First Bank Reports Second Quarter 2022 Net Income of $8.8 Million

HAMILTON, N.J., July 26, 2022 (GLOBE NEWSWIRE) -- First Bank (Nasdaq Global Market: FRBA) today announced results for the second quarter of 2022, accentuated by net income of $8.8 million, or $0.45 per diluted share. Return on average assets, return on average equity, and return on average tangible equityⁱ for the second quarter of 2022 were 1.38%, 12.92% and 13.93%, respectively. In the second quarter of 2021, First Bank reported net income of $8.9 million, or $0.45 per diluted share, and return on average assets, return on average equity, and return on average tangible equityⁱ of 1.48%, 14.26% and 15.37%, respectively.

Second Quarter 2022 Highlights:

• Total loans of $2.22 billion on June 30, 2022, reflected growth of $68.5 million, or 3.2%, from the end of the first quarter of 2022 and were up $108.2 million, or 5.1%, from December 31, 2021. Loan growth, excluding the decline in Paycheck Protection Program (PPP) loans, totaled $84.0 million in the second quarter of 2022, representing a 15.8% annualized increase.
• Total deposits of $2.17 billion on June 30, 2022, were down $12.7 million, or 0.6%, from the end of the linked first quarter and up $50.6 million, or 2.4%, from December 31, 2021.
• Asset quality metrics remained solid during the quarter, with annualized net charge offs to average loans of 0.07% and nonperforming loans to total loans of 0.57% as of June 30, 2022, compared to 0.62% on December 31, 2021, and 0.59% on March 31, 2022.
• Continued focus on managing expenses resulted in the sixth consecutive quarter of an efficiency ratioⁱⁱ below 50%, at 46.81% for the second quarter of 2022.

President and Chief Executive Officer, Patrick L. Ryan, said, “We are pleased with our performance during the second quarter. Our continued focus on developing new and existing customer relationships facilitated another quarter of robust loan growth. Total deposits remained relatively stable as we continued to shift our deposit mix with non-interest bearing deposits representing 27.7% of total deposits at quarter-end. Loan growth, improving asset yields and managing deposit costs contributed to a 19 basis point improvement in our net interest margin which was 3.76% for the second quarter of 2022 compared to 3.57% for the first quarter of 2022. We remain focused on driving organic growth as we continue to manage expenses to achieve greater profitability.”

“Asset quality metrics also remain strong, reflected by our eighth consecutive quarter end with our nonperforming loans to total loans ratio under 65 basis points. Annualized net charge offs were only 0.07% of average loans for the quarter ended June 30, 2022, and primarily related to one small business loan.”

“In our continuous effort to drive long-term shareholder value, we are pleased to announce another $0.06 quarterly dividend, reflecting an annualized yield of 1.69% based on our July 22, 2022, closing price of $14.18. We also have an active share repurchase program and from January 1, 2022, through July 22, 2022, we have repurchased 241,284 shares of our common stock at an aggregate cost of $3.4 million, or an average price of $13.99 per share.”

“Overall, we are very pleased with our performance through the first half of the year and our financial performance provides us with the confidence that we are well positioned to continue to generate strong results during the second half of 2022.”

Income Statement

First Bank’s (the “Bank’s”) net interest income for the second quarter of 2022 was $22.9 million, an increase of $2.5 million, or 12.2%, compared to $20.4 million in the second quarter of 2021 and an increase of $1.8 million, or 8.3%, compared to $21.1 million in the first quarter of 2022. The increase from the comparable prior year quarter was due to an increase in interest and dividend income of $2.0 million coupled with a decline of $444,000 in total interest expense. The increase from the linked first quarter of 2022 was due to an increase in interest and dividend income of $2.0 million offset somewhat by an increase in total interest expense of $216,000.

The increase in interest income during the second quarter of 2022 compared to the second quarter of 2021 and the first quarter of 2022 was primarily due to an increase in average loans combined with a 7 basis point and 18 basis point increase, respectively, in the average rate on loans. Interest income increased compared to the year-ago quarter and the linked first quarter despite a decrease in PPP loan fees, as loan growth and the rising rate environment led to improved interest income. Interest income from loans included $493,000 in PPP loan fees in the second quarter of 2022 compared to $1.3 million in the second quarter of 2021 and $860,000 in the linked first quarter of 2022. Also impacting loan interest income in the second quarter of 2022 was loan prepayment income of $682,000, compared to $730,000 for the quarter ended June 30, 2021, and $459,000 for the quarter ended March 31, 2022. As a result of the Bank’s concerted effort to control deposit costs, the average rate on interest bearing deposits was lower during the quarter ended June 30, 2022, compared to the quarter ended June 30, 2021, and increased only 6 basis points compared to the first quarter of 2022, despite the rising rate environment during the second quarter of 2022.

