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First Bank Reports Third Quarter 2020 Net Income of $5.9 Million

Net Income of $13.3 Million for First Nine Months of 2020

/EIN News/ -- For the Third Quarter and Nine Months of 2020: Strong Revenue Growth, Continued Solid Organic Loan Origination, Effective Management of Non-Interest Expense

HAMILTON, N.J., Oct. 26, 2020 (GLOBE NEWSWIRE) -- First Bank (Nasdaq Global Market: FRBA) today announced results for the three and nine months ended September 30, 2020. Net income for the third quarter of 2020 was $5.9 million, or $0.30 per diluted share, compared to $1.1 million, or $0.06 per diluted share, for the third quarter of 2019. Return on average assets and return on average equity for the third quarter of 2020 were 1.03% and 10.20%, respectively, compared with 0.23% and 2.11%, respectively, for the third quarter of 2019. Net income for the first nine months of 2020 was $13.3 million, an increase of $5.1 million, or 61.6%, compared to $8.2 million, for the same period in 2019. Diluted earnings per share for the year-to-date period ended September 30, 2020, were $0.66, an increase of $0.23 or 53.5%, compared to $0.43 per diluted share for the comparable period in 2019. Net income for the three and nine months ended September 30, 2019 was adversely impacted by merger-related expenses. Excluding the impact of these expenses adjusted diluted earnings per share1, adjusted return on average assets1 and adjusted return on average equity1 for the three months ended September 30, 2019 were $0.20, 0.81% and 7.34%, respectively.

Third Quarter 2020 Performance Highlights:

  • Total net revenue (net interest income plus non-interest income) of $19.9 million for the quarter increased $5.0 million, or 33.6%, from $14.9 million, compared to the prior year quarter. Total net revenue for the nine months ended September 30, 2020 was $55.2 million, an increase of $10.4 million, or 23.3%, compared to the prior year period.
  • Total loans of $2.00 billion at September 30, 2020 increased $260.8 million, or 15.0%, from $1.74 billion on September 30, 2019, and increased $281.1 million, or 16.3%, from December 31, 2019. Total loans on September 30, 2020 included $190.7 million in Paycheck Protection Program (“PPP”) loans.
  • Total deposits of $1.84 billion at September 30, 2020 increased $182.8 million, or 11.1%, from $1.65 billion on September 30, 2019 and increased $194.6 million, or 11.9%, compared to December 31, 2019.
  • Asset quality metrics remained solid and stable during the quarter, despite the ongoing economic uncertainty associated with the COVID-19 pandemic, with net charge-offs of $633,000, or an annualized 0.13% of average loans, for third quarter 2020, compared to net charge-offs of $1.1 million for third quarter 2019. Nonperforming loans were $12.7 million on September 30, 2020, $15.8 million on September 30, 2019, and $14.1 million on June 30, 2020. The ratio of nonperforming loans to total loans was 0.63% at September 30, 2020 compared to 0.91% at September 30, 2019, and 0.72% at June 30, 2020.
  • Continued effective non-interest expense management was reflected in the third quarter 2020 efficiency ratio2 of 50.08% compared to 57.19% for third quarter 2019, and 53.66% for the linked second quarter of 2020.

“First Bank’s overall performance for third quarter 2020 was very solid despite the ongoing COVID-related challenges to the operating environment,” said Patrick L. Ryan, President and Chief Executive Officer. “Total net revenue increased by more than 33% from third quarter 2019, reflecting strong growth in both net interest income and non-interest income. Total non-interest expense, excluding merger-related costs, was held to a 17.0% increase in the third quarter of 2020 compared to the same period in the prior year, providing significant operating leverage which was reflected in our bottom-line performance.”

“The third quarter net interest margin improved in comparison to both third quarter 2019 and second quarter 2020, driven primarily by our focus on lowering deposit costs and improving our mix. We were able to lower interest bearing deposit costs by 91 basis points compared to third quarter 2019, primarily by allowing higher-cost time deposits to run off and replacing them with lower-cost savings and transaction accounts. Our ratio of non-interest bearing deposits to total deposits has increased to 24.3% at September 30, 2020 compared to 17.0% at September 30, 2019, and CDs now make up slightly less than 30% of total deposits compared to 42.7% at September 30, 2019. We also realized solid loan growth, with average loan balances increasing by $84.3 million from the linked second quarter, primarily a result of organic commercial real estate activity. Our lending pipeline remains strong as we continue to successfully differentiate ourselves with clients by effectively addressing a wide range of needs and providing a superior customer experience.”    

“We continue to demonstrate a disciplined approach to managing operating expenses. We believe our third quarter total non-interest expense of $10.0 million, approximates our expected short-term quarterly run rate going forward with potential opportunities for further reductions as we continue to analyze our overall branch footprint as well our staff and office space needs. With a resulting third quarter efficiency ratio of 50.08%, we believe this level of operating expense is appropriate for an institution of our size, and will complement our performance in the fourth quarter of 2020 and the early part of 2021.”

“Our third quarter provision for loan losses of $2.0 million, was down from $3.0 million in the 2020 second quarter, and $2.9 million during the first quarter. Provision amounts for the last three quarters reflect the uncertain economic conditions related to the COVID-19 pandemic, as opposed to actual charge-offs which totaled $2.3 million in the year-to-date period. While it is difficult to predict how our loan portfolio will perform in the ongoing COVID environment, we remain comfortable with our credit metrics and confident that strong credit underwriting standards have the Bank in a good position to manage any potential negative impact. As detailed in the COVID-19 Response section that follows, we are experiencing positive trends with our deferred loans down to approximately $31.4 million as of October 15, 2020. We continue to monitor and analyze our COVID-19 deferrals based on asset class and borrower type, but we are pleased with the overall performance of our loan portfolio to date.”

