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First Bank Reports First Quarter 2014 Earnings of $3.2 Million; Total Assets Reach $599 Million

HAMILTON, NJ--(Marketwired - May 15, 2014) - First Bank (FRBA) today announced first quarter 2014 results. Net income for the quarter was $3.2 million or $0.37 per diluted share, compared to net income of $380,000 or $0.08 per diluted share for the first quarter of 2013 and $311,000 or $0.05 per diluted share for the fourth quarter of 2013. 

First quarter net income included $2.6 million in non-interest income associated with a bargain purchase gain from the acquisition of Heritage Community Bank (HCB). First quarter results also included $207,000 in merger related expenses. Book value per share was $6.54 at the end of the first quarter, an increase of 6.2% compared to book value per share of $6.16 at year-end.

President and Chief Executive Officer Patrick L. Ryan discussed the results: "Our results in the quarter were driven primarily by merger-related items. The bargain purchase gain was obviously the largest component of first quarter profit. While that is clearly a one-time income boost, the resultant increase in EPS and book value are certainly welcome. Beyond the financial benefits, the merger provides several strategic benefits: i) a larger, more scalable platform with eight branches in four counties with opportunities for enhanced operating leverage; ii) a jumping off point for penetration into the North Jersey market; and iii) a larger legal lending limit which will allow the bank to provide additional credit to existing customers and to target larger borrowers.

"In addition to the merger-related highlights, our core banking platform continues to perform well. The loan pipeline remains very active and we continue to add new deposit customers. Strong growth in non-interest bearing balances continued in the first quarter, which reached 14.1% of total deposits."

Ryan continued, "Importantly, we welcomed several strategic new hires recently. In addition to our new Chief Operating Officer, Ryan Manville, we added David Lidster as our new Chief Technology Officer. Dave brings tremendous breadth and depth of bank IT experience, having served most recently as the Chief Technology Officer of Somerset Hills Bank, prior to their acquisition last year. To help round out our team in the Finance Department, Don Theobald was hired as Controller. Don brings great finance, public company reporting, accounting and banking experience to the organization. We also hired two, seasoned commercial lending relationship managers, Tony Santoro and Brian Collins, to help us build out our presence in Bucks County, Pennsylvania. Both gentlemen have hit the ground running and have active pipelines of new business. As an organization, we are very excited about the growth prospects in Bucks County." 

First Quarter 2014 Highlights

As a result of the acquisition of HCB on March 7, 2014, First Bank added total assets, loans and deposits of $132.3 million, $98.2 million and $123.4 million respectively.

