First Bank Reports Fourth Quarter 2021 Net Income of $7.8 Million and Full Year Net Income of $35.4 Million

HAMILTON, N.J., Jan. 26, 2022 (GLOBE NEWSWIRE) -- First Bank (Nasdaq Global Market: FRBA) today announced results for the fourth quarter and full year 2021. Net income for the fourth quarter of 2021 was $7.8 million, or $0.40 per diluted share, compared to $6.2 million, or $0.31 per diluted share, for the fourth quarter of 2020. Return on average assets, return on average equity and return on average tangible equityⁱ for the fourth quarter of 2021 were 1.27%, 11.77% and 12.63%, respectively, compared to 1.06%, 10.44%, and 11.30%, respectively, for the fourth quarter of 2020. Excluding merger-related expenses, fourth quarter 2021 adjusted diluted earnings per shareⁱⁱ were $0.42, adjusted return on average assetsⁱⁱ was 1.33% and adjusted return on average tangible equityⁱⁱ was 13.26%.

Full year 2021 net income was $35.4 million, an increase of $16.0 million, or 82.2%, compared to $19.4 million for 2020. Diluted earnings per share for 2021 were $1.79, an increase of $0.82, or 84.5%, compared to $0.97 per diluted share in 2020. Return on average assets and return on average equity for the full year 2021 were 1.46% and 13.96%, respectively, compared to 0.87% and 8.45%, respectively, for the full year 2020. Excluding merger-related expenses, full year 2021 adjusted diluted earnings per shareⁱⁱ were $1.81, adjusted return on average assetsⁱⁱ was 1.48% and adjusted return on average equity was 14.16%.

Fourth Quarter and Full Year 2021 Performance Highlights:

• Completion of the acquisition of two branches during the fourth quarter of 2021, adding $100.9 million of deposits and $11.3 million of performing residential and consumer loans.
• Total net revenue (net interest income plus non-interest income) of $22.9 million for the quarter increased $1.8 million, or 8.6%, compared to the prior year quarter, while full year total net revenue was $89.6 million, an increase of $13.7 million, or 18.1%, compared to 2020.
• Total loans of $2.11 billion at December 31, 2021 reflected growth of $107.7 million, or 5.4%, from the end of the linked third quarter of 2021 and $64.4 million, or 3.1%, from December 31, 2020. Loan growth, excluding Paycheck Protection Program (PPP) loan activity, totaled $134.4 million in the fourth quarter of 2021 and $150.5 million for the full year 2021.
• Total deposits of $2.11 billion at December 31, 2021 were up $211.0 million, or 11.1%, from December 31, 2020 and $68.6 million, or 3.4%, from September 30, 2021. Non-interest bearing demand deposits increased to 26.4% of total deposits at December 31, 2021, compared to 22.3% at December 31, 2020, while time deposits decreased to 18.5% at December 31, 2021 from 27.5% of total deposits at December 31, 2020.
• Asset quality metrics remained solid during the quarter, with low net charge-offs of $6,000 during the fourth quarter of 2021, or 0.00% of average loans on an annualized basis, and nonperforming loans of $13.0 million, or 0.62% of total loans, at December 31, 2021 compared to $10.2 million, or 0.50% of total loans, at December 31, 2020.  
• Fourth consecutive quarter of an efficiency ratioⁱⁱⁱ below 50%, at 49.57% for the fourth quarter of 2021.

“First Bank’s fourth quarter performance provided a strong finish to 2021 highlighted by organic loan growth, revenue expansion and solid asset quality metrics, positioning us well heading into 2022,” said Patrick L. Ryan, President and Chief Executive Officer. “We put our liquidity to work in the fourth quarter and achieved significant loan growth, with non-PPP loans up $134.4 million during the quarter, while maintaining our nonperforming assets ratio under 60 basis points. The growth was driven primarily by organic growth in commercial and industrial, multi-family and owner-occupied commercial real estate lending. We also continued to enhance our deposit mix, expanding lower cost core deposits and reducing the proportion of higher cost time deposits on our balance sheet. These reduced funding costs supported a relatively stable net interest margin compared to the linked third quarter.”

Mr. Ryan continued, “We maintained an efficiency ratio below 50% for the fourth consecutive quarter, even as core operating expenses were elevated due to higher incentive compensation based on our strong 2021 performance. Our total non-interest expenses were also impacted by costs associated with our acquisition of two branches during the fourth quarter. Importantly, all remaining acquisition-related expenses related to this strategic in-market transaction were recorded during December and we have been very pleased with the performance of our two new branches since the transaction closed.”

