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First Bank Third Quarter 2016 Net Income of $1.8 million, up 148.8% from 2015

/EINPresswire.com/ -- Total Assets Surpass $1 Billion Threshold; Continued Strong Loan and Deposit Growth, Non-Interest Expenses Well Managed and Highly Favorable Asset Quality Metrics

HAMILTON, NJ--(Marketwired - October 25, 2016) - First Bank (NASDAQ: FRBA) today announced strong improvement to third quarter and year-to-date 2016 results. Net income for the quarter was $1.8 million or $0.16 per diluted share, compared to $724,000 or $0.08 per diluted share for the third quarter of 2015. Diluted earnings per share increased by 100%, despite a 2.0 million share increase in weighted average diluted shares outstanding from September 30, 2015. Third quarter net income growth was driven by higher net interest income reflecting continued strong loan growth, along with effective management of the Bank's non-interest expense. Net income for the first nine months of 2016 was $4.6 million, an increase of $1.4 million, or 43.7%, compared to the first nine months of 2015. Year-to-date net income improvement was also driven by net interest income growth coupled with managed expense growth.

2016 Performance Highlights:

  • Total net revenue (net interest income + non-interest income) for the quarter increased by 28.5%, or $1.7 million, to $7.8 million, compared to the prior year quarter
  • Total loans of $827.2 million at September 30, 2016 were up $218.4 million, or 35.9%, from September 30, 2015
  • Total deposits of $874.1 million at quarter end were up $171.8 million, or 24.5%, compared to third quarter 2015
  • Continued strong asset quality metrics with annualized net loan charge-offs to average loans of just 0.01% for the quarter, and nonperforming loans to total loans of 0.45% at September 30, 2016, down from 0.78% at September 30, 2015
  • Continued improvement in the Bank's efficiency ratio of 62.04% for the third quarter, down from 71.49% for third quarter 2015, and from 62.43% for second quarter 2016.

"Our team executed another highly productive and successful quarter where we continued to deploy the capital raised in the second quarter," said Patrick L. Ryan, President and Chief Executive Officer. "We continued the Bank's strong growth trajectory in the third quarter with year-to-date total loan and deposit growth of 19.9% and 18.3%, respectively, and with a 43.7% improvement in net income for the nine month period. Our respectable growth rates did not come at the expense of our prudent risk management, as our total nonperforming loans of $3.7 million were the lowest level we have experienced in nine quarters, and our efficiency ratio of 62.04% continued its downward trend over the last several quarters. Our strong loan generation and deposit gathering enabled us to eclipse an important growth threshold as we surpassed $1 billion in total assets for the first time in our history. Our active expense management has enabled the Bank to realize considerable operating leverage during 2016 with revenue growth well in excess of the increase in our non-interest expense. We believe that we are well positioned to continue our current growth trends in the fourth quarter of 2016 and into 2017, as we leverage our elevated brand awareness and strong capital position to compete for customers dislocated by the recent industry consolidation which is affecting our Central New Jersey markets."

Income Statement

The Bank's net interest income for third quarter 2016 was $7.5 million, an increase of $1.6 million, or 27.7%, compared to the third quarter of 2015. This growth was driven by a 27.0% increase in interest income primarily a result of a $217.1 million increase in average loan balances compared with third quarter 2015. This was somewhat offset by increased interest expense of $471,000 for the comparative quarters, which reflected average balance increases for both time deposits and transaction accounts.

Year-to-date net interest income totaled $21.1 million, an increase of $3.4 million, or 19.1%, compared to $17.7 million for the same period in 2015. The increase in net interest income for the nine months ended September 30, 2016 was driven by the same strong growth in average loans which increased by $206.5 million from the prior year period.

The third quarter 2016 net interest margin was 3.16%, an increase of twelve basis points compared to the linked second quarter of 2016, and an increase of two basis points compared to the prior year quarter.

The increase compared to second quarter 2016 was the result of a six basis point improvement in the yield on interest-earning assets, primarily loans, and a five basis-point drop in the rate paid on interest-bearing liabilities.