  • Balance Sheet
    • Total assets at March 31, 2014 were $599.2 million, an increase of $132.4 million or 28.4% compared to December 31, 2013, and an increase of $226.3 million or 60.7% compared to March 31, 2013.
    • Total loans reached $450.4 million at March 31, 2014, an increase of $110.4 million or 32.5% compared to December 31, 2013 and an increase of $170.3 million or 60.8% compared to March 31, 2013. Loan growth occurred across all product categories consistent with our current loan mix.
    • Total deposits reached $522.1 million, an increase of $123.0 million or 30.8% compared to December 31, 2013 and an increase of $191.4 million or 57.9% compared to March 31, 2013. 
    • Book equity increased to $61.5 million at March 31, 2014, driven by the 875,193 new shares issued in the Heritage deal and by strong first quarter profits.
    • Book value per share was $6.54 at March 31, 2014 compared to $6.16 per share at December 31, 2013 and $6.68 per share at March 31, 2013. Tangible book value per share was $6.50 at March 31, 2014, compared to $6.16 per share at December 31, 2013 and $6.68 per share at March 31, 2013. Note: shares outstanding at March 31, 2014 were 9,395,492 compared to 4,686,965 shares outstanding at March 31, 2013. The increase in shares relates to 3,833,334 shares issued in the November IPO and 875,193 shares issued in the HCB transaction.
  • Income Statement
    • Net interest income for the first quarter of 2014 totaled $4.2 million, an increase of $614 thousand or 17.0% compared to $3.6 million for the fourth quarter of 2013. Strong loan growth led net interest income higher during the first quarter of 2014.
    • Non-interest income for the first quarter of 2014 totaled $2.7 million. $2.6 million of non-interest income for the quarter relates to the bargain purchase gain from the HCB acquisition. The largest components of the bargain purchase gain included a $2.4 million general credit fair value reduction to non-impaired loans, a $7.6 million fair value reduction for identified impaired loans, and a $5.2 million increase to the value of the deferred tax assets. In aggregate, the reduction in fair value to the HCB loan portfolio was $10.0 million or 9.3% of HCB gross loans at closing. When excluding the bargain purchase gain, core non-interest income of $133 thousand in the first quarter of 2014 was up slightly compared to $102 thousand in the fourth quarter of 2013 and $106 thousand in the first quarter of 2013.
    • Non-interest expense for the first quarter of 2014 totaled $3.2 million, an increase of $751 thousand or 30.4% compared to $2.5 million for the fourth quarter of 2013.
    • Pre-tax income for the first quarter of 2014 totaled $3.6 million, an increase of $3.1 million or approximately 600% compared to $507 thousand for the fourth quarter of 2013. When excluding the $2.6 million in non-interest income from the bargain purchase and adding back in $207 thousand in merger-related costs and $107 thousand in other non-recurring expenses, pre-tax income was $1.2 million for the first quarter.
    • The provision for loan losses in the first quarter of 2014 totaled $178 thousand, a decrease of $555 thousand or 75.7% compared to $733 thousand for the fourth quarter of 2013. The provision for loan losses reflects the impact of loan growth and a sound asset quality profile.
  • Other items
    • The net interest margin (NIM) for the first quarter of 2014 was 3.61% compared to 3.38% for the fourth quarter of 2013 and 3.48% for the first quarter of 2013. 
    • Non-performing assets (NPAs) were $8.5 million or 1.42% of total assets at March 31, 2014 compared to $5.1 million or 1.09% of total assets at December 31, 2013. Non-accrual loans totaled $6.1 million at March 31, 2014. Loans 30-89 days past due totaled $8.8 million. We had no loans over 90 days past due and still accruing at March 31, 2014. OREO (including other repossessed assets) totaled $2.4 million. The increase relates to higher levels of non-performing assets at HCB. Non-performing assets at March 31, 2014 included $3.0 million of loans acquired from HCB with deteriorated credit quality which were recorded at their fair value at acquisition.
    • Regulatory capital ratios at March 31, 2014:
      • Tier 1 Leverage ratio of 12.09%
      • Tier 1 Risk-Based capital ratio of 12.08%
      • Total Risk-Based capital ratio of 13.03%
    • The allowance for loan losses (ALLL) to total loans at March 31, 2014 was 1.05% compared to 1.38% at December 31, 2013. The reduction in the ALLL ratio relates primarily to the purchase accounting adjustments required for the merger. The Heritage loans were marked to fair value and the ALLL for the Heritage loans was eliminated. 
    • 91 full-time equivalent employees (FTEs) at March 31, 2014, compared to 59 FTEs at December 31, 2013.
    • Loan portfolio breakdown at March 31, 2014:
      • Acquisition, Construction and Development (ACD) loans equaled 5.5% of total loans
      • Commercial Real Estate, Investor (CREI; including multi-family) loans equaled 37.8% of total loans
      • Commercial Real Estate, Owner-Occupied (CREO) loans equaled 21.8% of total loans
      • Commercial and Industrial (C&I) loans equaled 21.0% of total loans
      • Residential, Consumer and Other loans equaled 13.9% of total loans
    • Non-interest bearing deposits totaled $73.7 million at March 31, 2014 or 14.1% of total deposits.

About First Bank
First Bank (www.firstbanknj.com) is a New Jersey state-chartered bank with eight full-service branches in Denville, Ewing, Hamilton, Lawrence, Randolph (2), Somerset and Williamstown, New Jersey. With $599 million in assets as of March 31, 2014, First Bank offers a traditional range of deposit and loan products to individuals and businesses throughout the New York City to Philadelphia, PA corridor. First Bank's common stock is listed on the Nasdaq Global Market under the symbol "FRBA".