“As we look ahead to 2022, we are excited by the opportunities. Our reputation as a committed and valuable financial partner was significantly enhanced by our response to the challenges faced in 2020 and 2021. We introduced our relationship-based banking approach to a large number of new customers and we deepened our relationships with existing ones. Our lending pipelines at year-end continued to be very strong and, with an expanded team and customer base as a result of our recent branch acquisition, we are well positioned to drive continued organic loan and deposit growth. During the fourth quarter we were also approved as a Preferred Lender by the U.S. Small Business Administration, which should drive continued growth in our SBA lending business. Our SBA team had a great year in 2021 and we’re excited about continued growth in this area.”

“Our ability to deliver strong profitability and earnings enables us to consistently reward our shareholders. We are pleased to announce another $0.06 dividend, which reflects an annualized yield of 1.62% based on our January 25, 2022 closing price, as part of our ongoing focus on creating shareholder value.”

Income Statement

First Bank’s net interest income for the fourth quarter of 2021 was $20.6 million, an increase of $917,000, or 4.6%, compared to $19.7 million in the fourth quarter of 2020, driven by a $1.5 million decrease in total interest expense. The reduction in interest expense was primarily a result of a 61 basis point reduction in the average rates paid on time deposits, along with a decrease of $131.7 million in the average balance of time deposits. As a result of our concerted effort to drive down costs, interest expense on all other interest bearing deposits also declined for the comparative period. Interest income decreased primarily due to a 17 basis point decline in average loan yields, partially offset by a $17.6 million increase in average loans compared with the fourth quarter of 2020. Interest income from loans in the fourth quarter of 2021 included $1.1 million in PPP loan fee income compared to $1.8 million in the fourth quarter of 2020 and $1.8 million in the linked third quarter of 2021. Also impacting loan interest income was prepayment income of $312,000 for the quarter ended December 31, 2021 compared to $138,000 for the quarter ended December 31, 2020 and $166,000 for the linked third quarter of 2021.

Full year 2021 net interest income totaled $81.9 million, an increase of $12.3 million, or 17.7%, compared to $69.6 million for 2020. The increase in 2021 net interest income was also primarily a result of lower interest paid on interest bearing deposits, primarily time deposits. The average rate for time deposits declined by 104 basis points, and the average balance declined by $141.5 million compared to the same period in 2020. Total interest and dividend income of $91.1 million for the full year 2021, increased $1.9 million, driven by higher PPP fee income, solid growth in average loans, which increased by $122.6 million, or 6.4%, from the prior year, partially offset by a 15 basis point decrease in the average yield on loans. The decrease in average yield on loans was primarily due to the low interest rate environment that persisted throughout 2021. Also impacting our average loan yields were the level of PPP loan fees and prepayment income. For the year ended December 31, 2021 PPP fee income was $5.8 million compared to $3.3 million for year ended December 31, 2020. Loan prepayment income was $1.9 million in 2021 compared to $709,000 in 2020.

The fourth quarter 2021 tax equivalent net interest margin was 3.52%, a decrease of four basis points compared to the prior year quarter and a decrease of two basis points compared to the linked third quarter of 2021. The modest decline in the margin compared to the third quarter of 2021 was primarily a result of a 7 basis point decrease in interest earning asset yields, partially offset by a 6 basis point decrease in the average cost of interest-bearing liabilities, primarily interest-bearing deposits. The full year 2021 tax equivalent net interest margin was 3.56%, an increase of 27 basis points compared to the prior year period. The increase in the full year net interest margin was principally a result of a 71 basis point reduction in the cost of interest-bearing deposits, partially offset by a 26 basis point decline in earning asset yields.

First Bank (the Bank) reported a provision for loan losses of $825,000 for the fourth quarter of 2021, compared to a provision for loan losses of $1.6 million in the fourth quarter of 2020. The provision for the quarter ended December 31, 2021 was due to strong loan growth offset somewhat by the low level of net charge-offs and continued stable asset quality metrics. For full year 2021, the Bank reported a credit to the provision for loan losses of $232,000, compared to provision expense of $9.5 million for the same period in 2020. The provision for loan losses in 2020 reflected a higher degree of economic uncertainty associated with the COVID-19 pandemic as well as an elevated level of charge-offs compared to 2021.

