First Bank Reports Fourth Quarter 2018 Net Income of $4.1 Million


Full Year 2018 Net Income of $17.6 Million Compared to $7.0 Million in 2017

For the Fourth Quarter and Full Year 2018: Continued Strong Organic Loan Growth; Stable and Favorable Asset Quality Metrics

HAMILTON, N.J., Jan. 24, 2019 (GLOBE NEWSWIRE) -- First Bank (Nasdaq Global Market: FRBA) today announced results for the fourth quarter and full year 2018.  Net income for fourth quarter 2018 was $4.1 million, or $0.22 per diluted share, compared to $583,000 or $0.03 per diluted share for the fourth quarter of 2017. Return on average assets and return on average equity for the fourth quarter of 2018 were 0.94% and 8.42%, respectively. Fourth quarter 2017 return on average assets and return on average equity were 0.16% and 1.40%, respectively. During the fourth quarter of 2017, First Bank recognized a one-time charge to income tax expense of approximately $2.6 million, or $0.15 per diluted share, as a result of the federal tax legislation that lowered corporate statutory income tax rates, requiring a revaluation of First Bank’s deferred tax assets.

Net income for the fourth quarter 2018 and 2017 included certain merger-related items. First Bank’s fourth quarter 2018 adjusted diluted earnings per share1 were $0.21, adjusted return on average assets1 was 0.90% and adjusted return on average equity1 was 8.00%. Fourth quarter 2017 adjusted diluted earnings per share were $0.18, adjusted return on average assets was 0.89% and adjusted return on average equity was 7.84%.
   
Net income for 2018 was $17.6 million, or $0.95 per diluted share, compared to $7.0 million, or $0.48 per diluted share, for 2017. First Bank’s 2018 return on average assets and return on average equity were 1.09% and 9.70%, respectively, compared to 0.57% and 5.60%, respectively, in 2017.  2018 adjusted diluted earnings per share were $0.95, adjusted return on average assets was 1.10% and adjusted return on average equity was 9.78%. 2017 adjusted diluted earnings per share was $0.72, adjusted return on average assets was 0.86% and adjusted return on average equity was 8.42%.

Fourth Quarter and Full Year 2018 Performance Highlights:

  • A 17.7% increase in total net revenue (net interest income plus non-interest income) for the fourth quarter of 2018 to $15.1 million, compared to $12.9 million for the prior year quarter, and total net revenue for 2018 of $58.4 million an increase of  39.8%, or $16.6 million, compared to 2017.
  • Total loans of $1.46 billion at December 31, 2018, an increase of $235.1 million, or 19.2%, from $1.23 billion on December 31, 2017, which included $178.0 million of organic loan growth.
  • Total deposits of $1.4 billion at 2018 year end increased by $226.1 million, or 19.4%, from $1.2 billion at December 31, 2017, which included $117.9 million of organic deposit growth.
  • Continued strong asset quality metrics with net loan charge-offs of $7,000 for fourth quarter 2018 compared to $287,000 for fourth quarter 2017. Nonperforming loans to total loans of 0.44% at December 31, 2018, compared with 0.52% at September 30, 2018 and 0.43% at December 31, 2017. 

“Driven by strong average interest-earning asset growth of $365.3 million in 2018, and the resulting increase in interest and dividend income, First Bank recorded another solid and productive performance for the fourth quarter and full year,” said Patrick L. Ryan, President and Chief Executive Officer. “Our top-line revenue growth for the year continued at a double-digit pace and flowed through to strong earnings improvement reflective of both enhanced operating performance and a lower federal tax rate. Average loans grew $343.0 million, up 33.5% from 2017, from a combination of acquisition and strong organic origination activity. Average deposits were up $299.2 million at December 31, 2018, also reflecting acquisition activity, as well as actions taken targeted to attract new or enhanced deposit relationships.”

“Our increased non-interest expense for 2018 reflects a full year of additional expenses associated with our acquisition of Bucks County Bank in September 2017, and our second quarter addition of Delanco Bancorp, as well as investments in people and technology to support our growing franchise. Examples of these investments include the addition of a Chief Deposit Officer and additional members of our retail and commercial deposit teams in the fourth quarter of 2018 to build on the progress we have made toward becoming a strong deposit gatherer. Despite the increase in non-interest expense for the year, we continued to benefit from operating leverage with total revenue growth of 43%, compared to the 35% increase in non-interest expense.”

“Our fourth quarter net interest margin of 3.44% was down 7 basis points compared to fourth quarter 2017 and our 2018 net interest margin of 3.57% improved 18 basis points compared to the prior year. Margin compression continues to be a challenge that we intend to manage by focusing on opportunities for higher interest rates for interest-earning assets and by remaining disciplined in pricing deposits. Our asset quality metrics were highly favorable throughout 2018 including the fourth quarter, even while we continued to experience significant loan growth. After two reporting periods where we had net recoveries, our net charge-offs for the fourth quarter were de minimis at $7,000, and nonperforming loans to total loans finished the year at 0.44%, only 1 basis point higher than the ratio at 2017 year end.”

