SOURCE: First Bank

First Bank

October 25, 2016 16:38 ET

First Bank Third Quarter 2016 Net Income of $1.8 million, up 148.8% from 2015

Total Assets Surpass $1 Billion Threshold; Continued Strong Loan and Deposit Growth, Non-Interest Expenses Well Managed and Highly Favorable Asset Quality Metrics

HAMILTON, NJ--(Marketwired - October 25, 2016) - First Bank (NASDAQ: FRBA) today announced strong improvement to third quarter and year-to-date 2016 results. Net income for the quarter was $1.8 million or $0.16 per diluted share, compared to $724,000 or $0.08 per diluted share for the third quarter of 2015. Diluted earnings per share increased by 100%, despite a 2.0 million share increase in weighted average diluted shares outstanding from September 30, 2015. Third quarter net income growth was driven by higher net interest income reflecting continued strong loan growth, along with effective management of the Bank's non-interest expense. Net income for the first nine months of 2016 was $4.6 million, an increase of $1.4 million, or 43.7%, compared to the first nine months of 2015. Year-to-date net income improvement was also driven by net interest income growth coupled with managed expense growth.

2016 Performance Highlights:

  • Total net revenue (net interest income + non-interest income) for the quarter increased by 28.5%, or $1.7 million, to $7.8 million, compared to the prior year quarter
  • Total loans of $827.2 million at September 30, 2016 were up $218.4 million, or 35.9%, from September 30, 2015
  • Total deposits of $874.1 million at quarter end were up $171.8 million, or 24.5%, compared to third quarter 2015
  • Continued strong asset quality metrics with annualized net loan charge-offs to average loans of just 0.01% for the quarter, and nonperforming loans to total loans of 0.45% at September 30, 2016, down from 0.78% at September 30, 2015
  • Continued improvement in the Bank's efficiency ratio of 62.04% for the third quarter, down from 71.49% for third quarter 2015, and from 62.43% for second quarter 2016.

"Our team executed another highly productive and successful quarter where we continued to deploy the capital raised in the second quarter," said Patrick L. Ryan, President and Chief Executive Officer. "We continued the Bank's strong growth trajectory in the third quarter with year-to-date total loan and deposit growth of 19.9% and 18.3%, respectively, and with a 43.7% improvement in net income for the nine month period. Our respectable growth rates did not come at the expense of our prudent risk management, as our total nonperforming loans of $3.7 million were the lowest level we have experienced in nine quarters, and our efficiency ratio of 62.04% continued its downward trend over the last several quarters. Our strong loan generation and deposit gathering enabled us to eclipse an important growth threshold as we surpassed $1 billion in total assets for the first time in our history. Our active expense management has enabled the Bank to realize considerable operating leverage during 2016 with revenue growth well in excess of the increase in our non-interest expense. We believe that we are well positioned to continue our current growth trends in the fourth quarter of 2016 and into 2017, as we leverage our elevated brand awareness and strong capital position to compete for customers dislocated by the recent industry consolidation which is affecting our Central New Jersey markets."

Income Statement

The Bank's net interest income for third quarter 2016 was $7.5 million, an increase of $1.6 million, or 27.7%, compared to the third quarter of 2015. This growth was driven by a 27.0% increase in interest income primarily a result of a $217.1 million increase in average loan balances compared with third quarter 2015. This was somewhat offset by increased interest expense of $471,000 for the comparative quarters, which reflected average balance increases for both time deposits and transaction accounts.

Year-to-date net interest income totaled $21.1 million, an increase of $3.4 million, or 19.1%, compared to $17.7 million for the same period in 2015. The increase in net interest income for the nine months ended September 30, 2016 was driven by the same strong growth in average loans which increased by $206.5 million from the prior year period.

The third quarter 2016 net interest margin was 3.16%, an increase of twelve basis points compared to the linked second quarter of 2016, and an increase of two basis points compared to the prior year quarter.

The increase compared to second quarter 2016 was the result of a six basis point improvement in the yield on interest-earning assets, primarily loans, and a five basis-point drop in the rate paid on interest-bearing liabilities.

