First Bank Announces First Quarter Net Income of $7.0 Million and EPS of $0.36

HAMILTON, N.J., April 26, 2023 (GLOBE NEWSWIRE) -- First Bank (Nasdaq Global Market: FRBA) (the Bank) today announced its first quarter 2023 financial results, demonstrating continued strength and resilience in a challenging economic environment. The Bank achieved net income of $7.0 million, or $0.36 per diluted share, and maintained solid returns on average assets, equity, and tangible equityⁱ at 1.03%, 9.70%, and 10.16%, respectively. Excluding merger-related expenses and losses on sale of investment securities, First Bank’s first quarter 2023 adjusted diluted earnings per shareⁱⁱ were $0.38, adjusted return on average assetsⁱⁱ was 1.11% and adjusted return on average tangible equityⁱⁱ was 11.17%.

Compared to the same period last year, the Bank's net income and returns on assets, equity, and tangible equity were lower, reflecting broader industry headwinds, primarily increased market interest rates and deposit costs. However, the Bank remains confident in its ability to navigate the current economic landscape and achieve sustainable growth in earnings and book value over the long term.

First Quarter 2023 Performance Highlights:

• Total loans reached $2.39 billion at March 31, 2023, marking a 2.3% increase from the end of the linked quarter at December 31, 2022.
• Total deposits ended the quarter at $2.24 billion at March 31, 2023, a 2.3% decline from the end of the linked quarter at December 31, 2022.
• Continued strong asset quality throughout the quarter, as net charge-offs represented 0.05% of average loans on an annualized basis, and nonperforming loans increased slightly to 0.33% at March 31, 2023, compared to 0.27% at December 31, 2022.
• Net Interest Margin (NIM) for the quarter of 3.52%, down 5 basis points from first quarter 2022, and 17 basis points from the linked quarter ended December 31, 2022.
• Efficiency ratioⁱⁱⁱ of 54.42%, up from the prior quarter reflecting the interest rate environment, inflationary pressures and the impact from strategic investments.
• Steady growth in book value per share to $15.03 and tangible book value per share^iv to $14.05 at March 31, 2023. Tangible book value per share^iv increased $0.16 from the end of the linked quarter at December 31, 2022, and $1.26 from March 31, 2022, underlining continued value creation for shareholders.

Patrick L. Ryan, the President, and CEO of First Bank, reflected on the quarterly results, stating, “Despite the prevailing challenges in the banking industry, the strength of our relationships and our community-banking model helped minimize the impact of industry deposit outflows. While not immune to the challenges associated with higher funding costs and inflationary expenses, I’m proud of our ability to generate a return on average assets in excess of one percent, even after factoring in costs associated with the pending merger and the sale of certain investment securities.”

The Bank’s risk management strategy was further emphasized by the strong asset-quality metrics. Mr. Ryan stated, “Our focus on risk management underlines our commitment to prudent, sustainable growth and responsible stewardship of our assets and the assets of our communities.”

Mr. Ryan acknowledged that margins may compress further as long as the yield curve remains inverted, and funds leave the banking industry in search of higher returns. Nevertheless, he expressed confidence in the Bank's ability to manage these pressures through portfolio optimization, prudent reinvestment in higher-yielding C&I loans, and expense savings initiatives.

First Bank's strategic C&I expansion plans remain on track, with steady growth and building pipelines in four key areas: i) Small Business Administration (SBA) lending, ii) small business lending, iii) Private Equity/Fund Banking, and iv) Asset-Based Lending. While each initiative is relatively small in comparison to the overall loan portfolio at this point, collectively these groups will help us achieve several long-term goals: i) reduced reliance on commercial real estate lending, ii) continued growth in high-quality commercial deposits, and iii) a higher yielding and lower duration loan portfolio.

The Malvern Bancorp acquisition is currently tracking in-line with the Bank’s original timeline, with First Bank and Malvern Bancorp shareholder votes on April 28, 2023, all regulatory filings in place and regulatory approvals in process. Assuming all closing conditions are completed, closing is currently expected on June 30, 2023.

First Bank remains committed to prioritizing technology to enhance its online services and support growth as a middle-market commercial bank, with efforts aimed at enhancing online deposit and loan generation capabilities. By merging technology with traditional personal banking relationships, the Bank will effectively provide the right blend of service and convenience to its customer base.

First Bank's capital position and liquidity remain strong, with a stockholders' equity to assets ratio of 10.44% and tangible stockholders' equity to tangible assets ratio^v of 9.83%. Mr. Ryan expressed his confidence in the Bank’s ability to expand relationships with new and existing customers, maintain a strong asset quality position, and effectively manage expenses, even in the face of inflationary and competitive pressures.

