CORRECTING and REPLACING First Bank Reports Fourth Quarter 2019 Net Income of $5.2 Million

Nachrichtenquelle: globenewswire
27.03.2020, 21:50  |  125   |   |   

CORRECTION by First Bank

HAMILTON, N.J., March 27, 2020 (GLOBE NEWSWIRE) -- On January 29, 2020, First Bank (the “Company”) announced its operating results for the three and twelve months ended December 31, 2019. In March 2020, in connection with the Company’s preparation of, and its independent registered public accounting firm’s review of, the Company’s consolidated financial statements for the year ended December 31, 2019, a potential error was identified in relation to the accounting for certain recorded expenses related to the Company’s September 30, 2019 acquisition of Grand Bank, N.A. (“Grand Bank”). Based on the review, it was determined that certain merger-related expenses related to its acquisition of Grand Bank that were recorded by Grand Bank prior to the closing of the acquisition should have been recorded by the combined Company. This corrected press release now reflects $2.4 million in additional merger-related expenses and a reduction in income tax expense of $641,000 for the year ended December 31, 2019 and a reduction of goodwill of $1.8 million at December 31, 2019. These adjustments resulted in a $1.8 million reduction in previously reported net income and a reduction of $0.10 in previously reported diluted earnings per share for the full year 2019. These adjustments did not impact fourth quarter 2019 net income. All of the foregoing and related information included below in this corrected press release have been updated to reflect the correction of the error identified above.

The corrected press release reads:

First Bank Reports Fourth Quarter 2019 Net Income of $5.2 Million

Full Year 2019 Net Income of $13.4 Million

For the Fourth Quarter 2019: Efficiency Ratio1of 53.21% Lowest in Last Five Quarters, Pre-Provision Net Revenue2 of $8.2 Million, Successful Systems Integration for Grand Bank Acquisition

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 9.24%, 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 10.26% 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 $13.4 million, or $0.69 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 million
  • Total 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, 2018
  • Total 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 2018
  • Fourth 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 2018
  • Fourth 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 Statement

Net 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 $3.4 million 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 $39.4 million, an increase of $6.1 million or 18.2%, 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, merger-related expenses, 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 $306,000 or an effective tax rate of 21.9% in the linked third quarter 2019. The effective tax rate for the full year was 29.3%, 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 Sheet

Total assets at December 31, 2019, were $2.01 billion, an increase of $300.4 million, or 17.6%, 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 $226.4 million at December 31, 2019, up $31.6 million, or 16.2%, 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 an $11.1 million increase in retained earnings which was a result of the Bank’s net income offset somewhat by cash dividends.

Asset Quality

Net 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 10.27%, a Tier 1 Risk-Based capital ratio of 10.74%, a Common Equity Tier 1 Capital ratio of 10.74%, and a Total Risk-Based capital ratio of 12.79%.

Cash Dividend Declared

On 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 Completed

On 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.

About First Bank

First Bank is a New Jersey state-chartered bank with 18 full-service branches in Cinnaminson, Cranbury, Delanco, Denville, Ewing, Flemington, Hamilton, Hamilton Square, Lawrence, Mercerville, Pennington, Randolph, Somerset and Williamstown, New Jersey; and Doylestown, Trevose, Warminster and West Chester, Pennsylvania. With over $2.0 billion in assets as of December 31, 2019, 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; 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; 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; 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 joint 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.

_____________________________________

1 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 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.
2 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.
3 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. 

CONTACT:
Patrick L. Ryan
President and CEO
(609) 643-0168
patrick.ryan@firstbanknj.com

 
FIRST BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands, except for share data)
 
    December 31, 2019
       
    (unaudited)   December 31, 2018
Assets         
Cash and due from banks   $ 16,751     $ 13,547  
Federal funds sold     40,000       25,000  
Interest bearing deposits with banks     25,041       16,883  
Cash and cash equivalents     81,792       55,430  
Interest bearing time deposits with banks     6,087       5,925  
Investment securities available for sale     47,462       51,260  
Investment securities held to maturity (fair value of $47,100        
at December 31, 2019 and $49,411 at December 31, 2018)     46,612       49,811  
Restricted investment in bank stocks     6,652       5,803  
Other investments     6,388       6,203  
Loans held for sale     -       -  
Loans, net of deferred fees and costs     1,723,574       1,462,516  
Less: Allowance for loan losses     17,245       15,135  
Net loans     1,706,329       1,447,381  
Premises and equipment, net     11,881       11,003  
Other real estate owned, net     1,363       1,455  
Accrued interest receivable     4,810       4,258  
Bank-owned life insurance     49,580       40,350  
Goodwill     16,253       16,074  
Other intangible assets, net     2,083       1,475  
Deferred income taxes     10,400       10,216  
Other assets     13,895       4,515  
Total assets   $ 2,011,587     $ 1,711,159  
         