The provision for loan losses for the third quarter of 2016 totaled $291,000, a decrease of $740,000 or 71.8% compared to the third quarter of 2015, and a decrease of $348,000, or 54.5%, compared to $639,000 for the linked second quarter of 2016. The reduction in the provision, despite the loan growth for the quarter, is primarily the result of minimal net charge offs and strong asset quality. The provision for loan losses for the nine months ended September 30, 2016 totaled $1.74 million, an increase of $24,000 or 1.4% compared to $1.72 million for the same period in 2015. The provision level for the year-to-date period is reflective of the Bank's strong loan growth in 2016, as well as the improvement in asset quality metrics.

Third quarter 2016 non-interest income increased $120,000 to $384,000 compared to third quarter 2015, primarily a result of gains on recovery of acquired loans of $114,000, compared to $34,000 for third quarter 2015. Year-to-date non-interest income totaled $1.1 million, a decrease of $301,000, or 22.1%, compared to $1.4 million for the same period in 2015. This decrease was a result of a $400,000 decrease in gains on recovery of acquired loans in 2016, compared to the prior year period.

Non-interest expense for third quarter 2016 totaled $4.8 million, an increase of $462,000, or 10.7%, compared to $4.3 million for the prior year quarter. The increase in non-interest expense compared to third quarter 2015 was primarily a result of 18.6% increase in salaries and employee benefits which reflected the Bank's continued growth, as well as an employee incentive bonus accrual adjustment of $240,000 during the quarter. Year-to-date non-interest expense totaled $13.6 million, an increase of $555,000 or 4.2% compared to $13.1 million for the same period in 2015. The increase was primarily a result of increased salaries and employee benefits and higher occupancy and equipment costs in comparison to the nine month period of 2015.

Pre-provision net revenue[1] for the third quarter of 2016 was $2.9 million, an increase of $1.2 million, or 69.8%, compared to the third quarter of 2015, and an increase of $253,000, or 9.4%, compared to $2.7 million in the linked second quarter of 2016.

Income tax expense for the third quarter of 2016 was $955,000, compared to $661,000 for second quarter 2016. The increase, in comparison to second quarter 2016, resulted from higher pre-tax income and an additional $102,000 in tax expense that was recorded as a discrete item for changes in estimates relating to our prior year tax provision. The third quarter effective income tax rate was 34.7%, compared to 31.4% for second quarter 2016.

Balance Sheet

Total assets at September 30, 2016 were $1.0 billion, an increase of $152.2 million or 17.8% compared to December 31, 2015, and an increase of $199.7 million or 24.7% compared to September 30, 2015. Total loans were $827.2 million at September 30, 2016, an increase of $137.3 million or 19.9% compared to December 31, 2015, and an increase of $218.4 million or 35.9% compared to September 30, 2015. Total loans increased $25.7 million compared to the linked second quarter of 2016, net of $23.3 million in loan paydowns that occurred in the quarter.

Total deposits were $874.1 million at September 30, 2016, an increase of $135.1 million or 18.3% compared to December 31, 2015 and an increase of $171.8 million or 24.5% compared to September 30, 2015. Non-interest bearing deposits totaled $113.9 million at September 30, 2016, an increase of $13.9 million, or 13.9% from December 31, 2015, and an increase of $16.2 million, or 16.6% from September 30, 2015.

Stockholders' equity increased to $87.5 million at September 30, 2016, up $18.7 million or 27.2% compared to December 31, 2015 and an increase of $19.1 million, or 28.0%, from September 30, 2015.

Asset Quality

First Bank's asset quality metrics continued to improve during the third quarter and compare favorably to current peer and industry averages, reflective of disciplined risk management and underwriting standards. Net charge-offs were $30,000 for the third quarter of 2016, compared to $63,000 for the second quarter of 2016 and $626,000 for the third quarter of 2015. Net charge-offs as an annualized percentage of average loans were 0.01% in third quarter 2016, compared to 0.03% in the linked second quarter and 0.42% in third quarter 2015. Nonperforming loans as a percentage of total loans at September 30, 2016 were 0.45%, improved from 0.70% in the linked second quarter and 0.78% at September 30, 2015. The allowance for loan losses to nonperforming loans was 252.4% at September 30, 2016, compared with 161.5% at the end of the second quarter of 2016, and 151.4% at September 30, 2015.

