First Bank Announces Fourth Quarter 2023 Net Income of $8.4 Million and Full Year Net Income of $20.9 Million

Results highlighted by improved geographic diversification, continued balance sheet repositioning, and strong asset quality

HAMILTON, N.J., Jan. 24, 2024 (GLOBE NEWSWIRE) — First Bank (Nasdaq Global Market: FRBA) (the Bank) today announced results for the fourth quarter and full year 2023. Net income for the fourth quarter of 2023 was $8.4 million, or $0.33 per diluted share, compared to $9.1 million, or $0.46 per diluted share, for the fourth quarter of 2022. Return on average assets, return on average equity and return on average tangible equityⁱ for the fourth quarter of 2023 were 0.93%, 9.06% and 10.67%, respectively, compared to 1.35%, 12.61% and 13.53%, respectively, for the fourth quarter of 2022. Excluding merger-related expenses and losses on the sale of loans and investments, First Bank’s fourth quarter 2023 adjusted diluted earnings per shareⁱⁱ were $0.49, adjusted return on average assetsⁱⁱ was 1.38% and adjusted return on average tangible equityⁱⁱ was 15.75%.

Full year 2023 net income was $20.9 million, or $0.95 per diluted share, compared to $36.3 million, or $1.84 per diluted share for 2022. Return on average assets, return on average equity and return on average tangible equityⁱ for the full year 2023 were 0.66%, 6.38% and 7.17%, respectively. Excluding merger-related expenses, losses on the sale of loans and investments, and credit loss expenses on acquired loans, full year 2023 adjusted diluted earnings per share were $1.64, adjusted return on average assets was 1.14% and adjusted return on average tangible equity was 12.43%.

Fourth Quarter and Full Year 2023 Performance Highlights:

• Total net revenue (net interest income plus non-interest income) of $28.0 million for the fourth quarter of 2023 increased $2.8 million, or 11.1%, compared to the prior year quarter, while full year total net revenue was $103.8 million, an increase of $6.3 million, or 6.5%, compared to 2022. Excluding the net impact of loan and investment securities sales, total net revenue was $32.7 million for the fourth quarter of 2023, a 29.8% increase from the prior year quarter, and $109.6 million for 2023, a 12.8% increase from 2022.
• Total loans were $3.02 billion at December 31, 2023, in line with the linked quarter. Excluding the impact of loan sales totaling $35.6 million during the quarter, total loans grew an adjusted $36.3 million, or 4.8%, annualized, from September 30, 2023.
• Total deposits were $2.97 billion at December 31, 2023, in line with balances for the linked quarter ended September 30, 2023. Non-interest bearing deposits increased $8.1 million during the fourth quarter of 2023 while interest bearing deposits decreased $7.9 million.
• Strong asset quality continued, with nonperforming assets increasing slightly to 0.69% of total assets at December 31, 2023 compared to 0.68% at September 30, 2023, net charge-offs as a percentage of average loans measuring 0.03% for fourth quarter 2023, and a credit loss benefit measuring $294,000 recorded for the quarter.

Patrick L. Ryan, President and CEO of First Bank, reflected on the Bank’s performance, stating, “Results for the fourth quarter display the outstanding momentum First Bank has achieved from solid execution of our strategic priorities in 2023. The completed acquisition of Malvern Bancorp and Malvern Bank added meaningfully to our earnings profile, contributing to a 30% increase in adjusted revenue compared to the fourth quarter of 2022, despite the challenging interest rate environment. The ramp up of new business units and information technology investments remained on track and in line with expected costs. We also continued to reposition our balance sheet through the sale of $36 million in commercial loans. These outcomes drove improvement in our profitability metrics and overall risk diversification.”

Mr. Ryan added, “In 2024, we will continue to prioritize strong profit growth above overall balance sheet growth. We will continue to focus on core deposit generation which will drive our loan and asset growth in 2024. While the current rate environment continues to be a challenge, our strong team of bankers is focused on adding quality deposit relationships, diversifying our lending profile through growth in our new specialty banking businesses, and maintaining our excellent asset quality. With continued success, we expect to produce strong profitability metrics in 2024.”

Mr. Ryan concluded, “In December, the Kroll Bond Rating Agency (KBRA) again affirmed our investment grade credit ratings. Their report cited our successful execution of strategy in recent years, including a well-thought-out approach to M&A and a demonstrated ability to effectively integrate acquisitions. KRBA notes the Bank now reflects a vastly improved earnings profile that compares favorably to peers. We believe KBRA’s report is another validation of our approach to building franchise value for our shareholders.”

