First Bank Reports Second Quarter 2017 Net Income of $2.0 Million, an Increase of 38% From 2016

Year-To-Date Net Income up 40% to $3.9 Million

For the 2^nd Quarter and Six Months: Continued Strong Loan Growth, Efficiency Improvement, Stable and Favorable Asset Quality Metrics, Strong Period End Capital Levels

HAMILTON, N.J., July 24, 2017 (GLOBE NEWSWIRE) -- First Bank (Nasdaq:FRBA) today announced improved second quarter and six month 2017 results.  Net income for the quarter was $2.0 million or $0.15 per diluted share, compared to $1.4 million or $0.15 per diluted share for the second quarter of 2016. Diluted earnings per share equaled the prior year quarter despite a 3.4 million share increase in weighted average diluted shares outstanding from second quarter 2016. The increase in second quarter net income was driven by net interest income growth of 25.8%, which reflected continued strong loan generation, along with effective management of the Bank’s non-interest expense despite continued growth.  Net income for the first six months of 2017 was $3.9 million, an increase of $1.1 million, or 40.4%, compared to 2016. Diluted earnings per share for the first six months of 2017 were $0.32, an increase of $0.03, or 10.3%, over the prior year period. The increase in net income for the six month period was also driven by strong net interest income growth coupled with managed expense growth.

2017 Performance Highlights:

• Total net revenue (net interest income + non-interest income) for the quarter increased by 26.1%, or $1.9 million, to $9.1 million, compared to the prior year quarter
• Total loans of $993.4 million at June 30, 2017 were up $95.0 million, or 10.6%, from December 31, 2016, and up $192.0 million, or 24.0% from June 30, 2016
• Total deposits of $946.2 million at June 30, 2017 were up $51.2 million, or 5.7%, compared to the 2016 year end, and up $93.9 million, or 11.0% from June 30, 2016
• Continued strong asset quality metrics with annualized net loan charge-offs to average loans of just 0.01% for second quarter 2017 compared to 0.03% for second quarter 2016. Nonperforming loans to total loans of 0.49% at June 30, 2017 decreased by 21 basis points compared to 0.70% at June 30, 2016, and improved by eight basis points compared to 0.57% on March 31, 2017 
• Continued improvement in the Bank’s efficiency ratio¹ of 58.21% for the second quarter, down from 62.43% for second quarter 2016, and from 61.32% for first quarter 2017.

¹ The efficiency ratio is a non-GAAP financial measure.  For a reconciliation of this non-GAAP financial measure, along with the other non-GAAP financial measures in this press release, to their comparable GAAP measures, see page 11 of this press release.

“The First Bank team produced another highly productive effort during the second quarter of 2017, characterized by double-digit earnings growth, a successful follow-on stock offering, measurable progress toward the completion of our Bucks County Bank acquisition and operational successes that should contribute to future performance,” said Patrick L. Ryan, President and Chief Executive Officer. “During the second quarter we continued to productively invest our funding with loan growth of $78.1 million, and we established a new “commercial deposit division” to elevate the services provided to our commercial customers and deepen business relationships with this important segment of our client base. The effect of the effort can be seen in our non-interest bearing deposits, which grew 4.2% from March 31, 2017. Business lending, a focus area, was active during the first six months of 2017 as we grew our C&I loan portfolio by 11.7% annualized compared to 2016 year end. Importantly, even with the strong lending activity we have demonstrated over the last two years, our asset quality metrics have remained very solid. We made significant progress in closing of our planned acquisition of Bucks County Bank, gaining regulatory approval for the transaction to proceed to a scheduled vote by our shareholders and Bucks County shareholders, which is expected to occur in the third quarter. We finished the second quarter with very strong capital levels reflecting our successful stock offering of approximately $40 million in gross proceeds. We believe that this significant progress achieved during the second quarter has us well positioned for the remainder of 2017.”