The provision for loan losses for the third quarter of 2016 totaled $291,000, a decrease of $740,000 or 71.8% compared to the third quarter of 2015, and a decrease of $348,000, or 54.5%, compared to $639,000 for the linked second quarter of 2016. The reduction in the provision, despite the loan growth for the quarter, is primarily the result of minimal net charge offs and strong asset quality. The provision for loan losses for the nine months ended September 30, 2016 totaled $1.74 million, an increase of $24,000 or 1.4% compared to $1.72 million for the same period in 2015. The provision level for the year-to-date period is reflective of the Bank's strong loan growth in 2016, as well as the improvement in asset quality metrics.

Third quarter 2016 non-interest income increased $120,000 to $384,000 compared to third quarter 2015, primarily a result of gains on recovery of acquired loans of $114,000, compared to $34,000 for third quarter 2015. Year-to-date non-interest income totaled $1.1 million, a decrease of $301,000, or 22.1%, compared to $1.4 million for the same period in 2015. This decrease was a result of a $400,000 decrease in gains on recovery of acquired loans in 2016, compared to the prior year period.

Non-interest expense for third quarter 2016 totaled $4.8 million, an increase of $462,000, or 10.7%, compared to $4.3 million for the prior year quarter. The increase in non-interest expense compared to third quarter 2015 was primarily a result of 18.6% increase in salaries and employee benefits which reflected the Bank's continued growth, as well as an employee incentive bonus accrual adjustment of $240,000 during the quarter. Year-to-date non-interest expense totaled $13.6 million, an increase of $555,000 or 4.2% compared to $13.1 million for the same period in 2015. The increase was primarily a result of increased salaries and employee benefits and higher occupancy and equipment costs in comparison to the nine month period of 2015.

Pre-provision net revenue[1] for the third quarter of 2016 was $2.9 million, an increase of $1.2 million, or 69.8%, compared to the third quarter of 2015, and an increase of $253,000, or 9.4%, compared to $2.7 million in the linked second quarter of 2016.

Income tax expense for the third quarter of 2016 was $955,000, compared to $661,000 for second quarter 2016. The increase, in comparison to second quarter 2016, resulted from higher pre-tax income and an additional $102,000 in tax expense that was recorded as a discrete item for changes in estimates relating to our prior year tax provision. The third quarter effective income tax rate was 34.7%, compared to 31.4% for second quarter 2016.

Balance Sheet

Total assets at September 30, 2016 were $1.0 billion, an increase of $152.2 million or 17.8% compared to December 31, 2015, and an increase of $199.7 million or 24.7% compared to September 30, 2015. Total loans were $827.2 million at September 30, 2016, an increase of $137.3 million or 19.9% compared to December 31, 2015, and an increase of $218.4 million or 35.9% compared to September 30, 2015. Total loans increased $25.7 million compared to the linked second quarter of 2016, net of $23.3 million in loan paydowns that occurred in the quarter.

Total deposits were $874.1 million at September 30, 2016, an increase of $135.1 million or 18.3% compared to December 31, 2015 and an increase of $171.8 million or 24.5% compared to September 30, 2015. Non-interest bearing deposits totaled $113.9 million at September 30, 2016, an increase of $13.9 million, or 13.9% from December 31, 2015, and an increase of $16.2 million, or 16.6% from September 30, 2015.

Stockholders' equity increased to $87.5 million at September 30, 2016, up $18.7 million or 27.2% compared to December 31, 2015 and an increase of $19.1 million, or 28.0%, from September 30, 2015.

