First Bank Reports Second Quarter 2018 Net Income of $4.0 Million, an Increase of 102% From 2017

Year-To-Date Net Income up 105% to $8.1 Million

For the Second Quarter and First Half of 2018: Continued Strong Loan Origination, Solid Revenue Growth, Continued Stable and Favorable Asset Quality Metrics, Strong Period-End Capital Levels

HAMILTON, N.J., July 23, 2018 (GLOBE NEWSWIRE) -- First Bank (NASDAQ:FRBA) today announced solid results for the three and six months ended June 30, 2018, as strong net interest income growth, along with effective non-interest expense management, contributed to net income which more than doubled for both the quarter and first half of the year, compared to the prior year periods.  Net income for the second quarter of 2018 was $4.0 million, or $0.22 per diluted share, an increase of $2.0 million, or 102.3%, compared to $2.0 million, or $0.15 per diluted share, for the second quarter of 2017. Return on average assets and average equity for the second quarter of 2018 were 1.02% and 9.09%, respectively, compared to 0.72% and 7.54%, respectively, for the second quarter of 2017. Net income for the first six months of 2018 was $8.1 million, an increase of $4.2 million, or 105.0%, compared to $3.9 million in the similar period in 2017. Diluted earnings per share for the first six months of 2018 were $0.44, an increase of $0.12, or 37.5%, over $0.32 for the prior year period.  Diluted weighted average shares outstanding were 18.5 million for the quarter ended June 30, 2018, an increase of 5.5 million shares, or 42.5%, compared to the diluted weighted average shares outstanding for second quarter 2017.

Net income for second quarters 2018 and 2017 included certain merger-related items.  Excluding those items, First Bank’s second quarter 2018 adjusted diluted earnings per share¹ were $0.24, adjusted return on average assets1 was 1.14% and adjusted return on average equity1 was 10.13%. Second quarter 2017 adjusted diluted earnings per share were $0.16, adjusted return on average assets was 0.73% and adjusted return on average equity was 7.67%. 

Second Quarter 2018 Performance Highlights:

• Total net revenue (net interest income plus non-interest income) for the quarter increased by $5.3 million, or 58.6%, to $14.4 million, compared to the prior year quarter.
• Total loans of $1.4 billion at June 30, 2018 were up $377.3 million, or 38.0%, from June 30, 2017, and $143.4 million, or 11.7% from December 31, 2017.
• Total deposits of $1.3 billion at June 30, 2018 were up $154.0 million, or 13.2%, compared to the 2017 year end and $374.9 million, or 39.6% compared to June 30, 2017.
• Asset quality metrics continued to be strong, with net recoveries of $75,000 for second quarter 2018, compared to net charge-offs of $22,000 for second quarter 2017. Nonperforming loans to total loans of 0.61% at June 30, 2018 increased by 12 basis points from 0.49% at June 30, 2017, and 16 basis points from 0.45% on March 31, 2018. 
• For the fifth consecutive quarter the Bank’s efficiency ratio was below 60.00%.  The ratio was 55.64% for the second quarter of 2018, compared to 58.21% in the year-ago quarter and 53.91% in the linked first quarter of 2018.
• On April 30, 2018 we closed the acquisition of Delanco Bancorp, Inc. The fair value of the assets acquired and the liabilities assumed on the date of the transaction were $118.2 million in assets, $78.7 million in loans (which includes $23.1 million in loans held for sale) and $108.2 million in deposits.  

“We’re pleased with the Bank’s very solid performance through the first half of 2018, including double-digit loan and deposit growth, strong improvement to earnings, the successful integration of our two recent bank acquisitions and continued solid asset quality,” said Patrick L. Ryan, President and Chief Executive Officer. “Our quarter over prior year quarter loan growth of more than $377 million reflected both acquisition activity and continued strong originations. Deposits were up by nearly 40% compared to mid-year 2017, also reflective of our strategy to take advantage of both acquired and organic growth opportunities. Non-interest bearing deposits grew by more than 60% for the same period as a result of expanded commercial banking relationships and our recent acquisitions. Our acquisition of Delanco Bancorp, Inc. expanded our service footprint into Burlington County through the addition of two quality full-service locations in Delanco and Cinnaminson, New Jersey. We also opened a new loan production office in West Chester, Pennsylvania during the second quarter, strengthening our ability to compete for commercial lending business in Chester, Delaware and Philadelphia counties. Combined with the new full-service branch we opened in Pennington, New Jersey during the first quarter, we now have 18 service locations in nine counties in New Jersey and Pennsylvania.”