“As the flattening yield curve has generated margin pressure we continue to vigorously explore expense management. In October we consolidated our Bensalem location into the nearby Trevose branch to improve the efficiency of our service footprint in Eastern Pennsylvania. We continue to evaluate the effectiveness of our branch system and in March 2019, we plan to further consolidate the former Bucks County Bank location in Levittown into our Trevose location.”

“2018 was another productive and successful year for First Bank, and we believe that we’re well positioned to continue this trend in 2019. We begin the new year with a solid loan pipeline, continued favorable asset quality metrics, and a strong capital position from which to fund continued loan growth.”  

Income Statement

Our net interest income for fourth quarter 2018 was $14.2 million, an increase of $1.9 million, or 15.5%, compared to $12.3 million in the fourth quarter of 2017. This growth was driven by a $3.9 million, or 24.7%, increase in interest and dividend income. This increase was primarily a result of a $239.6 million increase in average loan balances, with growth in all of our loan types, along with an 18 basis point increase in the average interest rate on loans compared with the fourth quarter of 2017. Interest income growth was offset somewhat by increased interest expense of $2.0 million for the comparable quarter, which was primarily a result of higher average balances and interest rates paid for time deposits and money market deposits. Both loan and deposit balances reflect acquired and organic growth activity.

Net interest income of $54.9 million for 2018 increased by $15.3 million, or 38.5%, compared to $39.7 million for 2017. The increase in 2018 net interest income was also primarily driven by significant growth in average loans which increased by $343.0 million, along with a 30 basis point increase in the average interest rate on loans compared to the prior year, partially offset by higher interest expense on interest bearing deposits due to higher average balances and rates paid.

The fourth quarter 2018 tax equivalent net interest margin was 3.44%, a decrease of 7 basis points compared to 3.51% for the prior year quarter and a decrease of 16 basis points from the linked third quarter 2018. The decrease in the fourth quarter margin compared to 2017 was primarily the result of higher average balances and rates paid for interest-bearing liabilities, primarily money market and time deposits. Interest bearing liability costs increased 39 basis points for the comparable quarters. Partially offsetting higher interest bearing liability costs was the increase in the yield on interest-earning assets which increased 26 basis points, primarily driven by an increase of 18 basis points on the average yield on loans.  Our tax equivalent margin for the third quarter 2018 of 3.60% included the realization of $447,000 in interest income resulting from the payoff of a large nonaccrual commercial loan, which contributed approximately 11 basis points to the margin. Absent this item, our fourth quarter margin would have been 5 basis points lower compared to the third quarter due primarily to higher rates paid on money market and time deposits which contributed to a 13 basis point increase in the average cost of interest bearing liabilities.

The net interest margin for 2018 was 3.57%, an increase of 18 basis points compared to 3.39% for the prior year. The improvement in the full year net interest margin was driven by a $365.3 million increase in average interest-earning assets, primarily loans, along with a 36 basis point increase in the average rate for interest-earning assets compared to 2017. During 2018 the Federal Reserve increased the federal funds rate four times. First Bank’s loan portfolio yield increased 30 basis points, primarily due to the repricing of floating rate loans. Partially offsetting higher earning asset yields were higher average interest bearing liability balances and rates paid due to a rising rate environment.   

The provision for loan losses for the fourth quarter 2018 totaled $1.0 million, an increase of $311,000 compared to $715,000 for the fourth quarter 2017 and an increase of $305,000 compared to the linked third quarter 2018. The full year 2018 provision for loan losses was $3.4 million compared to $2.7 million for the prior year period. The increase in the provision amount for the quarter and for the full year was a result of continued solid organic growth in our commercial loan portfolio, along with a specific reserve for a single nonperforming commercial loan. The increase was partially offset by continued low net charge-offs and strong asset quality metrics.

Fourth quarter 2018 non-interest income increased $380,000, to $984,000, from $604,000 in the fourth quarter of 2017. The increase was primarily a result of higher gains on recovery of acquired loans, gains on sale of loans and income from bank-owned life insurance. Non-interest income totaled $3.5 million for 2018, an increase of $1.3 million compared to $2.1 million for 2017. The increase was primarily a result of higher gains on recovery of acquired loans, higher other non-interest income, and income from bank-owned life insurance.