"While additional COVID-related uncertainty likely remains ahead, the underlying strength of our franchise and business strategy will become more apparent as the benefit of our lower funding costs are reflected in our results. Our focus remains on driving organic growth, optimizing the balance sheet and executing on operational efficiency.”

Income Statement

First Bank’s net interest income for the third quarter of 2020 was $17.6 million, an increase of $3.7 million, or 26.1%, compared to $14.0 million in the third quarter of 2019. This increase was driven by a $2.5 million decrease in interest expense, in combination with a $1.1 million, or 5.3%, increase in interest and dividend income.

The increase in interest income was primarily a result of a $425.4 million increase in average loans compared with the third quarter of 2019, partially offset by a 66 basis point decline in the average rate for interest earning assets. The increase in average loans was due to a combination of PPP loans, loans acquired on September 30, 2019 via the Grand Bank acquisition and organic commercial loan growth. The reduction in interest expense was primarily a result of an 87 basis point reduction for the average rates paid on interest bearing liabilities. Nine-month 2020 net interest income totaled $49.8 million, an increase of $7.7 million or 18.1%, compared to $42.2 million for the first nine months of 2019. The increase in the 2020 year-to-date net interest income was also driven by strong growth in average loans, which increased by $356.1 million, or 23.4%, from the prior year period.

The third quarter 2020 tax equivalent net interest margin was 3.23%, an increase of eight basis points compared to 3.15% for the prior year quarter, and a 16 basis point increase compared to 3.07% for the linked second quarter of 2020. The increase compared to third quarter 2019 was primarily the result of an 87 basis point reduction in the average cost for interest bearing liabilities, reflective of a 91 basis point decrease in the cost of interest bearing deposits. The cost of money markets and time deposits declined 110 basis points and 77 basis points, respectively. Higher price time deposits have run off as rates have been significantly lowered based on the current interest rate environment. The yield on interest earning assets decreased by 66 basis points, primarily as a result of lower average loan yields which reflected the current lower interest rate environment and the Bank’s notable involvement in the PPP lending program.

The tax equivalent net interest margin for the nine months ended September 30, 2020 was 3.19%, a decrease of 13 basis points compared to 3.32% for the same period in 2019. The decrease in the nine-month net interest margin was a result of lower average interest rates for interest-earning assets, which declined by 57 basis points, partially mitigated by a 50 basis point reduction in the cost of total interest bearing liabilities, primarily from interest bearing deposits.

The provision for loan losses for the third quarter of 2020 was $2.0 million, an increase of $439,000 compared to $1.6 million in the third quarter of 2019, and a decrease of $980,000 compared to the linked second quarter of 2020. The increase in the provision compared to third quarter 2019, is primarily attributable to our assessment of the uncertainty caused by the ongoing COVID-19 pandemic and its impact on potential credit losses. The provision for loan losses for the first nine months of 2020 totaled $7.9 million compared to $3.6 million for the same period in 2019. The increase in the nine-month provision for loan losses was primarily a result of the same factor as discussed for the three-month period.

Third quarter 2020 non-interest income was $2.2 million, an increase of $1.3 million, compared to $905,000 in third quarter 2019, primarily the result of a $628,000 increase in loan fees, which included $631,000 in loan swap fees during the current quarter, and a $236,000 increase in gains on recovery of acquired loans compared to the third quarter of 2019. Non-interest income totaled $5.3 million for the nine months ended September 30, 2020, compared to $2.6 million for the same period in 2019. This increase in non-interest income for the first nine months of 2020, was primarily a result of the same sources of revenue described for the three-month period, along with higher income from bank-owned life insurance.

Non-interest expense for third quarter 2020 totaled $10.0 million, a decrease of $1.9 million, compared to $11.9 million for the prior year quarter. The higher non-interest expense during third quarter 2019 was primarily a result of $3.4 million in merger-related expense related to the acquisition of Grand Bank. Excluding the merger-related expenses in third quarter 2019, non-interest expense for third quarter 2020 increased by $1.4 million or 17.0%. Non-interest expense for the third quarter 2020 increased $186,000 to $10.0 million compared to $9.8 million for the linked second quarter of 2020, primarily a result of the increase in salaries and employee benefit costs. The increase in salaries and employee benefit costs compared to the prior quarter was primarily the result of the accounting associated with PPP loan origination costs. During the second quarter of 2020 salaries and employee benefits were reduced by $356,000 to reflect the PPP deferred loan costs.

Non-interest expense for the first nine months of 2020 totaled $29.6 million, a decrease of $493,000, or 1.6%, compared to $30.1 million for the same period in 2019. The first nine months of 2019 included $3.6 million of merger-related expenses compared with no merger-related expense for the nine-month period ended September 30, 2020. Excluding merger-related expenses for the nine month comparative period, non-interest expense would be $3.2 million or 11.9% higher. Salaries and employee benefits and occupancy and equipment costs increased $1.1 million and $753,000, respectively, primarily related to the employees and additional locations added via the Grand Bank acquisition.

Pre-provision net revenue3 for the third quarter of 2020 was $9.9 million, an increase of $3.6 million, or 55.8%, compared to $6.4 million for the third quarter of 2019, and up $1.5 million, or 17.6%, compared to $8.4 million in the linked second quarter of 2020.

