First Bank Describes Response to COVID-19 Pandemic
For the First Quarter 2020: Efficiency Ratio¹ of 58.65%, Pre-Provision Net Revenue² of $7.0 Million, Loan Growth of $34.8 millionHAMILTON, N.J., April 27, 2020 (GLOBE NEWSWIRE) — First Bank (Nasdaq Global Market: FRBA) today announced results for the first quarter of 2020. Net income for first quarter 2020 was $3.2 million, or $0.16 per diluted share, compared to $4.3 million, or $0.23 per diluted share, for the first quarter of 2019. Return on average assets and return on average equity for the first quarter of 2020 were 0.63% and 5.69%, respectively, compared to first quarter 2019 return on average assets and return on average equity of 0.99% and 8.79%, respectively. First quarter 2020 adjusted diluted earnings per share³ were $0.15, adjusted return on average assets³ was 0.61% and adjusted return on average equity³ was 5.44% compared to first quarter 2019 adjusted diluted earnings per share of $0.22, adjusted return on average assets of 0.99% and adjusted return on average equity of 8.76%.First Quarter 2020 Performance Highlights:Total net revenue (net interest income plus non-interest income) increased 16.2%, or $2.4 million, to $17.1 million, compared to $14.7 million for the first quarter 2019;Total loans of $1.76 billion at March 31, 2020, increased $34.8 million, or 2.0%, compared to $1.72 billion on December 31, 2019, and increased $261.3 million or 17.5% from March 31, 2019;Total deposits of $1.73 billion at March 31,2020 increased $84.7 million, or 5.2%, from $1.64 billion at December 31, 2019, and non-interest bearing deposits of $291.9 million increased $16.2 million, or 5.9%, from $275.8 million at December 31, 2019;First quarter 2019 non-interest expense of $9.9 million increased $915,000, or 10.2%, compared to $9.0 million for the first quarter of 2019; Efficiency ratio of 58.65% in the first quarter 2020 compared to 60.95% in first quarter 2019, and 53.21% in the linked fourth quarter of 2019.Nonperforming loans at March 31, 2020 were $13.8 million a decrease of $8.9 million from December 31, 2019.  “Despite the unprecedented challenges posed by the COVID-19 crisis and the related economic conditions, First Bank produced a solid first quarter 2020 with year-over-year net revenue (net interest income plus non interest income) growth of 16.2%, loan growth for the quarter in excess of $34 million, a solid deposit gathering effort that attracted $84.7 million and continued effective management of non-interest expense,” said Patrick L. Ryan, President and Chief Executive Officer. “Our net income of $3.2 million was down $1.0 million, or 24.3%, primarily due to loan loss provisions that were $2.6 million higher in the first quarter of 2020 compared to the first quarter of 2019, reflecting the economic uncertainty associated with the COVID-19 pandemic.”“As expected, our local market economy and customers have been negatively impacted by governmental actions necessary to contain the health crisis. We are closely monitoring the situation and taking the appropriate steps to minimize the current and future impact of this unprecedented situation. Our capital position remains very strong, we are closely tracking our loan portfolio and responding to deferral requests, and as evidenced by our balance sheet we took steps to increase liquidity in the first quarter.”   “We also moved aggressively to enact operating protocols that protect both our employees and customers, which include: limiting branch access to drive-thru and appointment only access; having back office staff work from home; providing additional paid time off; suspending unnecessary business travel; meeting via conference and video; and sanitizing our locations on a daily basis.”“We are fully focused on supporting the First Bank customers who are dealing with the financial and operating challenges that are a result of the COVID-19 crisis, including loan deferrals and participation in the Small Business Administration’s Paycheck Protection Program.”“We are closely monitoring the ongoing developments and uncertainties associated with this unprecedented health crisis. Currently, it’s not possible to fully determine how COVID-19 will impact demand for the Bank’s products and services, future revenue, earnings, asset quality, capital reserves, dividend practices or liquidity. However, we are confident in our long-term underlying strength and stability, strategic direction and our ability to navigate these challenging conditions. Unfortunately, it appears we’ll be dealing with these challenges for an extended period of time.”Income StatementNet interest income for first quarter 2020 was $15.9 million, an increase of $1.8 million, or 13.1%, compared to $14.0 million in the first quarter of 2019. This increase was driven by a $2.4 million, or 11.9%, increase in interest and dividend income to $22.2 million. This increase in interest and dividend income was primarily a result of a $265.8 million increase in average loan balances, with growth across all loan portfolios except consumer and other loans. The increase in interest income was partially offset by increased interest expense of $535,000 for the first quarter of 2020 