Mr. Ryan concluded that “Our results during the first quarter of 2023 demonstrate the strength of our relationships and the quality of our community-focused business model. While we are required to report on a quarterly basis, we continue to think strategically with a long-term goal of generating superior returns through the cycle. Short-term industry headwinds will not distract us from achieving our long-term value-creation goals. As I look toward the rest of this year, our new C&I business units, enhanced technology capabilities and our integrated franchise across the wealth belts of New Jersey and mainline Philadelphia will leave us very well positioned to take advantage of a better interest rate environment and continued strong demand for community banking services.”

Income Statement

In the first quarter of 2023, First Bank's net interest income increased to $22.8 million, representing a rise of $1.6 million, or 7.8%, compared to the same period in 2022. The increase was primarily driven by the $232.4 million increase in average loans in the first quarter of 2023 compared to the first quarter of 2022.

The Bank's tax equivalent net interest margin decreased by five basis points to 3.52% compared to the prior year quarter and by 17 basis points from the fourth quarter of 2022. The decrease was primarily driven by the increase in deposit costs which was partially offset by the increase in average loan yields.

The Bank's provision for credit losses increased to $1.1 million in the first quarter of 2023, compared to $642,000 in the same period of the previous year and $716,000 in the preceding quarter of 2022. The increase was in line with organic loan growth.

In the first quarter of 2023, non-interest income was $964,000, a decrease from $1.3 million during the same period in 2022. The decrease was primarily due to approximately $6.8 million in investment sales in the first quarter of 2023, which generated $207,000 in losses on sales of securities and a decline in loan fees, primarily loan swap fees, of $156,000. The declines were partially offset by a $104,000 increase in gains on sale of loans. The investment sales were executed to generate additional cash, earning a higher yield to the investments sold with an anticipated earn-back on the losses of less than 18 months. Loan swap activity continues to be slow which resulted in the reduced loan swap income, but SBA loan sale activity picked up during the first quarter of 2023.

Non-interest expense for the first quarter of 2023 was $13.5 million, an increase of $2.4 million, or 21.4%, compared to $11.1 million for the prior year quarter. The higher non-interest expense was primarily due to a $1.3 million or 20.3% increase in salaries and employee benefits, and $461,000 in merger-related costs in the first quarter of 2023. The increase in salaries and employee benefits was due to both merit adjustments and inflationary market adjustments, increased headcount, primarily due to new locations and growth initiatives, and increases in employee benefit costs.

On a linked quarter basis, first quarter 2023 non-interest expense increased $1.0 million, or 8.3%, compared to $12.5 million for the fourth quarter of 2022 primarily due to higher salaries and employee benefits and occupancy and equipment expense. The increase in salaries and employee benefits was due to the same factors as noted above, and the increase in occupancy expense was primarily due to the Bank’s new northern New Jersey regional banking center in Fairfield, New Jersey and the Bank’s move into an upgraded branch and regional center in West Chester, Pennsylvania.

The Bank's income tax expense for the first quarter of 2023 was $2.2 million with an effective tax rate of 23.7%, compared to $2.5 million with an effective tax rate of 23.4% for the first quarter of 2022 and $2.9 million with an effective tax rate of 24.3% for the fourth quarter of 2022.

Balance Sheet

First Bank reported total assets of $2.82 billion as of March 31, 2023, an increase of $84.0 million, or 3.1%, from $2.73 billion at December 31, 2022. The Bank's increase in loans during the twelve-month period ended March 31, 2023, reflects growth of $227.6 million, which is in line with the Bank's target loan growth rate for the period.

As of March 31, 2023, the Bank's total deposits were $2.24 billion, an increase of $63.9 million, or 2.9%, from $2.18 billion at March 31, 2022, but a decrease of $52.1 million, or 2.3%, from $2.29 billion at December 31, 2022. Non-interest-bearing deposits totaled $463.9 million at March 31, 2023, which represents a decrease of $39.9 million, or 7.9%, from December 31, 2022. In contrast, time deposits increased from 23.1% of total deposits at December 31, 2022, to 24.7% at March 31, 2023, a result of customers moving into time deposit products to obtain a higher yield.

As of March 31, 2023, the Bank's stockholders' equity totaled $294.2 million, growth of $4.7 million, or 1.6%, compared to $289.6 million at December 31, 2022. The increase was mainly driven by the first-quarter 2023 net income and a decline in accumulated other comprehensive loss. The increase was offset somewhat by the Bank’s $1.2 million in cash dividends during the three months ended March 31, 2023.

As of March 31, 2023, the Bank continued to exceed all regulatory capital requirements to be considered well-capitalized with a Tier 1 Leverage ratio of 10.30%, a Tier 1 Risk-Based capital ratio of 10.30%, a Common Equity Tier 1 Capital ratio of 10.30%, and a Total Risk-Based capital ratio of 12.51%. The Bank's strong capital position provides a cushion against potential losses and supports its ability to pursue growth opportunities.