Income tax expense for the three months ended September 30, 2020 was $2.0 million, with an effective tax rate of 25.5%, compared to $306,000 for the three months ended September 30, 2019, with an effective tax rate of 21.9%, and $1.3 million for the linked second quarter of 2020, with an effective tax rate of 24.7%. Income tax expense for the nine months ended September 30, 2020 was $4.4 million, with an effective tax rate of 24.8% compared to $2.8 million for the first nine months of 2019, with an effective tax rate of 25.3%. Income tax expense for the three and nine months ended September 30, 2020 included an increase in the New Jersey state income tax surcharge from 1.5% to 2.5%.

Balance Sheet

Total assets at September 30, 2020 were $2.31 billion, an increase of $265.0 million, or 13.0%, compared to $2.04 billion at September 30, 2019, and an increase of $298.3 million, or 14.8%, from December 31, 2019. The increase in assets during the nine months ended September 30, 2020 was primarily due to the origination of PPP loans and commercial loan growth. Total loans were $2.00 billion at September 30, 2020, an increase of $260.8 million, or 15.0%, compared to $1.74 billion at September 30, 2019, and an increase of $281.1 million, or 16.3%, from the 2019 year end. Total loans as of September 30, 2020 increased $49.6 million from $1.96 billion at the end of the linked second quarter of 2020. The growth during the third quarter 2020 was mainly derived from organic commercial real estate loan activity with existing and new relationships.

Total deposits were $1.84 billion at September 30, 2020, an increase of $182.8 million, or 11.1%, compared to $1.65 billion at September 30, 2019, and an increase of $194.6 million, or 11.9%, from December 31, 2019. Non-interest bearing deposits totaled $445.5 million at September 30, 2020, an increase of $169.7 million, or 61.5%, from December 31, 2019 reflective of PPP loan program related deposits and continued growth in commercial deposits.

Stockholders’ equity was $232.3 million at September 30, 2020, compared to $226.4 million at December 31, 2019. The increase in stockholders’ equity for the nine months ended September 30, 2020 was due to year-to-date net income of $13.3 million, $1.5 million in stock option exercises and restricted stock grants or vesting and an increase in accumulated other comprehensive income of $794,000. The increase was partially offset by stock repurchase program activity, whereby $7.9 million of stock was repurchased at an average cost of $7.88 per share, and $1.8 million in cash dividends during the first nine months of 2020.

As of September 30, 2020, the Bank continued to exceed all regulatory capital requirements to be considered well capitalized, with a Tier 1 Leverage ratio of 9.53%, a Tier 1 Risk-Based capital ratio of 10.53%, a Common Equity Tier 1 Capital ratio of 10.53%, and a Total Risk-Based capital ratio of 13.13%.

Asset Quality

First Bank’s asset quality metrics have remained relatively stable and favorable during the past 12 months. Net charge-offs were $633,000 for the third quarter of 2020, compared to net charge-offs of $1.1 million for the third quarter of 2019 and net charge-offs of $1.0 million for the second quarter of 2020. Net charge-offs as an annualized percentage of average loans were 0.13% in third quarter 2020, compared to 0.28% in third quarter 2019 and 0.21% in the linked second quarter 2020. Nonperforming loans as a percentage of total loans at September 30, 2020 were 0.63%, compared with 0.91% on September 30, 2019 and 0.72% at June 30, 2020. Nonperforming loans were $12.7 million at September 30, 2020, down from $15.8 million on September 30, 2019, and $14.1 million on June 30, 2020. The allowance for loan losses to nonperforming loans was 179.66% at September 30, 2020, compared with 108.77% at the end of third quarter 2019 and 152.26% at June 30, 2020.
  
COVID-19 Response

First Bank participated in the PPP, established by the Coronavirus Aid, Relief, and Economic Securities Act (CARES Act), during the first nine months of 2020. 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. As of September 30, 2020, First Bank has 1,147 PPP loans with a current balance of $190.7 million. First Bank generated gross fees of $6.9 million from the SBA related to the origination of these loans. These fees, net of the associated direct origination costs of approximately $529,000, are being amortized through interest income over the life of the PPP loans. As of September 30, 2020, the Bank had $4.8 million in unamortized fees associated with these 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 October 15, 2020, the Bank’s population of COVID-19 deferrals was $31.4 million, or 1.6% of total loans, down from a peak of $433.7 million. The $31.4 million includes $24.1 in loans still on deferral and $7.3 million in loans that have recently reached the end of their deferral period as of October 15, 2020 and have not yet been granted an additional deferral or resumed making payments.

The $31.4 million in COVID-19 deferrals is comprised of loans across a diverse list of industries and are primarily secured by real estate. The largest industry components are arts, entertainment and recreation at $10.0 million, restaurants at $5.7 million, transportation at $2.6 million, retail at $2.6 million, and hospitality at $1.8 million.

Consistent with industry regulatory guidance, borrowers that were otherwise current on loan payments that were granted COVID-19 related financial hardship payment deferrals continue to be reported as current loans throughout the agreed upon deferral period, continue to accrue interest and are not required to be accounted for as a troubled debt restructuring.
                                

Cash Dividend Declared

On October 20, 2020, 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 November 6, 2020, payable on November 20, 2020.

Share Repurchase Program

On October 23, 2020, the Bank received regulatory approval for the repurchase of up to 1.5 million shares of First Bank common stock in the open market. This new share repurchase program was also approved by the Bank’s board and will run through September 30, 2021. No shares were repurchased during the quarter ended September 30, 2020, however 1.0 million shares of common stock have been repurchased during first six months of 2020 for an aggregate purchase price of approximately $7.9 million under First Bank’s previous share repurchase program.

