First Bank Reports Fourth Quarter 2022 Net Income of $9.1 Million and Full Year Net Income of $36.3 Million

Quarterly Results Highlighted by Agreement to Acquire Malvern Bancorp, Strong Organic Loan Growth, Continued Revenue Expansion, and Outstanding Asset Quality Metrics

HAMILTON, N.J., Jan. 25, 2023 (GLOBE NEWSWIRE) -- First Bank (Nasdaq Global Market: FRBA) today announced results for the fourth quarter and full year 2022. Net income for the fourth quarter of 2022 was $9.1 million, or $0.46 per diluted share, compared to $7.8 million, or $0.40 per diluted share, for the fourth quarter of 2021. Return on average assets, return on average equity and return on average tangible equityi for the fourth quarter of 2022 were 1.35%, 12.61% and 13.53%, respectively, compared to 1.27%, 11.77%, and 12.63%, respectively, for the fourth quarter of 2021. Excluding merger-related expenses, First Bank’s fourth quarter 2022 adjusted diluted earnings per shareii were $0.48, adjusted return on average assetsii was 1.40% and adjusted return on average tangible equityii was 14.07%. Excluding merger-related expenses, fourth quarter 2021 adjusted diluted earnings per share were $0.42, adjusted return on average assets was 1.33% and adjusted return on average tangible equity was 13.26%.

Full year 2022 net income was $36.3 million, an increase of $860,000, or 2.4%, compared to $35.4 million for 2021. Diluted earnings per share for 2022 were $1.84, an increase of $0.05, or 2.8%, compared to $1.79 per diluted share for 2021. Return on average assets and return on average equity for the full year 2022 were 1.40% and 13.07%, respectively. Excluding merger-related expenses, full year 2022 adjusted diluted earnings per share were $1.86, adjusted return on average assets was 1.42% and adjusted return on average equity was 13.20%. Excluding merger-related expenses, full year 2021 adjusted diluted earnings per share were $1.81, adjusted return on average assets was 1.48% and adjusted return on average equity was 14.16%.

Fourth Quarter and Full Year 2022 Performance Highlights:

• Announced agreement to acquire Malvern Bancorp, Inc. and Malvern Bank during the fourth quarter of 2022. The acquisition is expected to close in the second quarter of 2023 and will add approximately $785.3 million of deposits and $824.7 million of loans.
  
  
• Total net revenue (net interest income plus non-interest income) of $25.2 million for the fourth quarter of 2022 increased $2.3 million, or 10.3%, compared to the prior year quarter, while full year total net revenue was $97.5 million, an increase of $7.8 million, or 8.8%, compared to 2021.
  
  
• Total loans of $2.34 billion at December 31, 2022 reflected growth of $74.4 million, or 3.3%, from the end of the linked third quarter of 2022 and $212.4 million, or 10.0%, from December 31, 2021. Excluding Paycheck Protection Program (PPP) loan declines, loan growth was $74.8 million and $259.9 million for the quarter and year ended December 31, 2022, respectively. PPP loans outstanding at December 31, 2022 were $3.5 million.
  
  
• Total deposits of $2.29 billion at December 31, 2022 increased by $103.8 million, or 4.7%, from the end of the linked third quarter of 2022 and $179.4 million, or 8.5%, from December 31, 2021. Non-interest-bearing demand deposits decreased to 22.0% of total deposits at December 31, 2022, compared to 26.4% at December 31, 2021, while time deposits increased to 23.1% at December 31, 2022 from 18.5% of total deposits at December 31, 2021.

• Asset quality metrics remained strong during the fourth quarter of 2022, with annualized net recoveries to average loans of 0.04%, and nonperforming loans to total loans of 0.27% at December 31, 2022, compared to 0.61% at December 31, 2021.
  
  
• Ongoing focus on cost containment resulted in the eighth consecutive quarter of an efficiency ratioiii below 50%, at 47.68% for the fourth quarter of 2022.

“We are proud of our solid performance in the fourth quarter and for the full year of 2022 which was highlighted by continued strong organic loan growth, revenue expansion and outstanding asset quality metrics. We are well positioned heading into 2023, despite the uncertain economic environment,” said Patrick L. Ryan, President and Chief Executive Officer. “In the fourth quarter, we continued to achieve strong organic loan growth, 13.3% annualized, while we continued to benefit from our strong underwriting standards with nonperforming assets to total assets of only 23 basis points at December 31, 2022. Strong commercial and industrial loan opportunities drove the need for accelerated deposit gathering during the quarter and while deposit pricing pressure has impacted our cost of deposits and net interest margin, we continue to operate at healthy profitability levels, achieving peer-leading returns on average assets.”

Mr. Ryan continued, “Our persistent focus on cost containment is essential in the current economic environment. We know how to operate lean, as evidenced by an efficiency ratio below 50% for the last eight consecutive quarters.”