Liabilities and Stockholders' Equity        
Liabilities:        
Non-interest bearing deposits   $ 275,778     $ 219,034  
Interest bearing deposits     1,365,089       1,174,170  
Total deposits     1,640,867       1,393,204  
Borrowings     105,476       93,351  
Subordinated debentures     21,964       21,856  
Accrued interest payable     1,076       1,045  
Other liabilities     15,811       6,867  
Total liabilities     1,785,194       1,516,323  
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 20,458,665 shares at December 31, 2019        
and 18,676,056 shares at December 31, 2018     101,887       93,132  
Additional paid-in capital     78,112       67,417  
Retained earnings     46,367       35,222  
Accumulated other comprehensive income (loss)     27       (935 )
Total stockholders' equity     226,393       194,836  
Total liabilities and stockholders' equity   $ 2,011,587     $ 1,711,159  


FIRST BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except for share data, unaudited)
 
    Three Months Ended   Year Ended
    December 31,   December 31,
      2019       2018       2019       2018  
Interest and Dividend Income                
Investment securities—taxable   $ 586     $ 541     $ 2,160     $ 2,156  
Investment securities—tax-exempt     84       107       360       443  
Interest bearing deposits with banks,                
Federal funds sold and other     516       567       2,181       1,609  
Loans, including fees     21,849       18,287       79,469       68,530  
Total interest and dividend income     23,035       19,502       84,170       72,738  
                 
Interest Expense                
Deposits     5,816       4,441       21,750       14,170  
Borrowings     630       511       2,461       2,031  
Subordinated debentures     398       398       1,593       1,593  
Total interest expense     6,844       5,350       25,804       17,794  
Net interest income     16,191       14,152       58,366       54,944  
Provision for loan losses     340       1,026       3,984       3,447  
Net interest income after provision for loan losses     15,851       13,126       54,382       51,497  
                 
Non-Interest Income                
Service fees on deposit accounts     178       93       515       364  
Loan fees     422       34       660       280  
Income from bank-owned life insurance     347       289       1,165       1,044  
Gains on sale of investment securities     -       -       -       3  
Gains on sale of loans     172       143       227       335  
Gains on recovery of acquired loans     190       260       776       804  
Other non-interest income     184       165       652       622  
Total non-interest income     1,493       984       3,995       3,452  
                 
Non-Interest Expense                
Salaries and employee benefits     5,306       4,913       20,460       17,583  
Occupancy and equipment     1,377       1,466       5,221       4,861  
Legal fees     159       133       595       536  
Other professional fees     397       559       1,634       1,953  
Regulatory fees     26       144       387       580  
Directors' fees     199       199       785       700  
Data processing     584       445       1,852       1,733  
Marketing and advertising     147       197       822       759  
Travel and entertainment     147       163       486       450  
Insurance     61       94       334       336  
Other real estate owned expense, net     (7 )     72       152       221  
Merger-related expenses     -       -       3,646       988  
Other expense     913       805       2,990       2,614  
Total non-interest expense     9,309       9,190       39,364       33,314  
Income Before Income Taxes     8,035       4,920       19,013       21,635  
Income tax expense     2,789       823       5,568       4,046  
Net Income   $ 5,246     $ 4,097     $ 13,445     $ 17,589  
                 
Basic earnings per common share   $ 0.26     $ 0.22     $ 0.70     $ 0.97  
Diluted earnings per common share   $ 0.25     $ 0.22     $ 0.69     $ 0.95  
Cash dividends per common share   $ 0.03     $ 0.03     $ 0.12     $ 0.12  
                 
Basic weighted average common shares outstanding     20,377,478       18,621,688       19,098,464       18,212,875  
Diluted weighted average common shares outstanding     20,666,729       18,937,468       19,392,429       18,571,537  


FIRST BANK AND SUBSIDIARIES
AVERAGE BALANCE SHEETS WITH INTEREST AND AVERAGE RATES
(dollars in thousands, unaudited)
                         
