First Commerce Bancorp, Inc., Reports the Fourth Quarter and the Full Year 2023 Results and Declares a Quarterly Cash Dividend of $0.04 Per Share

LAKEWOOD, NJ / ACCESSWIRE / February 1, 2024 / First Commerce Bancorp, Inc., (OTC PINK:CMRB), (the "Company"), today reported net income of $5.8 million and basic earnings per common share of $0.25 for the three months ended December 31, 2023, as compared to net income of $4.0 million and basic earnings per common share of $0.17 for the three months ended December 31, 2022. For the fiscal year ended December 31, 2023, net income was $13.8 million and basic earnings per common share of $0.58, as compared to net income of $16.6 million and basic earnings per common share of $0.70 for the fiscal year ended December 31, 2022.

The Company's Board of Directors declared a quarterly cash dividend of $0.04 per common share payable on February 20, 2024 to shareholders of record on February 6, 2024.

Regarding the year-end financial results, President & CEO Donald Mindiak commented, "Despite a challenging year that saw material disruptions in the banking industry as a result of liquidity concerns, the failure of several mid-size regional financial institutions, an inverted yield curve and continuing inflation, First Commerce Bank stayed true to its mission of a measured balance sheet and loan growth through prudent loan underwriting consistent with our strong capital base. Funding for loan growth occurred through growth in both deposits and wholesale borrowings appropriately laddered. Net interest margin compression continues to be challenging, however our recently opened office in Jackson, New Jersey boasts deposits of over $20.0 million after only four months of being open."

He continued, "A continued evaluation of our CECL Model and a corresponding review of the qualitative and quantitative factors resulted in a reduction of our year-end Allowance for Credit Losses consistent with the risk profile of the Bank's loan and investment portfolio. Diligent attention to non-interest expenses resulted in only a slight increase year-over-year and the management of this metric will continue to be engaged. Lastly, the Board and Management will continue to structure a balance sheet with a strong capital base, managing various forms of risk judiciously while generating competitive returns for our shareholders."

Financial Highlights

• Net interest margin decreased by 134 basis points to 2.51% for the fourth quarter of 2023 as compared to 3.85% for the fourth quarter of 2022 and decreased by 110 basis points to 2.92% at year-end 2023 as compared to 4.02% at year-end 2022.
• Total yield on interest earning assets increased by forty-three basis points to 5.43% for the fourth quarter of 2023 as compared to 5.00% for the fourth quarter of 2022 and increased by seventy-six basis points to 5.35% at year-end 2023 as compared to 4.59% at year-end 2022.
• Total cost of interest-bearing liabilities increased by 213 basis points to 3.78% for the fourth quarter of 2023 compared to 1.65% for the fourth quarter of 2022 and increased by 241 basis points to 3.25% at year-end 2023 as compared to 0.84% at year-end 2022.
• The efficiency ratio for the year ended December 31, 2023 was 66.97% as compared to 55.01% for the year ended December 31, 2022.
• Total loans receivable increased by $133.1 million or 11.9% to $1.25 billion at December 31, 2023, as compared to $1.1 billion at December 31, 2022.
• Total deposits increased by $71.3 million or 6.9% to $1.11 billion at December 31, 2023, as compared to $1.04 billion at December 31, 2022.
• The annualized return on average total assets was 0.99% at December 31, 2023 compared to 1.38% at December 31, 2022.
• The annualized return on average shareholders' equity was 7.51% at December 31, 2023 compared to 9.28% at December 31, 2022.
• The book value per common share was $8.06 at December 31, 2023 compared to $7.58 at December 31, 2022.

Balance Sheet Review

Total assets increased by $144.0 million or 11.1% to $1.44 billion at December 31, 2023 from $1.29 billion at December 31, 2022. The increase in total assets was primarily related to increases in total cash and cash equivalents and total loans, partially offset by decreases in total investment securities and other real estate owned ("OREO").

Total cash and cash equivalents increased by $19.1 million or 44.9% to $61.7 million at December 31, 2023 from $42.6 million at December 31, 2022. This increase was primarily due to an increase in total deposits.

Total loans receivable, net of allowance for credit losses, increased by $136.5 million or 12.4% to $1.24 billion at December 31, 2023 from $1.10 billion at December 31, 2022. This increase occurred primarily as a result of a $126.9 million increase in commercial mortgages, a $12.3 million increase in construction loans and a $384,000 increase in Small Business Administration loans, partially offset by a $4.6 million decrease in commercial loans and a $1.1 million decrease in home equity loans. The allowance for credit losses decreased by $3.3 million or 18.6% to $14.5 million or 1.16% of gross loans at December 31, 2023 as compared to $17.8 million or 1.59% of gross loans at December 31, 2022.