“2023 will be an exciting year for us. Our strategic merger with Malvern Bancorp will provide critical mass and operating leverage in our highly attractive Southeastern Pennsylvania markets. New initiatives in small business and asset-based lending will help drive additional commercial and industrial loan growth. And, perhaps most importantly, new deposit sales teams will help drive additional commercial and municipal deposit growth. Our reputation as a committed and valuable financial partner continues to be strengthened by our earnings profile, our organic expansion, and our growth through acquisitions.”

“We are pleased to announce another $0.06 quarterly dividend, which reflects an annualized yield of 1.77% based on the January 17, 2023 closing price of our common stock, as part of our ongoing focus on creating shareholder value.”

Income Statement

First Bank’s net interest income for the fourth quarter of 2022 was $23.8 million, an increase of $3.1 million, or 15.1%, compared to $20.6 million in the fourth quarter of 2021, driven by a $9.0 million increase in total interest and dividend income, principally loan interest income, offset somewhat by a $5.9 million increase in total interest expense, primarily from the increase in cost of deposits. Net interest income decreased $812,000 from the linked third quarter of 2022 due to the increase in interest expense of $4.3 million partially offset by the increase in interest and dividend income of $3.5 million.

Full year 2022 net interest income totaled $92.4 million, an increase of $10.5 million, or 12.8%, compared to $81.9 million for 2021. The increase was primarily a result of higher interest income from loans due to substantial loan growth and higher loan yields, which was partially offset by increased interest expense related to the increased cost of deposits. Reflective of the rapidly increasing interest rate environment, the average cost of interest bearing deposits increased 36 basis points. The average cost of money market and time deposits increased 54 and 31 basis points, respectively. Interest and dividend income increased by $16.1 million, driven by solid growth in average loans, which increased by $167.2 million, or 8.2%, from the prior year, and a 30 basis point increase in the average yield on loans.

The fourth quarter 2022 tax equivalent net interest margin was 3.69%, an increase of 17 basis points compared to 3.52% for the prior year quarter and a decrease of 28 basis points compared to 3.97% in the linked third quarter of 2022. The decline in the margin compared to the linked third quarter of 2022 was primarily a result of a 90 basis point increase in the cost of interest bearing deposits. The full year 2022 tax equivalent net interest margin was 3.75%, an increase of 19 basis points compared to 3.56% for the full year 2021. The increase in the full year net interest margin was principally a result of the 39 basis point increase in earning asset yields partially offset by the increase in the cost of interest bearing deposits.

First Bank reported a provision for loan losses of $716,000 for the fourth quarter of 2022, compared to a provision for loan losses of $825,000 in the fourth quarter of 2021. The provision for the quarter ended December 31, 2022, was due to loan growth offset somewhat by net recoveries and continued stable asset quality metrics. For full year 2022, the Bank reported a provision for loan losses of $2.9 million, compared to a credit to the provision of $232,000 in 2021. Provision expense for the full year 2022 reflected the strong growth in loans, low level of net charge-offs and strong credit quality metrics.

Fourth quarter 2022 non-interest income of $1.4 million decreased from $2.2 million during the fourth quarter 2021. The decrease between the periods was primarily the result of a decline in gains on sale of Small Business Administration (SBA) loans and gains on recovery of acquired loans in the fourth quarter 2022. Non-interest income totaled $5.1 million for the full year ended December 31, 2022, compared to $7.8 million for 2021, primarily a result of a decrease in gains on the sale of loans, loan fees and gains on recovery of acquired loans.

Non-interest expense for fourth quarter 2022 of $12.5 million increased $640,000, or 5.4%, compared to $11.8 million for the prior year quarter. The higher non-interest expense compared to fourth quarter 2021 was primarily a result of higher marketing and advertising costs, other expense, occupancy and equipment expenses and travel and entertainment costs. The increases in marketing and advertising and travel and entertainment costs were primarily due to these expenses being unusually low in the fourth quarter of 2021. The increases in other expense and occupancy and equipment expenses were primarily due to a full quarter of expenses for the two new branches acquired by the Bank in December 2021.

On a linked quarter basis, fourth quarter 2022 non-interest expense increased $728,000 to $12.5 million compared to $11.7 million for the third quarter of 2022. The increase was primarily due to merger-related costs associated with the pending Malvern Bancorp acquisition and an increase in performance-based bonus accruals. Excluding the merger-related expenses in the fourth quarter of 2022, non-interest expense increased $276,000, or 2.4%, when compared to the linked prior quarter.

Non-interest expense for the full year 2022 totaled $46.7 million, an increase of $3.6 million, or 8.3%, compared to $43.2 million for 2021. The increase was primarily a result of increased salaries and employee benefits, and to a lesser extent increases in other expense, other professional fees, travel and entertainment and data processing. These increases were primarily due to two new branches acquired by the Bank in December 2021 and other increases associated with the continued growth of the Bank.