Income Statement

The Bank’s net interest income for second quarter 2017 was $8.7 million, an increase of $1.8 million, or 25.8%, compared to $6.9 million in the second quarter of 2016. This growth was driven by a $2.1 million, or 22.4%, increase in interest and dividend income primarily a result of a $154.9 million increase in average loan balances compared with the second quarter of 2016. This was modestly offset by increased interest expense of $297,000 for the comparative quarter, which reflected average balance increases for both transaction accounts and borrowings.

Six month net interest income totaled $16.8 million, an increase of $3.1 million, or 22.7%, compared to $13.6 million for 2016. The increase in 2017 net interest income was also driven by the same strong growth in average loans which increased by $161.8 million from the same prior year period.

The second quarter 2017 net interest margin was 3.23%, an increase of 19 basis points compared to the prior year quarter, and an increase of seven basis points compared to the linked first quarter of 2017. The increase compared to second quarter 2016 was primarily the result of higher average interest-earning assets (primarily loans) and a 14 basis point improvement in the rate paid on interest-earning assets. This increase was driven by Federal Reserve rate increases which helped to increase our yield on interest earnings assets, particularly our variable rate loans, and our ability to shift our deposit mix slightly out of time deposits while maintaining stable rates on our other deposit products.

The provision for loan losses for the second quarter of 2017 totaled $806,000, an increase of $167,000 compared to the second quarter of 2016, and an increase of $368,000 compared to $438,000 for the linked first quarter of 2017. The increase in the provision compared to second quarter 2016, reflected continued growth to the Bank’s commercial loan portfolio. The provision for loan losses for the first six months of 2017 totaled $1.2 million compared to $1.5 million for the same period in 2016. The six month provision is reflective of the Bank’s continued strong loan growth in 2017, as well as its stable asset quality metrics.

Second quarter 2017 non-interest income increased $106,000, to $422,000, compared to $316,000 in second quarter 2016, primarily a result of higher income from bank owned life insurance and higher loan fees due to loan growth, compared to second quarter 2016. Six month non-interest income totaled $881,000 for 2017 compared to $676,000 in 2016. The increase in 2017 six-month non-interest income was a result of higher income from gains on sale of loans and bank owned life insurance, partially offset by lower gains on recovery of acquired loans.

Non-interest expense for second quarter 2017 totaled $5.4 million, an increase of $916,000, compared to $4.5 million for the prior year quarter. The higher non-interest expense compared to second quarter 2016 was primarily a result of increased salaries and employee benefits and merger-related expenses. Non-interest expense for the first six months of 2017 totaled $10.7 million, an increase of $1.8 million or 20.8% compared to $8.8 million for the same period in 2016. The increase was primarily a result of increased salaries and employee benefits, merger-related expenses and other professional fees. The increase in salaries and employee benefits cost reflects the Bank’s significant loan and revenue growth which occurred in 2016 and the first six months of 2017. The Bank’s revenue growth rate outpaced the rate of growth for non-interest expense during the second quarter and for the first six months of 2017 resulting in positive operating leverage and an improved efficiency ratio.

Pre-provision net revenue² for the second quarter of 2017 was $3.8 million, an increase of $1.1 million, or 40.3%, compared to the second quarter of 2016, and an increase of $517,000, or 15.9%, compared to $3.2 million in the linked first quarter of 2017. Pre-provision net revenue for the first six months of 2017 was $7.0 million, an increase of $1.7 million, or 32.1%, compared to the first six months of 2016.

Income tax expense for the second quarter of 2017 was $914,000, an increase of $253,000 compared to $661,000 for second quarter 2016. The increase was driven by higher pre-tax income as the Bank’s second quarter 2017 effective income tax rate remained stable at 31.5% compared to 31.4% for second quarter 2016.  

² Pre-provision net revenue is a non-GAAP financial measure.  For a reconciliation of this non-GAAP financial measure, along with the other non-GAAP financial measures in this press release, to their comparable GAAP measures, see page 11 of this press release.

