SOURCE: First Bank

First Bank

October 28, 2015 18:18 ET

First Bank Reports Third Quarter 2015 Earnings of $724 Thousand; Total Assets Reach $808 Million

HAMILTON, NJ--(Marketwired - October 28, 2015) - First Bank (NASDAQ: FRBA) today announced third quarter 2015 results. Net income for the quarter was $724 thousand or $0.08 per diluted share, compared to net income of $1.1 million or $0.12 per diluted share for the third quarter of 2014 and $748 thousand or $0.08 per diluted share for the second quarter of 2015.

Third quarter 2015 net income included $398 thousand in interest expense paid on subordinated debt. Second quarter 2015 results included $269 thousand in interest expense paid on subordinated debt. The Bank had no subordinated debt outstanding in 2014. Book value per share was $7.22 at the end of the third quarter 2015, an increase of 4.9% compared to book value of $6.88 at year-end 2014.

Net income for the nine months ended September 30, 2015 was $3.2 million compared to $4.6 million for the same period in 2014. The decrease in net income was due primarily to the $2.6 million tax-free bargain purchase gain realized in the first quarter of 2014 on the acquisition of Heritage Community Bank ("HCB") partially offset by higher net interest income in the first nine months of 2015. Diluted earnings per share for the comparative periods were $0.34 and $0.50, respectively.

President and Chief Executive Officer Patrick L. Ryan discussed the results: "The third quarter had a number of non-typical items that impacted our results. In the quarter we took steps to "clean up" some old problems from acquired portfolios. We charged off approximately $600 thousand on a legacy First Bank problem loan that could not be successfully restructured and we took a $170 thousand charge on a former HCB owned real estate asset that needed to be revalued. A reduction in our tax expense helped to offset some of the additional expenses resulting from the items noted above.

"Outside of the unusual items, we had a pretty good quarter. Loans and deposits grew nicely. Asset quality continued to improve with reductions in problem loans and delinquency rates. Our newer branches continued to grow. And, our loan pipeline remains very strong as we head into the fourth quarter. The primary negative factor in the third quarter was continued net interest margin pressure. Not only does loan pricing remain very competitive, but deposit pricing pressure is starting to emerge. While we remain a growth company with significant operating leverage, we are taking an even closer look at our expenses to make sure we can realize improved profitability in this difficult, low-rate environment. To that end, we are consolidating one of our branches in Q4 and continue to actively manage non-interest expenses reflected in flat non-interest expense growth in the third quarter compared to the second quarter."

Ryan continued, "While we continue to focus on cost control, we also continue to look for unique growth opportunities. We recently uncovered an excellent opportunity in the Hunterdon County market. We found a great branch location in Flemington in front of an extremely active shopping center on Route 31. We submitted an application to our regulators for the new branch in mid-October and hope to have approvals in time to open the new location in early 2016. And, because we remain very-much a people business, we brought in an excellent, seasoned, market executive to lead our efforts in that market: Gene McCarthy. Gene was most recently with Peapack Gladstone Bank and M&T Bank, but Gene also served as the market leader when we worked together back at Yardville National Bank. Gene's experience, credit skills, and network of relationships will be a tremendous asset for us as we build our presence in Hunterdon County and throughout Central NJ. With growth coming from the Northern NJ market, Eastern PA, and with Hunterdon now expanding our presence in Central NJ, we remain confident we can achieve our goal of $1 billion in assets in early to mid-2017. If we can achieve that growth while maintaining our profit goals, we believe we will see substantial growth in earnings and book value. We would hope the market will recognize our execution through a stronger stock price."

