per share was $6.79 at the end of the third quarter of 2014, an increase of $0.11 compared to book value of $6.68 at the end of the second quarter of 2014. 

Net income for the nine months ended September 30, 2014 was $5.3 million compared to $1.4 million for the same period in 2013, an increase of $3.9 million or 275.8%. Diluted earnings per share for the comparative periods were $0.57 and $0.30, respectively. For the year over year comparison the increase in net income was due primarily to the bargain purchase gain from the Heritage Community Bank acquisition, reflected in increases in net interest income and non-interest income, partially offset by higher non-interest expense and a higher provision for loan losses. The growth in our organic loan portfolio also contributed to the increase in net income for the comparable periods.   

President and Chief Executive Officer Patrick L. Ryan discussed the results: "As we expected, strong deposit and loan growth returned in the third quarter. Balance sheet growth more than offset some margin compression, pushing net interest income slightly higher. Certain non-ordinary income and expense items had a significant impact on net results for the quarter. Namely, we collected $857,000 on loans acquired and marked down to zero during the HCB acquisition. Offsetting this income boost was a larger than usual provision for loan losses in the quarter. The higher provision was partly related to incremental additional charge offs during the quarter (mostly related to acquired HCB loans) and partly related to strong commercial loan growth.

"Strategically we made good progress in the quarter. We received approval for our 9th branch, located in Cranbury, New Jersey. Consistent with our low-overhead branching model, the former Yardville National Bank/PNC site is a 2,200 square foot facility with minimal additional investment required. I'm happy to report the branch opened for business on October 20, 2014. Furthermore, we started to enjoy loan growth from our new Bucks County, Pennsylvania lending team. And, importantly, our Northern New Jersey team made continued progress stabilizing the legacy HCB portfolio and the pipeline of new deals is starting to grow."

Ryan continued, "Our post integration analysis of cost savings from the HCB transaction estimates total annualized cost savings of just under $1.0 million. As a point of reference, that is slightly less than 20% of the HCB pre-merger expense base and almost two times our initial merger model estimates of $500,000. Some of those savings started to materialize in the third quarter, while other savings will accrue as we move forward. 

"Like many of our competitors, we saw margin compression during the quarter. The rate environment in our markets is not ideal. In addition to continued downward pressure on loan rates, we are now seeing upward pressure on deposit rates. If this continues, margin reductions may work to reduce the operating leverage benefits we expect from the HCB acquisition and continued organic growth."

Highlights

  • Balance Sheet
    • Total assets at September 30, 2014 were $643.5 million, an increase of $32.9 million or 5.4% compared to June 30, 2014, and an increase of $217.8 million or 51.2% compared to September 30, 2013. 
    • Total loans reached $505.0 million at September 30, 2014, an increase of $38.1 million or 8.2% compared to June 30, 2014 and an increase of $191.0 million or 60.8% compared to September 30, 2013. 
    • Total deposits reached $563.4 million at September 30, 2014, an increase of $31.3 million or 5.9% compared to June 30, 2014 and an increase of $185.2 million or 48.9% compared to September 30, 2013. Non-interest bearing deposits increased to $86.3 million or 15.3% of total deposits at September 30, 2014.
    • Stockholders' equity increased to $63.9 million at September 30, 2014.
    • Book value per share was $6.79 at September 30, 2014 compared to $6.68 per share at June 30, 2014 and $6.73 per share at September 30, 2013. Tangible book value per share was $6.75 at September 30, 2014, compared to $6.64 per share at June 30, 2014 and $6.73 per share at September 30, 2013.
  • Quarterly Income Statement
    • Net interest income for the third quarter of 2014 totaled $5.5 million, an increase of $86,000 or 1.6% compared to $5.4 million for the second quarter of 2014, and an increase of $2.0 million or 58.5% compared to the third quarter of 2013.
    • Non-interest income for the third quarter of 2014 totaled $1.1 million, an increase of $762,000 or 241.1% compared to $316,000 for the second quarter of 2014. When compared to the third quarter of 2013, non-interest income increased $992,000 or 1,153.5%.
    • Non-interest expense for the third quarter of 2014 totaled $4.1 million, a decrease of $7,000 or 0.2% compared to $4.1 million for the second quarter of 2014, and an increase of $1.7 million or 69.5% compared to $2.4 million in the third quarter of 2013. 
    • Pre-tax income for the third quarter of 2014 totaled $1.5 million, an increase of $214,000 or 16.8% compared to $1.3 million for the second quarter of 2014, and an increase of $655,000 or 78.4% compared to the third quarter of 2013.
    • Net income for the third quarter of 2014 totaled $1.1 million, an increase of $166,000 or 18.0% compared to $923,000 in the second quarter of 2014, and an increase of $597,000 or 121.3% compared to the third quarter of 2013.
    • Diluted earnings per share for the third quarter totaled $0.12, an increase of $0.02 per share or 20.0% compared to $0.10 per share in the second quarter of 2014, and an increase of $0.02 per share or 20.0% compared to the third quarter of 2013.
    • The provision for loan losses in the third quarter of 2014 totaled $977,000, an increase of $641,000 or 190.8% compared to $336,000 for the second quarter of 2014, and an increase of $681,000 or 230.1% compared to the third quarter of 2013.
    • Pre-provision net revenue1 for the third quarter was $1.7 million, a decrease of $11,000 or 0.6% compared to $1.7 million in the second quarter of 2014, and an increase of $595,000 or 52.6% compared to the third quarter of 2013.