compared to the first quarter of 2019. Increased interest expense was primarily a result of higher average balances for money market deposits, time deposits and savings deposits. Loan and deposit balances for the quarter reflect both acquired and organic growth activity.The first quarter 2020 tax equivalent net interest margin was 3.30%, a decrease of 15 basis points compared to 3.45% for the prior-year quarter and a decrease of 4 basis points from the linked fourth quarter of 2019. The decrease in the first quarter net interest margin compared to first and fourth quarter of 2019 was primarily the result of a lower average rate on interest earning assets of 27 and 14 basis points, respectively. The decrease in the average rate was primarily due to lower average rates on loans. Average loan rates were impacted by the 75 basis point decrease in the targeted federal funds rate during the second half of 2019 and the 150 basis point reduction in March of 2020. The reduction in average rates on interest earning assets was offset somewhat by lower average rates on interest bearing liabilities. The average interest rate paid on interest bearing liabilities for first quarter 2020 was 1.68% a decrease of 11 basis points compared to first quarter 2019, and a decrease of 12 basis points compared to the linked fourth quarter of 2019. Approximately $385 million of the Bank’s time deposits will reprice over the next six months, which is expected to further reduce interest expense and provide margin stabilization.  The provision for loan losses for first quarter 2020 totaled $2.9 million which included the impact of $699,000 in net charge-offs and $34.8 million in loan growth. This compares to a provision for loan losses for the 2019 first quarter of $365,000 and $340,000 in the linked fourth quarter 2019. The $2.6 million increase in the provision for loan losses compared to the first and fourth quarters of 2019 is primarily attributable to uncertainty in relation to potential credit losses due to the COVID-19 pandemic.Nonperforming loans at March 31, 2020 of $13.8 million were down $8.9 million from December 31, 2019. Fourth quarter 2019 nonperforming loans included an $8.2 million commercial and industrial relationship that was added to nonperforming loans in the third quarter of 2019. The primary collateral for this relationship was sold and the loan was paid in full during the first quarter of 2020.           First quarter 2020 non-interest income increased $541,000 to $1.2 million from $673,000 in the first quarter of 2019. The increase was primarily a result of loan swap referral fees, an increase in service fees on deposit accounts, an increase in gain on sale of loans and increased income from bank-owned life insurance.Non-interest expense for first quarter 2019 totaled $9.9 million, an increase of $915,000, or 10.2%, compared to $9.0 million for the prior-year quarter, and an increase of $606,000 compared to the fourth quarter of 2019. The higher non-interest expense compared to first quarter 2019 was primarily a result of increased salaries and employee benefits as well as other expense categories, primarily as a result of the Grand Bank acquisition in third quarter 2019, partially offset by lower other marketing fees and merger-related expenses. The increase from the fourth quarter of 2019 was primarily the result of higher regulatory fees due to expiration of FDIC assessment credits received in 2019, higher insurance costs and higher other real estate expenses.The Bank’s efficiency ratio for the first quarter of 2019 was 58.65%, an improvement of 230 basis points compared to 60.95% in the first quarter of 2019, and an increase of 544 basis points compared to 53.21% for the linked fourth quarter of 2019.Pre-provision net revenue for first quarter 2020 was $7.0 million, an increase of $1.3 million compared to $5.7 million for the first quarter 2019.Income tax expense for the first quarter of 2020 was $1.0 million, or an effective tax rate of 23.7%, compared to $1.1 million, or an effective tax rate of 20.1%, in the first quarter of 2019 and $2.8 million or an effective tax rate of 34.7% in the linked fourth quarter 2019. The Bank expects an effective tax rate in a range of 24% to 25% for the remainder of 2020.Balance SheetTotal assets at March 31, 2020, were $2.1 billion, an increase of $315.1 million, or 17.7%, compared to $1.8 billion at March 31, 2019, due primarily to loan growth, both organic and acquired. Total assets at March 31, 2020 increased $80.9 million in comparison to December 31, 2019 reflecting loan growth of $34.8 million and an increase in cash and cash equivalents in response to the uncertainties created by the COVID-19 crisis.   