First Bank Reports Third Quarter 2014 Earnings of $1.1

HAMILTON, NJ --(Marketwired - October 28, 2014) - First Bank ( NASDAQ : FRBA ) today announced third quarter 2014 results.  Net income for the quarter was $1.1 million or $0.12 per diluted share, compared to net income of $492,000 or $0.10 per diluted share for the third quarter of 2013 and $923,000 or $0.10 per diluted share for the second quarter of 2014. 

Third quarter results were primarily effected by three items: i) $116,000 in merger related expenses for our acquisition of Heritage Community Bank ("HCB"), ii) $857,000 in gains on recovery of acquired loans, and iii) a higher provision for loan losses of $977,000. The higher provision for loan losses in the third quarter was driven by strong loan growth late in the quarter and higher net loan charge offs. Book value per share was $6.79 at the end of the third quarter of 2014, an increase of $0.11 compared to book value of $6.68 at the end of the second quarter of 2014. 

Net income for the nine months ended September 30, 2014 was $5.3 million compared to $1.4 million for the same period in 2013, an increase of $3.9 million or 275.8%. Diluted earnings per share for the comparative periods were $0.57 and $0.30, respectively. For the year over year comparison the increase in net income was due primarily to the bargain purchase gain from the Heritage Community Bank acquisition, reflected in increases in net interest income and non-interest income, partially offset by higher non-interest expense and a higher provision for loan losses. The growth in our organic loan portfolio also contributed to the increase in net income for the comparable periods.   

President and Chief Executive Officer Patrick L. Ryan discussed the results: "As we expected, strong deposit and loan growth returned in the third quarter. Balance sheet growth more than offset some margin compression, pushing net interest income slightly higher. Certain non-ordinary income and expense items had a significant impact on net results for the quarter. Namely, we collected $857,000 on loans acquired and marked down to zero during the HCB acquisition. Offsetting this income boost was a larger than usual provision for loan losses in the quarter. The higher provision was partly related to incremental additional charge offs during the quarter (mostly related to acquired HCB loans) and partly related to strong commercial loan growth.

"Strategically we made good progress in the quarter. We received approval for our 9 ^th branch, located in Cranbury, New Jersey. Consistent with our low-overhead branching model, the former Yardville National Bank/PNC site is a 2,200 square foot facility with minimal additional investment required. I'm happy to report the branch opened for business on October 20, 2014. Furthermore, we started to enjoy loan growth from our new Bucks County, Pennsylvania lending team. And, importantly, our Northern New Jersey team made continued progress stabilizing the legacy HCB portfolio and the pipeline of new deals is starting to grow."

Ryan continued, "Our post integration analysis of cost savings from the HCB transaction estimates total annualized cost savings of just under $1.0 million. As a point of reference, that is slightly less than 20% of the HCB pre-merger expense base and almost two times our initial merger model estimates of $500,000. Some of those savings started to materialize in the third quarter, while other savings will accrue as we move forward. 

"Like many of our competitors, we saw margin compression during the quarter. The rate environment in our markets is not ideal. In addition to continued downward pressure on loan rates, we are now seeing upward pressure on deposit rates. If this continues, margin reductions may work to reduce the operating leverage benefits we expect from the HCB acquisition and continued organic growth."

Highlights

• Balance Sheet
  • Total assets at September 30, 2014 were $643.5 million, an increase of $32.9 million or 5.4% compared to June 30, 2014, and an increase of $217.8 million or 51.2% compared to September 30, 2013. 
  • Total loans reached $505.0 million at September 30, 2014, an increase of $38.1 million or 8.2% compared to June 30, 2014 and an increase of $191.0 million or 60.8% compared to September 30, 2013. 
  • Total deposits reached $563.4 million at September 30, 2014, an increase of $31.3 million or 5.9% compared to June 30, 2014 and an increase of $185.2 million or 48.9% compared to September 30, 2013. Non-interest bearing deposits increased to $86.3 million or 15.3% of total deposits at September 30, 2014.
  • Stockholders' equity increased to $63.9 million at September 30, 2014.
  • Book value per share was $6.79 at September 30, 2014 compared to $6.68 per share at June 30, 2014 and $6.73 per share at September 30, 2013. Tangible book value per share was $6.75 at September 30, 2014, compared to $6.64 per share at June 30, 2014 and $6.73 per share at September 30, 2013.

