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First Bank Reports First Quarter of 2018 Net Income of $4.0 Million, up $2.1 Million Compared to First Quarter of 2017

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HAMILTON, N.J., April 23, 2018 (GLOBE NEWSWIRE) -- First Bank (Nasdaq Global Market:FRBA) today announced results for the first quarter of 2018.  Net income for the first quarter of 2018 was $4.0 million or $0.23 per diluted share, compared to $1.9 million or $0.17 per diluted share for the first quarter of 2017. Return on average assets and average equity for the first quarter of 2018 were 1.11% and 9.90%, respectively, compared to 0.73% and 8.73%, respectively, for the first quarter of 2017. Net income for the first quarter of 2018 reflected the change in the federal statutory corporate income tax rate which was lowered from 35% to 21% effective January 1, 2018.

First quarter of 2018 and 2017 net income included certain merger-related items.  Excluding these items, First Bank's first quarter of 2018 adjusted diluted earnings per share1 was $0.23, adjusted return on average assets1 was 1.14% and adjusted return on average equity1 was 10.18%. First Bank's first quarter of 2017 adjusted diluted earnings per share was $0.17, adjusted return on average assets was 0.76% and adjusted return on average equity was 9.07%.  

First Quarter of 2018 Performance Highlights:

  • A 53.3% increase in total net revenue (net interest income plus non-interest income) to $13.1 million, compared to $8.6 million for the prior year quarter
  • Total loans of $1.3 billion at March 31, 2018, an increase of $43.1 million, or 3.5%, from December 31, 2017 and an increase of $355.3 million, or 38.8%, from March 31, 2017
  • Total deposits of $1.2 billion at March 31, 2018, an increase of $23.5 million from December 31, 2017, and an increase of $256.3 million, or 27.4%, from $934.3 million at March 31, 2017
  • Continued strong asset quality metrics with annualized net loan charge-offs to average loans of 0.06% for the first quarter of 2018 compared to 0.10% for the fourth quarter of 2017, and nonperforming loans to total loans of 0.47% at March 31, 2018, an improvement of 10 basis points compared to 0.57% at March 31, 2017 and a slight increase of 0.04% from 0.43% at December 31, 2017
  • Continued effective expense management reflected in the first quarter of 2018 efficiency ratio2 of 53.91%, compared to 60.34% for the first quarter of 2017
  • Regulatory approval to acquire Delanco Bancorp, Inc. (Delanco) and its banking subsidiary, Delanco Federal Savings Bank, was received

"Our team helped drive really strong performance in the first quarter of 2018 highlighted by solid loan growth, continued favorable asset quality metrics and effective management of non-interest expense growth. This complete team effort provided strong top line growth and resulted in record quarterly net income of more than $4 million," said Patrick L. Ryan, President and Chief Executive Officer. "Our first quarter total net revenue increased $4.6 million reflecting our effective organic growth initiatives, our margin retention strategies and the continued integration of Bucks County Bank in the suburban Philadelphia market area. Period-end loans were up $43.1 million from the 2017 year-end despite higher than expected loan payoffs of $36.7 million during the quarter.

"We successfully navigated the regulatory approval process for our planned acquisition of Delanco Bancorp, Inc. and we expect to complete the transaction at the close of business on April 30, 2018. Delanco will strengthen our market presence in our southern region of New Jersey, diversify our balance sheet and provide expanded access to cost-effective and stable retail deposits. Along with growing our service footprint through acquisitions, we have taken steps to expand our presence in desirable markets by adding new locations. We recently opened a new full-service branch, our 15th, at 3 Tree Farm Road in Pennington, New Jersey, giving us a presence in the northern section of Mercer County and providing convenient access to the southern part of Hunterdon County.

"We're pleased with the Bank's great start to 2018. That said, we expect that we'll face some funding cost headwinds in the coming months related to increased deposit competition that started to develop during the first quarter. The completion of the Delanco acquisition, with its stable core deposit base, will help to mitigate the effect of this issue. Our efforts in growing our commercial deposit base should also help to preserve our margin. As we save costs through thoughtful merger integration, we will also look for quality reinvestment opportunities. We remain optimistic about our prospects over the short and long term as we see continued growth from our Northern NJ, Central NJ and PA regional teams." 