1 A non-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).

  • Year to Date Income Statement
    • Net interest income for the nine months ended September 30, 2014 totaled $15.1 million, an increase of $5.5 million or 57.7% compared to $9.6 million for the same period in 2013.
    • Non-interest income for the nine months ended September 30, 2014 totaled $4.1 million, an increase of $3.7 million or 908.0% compared to $410,000 for the same period in 2013.
    • Non-interest expense for the nine months ended September 30, 2014 totaled $11.5 million, an increase of $4.5 million or 65.5% compared to $6.9 million for the same period in 2013.
    • The provision for loan losses for the nine months ended September 30, 2014 totaled $1.5 million, an increase of $681,000 or 84.1% compared to $810,000 for the same period in 2013.
  • Other items
    • The tax equivalent net interest margin ("NIM") for the third quarter of 2014 was 3.72% compared to 3.81% for the second quarter of 2014 and 3.57% for the third quarter of 2013. 
    • Non-performing assets ("NPAs") were $7.0 million or 1.09% of total assets at September 30, 2014 compared to $5.7 million or 0.94% of total assets at June 30, 2014.  
      • Non-accrual loans totaled $4.3 million or 0.85% of total loans at September 30, 2014 compared to non-accrual loans of $3.3 million or 0.71% of total loans at June 30, 2014.
      • Loans 30-89 days past due totaled $8.5 million at September 30, 2014 compared to $7.8 million at June 30, 2014. We had 4 loans over 90 days past due and still accruing at September 30, 2014 totaling $354,000.
      • Other real estate owned (including other repossessed assets) totaled $2.3 million at September 30, 2014.
    • Regulatory capital ratios at September 30, 2014:
      • Tier 1 Leverage ratio of 10.05%
      • Tier 1 Risk-Based capital ratio of 11.38%
      • Total Risk-Based capital ratio of 12.39%
    • The allowance for loan losses ("ALLL") to total loans at September 30, 2014 was 1.09% compared to 1.08% at June 30, 2014. The increase in the ALLL ratio related primarily to an increase in our organic portfolio and payoffs/reductions in the loan portfolio acquired in the Heritage transaction that currently carries no loan loss reserve because of the mark to market accounting treatment on that portfolio at the time of acquisition.
    • 89 full-time equivalent employees ("FTEs") at September 30, 2014, compared to 95 FTEs at June 30, 2014.

