Full Year 2019 Net Income of $15.2 Million
For the Fourth Quarter 2019: Efficiency Ratio1of 53.21% Lowest in Last Five Quarters, Pre-Provision Net Revenue2of $8.2 Million, Successful Systems Integration for Grand Bank AcquisitionHAMILTON, N.J., Jan. 29, 2020 (GLOBE NEWSWIRE) — First Bank (Nasdaq Global Market: FRBA) today announced results for the fourth quarter and full year 2019. Net income for fourth quarter 2019 was $5.2 million, or $0.25 per diluted share, compared to $4.1 million, or $0.22 per diluted share, for the fourth quarter of 2018. Return on average assets and return on average equity for the fourth quarter of 2019 were 1.02% and 9.17%, respectively compared to fourth quarter 2018 return on average assets and return on average equity of 0.94% and 8.42%, respectively. First Bank’s fourth quarter 2019 adjusted diluted earnings per share3 were $0.28, adjusted return on average assets3 was 1.13% and adjusted return on average equity3 was 10.18% compared to fourth quarter 2018 adjusted diluted earnings per share of $0.21, adjusted return on average assets of 0.90% and adjusted return on average equity of 8.00%. Adjusted results for the fourth quarter of 2019 were impacted by a one-time revaluation of deferred tax assets which increased tax expense by approximately $730,000. Net income for 2019 was $15.2 million, or $0.79 per diluted share, compared to $17.6 million, or $0.95 per diluted share, for 2018.Fourth Quarter and Full Year 2019 Performance Highlights:A 16.8%, or $2.5 million, increase in total net revenue (net interest income plus non-interest income) for the fourth quarter 2019 to $17.7 million, compared to $15.1 million for the prior-year quarter, and total net revenue for 2019 of $62.4 million, an increase of 6.8%, or $4.0 million, compared to 2018 net revenue of $58.4 millionTotal loans of $1.72 billion at December 31, 2019, an increase of $261.1 million, or 17.8%, from $1.46 billion on December 31, 2018Total deposits of $1.64 billion at 2019 yearend increased by $247.7 million, or 17.8%, from $1.39 billion at December 31, 2018; non-interest bearing deposits were up $56.7 million or 25.9% in 2019 compared to 2018Fourth quarter 2019 non-interest expense of $9.3 million increased $119,000, or 1.3%, compared to $9.2 million for the prior year quarter Efficiency ratio of 53.21% in the fourth quarter of 2019 improved by 5.01% from 58.22% in the linked quarter and improved 8.57% from 61.78% in the fourth quarter of 2018Fourth quarter 2019 tax equivalent net interest margin of 3.34% increased by 19 basis points compared to the linked quarter“Our fourth quarter results provided a nice performance rebound and reflect an ongoing strategic focus on managing our funding costs, controlling non-interest expense, integrating and fully leveraging recently acquired locations and staff and our efforts to resolve a pair of commercial credits that affected our asset quality metrics,” said Patrick L. Ryan, President and Chief Executive Officer. “We realized a solid increase in core profitability for the fourth quarter even with increased tax expense related to the revaluation of our deferred tax assets. We believe that we’re well positioned to drive improved earnings performance during 2020.”“While total deposits for the full year were up almost 18%, we allowed some price-sensitive time deposits to run off during the fourth quarter, which is reflected in a 14 basis-point drop in the average rate for interest bearing deposits from the linked third quarter. Our average balance for non-interest-bearing deposits was up by nearly $40 million from third quarter 2019, positively impacted by the Grand Bank acquisition and favorable results related to our commercial deposit gathering efforts. Growth in this area remains our focus. These efforts are closely aligned with a primary operating strategy for 2020 of stabilizing our net interest margin.”“Non-interest expense for the fourth quarter was up by just 1.3% year-over-year, which we consider a solid accomplishment when you factor in a full quarter of expenses related to the staff and facilities acquired in our Grand Bank transaction. Linked quarter expenses, excluding merger-related costs in the third quarter, were up 9.4%, primarily a result of the Grand Bank acquisition. Continued effective management of our expenses will help our efforts to drive more to our bottom line.”“We completed the successful system integration of the Grand Bank locations and staff in December. We’re pleased by the reaction of the Grand Bank customers as they get to know our expanded menu of products and services, while being served by familiar staff. While not a large transaction, it has made us the second largest community bank by deposit share for Mercer County and enhanced our market presence going into 2020.” “Our loan growth of $261 million for 2019 was very strong and reflected an active organic pipeline and the addition of the Grand Bank portfolio at the end of the third quarter. During the fourth quarter we experienced some early paydowns of commercial real estate loans which had the effect of lowering our period end loan balance in relation to the end of third quarter, however, we did benefit from elevated levels of prepayment penalty income in the quarter. Our commercial real estate pipeline remains strong and active and we plan to remain a fully engaged participant in this market. During 2020, we do plan to moderate the pace at which we grow our loan book to be more selective and to provide more flexibility in how we fund this growth.”