First Bank Reports Second Quarter 2021 Net Income of $8.9 Million

For the Second Quarter and First Half of 2021: Continued Revenue and Asset Growth, Effective Management of Non-Interest Expense, and Solid Asset Quality Metrics

HAMILTON, N.J., July 26, 2021 (GLOBE NEWSWIRE) -- First Bank (Nasdaq Global Market: FRBA) today announced results for the three and six months ended June 30, 2021. Net income for the second quarter of 2021 was $8.9 million, or $0.45 per diluted share, compared to $4.1 million, or $0.21 per diluted share, for the second quarter of 2020. Return on average assets and return on average equity for the second quarter of 2021 were 1.48% and 14.26%, respectively, compared to 0.74% and 7.33%, respectively, for the second quarter of 2020. Net income for the first six months of 2021 was $18.6 million, or $0.93 per diluted share, compared to $7.4 million, or $0.36 per diluted share, for the same period in 2020.

Second Quarter and Year-to-Date 2021 Performance Highlights:

• Total net revenue (net interest income plus non-interest income) of $21.8 million for the quarter increased $3.6 million, or 19.5%, compared to $18.2 million for the prior year quarter.
• Total loans of $2.05 billion at June 30, 2021 increased $31.8 million, or 1.6%, from the end of the linked first quarter of 2021 and were up $6.4 million from December 31, 2020.
• Continued participation in the Paycheck Protection Program (PPP) with $5.7 million in new PPP loans originated during the quarter for a total of $107.9 million during the first six months of 2021. There were $59.6 million in PPP loans forgiven during the second quarter of 2021 and $105.1 million for the six months ended June 30, 2021. PPP loans outstanding at June 30, 2021 were $139.9 million.
• Total deposits of $2.04 billion at June 30, 2021 increased $132.6 million, or 7.0%, from December 31, 2020 and $65.7 million, or 3.3%, compared to March 31, 2021.
• Asset quality metrics remained solid during the quarter, with net charge-offs of $116,000, or an annualized 0.02% of average loans, for second quarter 2021, compared to net charge-offs of $1.0 million, or an annualized 0.21% of average loans, for second quarter 2020. Nonperforming loans were $9.6 million at June 30, 2021, $14.1 million on June 30, 2020, and $10.7 million on March 31, 2021. The ratio of nonperforming loans to total loans was 0.47% at June 30, 2021, down from 0.72% at June 30, 2020, and 0.53% at March 31, 2021.
• Continued effective non-interest expense management was reflected in the second quarter 2021 efficiency ratioⁱ of 46.66%, improved from 53.64% for second quarter 2020, and 47.66% for the linked first quarter of 2021.

“Our team delivered another quarter of very strong financial performance. During the second quarter we continued to focus on generating revenues, managing expenses, maintaining solid asset quality metrics and expanding relationships with new and existing customers,” said Patrick L. Ryan, President and Chief Executive Officer. “Our strong earnings performance is reflected in the recent improvement in our stock price. Through the first six months of the year, the price of our common stock grew by more than 44%, outpacing the broad-market Russell 3000® Index’s 14% by a wide margin. We were pleased that our growing market capitalization position earned us inclusion in this index for the third year in a row.”

“Net interest income and non-interest income combined to generate strong total net revenue of $21.8 million, up nearly 20% year-over-year. While total revenue was down slightly from the record level achieved in the first quarter of 2021, we were able to drive further improvement in our efficiency ratio as a result of our ability to effectively manage expenses. As a reminder, during the first quarter we consolidated two Mercer County branches into nearby locations and reduced our leased corporate office space, which benefitted our non-interest expenses in the second quarter and will continue to favorably impact expenses going forward.”

“Total deposits surpassed the $2 billion threshold, a record level for us, as we further improved our deposit mix during the quarter. Non-interest bearing deposits have grown over $110 million in the first six months of 2021 and now represent over 26% of total deposits. We have also been able to reduce higher cost time deposits and significantly lower our rates on all deposit types. These efforts are allowing us to successfully reduce our overall deposit costs, which is helping to drive core profitability higher.”

“We’re utilizing our strong liquidity position to fund loan growth with high-quality borrowers throughout our service footprint. Non-PPP loans rebounded nicely with $85.7 million in net loan growth during the second quarter. We maintained our solid asset quality position, reporting just two basis points of annualized net charge-offs to average loans, and we reduced both non-performing loans and non-performing assets during both the quarter and year ended June 30, 2021.”  