About First Bank

First Bank (www.firstbanknj.com) is a New Jersey state-chartered bank with nine full-service branches in Cranbury, Denville, Ewing, Hamilton, Lawrence, Randolph (2), Somerset and Williamstown, New Jersey. With $643 million in assets as of September 30, 2014, First Bank offers a traditional range of deposit and loan products to individuals and businesses throughout the New York City to Philadelphia, PA 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 may be identified by use of terms such as "estimates", "believes", "intends", "expects", "projects", or similar expressions. 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, and results of regulatory exams, among other factors. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. First Bank does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

  
FIRST BANK AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION  
(in thousands, except share data, unaudited)  
   
          
   September 30,   December 31,  
   2014   2013  
Assets           
Cash and due from banks  $8,007   $9,787  
Interest bearing deposits with banks   21,637    13,927  
  Cash and cash equivalents   29,644    23,714  
Interest bearing time deposits with banks   5,183    4,903  
Investment securities available for sale   41,519    65,017  
Investment securities held to maturity (fair value of $31,497 at September 30, 2014 and $15,353 at December 31, 2013)   31,240    15,414  
Restricted investment in bank stocks   1,304    1,131  
Other investments   5,000    5,000  
Loans, net of deferred fees and costs   505,008    339,975  
 Less: Allowance for loan losses   5,511    4,675  
  Net loans   499,497    335,300  
Premises and equipment, net   3,439    1,787  
Other real estate owned, net   2,260    1,664  
Accrued interest receivable   1,547    1,232  
Bank-owned life insurance   14,036    8,805  
Intangible assets, net   375    -  
Deferred income taxes   7,229    2,352  
Other assets   1,226    473  
  Total assets  $643,499   $466,792  
            
Liabilities and Stockholders' Equity           
Deposits:           
 Non-interest bearing  $86,252   $48,186  
 Interest bearing   477,181    350,927  
  Total deposits   563,433    399,113  
Long-term borrowings   14,000    14,000  
Accrued interest payable   319    156  
Other liabilities   1,852    1,016  
  Total liabilities   579,604    414,285  
Stockholders' Equity:           
Preferred stock, par value $2 per share; authorized 5,000,000 shares; no shares issued and outstanding   -    -  
Common stock, par value $5 per share; authorized 20,000,000 shares; issued and outstanding 9,408,491 shares at September 30, 2014 and 8,520,299 shares at December 31, 2013   
47,042
   
42,602
 
Additional paid-in capital   14,252    13,052  
Retained earnings (accumulated deficit)   2,960    (2,290 )
Accumulated other comprehensive loss   (359 )  (857 )
  Total stockholders' equity   63,895    52,507  
  Total liabilities and stockholders' equity  $643,499   $466,792  
 
FIRST BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share data, unaudited)
 
             
   Three Months Ended  Nine Months Ended
   September 30,  September 30,
   2014  2013  2014  2013
Interest and Dividend Income                
Investment securities - taxable  $276  $241  $981  $666
Investment securities - tax-exempt   75   34   205   86
Federal funds sold   -   -   2   -
Interest bearing deposits with banks and other   63   40   180   118
Loans, including fees   6,129   4,026   16,729   11,214
  Total interest and dividend income   6,543   4,341   18,097   12,084
                 
Interest Expense                
Deposits   987   817   2,796   2,341
Borrowings   55   53   163   144
  Total interest expense   1,042   870   2,959   2,485
Net interest income   5,501   3,471   15,138   9,599
Provision for loan losses   977   296   1,491   810
Net interest income after provision for loan losses   4,524   3,175   13,647   8,789
                 
Non-Interest Income                
Service fees on deposit accounts   26   21   106   57
Loan fees   8   7   18   29
Title insurance fees   -   8   5   23
Income from bank-owned life insurance   103   37   231   110
Gains on sale of investment securities, net   -   -   34   18
Gains on sale of loans held for sale   23   -   37   134
Gain on acquisition of Heritage Community Bank   -   -   2,606   -
Gains on recovery of acquired loans   857   -   954   -
Other non-interest income   61   13   142   39
  Total non-interest income   1,078   86   4,133   410
                 