“Recently our nonperforming loans to total loans ratio has increased, mainly as a result of two larger commercial relationships. We believe that these credits are adequately collateralized. The largest of these relationships is 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 is under contract to be sold and we anticipate the loan being paid off during the first quarter of 2020.” Income StatementNet interest income for fourth quarter 2019 was $16.2 million, an increase of $2.0 million, or 14.4%, compared to $14.2 million in the fourth quarter of 2018. This increase was driven by a $3.5 million, or 18.1%, increase in interest and dividend income to $23.0 million. This increase was primarily a result of a $291.4 million increase in average loan balances, with growth across all loan portfolios except consumer lending. Interest income for the fourth quarter 2019 included approximately $361,000 in loan prepayment penalty income compared to approximately $73,000 in the fourth quarter of 2018. The increase in interest income was partially offset by increased interest expense of $1.5 million for the comparable quarter. Increased interest expense was primarily a result of higher average balances and interest rates paid for time deposits and money market deposits. Loan and deposit balances for the fourth quarter reflect acquired and organic growth activity.Net interest income of $58.4 million for 2019 increased by $3.4 million, or 6.2%, compared to $54.9 million for 2018. Interest and dividend income for 2019 was $84.2 million, an increase of $11.4 million, or 15.7%, compared to $72.7 million for 2018, partially offset by interest expense of $25.8 million, which increased $8.0 million or 45.0% from 2018. The increase in interest and dividend income for 2019 was also primarily driven by significant growth in average loans, which increased by $211.8 million, along with a 2 basis-point increase in the average interest rate on loans compared to the prior year. Increased interest and dividend income was partially offset by higher interest expense on interest-bearing deposits, reflecting higher average balances and rates paid.The fourth quarter 2019 tax equivalent net interest margin was 3.34%, a decrease of 10 basis points compared to 3.44% for the prior-year quarter and an increase of 19 basis points from the linked third quarter 2019. The decrease in the fourth quarter margin compared to 2018 was primarily the result of higher average balances and rates paid for interest-bearing liabilities, primarily money market and time deposits. The increase in interest-bearing liability costs was partially offset by a volume-related increase in interest income on interest earning assets. The improvement from the linked third quarter was driven by increased loan volume and a higher average rate for interest earning assets, along with a 14 basis-point decrease in the average rate for interest-bearing liabilities. The net interest margin for 2019 was 3.32%, a decrease of 25 basis points compared to 3.57% for the prior year, was primarily driven by increased average balances for money market and time deposits as well as a 40 basis-point increase in the average rate on interest bearing liabilities. The provision for loan losses for the fourth quarter 2019 totaled $340,000, a decrease of $686,000 compared to $1.0 million for fourth quarter 2018 and a decrease of $1.2 million compared to $1.6 million in the linked third quarter 2019. The 2019 provision for loan losses was $4.0 million compared to $3.4 million for the prior-year period. The increase in the provision amount for the full year was primarily a result of continued organic growth in the Bank’s commercial loan portfolio and elevated levels of charge-offs in 2019 compared to the prior year.Fourth quarter 2019 non-interest income increased $509,000 to $1.5 million from $1.0 million in the fourth quarter of 2018. The increase was primarily a result of loan swap referral fees, an increase in service fees on deposit accounts and increased income from bank-owned life insurance. Non-interest income for 2019 totaled $4.0 million, an increase of $543,000 compared to $3.5 million for 2018. The annual increase was primarily a result of the same factors as the quarter over quarter increase.Non-interest expense for fourth quarter 2019 totaled $9.3 million, an increase of $119,000, or 1.3%, compared to $9.2 million for the prior-year quarter and an increase of $799,000 compared to the third quarter of 2019 after excluding $984,000 in merger-related expenses from the third quarter. The higher non-interest expense compared to fourth quarter 2018 was primarily a result of increased salaries and employee benefits as well as data processing expense as a result of the Grand Bank acquisition on September 30, 2019, partially offset by lower other professional and regulatory fees. Excluding merger related costs in the third quarter