Asset Quality

First Bank's asset quality metrics continued to improve during the third quarter and compare favorably to current peer and industry averages, reflective of disciplined risk management and underwriting standards. Net charge-offs were $30,000 for the third quarter of 2016, compared to $63,000 for the second quarter of 2016 and $626,000 for the third quarter of 2015. Net charge-offs as an annualized percentage of average loans were 0.01% in third quarter 2016, compared to 0.03% in the linked second quarter and 0.42% in third quarter 2015. Nonperforming loans as a percentage of total loans at September 30, 2016 were 0.45%, improved from 0.70% in the linked second quarter and 0.78% at September 30, 2015. The allowance for loan losses to nonperforming loans was 252.4% at September 30, 2016, compared with 161.5% at the end of the second quarter of 2016, and 151.4% at September 30, 2015.

As of September 30, 2016, the Bank exceeded all regulatory capital requirements to be considered well capitalized with a Tier 1 Leverage ratio of 8.88%, a Tier 1 Risk-Based capital ratio of 9.33%, a Common Equity Tier 1 Capital ("CET1") ratio of 9.33%, and a Total Risk-Based capital ratio of 12.66%.

1 A non-U.S. GAAP metric defined by SNL Financial as net interest income before provision for loan losses plus non-interest income excluding non-ordinary items (e.g. gains on sale of investment securities, gains on recovery of acquired loans, and bargain purchase gains) minus non-interest expense excluding non-ordinary items (e.g. merger related expenses and other one-time, non-ordinary costs).

Conference Call
First Bank will host an earnings call on Wednesday, October 26, 2016 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 from one hour after the end of the conference call until January 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 $1.0 billion in assets as of September 30, 2016, 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 10K under the caption "Item 1A-Risk Factors", and general economic conditions, trends in interest rates, the ability of our borrowers to repay their loans, and results of regulatory exams, among other factors.

   
   
FIRST BANK AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION  
(in thousands, except share data, unaudited)  
   
             
    September 30,     December 31,  
    2016     2015  
Assets                
Cash and due from banks   $ 6,396     $ 10,032  
Interest bearing deposits in other banks     51,391       23,299  
    Cash and cash equivalents     57,787       33,331  
Interest bearing time deposits in other banks     7,943       4,125  
Investment securities available for sale     28,375       45,341  
Investment securities held to maturity (fair value of $53,796 at September 30, 2016 and $53,793 at December 31, 2015)     52,663       53,262  
Restricted investment in bank stocks     1,958       1,862  
Other investments     5,000       5,000  
Loans, net of deferred fees and costs     827,161       689,887  
  Less: Allowance for loan losses     9,296       7,940  
    Net loans     817,865       681,947  
Premises and equipment, net     3,420       3,449  
Other real estate owned, net     1,182       1,557  
Accrued interest receivable     2,200       2,056  
Bank-owned life insurance     20,909       14,572  
Intangible assets, net     239       286  
Deferred income taxes     7,559       7,935  
Other assets     585       778  
    Total assets   $ 1,007,685     $ 855,501  
                 
Liabilities and Stockholders' Equity                
Deposits:                
  Non-interest bearing   $ 113,854     $ 99,966  
  Interest bearing     760,295       639,055  
    Total deposits     874,149       739,021  
Borrowings     21,573       24,000  
Subordinated debentures     21,614       21,533  
Accrued interest payable     944       612  
Other liabilities     1,942       1,572  
    Total liabilities     920,222       786,738  
Stockholders' Equity:                
Preferred stock, par value $2 per share; authorized 5,000,000 shares; no shares outstanding     -       -  
Common stock, par value $5 per share; authorized 20,000,000 shares; issued and outstanding 11,393,609 shares at September 30, 2016 and 9,470,157 shares at December 31, 2015     56,800       47,218  
Additional paid-in capital     18,677       14,510  
Retained earnings     12,033       7,433  
Accumulated other comprehensive loss     (47 )     (398 )
    Total stockholders' equity     87,463       68,763  
    Total liabilities and stockholders' equity   $ 1,007,685     $ 855,501  
                 
 
 
FIRST BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share data, unaudited)
 