As of September 30, 2016, the Bank exceeded all regulatory capital requirements to be considered well capitalized with a Tier 1 Leverage ratio of 8.88%, a Tier 1 Risk-Based capital ratio of 9.33%, a Common Equity Tier 1 Capital ("CET1") ratio of 9.33%, and a Total Risk-Based capital ratio of 12.66%.

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).

Conference Call
First Bank will host an earnings call on Wednesday, October 26, 2016 at 9:00 AM 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 January 24, 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 $1.0 billion in assets as of September 30, 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, 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, 
  2016  2015 
Assets        
Cash and due from banks $6,396  $10,032 
Interest bearing deposits in other banks  51,391   23,299 
  Cash and cash equivalents  57,787   33,331 
Interest bearing time deposits in other banks  7,943   4,125 
Investment securities available for sale  28,375   45,341 
Investment securities held to maturity (fair value of $53,796 at September 30, 2016 and $53,793 at December 31, 2015)  52,663   53,262 
Restricted investment in bank stocks  1,958   1,862 
Other investments  5,000   5,000 
Loans, net of deferred fees and costs  827,161   689,887 
 Less: Allowance for loan losses  9,296   7,940 
  Net loans  817,865   681,947 
Premises and equipment, net  3,420   3,449 
Other real estate owned, net  1,182   1,557 
Accrued interest receivable  2,200   2,056 
Bank-owned life insurance  20,909   14,572 
Intangible assets, net  239   286 
Deferred income taxes  7,559   7,935 
Other assets  585   778 
  Total assets $1,007,685  $855,501 
         
Liabilities and Stockholders' Equity        
Deposits:        
 Non-interest bearing $113,854  $99,966 
 Interest bearing  760,295   639,055 
  Total deposits  874,149   739,021 
Borrowings  21,573   24,000 
Subordinated debentures  21,614   21,533 
Accrued interest payable  944   612 
Other liabilities  1,942   1,572 
  Total liabilities  920,222   786,738 
Stockholders' Equity:        
Preferred stock, par value $2 per share; authorized 5,000,000 shares; no shares outstanding  -   - 
Common stock, par value $5 per share; authorized 20,000,000 shares; issued and outstanding 11,393,609 shares at September 30, 2016 and 9,470,157 shares at December 31, 2015  56,800   47,218 
Additional paid-in capital  18,677   14,510 
Retained earnings  12,033   7,433 
Accumulated other comprehensive loss  (47)  (398)
  Total stockholders' equity  87,463   68,763 
  Total liabilities and stockholders' equity $1,007,685  $855,501 
         
 
 
FIRST BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share data, unaudited)
 
         
  Three Months Ended Nine Months Ended
  September 30, September 30,
  2016 2015 2016 2015
Interest and Dividend Income            
Investment securities-taxable $247 $396 $882 $1,048
Investment securities-tax-exempt  125  127  376  325
Interest bearing deposits in other banks and other  102  53  279  178
Loans, including fees  9,340  7,150  26,574  21,036
 Total interest and dividend income  9,814  7,726  28,111  22,587
             
Interest Expense            
Deposits  1,941  1,434  5,666  4,030
Borrowings  18  55  145  163
Subordinated debentures  399  398  1,195  667
 Total interest expense  2,358  1,887  7,006  4,860
Net interest income  7,456  5,839  21,105  17,727
Provision for loan losses  291  1,031  1,743  1,719
Net interest income after provision for loan losses  7,165  4,808  19,362  16,008
             
Non-Interest Income            
Service fees on deposit accounts  38  30  119  95
Loan fees  21  8  56  31
Income from bank-owned life insurance  129  105  337  319
Gains on sale of investment securities, net  -  11  25  11
Gains on recovery of acquired loans  114  34  288  688
Other non-interest income  82  76  235  217
 Total non-interest income  384  264  1,060  1,361
             
