First Bank Reports Third Quarter 2017 Net Income of $2.5 Million, an Increase of 38% Compared to 2016

Year-To-Date Net Income is Up 39% to $6.4 Million

For the Third Quarter and Year to Date: Continued Organic Loan Growth; Increased Operating Efficiency; Stable Asset Quality Metrics; Strong Period End Capital Levels

HAMILTON, N.J., Oct. 30, 2017 (GLOBE NEWSWIRE) -- First Bank (Nasdaq:FRBA) today announced results for the third quarter and first nine months of 2017.  Net income for the third quarter was $2.5 million or $0.16 per diluted share, compared to $1.8 million or $0.16 per diluted share for the third quarter 2016. Third quarter 2017 diluted earnings per share were consistent with the prior year quarter despite both a 4.2 million share increase in diluted weighted average shares outstanding and non-recurring merger-related expenses, excluding tax effects, of $0.08 per share. The increase in third quarter net income was driven by net interest income growth of 42.9%, which was primarily the result of organic loan growth.  

Net income for the first nine months of 2017 was $6.4 million, an increase of $1.8 million, or 39.3%, compared to $4.6 million for 2016. Diluted earnings per share for the first nine months of 2017 were $0.47, an increase of $0.02, or 4.4%, over the prior year period and were also reflective of increased weighted average diluted shares outstanding and merger-related expenses for the current period.

On September 18, 2017, First Bank announced that it had completed its merger with Bucks County Bank, previously headquartered in Doylestown, Pennsylvania. The acquisition of Bucks County Bank, effective September 15, expands First Bank’s Pennsylvania presence through the addition of four full-service locations in Doylestown, Warminster, Bensalem and Levittown, Pennsylvania. First Bank has added two former Bucks County Bank directors, John Harding and Christopher Chandor, to its Board of Directors. At the time of closing of the merger, excluding any purchase accounting adjustments, Bucks County Bank had $197.6 million in assets, $175.6 million in total loans, $155.1 million in total deposits and $21.1 million in stockholders’ equity. The effect of the merger on First Bank net income for the quarter and year to date was minimal as it reflected only 15 days of activity.

2017 Performance Highlights:

• Total net revenue (net interest income plus non-interest income) for the quarter increased by 44.0%, or $3.4 million, to $11.3 million, compared to $7.8 million for the prior year quarter.
• Total loans of $1.2 billion at September 30, 2017 were up $296.1 million, or 33.0%, from December 31, 2016, and up $367.4 million, or 44.4% from $827.2 million on September 30, 2016.
• Total deposits of $1.2 billion at September 30, 2017 were up $256.9 million, or 28.7%, from $894.9 million at December 31, 2016 and up $277.7 million, or 31.8% from $874.1 million at September 30, 2016.
• Continued strong asset quality metrics with annualized net loan charge-offs to average loans of 0.13% for third quarter 2017. Nonperforming loans to total loans of 0.56% at September 30, 2017 increased by 7 basis points compared to 0.49% for the linked second quarter 2017 and is 10 basis points lower compared to 0.66% at December 31, 2016. 
• Continued improvement in our efficiency ratio¹ of 50.21% for the third quarter, down from 62.04% for the third quarter 2016, and from 58.21% for the second quarter 2017.
• Completed acquisition of Bucks County Bank which added four full-service locations in Pennsylvania.

“Our third quarter results were an extension of First Bank’s very strong momentum from the first half of 2017, as we continued to grow earning assets, effectively manage our operating expenses, successfully completed the acquisition of Bucks County Bank and maintained our solid asset quality metrics,” said Patrick L. Ryan, President and Chief Executive Officer. “These efforts are mirrored in our strong improvement in top-line revenue which flowed down through to a nearly 38% increase in net income compared to third quarter 2016. Our earnings per share held steady compared to the prior year quarter despite an increase of approximately 4.2 million in diluted weighted average shares outstanding, as well as the impact of non-recurring merger-related expenses for the current quarter. Our effective two-pronged strategy of growing both organically and by a targeted acquisition enabled us to grow total assets by $439.1 million from the third quarter 2016, while at the same time continuing to reduce our efficiency ratio to a very respectable 50.21% for the current quarter.