“Overall, we are very pleased with our performance through the first half of the year. Our team’s incredible efforts to help small businesses access critical funding during the past year have helped us attract new customers and deepen relationships with existing ones. With all our branch locations open and fully accessible to customers, and our reputation for personalized, relationship-based banking as strong as ever, we believe we are well-positioned for a strong and profitable second half of 2021.”

Income Statement

First Bank’s net interest income for the second quarter of 2021 was $20.4 million, an increase of $4.1 million, or 25.1%, compared to $16.3 million in the second quarter of 2020. This increase was driven by a $3.3 million decrease in total interest expense, along with an $839,000 increase in interest and dividend income.

Interest income increased primarily due to a $139.6 million increase in average loans compared with the second quarter of 2020. Interest income was also impacted by $1.3 million in PPP loan fee income during the second quarter of 2021 compared to $739,000 in the second quarter of 2020. Also contributing to the increase was prepayment penalty income of $730,000 for the quarter ended June 30, 2021 compared to $184,000 for the quarter ended June 30, 2020. The reduction in interest expense was primarily a result of an 85-basis point reduction for the average rates paid on interest-bearing deposits. Six-month 2021 net interest income totaled $40.5 million, an increase of $8.3 million, or 25.7%, compared to $32.2 million for the same period in 2020. The increase in the 2021 year to date net interest income was also driven by solid growth in average loans, which increased by $217.1 million, or 11.9%, from the prior year period, along with a 95-basis-point decrease in the interest rate for interest-bearing deposits.

The second quarter 2021 tax equivalent net interest margin was 3.57%, an increase of 50 basis points compared to the prior year quarter and a decrease of three basis points compared to the linked first quarter of 2021. The increase compared to second quarter 2020 was primarily the result of an 85-basis-point reduction in the average interest rate paid on interest-bearing deposits. The lower average cost of interest-bearing deposits is reflective of the continued repricing of time deposits, as well as lower interest rates for money markets, interest-bearing demand deposits and savings.   The decline in the margin compared to the first quarter of 2021 was primarily a result of an 11-basis-point decrease in interest earning asset yields, primarily loans. The year-to-date tax equivalent net interest margin was 3.58%, an increase of 40 basis points compared to the prior year period. The increase in the six-month net interest margin was principally a result of the lower cost of interest-bearing deposits, partially offset by lower earning asset yields.

First Bank reported a credit to the provision for loan losses of $162,000 for the second quarter of 2021, compared to a provision for loan losses of $3.0 million in the second quarter of 2020. The provision credit for the quarter ended June 30, 2021 was notably affected by an improving economic outlook combined with continued stable asset quality metrics, including annualized net charge-offs of 0.02% of average loans and nonperforming loans of 0.47% of total loans. For the year-to-date comparison, the Company reported a credit to the provision for loan losses of $1.2 million, compared to provision expense of $5.9 million for the same period in 2020. The variance in the six-month provision for loan losses was primarily due to the same factors as discussed for the three-month period.

Second quarter 2021 non-interest income decreased by $538,000 to $1.3 million, compared to $1.9 million in second quarter 2020, primarily the result of a $515,000 decrease in loan fees, comprised mostly of loan swap fees, and a $249,000 decrease in income from bank owned life insurance (BOLI) compared to the second quarter of 2020. Non-interest income totaled $3.6 million for the six months ended June 30, 2021, compared to $3.1 million for the same period in 2020. This increase in non-interest income for the first six months of 2021 was primarily a result of an increase of $732,000 in gains on the sale of loans, comprised mostly of SBA loans.

Non-interest expense for second quarter 2021 totaled $10.2 million, an increase of $388,000 compared to $9.8 million for the prior year quarter. The higher non-interest expense compared to second quarter 2020 was primarily a result of increased salaries and employee benefits expense partially offset by lower occupancy and equipment costs.

On a linked quarter basis, non-interest expense decreased $495,000 to $10.2 million for second quarter 2021 compared to $10.7 million for the first quarter of 2021. The lower non-interest expense compared to the linked first quarter of 2021 was primarily a result of reduced occupancy and equipment expenses.  