Conference Call

First Bank will host its earnings call on Tuesday, October 27, 2020 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 10148521) from one hour after the end of the conference call until January 28, 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 18 full-service branches in Cinnaminson, Cranbury, Delanco, Denville, Ewing, Flemington, Hamilton, Hamilton Square, Lawrence, Mercerville, Pennington, Randolph, Somerset and Williamstown, New Jersey; and Doylestown, Trevose, Warminster and West Chester, Pennsylvania. With $2.3 billion in assets as of September 30, 2020, 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, such as the novel strain of coronavirus disease (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, 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; 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.


1 Adjusted diluted earnings per share, adjusted return on average assets and adjusted return on average 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 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.
2 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.
3 Pre-provision net revenue is a non-U.S. GAAP financial measure and is calculated by adding net interest income and non-interest income and subtracting non-interest expense adjusted by certain non-recurring items. 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.
4 Certain reclassifications, none of which are material, have been made to prior period information to conform to the current 2020 quarter presentation.

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


FIRST BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands, except for share data)
 
             
        September 30, 2020    
        (unaudited)   December 31, 2019
Assets        
Cash and due from banks $ 24,393     $ 16,751
Federal funds sold   -       40,000
Interest bearing deposits with banks   60,007       25,041
    Cash and cash equivalents   84,400       81,792
Interest bearing time deposits with banks   6,162       6,087
Investment securities available for sale, at fair value   70,413       47,462
Investment securities held to maturity (fair value of $41,482      
   at September 30, 2020 and $47,100 at December 31, 2019)   40,841       46,612
Restricted investment in bank stocks   6,872       6,652
Other investments   6,483       6,388
Loans, net of deferred fees and costs   2,004,650       1,723,574
  Less: Allowance for loan losses   22,806       17,245
    Net loans   1,981,844       1,706,329
Premises and equipment, net   11,018       11,881
Other real estate owned, net   703       1,363
Accrued interest receivable   7,694       4,810
Bank-owned life insurance   50,013       49,580
Goodwill   16,253       16,253
Other intangible assets, net   1,855       2,083
Deferred income taxes   10,104       10,400
Other assets   15,242       13,895
    Total assets $ 2,309,897     $ 2,011,587
             
Liabilities and Stockholders' Equity      
Liabilities:      
Non-interest bearing deposits $ 445,514     $ 275,778
Interest bearing deposits   1,389,913       1,365,089
    Total deposits   1,835,427       1,640,867
Borrowings   196,210       105,476
Subordinated debentures   29,481       21,964
Accrued interest payable   1,055       1,076
Other liabilities   15,424       15,811
    Total liabilities   2,077,597       1,785,194
Stockholders' Equity:      
Preferred stock, par value $2 per share; 10,000,000 shares authorized;      
  no shares issued and outstanding   -       -
Common stock, par value $5 per share; 40,000,000 shares authorized; 20,694,892    
  shares issued and 19,694,892 shares outstanding at September 30, 2020      
  and 20,458,665 shares issued and outstanding at December 31, 2019   102,898       101,887
Additional paid-in capital   78,637       78,112
Retained earnings   57,828       46,367
Accumulated other comprehensive income   821       27
Treasury stock, 1,000,000 shares at June 30, 2020   (7,884 )     -
    Total stockholders' equity   232,300       226,393
    Total liabilities and stockholders' equity $ 2,309,897     $ 2,011,587
             


FIRST BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except for share data, unaudited)
 
                     
        Three Months Ended   Nine Months Ended
        September 30,   September 30,
          2020     2019     2020     2019
Interest and Dividend Income              
Investment securities—taxable $ 567   $ 496   $ 1,729   $ 1,574
Investment securities—tax-exempt   66     87     220     276
Interest bearing deposits with banks,              
  Federal funds sold and other   146     689     772     1,665
Loans, including fees   21,142     19,540     63,393     57,620
  Total interest and dividend income   21,921     20,812     66,114     61,135
                     
Interest Expense              
Deposits     3,265     5,706     13,216     15,934
Borrowings   586     731     1,695     1,831
Subordinated debentures   440     399     1,374     1,195
  Total interest expense   4,291     6,836     16,285     18,960
Net interest income   17,630     13,976     49,829     42,175
Provision for loan losses   1,997     1,558     7,906     3,644
  Net interest income after provision for loan losses   15,633     12,418     41,923     38,531
                     
Non-Interest Income              
Service fees on deposit accounts   153     129     440     337
Loan fees     682     54     1,580     221
Income from bank-owned life insurance   336     277     1,272     818
Gains on sale of other real estate owned   300     -     308     81
Gains on sale of loans   65     5     218     72
Gains on recovery of acquired loans   500     264     974     586
Other non-interest income   210     176     556     468
  Total non-interest income   2,246     905     5,348     2,583
                     
Non-Interest Expense              
Salaries and employee benefits   5,516     4,937     16,208     15,154
Occupancy and equipment   1,633     1,200     4,597     3,844
Legal fees   218     197     673     436
Other professional fees   460     450     1,485     1,237
Regulatory fees   293     67     803     361
Directors' fees   219     192     649     586
Data processing   424     386     1,418     1,268
Marketing and advertising   113     225     338     675
Travel and entertainment   18     93     132     339
Insurance     187     89     505     273
Other real estate owned expense, net   73     46     292     240
Merger-related expenses   -     3,418     -     3,646
Other expense   799     628     2,543     2,077
  Total non-interest expense   9,953     11,928     29,643     30,136
Income Before Income Taxes   7,926     1,395     17,628     10,978
Income tax expense   2,023     306     4,375     2,779
Net Income $ 5,903   $ 1,089   $ 13,253   $ 8,199
                     