Net interest income for the six months ended June 30, 2022, totaled $44.1 million, an increase of $3.6 million, or 8.9%, compared to $40.5 million for the same period in 2021. The increase in the 2022 year to date net interest income was also driven by solid growth in average loans, which increased by $115.2 million, or 5.6%, from the prior year period, along with a 16 basis point decrease in the average rate on interest-bearing deposits.

The second quarter 2022 tax equivalent net interest margin was 3.76%, an increase of 19 basis points compared to the comparable prior year quarter and from the first quarter of 2022. The Bank’s margin continues to benefit from the increase in average non-interest bearing deposits, improving asset yields and actively managing the cost of funds. The year-to-date tax equivalent net interest margin was 3.67%, an increase of 9 basis points compared to the prior year period. The increase in the six-month net interest margin was principally a result of the lower cost of interest bearing deposits, partially offset by lower earning asset yields.

The Bank’s provision for loan losses was $1.3 million for the second quarter of 2022, compared to a $162,000 credit to the provision for loan losses in the second quarter of 2021 and a provision for loan losses of $642,000 for the linked first quarter 2022. The Bank’s provision for loan losses was $1.9 million for the six months ended June 30, 2022, compared to a credit to the provision for loan losses of $1.2 million for the same period in 2021. The provision for loan losses for the three and six months ended June 30, 2022, reflects consistent organic loan growth and continued strong asset quality. The credit to the provision for loan losses for the three and six months ended June 30, 2021, reflected a reduction in qualitative factors that were increased significantly in 2020 due to the economic uncertainties created by the COVID-19 pandemic.

Second quarter 2022 non-interest income of $1.5 million compares to $1.3 million during the second quarter of 2021. The increase between the periods was primarily the result of higher income from service fees from deposit accounts and higher gains on recovery of acquired loans. Non-interest income totaled $2.7 million for the six months ended June 30, 2022, compared to $3.6 million for the same period in 2021. This decrease in non-interest income for the first six months of 2022 was a result of lower gains on sale of loans, lower loan fees and lower gains on recovery of acquired loans. The decrease was primarily the result of a reduction in Small Business Administration loan sales and a decline in loan swap activity, primarily due to the current market conditions.   

Non-interest expense for second quarter 2022 of $11.4 million, increased $1.3 million, or 12.3%, compared to $10.2 million for the prior year quarter. The higher non-interest expense compared to second quarter 2021 was primarily a result of a $768,000, or 13.0%, increase in salaries and employee benefits, along with lesser increases in other professional fees, travel and entertainment, and other expense. These increases were partially offset by lower legal fees, directors’ fees, and marginal declines in certain other non-interest expense categories. The increase in salaries and employee benefits was due primarily to salary increases and an increase in the number of employees, partially due to the employees added from our acquisition of two branches during the fourth quarter of 2021.

On a linked quarter basis, second quarter 2022 non-interest expense of $11.4 million, increased $287,000, or 2.6%, compared to $11.1 million for the first quarter of 2022. This increase was also primarily due to salary and employee benefits increases which was primarily due to annual salary increases that occurred at the end of the first quarter of 2022.

Non-interest expense for the first six months of 2022 totaled $22.5 million, an increase of $1.7 million, or 8.3%, compared to $20.8 million for the same period in 2021. The increase was primarily a result of higher salaries and employee benefits and higher other professional fees, offset somewhat by lower occupancy and equipment expenses.

Income tax expense for the three months ended June 30, 2022, was $2.8 million with an effective tax rate of 24.4%, compared to $2.9 million with an effective tax rate of 24.4% for the second quarter of 2021 and $2.5 million with an effective tax rate of 23.4% for the first quarter of 2022. Income tax expense for the six months ended June 30, 2022, was $5.3 million with an effective tax rate of 23.9%, compared to $6.0 million for the first six months of 2021 with an effective tax rate of 24.3%.