Income Statement

In the fourth quarter of 2023, the Bank’s net interest income increased to $31.0 million, growing $7.2 million, or 30.5%, compared to the same period in 2022. The increase was primarily driven by an increase of $20.0 million in interest income on loans which outpaced the $12.8 million increase in interest expense on deposits in the fourth quarter of 2023 compared to the same quarter in 2022. Net interest income increased $2.4 million, or 8.4%, over the linked third quarter of 2023. The increase was primarily driven by an increase of $3.2 million in interest income on loans and a decrease of $475,000 in interest expense on borrowings, which resulted from the Bank’s balance sheet repositioning efforts. This was partially offset by a $1.2 million increase in deposit interest expense.

Full year 2023 net interest income totaled $104.5 million, an increase of $12.1 million, or 13.1%, compared to $92.4 million for 2022. The increase was primarily a result of higher interest income from loans due to substantial loan growth related to the Malvern acquisition in the third quarter of 2023 and higher loan yields, which were partially offset by increased interest expense related to the higher cost of deposits and expanded deposit base. Interest and dividend income increased by $66.8 million, reflecting Malvern-driven growth in average loans, which increased by $493.0 million, or 22.4%, from the prior year, and a 133 basis point increase in the average yield on loans. Reflective of the increasing interest rate environment and heightened competition for deposits throughout 2023, the average cost of total interest bearing deposits increased 208 basis points compared to the prior year. The average cost of money market, time, and interest bearing demand deposits increased 249, 215, and 173 basis points, respectively.

The Bank’s tax equivalent net interest margin measured 3.68% for the fourth quarter of 2023, decreasing by one basis point compared to the prior year quarter and increasing by 32 basis points from 3.36% for the third quarter of 2023. The modest change from the prior year quarter was primarily driven by the increase in deposit costs, which was partially offset by an increase in average loan yields. The linked quarter increase in net interest margin was primarily due to the impact of the Malvern acquisition and the related balance sheet repositioning, including the aforementioned asset sales, coupled with accretion income from the Malvern fair value adjustments.

The full year 2023 tax equivalent net interest margin was 3.47%, a decrease of 28 basis points compared to 3.75% for the full year 2022. The decrease was principally a result of the 212 basis point increase in interest bearing liabilities cost, partially offset by the 142 basis point increase in the yield on interest earning assets.

The Bank recorded a credit loss benefit totaling $294,000 during the fourth quarter of 2023, compared to a credit loss expense totaling $716,000 for the same period of the previous year and a $6.7 million credit loss expense for the third quarter of 2023. The benefit during the current quarter was primarily due to the Bank’s strong and stable asset quality and flat loan growth during the quarter. The credit loss expense for the third quarter of 2023 included $5.5 million in credit losses recorded to establish the allowance for credit losses on the acquired Malvern loan portfolio.

For the full year 2023, the Bank reported a credit loss expense of $7.9 million, compared to $2.9 million for 2022. Excluding the $5.5 million credit loss recorded to establish a reserve for acquired Malvern balances, credit loss expenses were $2.4 million for the full year 2023, reflecting a low level of net charge-offs, strong credit quality metrics, and lower net loan growth when compared to 2022.

In the fourth quarter of 2023, the Bank recorded non-interest income totaling $(3.0) million, compared to non-interest income measuring $1.4 million during the same period in 2022 and $193,000 in non-interest income during the third quarter of 2023. Results for the third and fourth quarters of 2023 include $1.2 million and $4.7 million in combined losses on the sale of investments and loans, respectively, which are net against non-interest income on the consolidated statements of income. The losses were primarily related to the Bank’s aforementioned balance sheet repositioning, which included the sale of Malvern investments and, lower-yielding residential and commercial investor real estate loans.

For the full year ended December 31, 2023, the Bank recorded non-interest income totaling $(715,000), compared to $5.1 million in non-interest income earned for the full year ended December 31, 2022. The decrease was primarily the result of net losses realized on the sale of loans and investments related to balance sheet repositioning initiatives in 2023.

Non-interest expense for the fourth quarter of 2023 was $17.9 million, an increase of $5.5 million, or 43.9%, compared to $12.5 million for the prior year quarter. Higher non-interest expense was largely due to the increased operating expenses associated with the Malvern acquisition, including increases of $1.8 million in salaries and employee benefits, $670,000 in regulatory fees, $590,000 in occupancy and equipment, and $1.4 million in other expense. The increase in other expense was primarily due to an increase in core deposit intangible amortization and higher Pennsylvania shares tax.

On a linked quarter basis, non-interest expense declined $5.6 million from $23.5 million for the third quarter of 2023. The linked quarter decrease primarily reflects the decline of $6.7 million in merger-related expenses following the closing of the Malvern acquisition during the third quarter of 2023, partially offset by general increases related to a full quarter of Malvern operating expenses.