Basic earnings per common share $ 0.30   $ 0.06   $ 0.67   $ 0.44
Diluted earnings per common share $ 0.30   $ 0.06   $ 0.66   $ 0.43
Cash dividends per common share $ 0.03   $ 0.03   $ 0.06   $ 0.09
                     
Basic weighted average common shares outstanding   19,542,231     18,694,801     19,835,359     18,667,440
Diluted weighted average common shares outstanding   19,635,127     18,976,574     20,016,732     18,961,434
                     


FIRST BANK AND SUBSIDIARIES
AVERAGE BALANCE SHEETS WITH INTEREST AND AVERAGE RATES
(dollars in thousands, unaudited)
                       
                       
  Three Months Ended September 30,
    2020       2019  
  Average       Average Average       Average
  Balance   Interest   Rate (5)   Balance   Interest   Rate (5)
Interest earning assets                      
Investment securities (1) (2) $ 114,481     $ 647     2.25 %   $ 90,732     $ 601     2.63 %
Loans (3)   1,989,565       21,142     4.23 %     1,564,182       19,540     4.96 %
Interest bearing deposits with banks,                      
   Federal funds sold and other   55,188       42     0.30 %     95,689       535     2.22 %
Restricted investment in bank stocks   6,837       89     5.18 %     7,629       106     5.51 %
Other investments   6,479       15     0.92 %     6,324       48     3.01 %
Total interest earning assets (2)   2,172,550       21,935     4.02 %     1,764,556       20,830     4.68 %
Allowance for loan losses   (22,184 )             (16,885 )        
Non-interest earning assets   138,937               112,147          
     Total assets $ 2,289,303             $ 1,859,818          
                       
Interest bearing liabilities                      
Interest bearing demand deposits $ 157,845     $ 84     0.21 %   $ 133,580     $ 188     0.56 %
Money market deposits   545,569       730     0.53 %     347,322       1,423     1.63 %
Savings deposits   143,817       250     0.69 %     78,461       155     0.78 %
Time deposits   577,259       2,201     1.52 %     681,740       3,940     2.29 %
       Total interest bearing deposits   1,424,490       3,265     0.91 %     1,241,103       5,706     1.82 %
Borrowings   148,588       586     1.57 %     131,678       731     2.20 %
Subordinated debentures   29,464       440     5.97 %     21,919       399     7.28 %
      Total interest bearing liabilities   1,602,542       4,291     1.07 %     1,394,700       6,836     1.94 %
Non-interest bearing deposits   441,103               243,401          
Other liabilities   15,536               16,958          
Stockholders' equity   230,122               204,759          
     Total liabilities and stockholders' equity $ 2,289,303             $ 1,859,818          
Net interest income/interest rate spread (2)       17,644     2.95 %         13,994     2.74 %
Net interest margin (2) (4)         3.23 %           3.15 %
Tax equivalent adjustment (2)       (14 )             (18 )    
Net interest income     $ 17,630             $ 13,976      
                       
(1) Average balance of investment securities available for sale is based on amortized cost.            
(2) Interest and average rates are tax equivalent using a federal income tax rate of 21%.            
(3) Average balances of loans include loans on nonaccrual status.                    
(4) Net interest income divided by average total interest earning assets.                
(5) Annualized.                      
                       


FIRST BANK AND SUBSIDIARIES
AVERAGE BALANCE SHEETS WITH INTEREST AND AVERAGE RATES
(dollars in thousands, unaudited)
                       
                       
  Nine Months Ended September 30,
    2020       2019  
  Average       Average Average       Average
  Balance   Interest   Rate (5)   Balance   Interest   Rate (5)
Interest earning assets                      
Investment securities (1) (2) $ 103,901     $ 1,995     2.56 %   $ 94,626     $ 1,908     2.70 %
Loans (3)   1,879,604       63,393     4.51 %     1,523,463       57,620     5.06 %
Interest bearing deposits with banks,                      
   Federal funds sold and other   88,816       385     0.58 %     70,847       1,229     2.32 %
Restricted investment in bank stocks   6,646       291     5.85 %     6,766       299     5.91 %
Other investments   6,452       96     1.99 %     6,279       137     2.92 %
Total interest earning assets (2)   2,085,419       66,160     4.24 %     1,701,981       61,193     4.81 %
Allowance for loan losses   (19,910 )             (16,084 )        
Non-interest earning assets   131,472               111,199          
     Total assets $ 2,196,981             $ 1,797,096          
                       
Interest bearing liabilities                      
Interest bearing demand deposits $ 161,032     $ 377     0.31 %   $ 144,213     $ 706     0.65 %
Money market deposits   507,031       3,358     0.88 %     340,690       4,131     1.62 %
Savings deposits   135,447       840     0.83 %     79,185       425     0.72 %
Time deposits   623,599       8,641     1.85 %     648,032       10,672     2.20 %
       Total interest bearing deposits   1,427,109       13,216     1.24 %     1,212,120       15,934     1.76 %
Borrowings   118,486       1,695     1.91 %     113,327       1,831     2.16 %
Subordinated debentures   27,990       1,374     6.55 %     21,893       1,195     7.28 %
      Total interest bearing liabilities   1,573,585       16,285     1.38 %     1,347,340       18,960     1.88 %
Non-interest bearing deposits   378,954               231,767          
Other liabilities   16,269               16,755          
Stockholders' equity   228,173               201,234          
     Total liabilities and stockholders' equity $ 2,196,981             $ 1,797,096          
Net interest income/interest rate spread (2)       49,875     2.86 %         42,233     2.93 %
Net interest margin (2) (4)         3.19 %           3.32 %
Tax equivalent adjustment (2)       (46 )             (58 )    
Net interest income     $ 49,829             $ 42,175      
                       