Total investment securities decreased by $10.6 million or 13.3% to $69.1 million at December 31, 2023 from $79.7 million at December 31, 2022. The decrease in investment securities resulted primarily from $10.3 million in total paydowns of investment securities and $5.1 million in maturities, partially offset by $4.8 million in purchases.

Total deposits increased by $71.3 million or 6.9% to $1.11 billion at December 31, 2023 from $1.04 billion at December 31, 2022. The increase in total deposits occurred primarily as a result of a $61.9 million increase in time deposits, a $70.0 million increase in brokered time deposits, a $19.0 million increase in money market deposits and a $5.9 million increase in interest bearing checking deposits, partially offset by decreases of $47.5 million in noninterest-bearing demand deposits, $35.7 million in savings deposits and a $2.3 million in NOW deposits as customers move into high-yielding deposit products.

Shareholders' equity increased by $3.6 million or 2.0% to $184.0 million at December 31, 2023 from $180.4 million at December 31, 2022. The increase in shareholders' equity was primarily attributable to an increase in retained earnings of $10.0 million and an increase of $433,000 in additional paid in capital as a result of the exercise of certain stock options, partially offset by $7.0 million in share repurchases and a decrease of $109,000 in accumulated other comprehensive loss. During the year 2023, the Company repurchased 1.0 million shares for approximately $7.0 million, or a weighted average price of $6.78 per share.

Three Months of Operations

Net interest income decreased by $3.0 million or 25.4% to $8.8 million for the three months ended December 31, 2023 from $11.8 million for the three months ended December 31, 2022. The decrease in net interest income was primarily due to a significant increase in the cost of interest-bearing liabilities.

Total interest income increased by $3.7 million or 24.0% to $19.0 million for the three months ended December 31, 2023 from $15.3 million for the three months ended December 31, 2022. Interest income on loans, including fees, increased $3.2 million or 22.5% to $17.7 million for the three months ended December 31, 2023 compared to $14.4 million for the three months December 31, 2022. The increase in interest income from loans, including fees, resulted primarily from an increase in the average balance of loans receivable of $165.2 million or 15.1% to $1.26 billion for the three months ended December 31, 2023 compared to $1.09 billion for the three months ended December 31, 2022 and an increase of thirty-three basis points in the average yield on loans to 5.56% for the three months ended December 31, 2023 compared to 5.23% for the same period in the prior year. Interest income on interest-bearing deposits with banks increased $327,000 or 121.0% to $598,000 for the three months ended December 31, 2023 as compared to $271,000 for the same period in the prior year. This increase resulted from a significantly higher average yield on interest-bearing deposits with banks of 4.83% for the three months ended December 31, 2023 compared to 3.09% for the same period in the prior year, and an increase of $14.4 million in average balances of interest-bearing deposits with banks year over year.

Total interest expense increased by $6.7 million or 189.3% to $10.2 million for the three months ended December 31, 2023 from $3.5 million for the three months ended December 31, 2022. The increase in interest expense occurred primarily as a result of a 213 basis points increase in the average cost of interest-bearing liabilities to 3.78% for the three months ended December 31, 2023 from 1.65% for the three months ended December 31, 2022 and an increase in average balance of interest-bearing liabilities of $225.1 million or 26.7%, to $1.07 billion for the three months ended December 31, 2023 from $844.6 million for the three months ended December 31, 2022. The increase in average balance of interest-bearing liabilities included a $160.6 million increase in average interest-bearing deposit liabilities and a $64.5 million increase in average wholesale borrowings for the three months ended December 31, 2023. The increase in the average cost of interest-bearing liabilities resulted primarily from a significant increase in market interest rates over the past several quarters. The increase in interest-bearing liabilities was primarily used to support loan growth.

During the fourth quarter of 2023, the Company recorded a $5.7 million benefit to the provision (benefit) for credit losses as compared to a $114,000 benefit for the same period in the prior year. Management has continued to evaluate the Current Expected Credit Losses ("CECL") model since its adoption in the beginning of the year 2023. Given Management's fourth quarter evaluation of both quantitative and qualitative CECL model factors and experience with the model, the decision was made to reduce the level of qualitative factors within the CECL model. In addition, the loan portfolio and the unfunded commitments both declined in the fourth quarter of 2023 compared to the third quarter of 2023, which also contributed to the reduction in provision for credit losses. Finally, the CECL model is driven primarily by quantitative inputs and, as such, there was increased reliance on the quantitative factors rather than qualitative during 2023. Management believes that the allowance for credit losses on loans was appropriate at December 31, 2023 and 2022.