Non-Interest Expense                
Salaries and employee benefits   2,125   1,169   5,690   3,500
Occupancy and equipment   523   442   1,429   1,041
Legal fees   77   72   246   185
Other professional fees   252   227   839   383
Regulatory fees   165   3   389   170
Directors' fees   102   57   236   174
Data processing   196   101   543   306
Marketing and advertising   131   95   320   199
Travel and entertainment   58   36   163   103
Insurance   36   24   109   85
Other real estate owned expense, net   106   83   300   351
Merger-related expenses   116   39   579   51
Other expense   225   78   609   371
  Total non-interest expense   4,112   2,426   11,452   6,919
Income Before Income Taxes   1,490   835   6,328   2,280
Income tax expense   401   343   1,078   883
Net Income  $1,089  $492  $5,250  $1,397
                 
Basic earnings per share  $0.12  $0.10  $0.57  $0.30
Diluted earnings per share  $0.12  $0.10  $0.57  $0.30
                 
Basic weighted average common shares outstanding   9,408,491   4,686,965   9,188,573   4,686,965
Diluted weighted average common shares outstanding   9,469,294   4,744,088   9,256,116   4,720,805
                       
                       
   Three Months Ended September 30,  
   2014   2013  
   Average      Average   Average     Average  
   Balance   Interest  Rate (5)   Balance  Interest  Rate (5)  
   (dollars in thousands)  
Interest earning assets                          
Investment securities (1) (2)  $66,441   $377  2.25 % $58,462  $287  1.94 %
Loans (3)   478,249    6,129  5.08 %  305,633   4,026  5.23 %
Federal funds sold and interest                          
bearing deposits with banks   37,729    28  0.29 %  17,020   13  0.30 %
Restricted investment in bank stocks   1,369    14  4.06 %  1,084   9  3.29 %
Other investments   5,000    21  1.67 %  5,000   18  1.43 %
 Total interest earning assets (2)   588,788    6,569  4.43 %  387,199   4,353  4.46 %
Allowance for loan losses   (5,224 )          (4,442 )       
Non-interest earning assets   38,594            19,295         
 Total assets  $622,158           $402,052         
                           
Interest bearing liabilities                          
Interest bearing demand deposits  $19,326    17  0.35 % $11,932  $10  0.33 %
Money market deposits   90,830    119  0.52 %  73,855   130  0.70 %
Savings deposits   118,611    179  0.60 %  87,381   166  0.75 %
Time deposits   230,964    672  1.15 %  144,383   511  1.40 %
 Total interest bearing deposits   459,731    987  0.85 %  317,551   817  1.02 %
Borrowings   14,000    55  1.56 %  12,990   53  1.62 %
 Total interest bearing liabilities   473,731    1,042  0.87 %  330,541   870  1.04 %
Non-interest bearing deposits   82,866            38,782         
Other liabilities   1,769            1,286         
Stockholders' equity   63,792            31,443         
 Total liabilities and stockholders' equity  $622,158           $402,052         
Net interest income/interest rate spread (2)        5,527  3.56 %      3,483  3.42 %
Net interest margin (4)           3.72 %         3.57 %
Tax-equivalent adjustment (2)        (26 )         (12 )   
Net interest income       $5,501          $3,471     
                           

(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.             

                      
                      
   Nine Months Ended September 30,  
   2014   2013  
   Average     Average   Average     Average  
   Balance  Interest  Rate (5)   Balance  Interest  Rate (5)  
   (dollars in thousands)  
Interest earning assets                         
Investment securities (1) (2)  $73,624  $1,256  2.28 % $56,114  $781  1.86 %
Loans (3)   434,163   16,729  5.15 %  285,366   11,214  5.25 %
Federal funds sold and interest bearing deposits with banks   32,124   76  0.32 %  17,265   35  0.27 %
Restricted investment in bank stocks   1,348   40  3.97 %  952   24  3.37 %
Other investments   5,000   66  1.76 %  5,000   59  1.58 %
 Total interest earning assets (2)   546,259   18,167  4.45 %  364,697   12,113  4.44 %
Allowance for loan losses   (4,943 )         (4,326 )       
Non-interest earning assets   33,621           19,107         
 Total assets  $574,937          $379,478         
                          