(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 21%.            
(3) Average balances of loans include loans on nonaccrual status.                    
(4) Net interest income divided by average total interest earning assets.                
(5) Annualized.                      
                       



FIRST BANK AND SUBSIDIARIES
QUARTERLY FINANCIAL HIGHLIGHTS
(in thousands, except for share and employee data, unaudited)
                     
    As of or For the Quarter Ended
    9/30/2020   6/30/2020   3/31/2020   12/31/2019   9/30/2019 (1)
EARNINGS                    
   Net interest income   $ 17,630     $ 16,328     $ 15,871     $ 16,191     $ 13,976  
   Provision for loan losses     1,997       2,977       2,932       340       1,558  
   Non-interest income     2,246       1,888       1,222       1,608       905  
   Non-interest expense     9,953       9,775       9,923       9,424       11,928  
   Income tax expense     2,023       1,347       1,005       2,789       306  
   Net income     5,903       4,117       3,233       5,246       1,089  
                     
PERFORMANCE RATIOS                    
Return on average assets (2)     1.03 %     0.74 %     0.63 %     1.02 %     0.23 %
Adjusted return on average assets (2) (3)     1.03 %     0.74 %     0.63 %     1.16 %     0.81 %
Return on average equity (2)     10.20 %     7.33 %     5.69 %     9.24 %     2.11 %
Adjusted return on average equity (2) (3)     10.20 %     7.33 %     5.69 %     10.53 %     7.34 %
Return on average tangible equity (2) (3)     11.08 %     7.97 %     6.19 %     10.06 %     2.31 %
Adjusted return on average tangible equity (2) (3)     11.08 %     7.97 %     6.19 %     11.46 %     8.02 %
Net interest margin (2) (4)     3.23 %     3.07 %     3.30 %     3.34 %     3.15 %
Total cost of deposits (2)     0.70 %     0.98 %     1.29 %     1.39 %     1.52 %
Efficiency ratio (3)     50.08 %     53.66 %     58.03 %     52.64 %     57.19 %
Pre-provision net revenue (3)   $ 9,923     $ 8,441     $ 7,170     $ 8,375     $ 6,371  
                     
SHARE DATA                    
   Common shares outstanding     19,694,892       19,629,892       20,141,204       20,458,665       20,460,078  
   Basic earnings per share   $ 0.30     $ 0.21     $ 0.16     $ 0.26     $ 0.06  
   Diluted earnings per share     0.30       0.21       0.16       0.25       0.06  
   Adjusted diluted earnings per share (3)     0.30       0.21       0.16       0.29       0.20  
Tangible book value per share (3)     10.88       10.61       10.33       10.17       9.92  
   Book value per share     11.79       11.54       11.23       11.07       10.83  
                     
MARKET DATA                    
   Market value per share   $ 6.20     $ 6.52     $ 6.94     $ 11.05     $ 10.83  
   Market value / Tangible book value     57.01 %     61.46 %     67.20 %     108.66 %     109.59 %
   Market capitalization   $ 122,108     $ 127,987     $ 139,780     $ 226,068     $ 221,583  
                     
CAPITAL & LIQUIDITY                    
Tangible stockholders' equity / tangible assets (3)     9.35 %     9.12 %     10.03 %     10.44 %     10.02 %
   Stockholders' equity / assets     10.06 %     9.84 %     10.81 %     11.25 %     10.83 %
   Loans / deposits     109.22 %     101.65 %     101.90 %     105.04 %     105.52 %
                     
ASSET QUALITY                    
Net charge-offs   $ 633     $ 1,013     $ 699     $ 325     $ 1,084  
   Nonperforming loans     12,694       14,082       13,814       22,746       15,841  
   Nonperforming assets     13,397       15,224       14,975       24,108       17,705  
Net charge offs / average loans (2)     0.13 %     0.21 %     0.16 %     0.07 %     0.28 %
   Nonperforming loans / total loans     0.63 %     0.72 %     0.79 %     1.32 %     0.91 %
   Nonperforming assets / total assets     0.58 %     0.66 %     0.72 %     1.20 %     0.87 %
   Allowance for loan losses / total loans     1.14 %     1.10 %     1.11 %     1.00 %     0.99 %
   Allowance for loan losses / total loans (excluding PPP loans)   1.25 %     1.20 %     1.11 %     1.00 %     0.99 %
   Allowance for loan losses / nonperforming loans     179.66 %     152.26 %     141.00 %     75.82 %     108.77 %
                     
OTHER DATA                    
   Total assets   $ 2,309,897     $ 2,300,594     $ 2,092,444     $ 2,011,587     $ 2,044,938  
   Total loans     2,004,650       1,955,007       1,758,364       1,723,574       1,743,897  
   Total deposits     1,835,427       1,923,266       1,725,547       1,640,867       1,652,608  
   Total stockholders' equity     232,300       226,450       226,259       226,393       221,510  
   Number of full-time equivalent employees (5)     204       209       208       216       216  
                     
(1) Includes effects of Grand Bank merger effective September 30, 2019.                
(2) Annualized.                    
(3) 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. See accompanying table, "Non-U.S. GAAP Financial Measures", for calculation and reconciliation. 
(4) Tax equivalent using a federal income tax rate of 21%.                    
(5) Includes 4 full-time equivalent seasonal interns as of June 30, 2020.                  
                     