Net interest margin decreased by 134 basis points to 2.51% for the three months ended December 31, 2023 compared to 3.85% for the three months ended December 31, 2022. The decrease in the net interest margin is primarily attributable to a significant increase in the average cost of interest-bearing liabilities to 3.78% for the three months ended December 31, 2023 from 1.65% for the three months ended December 31, 2022 and an increase in the average balance of interest-bearing liabilities to $1.07 billion for the three months ended December 31, 2023 from $844.6 million for the three months ended December 31, 2022. These increases were partially offset by an increase in average balance of interest earning assets to $1.26 billion for the three months ended December 31, 2023 compared to $1.09 billion for the three months ended December 31, 2022 and an increase in the average yield of interest earning assets to 5.43% for the three months ended December 31, 2023 from 5.00% for the three months ended December 31, 2022.

Non-interest income increased by $95,000 or 23.1% to $506,000 for the three months ended December 31, 2023 from $411,000 for the three months ended December 31, 2022. The increase in total non-interest income resulted primarily from an increase in service charges and fees of $42,000 as a result of loan commitment fee income recorded in the fourth quarter of 2023. Income on bank owned life insurance increased $50,000 or 29.3% for the three months ended December 31, 2023 compared to the same period in the prior year as a result of an increase in interest rate.

Non-interest expense decreased by $151,000 or 2.1% to $7.0 million for the three months ended December 31, 2023 compared to $7.2 million for the three months ended December 31, 2022. Salaries and employee benefits increased by $213,000 or 5.3% to $4.2 million for the three months ended December 31, 2023 as compared to $4.0 million for the three months ended December 31, 2022. The increase in salaries and employee benefits resulted primarily due to additions to staff and separation cost. Occupancy and equipment expense increased by $125,000 or 16.0% to $909,000 for the three months ended December 31, 2023 from $784,000 for the three months ended December 31, 2022. The increase in occupancy and equipment expense was primarily due to addition of a new cloud-based software services to assist the Bank in improving the on-line banking experience. FDIC insurance assessment increased $203,000 or 414.7% to $252,000 for the three months ended December 31, 2023 as compared to $49,000 for the same period in the prior year as a result of an increase in the deposit insurance assessment rate. Data processing costs increased by $64,000 or 19.0% to $399,000 for the three months ended December 31, 2023 from $334,000 for the same period in the prior year. All of these increases were more than offset by a decrease in other operating expenses of $471,000 or 39.9% to $710,000 for the three months ended December 31, 2023 as compared to $1.2 million for the same period in the prior year, primarily due to reserve provided for unfunded loan commitments. The Bank had no gain/loss on other real estate owned in the fourth quarter of 2023 compared to a $230,000 loss on other real estate owned in the fourth quarter of 2022. All other variances within the other components of non-interest expenses were not material.

The income tax provision increased by $1.0 million or 90.4% to $2.1 million for the three months ended December 31, 2023 from $1.1 million for the three months ended December 31, 2022. The increase in the income tax provision resulted primarily from a significant increase in the pre-tax income and an increase in the state tax rate year over year.

Full Year of Operations

Net interest income decreased by $7.0 million or 15.0% to $39.4 million for the fiscal year ended December 31, 2023 from $46.4 million for the fiscal year ended December 31, 2022.

Total interest income increased by $19.1 million or 36.0% to $72.1 million for the fiscal year ended December 31, 2023 from $53.0 million for the fiscal year ended December 31, 2022. Interest income on loans, including fees, increased $17.1 million or 34.2% year over year resulting primarily from an increase in the average balance of loans receivable of $210.5 million or 20.9% to $1.2 billion for the fiscal year ended December 31, 2023 compared to $1.0 billion for the fiscal year ended December 31, 2022 and an increase of fifty-five basis points in the average yield on loans to 5.52% for the fiscal year ended December 31, 2023 from 4.97% for the fiscal year ended December 31, 2022. Fee income from loans decreased $913,000 for the fiscal year ended December 31, 2023 primarily due to declines in both prepayment penalty fees and Paycheck Protection Program fees of $685,000 and $505,000, respectively, partially offset by a net increase of $240,000 in commercial loan fees compared to the same period in the prior year.