Third Quarter 2015 Highlights

  • Balance Sheet
    • Total assets at September 30, 2015 were $808.0 million, an increase of $51.0 million or 6.7% compared to June 30, 2015, and an increase of $164.5 million or 25.6% compared to September 30, 2014.
    • Total loans reached $608.8 million at September 30, 2015, an increase of $28.0 million or 4.8% compared to June 30, 2015 and an increase of $103.8 million or 20.6% compared to September 30, 2014.
    • Loan portfolio composition at September 30, 2015:
      • Acquisition, Construction and Development (ACD) loans equaled 5.2% of total loans
      • Commercial Real Estate, Investor (CREI; including multi-family) loans equaled 43.6% of total loans
      • Commercial Real Estate, Owner-Occupied (CREO) loans equaled 23.1% of total loans
      • Commercial and Industrial (C&I) loans equaled 15.9% of total loans
      • Residential, Consumer and Other loans equaled 12.2% of total loans
    • Total deposits reached $702.3 million at September 30, 2015, an increase of $49.7 million or 7.6% compared to June 30, 2015 and an increase of $138.9 million or 24.7% compared to September 30, 2014. Non-interest bearing deposits totaled $97.7 million at September 30, 2015 or 13.9% of total deposits.
    • Stockholders' equity increased to $68.3 million at September 30, 2015.
    • Book value per share was $7.21 at September 30, 2015 compared to $7.12 per share at June 30, 2015 and $6.79 per share at September 30, 2014. Tangible book value per share was $7.18 at September 30, 2015, compared to $7.09 per share at June 30, 2015 and $6.75 per share at September 30, 2014.
  • Quarterly Income Statement
    • Net interest income for the third quarter of 2015 totaled $5.84 million, an increase of $83 thousand or 1.4% compared to $5.76 million for the second quarter of 2015 and an increase of $338 thousand or 6.1% compared to the third quarter of 2014.
    • Non-interest income for the third quarter of 2015 totaled $264 thousand compared to $265 thousand for the second quarter of 2015. When compared to the third quarter of 2014 non-interest income decreased $814 thousand. Gains on recovery of acquired loans totaled $34 thousand in the third quarter of 2015 compared to $30 thousand in the second quarter of 2015 and $857 thousand in the third quarter of 2014.
    • Non-interest expense for the third quarter of 2015 totaled $4.33 million, an increase of $36 thousand or 0.8% compared to $4.30 million for the second quarter of 2015 and an increase of $219 thousand or 5.3% compared to the third quarter of 2014.
    • Pre-tax income for the third quarter of 2015 totaled $741 thousand, a decrease of $353 thousand or 32.3% compared to $1.1 million for the second quarter of 2015 and a decrease of $749 thousand or 50.3% compared to the third quarter of 2014.
    • Income tax expense for the third quarter of 2015 totaled $17 thousand, a decrease of $329 thousand or 95.1% compared to $346 thousand for the second quarter of 2015 and a decrease of $384 thousand or 95.8% compared to the third quarter of 2014. In the third quarter of 2015 a tax benefit was recorded through tax expense as a discrete item for changes in estimates relating to our prior-year tax provision. Additionally, the Bank had a reduction in its calculated annual effective tax rate for the year. These adjustments resulted in a reduction in tax expense.
    • Net income for the third quarter of 2015 totaled $724 thousand, a decrease of $24 thousand or 3.2% compared to $748 thousand in the second quarter of 2015, and a decrease of $365 thousand or 33.5% compared to the third quarter of 2014.
    • Diluted earnings per share for the third and second quarters of 2015 totaled $0.08. Diluted earnings per share for the third quarter of 2015 decreased $0.04 compared to the third quarter of 2014.
    • The provision for loan losses in the third quarter of 2015 totaled $1.0 million, an increase of $399 thousand or 63.1% compared to $632 thousand for the second quarter of 2015 and an increase of $54 thousand or 5.5% compared to the third quarter of 2014.
    • Pre-provision net revenue1 for the third quarter was $1.73 million, an increase of $31 thousand or 1.8% compared to $1.70 million in the second quarter of 2015, and an increase of $24 thousand or 1.4% compared to the third quarter of 2014.
      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).
  • Year to Date Income Statement
    • Net interest income for the nine months ended September 30, 2015 totaled $17.7 million, an increase of $2.6 million or 17.1% compared to $15.1 million for the same period in 2014.
    • Non-interest income for the nine months ended September 30, 2015 totaled $1.4 million, a decrease of $2.7 million or 67.1% compared to $4.1 million for the same period in 2014. The bargain purchase gain of $2.6 million is included for the nine months ended September 30, 2014.
    • Non-interest expense for the nine months ended September 30, 2015 totaled $13.1 million, an increase of $1.6 million or 14.0% compared to $11.5 million for the same period in 2014.
    • The provision for loan losses for the nine months ended September 30, 2015 totaled $1.7 million, an increase of $228 thousand or 15.3% compared to $1.5 million for the same period in 2014.
  • Other items
    • The tax equivalent net interest margin (NIM) for the third quarter of 2015 was 3.14% compared to 3.24% for the second quarter of 2015 and 3.72% for the third quarter of 2014.
    • Non-performing assets (NPAs) were $6.6 million or 0.81% of total assets at September 30, 2015 compared to $6.9 million or 0.92% of total assets at June 30, 2015.
      • Non-accrual loans totaled $4.5 million or 0.75% of total loans at September 30, 2015 compared to non-accrual loans of $4.9 million or 0.84% of total loans at June 30, 2015.
      • Loans 30-89 days past due totaled $1.1 million at September 30, 2015 compared to $4.4 million at June 30, 2015. Loans over 90 days past due or more and still accruing at September 30, 2015 totaled $185 thousand. We had no loans over 90 days past due or more and still accruing at June 30, 2015.
      • Other real estate owned and other repossessed assets totaled $1.8 million at September 30, 2015 and $2.1 million at June 30, 2015.
    • Regulatory capital ratios at September 30, 2015:
      • Tier 1 Leverage ratio of 8.71%
      • Tier 1 Risk-Based capital ratio of 9.61%
      • Total Risk-Based capital ratio of 13.68%
    • The allowance for loan losses (ALLL) to total loans at September 30, 2015 was 1.18% compared to 1.16% at June 30, 2015.
    • 103 full-time equivalent employees (FTEs) at September 30, 2015, compared to 105 at June 30, 2015.

