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, [email protected]

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.