FIRST BANK AND SUBSIDIARIES  
QUARTERLY FINANCIAL HIGHLIGHTS  
(dollars in thousands, unaudited)  
                         
      As of the Quarter Ended  
      9/30/2020   6/30/2020   3/31/2020   12/31/2019   9/30/2019 (1)  
LOAN COMPOSITION                      
Commercial and industrial   $ 430,722     $ 428,494     $ 247,654     $ 239,090     $ 236,932    
Commercial real estate:                      
  Owner-occupied     402,147       392,096       387,217       395,995       405,485    
  Investor     721,029       689,891       678,568       673,300       685,006    
  Construction and development     146,057       131,791       124,496       105,709       113,281    
  Multi-family     133,778       132,942       131,566       119,005       103,858    
      Total commercial real estate     1,403,011       1,346,720       1,321,847       1,294,009       1,307,630    
Residential real estate:                      
  Residential mortgage and first lien home equity loans     117,530       117,796       118,020       123,917       127,337    
  Home equity–second lien loans and revolving lines of credit     27,600       29,371       33,764       32,555       35,264    
      Total residential real estate     145,130       147,167       151,784       156,472       162,601    
Consumer and other     32,531       40,230       38,902       35,810       38,584    
      Total loans prior to deferred loan fees and costs     2,011,394       1,962,611       1,760,187       1,725,381       1,745,747    
Net deferred loan fees and costs     (6,744 )     (7,604 )     (1,823 )     (1,807 )     (1,850 )  
      Total loans   $ 2,004,650     $ 1,955,007     $ 1,758,364     $ 1,723,574     $ 1,743,897    
                         
LOAN MIX                      
Commercial and industrial     21.5 %     21.9 %     14.1 %     13.9 %     13.6 %  
Commercial real estate:                      
  Owner-occupied     20.1 %     20.1 %     22.0 %     23.0 %     23.3 %  
  Investor     36.0 %     35.3 %     38.6 %     39.1 %     39.3 %  
  Construction and development     7.3 %     6.7 %     7.1 %     6.1 %     6.5 %  
  Multi-family     6.6 %     6.8 %     7.5 %     6.9 %     6.0 %  
      Total commercial real estate     70.0 %     68.9 %     75.2 %     75.1 %     75.0 %  
Residential real estate:                      
  Residential mortgage and first lien home equity loans     5.8 %     6.0 %     6.7 %     7.2 %     7.3 %  
  Home equity–second lien loans and revolving lines of credit     1.4 %     1.5 %     1.9 %     1.9 %     2.0 %  
      Total residential real estate     7.2 %     7.5 %     8.6 %     9.1 %     9.3 %  
Consumer and other     1.6 %     2.1 %     2.2 %     2.0 %     2.2 %  
Net deferred loan fees and costs     (0.3 %)     (0.4 %)     (0.1 %)     (0.1 %)     (0.1 %)  
      Total loans     100.0 %     100.0 %     100.0 %     100.0 %     100.0 %  
                         
(1) Includes effects of Grand Bank merger effective September 30, 2019.                  
                         



FIRST BANK AND SUBSIDIARIES  
QUARTERLY FINANCIAL HIGHLIGHTS  
(dollars in thousands, unaudited)  
                         
      As of the Quarter Ended  
      9/30/2020   6/30/2020   3/31/2020   12/31/2019   9/30/2019 (1)  
DEPOSIT COMPOSITION                      
Non-interest bearing demand deposits   $ 445,514     $ 459,123     $ 291,949     $ 275,778     $ 280,216    
Interest bearing demand deposits     156,059       165,081       161,726       170,951       154,293    
Money market and savings deposits     695,224       703,365       611,098       521,263       512,000    
Time deposits     538,630       595,697       660,774       672,875       706,099    
  Total Deposits   $ 1,835,427     $ 1,923,266     $ 1,725,547     $ 1,640,867     $ 1,652,608    
                         
DEPOSIT MIX                      
Non-interest bearing demand deposits     24.3 %     23.9 %     16.9 %     16.8 %     17.0 %  
Interest bearing demand deposits     8.5 %     8.6 %     9.4 %     10.4 %     9.3 %  
Money market and savings deposits     37.9 %     36.5 %     35.4 %     31.8 %     31.0 %  
Time deposits     29.3 %     31.0 %     38.3 %     41.0 %     42.7 %  
  Total Deposits     100.0 %     100.0 %     100.0 %     100.0 %     100.0 %  
                         
(1) Includes effects of Grand Bank merger effective September 30, 2019.                  
                         



FIRST BANK AND SUBSIDIARIES
NON-U.S. GAAP FINANCIAL MEASURES
(in thousands, except for share data, unaudited)
                   
  As of or For the Quarter Ended
  9/30/2020   6/30/2020   3/31/2020   12/31/2019   9/30/2019 (1)
Return on Average Tangible Equity                  
Net income (numerator) $ 5,903     $ 4,117     $ 3,233     $ 5,246     $ 1,089  
                   
Average stockholders' equity $ 230,122     $ 225,905     $ 228,471     $ 225,200     $ 204,759  
Less: Average Goodwill and other intangible assets, net   18,156       18,236       18,309       18,377       17,412  
Average Tangible stockholders' equity (denominator) $ 211,966     $ 207,669     $ 210,162     $ 206,823     $ 187,347  
                   