Non-interest expense for fourth quarter 2018 totaled $9.2 million, an increase of $1.9 million compared to $7.2 million for the prior year quarter and an increase of $976,000 compared to the third quarter of 2018. The higher non-interest expense compared to fourth quarter 2017 was primarily a result of increased salaries and employee benefits expense, higher occupancy and equipment costs and other expense. These higher expenses were partially offset by a reduction in merger-related expenses and other real estate owned expense, net. Non-interest expense in 2018 was higher, in part, due to the acquisition of Delanco in the second quarter of 2018, primarily reflected in higher salaries and occupancy and equipment costs. The increase in the fourth quarter compared to the linked third quarter was mainly the result of salary related expenses including the hiring of our Chief Deposit Officer and additional staffing for our retail and commercial deposit teams. We also incurred additional depreciation related costs associated with the upcoming closure of our Levittown branch in the first quarter of 2019. Non-interest expense for 2018 totaled $33.3 million, an increase of $8.6 million or 35%, compared to $24.7 million for 2017.   The 2018 increase in non-interest expense over 2017 was also primarily a result of increased salaries and employee benefits expense and higher occupancy and equipment expense, largely the result of our recent acquisitions, and other expense associated with a growing bank, partially offset by lower merger-related and other real estate owned expenses.

Our efficiency ratio2 for the fourth quarter of 2018 was 61.8% compared to 54.8% in the fourth quarter of 2017. The efficiency ratio was relatively stable for the year despite the increase in the fourth quarter of 2018. The efficiency ratio was affected in the fourth quarter of 2018 by a modestly declining net interest margin, higher salary related expenses and the one-time depreciation increase related to the Levittown branch closure. Absent unusual items in the first quarter of 2019 we anticipate that our efficiency ratio will be more in line with our recent historical levels.

Pre-provision net revenue3 for the fourth quarter of 2018 was $5.7 million, a decrease of $91,000, compared to $5.8 million for the fourth quarter 2017. Similar to the efficiency ratio, pre-provision net revenue was also impacted by a lower net interest margin, higher salary related expense and the additional Levittown depreciation expense noted previously.  Similar to our efficiency ratio we anticipate that our pre-provision net revenue will improve in the first quarter of 2019.

Income tax expense for the fourth quarter of 2018 was $823,000, or an effective tax rate of 16.7% compared to $4.3 million or an effective tax rate of 88.1% in the fourth quarter of 2017 and $1.4 million or an effective tax rate of 20.2% in the linked third quarter 2018. As a result of the Tax Cuts and Jobs Act that was enacted on December 22, 2017, First Bank revalued its deferred tax assets to account for the future impact of a significantly lower corporate income tax rate. Based on this analysis, First Bank recorded a one-time charge of $2.6 million in the fourth quarter of 2017, primarily related to the revaluation of the deferred tax assets. Excluding the effects of this one-time charge the effective tax rate for fourth quarter 2017 would have been 33.7%. The effective tax rate for the full year 2018 and 2017 was 18.7% and 51.5%, respectively. The reduction in the effective tax rate for the full year and quarter ended December 2018 was primarily a result of the enactment of the Tax Cuts and Jobs Act in 2017, which reduced the federal statutory corporate income tax rate from 35% to 21%. The reduction in the fourth quarter effective tax rate compared to the linked third quarter is attributable to the tax benefit received related to additional options exercised in the fourth quarter of 2018 as well as lower than expected state income tax as a result of state tax strategies.

On July 1, 2018 New Jersey passed new tax legislation which imposes a surtax on corporations beginning on or after January 1, 2018. In addition, the new law reduced the dividends received deduction for certain dividend income retroactive to January 1, 2017. Another aspect of the law that could impact First Bank is the adoption of combined tax filings for corporations that are part of an affiliated group beginning in 2019. The surtax and the reduction in the dividends received deduction had a minimal impact to our 2018 income tax expense and effective tax rate. We are continuing to assess the potential impact of the change to the state tax regulations in 2019 with our advisors. We believe, at this time, our state tax planning strategies will continue to be beneficial in 2019 and our effective tax rate will be approximately 21% as we enter 2019. If certain state tax strategies are curtailed with the new regulations, we currently estimate that it will result in an effective tax rate of approximately 28% in 2019.

Balance Sheet

Total assets at December 31, 2018 were $1.71 billion, an increase of $258.8 million, or 17.8%, compared to $1.45 billion at December 31, 2017 due primarily to loan growth, both organic and acquired. Total loans were $1.46 billion at December 31, 2018, an increase of $235.1 million, or 19.2%, compared to $1.23 billion at the 2017 year end. Loan growth during 2018 was distributed across commercial and consumer loan segments and included both originated and acquired loans. The acquired Delanco loan portfolio contributed $57.1 million to the 2018 loan growth.  

Total deposits were $1.4 billion at December 31, 2018, an increase of $226.1 million, or 19.4%, compared to $1.2 billion at December 31, 2017. Non-interest bearing deposits totaled $219.0 million at December 31, 2018, an increase of $20.4 million, or 10.3%, from December 31, 2017. The Delanco acquisition added $108.2 million of deposits at the time of acquisition. 