                 
    Three Months Ended   Nine Months Ended
    September 30,   September 30,
    2016   2015   2016   2015
Interest and Dividend Income                        
Investment securities-taxable   $ 247   $ 396   $ 882   $ 1,048
Investment securities-tax-exempt     125     127     376     325
Interest bearing deposits in other banks and other     102     53     279     178
Loans, including fees     9,340     7,150     26,574     21,036
  Total interest and dividend income     9,814     7,726     28,111     22,587
                         
Interest Expense                        
Deposits     1,941     1,434     5,666     4,030
Borrowings     18     55     145     163
Subordinated debentures     399     398     1,195     667
  Total interest expense     2,358     1,887     7,006     4,860
Net interest income     7,456     5,839     21,105     17,727
Provision for loan losses     291     1,031     1,743     1,719
Net interest income after provision for loan losses     7,165     4,808     19,362     16,008
                         
Non-Interest Income                        
Service fees on deposit accounts     38     30     119     95
Loan fees     21     8     56     31
Income from bank-owned life insurance     129     105     337     319
Gains on sale of investment securities, net     -     11     25     11
Gains on recovery of acquired loans     114     34     288     688
Other non-interest income     82     76     235     217
  Total non-interest income     384     264     1,060     1,361
                         
Non-Interest Expense                        
Salaries and employee benefits     2,684     2,263     7,185     6,772
Occupancy and equipment     671     632     1,996     1,787
Legal fees     63     58     215     241
Other professional fees     287     219     856     905
Regulatory fees     139     91     464     381
Directors' fees     107     101     340     329
Data processing     236     205     694     597
Marketing and advertising     125     143     375     380
Travel and entertainment     49     63     154     180
Insurance     50     43     160     146
Other real estate owned expense, net     118     251     360     581
Other expense     264     262     816     761
  Total non-interest expense     4,793     4,331     13,615     13,060
Income Before Income Taxes     2,756     741     6,807     4,309
Income tax expense     955     17     2,207     1,108
Net Income   $ 1,801   $ 724   $ 4,600   $ 3,201
                         
Basic earnings per share   $ 0.16   $ 0.08   $ 0.46   $ 0.34
Diluted earnings per share   $ 0.16   $ 0.08   $ 0.45   $ 0.34
                         
Basic weighted average common shares outstanding     11,359,613     9,431,043     10,102,767     9,416,091
Diluted weighted average common shares outstanding     11,520,646     9,493,900     10,224,537     9,478,893
                         
   
   
FIRST BANK AND SUBSIDIARIES  
AVERAGE BALANCE SHEETS WITH INTEREST AND AVERAGE RATES  
(in thousands, unaudited)  
                                     
                                     
    Three Months Ended September 30,  
    2016     2015  
    Average           Average     Average           Average  
    Balance     Interest     Rate (5)     Balance     Interest     Rate (5)  
    (dollars in thousands)  
Interest earning assets                                            
Investment securities (1) (2)   $ 79,685     $ 415     2.07 %   $ 106,963     $ 566     2.10 %
Loans (3)     812,254       9,340     4.57 %     595,171       7,150     4.77 %
Interest bearing deposits in other banks     46,772       64     0.54 %     35,084       23     0.26 %
Restricted investment in bank stocks     1,294       20     6.15 %     1,412       14     3.93 %
Other investments     5,000       18     1.43 %     5,000       16     1.27 %
  Total interest earning assets (2)     945,005       9,857     4.15 %     743,630       7,769     4.14 %
Allowance for loan losses     (9,300 )                   (6,961 )              
Non-interest earning assets     38,927                     38,726                
  Total assets   $ 974,632                   $ 775,395                
                                             