“Shortly after we completed a very solid quarter, we entered into a definitive merger agreement to expand our service footprint into neighboring Burlington County by acquiring Delanco Bancorp, Inc. This is another strategic transaction into an area with compelling customer demographics and excellent growth potential which should further strengthen our balance sheet by diversifying our loan portfolio and providing expanded access to cost-effective retail funding. Importantly, we believe the transaction will be immediately accretive to First Bank earnings per share and we expect there to be minimal dilution to our tangible book value. We remain well-positioned to continue our solid performance for the remainder of 2017 and into 2018, and to continue to explore all appropriate growth opportunities.”

Income Statement

Our net interest income for the third quarter 2017 was $10.7 million, an increase of $3.2 million, or 42.9%, compared to $7.5 million in the third quarter 2016. This growth was driven by a $3.8 million, or 38.4%, increase in interest and dividend income primarily a result of a $231.7 million increase in average loan balances compared with the third quarter 2016. This was modestly offset by increased interest expense of $566,000 for the comparative quarter, which reflected average balance increases for both interest bearing deposits and borrowings.

Net interest income for the nine months ended September 30, 2017, totaled $27.4 million, an increase of $6.3 million, or 29.9%, compared to $21.1 million for 2016. The increase in net interest income was also driven by significant growth in average loans, primarily organic, which increased by $185.4 million from the prior year period.

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 the last page of this press release.

The third quarter 2017 net interest margin was 3.58%, an increase of 42 basis points compared to 3.16% for the prior year quarter, and an increase of 35 basis points compared to the linked second quarter 2017. The increase compared to third quarter 2016 and linked second quarter 2017 was primarily the result of a higher average loan yield reflected in a 41 basis point increase in the rate paid on interest-earning assets. The higher earning asset yield and subsequent higher net interest margin included the impact of a significant prepayment penalty related to the early payoff of a large commercial loan relationship which had the effect of adding 16 basis points to the net interest margin.   

The provision for loan losses for the third quarter 2017 totaled $716,000, an increase of $425,000 compared to $291,000 for the third quarter 2016, and a decrease of $90,000 compared to $806,000 for the linked second quarter 2017. The increase in the provision compared to third quarter 2016, reflected organic growth in our commercial loan portfolio and higher net loan charge-offs. Asset quality metrics were relatively stable for the comparable periods. The provision for loan losses for the first nine months of 2017 totaled $2.0 million compared to $1.7 million for the same period in 2016. The nine month provision is also reflective of our organic loan growth in 2017, as well as its continued stable asset quality metrics. 

Third quarter 2017 non-interest income increased $247,000, to $631,000, compared to $384,000 in the third quarter 2016, primarily a result of higher gains on sale of loans along with additional income from bank-owned life insurance. Nine month non-interest income totaled $1.5 million for 2017 compared to $1.1 million for 2016. Similar to the third quarter 2017, the increase in year to date non-interest income was a result of higher gains on sale of loans and an increase in income from bank-owned life insurance, partially offset by lower gains on recovery of acquired loans.

Non-interest expense for third quarter 2017 totaled $6.8 million, an increase of $2.0 million, or 41.4%, compared to $4.8 million for the prior year quarter. The higher non-interest expense compared to third quarter 2016 was primarily a result of merger-related expenses of $1.2 million, along with higher salaries and employee benefits, which increased by $284,000 and reflected, in part, the assimilation of former Bucks County Bank employees. Non-interest expense for the first nine months of 2017 totaled $17.4 million, an increase of $3.8 million or 28.1% compared to $13.6 million for the same period in 2016. The increase was also primarily a result of merger-related expenses and increased salaries and employee benefits. Excluding non-recurring merger-related expenses, the Bank’s revenue growth rate outpaced the rate of growth for non-interest expense during the third quarter and for the first nine months of 2017.

Pre-provision net revenue² for the third quarter 2017 was $5.5 million, an increase of $2.6 million, or 87.5%, compared to $2.9 million for the third quarter 2016, and an increase of $1.7 million, or 46.2%, compared to $3.8 million in the linked second quarter 2017.

Income tax expense for the third quarter 2017 was $1.3 million, an increase of $358,000 compared to $955,000 for third quarter 2016. The third quarter 2017 effective income tax rate was 34.6% compared to 34.7% for third 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 the last page of this press release.