Stockholders’ equity increased to $194.8 million at December 31, 2018, up $31.6 million or 19.3% compared to $163.3 million at December 31, 2017. The increase was primarily the result of a $15.5 million increase in retained earnings, along with the Bank’s issuance of additional common shares for the acquisition of Delanco, which increased capital by $14.4 million.

Asset Quality

First Bank’s asset quality metrics were stable and favorable throughout 2018, reflective of our ongoing disciplined risk management and underwriting standards. Net charge-offs for the fourth quarter were $7,000, compared to $287,000 for fourth quarter 2017 and net recoveries of $103,000 for the linked third quarter of 2018. Net charge-offs as an annualized percentage of average loans were 0.00% in fourth quarter 2018, compared to 0.10% for fourth quarter 2017 and net recoveries of 0.03% for the linked third quarter 2018. Nonperforming loans as a percentage of total loans at December 31, 2018 were 0.44%, compared with 0.43% at December 31, 2017, and 0.52% at September 30, 2018. The allowance for loan losses to nonperforming loans was 237.9% at December 31, 2018, compared with 220.7% at December 31, 2017, and 192.2% at September 30, 2018.

As of December 31, 2018, the Bank exceeded all regulatory capital requirements to be considered well capitalized, with a Tier 1 Leverage ratio of 10.42%, a Tier 1 Risk-Based capital ratio of 10.86%, a Common Equity Tier 1 Capital ratio of 10.86%, and a Total Risk-Based capital ratio of 13.12%.

Cash Dividend Declared

On January 22, 2019 the Board of Directors declared a quarterly cash dividend of $0.03 per share to common stockholders of record at the close of business on February 8, 2019, payable on February 22, 2019. The Board of Directors believes that this dividend provides stockholders an added tangible benefit, and that it is appropriate given our current financial performance, momentum and near-term prospects.

Conference Call

First Bank will host an earnings call on Friday, January 25, 2019 at 9:00 a.m. Eastern time.  The direct dial toll free number for the call is 844-825-9784.  For those unable to participate in the call, a replay will be available by dialing 877-344-7529 (access code 10128154) from one hour after the end of the conference call until April 25, 2019.  Replay information will also be available on our website at www.firstbanknj.com under the “About Us” tab.  Click on “Investor Relations” to access the replay information for the conference call.

About First Bank

First Bank is a New Jersey state-chartered bank with 17 full-service branches in Cinnaminson, Cranbury, Denville, Delanco, Ewing, Flemington, Hamilton, Lawrence, Pennington, Randolph, Somerset and Williamstown, New Jersey, and Doylestown, Levittown, Trevose, Warminster and West Chester Pennsylvania. With $1.7 billion in assets as of December 31, 2018, First Bank offers a traditional range of deposit and loan products to individuals and businesses throughout the New York City to Philadelphia corridor. First Bank's common stock is listed on the Nasdaq Global Market exchange 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 the 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 markets; 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; 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 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 income and other one-time 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 adjusted for gains on sale of investment securities and gain on recovery of acquired 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.

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.

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)  
   
    December 31,   
    2018  December 31, 
    (unaudited)  2017   
Assets      
Cash and due from banks$  13,547  $  12,808   
Federal funds sold   25,000     -   
Interest bearing deposits with banks   16,883     30,570   
  Cash and cash equivalents   55,430     43,378   
Interest bearing time deposits with banks   5,925     4,113   
Investment securities available for sale   51,260     62,393   
Investment securities held to maturity (fair value of $49,411     
  at December 31, 2018 and $52,920 at December 31, 2017)   49,811     52,900   
Restricted investment in bank stocks   5,803     5,289   
Other investments   6,203     6,054   
Loans, net of deferred fees and costs   1,462,516     1,227,413   
 Less: Allowance for loan losses   15,135     11,697   
  Net loans   1,447,381     1,215,716   
Premises and equipment, net   11,003     5,880   
Other real estate owned, net   1,455     1,183   
Accrued interest receivable   4,258     3,828   
Bank-owned life insurance   40,350     29,806   
Goodwill   16,074     10,497   
Other intangible assets, net   1,363     917   
Deferred income taxes   10,216     5,596   
Other assets   4,627     4,777   
  Total assets$  1,711,159  $  1,452,327   
         
Liabilities and Stockholders' Equity     
Liabilities:     
Non-interest bearing deposits$  219,034  $  198,595   
Interest bearing deposits   1,174,170     968,503   
  Total deposits   1,393,204     1,167,098   
Borrowings   93,351     94,863   
Subordinated debentures   21,856     21,748   
Accrued interest payable   1,045     988   
Other liabilities   6,867     4,380   
  Total liabilities   1,516,323     1,289,077   
Stockholders' Equity:     
Preferred stock, par value $2 per share; 10,000,000 shares authorized;     
 no shares issued and outstanding   -     -   
Common stock, par value $5 per share; 40,000,000 shares authorized;     
 issued and outstanding 18,676,056 shares at December 31, 2018     
 and 17,443,173 shares at December 31, 2017   93,132     87,003   
Additional paid-in capital   67,417     57,015   
Retained earnings   35,222     19,726   
Accumulated other comprehensive loss   (935)    (494)  
  Total stockholders' equity   194,836     163,250   
  Total liabilities and stockholders' equity$  1,711,159  $  1,452,327   
         