of 2019, the increase in the fourth quarter compared to the linked third quarter was mainly the result of increased salaries and employee benefits; higher occupancy and equipment cost; and an increase in other expense. Non-interest expense for 2019 totaled $36.9 million, an increase of $3.6 million or 10.9%, compared to $33.3 million for 2018. The 2019 increase in non-interest expense over the prior year was also primarily a result of increased salaries and employee benefits expense, an increase in other expense and higher occupancy and equipment costs, which includes the impact of the acquisition of Grand Bank.The Bank’s efficiency ratio for the fourth quarter of 2019 was 53.21%, a reduction of 8.57% compared to 61.78% in the fourth quarter of 2018, and a reduction of 5.01% compared to 58.22% for the linked third quarter of 2019. The efficiency ratio for the full year 2019 was 58.00% compared to 56.13% in 2018. Pre-provision net revenue for fourth quarter 2019 was $8.2 million, an increase of $2.5 million compared to $5.7 million for the fourth quarter 2018.Income tax expense for the fourth quarter of 2019 was $2.8 million, or an effective tax rate of 34.7%, compared to $823,000, or an effective tax rate of 16.7%, in the fourth quarter of 2018 and $947,000 or an effective tax rate of 24.7% in the linked third quarter 2019. The effective tax rate for the full year was 29.0%, compared to 18.7% for 2018. In December 2019, the State of New Jersey issued a clarifying technical bulletin related to the impact of the new tax legislation enacted in July 2018, specifically related to the combined income tax reporting for certain members of a commonly controlled unitary business group. This technical bulletin provided clarification on the state’s position and accordingly initiated a revaluation of the Bank’s deferred tax assets. This revaluation increased the Bank’s tax expense by approximately $730,000 during the fourth quarter of 2019.Balance SheetTotal assets at December 31, 2019, were $2.01 billion, an increase of $302.2 million, or 17.7%, compared to $1.71 billion at December 31, 2018, due primarily to loan growth, both organic and acquired. Total loans were $1.72 billion at December 31, 2019, an increase of $261.1 million, or 17.8%, compared to $1.46 billion at the 2018 year end. Loan growth during 2019 was primarily in commercial loans and included both originated and acquired loans.Total deposits were $1.64 billion at December 31, 2019, an increase of $247.7 million, or 17.8%, compared to $1.39 billion at December 31, 2018. Non-interest-bearing deposits totaled $275.8 million at December 31, 2019, an increase of $56.7 million, or 25.9%, from December 31, 2018. Deposit growth also includes both organically sourced and acquired balances.Stockholders’ equity increased to $228.2 million at December 31, 2019, up $33.4 million, or 17.1%, compared to $194.8 million at December 31, 2018. 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. The increase was also due to a $12.9 million increase in retained earnings which was a result of the Bank’s net income offset somewhat by cash dividends.Asset QualityNet charge-offs for the fourth quarter 2019 were $325,000, compared to $7,000 for fourth quarter 2018 and $1.1 million for the linked third quarter of 2019. Net charge-offs as an annualized percentage of average loans were 0.07% in fourth quarter 2019, compared to 0.00% for fourth quarter 2018 and 0.28% for the linked third quarter 2019. Nonperforming loans as a percentage of total loans at December 31, 2019, were 1.32%, compared with 0.44% at December 31, 2018, and 0.91% at September 30, 2019. The allowance for loan losses to nonperforming loans was 75.8% at December 31, 2019, compared with 237.9% at December 31, 2018, and 108.8% at September 30, 2019. The increase in nonperforming loans was primarily due to the aforementioned two commercial loan relationships.As of December 31, 2019, the Bank exceeded all regulatory capital requirements to be considered well capitalized, with a Tier 1 Leverage ratio of 10.26%, a Tier 1 Risk-Based capital ratio of 10.77%, a Common Equity Tier 1 Capital ratio of 10.77%, and a Total Risk-Based capital ratio of 12.77%.Cash Dividend DeclaredOn January 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 February 14, 2020, payable on February 28, 2020.Grand Bank Acquisition CompletedOn October 1, 2019, First Bank announced that it had completed the acquisition of Grand Bank, N.A., effective as of the close of business on September 30, 2019. The merger had previously been unanimously approved by both boards of directors and was then approved by the shareholders of both institutions in September. The merger provided two additional full-service branch locations in Mercer County, New Jersey, approximately $146.3 million in loans and approximately $170.9 million in deposits at the time of acquisition.Conference CallFirst Bank will host an earnings conference call on Thursday, January 30, 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 10138057) from one hour after the end of the conference call until April 30, 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.About First Bank
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