This news release contains certain forward-looking statements, either expressed or implied, which are provided to assist the reader in understanding anticipated future financial performance. These statements involve certain risks, uncertainties, estimates and assumptions made by management, which are subject to factors beyond First Bank's control and could impede its ability to achieve these goals. These factors include those listed in our Annual Report on Form 10K under the caption "Item 1A-Risk Factors", and general economic conditions, trends in interest rates, the ability of our borrowers to repay their loans, and results of regulatory exams, among other factors.

(in thousands, except share data)  
    March 31,     December 31,  
    2014     2013  
Cash and due from banks   $ 8,966     $ 9,787  
Interest bearing deposits with banks     26,291       13,927  
Federal funds sold     2,863       -  
    Cash and cash equivalents     38,120       23,714  
Interest bearing time deposits with banks     5,339       4,903  
Investment securities available for sale     63,506       65,017  
Investment securities held to maturity (fair value of $15,459 at March 31, 2014 and $15,353 at December 31, 2013)     15,380       15,414  
Restricted investment in bank stocks     1,344       1,131  
Other investments     5,000       5,000  
Loans, net of deferred fees and costs     450,424       339,975  
  Less: Allowance for loan losses     4,729       4,675  
    Net loans     445,695       335,300  
Premises and equipment, net     3,382       1,787  
Other real estate owned, net     2,266       1,664  
Accrued interest receivable     1,356       1,232  
Bank-owned life insurance     8,868       8,805  
Intangible assets, net     413       -  
Deferred income taxes     7,442       2,352  
Other assets     1,101       473  
  Total assets   $ 599,212     $ 466,792  
Liabilities and Stockholders' Equity                
  Non-interest bearing   $ 73,714     $ 48,186  
  Interest bearing     448,388       350,927  
    Total deposits     522,102       399,113  
Long-term borrowings     14,000       14,000  
Accrued interest payable     364       156  
Other liabilities     1,293       1,016  
    Total liabilities     537,759       414,285  
Stockholders' Equity:                
Preferred stock, par value $2 per share; authorized 5,000,000 shares;                
no shares issued and outstanding     -       -  
Common stock, par value $5 per share; authorized 20,000,000 shares;                
issued and outstanding 9,395,492 shares at March 31, 2014                
and 8,520,299 shares at December 31, 2013     46,977       42,602  
Additional paid-in capital     14,207       13,052  
Retained earnings (accumulated deficit)     948       (2,290 )
Accumulated other comprehensive loss     (679 )     (857 )
Total stockholders' equity     61,453       52,507  
Total liabilities and stockholders' equity   $ 599,212     $ 466,792  
(in thousands, except for share data)
    Three Months Ended
    March 31,
    2014   2013
Interest and Dividend Income            
Investment securities - taxable   $ 367   $ 200
Investment securities - tax-exempt     64     22
Federal funds sold     1     -
Interest bearing deposits with banks and other     58     41
Loans, including fees     4,662     3,518
  Total interest and dividend income     5,152     3,781
Interest Expense            
Deposits     876     760
Borrowings     54     46
  Total interest expense     930     806
Net interest income     4,222     2,975
Provision for loan losses     178     334
Net interest income after provision for loan losses     4,044     2,641
Non-Interest Income            
Service fees on deposit accounts     27     17
Loan fees     2     12
Title insurance fees     -     12
Income from bank-owned life insurance     63     36
Gains on sale of investment securities, net     -     18
Gains on sale of loans held for sale     14     -
Gain on acquisition of Heritage Community Bank     2,606     -
Other non-interest income     27     11
  Total non-interest income     2,739     106
Non-Interest Expense            
Salaries and employee benefits     1,517     1,112
Occupancy and equipment     412     302
Legal fees     71     34
Other professional fees     272     74
Regulatory fees     86     82
Directors' fees     59     60
Data processing     145     96
Marketing and advertising     92     50
Travel and entertainment     34     32
Insurance     32     36
Other real estate owned expense, net     120     146
Merger-related expenses     207     -
Other expense     174     112
  Total non-interest expense     3,221     2,136
Income Before Income Taxes     3,562     611
Income tax expense     324     231
Net Income   $ 3,238   $ 380
Basic earnings per share   $ 0.37   $ 0.08
Diluted earnings per share   $ 0.37   $ 0.08
Basic weighted average common shares outstanding     8,753,684     4,686,965
Diluted weighted average common shares outstanding     8,839,284     4,703,296