 

FIRST BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except for share data, unaudited)
 
           
    Three Months Ended Year Ended
    December 31,  December 31, 
     2018  2017  2018  2017
Interest and Dividend Income       
Investment securities—taxable$  541 $  520 $  2,156 $  1,695
Investment securities—tax-exempt   107    119    443    488
Interest bearing deposits with banks,        
  Federal funds sold and other   567    280    1,609    725
Loans, including fees   18,287    14,715    68,530    48,290
 Total interest and dividend income   19,502    15,634    72,738    51,198
           
Interest Expense       
Deposits    4,441    2,584    14,170    8,939
Borrowings   511    398    2,031    1,003
Subordinated debentures   398    398    1,593    1,593
 Total interest expense   5,350    3,380    17,794    11,535
Net interest income   14,152    12,254    54,944    39,663
Provision for loan losses   1,026    715    3,447    2,675
 Net interest income after provision for loan losses   13,126    11,539    51,497    36,988
           
Non-Interest Income       
Service fees on deposit accounts   63    63    258    197
Loan fees   34    30    163    113
Income from bank-owned life insurance   289    218    1,044    739
Gains on sale of investment securities, net   -    -    3    -
Gains on sale of loans   143    32    335    296
Gains on recovery of acquired loans   260    89    804    316
Other non-interest income   195    172    845    455
 Total non-interest income   984    604    3,452    2,116
           
Non-Interest Expense       
Salaries and employee benefits   4,913    3,818    17,583    12,364
Occupancy and equipment   1,466    879    4,861    3,037
Legal fees   133    113    536    331
Other professional fees   559    443    1,953    1,466
Regulatory fees   144    92    580    566
Directors' fees   199    137    700    534
Data processing   445    436    1,733    1,243
Marketing and advertising   197    172    759    594
Travel and entertainment   163    119    450    303
Insurance   94    75    336    256
Other real estate owned expense, net   72    214    221    817
Merger-related expenses   -    254    988    1,767
Other expense   805    494    2,614    1,406
 Total non-interest expense   9,190    7,246    33,314    24,684
Income Before Income Taxes   4,920    4,897    21,635    14,420
Income tax expense   823    4,314    4,046    7,427
Net Income$  4,097 $  583 $  17,589 $  6,993
           
Basic earnings per share$  0.22 $  0.03 $  0.97 $  0.49
Diluted earnings per share$  0.22 $  0.03 $  0.95 $  0.48
Cash dividends per common share$  0.03 $  0.02 $  0.12 $  0.08
           
Basic weighted average common shares outstanding   18,621,688    17,395,993    18,212,875    14,221,506
Diluted weighted average common shares outstanding   18,937,468    17,764,188    18,572,306    14,577,664
           

 

FIRST BANK AND SUBSIDIARIES
AVERAGE BALANCE SHEETS WITH INTEREST AND AVERAGE RATES
(dollars in thousands, unaudited)
            
            
 Three Months Ended December 31,
  2018
  2017
 Average    Average Average    Average
 Balance Interest Rate (5) Balance Interest Rate (5)
Interest earning assets           
Investment securities (1) (2)$  103,201  $  670  2.58% $  115,472  $  679  2.33%
Loans (3)   1,447,438     18,287  5.01%    1,207,802     14,715  4.83%
Interest bearing deposits with banks,           
  Federal funds sold and other   72,061     406  2.24%    54,697     179  1.30%
Restricted investment in bank stocks   6,118     120  7.78%    5,557     73  5.21%
Other investments   6,190     41  2.63%    6,047     28  1.84%
  Total interest earning assets (2)   1,635,008     19,524  4.74%    1,389,575     15,674  4.48%
Allowance for loan losses   (14,466)        (11,553)    
Non-interest earning assets   100,565         74,800     
  Total assets$  1,721,107      $  1,452,822     
            