Fourth quarter 2021 non-interest income of $2.2 million increased $899,000, or 68.5%, from $1.3 million during the fourth quarter 2020. The increase between the periods was primarily the result of a $321,000 increase in gains on sale of loans, reflecting an increase in U.S. Small Business Administration (SBA) loan sales and a $305,000 increase in loan fees reflecting increased swap fees in the fourth quarter 2021. Non-interest income totaled $7.8 million for the full year ended December 31, 2021, compared to $6.4 million for the same period in 2020, an increase of $1.4 million, or 22.1%. The increase in non-interest income for the full year of 2021 was primarily a result of an increase of $1.6 million in gains on the sale of loans and an increase in other non-interest income of $331,000. For the full year ended December 31, 2021 gain on sale of loans included increased income from the Bank’s growing SBA business as well as gains on the sale of problem loan assets totaling $364,000. Other non-interest income during the year ended December, 31 2021 included a $159,000 gain on the sale of a former branch facility.

Non-interest expense for fourth quarter 2021 of $11.8 million increased $773,000, or 7.0%, compared to $11.1 million for the prior year quarter. The higher non-interest expense compared to fourth quarter 2020 was primarily a result of higher performance related compensation which was reflected in the $628,000 increase in salaries and employee benefits, along with merger-related expenses of $498,000 related to the acquisition of two former OceanFirst Bank branches. These increases were partially offset by reduced occupancy and equipment, regulatory fees, and marketing and advertising costs. Excluding merger-related expenses, non-interest expense would have increased 2.5% for the comparable periods.

On a linked quarter basis, fourth quarter 2021 non-interest expense increased $1.3 million compared to $10.5 million for the third quarter of 2021. The higher non-interest expense compared to the third quarter of 2021 was also due principally to an increase in performance related compensation and merger-related expenses.

Non-interest expense for the full year 2021 totaled $43.2 million, an increase of $2.8 million, or 6.8%, compared to $40.4 million for the same period in 2020. The increase was primarily a result of increased performance related compensation, merger-related expenses and data processing costs, partially offset by lower occupancy and equipment costs and other expense. Lower occupancy and equipment and other expense was primarily due to cost savings from the closure of two branches and administrative office space during 2021. Excluding merger-related expenses, non-interest expense would have increased 5.3% for the comparable periods.

Income tax expense for the three months ended December 31, 2021 was $2.4 million with an effective tax rate of 23.2%, compared to $2.2 million with an effective tax rate of 25.8% for the fourth quarter of 2020 and $3.0 million with an effective tax rate of 24.7% for the third quarter of 2021. Income tax expense for the full year ended December 31, 2021 was $11.3 million with an effective tax rate of 24.2%, compared to $6.5 million for the full year 2020 with an effective tax rate of 25.1%. The increase in the income tax expense is primarily due to higher pre-tax income for the current periods.

Balance Sheet

Total assets at December 31, 2021 were $2.51 billion, an increase of $164.0 million, or 7.0%, compared to $2.35 billion at December 31, 2020. Total loans increased $64.4 million, or 3.1%, to $2.11 billion at December 31, 2021 compared to $2.05 billion at December 31, 2020. The increase in loans for the full year 2021 reflects organic growth of $139.2 million and $11.3 million in acquired loans, offset by a net decline in PPP loans of $86.1 million. Total loans as of December 31, 2021 increased $107.7 million, or 5.4%, from $2.00 billion at September 30, 2021, reflecting organic, net non-PPP loan growth of $123.1 million and $11.3 million in acquired loans, offset by a net decline in PPP loans of $26.7 million. PPP loans outstanding at December 31, 2021 were $51.0 million.

Total deposits were $2.11 billion at December 31, 2021, an increase of $211.0 million, or 11.1%, from $1.90 billion at December 31, 2020, and an increase of $68.6 million, or 3.4%, compared to $2.05 billion at September 30, 2021. Non-interest-bearing deposits totaled $558.8 million at December 31, 2021, an increase of $134.7 million, or 31.7%, from December 31, 2020, and an increase of $21.9 million, or 4.1%, from September 30, 2021, reflective of continued growth in commercial deposits. The Bank continues to focus on enhancing its deposit mix and, as of December 31, 2021, had grown non-interest bearing deposits to 26.4% and lowered time deposits to 18.5% of total deposits.

Stockholders’ equity was $266.7 million at December 31, 2021, compared to $238.1 million on December 31, 2020. The growth of $28.6 million, or 12.0%, in stockholders’ equity was primarily a result of full year 2021 net income of $35.4 million, partially offset by repurchases of 344,458 shares of common stock totaling $4.1 million and cash dividends paid of $2.9 million during the full year ended December 31, 2021.