Return on Average Tangible equity   11.08 %     7.97 %     6.19 %     10.06 %     2.31 %
                   
Tangible Book Value Per Share                  
Stockholders' equity $ 232,300     $ 226,450     $ 226,259     $ 226,393     $ 221,510  
Less: Goodwill and other intangible assets, net   18,108       18,192       18,245       18,336       18,485  
Tangible stockholders' equity (numerator) $ 214,192     $ 208,258     $ 208,014     $ 208,057     $ 203,025  
                   
Common shares outstanding (denominator)   19,694,892       19,629,892       20,141,204       20,458,665       20,460,078  
                   
Tangible book value per share $ 10.88     $ 10.61     $ 10.33     $ 10.17     $ 9.92  
                   
                   
Tangible Equity / Assets                  
Stockholders' equity $ 232,300     $ 226,450     $ 226,259     $ 226,393     $ 221,510  
Less: Goodwill and other intangible assets, net   18,108       18,192       18,245       18,336       18,485  
Tangible equity (numerator) $ 214,192     $ 208,258     $ 208,014     $ 208,057     $ 203,025  
                   
Total assets $ 2,309,897     $ 2,300,594     $ 2,092,444     $ 2,011,587     $ 2,044,938  
Less: Goodwill and other intangible assets, net   18,108       18,192       18,245       18,336       18,485  
Adjusted total assets (denominator) $ 2,291,789     $ 2,282,402     $ 2,074,199     $ 1,993,251     $ 2,026,453  
                   
Tangible equity / assets   9.35 %     9.12 %     10.03 %     10.44 %     10.02 %
                   
                   
Efficiency Ratio (2)                  
Non-interest expense $ 9,953     $ 9,775     $ 9,923     $ 9,424     $ 11,928  
Less: Merger-related expenses   -       -       -       -       3,418  
Adjusted non-interest expense (numerator) $ 9,953     $ 9,775     $ 9,923     $ 9,424     $ 8,510  
                   
Net interest income $ 17,630     $ 16,328     $ 15,871     $ 16,191     $ 13,976  
Non-interest income   2,246       1,888       1,222       1,608       905  
Total revenue   19,876       18,216       17,093       17,799       14,881  
Adjusted total revenue (denominator) $ 19,876     $ 18,216     $ 16,912     $ 17,609     $ 14,881  
                   
Efficiency ratio   50.08 %     53.66 %     58.67 %     53.52 %     57.19 %
                   
                   
Pre-Provision Net Revenue (2)                  
Net interest income $ 17,630     $ 16,328     $ 15,871     $ 16,191     $ 13,976  
Non-interest income   2,246       1,888       1,222       1,608       905  
Less: Non-interest expense   9,953       9,775       9,923       9,424       11,928  
Add: Merger-related expenses   -       -       -       -       3,418  
Pre-provision net revenue $ 9,923     $ 8,441     $ 7,170     $ 8,375     $ 6,371  
                   
(1) Includes effects of Grand Bank merger effective September 30, 2019.                
(2) During the quarter ended 6/30/2020 the efficiency ratio and pre-provision net revenue calculations were changed from the way these amounts were calculated in
      previous period reports. The prior quarter numbers above have been adjusted accordingly. Gains on recovery of acquired loans are no longer removed from the
      revenue numbers as management has determined that these amounts have become part of our core operations and should not be removed in our adjusted totals.



FIRST BANK AND SUBSIDIARIES
NON-U.S. GAAP FINANCIAL MEASURES
(dollars in thousands, except for share data, unaudited)
                   
                   
  For the Quarter Ended
  9/30/2020   6/30/2020   3/31/2020   12/31/2019   9/30/2019 (1)
                   
Adjusted diluted earnings per share,                  
    Adjusted return on average assets, and                  
Adjusted return on average equity (2)                  
                   
Net income $ 5,903     $ 4,117     $ 3,233     $ 5,246     $ 1,089  
Add: Merger-related expenses (3)   -       -       -       -       2,700  
Add: Deferred Tax Asset revaluation   -       -       -       730       -  
Adjusted net income $ 5,903     $ 4,117     $ 3,233     $ 5,976     $ 3,789  
                   
Diluted weighted average common shares outstanding   19,635,127       19,744,575       20,565,867       20,666,729       18,976,574  
Average assets $ 2,289,303     $ 2,251,396     $ 2,049,229     $ 2,037,127     $ 1,859,818  
Average equity $ 230,122     $ 225,905     $ 228,471     $ 225,200     $ 204,759  
Average Tangible Equity $ 211,966     $ 207,669     $ 210,162     $ 206,823     $ 187,347  
                   
Adjusted diluted earnings per share $ 0.30     $ 0.21     $ 0.16     $ 0.29     $ 0.20  
Adjusted return on average assets (4)   1.03 %     0.74 %     0.63 %     1.16 %     0.81 %
Adjusted return on average equity (4)   10.20 %     7.33 %     5.69 %     10.53 %     7.34 %
Adjusted return on average tangible equity (4)   11.08 %     7.97 %     6.19 %     11.46 %     8.02 %
                   
(1) Includes effects of Grand Bank merger effective September 30, 2019.                
(2) During the quarter ended 6/30/2020 the adjusted net income calculation was changed from the way it was calculated in previous period reports. The prior quarter
     amounts above have been adjusted accordingly. Gains on recovery of acquired loans are no longer removed from adjusted net income as management has
     determined that these amounts have become part of our core operations and should not be removed in our adjusted totals.    
(3) Items are tax-effected using a federal income tax rate of 21%.                
(4) Annualized.                  

 

 

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