Total loans were $1.76 billion at March 31, 2020, an increase of $261.3 million, or 17.5%, compared to $1.50 billion on March 31, 2019, and included both organic and acquired growth. Total loan growth of $34.8 million during first quarter 2020, primarily reflected increases in commercial lending portfolios, and was consistent with announced plans to moderate the pace of loan growth in 2020.Total deposits were $1.73 billion at March 31, 2020, an increase of $84.7 million, or 5.2%, compared to $1.64 billion at December 31, 2019. Non-interest-bearing deposits totaled $291.9 million at March 31, 2020, an increase of $16.2 million, or 5.9%, from December 31, 2019. Total deposits increased $274.8 million from March 31, 2019 and included both organic and acquired growth.Stockholders’ equity was $226.3 million at March 31, 2020, up $26.9 million, or 13.5%, compared to $199.3 million at March 31, 2019. The increase was primarily the result of the Bank’s issuance of additional common shares for the acquisition of Grand Bank, which added $18.4 million to stockholders’ equity. Total stockholders’ equity on December 31, 2019 was $226.4 million. Stockholder’s equity declined slightly as of March 31, 2020 compared to December 31, 2019 due to treasury stock purchases of $3.9 million and $613,000 in cash dividends offset somewhat by net income of $3.2 million, stock option exercises and an increase in accumulated other comprehensive income.    Asset QualityNonperforming loans as a percentage of total loans at March 31, 2020, were 0.79% compared with 1.32% at December 31, 2019. Net charge-offs for first quarter 2020 were $699,000, compared to net recoveries of $16,000 for first quarter 2019, and net charge-offs of $325,000 for the linked fourth quarter of 2019. Net charge-offs as an annualized percentage of average loans were 0.16% in first quarter 2020, compared to 0.00% for first quarter 2019 and 0.07% for the linked fourth quarter 2019. The allowance for loan losses was $19.5 million at March 31, 2020, an increase of $2.2 million from $17.2 million at December 31, 2019. The allowance for loan losses to nonperforming loans was 141.00% at March 31, 2020, compared to 75.82% at December 31, 2019. The increase to First Bank’s loan loss reserves primarily reflects the loan growth during the quarter ended March 31, 2020 and the current economic uncertainty associated with the COVID-19 pandemic.As of March 31, 2020, the Bank exceeded all regulatory capital requirements to be considered well capitalized, with a Tier 1 Leverage ratio of 10.18%, a Tier 1 Risk-Based capital ratio of 10.57%, a Common Equity Tier 1 Capital ratio of 10.57%, and a Total Risk-Based capital ratio of 12.70%.Additional COVID-19 DiscussionFirst Bank is participating in the Paycheck Protection Program (PPP), established by the Coronavirus Aid, Relief, and Economic Securities Act (CARES Act), a specialized low-interest loan program funded by the U.S. Treasury Department and administered by the U.S. Small Business Administration (SBA). The PPP provides, borrower guarantees for lenders, as well as loan forgiveness incentives for borrowers that utilize the loan proceeds to cover compensation-related business operating costs.  Through April 20, 2020, First Bank has submitted and received approval from the SBA for 577 loans totaling approximately $135 million and is in the process of submitting additional applications utilizing the latest round of funding from the SBA. We believe the Bank has sufficient liquidity to handle current and anticipated funding requests from its borrowers.First Bank has conducted an analysis of its COVID-19 related credit exposures based on asset class and borrower type.  No specific COVID-19 related credit impairment was identified within the Bank’s lending activities as of March 31, 2020.First Bank has been proactively working with customers to assist both consumer and business borrowers experiencing financial hardship due to COVID-19 related challenges.  Through April 20, 2020, the Bank granted payment deferral requests, primarily for 90 days, representing approximately $271 million of existing loan balances. Additional loan deferrals are being processed but activity has slowed somewhat. Consistent with industry regulatory guidance, borrowers that were otherwise current on loan payments that were granted COVID-19 related financial hardship payment deferrals will continue to be reported as current loans throughout the agreed upon deferral period, will continue to accrue interest and will not be required to be accounted for as a troubled debt restructuring. Cash Dividend DeclaredOn April 21, 2020, 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 May 8, 2020, payable on May 22, 2020.Share Repurchase ProgramOn October 23, 2019, First Bank announced that the board of directors authorized, and the Bank had received regulatory approval for, the repurchase of up to 1.0 million shares of First Bank common stock in the open market. The Bank repurchased 442,136 shares of common stock during the first quarter of 2020 for an aggregate purchase price of approximately $3.9 million.Conference CallFirst Bank will host a conference call to discuss first quarter 2020 results on Tuesday, April 28, 2020, 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 10142000) from one hour after the end of the conference call until July 28, 2020.  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.This earnings release, including supporting financial tables and presentation slides, is available within the press releases section of First Bank’s investor relations website at www.firstbanknj.comAbout First Bank
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