First Bank Reports Fourth Quarter 2016 Net Income

HAMILTON, NJ --(Marketwired - January 30, 2017) - First Bank ( NASDAQ : FRBA ) today announced improved fourth quarter and full year 2016 results. Net income for the quarter was $1.8 million or $0.16 per diluted share, compared to $686,000 or $0.07 per diluted share for the fourth quarter of 2015. Diluted earnings per share increased by $0.09, or 129%, despite a 2.12 million share increase in weighted average diluted shares outstanding from December 2015. The increase in fourth quarter net income was driven by net interest income growth of 27.9%, which reflected continued strong loan generation, along with effective management of the Bank's non-interest expense. Net income for 2016 was $6.4 million, an increase of $2.5 million, or 64.8%, compared to 2015. The increase in net income for the full year was also driven by 21.3% net interest income growth coupled with managed expense growth of only 3.4%.

2016 Performance Highlights:

• Total net revenue (net interest income + non-interest income) for the fourth quarter increased by 31.2%, or $2.0 million, to $8.4 million, compared to the prior year quarter.
• Total loans of $898.4 million at December 31, 2016 were up $208.5 million, or 30.2%, from December 31, 2015.
• Total deposits of $894.9 million at December 31, 2016 were up $155.9 million, or 21.1%, compared to December 31, 2015.
• Asset quality metrics continued to be strong, with net loan charge-offs to average loans of just 0.10% for 2016 compared to 0.11% in 2015. Nonperforming loans to total loans of 0.66% at December 31, 2016, were relatively consistent compared to 0.45% at September 30, 2016, and 0.57% at December 31, 2015
• The Bank's efficiency ratio improved to 58.23% for the fourth quarter, down from 73.79% for fourth quarter 2015, and from 62.04% for third quarter 2016.

"2016 was a transformative year for First Bank as we surpassed the $1 billion threshold for total assets, realized strong double-digit growth in loans and booked record profits for the year," said Patrick L. Ryan, President and Chief Executive Officer. "In addition," said Mr. Ryan, "we conducted a successful capital raise in June which elevated institutional investor interest and ownership in First Bank, and in November our Board initiated the payment of a cash dividend, payable in the first quarter of 2017. We finished the year with strong capital levels which reflected both our capital raise and a strong increase in retained earnings for the twelve month period. Despite our very strong loan generation during 2016, our asset quality metrics remained strong and stable at year end. We entered 2017 in a very good place with a strong competitive posture in our banking service area, growing brand awareness and improving operating efficiency. The loan pipeline at year end remained strong and we expect to see this activity reflected in our results in 2017. The substantive growth we realized in 2016, and our improved competitive positioning going forward, couldn't have happened without the dedicated efforts of our entire team, which is poised and energized to continue this progress throughout 2017 and beyond."

Income Statement

The Bank's net interest income for fourth quarter 2016 was $7.8 million, an increase of $1.7 million, or 27.9%, compared to $6.1 million in the fourth quarter of 2015. This growth was driven by a 24.9% increase in interest and dividend income primarily a result of a $212.0 million increase in average loan balances compared with the fourth quarter of 2015. This was somewhat offset by increased interest expense of $337,000 for the comparative quarters, which reflected average balance increases for both time deposits and transaction accounts.

Full year net interest income totaled $28.9 million, an increase of $5.1 million, or 21.3%, compared to $23.8 million for 2015. The increase in 2016 net interest income was also driven by the same strong growth in average loans which increased by $207.8 million from the prior year period.

The fourth quarter 2016 net interest margin was 3.12%, an increase of seven basis points compared to the prior year quarter, and a decrease of four basis points compared to the linked third quarter of 2016. The increase compared to fourth quarter 2015 was primarily the result of higher average interest-earning assets and an eight basis point drop in the rate paid on interest-bearing liabilities.

The provision for loan losses for the fourth quarter of 2016 totaled $954,000, an increase of $4,000 compared to the fourth quarter of 2015, and an increase of $663,000 compared to $291,000 for the linked third quarter of 2016. The increase in the provision, compared to third quarter 2016, reflected comparatively stronger commercial loan growth for the fourth quarter. The provision for loan losses for 2016 and for 2015 totaled $2.7 million. The full year provision is reflective of the Bank's continued strong loan growth in 2016, as well as its stable asset quality metrics.

Fourth quarter 2016 non-interest income increased $288,000, to $570,000, compared to $282,000 in fourth quarter 2015, primarily a result of higher gains on recovery of acquired loans of $212,000 and additional income from bank owned life insurance of $53,000, compared to fourth quarter 2015. Full year non-interest income totaled $1.6 million for both 2016 and 2015.