Interest bearing liabilities           
Interest bearing demand deposits$  165,625  $  257  0.62%    146,690  $  198  0.54%
Money market deposits   310,065     1,093  1.40%    198,228     378  0.76%
Savings deposits   86,974     141  0.64%    72,339     88  0.48%
Time deposits   614,299     2,950  1.91%    545,796     1,920  1.40%
  Total interest bearing deposits   1,176,963     4,441  1.50%    963,053     2,584  1.06%
Borrowings   100,334     511  2.02%    99,690     398  1.58%
Subordinated debentures   21,841     398  7.29%    21,731     398  7.33%
  Total interest bearing liabilities   1,299,138     5,350  1.63%    1,084,474     3,380  1.24%
Non-interest bearing deposits   219,844         198,575     
Other liabilities   9,051         4,662     
Stockholders' equity   193,074         165,111     
  Total liabilities and stockholders' equity$  1,721,107      $  1,452,822     
Net interest income/interest rate spread (2)     14,174  3.10%      12,294  3.24%
Net interest margin (2) (4)    3.44%     3.51%
Tax-equivalent adjustment (2)     (22)        (40)  
Net interest income  $  14,152      $  12,254   
            
(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% in 2018 and 34% in 2017.    
(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) 
             
             
 Year Ended December 31, 
 2018
 2017
 
 Average    Average Average    Average 
 Balance Interest Rate Balance Interest Rate 
Interest earning assets            
Investment securities (1) (2)$108,816  $2,692  2.47% $103,317  $2,349  2.27% 
Loans (3) 1,366,385   68,530  5.02%  1,023,342   48,290  4.72% 
Interest bearing deposits with banks,            
Federal funds sold and other 52,762   1,054  2.00%  39,070   436  1.11% 
Restricted investment in bank stocks 6,361   406  6.38%  4,193   195  4.65% 
Other investments 6,130   149  2.43%  5,282   94  1.79% 
Total interest earning assets (2) 1,540,454   72,831  4.73%  1,175,204   51,364  4.37% 
Allowance for loan losses (13,282)      (10,811)     
Non-interest earning assets 90,442       54,306      
Total assets$1,617,614      $1,218,699      
             
Interest bearing liabilities            
Interest bearing demand deposits$163,240  $979  0.60% $125,300  $726  0.58% 
Money market deposits 267,965   3,158  1.18%  170,465   1,239  0.73% 
Savings deposits 84,336   458  0.54%  71,648   349  0.49% 
Time deposits 572,411   9,575  1.67%  480,231   6,625  1.38% 
Total interest bearing deposits 1,087,952   14,170  1.30%  847,644   8,939  1.05% 
Borrowings 109,419   2,031  1.86%  69,943   1,003  1.43% 
Subordinated debentures 21,800   1,593  7.31%  21,691   1,593  7.34% 
Total interest bearing liabilities 1,219,171   17,794  1.46%  939,278   11,535  1.23% 
Non-interest bearing deposits 209,876       150,986      
Other liabilities 7,294       3,556      
Stockholders' equity 181,273       124,879      
Total liabilities and stockholders' equity$1,617,614      $1,218,699      
Net interest income/interest rate spread (2)   55,037  3.27%    39,829  3.14% 
Net interest margin (2) (4)    3.57%     3.39% 
Tax-equivalent adjustment (2)   (93)      (166)   
Net interest income  $54,944      $39,663    
             
(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% in 2018 and 34% in 2017.     
(3) Average balances of loans include loans on nonaccrual status.           
(4) Net interest income divided by average total interest earning assets.         
             

 

FIRST BANK AND SUBSIDIARIES
QUARTERLY FINANCIAL HIGHLIGHTS
(in thousands, except for share and employee data, unaudited)
           
  As of or For the Quarter Ended
  12/31/2018 9/30/2018 6/30/2018 (1) 3/31/2018 12/31/2017
EARNINGS          
Net interest income $14,152  $14,558  $13,633  $12,601  $12,254 
Provision for loan losses  1,026   721   701   999   715 
Non-interest income  984   1,185   760   523   604 
Non-interest expense  9,190   8,214   8,654   7,256   7,246 
Income tax expense  823   1,372   1,019   832   4,314 
Net income  4,097   5,436   4,019   4,037   583 
           
PERFORMANCE RATIOS           
Return on average assets (2)  0.94%  1.28%  1.02%  1.11%  0.16%
Adjusted return on average assets (2) (3)  0.90%  1.22%  1.13%  1.14%  0.89%
Return on average equity (2)  8.42%  11.45%  9.09%  9.90%  1.40%
Adjusted return on average equity (2) (3)  8.00%  10.98%  10.12%  10.18%  7.84%
Net interest margin (2) (4)  3.44%  3.60%  3.63%  3.62%  3.51%
Efficiency ratio (3)  61.78%  53.02%  55.64%  53.91%  54.76%
Pre-provision net revenue (3) $5,686  $7,245  $6,316  $6,016  $5,777 
           
SHARE DATA          
Common shares outstanding  18,676,056   18,665,664   18,640,484   17,517,842   17,443,173 
Basic earnings per share $0.22  $0.29  $0.22  $0.23  $0.03 
Diluted earnings per share  0.22   0.29   0.22   0.23   0.03 
Adjusted diluted earnings per share (3)  0.21   0.28   0.24   0.23   0.18 
Tangible book value per share (3)  9.50   9.28   9.01   8.87   8.70 
Book value per share  10.43   10.22   9.95   9.52   9.36 
           