Non-interest expense for the first six months of 2021 totaled $20.8 million, an increase of $1.1 million, or 5.7%, compared to $19.7 million for the same period in 2020. The increase was primarily a result of increased salaries and employee benefits, as well as higher occupancy and equipment, marketing and data processing costs. These increases were partially offset by lower other expense.

Income tax expense for the three months ended June 30, 2021 was $2.9 million with an effective tax rate of 24.4%, compared to $1.3 million with an effective tax rate of 24.7% for the second quarter of 2020 and $3.1 million with an effective tax rate of 24.2% for the first quarter of 2021. Income tax expense for the six months ended June 30, 2021 was $6.0 million with an effective tax rate of 24.3%, compared to $2.4 million for the first six months of 2020 with an effective tax rate of 24.2%.

Balance Sheet

Total assets at June 30, 2021 were $2.44 billion, an increase of $142.5 million, or 6.2%, compared to $2.30 billion at June 30, 2020, and an increase of $96.8 million, or 4.1%, from December 31, 2020. Total loans were $2.05 billion at June 30, 2021, an increase of $98.9 million, or 5.1%, compared to $1.96 billion at June 30, 2020, and an increase of $6.4 million, or 0.3%, from the 2020 year-end. Total loans as of June 30, 2021 increased $31.8 million, or 1.6%, from $2.02 billion at March 31, 2021, reflecting organic, net non-PPP loan growth of $85.7 million, partially offset by a net decline in PPP loans of $53.9 million.

Total deposits were $2.04 billion at June 30, 2021, an increase of $65.7 million, or 3.3%, compared to $1.97 billion at March 31, 2021, and an increase of $132.6 million, or 7.0%, from December 31, 2020. Non-interest-bearing deposits totaled $534.5 million at June 30, 2021, an increase of $34.5 million, or 6.9%, from March 31, 2021, reflective of continued growth in commercial deposits primarily related to expanded business banking relationships.

Stockholders’ equity was $254.6 million at June 30, 2021, compared to $238.1 million on December 31, 2020. The growth in stockholder’s equity at June 30, 2021 was primarily a result of year-to-date net income of $18.6 million, partially offset by treasury stock repurchases of $1.3 million and cash dividends paid of $1.2 million during the six months ended June 30, 2021.

As of June 30, 2021, the Bank continued to exceed all regulatory capital requirements to be considered well capitalized, with a Tier 1 Leverage ratio of 9.84%, a Tier 1 Risk-Based capital ratio of 10.88%, a Common Equity Tier 1 Capital ratio of 10.88%, and a Total Risk-Based capital ratio of 13.30%.

Asset Quality

First Bank’s asset quality metrics have steadily improved during the past 12 months. Net charge-offs were $116,000 for the second quarter of 2021, compared to net charge-offs of $1.0 million for the second quarter of 2020 and net recoveries of $5,000 for the first quarter of 2021. Net charge-offs as an annualized percentage of average loans were 0.02% in second quarter 2021, compared to 0.21% in second quarter 2020. Nonperforming loans as a percentage of total loans at June 30, 2021 were 0.47%, compared with 0.72% on June 30, 2020 and 0.53% at March 31, 2021. Nonperforming loans were $9.6 million at June 30, 2021, down from $14.1 million on June 30, 2020, and down from $10.7 million on March 31, 2021. The allowance for loan losses to nonperforming loans was 236.95% at June 30, 2021, compared with 152.26% at the end of second quarter 2020, and 214.74% at March 31, 2021.

COVID-19 Response

First Bank participated in the PPP, established by the Coronavirus Aid, Relief, and Economic Securities Act (CARES Act), during 2020 and the first half of 2021. The PPP is a specialized low-interest loan program funded by the U.S. Treasury Department and administered by the U.S. Small Business Administration (SBA). The PPP provides borrower guarantees for lenders, as well as loan forgiveness incentives for borrowers that utilize the loan proceeds to cover compensation-related business operating costs. The PPP came to an end during the quarter ended June 30, 2021. As of June 30, 2021, First Bank had 1,024 PPP loans with outstanding balances of $139.9 million. During the first half of 2021, First Bank originated 783 new PPP loans totaling $107.9 million. During the first six months of 2021, PPP loans totaling $105.1 million were forgiven. During the six months ended June 30, 2021, the Bank realized $2.9 million in fee income on these loans as any deferred fees remaining on the forgiven loans were accelerated. As of June 30, 2021, the Bank had $4.5 million in remaining unamortized fees associated with outstanding balances of PPP loans.