Non-interest expense for fourth quarter 2016 totaled $4.72 million, an increase of $52,000, compared to $4.67 million for the prior year quarter. The higher non-interest expense compared to fourth quarter 2015 was primarily a result of increased regulatory and professional fees, and increased occupancy and equipment cost, partially offset by lower other real estate owned expense, net. Non-interest expense for 2016 totaled $18.3 million, an increase of $607,000 or 3.4% compared to $17.7 million for the same period in 2015. The increase was primarily a result of increased salaries and employee benefits, occupancy and equipment costs, regulatory fees, and data processing costs, partially offset by lower other real estate owned expense, net. The increases in non-interest expense were mainly the result of the significant growth during 2016.

Pre-provision net revenue ^[1] for the fourth quarter of 2016 was $3.4 million, an increase of $1.4 million, or 68.6%, compared to the fourth quarter of 2015, and an increase of $450,000, or 15.3%, compared to $2.9 million in the linked third quarter of 2016.

^[1] A non-U.S. 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 and other one-time, non-ordinary costs).

Income tax expense for the fourth quarter of 2016 was $891,000, a decrease of $64,000 compared to $955,000 for third quarter 2016. The fourth quarter effective income tax rate was 33.0%, compared to 34.7% for third quarter 2016.

Balance Sheet

Total assets at December 31, 2016 were $1.1 billion, an increase of $217.2 million or 25.4% compared to December 31, 2015. Total loans were $898.4 million at year end, an increase of $208.5 million or 30.2% compared to December 31, 2015. Total loans increased $71.3 million compared to the linked third quarter of 2016. The growth during the fourth quarter came from all of the Bank's commercial loan segments.

Total deposits were $894.9 million at December 31, 2016, an increase of $155.9 million or 21.1% compared to December 31, 2015, and were up $20.8 million from the linked third quarter of 2016. Non-interest bearing deposits totaled $118.6 million at December 31, 2016, an increase of $18.6 million, or 18.6% from December 31, 2015, reflective of expanded commercial lending relationships. Average time deposits for fourth quarter 2016 were down $9.6 million in comparison to the linked third quarter of 2016.

Stockholders' equity increased to $88.8 million at December 31, 2016, up $20.0 million or 29.1% compared to December 31, 2015, primarily a result of the capital offering completed in June 2016, which raised $13.4 million in net new capital, and $6.2 million of growth in retained earnings.

Asset Quality

First Bank's asset quality metrics remained stable during the fourth quarter and compare favorably to peer and industry averages, reflective of disciplined risk management and underwriting standards. Net charge-offs were $424,000 for the fourth quarter of 2016, compared to $170,000 for fourth quarter 2015 and $30,000 for the third quarter of 2016. Net charge-offs as an annualized percentage of average loans were 0.20% in fourth quarter 2016, compared to 0.01% in the linked third quarter and 0.11% in fourth quarter 2015. Nonperforming loans as a percentage of total loans at December 31, 2016 were 0.66%, compared with 0.45% on September 30, 2016 and 0.57% at December 31, 2015. The allowance for loan losses to nonperforming loans was 164.67% at December 31, 2016, compared with 252.40% at the end of third quarter 2016, and 203.43% at December 31, 2015.

As of December 31, 2016, the Bank exceeded all regulatory capital requirements to be considered well capitalized with a Tier 1 Leverage ratio of 8.56%, a Tier 1 Risk-Based capital ratio of 8.78%, a Common Equity Tier 1 Capital ("CET1") ratio of 8.78%, and a Total Risk-Based capital ratio of 11.91%.

Cash Dividend Initiated

On November 16, 2016, the Company announced that the Board of Directors declared an initial quarterly cash dividend of $0.02 per share to common shareholders of record at the close of business on February 10, 2017, and payable on February 28, 2017. The First Bank Board believes that this dividend provides shareholders an added tangible benefit, and that it is appropriate given the Company's current financial performance, momentum and near-term prospects.

Conference Call

First Bank will host an earnings call on Tuesday, January 31, 2017 at 2:00 PM eastern time. The direct dial toll free number for the call is 1-844-825-9784. For those unable to participate in the call, a replay will be available by dialing 1-877-344-7529 from one hour after the end of the conference call until April 26, 2017. 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 of the conference call.

About First Bank

First Bank ( www.firstbanknj.com ) is a New Jersey state-chartered bank with ten full-service branches in Cranbury, Denville, Ewing, Flemington, Hamilton, Lawrence, Randolph, Somerset and Williamstown, New Jersey, and Trevose, Pennsylvania. With $1.1 billion in assets as of December 31, 2016, 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 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 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, changes in laws and regulations and results of regulatory exams, among other factors.