Income tax expense for the three months ended December 2022 was $2.9 million with an effective tax rate of 24.3%, compared to $2.4 million with an effective tax rate of 23.2% for the fourth quarter of 2021 and $3.3 million with an effective tax rate of 24.7% for the third quarter of 2022. Income tax expense for the full year ended December 31, 2022, was $11.6 million with an effective tax rate of 24.2%, compared to $11.3 million for the full year 2021 with an effective tax rate of 24.2%.

Balance Sheet

Total assets at December 31, 2022 were $2.73 billion, an increase of $209.2 million, or 8.3%, compared to $2.52 billion at December 31, 2021. Total loans increased $212.4 million, or 10.0%, to $2.34 billion at December 31, 2022 compared to $2.13 billion at December 31, 2021. Total loans as of December 31, 2022 increased $74.4 million, or 3.3%, from $2.26 billion at September 30, 2022. The increase in loans during the fourth quarter of 2022 was due to commercial and industrial and commercial real estate loan growth.

Total deposits were $2.29 billion at December 31, 2022, an increase of $103.8 million, or 4.7%, compared to $2.19 billion at September 30, 2022, and an increase of $179.4 million, or 8.5%, from December 31, 2021. Non-interest-bearing deposits totaled $503.9 million at December 31, 2022, a decrease of $80.2 million, or 13.7%, from September 30, 2022, primarily due to a shift in the mix of deposits to interest-bearing accounts, which increased $183.9 million, or 11.5% in the fourth quarter. The shift in deposits was due, in part, to certain higher non-interest bearing balances shifting to interest bearing accounts as a result of a notably higher interest rate environment.

Stockholders’ equity was $289.6 million at December 31, 2022, compared to $266.7 million on December 31, 2021. The growth of $22.9 million, or 8.6%, in stockholders’ equity was primarily a result of full year 2022 net income of $36.3 million, partially offset by a $7.1 million increase in accumulated other comprehensive loss, $3.5 million in treasury stock purchases and cash dividends paid of $4.7 million for the full year ending December 31, 2022. The increase in accumulated other comprehensive loss was due to an increase in unrealized losses on the Bank’s available for sale investment securities, primarily resulting from the current interest rate environment.

As of December 31, 2022, the Bank continued to exceed all regulatory capital requirements to be considered well capitalized, with a Tier 1 Leverage ratio of 10.41%, a Tier 1 Risk-Based capital ratio of 10.40%, a Common Equity Tier 1 Capital ratio of 10.40%, and a Total Risk-Based capital ratio of 12.49%.

Asset Quality

First Bank’s asset quality metrics have remained solid during the year ended December 31, 2022. Net recoveries were $213,000 for the fourth quarter of 2022, compared to net charge-offs of $6,000 for the fourth quarter of 2021 and net charge-offs of $705,000 for the third quarter of 2022. Net recoveries as an annualized percentage of average loans were 0.04% in fourth quarter 2022, compared to annualized net charge-offs of 0.00% in fourth quarter 2021. Nonperforming loans were $6.3 million at December 31, 2022, down from $13.0 million on December 31, 2021, and up slightly from $5.1 million on September 30, 2022. Nonperforming loans as a percentage of total loans at December 31, 2022 were 0.27%, compared with 0.61% at December 31, 2021 and 0.23% at September 30, 2022. The allowance for loan losses to nonperforming loans was 407.58% at December 31, 2022, compared with 182.65% at December 31, 2021, and 480.61% at September 30, 2022.

Cash Dividend Declared

On January 17, 2023, First 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 10, 2023, payable on February 24, 2023.

Conference Call

First Bank will host its earnings call on Thursday, January 26, 2023 at 9:00 AM eastern time. The direct dial toll free number for the live call is 1-844-200-6205 and the access code is 106228. For those unable to participate in the call, a replay will 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 18 full-service branches in Cinnaminson, Cranbury, Delanco, Denville, Ewing, Flemington (2), Hamilton, Lawrence, Monroe, Pennington, Randolph, Somerset and Williamstown, New Jersey; and Doylestown, Trevose, Warminster and West Chester, Pennsylvania. With $2.7 billion in assets as of December 31, 2022, 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, including the proposed acquisition of Malvern Bancorp, Inc. and Malvern Bank, First Bank’s 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 inflation and declines in housing market values; the impact of disease pandemics, including 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; possible changes in trade, monetary and fiscal policies, laws and regulations and other activities of governments, agencies, and similar organizations. First Bank’s ability to obtain regulatory approvals and meet other closing conditions to its proposed acquisition of Malvern Bancorp and Malvern Bank; delays in closing the merger; difficulties and delays in integrating the acquired business or fully realizing cost savings and other benefits of the proposed merger; and business disruptions following the merger. 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.

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 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). 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