• Quarterly Income Statement
  • Net interest income for the third quarter of 2014 totaled $5.5 million, an increase of $86,000 or 1.6% compared to $5.4 million for the second quarter of 2014, and an increase of $2.0 million or 58.5% compared to the third quarter of 2013.
  • Non-interest income for the third quarter of 2014 totaled $1.1 million, an increase of $762,000 or 241.1% compared to $316,000 for the second quarter of 2014. When compared to the third quarter of 2013, non-interest income increased $992,000 or 1,153.5%.
  • Non-interest expense for the third quarter of 2014 totaled $4.1 million, a decrease of $7,000 or 0.2% compared to $4.1 million for the second quarter of 2014, and an increase of $1.7 million or 69.5% compared to $2.4 million in the third quarter of 2013. 
  • Pre-tax income for the third quarter of 2014 totaled $1.5 million, an increase of $214,000 or 16.8% compared to $1.3 million for the second quarter of 2014, and an increase of $655,000 or 78.4% compared to the third quarter of 2013.
  • Net income for the third quarter of 2014 totaled $1.1 million, an increase of $166,000 or 18.0% compared to $923,000 in the second quarter of 2014, and an increase of $597,000 or 121.3% compared to the third quarter of 2013.
  • Diluted earnings per share for the third quarter totaled $0.12, an increase of $0.02 per share or 20.0% compared to $0.10 per share in the second quarter of 2014, and an increase of $0.02 per share or 20.0% compared to the third quarter of 2013.
  • The provision for loan losses in the third quarter of 2014 totaled $977,000, an increase of $641,000 or 190.8% compared to $336,000 for the second quarter of 2014, and an increase of $681,000 or 230.1% compared to the third quarter of 2013.
  • Pre-provision net revenue ¹ for the third quarter was $1.7 million, a decrease of $11,000 or 0.6% compared to $1.7 million in the second quarter of 2014, and an increase of $595,000 or 52.6% compared to the third quarter of 2013.

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

• Year to Date Income Statement
  • Net interest income for the nine months ended September 30, 2014 totaled $15.1 million, an increase of $5.5 million or 57.7% compared to $9.6 million for the same period in 2013.
  • Non-interest income for the nine months ended September 30, 2014 totaled $4.1 million, an increase of $3.7 million or 908.0% compared to $410,000 for the same period in 2013.
  • Non-interest expense for the nine months ended September 30, 2014 totaled $11.5 million, an increase of $4.5 million or 65.5% compared to $6.9 million for the same period in 2013.
  • The provision for loan losses for the nine months ended September 30, 2014 totaled $1.5 million, an increase of $681,000 or 84.1% compared to $810,000 for the same period in 2013.

• Other items
  • The tax equivalent net interest margin ("NIM") for the third quarter of 2014 was 3.72% compared to 3.81% for the second quarter of 2014 and 3.57% for the third quarter of 2013. 
  • Non-performing assets ("NPAs") were $7.0 million or 1.09% of total assets at September 30, 2014 compared to $5.7 million or 0.94% of total assets at June 30, 2014.  
    • Non-accrual loans totaled $4.3 million or 0.85% of total loans at September 30, 2014 compared to non-accrual loans of $3.3 million or 0.71% of total loans at June 30, 2014.
    • Loans 30-89 days past due totaled $8.5 million at September 30, 2014 compared to $7.8 million at June 30, 2014. We had 4 loans over 90 days past due and still accruing at September 30, 2014 totaling $354,000.
    • Other real estate owned (including other repossessed assets) totaled $2.3 million at September 30, 2014.
  • Regulatory capital ratios at September 30, 2014:
    • Tier 1 Leverage ratio of 10.05%
    • Tier 1 Risk-Based capital ratio of 11.38%
    • Total Risk-Based capital ratio of 12.39%
  • The allowance for loan losses ("ALLL") to total loans at September 30, 2014 was 1.09% compared to 1.08% at June 30, 2014. The increase in the ALLL ratio related primarily to an increase in our organic portfolio and payoffs/reductions in the loan portfolio acquired in the Heritage transaction that currently carries no loan loss reserve because of the mark to market accounting treatment on that portfolio at the time of acquisition.
  • 89 full-time equivalent employees ("FTEs") at September 30, 2014, compared to 95 FTEs at June 30, 2014.

About First Bank

First Bank ( www.firstbanknj.com ) is a New Jersey state-chartered bank with nine full-service branches in Cranbury, Denville, Ewing, Hamilton, Lawrence, Randolph (2), Somerset and Williamstown, New Jersey. With $643 million in assets as of September 30, 2014, First Bank offers a traditional range of deposit and loan products to individuals and businesses throughout the New York City to Philadelphia, PA corridor. First Bank's common stock is listed on the Nasdaq Global Market under the symbol "FRBA". 

This news release contains certain forward-looking statements, either expressed or implied, which are provided to assist the reader in understanding anticipated future financial performance. These statements may be identified by use of terms such as "estimates", "believes", "intends", "expects", "projects", or similar expressions. These statements involve certain risks, uncertainties, estimates and assumptions made by management, which are subject to factors beyond First Bank's control and could impede its ability to achieve these goals. These factors include those listed in our Annual Report on Form 10K under the caption "Item 1A-Risk Factors", and general economic conditions, trends in interest rates, the ability of our borrowers to repay their loans, and results of regulatory exams, among other factors. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. First Bank does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

(1) Average balances of investment securities available for sale are based on amortized cost.      (2) Interest and average rates are tax equivalent using a Federal income tax rate of 34 percent.      (3) Average balances of loans include loans on nonaccrual status.          (4) Net interest income divided by average total interest earning assets.          (5) Average rates are annualized.             

(1) Average balances of investment securities available for sale are based on amortized cost.      (2) Interest and average rates are tax equivalent using a Federal income tax rate of 34 percent.      (3) Average balances of loans include loans on nonaccrual status.          (4) Net interest income divided by average total interest earning assets.          (5) Average rates are annualized.