About First Bank

First Bank (www.firstbanknj.com) is a New Jersey state-chartered bank with ten full-service branches in Cranbury, Denville, Ewing, Hamilton, Lawrence, Randolph (2), Somerset and Williamstown, New Jersey, and Trevose, Pennsylvania. With $808 million in assets as of September 30, 2015, 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, and results of regulatory exams, among other factors.

 
FIRST BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands, except share data, unaudited)
 
   September 30,  December 31,
   2015  2014
Assets      
Cash and due from banks  $9,045   $4,352  
Interest bearing deposits with banks   54,767    16,018  
 Cash and cash equivalents   63,812    20,370  
Interest bearing time deposits with banks   5,122    5,183  
Investment securities available for sale   47,314    40,390  
Investment securities held to maturity (fair value of $55,096 at September 30, 2015 and $34,734 at December 31, 2014)   54,295    34,273  
Restricted investment in bank stocks   1,412    1,304  
Other investments   5,000    5,000  
Loans, net of deferred fees and costs   608,794    547,759  
 Less: Allowance for loan losses   7,160    6,104  
  Net loans   601,634    541,655  
Premises and equipment, net   3,472    3,452  
Other real estate owned, net   1,765    2,182  
Accrued interest receivable   1,743    1,724  
Bank-owned life insurance   14,466    14,147  
Intangible assets, net   303    356  
Deferred income taxes   6,884    6,864  
Other assets   809    558  
 Total assets  $808,031   $677,458  
            