Income Statement

Net interest income for the first quarter of 2018 was $12.6 million, an increase of $4.5 million, or 55.6%, compared to $8.1 million in the first quarter of 2017. This growth was driven by a $5.5 million, or 52.0%, increase in interest and dividend income that was primarily a result of a $357.6 million increase in average loan balances compared with the first quarter of 2017, and a result of both organic and acquired growth. The increase in interest income was offset somewhat by increased interest expense of $1.0 million for the comparable period, reflecting average balance increases for interest bearing deposits, including deposits from the Bucks County Bank acquisition and organic growth.

The first quarter of 2018 net interest margin was 3.62%, an improvement of 46 basis points compared to 3.16% for the prior year quarter, and an increase of 11 basis points from 3.51% for the fourth quarter of 2017. The increase in first quarter of 2018 net interest margin compared to the same period in 2017 was primarily from a higher average loan yield which increased 41 basis points. The first quarter of 2018 net interest margin also reflected the receipt of approximately $302,000 in commercial loan prepayment fees which added approximately 8 basis points to the net interest margin.

The provision for loan losses for the first quarter of 2018 was $999,000, an increase of $561,000 compared to $438,000 for the first quarter of 2017, and an increase of $284,000 compared to $715,000 for the fourth quarter of 2017. The first quarter of 2018 provision for loan losses reflected growth in our loan portfolio, along with asset quality metrics that remained stable and favorable for the comparable periods.

First quarter of 2018 non-interest income increased $64,000 to $523,000, from $459,000 in the first quarter of 2017. The increase in relation to the prior year quarter was a result of higher income from bank-owned life insurance, other non-interest income and gains on acquired loans, partially offset by a reduction in gross gains on sale of loans.

Non-interest expense for first quarter of 2018 totaled $7.3 million, an increase of $2.0 million compared to $5.3 million for the prior year quarter, and an increase of $10,000 compared to the linked fourth quarter of 2017. The higher non-interest expense in the first quarter of 2018 compared to the same period in 2017 primarily reflects the integration of Bucks County Bank into First Bank as a result of the acquisition in the third quarter of 2017 and expenses associated with a growing bank. First quarter of 2018 salaries and employee benefits expense increased by $1.2 million, occupancy and equipment costs were up $280,000, and data processing fees were $165,000 higher in comparison to the first quarter of 2017. The first quarter of 2018 also included $220,000 of merger-related expenses compared to $150,000 for the first quarter of 2017. Compared to the linked fourth quarter of 2017, salaries and employee benefits expense increased by $181,000, occupancy and equipment costs increased by $86,000, and regulatory fees increased by $45,000, while other real estate expense, net, decreased by $193,000.

Pre-provision net revenue3 for first quarter of 2018 was $6.0 million, an increase of $2.6 million, or 78.0%, compared to $3.4 million for the first quarter of 2017, and an increase of $239,000, or 4.1%, compared to $5.8 million in the linked fourth quarter of 2017.

Income tax expense for the first quarter of 2018 was $832,000, with an effective tax rate of 17.1% compared to $886,000, with an effective tax rate of 31.3% for the first quarter of 2017. The first quarter of 2018 effective tax rate of 17.1% was primarily a result of the enactment of the Tax Cuts and Jobs Act, which reduced the federal statutory corporate income tax rate from 35% to 21%, along with discrete items related to equity issuances and exercises which reduced tax expense by approximately $140,000 in the first quarter of 2018. Excluding these benefits the effective tax rate would have been approximately 20% for the quarter.

Balance Sheet

Total assets as of March 31, 2018 were $1.5 billion, an increase of $30.7 million compared to December 31, 2017. Total assets as of March 31, 2018 increased $386.7 million or 35.3%, compared to $1.1 billion at March 31, 2017, due primarily to organic and acquired loan growth. Total loans were $1.3 billion as of March 31, 2018, an increase of $43.1 million, or 3.5%, compared to December 31, 2017 and increased $355.3 million, or 38.8%, compared to $915.3 million at March 31, 2017. Loan growth for the period was distributed across commercial and consumer loan segments and included both new originations and loans acquired in the Bucks County Bank merger.

Total deposits were $1.2 billion as of March 31, 2018, an increase of $256.3 million, or 27.4%, compared to $934.3 million at March 31, 2017. Non-interest bearing deposits totaled $194.2 million as of March 31, 2018, an increase of $66.4 million, or 52.0%, from $127.8 million at March 31, 2017.