Interest income on interest-bearing deposits with banks increased $1.6 million or 241.6% to $2.3 million for the fiscal year ended December 31, 2023 compared to $660,000 for the same period in the prior year. This increase resulted from a significantly higher average yield on interest-bearing deposits with banks of 4.58% for the fiscal year ended December 31, 2023 compared to 0.93% for the same period in the prior year, despite a decline of $21.9 million in average balances of interest-bearing deposits with banks year over year. Dividend income on Federal Home Loan Bank stock increased $382,000, or 642.9% to $442,000 for the fiscal year ended December 31, 2023 compared to $59,000 for the same period in the prior year. This increase was a result of an increase in dividend yield to 7.19% for the fiscal year ended December 31, 2023 compared to 3.44% for the same period in the prior year coupled with an increase in average balance of $4.3 million to $6.1 million compared to $1.7 million year over year. Interest income on investment securities totaled $2.2 for the year end December 31, 2023, almost unchanged when compared to $2.2 million for the fiscal year ended December 31, 2022. The average yield on investment securities declined two basis points to 2.88% for the fiscal year ended December 31, 2023 compared to 2.90% for the same period in the prior year.

Total interest expense increased by $26.1 million or 395.3% to $32.7 million for the fiscal year ended December 31, 2023 from $6.6 million for the fiscal year ended December 31, 2022. The increase in interest expense was primarily as a result of an increase in the average cost of interest-bearing liabilities of 241 basis points to 3.25% for the fiscal year ended December 31, 2023 from 0.84% for the fiscal year ended December 31, 2022, coupled with an increase in average balance of interest-bearing liabilities of $224.9 million or 28.8% to $1.01 billion for the fiscal year ended December 31, 2023 from $781.9 million for the fiscal year ended December 31, 2022. The average balance of interest-bearing liabilities included a $133.3 million increase in average interest-bearing deposit liabilities and a $91.5 million increase in average wholesale borrowings for the fiscal year ended December 31, 2023. The increase in the average cost of interest-bearing liabilities resulted primarily from a significant increase in market interest rates over the past few years as the Federal Reserve Board of Governors has systematically tightened short-term interest rates in an effort to combat inflation.

The Company recorded a $4.7 million benefit to the provision (benefit) for credit losses for the fiscal year ended December 31, 2023 as compared to a benefit of $358,000 for the fiscal year ended December 31, 2022. The increase in the benefit for credit losses was primarily due to the reduction in percentages of qualitative factors applied in estimating the provision (benefit) for credit losses which resulted in a benefit of $5.7 million recorded in the fourth quarter of 2023. Given Management's fourth quarter evaluation of both quantitative and qualitative model factors and experience with the CECL model, the decision was made to reduce the level of qualitative factors within the CECL model. The CECL model is driven primarily by quantitative inputs and, as such, there was increased reliance on the quantitative factors than qualitative during 2023. Management believes that the allowance for credit losses on loans was appropriate at December 31, 2023 and 2022.

Net interest margin decreased by 110 basis points to 2.92% for the fiscal year ended December 31, 2023 compared to 4.02% for the fiscal year ended December 31, 2022. The decrease in the net interest margin is primarily attributable to a significant increase in the cost of interest-bearing liabilities and increase in the average balance of interest-bearing liabilities year over year, partially offset by an increase in the average balance of interest earning assets as well as an increase in average yield on average interest earning assets.

Non-interest income increased by $665,000 or 46.2% to $2.1 million for the fiscal year ended December 31, 2023 from $1.4 million for the fiscal year ended December 31, 2022. The increase in total non-interest income resulted primarily from an increase in Bank owned life insurance ("BOLI") income of $580,000 or 87.1% to $1.2 million for the fiscal year ended December 31, 2023 from $666,000 for the fiscal year ended December 31, 2022. The increase in BOLI income resulted from a one-time death benefit received on the Bank's investment in BOLI. Service charges and fees increased $98,000 to $816,000 for the fiscal year ended December 31, 2023 compared to $718,000 for the same period in the prior year, primarily as a result of fees collected on loan commitments.