    Three Months Ended December 31,
      2019       2018  
                 
    Average       Average
  Average       Average
    Balance   Interest   Rate (5)   Balance   Interest   Rate (5)
Interest earning assets                        
Investment securities (1) (2)   $ 92,875     $ 688     2.94 %   $ 103,201     $ 670     2.58 %
Loans (3)     1,738,847       21,849     4.99 %     1,447,438       18,287     5.01 %
Interest bearing deposits with banks,                        
Federal funds sold and other     81,247       346     1.69 %     72,061       406     2.24 %
Restricted investment in bank stocks     7,078       122     6.84 %     6,118       120     7.78 %
Other investments     6,374       48     2.99 %     6,190       41     2.63 %
Total interest earning assets (2)     1,926,421       23,053     4.75 %     1,635,008       19,524     4.74 %
Allowance for loan losses     (17,547 )             (14,466 )        
Non-interest earning assets     128,253               100,565          
Total assets   $ 2,037,127             $ 1,721,107          
                         
Interest bearing liabilities                        
Interest bearing demand deposits   $ 159,936     $ 171     0.42 %     165,625     $ 257     0.62 %
Money market deposits     397,248       1,488     1.49 %     310,065       1,093     1.40 %
Savings deposits     126,768       338     1.06 %     86,974       141     0.64 %
Time deposits     690,194       3,819     2.20 %     614,299       2,950     1.91 %
Total interest bearing deposits     1,374,146       5,816     1.68 %     1,176,963       4,441     1.50 %
Borrowings     114,965       630     2.17 %     100,334       511     2.02 %
Subordinated debentures     21,946       398     7.25 %     21,841       398     7.29 %
Total interest bearing liabilities     1,511,057       6,844     1.80 %     1,299,138       5,350     1.63 %
Non-interest bearing deposits     283,112               219,844          
Other liabilities     17,758               9,051          
Stockholders' equity     225,200               193,074          
Total liabilities and stockholders' equity   $ 2,037,127             $ 1,721,107          
Net interest income/interest rate spread (2)         16,209     2.95 %         14,174     3.10 %
Net interest margin (2) (4)           3.34 %           3.44 %
Tax equivalent adjustment (2)         (18 )             (22 )    
Net interest income       $ 16,191             $ 14,152      
                         
(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%.
(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,
      2019       2018  
                 
    Average       Average
  Average       Average
    Balance   Interest   Rate   Balance   Interest   Rate
Interest earning assets                        
Investment securities (1) (2)   $ 94,185     $ 2,596     2.76 %   $ 108,816     $ 2,692     2.47 %
Loans (3)     1,578,174       79,469     5.04 %     1,366,385       68,530     5.02 %
Interest bearing deposits with banks,                        
Federal funds sold and other     73,544       1,575     2.14 %     52,762       1,054     2.00 %
Restricted investment in bank stocks     6,848       421     6.15 %     6,361       406     6.38 %
Other investments     6,303       185     2.94 %     6,130       149     2.43 %
Total interest earning assets (2)     1,759,054       84,246     4.79 %     1,540,454       72,831     4.73 %
Allowance for loan losses     (16,458 )             (13,282 )        
Non-interest earning assets     115,695               90,442          
Total assets   $ 1,858,291             $ 1,617,614          
                         
Interest bearing liabilities                        
Interest bearing demand deposits   $ 148,234     $ 877     0.59 %   $ 163,240     $ 979     0.60 %
Money market deposits     355,046       5,619     1.58 %     267,965       3,158     1.18 %
Savings deposits     91,293       763     0.84 %     84,336       458     0.54 %
Time deposits     658,741       14,491     2.20 %     572,411       9,575     1.67 %
Total interest bearing deposits     1,253,314       21,750     1.74 %     1,087,952       14,170     1.30 %
Borrowings     113,740       2,461     2.16 %     109,419       2,031     1.86 %
Subordinated debentures     21,906       1,593     7.27 %     21,800       1,593     7.31 %
Total interest bearing liabilities     1,388,960       25,804     1.86 %     1,219,171       17,794     1.46 %
Non-interest bearing deposits     244,820               209,876          
Other liabilities     17,173               7,294          
Stockholders' equity     207,338               181,273          
Total liabilities and stockholders' equity   $ 1,858,291             $ 1,617,614          
Net interest income/interest rate spread (2)         58,442     2.93 %         55,037     3.27 %
Net interest margin (2) (4)           3.32 %           3.57 %
Tax equivalent adjustment (2)         (76 )             (93 )    
Net interest income       $ 58,366             $ 54,944      
                         