Interest bearing liabilities                                            
Interest bearing demand deposits   $ 97,924     $ 136     0.55 %   $ 62,464       110     0.70 %
Money market deposits     127,669       201     0.63 %     108,754       186     0.68 %
Savings deposits     70,365       88     0.50 %     84,821       107     0.50 %
Time deposits     448,590       1,516     1.34 %     315,832       1,031     1.30 %
  Total interest bearing deposits     744,548       1,941     1.04 %     571,871       1,434     0.99 %
Borrowings     6,790       18     1.05 %     14,000       55     1.56 %
Subordinated debentures     21,600       399     7.39 %     21,496       398     7.41 %
  Total interest bearing liabilities     772,938       2,358     1.21 %     607,367       1,887     1.23 %
Non-interest bearing deposits     112,260                     97,794                
Other liabilities     2,586                     2,051                
Stockholders' equity     86,848                     68,183                
  Total liabilities and stockholders' equity   $ 974,632                   $ 775,395                
Net interest income/interest rate spread (2)             7,499     2.94 %             5,882     2.91 %
Net interest margin (2) (4)                   3.16 %                   3.14 %
Tax-equivalent adjustment (2)             (43 )                   (43 )      
Net interest income           $ 7,456                   $ 5,839        
 
(1) Average balances of investment securities available for sale are based on amortized cost.
(2) Interest and average rates are tax equivalent using a Federal income tax rate of 34 percent.
(3) Average balances of loans include loans on nonaccrual status.
(4) Net interest income divided by average total interest earning assets.
(5) Average rates are annualized.
 
   
   
FIRST BANK AND SUBSIDIARIES  
AVERAGE BALANCE SHEETS WITH INTEREST AND AVERAGE RATES  
(in thousands, unaudited)  
                                     
                                     
    Nine Months Ended September 30,  
    2016     2015  
    Average           Average     Average           Average  
    Balance     Interest     Rate (5)     Balance     Interest     Rate (5)  
    (dollars in thousands)  
Interest earning assets                                            
Investment securities (1) (2)   $ 85,586     $ 1,386     2.16 %   $ 92,856     $ 1,484     2.14 %
Loans (3)     775,786       26,574     4.58 %     569,310       21,036     4.94 %
Interest bearing deposits in other banks     43,079       171     0.53 %     41,853       90     0.29 %
Restricted investment in bank stocks     1,745       59     4.52 %     1,375       41     3.99 %
Other investments     5,000       49     1.31 %     5,000       47     1.26 %
  Total interest earning assets (2)     911,196       28,239     4.14 %     710,394       22,698     4.27 %
Allowance for loan losses     (8,728 )                   (6,621 )              
Non-interest earning assets     37,369                     38,320                
  Total assets   $ 939,837                   $ 742,093                
                                             
Interest bearing liabilities                                            
Interest bearing demand deposits   $ 87,516     $ 416     0.63 %   $ 47,745     $ 253     0.71 %
Money market deposits     122,807       630     0.69 %     108,701       538     0.66 %
Savings deposits     73,443       275     0.50 %     92,849       374     0.54 %
Time deposits     430,200       4,345     1.35 %     304,775       2,865     1.26 %
  Total interest bearing deposits     713,966       5,666     1.06 %     554,070       4,030     0.97 %
Borrowings     18,349       145     1.06 %     14,015       163     1.55 %
Subordinated debentures     21,572       1,195     7.39 %     12,143       667     7.32 %
  Total interest bearing liabilities     753,887       7,006     1.24 %     580,228       4,860     1.12 %
Non-interest bearing deposits     107,466                     92,719                
Other liabilities     2,342                     1,905                
Stockholders' equity     76,142                     67,241                
  Total liabilities and stockholders' equity   $ 939,837                   $ 742,093                
Net interest income/interest rate spread (2)             21,233     2.90 %             17,838     3.15 %
Net interest margin (2) (4)                   3.11 %                   3.36 %
Tax-equivalent adjustment (2)             (128 )                   (111 )      
Net interest income           $ 21,105                   $ 17,727        
                                             
(1) Average balances of investment securities available for sale are based on amortized cost.
(2) Interest and average rates are tax equivalent using a Federal income tax rate of 34 percent.
(3) Average balances of loans include loans on nonaccrual status.
(4) Net interest income divided by average total interest earning assets.
(5) Average rates are annualized.
 