Non-Interest Expense            
Salaries and employee benefits  2,684  2,263  7,185  6,772
Occupancy and equipment  671  632  1,996  1,787
Legal fees  63  58  215  241
Other professional fees  287  219  856  905
Regulatory fees  139  91  464  381
Directors' fees  107  101  340  329
Data processing  236  205  694  597
Marketing and advertising  125  143  375  380
Travel and entertainment  49  63  154  180
Insurance  50  43  160  146
Other real estate owned expense, net  118  251  360  581
Other expense  264  262  816  761
 Total non-interest expense  4,793  4,331  13,615  13,060
Income Before Income Taxes  2,756  741  6,807  4,309
Income tax expense  955  17  2,207  1,108
Net Income $1,801 $724 $4,600 $3,201
             
Basic earnings per share $0.16 $0.08 $0.46 $0.34
Diluted earnings per share $0.16 $0.08 $0.45 $0.34
             
Basic weighted average common shares outstanding  11,359,613  9,431,043  10,102,767  9,416,091
Diluted weighted average common shares outstanding  11,520,646  9,493,900  10,224,537  9,478,893
             
  
  
FIRST BANK AND SUBSIDIARIES 
AVERAGE BALANCE SHEETS WITH INTEREST AND AVERAGE RATES 
(in thousands, unaudited) 
                   
                   
  Three Months Ended September 30, 
  2016  2015 
  Average     Average  Average     Average 
  Balance  Interest  Rate (5)  Balance  Interest  Rate (5) 
  (dollars in thousands) 
Interest earning assets                      
Investment securities (1) (2) $79,685  $415  2.07% $106,963  $566  2.10%
Loans (3)  812,254   9,340  4.57%  595,171   7,150  4.77%
Interest bearing deposits in other banks  46,772   64  0.54%  35,084   23  0.26%
Restricted investment in bank stocks  1,294   20  6.15%  1,412   14  3.93%
Other investments  5,000   18  1.43%  5,000   16  1.27%
 Total interest earning assets (2)  945,005   9,857  4.15%  743,630   7,769  4.14%
Allowance for loan losses  (9,300)         (6,961)       
Non-interest earning assets  38,927          38,726        
 Total assets $974,632         $775,395        
                       
Interest bearing liabilities                      
Interest bearing demand deposits $97,924  $136  0.55% $62,464   110  0.70%
Money market deposits  127,669   201  0.63%  108,754   186  0.68%
Savings deposits  70,365   88  0.50%  84,821   107  0.50%
Time deposits  448,590   1,516  1.34%  315,832   1,031  1.30%
 Total interest bearing deposits  744,548   1,941  1.04%  571,871   1,434  0.99%
Borrowings  6,790   18  1.05%  14,000   55  1.56%
Subordinated debentures  21,600   399  7.39%  21,496   398  7.41%
 Total interest bearing liabilities  772,938   2,358  1.21%  607,367   1,887  1.23%
Non-interest bearing deposits  112,260          97,794        
Other liabilities  2,586          2,051        
Stockholders' equity  86,848          68,183        
 Total liabilities and stockholders' equity $974,632         $775,395        
Net interest income/interest rate spread (2)      7,499  2.94%      5,882  2.91%
Net interest margin (2) (4)         3.16%         3.14%
Tax-equivalent adjustment (2)      (43)         (43)   
Net interest income     $7,456         $5,839    
 
(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 
(in thousands, unaudited) 
                   
                   
  Nine Months Ended September 30, 
  2016  2015 
  Average     Average  Average     Average 
  Balance  Interest  Rate (5)  Balance  Interest  Rate (5) 
  (dollars in thousands) 
Interest earning assets                      
Investment securities (1) (2) $85,586  $1,386  2.16% $92,856  $1,484  2.14%
Loans (3)  775,786   26,574  4.58%  569,310   21,036  4.94%
Interest bearing deposits in other banks  43,079   171  0.53%  41,853   90  0.29%
Restricted investment in bank stocks  1,745   59  4.52%  1,375   41  3.99%
Other investments  5,000   49  1.31%  5,000   47  1.26%
 Total interest earning assets (2)  911,196   28,239  4.14%  710,394   22,698  4.27%
Allowance for loan losses  (8,728)         (6,621)       
Non-interest earning assets  37,369          38,320        
 Total assets $939,837         $742,093        
                       