(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%.
(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
    12/31/2019   9/30/2019 (1)   6/30/2019   3/31/2019   12/31/2018
EARNINGS                    
Net interest income   $ 16,191     $ 13,976     $ 14,164     $ 14,035     $ 14,152  
Provision for loan losses     340       1,558       1,721       365       1,026  
Non-interest income     1,493       905       924       673       984  
Non-interest expense     9,309       11,928       9,127       9,000       9,190  
Income tax expense     2,789       306       1,400       1,073       823  
Net income     5,246       1,089       2,840       4,270       4,097  
                     
PERFORMANCE RATIOS                    
Return on average assets (2)     1.02 %     0.23 %     0.64 %     0.99 %     0.94 %
Adjusted return on average assets (2) (3)     1.13 %     0.76 %     0.63 %     0.99 %     0.90 %
Return on average equity (2)     9.24 %     2.11 %     5.64 %     8.79 %     8.42 %
Adjusted return on average equity (2) (3)     10.26 %     6.94 %     5.52 %     8.76 %     8.00 %
Return on average tangible equity (2) (3)     10.06 %     2.31 %     6.11 %     9.64 %     9.26 %
Adjusted return on average tangible equity (2) (3)     11.18 %     7.58 %     7.67 %     7.75 %     7.58 %
Net interest margin (2) (4)     3.34 %     3.15 %     3.37 %     3.45 %     3.44 %
Efficiency ratio (3)     53.21 %     58.22 %     60.51 %     60.95 %     61.78 %
Pre-provision net revenue (3)   $ 8,185     $ 6,107     $ 5,884     $ 5,691     $ 5,686  
                     
SHARE DATA                    
Common shares outstanding     20,458,665       20,460,078       18,757,965       18,735,291       18,676,056  
Basic earnings per share   $ 0.26     $ 0.06     $ 0.15     $ 0.23     $ 0.22  
Diluted earnings per share     0.25       0.06       0.15       0.23       0.22  
Adjusted diluted earnings per share (3)     0.28       0.19       0.15       0.22       0.21  
Tangible book value per share (3)     10.17       9.92       9.85       9.71       9.50  
Book value per share     11.07       10.83       10.78       10.64       10.43  
                     
MARKET DATA                    
Market value per share   $ 11.05     $ 10.83     $ 11.74     $ 11.53     $ 12.12  
Market value / Tangible book value     108.66 %     109.59 %     119.14 %     118.78 %     127.60 %
Market capitalization   $ 226,068     $ 221,583     $ 220,219     $ 216,018     $ 226,354  
                     
CAPITAL & LIQUIDITY                    
Tangible stockholders' equity / tangible assets (3)     10.44 %     10.02 %     10.19 %     10.33 %     10.47 %
Stockholders' equity / assets     11.25 %     10.83 %     11.05 %     11.22 %     11.39 %
Loans / deposits     105.04 %     105.52 %     107.28 %     103.19 %     104.98 %
                     
ASSET QUALITY                    
Net charge-offs (recoveries)   $ 325     $ 1,084     $ 481     $ (16 )   $ 7  
Nonperforming loans     22,746       15,841       14,554       7,501       6,362  
Nonperforming assets     24,108       17,705       15,330       8,952       7,817  
Net charge offs (recoveries) / average loans (2)     0.07 %     0.28 %     0.13 %     0.00 %     0.00 %
Nonperforming loans / total loans     1.32 %     0.91 %     0.94 %     0.50 %     0.44 %
Nonperforming assets / total assets     1.20 %     0.87 %     0.84 %     0.50 %     0.46 %
Allowance for loan losses / total loans     1.00 %     0.99 %     1.08 %     1.04 %     1.03 %
Allowance for loan losses / nonperforming loans     75.82 %     108.77 %     115.13 %     206.85 %     237.90 %
                     
OTHER DATA                    
Total assets   $ 2,011,587     $ 2,044,938     $ 1,830,695     $ 1,777,301     $ 1,711,159  
Total loans     1,723,574       1,743,897       1,548,540       1,497,086       1,462,516  
Total deposits     1,640,867       1,652,608       1,443,497       1,450,774       1,393,204  
Total stockholders' equity     226,393       221,510       202,242       199,337       194,836  
Number of full-time equivalent employees (5)     216       216       195       181       186  
                     
(1) Includes effects of Grand Bank merger effective September 30, 2019.
(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%.
(5) Includes 15 full-time equivalent seasonal interns as of 6/30/2019.