MARKET DATA          
Market value per share $12.12  $13.15  $13.90  $14.40  $13.85 
Market value / book value  116.18%  128.73%  139.67%  151.29%  147.99%
Market capitalization $226,354  $245,453  $259,103  $252,257  $241,588 
           
CAPITAL & LIQUIDITY          
Tangible stockholders' equity / tangible assets (3) 10.47%  10.19%  10.35%  10.56%  10.54%
Stockholders' equity / assets  11.39%  11.10%  11.30%  11.24%  11.24%
Loans / deposits  104.98%  101.88%  103.76%  106.72%  105.17%
           
ASSET QUALITY          
Net charge-offs (recoveries) $7  $(103) $(75) $180  $287 
Nonperforming loans  6,362   7,346   8,372   5,676   5,299 
Nonperforming assets  7,817   8,612   10,486   6,822   6,482 
Net charge offs (recoveries) / average loans (2)  0.00%  (0.03%)  (0.02%)  0.06%  0.10%
Nonperforming loans / total loans  0.44%  0.52%  0.61%  0.45%  0.43%
Nonperforming assets / total assets  0.46%  0.50%  0.64%  0.46%  0.45%
Allowance for loan losses / total loans  1.03%  1.00%  0.97%  0.99%  0.95%
Allowance for loan losses / nonperforming loans 237.90%  192.16%  158.77%  220.51%  220.74%
           
OTHER DATA          
Total assets $1,711,159  $1,717,146  $1,640,999  $1,483,060  $1,452,327 
Total loans  1,462,516   1,411,380   1,370,769   1,270,550   1,227,413 
Total deposits  1,393,204   1,385,329   1,321,068   1,190,593   1,167,098 
Total stockholders' equity  194,836   190,672   185,506   166,740   163,250 
Number of full-time equivalent employees (5)  186   174   183   150   150 
           
(1) Includes effects of Delanco Bancorp, Inc. merger effective April 30, 2018.         
(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% in 2018 and 34% in 2017.         
(5) Includes 12 seasonal interns as of 6/30/2018.          
           


FIRST BANK AND SUBSIDIARIES
QUARTERLY FINANCIAL HIGHLIGHTS
(dollars in thousands, unaudited)
            
   As of the Quarter Ended
   12/31/2018 9/30/2018 6/30/2018 (1) 3/31/2018 12/31/2017
LOAN COMPOSITION          
Commercial and industrial $  195,786  $  185,157  $  177,679  $  161,255  $  159,516 
Commercial real estate:          
 Owner-occupied  355,062     361,224     351,333     331,128     308,004 
 Investor  567,407     553,096     517,964     506,027     502,833 
 Construction and development  85,064     77,890     92,667     92,102     80,445 
 Multi-family  87,930     65,391     67,787     64,083     64,056 
Residential real estate:          
 Residential mortgage and first lien home equity loans  101,341     104,940     98,786     69,418     67,876 
 Home equity–second lien loans and revolving lines of credit  28,563     27,915     27,319     22,460     26,038 
Consumer and other  43,070     37,401     38,942     25,780     20,191 
    1,464,223     1,413,014     1,372,477     1,272,253     1,228,959 
Net deferred loan fees and costs  (1,708)    (1,634)    (1,708)    (1,703)    (1,546)
 Total loans $  1,462,515  $  1,411,380  $  1,370,769  $  1,270,550  $  1,227,413 
            
LOAN MIX          
Commercial and industrial  13.4%  13.1%  13.0%  12.7%  13.0%
Commercial real estate:          
 Owner-occupied  24.3%  25.6%  25.6%  26.1%  25.1%
 Investor  38.8%  39.2%  37.8%  39.8%  41.0%
 Construction and development  5.8%  5.5%  6.8%  7.2%  6.6%
 Multi-family  6.0%  4.6%  4.9%  5.0%  5.2%
Residential real estate:          
 Residential mortgage and first lien home equity loans  6.9%  7.4%  7.2%  5.5%  5.5%
 Home equity–second lien loans and revolving lines of credit  2.0%  2.0%  2.0%  1.8%  2.1%
Consumer and other  2.9%  2.7%  2.8%  2.0%  1.6%
    100.1%  100.1%  100.1%  100.1%  100.1%
Net deferred loan fees and costs  (0.1%)  (0.1%)  (0.1%)  (0.1%)  (0.1%)
 Total loans  100.0%  100.0%  100.0%  100.0%  100.0%
            
(1) Includes effects of Delanco Bancorp, Inc. merger effective April 30, 2018.          
            