As of December 31, 2021, the Bank continued to exceed all regulatory capital requirements to be considered well capitalized, with a Tier 1 Leverage ratio of 10.15%, a Tier 1 Risk-Based capital ratio of 10.65%, a Common Equity Tier 1 Capital ratio of 10.65%, and a Total Risk-Based capital ratio of 12.97%.

Asset Quality

First Bank’s asset quality metrics have remained stable and favorable during the twelve months ended December 31, 2021. Net charge-offs were $6,000 for the fourth quarter of 2021, compared to net charge-offs of $465,000 for the fourth quarter of 2020 and net recoveries of $121,000 for the third quarter of 2021. Net charge-offs as an annualized percentage of average loans were 0.00% in fourth quarter 2021, compared to 0.09% in fourth quarter 2020. Nonperforming loans were $13.0 million at December 31, 2021, up from $10.2 million on December 31, 2020, and up from $11.5 million on September 30, 2021. Nonperforming loans as a percentage of total loans at December 31, 2021 were 0.62%, compared with 0.50%, at December 31, 2020 and 0.57% at September 30, 2021. The allowance for loan losses to nonperforming loans was 182.65% at December 31, 2021, compared with 234.24% at the end of fourth quarter 2020, and 199.57% at September 30, 2021.

COVID-19 Response

First Bank participated in the PPP, established by the Coronavirus Aid, Relief, and Economic Securities Act (CARES Act), during 2020 and 2021. The PPP was a specialized low-interest loan program funded by the U.S. Treasury Department and administered by the SBA. The PPP provided borrower guarantees for lenders, as well as loan forgiveness incentives for borrowers that utilized the loan proceeds to cover compensation and other business-related operating costs. The PPP ended on May 31, 2021 but the PPP loan forgiveness process is ongoing. As of December 31, 2021, First Bank had 341 PPP loans with outstanding balances of $51.0 million. During 2021, prior to the end of the PPP on May 31, 2021, First Bank originated 783 new PPP loans totaling $107.9 million. During the year ended December 31, 2021, PPP loans totaling $194.0 million were forgiven. During 2021, the Bank realized $5.8 million in fee income on these loans as any deferred fees remaining on the forgiven loans were accelerated. As of December 31, 2021, the Bank had $1.7 million in remaining unamortized fees associated with outstanding balances of PPP loans.

First Bank continues to monitor and analyze its COVID-19 related financial hardship payment deferrals (COVID-19 deferrals). As of December 31, 2021, the Bank’s population of COVID-19 deferrals consisted of three loans totaling $1.6 million, or 0.08% of total loans, down from $10.3 million, or 0.52% of total loans, at September 30, 2021.

Branch Acquisition Completed

At the close of business on December 3, 2021, First Bank completed the acquisition of two New Jersey branch locations from OceanFirst Bank. As part of the acquisition, First Bank also acquired $100.9 million of associated deposits and $11.3 million of select performing loans. Located in Flemington and Monroe, the two branches enhance First Bank’s existing Central New Jersey footprint and further strengthen its presence along the New York City to Philadelphia corridor. Through December 31, 2021 there have been no material fluctuations in the acquired loan or deposit balances since the acquisition.

Cash Dividend Declared

On January 18, 2022, 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 February 11, 2022, payable on February 25, 2022.

Conference Call

First Bank will host its earnings call on Thursday, January 27, 2022 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 448993. For those unable to participate in the call, a replay will be available by dialing 1-866-813-9403 (access code 410946) from one hour after the end of the conference call until April 27, 2022. 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 $2.5 billion in assets as of December 31, 2021, First Bank offers a full range of deposit and loan products to individuals and businesses throughout the New York City to Philadelphia corridor. First Bank's common stock is listed on the Nasdaq Global Market under the symbol “FRBA.”

Forward Looking Statements

This press release contains certain forward-looking statements, either express or implied, within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include information regarding First Bank’s future financial performance, business and growth strategy, projected plans and objectives, and related transactions, integration of acquired businesses, ability to recognize anticipated operational efficiencies, and other projections based on macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact economic trends, and any such variations may be material. Such forward-looking statements are based on various facts and derived utilizing important assumptions, current expectations, estimates and projections about First Bank, any of which may change over time and some of which may be beyond First Bank’s control. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could” are generally forward-looking in nature and not historical facts, although not all forward-looking statements include the foregoing. Further, certain factors that could affect our future results and cause actual results to differ materially from those expressed in the forward-looking statements include, but are not limited to: whether First Bank can: successfully implement its growth strategy, including identifying acquisition targets and consummating suitable acquisitions, 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 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.

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

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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 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.