FIRST BANK AND SUBSIDIARIES
QUARTERLY FINANCIAL HIGHLIGHTS
(dollars in thousands, unaudited)
                     
    As of the Quarter Ended
    12/31/2019   9/30/2019 (1)   6/30/2019   3/31/2019   12/31/2018
LOAN COMPOSITION                    
Commercial and industrial   $ 239,090     $ 236,932     $ 219,930     $ 204,159     $ 195,786  
Commercial real estate:                    
Owner-occupied     395,995       405,485       370,498       361,671       355,062  
Investor     673,300       685,006       619,174       583,849       567,407  
Construction and development     105,709       113,281       93,916       99,368       85,064  
Multi-family     119,005       103,858       88,801       87,598       87,930  
Total commercial real estate     1,294,009       1,307,630       1,172,389       1,132,486       1,095,463  
Residential real estate:                    
Residential mortgage and first lien home equity loans     123,917       127,337       92,760       94,143       101,341  
Home equity–second lien loans and revolving lines of credit     32,555       35,264       26,695       27,486       28,563  
Total residential real estate     156,472       162,601       119,455       121,629       129,904  
Consumer and other     35,810       38,584       38,529       40,517       43,070  
Net deferred loan fees and costs     (1,807 )     (1,850 )     (1,763 )     (1,705 )     (1,708 )
Total loans   $ 1,723,574     $ 1,743,897     $ 1,548,540     $ 1,497,086     $ 1,462,515  
                     
LOAN MIX                    
Commercial and industrial     13.9 %     13.6 %     14.2 %     13.6 %     13.4 %
Commercial real estate:                    
Owner-occupied     23.0 %     23.3 %     23.9 %     24.2 %     24.3 %
Investor     39.1 %     39.3 %     40.0 %     39.0 %     38.8 %
Construction and development     6.1 %     6.5 %     6.1 %     6.6 %     5.8 %
Multi-family     6.9 %     6.0 %     5.7 %     5.9 %     6.0 %
Total commercial real estate     75.1 %     75.0 %     75.7 %     75.7 %     74.9 %
Residential real estate:                    
Residential mortgage and first lien home equity loans     7.2 %     7.3 %     6.0 %     6.3 %     6.9 %
Home equity–second lien loans and revolving lines of credit     1.9 %     2.0 %     1.7 %     1.8 %     2.0 %
Total residential real estate     9.1 %     9.3 %     7.7 %     8.1 %     8.9 %
Consumer and other     2.0 %     2.2 %     2.5 %     2.7 %     2.9 %
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 Grand Bank merger effective September 30, 2019.


FIRST BANK AND SUBSIDIARIES
NON-U.S. GAAP FINANCIAL MEASURES
(in thousands, except for share data, unaudited)
                     
    As of or For the Quarter Ended
    12/31/2019   9/30/2019 (1)   6/30/2019   3/31/2019   12/31/2018
Return on Average Tangible Equity                    
Net income (numerator)   $ 5,246     $ 1,089     $ 2,840     $ 4,270     $ 4,097  
                     
Average stockholders' equity   $ 225,200     $ 204,759     $ 201,796     $ 197,061     $ 193,074  
Less: Average Goodwill and other intangible assets, net     18,377       17,412       17,450       17,450       17,484  
Average Tangible stockholders' equity (denominator)   $ 206,823     $ 187,347     $ 184,346     $ 179,611     $ 175,590  
                     
Return on Average Tangible equity     10.06 %     2.31 %     6.11 %     9.64 %     9.26 %
                     
Tangible Book Value Per Share                    
Stockholders' equity   $ 226,393     $ 221,510     $ 202,242     $ 199,337     $ 194,836  
Less: Goodwill and other intangible assets, net     18,336       18,485       17,406       17,467       17,549  
Tangible stockholders' equity (numerator)   $ 208,057     $ 203,025     $ 184,836     $ 181,870     $ 177,287  
                     
Common shares outstanding (denominator)     20,458,665       20,460,078       18,757,965       18,735,291       18,676,056  
                     
Tangible book value per share   $ 10.17     $ 9.92     $ 9.85     $ 9.71     $ 9.49  
                     