First Bank continues to monitor and analyze its COVID-19 related financial hardship payment deferrals (COVID-19 deferrals) based on asset class and borrower type. As of June 30, 2021, the Bank’s population of COVID-19 deferrals was $11.7 million, or 0.57% of total loans, down from $22.1 million, or 1.1% of total loans, at March 31, 2021.
                                
Cash Dividend Declared

On July 20, 2021, First Bank’s Board of Directors declared a quarterly cash dividend of $0.03 per share to common stockholders of record at the close of business on August 6, 2021, payable on August 20, 2021.

Conference Call

First Bank will host its earnings call on Tuesday, July 27, 2021 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 10158104) from one hour after the end of the conference call until October 27, 2021. Replay information will also be available on First Bank’s 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 16 full-service branches in Cinnaminson, Cranbury, Delanco, Denville, Ewing, Flemington, Hamilton, Lawrence, Pennington, Randolph, Somerset and Williamstown, New Jersey; and Doylestown, Trevose, Warminster and West Chester, Pennsylvania. With $2.4 billion in assets as of June 30, 2021, First Bank offers a full 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.”

Forward Looking Statements

This press release contains certain forward-looking statements, either express or implied, within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements include information regarding First Bank’s future financial performance, business and growth strategy, projected plans and objectives, and related transactions, integration of acquired businesses, ability to recognize anticipated operational efficiencies, and other projections based on macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact economic trends, and any such variations may be material.  Such forward-looking statements are based on various facts and derived utilizing important assumptions, current expectations, estimates and projections about First Bank, any of which may change over time and some of which may be beyond First Bank’s control. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could” are generally forward-looking in nature and not historical facts, although not all forward-looking statements include the foregoing. Further, certain factors that could affect our future results and cause actual results to differ materially from those expressed in the forward-looking statements include, but are not limited to: whether First Bank can: successfully implement its growth strategy, including identifying acquisition targets and consummating suitable acquisitions; continue to sustain its internal growth rate; provide competitive products and services that appeal to its customers and target markets; difficult market conditions and unfavorable economic trends in the United States generally, and particularly in the market areas in which First Bank operates and in which its loans are concentrated, including the effects of declines in housing market values; the impact of disease pandemics, including COVID-19, on First Bank, its operations and its customers and employees; an increase in unemployment levels and slowdowns in economic growth; First Bank's level of nonperforming assets and the costs associated with resolving any problem loans including litigation and other costs; changes in market interest rates may increase funding costs and reduce earning asset yields thus reducing margin; the impact of changes in interest rates and the credit quality and strength of underlying collateral and the effect of such changes on the market value of First Bank's investment securities portfolio; the extensive federal and state regulation, supervision and examination governing almost every aspect of First Bank's operations including changes in regulations affecting financial institutions, and expenses associated with complying with such regulations; uncertainties in tax estimates and valuations, including due to changes in state and federal tax law; First Bank's ability to comply with applicable capital and liquidity requirements, including First Bank’s ability to generate liquidity internally or raise capital on favorable terms, including continued access to the debt and equity capital markets; possible changes in trade, monetary and fiscal policies, laws and regulations and other activities of governments, agencies, and similar organizations. For discussion of these and other risks that may cause actual results to differ from expectations, please refer to “Forward-Looking Statements” and “Risk Factors” in First Bank’s Annual Report on Form 10-K and any updates to those risk factors set forth in First Bank’s proxy statement, subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K. If one or more events related to these or other risks or uncertainties materialize, or if First Bank’s underlying assumptions prove to be incorrect, actual results may differ materially from what First Bank anticipates. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and First Bank does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. All forward-looking statements, expressed or implied, included in this communication are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that First Bank or persons acting on First Bank’s behalf may issue.

ⁱ The efficiency ratio is a non-U.S. GAAP financial measure and is calculated by dividing non-interest expense less merger-related expenses by adjusted total revenue (net interest income plus non-interest income). For a reconciliation of this non-U.S. GAAP financial measure, along with the other non-U.S. GAAP financial measures in this press release, to their comparable U.S. GAAP measures, see the financial reconciliations at the end of this press release.

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