Asset Quality

First Bank's asset quality metrics for the first quarter of 2023 remained favorable, with net charge-offs of $315,000 compared to a net recovery of $213,000 in the previous quarter and net charge-offs of $247,000 in the first quarter of 2022. Nonperforming loans increased from $6.3 million at December 31, 2022, to $7.8 million at March 31, 2023, although they decreased from $12.6 million at the end of the first quarter of 2022. Nonperforming loans as a percentage of total loans were 0.33% at March 31, 2023, up from 0.27% at December 31, 2022, but down from 0.58% at the end of the first quarter of 2022. Despite the slight increase in nonperforming loans, the allowance for loan credit losses to nonperforming loans remains healthy at 382.3% at March 31, 2023, which was a modest decrease from 407.6% at December 31, 2022, but a significant increase from 191.7% at the end of the first quarter of 2022. The allowance for credit losses as a percentage of total loans increased to 1.25% at March 31, 2023 from 1.09% at December 31, 2022, primarily due to the implementation of the adoption of the Current Expected Credit Losses (CECL) accounting standard during the first quarter of 2023.

Balance Sheet Positioning for the Current Environment

First Bank enhanced its liquidity position in the first quarter of 2023. Total cash and cash equivalents increased $35.1 million during the first quarter to $161.0 million at March 31, 2023. The decline in deposits and the increased use of the Bank’s insured reciprocal deposit product contributed to a decline in adjusted estimated uninsured deposits (estimated uninsured deposits minus uninsured deposits of states and political subdivisions which are secured or collateralized as required under state law) from $808.1 million at December 31, 2022 to $628.5 million at March 31, 2023.

During the first quarter of 2023 the Bank sold approximately $6.9 million in available for sale securities, significantly increased its available funding with the Federal Home Loan Bank through pledging additional commercial loans, and registered for the Federal Reserve’s Bank Term Funding Program (BTFP). Subsequent to quarter end, the Bank has rolled out some enhanced in-market deposit promotions and added additional collateral for the BTFP and Federal Reserve discount window. These actions have led to a significantly improved available liquidity position. Our available liquidity to adjusted estimated uninsured deposits ratio was approximately 100% at March 31, 2023. Available liquidity includes cash and due from banks, market value of the Bank’s investment securities, currently available funding sources minus pledged securities and restricted cash. This enhanced liquidity position coupled with the flexibility that the Bank will gain after the Malvern Bancorp transaction is closed, provides the Bank with a strong liquidity base and a diverse source of funding options.   

The tangible stockholders' equity to tangible assets ratio was 9.83% as of March 31, 2023, indicating that the Bank has a sufficient cushion to absorb potential losses.

Overall, First Bank has a strong capital and liquidity position, which it believes provides a solid foundation to navigate future challenges that may arise. The Bank is committed to managing risk prudently while pursuing growth opportunities and delivering value to its shareholders.

Cash Dividend Declared

On April 18, 2023, First Bank’s Board of Directors declared a quarterly cash dividend of $0.06 per share to common stockholders of record at the close of business on May 12, 2023, payable on May 24, 2023.

Conference Call

First Bank will host its earnings call on Thursday, April 27, 2023 at 9:00 AM eastern time. The direct dial toll free number for the live call is 1-844-200-6205 and the access code is 583346. For those unable to participate in the call, a replay will be available by dialing 1-866-813-9403 (access code 164395) from one hour after the end of the conference call until July 25, 2023. 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 18 full-service branches in Cinnaminson, Cranbury, Delanco, Denville, Ewing, Flemington (2), Hamilton, Lawrence, Monroe, Pennington, Randolph, Somerset and Williamstown, New Jersey; and Doylestown, Trevose, Warminster and West Chester, Pennsylvania. With $2.8 billion in assets as of March 31, 2023, 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, sustain its internal growth rate, and 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 effects of the recent turmoil in the banking industry (including the failures of two financial institutions); 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; and 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.

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ⁱ Return on average tangible equity is a non-U.S. GAAP financial measure and is calculated by dividing net income by average tangible equity (average equity minus average goodwill and other intangible assets). 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.

ⁱⁱ Adjusted diluted earnings per share, adjusted return on average assets and adjusted return on average tangible equity are non-U.S. GAAP financial measures and are calculated by dividing net income adjusted for certain merger-related expenses and other one-time gains or expenses by diluted weighted average shares, average assets and average tangible equity, respectively. 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.

ⁱⁱⁱ 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.

^iv Tangible book value per share is a non-U.S. GAAP financial measure and is calculated by dividing common shares outstanding by tangible equity (equity minus goodwill and other intangible assets). 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.

^v Tangible stockholders' equity to tangible assets ratio is a non-U.S. GAAP financial measure and is calculated by dividing tangible equity (equity minus goodwill and other intangible assets) by tangible assets (total assets minus goodwill and other intangible assets). 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: Andrew Hibshman, Chief Financial Officer
(609) 643-0058, andrew.hibshman@firstbanknj.com