Liabilities and Stockholders' Equity           
Deposits:           
 Non-interest bearing  $97,664   $91,972  
 Interest bearing   604,661    504,510  
  Total deposits   702,325    596,482  
Long-term borrowings   14,000    14,000  
Subordinated debentures   21,511    -  
Accrued interest payable   965    337  
Other liabilities   907    1,880  
 Total liabilities   739,708    612,699  
Stockholders' Equity:           
Preferred stock, par value $2 per share; 5,000,000 shares authorized; no shares outstanding   -    -  
Common stock, par value $5 per share; 20,000,000 shares authorized; issued and outstanding 9,470,407 shares at September 30, 2015 and 9,408,491 shares at December 31, 2014   47,218    47,042  
Additional paid-in capital   14,518    14,301  
Retained earnings   6,747    3,546  
Accumulated other comprehensive loss   (160 )  (130 )
 Total stockholders' equity   68,323    64,759  
 Total liabilities and stockholders' equity  $808,031   $677,458  
         
 
FIRST BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share data, unaudited)
 
   Three Months Ended  Nine Months Ended
   September 30,  September 30,
   2015  2014  2015  2014
Interest and Dividend Income            
Investment securities-taxable  $396  $276  $1,048  $981
Investment securities-tax-exempt   127   75   325   205
Federal funds sold   -   -   -   2
Interest bearing deposits with banks and other   53   63   178   180
Loans, including fees   7,150   6,129   21,036   16,729
 Total interest and dividend income   7,726   6,543   22,587   18,097
                 
Interest Expense                
Deposits   1,434   987   4,030   2,796
Long-term borrowings   55   55   163   163
Subordinated debentures   398   -   667   -
 Total interest expense   1,887   1,042   4,860   2,959
Net interest income   5,839   5,501   17,727   15,138
Provision for loan losses   1,031   977   1,719   1,491
Net interest income after provision for loan losses   4,808   4,524   16,008   13,647
                 
Non-Interest Income                
Service fees on deposit accounts   30   26   95   106
Loan fees   8   8   31   18
Income from bank-owned life insurance   105   103   319   231
Gains on sale of investment securities   11   -   11   34
Gains on sale of loans held for sale   -   23   -   37
Gain on acquisition of Heritage Community Bank   -   -   -   2,606
Gains on recovery of acquired loans   34   857   688   954
Other non-interest income   76   61   217   147
 Total non-interest income   264   1,078   1,361   4,133
                 
Non-Interest Expense                
Salaries and employee benefits   2,263   2,125   6,772   5,690
Occupancy and equipment   632   523   1,787   1,429
Legal fees   58   77   241   246
Other professional fees   219   252   905   839
Regulatory fees   91   165   381   389
Directors' fees   101   102   329   236
Data processing   205   196   597   543
Marketing and advertising   143   131   380   320
Travel and entertainment   63   58   180   163
Insurance   43   36   146   109
Other real estate owned expense, net   251   106   581   300
Merger-related expenses   -   116   -   579
Other expense   262   225   761   609
 Total non-interest expense   4,331   4,112   13,060   11,452
Income Before Income Taxes   741   1,490   4,309   6,328
Income tax expense   17   401   1,108   1,733
Net Income  $724  $1,089  $3,201  $4,595
                 
Basic earnings per share  $0.08  $0.12  $0.34  $0.50
Diluted earnings per share  $0.08  $0.12  $0.34  $0.50
                 
Basic weighted average common shares outstanding   9,431,043   9,408,491   9,416,091   9,188,573
Diluted weighted average common shares outstanding   9,493,900   9,469,294   9,478,893   9,256,116
             
 
FIRST BANK AND SUBSIDIARIES
AVERAGE BALANCE SHEETS WITH INTEREST AND AVERAGE RATES
(unaudited)
                   