“During the second quarter, First Bank was made a component of the Russell 3000 Index, a broad-market and capitalization-weighted stock index,” Mr. Ryan added. “Our addition to the Russell 3000 helps to raise our profile among a larger universe of investors, as we grow both the Bank and our market cap. In May 2018, we commenced an ‘at-the-market’ offering of our common stock, during which 74,206 shares were sold at a price per share of $13.90, for aggregate gross proceeds of approximately $1.0 million (before deducting commissions and offering expenses). The inclusion in the Russell 3000 Index did not provide a boost to our stock price during the offering period so we decided to hold off on a large scale offering at this time given our strong current capital position. Our capital levels at midyear were very strong reflecting our performance during the first six months of 2018, and we’re well positioned to take advantage of appropriate growth opportunities within our targeted service area. Our team has done a good job of managing our funding costs through midyear; however, we do expect to see some deposit cost headwinds through year end, which are reflective of a flattening yield curve environment and the competitive nature of our markets. Building on our accomplishments of the first six months, we believe that we’re well positioned to continue our strong performance through the remainder of 2018.”

Income Statement
The Bank’s net interest income for second quarter 2018 was $13.6 million, an increase of $5.0 million, or 57.5%, compared to $8.7 million in the second quarter of 2017. This growth was driven by a $6.3 million, or 56.0%, increase in interest and dividend income from the second quarter of 2017, primarily as a result of a $405.1 million increase in average loans along with a 42 basis points increase in the average yield on loans compared with the second quarter of 2017. This was partially offset by an increase to interest expense of $1.4 million from the comparable 2017 quarter, which reflected average balance increases for transaction and time accounts, as well as borrowings. Also contributing to the increase in interest expense was an increase of 13 basis points in average rate on interest bearing liabilities.

Six month net interest income totaled $26.2 million, an increase of $9.5 million, or 56.6%, compared to $16.8 million for the first six months of 2017. The increase in 2018 net interest income was also driven by the same strong growth in average loans which increased by $380.8 million from the prior year six-month period.

The second quarter of 2018 net interest margin was 3.63%, an increase of 40 basis points compared to the prior year quarter, and an increase of 1 basis point compared to the linked first quarter of 2018. The increase compared to second quarter 2017 was primarily the result of higher average interest-earning assets (primarily loans) and a 48 basis points improvement in the average yield on interest-earning assets over the second quarter of 2017. Second quarter net interest margin also benefitted from loan prepayment penalty fees of $232,000 related to early commercial loan payoffs during the quarter. The net interest margin for the six months ended June 30, 2018 was also 3.63%, an increase of 43 basis points compared to the same period in 2017. The improvement was also driven by higher average interest-earning assets (primarily loans) and an increase in the average yield on interest-earning assets.

The provision for loan losses for the second quarter of 2018 totaled $701,000, a decrease of $105,000 compared to $806,000 in the second quarter of 2017, and a decrease of $298,000 compared to $999,000 for the linked first quarter of 2018. The decrease in the provision compared to second quarter 2017 and the first quarter of 2018, reflected continued strong asset quality metrics along with net recoveries of $75,000 for the second quarter of 2018. The provision for loan losses for the first six months of 2018 totaled $1.7 million compared to $1.2 million for the same period in 2017. The increase in the six month provision is reflective of the Bank’s continued strong loan growth in 2018, partially offset by continued stable asset quality metrics. 

Second quarter 2018 non-interest income increased by $338,000 to $760,000, compared to $422,000 in second quarter 2017, primarily as a result of higher income from bank-owned life insurance, higher gains on recovery of acquired loans and higher other income compared to second quarter 2017. The increase in other income was mainly due to increases in variance customer service fees reflective of our growing customer base.  Six month non-interest income totaled $1.3 million for 2018 compared to $881,000 for 2017. The increase in 2018 six month non-interest income was primarily a result of the same factors as the three month period.

Non-interest expense for second quarter 2018 totaled $8.7 million, an increase of $3.3 million, compared to $5.4 million for the prior year quarter. The higher non-interest expense compared to second quarter 2017 was primarily a result of increased salaries and employee benefits, merger-related expenses and higher occupancy and equipment cost. The higher salaries and employee benefits and occupancy and equipment cost, compared to second quarter 2017, reflect the additional service locations added during the second half of 2017 and the first half of 2018, primarily the result of our acquisition activity. Non-interest expense for the first six months of 2018 totaled $15.9 million, an increase of $5.2 million, or 49.2%, compared to $10.7 million for the same period in 2017. The increase was also primarily a result of increased salaries and employee benefits, higher merger-related expenses and higher occupancy and equipment cost. The Bank’s net revenue growth rate of 56.0% provided operating leverage for the first six months of 2018 outpacing the 49.2% increase in non-interest expense.

Pre-provision net revenue² for the second quarter of 2018 was $6.3 million, an increase of $2.6 million, or 67.9%, compared to $3.8 million in the second quarter of 2017, and an increase of $300,000, or 5.0%, compared to $6.0 million in the linked first quarter of 2018.

Income tax expense for the second quarter of 2018 was $1.0 million, with an effective tax rate of 20.2% compared to $914,000, with an effective tax rate of 31.5% for the second quarter of 2017. The reduction in the second quarter 2018 effective tax rate was primarily a result of the enactment of the Tax Cuts and Jobs Act in 2017, which reduced the federal statutory corporate income tax rate from 35% to 21%. On July 1, 2018 New Jersey passed a new law regarding the Corporation Business Tax. The new law imposes an array of new and different tax implications. Notable changes include a surtax on corporations beginning on or after January 1, 2018, limited dividend received deduction retroactive to January 1, 2017, and the adoption of mandatory unitary combined tax filings for corporations that are part of an affiliated group beginning on or after January 1, 2019. We expect these new tax law changes will create additional New Jersey income tax expense starting in the third quarter of 2018 and into future periods. We are currently assessing the impact with our tax advisors.