                     
Tangible Equity / Assets                    
Stockholders' equity   $ 226,393     $ 221,510     $ 202,242     $ 199,337     $ 194,836  
Less: Goodwill and other intangible assets, net     18,336       18,485       17,406       17,467       17,549  
Tangible equity (numerator)   $ 208,057     $ 203,025     $ 184,836     $ 181,870     $ 177,287  
                     
Total assets   $ 2,011,587     $ 2,044,938     $ 1,830,695     $ 1,777,301     $ 1,711,159  
Less: Goodwill and other intangible assets, net     18,336       18,485       17,406       17,467       17,549  
Adjusted total assets (denominator)   $ 1,993,251     $ 2,026,453     $ 1,813,289     $ 1,759,834     $ 1,693,610  
                     
Tangible equity / assets     10.44 %     10.02 %     10.19 %     10.33 %     10.47 %
                     
                     
Efficiency Ratio                    
Non-interest expense   $ 9,309     $ 11,928     $ 9,127     $ 9,000     $ 9,190  
Less: Merger-related expenses     -       3,418       110       118       -  
Adjusted non-interest expense (numerator)   $ 9,309     $ 8,510     $ 9,017     $ 8,882     $ 9,190  
                     
Net interest income   $ 16,191     $ 13,976     $ 14,164     $ 14,035     $ 14,152  
Non-interest income     1,493       905       924       673       984  
Total revenue     17,684       14,881       15,088       14,708       15,136  
Less: Gains on recovery of acquired loans     190       264       187       135       260  
Adjusted total revenue (denominator)   $ 17,494     $ 14,617     $ 14,901     $ 14,573     $ 14,876  
                     
Efficiency ratio     53.21 %     58.22 %     60.51 %     60.95 %     61.78 %
                     
                     
Pre-Provision Net Revenue                    
Net interest income   $ 16,191     $ 13,976     $ 14,164     $ 14,035     $ 14,152  
Non-interest income     1,493       905       924       673       984  
Less: Gains on recovery of acquired loans     190       264       187       135       260  
Less: Non-interest expense     9,309       11,928       9,127       9,000       9,190  
Add: Merger-related expenses     -       3,418       110       118       -  
Pre-provision net revenue   $ 8,185     $ 6,107     $ 5,884     $ 5,691     $ 5,686  
                     
(1) Includes effects of Grand Bank merger effective September 30, 2019.


FIRST BANK AND SUBSIDIARIES
NON-U.S. GAAP FINANCIAL MEASURES
(dollars in thousands, except for share data, unaudited)
                     
    For the Quarter Ended
    12/31/2019   9/30/2019 (1)   6/30/2019   3/31/2019   12/31/2018
                     
Adjusted diluted earnings per share,                    
Adjusted return on average assets, and                    
Adjusted return on average equity                    
                     
Net income   $ 5,246     $ 1,089     $ 2,840     $ 4,270     $ 4,097  
Add: Merger-related expenses (2)     -       2,700       87       93       -  
Add: Deferred Tax Asset revaluation     730       -       -       -       -  
Less: Gains on sale of investment securities, net (2)     -       -       -       -       -  
Less: Gains on recovery of acquired loans (2)     150       209       148       107       205  
Adjusted net income   $ 5,826     $ 3,580     $ 2,779     $ 4,257     $ 3,892  
                     
Diluted weighted average common shares outstanding     20,666,729       18,976,574       18,954,171       18,955,624       18,937,468  
Average assets   $ 2,037,127     $ 1,859,818     $ 1,782,832     $ 1,747,414     $ 1,721,107  
Average equity   $ 225,200     $ 204,759     $ 201,796     $ 197,061     $ 193,074  
Average Tangible Equity   $ 206,823     $ 187,347     $ 184,346     $ 179,611     $ 175,590  
                     
Adjusted diluted earnings per share   $ 0.28     $ 0.19     $ 0.15     $ 0.22     $ 0.21  
Adjusted return on average assets (3)     1.13 %     0.76 %     0.63 %     0.99 %     0.90 %
Adjusted return on average equity (3)     10.26 %     6.94 %     5.52 %     8.76 %     8.00 %
Adjusted return on average tangible equity (3)     11.18 %     7.58 %     7.67 %     7.75 %     7.58 %
                     
(1) Includes effects of Grand Bank merger effective September 30, 2019.
(2) Items are tax-effected using a federal income tax rate of 21%.
(3) Annualized.
 
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