   Three Months Ended September 30,
   2015  2014
   Average     Average  Average     Average
   Balance  Interest  Rate (5)  Balance  Interest  Rate (5)
   (dollars in thousands)
Interest earning assets                  
Investment securities (1) (2)  $106,963   $566   2.10 % $66,441   $377   2.25 %
Loans (3)   595,171    7,150   4.77 %  478,249    6,129   5.08 %
Interest bearing deposits with banks   35,084    23   0.26 %  37,729    28   0.29 %
Restricted investment in bank stocks   1,412    14   3.93 %  1,369    14   4.06 %
Other investments   5,000    16   1.27 %  5,000    21   1.67 %
 Total interest earning assets (2)   743,630    7,769   4.14 %  588,788    6,569   4.43 %
Allowance for loan losses   (6,961 )           (5,224 )         
Non-interest earning assets   38,726             38,594           
 Total assets  $775,395            $622,158           
                              
Interest bearing liabilities                             
Interest bearing demand deposits  $62,464   $110   0.70 % $19,326   $17   0.35 %
Money market deposits   108,754    186   0.68 %  90,830    119   0.52 %
Savings deposits   84,821    107   0.50 %  118,611    179   0.60 %
Time deposits   315,832    1,031   1.30 %  230,964    672   1.15 %
Total interest bearing deposits   571,871    1,434   0.99 %  459,731    987   0.85 %
Long-term borrowings   14,000    55   1.56 %  14,000    55   1.56 %
Subordinated debentures   21,496    398   7.41 %  -    -   -  
 Total interest bearing liabilities   607,367    1,887   1.23 %  473,731    1,042   0.87 %
Non-interest bearing deposits   97,794             82,866           
Other liabilities   2,051             1,769           
Stockholders' equity   68,183             63,792           
 Total liabilities and stockholders' equity  $775,395            $622,158           
Net interest income/interest rate spread (2)        5,882   2.91 %       5,527   3.56 %
Net interest margin (2) (4)            3.14 %           3.72 %
Tax-equivalent adjustment (2)        (43 )           (26 )    
Net interest income       $5,839            $5,501      
                              
   
(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)
                   
   Nine Months Ended September 30,
   2015  2014
   Average     Average  Average     Average
   Balance  Interest  Rate (5)  Balance  Interest  Rate (5)
   (dollars in thousands)
Interest earning assets                  
Investment securities (1) (2)  $92,856   $1,484   2.14 % $73,624   $1,256   2.28 %
Loans (3)   569,310    21,036   4.94 %  434,163    16,729   5.15 %
Federal funds sold and interest bearing deposits with banks   41,853    90   0.29 %  32,124    76   0.32 %
Restricted investment in bank stocks   1,375    41   3.99 %  1,348    40   3.97 %
Other investments   5,000    47   1.26 %  5,000    66   1.76 %
 Total interest earning assets (2)   710,394    22,698   4.27 %  546,259    18,167   4.45 %
Allowance for loan losses   (6,621 )           (4,943 )         
Non-interest earning assets   38,320             33,621           
 Total assets  $742,093            $574,937           
                              
Interest bearing liabilities                             
Interest bearing demand deposits  $47,745   $253   0.71 % $16,972   $45   0.35 %
Money market deposits   108,701    538   0.66 %  87,995    364   0.55 %
Savings deposits   92,849    374   0.54 %  116,097    555   0.64 %
Time deposits   304,775    2,865   1.26 %  205,342    1,832   1.19 %
Total interest bearing deposits   554,070    4,030   0.97 %  426,406    2,796   0.88 %
Long-term borrowings   14,015    163   1.55 %  14,000    163   1.56 %
Subordinated debentures   12,143    667   7.32 %  -    -   -  
 Total interest bearing liabilities   580,228    4,860   1.12 %  440,406    2,959   0.90 %
Non-interest bearing deposits   92,719             72,690           
Other liabilities   1,905             1,487           
Stockholders' equity   67,241             60,354           
 Total liabilities and stockholders' equity  $742,093            $574,937           
Net interest income/interest rate spread (2)        17,838   3.15 %       15,208   3.55 %
Net interest margin (2) (4)            3.36 %           3.72 %
Tax-equivalent adjustment (2)        (111 )           (70 )    
Net interest income       $17,727            $15,138      
                              