Non-interest expense for the full year 2023 totaled $68.7 million, an increase of $22.0 million, or 47.0%, compared to $46.7 million for 2022. The increase was primarily a result of merger-related costs rising $7.6 million, salaries and employee benefits costs increasing $7.0 million due to a larger employee base, occupancy and equipment costs rising $1.4 million due to an expanded network of facilities, and other generalized increases related to the addition of Malvern in the second half of 2023.

Income tax expense for the three months ended December 31, 2023 was $2.0 million with an effective tax rate of 19.1%, compared to $2.9 million with an effective tax rate of 24.3% for the fourth quarter of 2022. Income tax expense for the full year ended December 31, 2023 was $6.3 million with an effective tax rate of 23.1%, compared to $11.6 million for the full year 2022 with an effective tax rate of 24.2%. Income tax expense in 2023 was impacted by a number of factors including certain non-deductible merger-related costs and changes in the apportionment of our income to the various states in which we do business. The state tax apportionment adjustments impacted our current taxes as well as our deferred tax assets. The change in state tax apportionment resulted in an increase to our deferred tax rate in the fourth quarter of 2023. Consequently, our deferred tax assets increased during the quarter and tax expense decreased, driving the lower effective tax rate. We expect our effective tax rate to be in-line with historic levels between 23-25% in 2024 as we continue to explore tax planning opportunities.

Balance Sheet

The Bank reported total assets of $3.61 billion as of December 31, 2023, an increase of $876.4 million, or 32.1%, from $2.73 billion at December 31, 2022. Total loans increased $683.7 million, or 29.2%, to $3.02 billion at December 31, 2023 compared to $2.34 billion at December 31, 2022. Increases primarily reflect growth from the Malvern acquisition, partially offset by sales of loans and investment securities totaling approximately $238.2 million during 2023. The Bank also increased its cash and cash equivalents by $102.0 million, or 81.0%, compared to December 31, 2022, to ensure adequate on-balance sheet liquidity.

Total assets increased $50.9 million, or 1.4%, from September 30, 2023 to December 31, 2023. Total loans as of December 31, 2023 were effectively unchanged from $3.02 billion at September 30, 2023. Loan growth totaling $36.3 million was offset by sales of commercial investor real estate loans totaling $35.6 million during the fourth quarter of 2023. The Bank increased its cash and cash equivalents by $47.7 million, or 26.5%, compared to September 30, 2023, to ensure adequate on-balance sheet liquidity.

The Bank’s increase in loans during the three and twelve month periods ended December 31, 2023 were $723,000 and $683.7 million, respectively. Excluding the $617.2 million in loans acquired from Malvern at December 31, 2023, which is net of loan sales and pay-downs since the acquisition, net organic loan growth was $66.5 million during the twelve months ended December 31, 2023. Excluding the impact of loan sales totaling $35.6 million during the fourth quarter of 2023, total loans grew an adjusted $36.3 million, or 4.8%, annualized, from September 30, 2023.

As of December 31, 2023, the Bank’s total deposits were $2.97 billion, an increase of $673.6 million, or 29.4%, from $2.29 billion at December 31, 2022. Excluding $671.9 million in deposits acquired from Malvern, deposit balances increased $1.7 million for the twelve months of 2023. Modest organic deposit growth during 2023 was primarily due to the Bank allowing some higher cost and non-core funding to leave the Bank, while heightened industry-wide pricing competition also tempered deposit growth. This served to partially offset our team’s success in attracting new deposit relationships while also maintaining existing balances.   

As of December 31, 2023, the Bank’s stockholders’ equity totaled $370.9 million, an increase of $81.3 million, or 28.1%, compared to $289.6 million at December 31, 2022, primarily due to the equity issued in the Malvern acquisition. During the three months ended December 31, 2023, stockholders’ equity increased by $9.9 million, primarily due to net income and a reduction in unrealized losses on available for sale securities, partially offset by dividends.

As of December 31, 2023, the Bank continued to exceed all regulatory capital requirements to be considered well-capitalized, with a Tier 1 Leverage ratio of 9.12%, a Tier 1 Risk-Based capital ratio of 9.22%, a Common Equity Tier 1 Capital ratio of 9.22%, and a Total Risk-Based capital ratio of 11.59%. The tangible stockholders’ equity to tangible assets ratioⁱⁱⁱ increased to 8.89% as of December 31, 2023 compared to 8.72% at September 30, 2023.