   
   
FIRST BANK AND SUBSIDIARIES  
QUARTERLY FINANCIAL HIGHLIGHTS  
(in thousands, except share and employee data, unaudited)  
                       
    3Q2016   2Q2016   1Q2016   4Q2015   3Q2015  
EARNINGS                                
  Net interest income   $ 7,456   $ 6,880   $ 6,769   $ 6,096   $ 5,839  
  Provision for loan losses     291     639     813     950     1,031  
  Non-interest income     384     316     360     282     264  
  Non-interest expense     4,793     4,453     4,369     4,665     4,331  
  Income tax expense     955     661     591     77     17  
  Net income     1,801     1,443     1,356     686     724  
                                 
PER SHARE DATA                                
  Basic earnings per share   $ 0.16   $ 0.15   $ 0.14   $ 0.07   $ 0.08  
  Diluted earnings per share     0.16     0.15     0.14     0.07     0.08  
  Tangible book value (1)     7.66     7.49     7.39     7.23     7.18  
  Book value     7.68     7.51     7.42     7.26     7.21  
                                 
PERFORMANCE RATIOS                                
  Return on average assets (2)     0.74 %   0.62 %   0.60 %   0.33 %   0.37 %
  Return on average equity (2)     8.25 %   8.09 %   7.83 %   3.97 %   4.21 %
  Net interest margin, tax equivalent basis (2)     3.16 %   3.04 %   3.14 %   3.05 %   3.14 %
  Efficiency ratio (1)     62.04 %   62.43 %   62.48 %   73.79 %   71.49 %
  Pre-provision net revenue (1)     2,933   $ 2,680   $ 2,624   $ 2,006   $ 1,727  
                                 
MARKET DATA (period-end)                                
  Market value per share   $ 8.38   $ 6.94   $ 6.94   $ 6.61   $ 6.21  
  Market value / book value     109.16 %   92.43 %   93.37 %   91.03 %   86.07 %
  Common shares outstanding     11,393,609     11,392,776     9,497,776     9,470,157     9,470,407  
  Market capitalization   $ 95,478   $ 79,066   $ 65,805   $ 62,597   $ 58,809  
                                 
CAPITAL & LIQUIDITY                                
  Tangible equity / assets (1)     8.66 %   8.79 %   7.65 %   8.00 %   8.42 %
  Equity / assets     8.68 %   8.81 %   7.68 %   8.04 %   8.46 %
  Loans / deposits     94.62 %   94.04 %   94.89 %   93.35 %   86.68 %
                                 
ASSET QUALITY                                
  Net charge offs (recoveries)   $ 30   $ 63   $ 294   $ 170   $ 626  
  Nonperforming loans     3,683     5,595     4,094     3,903     4,729  
  Nonperforming assets     4,895     7,270     5,793     5,489     6,567  
  Net charge offs (recoveries) / average loans (2)     0.01 %   0.03 %   0.16 %   0.11 %   0.42 %
  Nonperforming loans / total loans     0.45 %   0.70 %   0.54 %   0.57 %   0.78 %
  Nonperforming assets / total assets     0.49 %   0.75 %   0.63 %   0.64 %   0.81 %
  Allowance for loan losses / total loans     1.12 %   1.13 %   1.12 %   1.15 %   1.18 %
  Allowance for loan losses / nonperforming loans     252.40 %   161.48 %   206.62 %   203.43 %   151.41 %
                                 
PERIOD-END DATA                                
  Total assets   $ 1,007,685   $ 970,689   $ 917,441   $ 855,501   $ 808,031  
  Total loans     827,161     801,421     758,131     689,887     608,794  
  Total deposits     874,149     852,230     798,985     739,021     702,325  
  Total stockholders' equity     87,463     85,540     70,474     68,763     68,323  
  Full-time equivalent employees     104     107     102     99     103  
                                   
(1) Non-U.S. GAAP financial measure that we believe provides management and investors with information that is useful in understanding our
financial performance and condition.
(2) Annualized.
 

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