FIRST BANK AND SUBSIDIARIES
NON-U.S. GAAP FINANCIAL MEASURES
(in thousands, except for share data, unaudited)
          
 As of or For the Quarter Ended
 12/31/2018 9/30/2018 6/30/2018 (1) 3/31/2018 12/31/2017
Tangible Book Value         
Stockholders' equity$  194,836  $  190,672  $  185,506  $  166,740  $  163,250 
Less:  Goodwill and other intangible assets, net   17,437     17,437     17,516     11,365     11,414 
Tangible equity (numerator)$  177,399  $  173,235  $  167,990  $  155,375  $  151,836 
          
Common shares outstanding (denominator)   18,676,056     18,665,664     18,640,484     17,517,842     17,443,173 
          
Tangible book value per share$  9.50  $  9.28  $  9.01  $  8.87  $  8.70 
          
          
Tangible Equity / Assets         
Stockholders' equity$  194,836  $  190,672  $  185,506  $  166,740  $  163,250 
Less:  Goodwill and other intangible assets, net   17,437     17,437     17,516     11,365     11,414 
Tangible equity (numerator)$  177,399  $  173,235  $  167,990  $  155,375  $  151,836 
          
Total assets$  1,711,159  $  1,717,146  $  1,640,999  $  1,483,060  $  1,452,327 
Less:  Goodwill and other intangible assets, net   17,437     17,437     17,516     11,365     11,414 
Adjusted total assets (denominator)$  1,693,722  $  1,699,709  $  1,623,483  $  1,471,695  $  1,440,913 
          
Tangible equity / assets 10.47%  10.19%  10.35%  10.56%  10.54%
          
          
Efficiency Ratio         
Non-interest expense$  9,190  $  8,214  $  8,654  $  7,256  $  7,246 
Less:  Merger-related expenses   -     37     731     220     254 
Adjusted non-interest expense (numerator)$  9,190  $  8,177  $  7,923  $  7,036  $  6,992 
          
Net interest income$  14,152  $  14,558  $  13,633  $  12,601  $  12,254 
Non-interest income   984     1,185     760     523     604 
Total revenue   15,136     15,743     14,393     13,124     12,858 
Less:  Gains on sale of investment securities, net   -     -     3     -     - 
Less:  Gains on recovery of acquired loans   260     321     151     72     89 
Adjusted total revenue (denominator)$  14,876  $  15,422  $  14,239  $  13,052  $  12,769 
          
Efficiency ratio 61.78%  53.02%  55.64%  53.91%  54.76%
          
          
Pre-Provision Net Revenue         
Net interest income$  14,152  $  14,558  $  13,633  $  12,601  $  12,254 
Non-interest income   984     1,185     760     523     604 
Less:  Gains on sale of investment securities, net   -      -      3     -      -  
Less:  Gains on recovery of acquired loans   260     321     151     72     89 
Less:  Non-interest expense   9,190     8,214     8,654     7,256     7,246 
Add:  Merger-related expenses   -      37     731     220     254 
Pre-provision net revenue$  5,686  $  7,245  $  6,316  $  6,016  $  5,777 
          
(1) Includes effects of Delanco Bancorp, Inc. merger effective April 30, 2018.         
          

 

FIRST BANK AND SUBSIDIARIES
NON-U.S. GAAP FINANCIAL MEASURES
(dollars in thousands, except for  share data, unaudited)
          
          
 For the Quarter Ended
 12/31/2018 9/30/2018 6/30/2018 (1) 3/31/2018 12/31/2017
          
Adjusted diluted earnings per share,         
Adjusted return on average assets, and         
Adjusted return on average equity         
          
Net income$  4,097  $  5,436  $  4,019  $  4,037  $  583 
Add: Merger-related expenses (2)   -     29     577   174   168 
Add: Impact of income tax rate change    -     -     -     -     2,570 
Less:  Gains on sale of investment securities, net (2)   -     -     2     -     - 
Less: Gains on recovery of acquired loans (2)   205     253     119   57   59 
Adjusted net income$  3,892  $  5,212  $  4,475  $  4,154  $  3,262 
          
Diluted weighted average common shares outstanding   18,937,468     18,949,285     18,517,953     17,802,021     17,764,188 
Average assets$  1,721,107  $  1,688,550  $  1,581,820  $  1,475,041  $  1,452,822 
Average equity$  193,074  $  188,326  $  177,299  $  165,424  $  165,111 
          
Adjusted diluted earnings per share$  0.21  $  0.28  $  0.24  $  0.23  $  0.18 
Adjusted return on average assets (3) 0.90%  1.22%  1.13%  1.14%  0.89%
Adjusted return on average equity (3) 8.00%  10.98%  10.12%  10.18%  7.84%
          
(1) Includes effects of Delanco Bancorp, Inc. merger effective April 30, 2018.         
(2) Items are tax-effected using a federal income tax rate of 21% in 2018 and 34% in 2017.         
(3) Annualized.