Asset Quality

First Bank’s asset quality metrics for the fourth quarter of 2023 remained favorable and continue to reflect the inclusion of $17.0 million of purchase credit deteriorated (PCD) loans primarily related to the Malvern acquisition. Excluding PCD loans, nonperforming loans increased slightly from $7.0 million at September 30, 2023 to $8.0 million at December 31, 2023. Nonperforming loans, excluding PCD loans, as a percentage of total loans were 0.26% at December 31, 2023, compared to 0.23% at September 30, 2023. The Bank recorded net charge-offs of $209,000 during the fourth quarter of 2023 compared to net charge-offs of $1.1 million in the third quarter of 2023 and net recoveries of $213,000 in the fourth quarter of 2022. The allowance for credit losses on loans as a percentage of total loans measured 1.40% at December 31, 2023, compared to 1.42% at September 30, 2023 and 1.09% at December 31, 2022. The increase compared to the prior year end largely reflects the impact of the adoption of the Current Expected Credit Loss accounting standard in the first quarter of 2023 and the allowance for credit losses on the acquired Malvern loan portfolio. The allowance for credit losses at December 31, 2023 included $6.0 million in reserves on the Bank’s PCD loans.   

Liquidity and Borrowings

The Bank increased its liquidity position in the fourth quarter of 2023 as total cash and cash equivalents increased by $47.7 million to $228.0 million at December 31, 2023. The Bank continued to utilize asset sales, while also adding some Federal Home Loan Bank advances, to enhance its liquidity position heading into 2024. The Bank’s current liquidity position coupled with the balance sheet flexibility gained after the Malvern acquisition provides the Bank with a strong liquidity base and a diverse source of funding options.   

Pending Redemption of Subordinated Debt

The Bank has received the regulatory approvals required to retire $25 million of subordinated notes inherited from Malvern as part of its balance sheet repositioning initiative. The notes, which currently carry a 9.79% interest rate, will be redeemed on February 15, 2024.

Cash Dividend Declared

On January 16, 2024, the Bank’s Board of Directors declared a quarterly cash dividend of $0.06 per share to common stockholders of record at the close of business on February 9, 2024, payable on February 23, 2024.

Conference Call and Earnings Release Supplement

Additional details on the quarterly results and the Bank are included in the attached earnings release supplement. 
http://ml.globenewswire.com/Resource/Download/da24d66e-2436-456b-a1c5-13fffc470852

First Bank will host its earnings call on Thursday, January 25, 2024 at 9:00 AM Eastern Time. The direct dial toll free number for the live call is 1-888-330-3273 and the access code is 7660423. For those unable to participate in the call, a replay will be available by dialing 1-888-330-3273 (access code 7660423) from one hour after the end of the conference call until April 24, 2024. Replay information will also be available on First Bank’s website at www.firstbanknj.com under the “About Us” tab. Click on “Investor Relations” to access the replay of the conference call.

About First Bank

First Bank is a New Jersey state-chartered bank with 26 full-service branches in Cinnaminson, Delanco, Denville, Ewing, Fairfield, Flemington (2), Hamilton, Lawrence, Monroe, Morristown, Pennington, Randolph, Somerset and Williamstown, New Jersey; and Coventry, Devon, Doylestown, Glenn Mills, Lionville, Malvern, Paoli, Trevose, Warminster and West Chester, Pennsylvania; and Palm Beach, Florida. With $3.61 billion in assets as of December 31, 2023, First Bank offers a full 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 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 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, integrate acquired entities and realize anticipated efficiencies, sustain its internal growth rate, and 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 market values; the effects of the recent turmoil in the banking industry (including the failures of two financial institutions in early 2023); the impact of public health emergencies, such as COVID-19, on First Bank, its operations and its customers and employees; 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 and expenses associated with complying with such regulations; uncertainties in tax estimates and valuations, including due to changes in state and federal tax law; 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; and 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 proxy statement, 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.

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ⁱ Return on average tangible equity is a non-U.S. GAAP financial measure and is calculated by dividing net income by average tangible equity (average equity minus average goodwill and other intangible 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

ⁱⁱ Adjusted diluted earnings per share, adjusted return on average assets and adjusted return on average tangible equity are non-U.S. GAAP financial measures and are calculated by dividing net income adjusted for certain merger-related expenses and other one-time gains or expenses by diluted weighted average shares, average assets and average tangible 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.

ⁱⁱⁱ Tangible stockholders’ equity to tangible assets ratio is a non-U.S. GAAP financial measure and is calculated by dividing tangible equity (equity minus goodwill and other intangible assets) by tangible assets (total assets minus goodwill and other intangible 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.

CONTACT: Andrew Hibshman, Chief Financial Officer
(609) 643-0058, andrew.hibshman@firstbanknj.com