Stockholders' equity increased to $166.7 million as of March 31, 2018, up $75.7 million or 83.1% compared to $91.0 million at March 31, 2017. The increase was primarily the result of the Bank's common stock offering completed in June 2017, which raised $37.5 million in net new capital, the issuance of additional common shares for the acquisition of Bucks County Bank, which increased capital by $29.7 million, along with a $7.8 million increase in retained earnings.

Asset Quality

First Bank's asset quality metrics were stable and favorable throughout 2017 and this trend continued through the first quarter of 2018. Net charge-offs for the first quarter were $180,000, compared to $146,000 for first quarter of 2017 and $287,000 for the fourth quarter of 2017. Net charge-offs as an annualized percentage of average loans were 0.06% for the first quarter of 2018 and 2017, and were 0.10% for the linked fourth quarter of 2017. Nonperforming loans as a percentage of total loans at March 31, 2018 were 0.47%, compared with 0.57% at March 31, 2017, and 0.43% at December 31, 2017. The allowance for loan losses to nonperforming loans was 211.81% at March 31, 2018, compared with 193.35% at March 31, 2017, and 220.74% at December 31, 2017.

As of March 31, 2018, the Bank exceeded all regulatory capital requirements to be considered well-capitalized with a Tier 1 Leverage ratio of 10.57%, a Tier 1 Risk-Based capital ratio of 10.87%, a Common Equity Tier 1 Capital ("CET1") ratio of 10.87%, and a Total Risk-Based capital ratio of 13.27%.

Delanco Bancorp, Inc. Acquisition

First Bank entered into a definitive merger agreement to acquire Delanco Bancorp, Inc. (OTC:DLNO) on October 18, 2017, in a stock transaction for total consideration valued at approximately $13.5 million based on First Bank's stock price on the date of the merger agreement. Upon the closing of the transaction, Delanco Federal Savings Bank, the wholly-owned bank subsidiary of Delanco Bancorp, Inc. will merge with and into First Bank. The merger has been unanimously approved by the boards of directors of both institutions and has received regulatory approval to proceed. We anticipate final shareholder approval at our annual shareholder meeting on April 24, 2018 and expect to complete the acquisition at the close of business on April 30, 2018. Delanco Federal Savings Bank had assets of approximately $128 million, loans of $85 million, and deposits of $115 million as of December 31, 2017. 

Cash Dividend Declared

On April 17, 2018, as a result of our performance, the Board of Directors declared a quarterly cash dividend of $0.03 per share payable on May 25, 2018 to common shareholders of record at the close of business on May 11, 2018. The Board of Directors believes that the current dividend is appropriate given the Bank's current financial performance, momentum and near-term prospects.

Conference Call

First Bank will host an earnings call on Tuesday, April 24, 2018 at 3:00 p.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 10118894) from one hour after the end of the conference call until July 27, 2018.  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 is a New Jersey state-chartered bank with 15 full-service branches in Cranbury, Denville, Ewing, Flemington, Hamilton, Lawrence, Pennington, Randolph, Somerset and Williamstown, New Jersey, and Trevose, Doylestown, Warminster, Bensalem and Levittown, Pennsylvania. With $1.5 billion in assets as of March 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 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; the ability to obtain required shareholder approvals of the Delanco Bancorp, Inc. merger, the ability to complete such merger as expected and within the expected timeframe, the possibility that one or more of the conditions to the completion of such merger may not be satisfied; 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 our 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.  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.  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.  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, unaudited)  
   
               
        March 31,   December 31,
          2018       2017    
Assets          
Cash and due from banks $ 7,363     $ 12,808    
Interest bearing deposits with banks   26,567       30,570    
    Cash and cash equivalents   33,930       43,378    
Interest bearing time deposits with banks   3,297       4,113    
Investment securities available for sale   59,869       62,393    
Investment securities held to maturity (fair value of $49,435        
  at March 31, 2018 and $52,920 at December 31, 2017)   49,849       52,900    
Restricted investment in bank stocks   5,502       5,289    
Other investments   6,088       6,054    
Loans, net of deferred fees and costs   1,270,550       1,227,413    
  Less: Allowance for loan losses   12,516  
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