Balance Sheet

Total assets at September 30, 2017 were $1.4 billion, an increase of $439.1 million, or 43.6%, compared to $1.0 billion at September 30, 2016 due primarily to loan growth, both organic and acquired. Total loans were $1.2 billion at September 30, 2017, an increase of $367.4 million, or 44.4%, compared to $827.2 million on September 30, 2016, and an increase of $296.1 million, or 33.0%, compared to $898.4 million at the 2016 year end. Total loans increased $201.1 million compared to $993.4 million for the linked second quarter 2017. The growth during the third quarter was broadly distributed across our commercial and consumer loan segments and included both originated and acquired loans.

Total deposits were $1.2 billion at September 30, 2017, an increase of $277.7 million, or 31.8%, compared to $874.1 million on September 30, 2016, and were up $256.9 million, or 28.7%, from December 31, 2016. Non-interest bearing deposits totaled $195.4 million at September 30, 2017, an increase of $76.8 million, or 64.8%, from December 31, 2016.

Stockholders’ equity increased to $163.0 million at September 30, 2017, up $74.2 million or 83.6% compared to $88.8 million at December 31, 2016. The increase was primarily a result of the common stock offering completed in June 2017, which raised $37.5 million in net new capital, the issuance of additional shares in the acquisition of Bucks County Bank which increased capital by $29.7 million and a $5.9 million increase in retained earnings for the nine-month period ended September 30, 2017.

Asset Quality

First Bank’s asset quality metrics remained stable during the third quarter, reflective of ongoing disciplined risk management and underwriting standards. Net charge-offs were $348,000 for the third quarter 2017, compared to $30,000 for third quarter 2016 and $22,000 for the second quarter 2017. Net charge-offs as an annualized percentage of average loans were 0.13% in third quarter 2017, compared to 0.01% for both the third quarter 2016 and the linked second quarter 2017. Nonperforming loans as a percentage of total loans at September 30, 2017 were 0.56%, compared with 0.66% at December 31, 2016, 0.45% at September 30, 2016 and 0.49% at June 30, 2017. The allowance for loan losses to nonperforming loans was 167.1% at September 30, 2017, compared with 164.7% at December 31, 2016, 252.4% at the end of third quarter 2016, and 221.8% at June 30, 2017.

As of September 30, 2017, the Bank exceeded all regulatory capital requirements to be considered well capitalized with a Tier 1 Leverage ratio of 12.41% a Tier 1 Risk-Based capital ratio of 11.38%, a Common Equity Tier 1 Capital ("CET1") ratio of 11.38%, and a Total Risk-Based capital ratio of 13.87%.

Definitive Agreement to Acquire Delanco Bancorp, Inc.

First Bank announced on October 18, 2017 that it had entered into a definitive merger agreement to acquire Delanco Bancorp, Inc. in a stock transaction for total consideration valued at approximately $13.5 million. Upon the closing of the transaction, Delanco Federal Savings Bank, the wholly owned bank subsidiary of Delanco Bancorp, Inc. will merge with and into First Bank. The merger has been unanimously approved by the boards of directors of both institutions. The transaction is expected to be completed in first quarter 2018, subject customary approvals and closing conditions. Delanco Federal Savings Bank is headquartered in Delanco, New Jersey, and serves its customers and communities through two full-service locations in Delanco and Cinnaminson, New Jersey. Delanco Federal Savings Bank has assets of approximately $126 million, loans of $85 million and deposits of $111 million as of June 30, 2017. 

Cash Dividend Declared

On October 17, 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 November 10, 2017, payable on November 24, 2017. The Board of Directors believes that this dividend provides shareholders an added tangible benefit, and that it is appropriate given our current financial performance, momentum and near-term prospects.

Conference Call

First Bank will host an earnings call on Tuesday, October 31, 2017 at 9:00 a.m. Eastern time.  The direct dial toll free number for the call is 844-825-9784.  For those unable to participate in the call, a replay will be available by dialing 1-877-344-7529 (access code 10112994) from one hour after the end of the conference call until January 29, 2018.  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 is a New Jersey state-chartered bank with 14 full-service branches in Cranbury, Denville, Ewing, Flemington, Hamilton, Lawrence, Randolph, Somerset and Williamstown, New Jersey, and Trevose, Doylestown, Warminster, Bensalem and Levittown, Pennsylvania. With $1.4 billion in assets as of September 30, 2017, 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 10-K under the caption “Item 1A. Risk Factors”, and any subsequent quarterly reports on Forms 10-Q 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 Delanco Bancorp 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.