Interest bearing liabilities                         
Interest bearing demand deposits  $16,972   45  0.35 % $11,433   30  0.35 %
Money market deposits   87,995   364  0.55 %  68,706   358  0.70 %
Savings deposits   116,097   555  0.64 %  86,098   498  0.77 %
Time deposits   205,342   1,832  1.19 %  132,879   1,455  1.46 %
 Total interest bearing deposits   426,406   2,796  0.88 %  299,116   2,341  1.05 %
Borrowings   14,000   163  1.56 %  11,112   144  1.73 %
 Total interest bearing liabilities   440,406   2,959  0.90 %  310,228   2,485  1.07 %
Non-interest bearing deposits   72,690           36,802         
Other liabilities   1,487           910         
Stockholders' equity   60,354           31,538         
 Total liabilities and stockholders' equity  $574,937          $379,478         
Net interest income/interest rate spread (2)       15,208  3.55 %      9,628  3.37 %
Net interest margin (4)          3.72 %         3.53 %
Tax-equivalent adjustment (2)       (70 )         (29 )   
Net interest income      $15,138          $9,599     

(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                 
QUARTERLY CONSOLIDATED FINANCIAL HIGHLIGHTS           
(in thousands, except share data, unaudited)                 
                  
   3Q2014  2Q2014  1Q2014  4Q2013  3Q2013  
EARNINGS                      
 Net interest income  $5,501  $5,415  $4,222  $3,607  $3,471  
 Provision for loan losses   977   336   178   733   296  
 Non-interest income   1,078   316   2,739   102   86  
 Non-interest expense   4,112   4,119   3,221   2,469   2,426  
 Income tax expense   401   353   324   196   343  
 Net income   1,089   923   3,238   311   492  
                       
PER SHARE DATA                      
 Basic earnings per share  $0.12  $0.10  $0.37  $0.04  $0.10  
 Diluted earnings per share   0.12   0.10   0.37   0.04   0.10  
 Book value   6.79   6.68   6.54   6.16   6.73  
 Tangible book value   6.75   6.64   6.50   6.16   6.73  
                       
PERFORMANCE RATIOS                      
 Return on average assets   0.69 % 0.61 % 2.63 % 0.27 % 0.49 %
 Return on average equity   6.77 % 5.95 % 23.79 % 2.32 % 6.21 %
 Net interest margin (tax equivalent basis)   3.72 % 3.81 % 3.61 % 3.47 % 3.57 %
 Efficiency ratio   70.12 % 68.98 % 74.20 % 69.20 % 68.20 %
                       
MARKET DATA                      
 Market value per share - period end  $6.15  $6.00  $6.50  $6.34  $6.00  
 Market value / book value (x)   0.91   0.90   0.99   1.03   0.89  
 Period-end common shares outstanding   9,408   9,408   9,395   8,520   4,687  
 Market capitalization  $57,859  $56,448  $61,068  $54,017  $28,122  
                       
CAPITAL & LIQUIDITY                      
 Tangible equity / assets   9.87 % 10.23 % 10.19 % 11.25 % 7.41 %
 Equity / assets   9.93 % 10.29 % 10.26 % 11.25 % 7.41 %
 Loans / deposits   89.63 % 87.73 % 86.27 % 85.18 % 83.01 %
                       
ASSET QUALITY                      
 Net charge offs  $490  $165  $124  $600  $104  
 Annualized net charge offs / average loans   0.41 % 0.14 % 0.14 % 0.71 % 0.14 %
 Nonperforming loans  $4,666  $3,411  $3,175  $3,336  $2,953  
 Nonperforming loans / total loans   0.92 % 0.73 % 0.70 % 0.98 % 0.94 %
 Nonperforming assets  $7,014  $5,745  $5,539  $5,087  $4,727  
 Nonperforming assets / total assets   1.09 % 0.94 % 0.92 % 1.09 % 1.11 %
 Allowance for loan losses / total loans   1.09 % 1.08 % 1.05 % 1.38 % 1.45 %
                       
PERIOD-END DATA                      
 Total assets  $643,499  $610,645  $599,212  $466,792  $425,699  
 Total loans   505,008   466,878   450,424   339,975   314,008  
 Total deposits   563,433   532,147   522,102   399,113   378,283  
 Total stockholders' equity   63,895   62,847   61,453   52,507   31,561  
 Full-time equivalent employees   89   95   91   59   58  

Contact Information

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