   
(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 FINANCIAL HIGHLIGHTS
(in thousands, except share data, unaudited)
                
   3Q2015  2Q2015  1Q2015  4Q2014  3Q2014
EARNINGS               
 Net interest income  $5,839   $5,756   $6,132   $6,075   $5,501  
 Provision for loan losses   1,031    632    56    947    977  
 Non-interest income   264    265    832    966    1,078  
 Non-interest expense   4,331    4,295    4,434    4,368    4,112  
 Income tax expense   17    346    745    484    401  
 Net income   724    748    1,729    1,242    1,089  
                           
PER SHARE DATA                          
 Basic earnings per share  $0.08   $0.08   $0.18   $0.13   $0.12  
 Diluted earnings per share   0.08    0.08    0.18    0.13    0.12  
 Tangible book value (1)   7.18    7.09    7.03    6.85    6.75  
 Book value   7.21    7.12    7.07    6.88    6.79  
                           
PERFORMANCE RATIOS                          
 Return on average assets (2)   0.37 %  0.40 %  1.00 %  0.74 %  0.69 %
 Return on average equity (2)   4.21 %  4.44 %  10.63 %  7.55 %  6.77 %
 Net interest margin, tax equivalent basis (2)   3.14 %  3.24 %  3.74 %  3.84 %  3.72 %
 Efficiency ratio (1)   71.49 %  71.69 %  69.94 %  68.91 %  70.12 %
 Pre-provision net revenue (1)  $1,727   $1,696   $2,056   $2,212   $1,726  
                           
MARKET DATA (period-end)                          
 Market value per share  $6.21   $6.00   $6.03   $6.24   $6.15  
 Market value / book value   86.07 %  84.24 %  85.34 %  90.65 %  90.55 %
 Common shares outstanding   9,470    9,435    9,437    9,408    9,408  
 Market capitalization  $58,809   $56,610   $56,905   $58,706   $57,859  
                           
CAPITAL & LIQUIDITY                          
 Tangible equity / assets (1)   8.42 %  8.83 %  9.08 %  9.51 %  9.87 %
 Equity / assets   8.46 %  8.88 %  9.12 %  9.56 %  9.93 %
 Loans / deposits   86.68 %  88.98 %  84.08 %  91.83 %  89.63 %
                           
ASSET QUALITY                          
 Net charge offs (recoveries)  $626   $58   $(21 ) $354   $490  
 Nonperforming loans   4,729    4,887    5,414    7,112    4,666  
 Nonperforming assets   6,567    6,949    7,521    9,394    7,014  
 Net charge offs (recoveries) / average loans (2)   0.42 %  0.04 %  (0.02 %)  0.27 %  0.41 %
 Nonperforming loans / total loans   0.78 %  0.84 %  0.99 %  1.30 %  0.92 %
 Nonperforming assets / total assets   0.81 %  0.92 %  1.03 %  1.39 %  1.09 %
 Allowance for loan losses / total loans   1.18 %  1.16 %  1.13 %  1.11 %  1.09 %
 Allowance for loan losses / nonperforming loans   151.41 %  138.22 %  114.17 %  85.83 %  118.11 %
                           
PERIOD-END DATA                          
 Total assets  $808,031   $757,039   $730,935   $677,458   $643,499  
 Total loans   608,794    580,760    545,074    547,759    505,008  
 Total deposits   702,325    652,665    648,316    596,482    563,433  
 Total stockholders' equity   68,323    67,198    66,684    64,759    63,895  
 Full-time equivalent employees   103    105    94    94    89  
                           
   
(1) Non-U.S. GAAP financial measure that we believe provides management and investors with information that is useful in understanding our  
financial performance and condition.  
(2) Annualized.  

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