Balance Sheet

Total assets at June 30, 2017 were $1.2 billion, an increase of $187.9 million, or 19.4%, compared to $970.7 million at June 30, 2016, due primarily to loan growth during the second quarter 2017. Total loans were $993.4 million at June 30, 2017, an increase of $192.0 million, or 24.0%, compared to June 30, 2016, and an increase of $95.0 million, or 10.6%, from the 2016 year end. Total loans increased $78.1 million compared to the linked first quarter of 2017. The growth during the second quarter was broadly distributed across the Bank’s commercial and consumer loan segments.   

Total deposits were $946.2 million at June 30, 2017, an increase of $93.9 million, or 11.0%, compared to June 30, 2016, and were up $51.2 million from December 31, 2016. Non-interest bearing deposits totaled $133.1 million at June 30, 2017, an increase of $14.5 million, or 12.2%, from December 31, 2016, reflective of expanded commercial lending relationships and the Bank’s recently created Commercial Deposit Division.

Stockholders’ equity increased to $131.0 million at June 30, 2017, up $42.2 million or 47.5% compared to December 31, 2016, primarily a result of the capital offering completed in June 2017 which raised $37.5 million in net new capital, as well as a $3.7 million increase in retained earnings.

Asset Quality

First Bank’s asset quality metrics remained stable during the second quarter, reflective of disciplined risk management and underwriting standards. Net charge-offs were $22,000 for the second quarter of 2017, compared to $63,000 for second quarter 2016 and $146,000 for the first quarter of 2017. Net charge-offs as an annualized percentage of average loans were 0.01% in second quarter 2017, compared to 0.06% in the linked first quarter and 0.03% in second quarter 2016. Nonperforming loans as a percentage of total loans at June 30, 2017 were 0.49%, compared with 0.70% on June 30, 2016 and 0.57% at March 31, 2017. The allowance for loan losses to nonperforming loans was 221.77% at June 30, 2017, compared with 161.48% at the end of second quarter 2016, and 193.35% at March 31, 2017.

As of June 30, 2017, the Bank exceeded all regulatory capital requirements to be considered well capitalized with a Tier 1 Leverage ratio of 11.74% a Tier 1 Risk-Based capital ratio of 11.83%, a Common Equity Tier 1 Capital ("CET1") ratio of 11.83%, and a Total Risk-Based capital ratio of 14.80%.

Follow-On Offering Completed in Second Quarter

The Bank announced during the second quarter that it had completed its public offering of approximately 3.5 million shares of its common stock, including an underwriters’ over-allotment of approximately 219,000 shares, which raised $37.5 million in additional capital, net of expenses. The Company expects to continue to use the net proceeds from the offering for general corporate purposes, including the support of additional growth.

Commercial Deposit Division Added

In June, the Bank announced the establishment of a new commercial deposit division focused on deposits and cash management services for commercial clients. First Bank’s new division targets mid- to large-size companies with more sophisticated deposit and cash management needs and provides a proactive consultative approach to addressing client needs.

Cash Dividend Declared

On July 18, 2017 the Board of Directors declared a quarterly cash dividend of $0.02 per share to common shareholders of record at the close of business on August 10, 2017, and payable on August 24, 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, July 25, 2017 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 (access code 10110137) from one hour after the end of the conference call until November 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 $1.2 billion in assets as of June 30, 2017, First Bank offers a traditional range of deposit and loan products to individuals and mid- to large-size 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 10-K under the caption “Item 1A-Risk Factors”, and general economic conditions, trends in interest rates, the ability of our borrowers to repay their loans, the ability to obtain required shareholder approvals of the Bucks County Bank merger, the ability to complete such merger as expected and within the expected timeframe, the possibility that one or more of the conditions to the completion of such merger may not be satisfied, and results of regulatory exams, among other factors. Because of these uncertainties and the assumptions on which this discussion and the forward-looking statements are based, actual future operations and results in the future may differ materially from those indicated herein.  Readers are cautioned against placing undue reliance on such forward-looking statements.  Past results are not necessarily indicative of future performance.