Balance Sheet
Total assets at June 30, 2018 were $1.6 billion, an increase of $482.5 million, or 41.6%, compared to $1.2 billion at June 30, 2017. Total loans were $1.4 billion at June 30, 2018, an increase of $377.3 million, or 38.0%, compared to $993.4 million at June 30, 2017, and an increase of $143.4 million, or 11.7%, from the 2017 year end. Total loans increased $100.2 million, or 7.9%, to $1.4 billion, compared to $1.3 billion in the linked first quarter of 2018. Loan growth during the second quarter was broadly distributed across the Bank’s commercial and consumer loan segments, and reflected loans acquired in the Delanco transaction and continued strong organic originations.

As of June 30, 2018 we had $22.6 million in residential mortgage loans held for sale that were acquired in the Delanco acquisition. 

Total deposits were $1.3 billion at June 30, 2018, an increase of $374.9 million, or 39.6%, compared to $946.2 million at June 30, 2017, and an increase of $154.0 million from December 31, 2017. Non-interest bearing deposits totaled $215.4 million at June 30, 2018, an increase of $82.3 million, or 61.9%, from June 30, 2017, reflective of expanded commercial lending relationships and our recent acquisitions.

Stockholders’ equity increased to $185.5 million at June 30, 2018, up $22.3 million or 13.6% compared to December 31, 2017.  The increase was primarily the result of the Bank’s issuance of additional common shares for the acquisition of Delanco, which increased capital by $14.4 million, and a $7.1 million increase in retained earnings.

Asset Quality
First Bank’s asset quality metrics remained stable during the second quarter and compare favorably to peer and industry averages, reflecting our disciplined risk management and underwriting standards. Net recoveries were $75,000 for the second quarter of 2018, compared to net charge-offs of $22,000 for second quarter 2017 and $180,000 for the first quarter of 2018. Net recoveries as an annualized percentage of average loans were (0.02%) in second quarter 2018, compared to net charge-offs as an annualized percentage of average loans of 0.06% in the linked first quarter of 2018 and 0.01% in second quarter 2017. Nonperforming loans increased to $8.4 million at June 30, 2018, up from $5.7 million at March 31, 2018, primarily reflecting the movement of a $2.2 million commercial loan to 90 days or more past due and still accruing.  Nonperforming loans as a percentage of total loans at June 30, 2018 were 0.61%, compared with 0.49% at June 30, 2017 and 0.45% at March 31, 2018. The allowance for loan losses to nonperforming loans was 158.77% at June 30, 2018, compared with 221.77% at the end of second quarter 2017 and 220.51% at March 31, 2018.

As of June 30, 2018, the Bank exceeded all regulatory capital requirements to be considered well capitalized, with a Tier 1 Leverage ratio of 10.63%, a Tier 1 Risk-Based capital ratio of 10.83%, a Common Equity Tier 1 Capital ("CET1") ratio of 10.83%, and a Total Risk-Based capital ratio of 13.10%.

Delanco Acquisition Completed
First Bank completed its merger with Delanco Bancorp, Inc. and its wholly-owned subsidiary Delanco Federal Savings Bank on April 30, 2018. This successful transaction expands First Bank’s banking footprint into Burlington County through the addition of two full-service locations in Delanco and Cinnaminson, New Jersey. James Igo, former Chairman, President and Chief Executive Officer of Delanco Federal Savings Bank, will remain with First Bank as the Southern New Jersey Regional President, and will continue to focus on relationship banking to quality consumer and commercial customers.

Cash Dividend Declared
On July 17, 2018, the Board of Directors declared a quarterly cash dividend of $0.03 per share to common shareholders of record at the close of business on August 10, 2018, payable on August 24, 2018. 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 24, 2018 at 9:00 a.m. EST.  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 10121931) from one hour after the end of the conference call until October 24, 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 17 full-service branches in Cinnaminson, Cranbury, Denville, Delanco, Ewing, Flemington, Hamilton, Lawrence, Pennington, Randolph, Somerset and Williamstown, New Jersey, and Trevose, Doylestown, Warminster, Bensalem and Levittown, Pennsylvania. With $1.6 billion in assets as of June 30, 2018, 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 exchange 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 the 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 markets; 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, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations being issued in accordance with this statute and potential expenses associated with complying with such regulations; 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 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.

¹ Adjusted diluted earnings per share, adjusted return on average assets and adjusted return on average equity are non-U.S. GAAP financial measures.  For a reconciliation of these non-U.S. GAAP financial measures, 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. 

² Pre-provision net revenue is a non-U.S. GAAP financial measure.  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