Balance Sheet

Total assets at June 30, 2022, were $2.57 billion, an increase of $57.8 million, or 2.3%, from December 31, 2021. Total loans increased $108.2 million, or 5.1%, to $2.22 billion at June 30, 2022, compared to $2.11 billion at December 31, 2021. The increase in loans during the six-month period ended June 30, 2022, reflects net non-PPP organic loan growth of $149.3 million, offset somewhat by a decline in PPP loans of $41.0 million, as such loans continue to be forgiven. Total loans as of June 30, 2022, increased $68.5 million, or 3.2%, from $2.15 billion on March 31, 2022, reflecting organic, net non-PPP loan growth of $84.0 million, offset somewhat by a decline in PPP loans of $15.5 million. PPP loans outstanding on June 30, 2022, were $10.0 million.

Total deposits were $2.17 billion on June 30, 2022, an increase of $50.6 million, or 2.4%, from $2.11 billion at December 31, 2021. Non-interest-bearing deposits totaled $600.4 million on June 30, 2022, an increase of $41.6 million, or 7.4%, from December 31, 2021. The Bank continues to focus on enhancing its deposit mix and, as of June 30, 2022, had grown non-interest bearing deposits to 27.7% and lowered time deposits to 14.7% of total deposits. Total deposits declined by $12.7 million, or 0.6%, from March 31, 2022, with interest bearing deposits declining $15.8 million, offset somewhat by a $3.1 million increase in non-interest bearing deposits.

Stockholders’ equity was $274.7 million on June 30, 2022, compared to $266.7 million on December 31, 2021. The growth of $8.0 million, or 3.0%, was primarily a result of year-to-date net income of $17.0 million, partially offset by a $5.1 million increase in accumulated other comprehensive loss, $2.7 million in treasury stock purchases and cash dividends paid of $2.3 million during the six months ended June 30, 2022. The increase in accumulated other comprehensive loss was due to an increase in unrealized losses on the Bank’s available for sale investment securities, primarily resulting from the current interest rate environment.

As of June 30, 2022, the Bank continued to exceed all regulatory capital requirements to be considered well capitalized, with a Tier 1 Leverage ratio of 10.19%, a Tier 1 Risk-Based capital ratio of 10.28%, a Common Equity Tier 1 Capital ratio of 10.28%, and a Total Risk-Based capital ratio of 12.46%.

Asset Quality

First Bank’s asset quality metrics remained stable and favorable during the three and six months ended June 30, 2022. Net charge offs of $404,000 for the second quarter of 2022 were 0.07% of average loans on an annualized basis. This compares to net charge offs of $116,000, or an annualized 0.02% of average loans, for the second quarter of 2021 and net charge offs of $247,000, or an annualized 0.05%, for the first quarter of 2022. Nonperforming loans were $12.7 million on June 30, 2022, down from $13.0 million on December 31, 2021. Nonperforming loans as a percentage of total loans on June 30, 2022, were 0.57%, compared with 0.62% at December 31, 2021, and 0.59% at March 31, 2022. The allowance for loan losses to nonperforming loans was 197.06% on June 30, 2022, compared with 182.65% at December 31, 2021, and 191.72% on March 31, 2022.

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 Small Business Administration. 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 June 30, 2022, First Bank had 99 PPP loans with outstanding balances of $10.0 million. During the quarter ended June 30, 2022, PPP loans totaling $15.5 million were forgiven and the Bank realized $493,000 in loan fees on these loans as any deferred fees remaining on the forgiven loans were accelerated. As of June 30, 2022, the Bank had $336,000 in remaining unamortized fees associated with outstanding balances of PPP loans.

Cash Dividend Declared

On July 19, 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 August 12, 2022, payable on August 26, 2022.

Conference Call

First Bank will host its earnings call on Wednesday, July 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 212059. For those unable to participate in the call, a replay will be available by dialing 1-866-813-9403 (access code 861313) from one hour after the end of the conference call until October 24, 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 $2.6 billion in assets as of June 30, 2022, 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 inflation and declines in housing market values; the impact of disease pandemics, including COVID-19, on First Bank’s operations, 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: Andrew Hibshman, Chief Financial Officer
(609) 643-0058, andrew.hibshman@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 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.