Interest bearing liabilities                      
Interest bearing demand deposits $87,516  $416  0.63% $47,745  $253  0.71%
Money market deposits  122,807   630  0.69%  108,701   538  0.66%
Savings deposits  73,443   275  0.50%  92,849   374  0.54%
Time deposits  430,200   4,345  1.35%  304,775   2,865  1.26%
 Total interest bearing deposits  713,966   5,666  1.06%  554,070   4,030  0.97%
Borrowings  18,349   145  1.06%  14,015   163  1.55%
Subordinated debentures  21,572   1,195  7.39%  12,143   667  7.32%
 Total interest bearing liabilities  753,887   7,006  1.24%  580,228   4,860  1.12%
Non-interest bearing deposits  107,466          92,719        
Other liabilities  2,342          1,905        
Stockholders' equity  76,142          67,241        
 Total liabilities and stockholders' equity $939,837         $742,093        
Net interest income/interest rate spread (2)      21,233  2.90%      17,838  3.15%
Net interest margin (2) (4)         3.11%         3.36%
Tax-equivalent adjustment (2)      (128)         (111)   
Net interest income     $21,105         $17,727    
                       
(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 and employee data, unaudited) 
            
  3Q2016 2Q2016 1Q2016 4Q2015 3Q2015 
EARNINGS                
 Net interest income $7,456 $6,880 $6,769 $6,096 $5,839 
 Provision for loan losses  291  639  813  950  1,031 
 Non-interest income  384  316  360  282  264 
 Non-interest expense  4,793  4,453  4,369  4,665  4,331 
 Income tax expense  955  661  591  77  17 
 Net income  1,801  1,443  1,356  686  724 
                 
PER SHARE DATA                
 Basic earnings per share $0.16 $0.15 $0.14 $0.07 $0.08 
 Diluted earnings per share  0.16  0.15  0.14  0.07  0.08 
 Tangible book value (1)  7.66  7.49  7.39  7.23  7.18 
 Book value  7.68  7.51  7.42  7.26  7.21 
                 
PERFORMANCE RATIOS                
 Return on average assets (2)  0.74% 0.62% 0.60% 0.33% 0.37%
 Return on average equity (2)  8.25% 8.09% 7.83% 3.97% 4.21%
 Net interest margin, tax equivalent basis (2)  3.16% 3.04% 3.14% 3.05% 3.14%
 Efficiency ratio (1)  62.04% 62.43% 62.48% 73.79% 71.49%
 Pre-provision net revenue (1)  2,933 $2,680 $2,624 $2,006 $1,727 
                 
MARKET DATA (period-end)                
 Market value per share $8.38 $6.94 $6.94 $6.61 $6.21 
 Market value / book value  109.16% 92.43% 93.37% 91.03% 86.07%
 Common shares outstanding  11,393,609  11,392,776  9,497,776  9,470,157  9,470,407 
 Market capitalization $95,478 $79,066 $65,805 $62,597 $58,809 
                 
CAPITAL & LIQUIDITY                
 Tangible equity / assets (1)  8.66% 8.79% 7.65% 8.00% 8.42%
 Equity / assets  8.68% 8.81% 7.68% 8.04% 8.46%
 Loans / deposits  94.62% 94.04% 94.89% 93.35% 86.68%
                 
ASSET QUALITY                
 Net charge offs (recoveries) $30 $63 $294 $170 $626 
 Nonperforming loans  3,683  5,595  4,094  3,903  4,729 
 Nonperforming assets  4,895  7,270  5,793  5,489  6,567 
 Net charge offs (recoveries) / average loans (2)  0.01% 0.03% 0.16% 0.11% 0.42%
 Nonperforming loans / total loans  0.45% 0.70% 0.54% 0.57% 0.78%
 Nonperforming assets / total assets  0.49% 0.75% 0.63% 0.64% 0.81%
 Allowance for loan losses / total loans  1.12% 1.13% 1.12% 1.15% 1.18%
 Allowance for loan losses / nonperforming loans  252.40% 161.48% 206.62% 203.43% 151.41%
                 
PERIOD-END DATA                
 Total assets $1,007,685 $970,689 $917,441 $855,501 $808,031 
 Total loans  827,161  801,421  758,131  689,887  608,794 
 Total deposits  874,149  852,230  798,985  739,021  702,325 
 Total stockholders' equity  87,463  85,540  70,474  68,763  68,323 
 Full-time equivalent employees  104  107  102  99  103 
                  
(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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