Non-interest expense increased by $1.5 million or 5.7% to $27.8 million for the fiscal year ended December 31, 2023 compared to $26.3 million for the fiscal year ended December 31, 2022. Salaries and employee benefits increased by $1.2 million or 7.4% to $17.2 million for the fiscal year ended December 31, 2023 compared to $16.0 million for the fiscal year ended December 31, 2022. The increase in salaries and employee benefits resulted primarily due to additions to staff year-over-year as well as increased employee incentive plan cost and employee health benefits cost. Occupancy and equipment expense increased by $185,000 or 5.5% to $3.6 million for the fiscal year ended December 31, 2023 compared to $3.4 million for the fiscal year ended December 31, 2022, as a result of a significant reduction in rental income during the year 2023 as compared to the year 2022, coupled with the addition of a new cloud-based software services to assist the Bank in improving the on-line banking experience. Advertising and marketing expense increased by $138,000 or 65.0% to $350,000 for the fiscal year ended December 31, 2023 from $212,000 for the fiscal year ended December 31, 2022, as a result of the Bank utilizing resources to build our brand and attract retail deposits. Professional fees increased by $428,000 or 25.9% to $2.1 million for the fiscal year ended December 31, 2023 from $1.7 million for the fiscal year ended December 31, 2022, as a result of increased fees related to the bank holding company reorganization application and the initiative to list on the Nasdaq Capital Market exchange. Data processing costs increased by $185,000 or 21.2% to $1.1 million for the fiscal year ended December 31, 2023 from $869,000 for the fiscal year ended December 31, 2022, primarily due to the overall growth of the Bank. FDIC assessment increased by $150,000 or 28.2% to $681,000 for the fiscal year ended December 31, 2023 from $531,000 for the fiscal year ended December 31, 2022, primarily due to an increase in the deposit insurance assessment rate in effect during the fourth quarter of 2023. These increases were partially offset by a $676,000 or 19.5% decrease in other expenses to $2.8 million for the fiscal year ended December 31, 2023 from $3.5 million for the same period in the prior year, primarily due to a significant decrease in miscellaneous loan expenses. Other expenses also include telephone, subscriptions, software maintenance and depreciation, office supplies and computer supplies. Loss on OREO totaled $59,000 for the fiscal year ended December 31, 2023, a decrease of $106,000 or $64.3% compared to $165,000 for the fiscal year ended December 31, 2022.

The income tax provision decreased by $619,000 or 11.7% to $4.7 million for the fiscal year ended December 31, 2023 from $5.3 million for the fiscal year ended December 31, 2022. The decrease in the income tax provision resulted primarily from a decrease in earnings before income taxes of $3.4 million or 15.7%, which included additional non-taxable income of $510,000 for the one-time death benefit from BOLI investment, to $18.4 million for the fiscal year ended December 31, 2023 from $21.9 million for the fiscal year ended December 31, 2022. The effective tax rate for the fiscal year ended December 31, 2023 was 25.3% as compared to 24.1% for the fiscal year ended December 31, 2022. The increase in effective tax rate resulted from an increase in the state tax rate year over year.

Asset Quality

The allowance for credit losses decreased by $3.3 million to $14.5 million or 1.16% of gross loans at December 31, 2023 from $17.8 million or 1.59% of gross loans at December 31, 2022. Changes in the allowance for credit losses are calculated and adjusted quarterly, relative to those identified parameters within CECL which include, but are not necessarily limited to: loan growth, expected credit losses, economic conditions and forecasts.

The Bank had non-accrual loans totaling $18.4 million or 1.47% of gross loans at December 31, 2023 as compared to $12.7 million or 1.14% of gross loans at December 31, 2022. Non-accrual loans increased by $5.7 million or 44.9% during the year ended December 31, 2023 and OREO balances decreased by $4.0 million or 100% to no OREO at December 31, 2023 from $4.0 million at December 31, 2022.

The allowance for credit losses was 78.8% of non-accrual loans at December 31, 2023, compared to 139.6% of non-accrual loans at December 31, 2022.

About First Commerce Bancorp, Inc.

First Commerce Bancorp, Inc, is a financial services organization headquartered in Lakewood, New Jersey. The Bank, the Company's wholly owned subsidiary, provides businesses and individuals a wide range of loans, deposit products and retail and commercial banking services through its branch network located in Allentown, Bordentown, Closter, Englewood, Fairfield, Freehold, Jackson, Lakewood, Montvale, Robbinsville and Teaneck, New Jersey. For more information, please go to www.firstcommercebk.com.

Forward-Looking Statements

This release, like many written and oral communications presented by First Commerce Bancorp Inc., and our authorized officers, may contain certain forward-looking statements regarding our prospective performance and strategies within the meaning of Section 27A of the Securities Act of 1933 as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and are including this statement for purposes of said safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies, and expectations of the Company, are generally identified by use of the words "anticipate," "believe," "estimate," "expect," "intend," "plan," "project," "seek," "strive," "try," or future or conditional verbs such as "could," "may," "should," "will," "would," or similar expressions. Our ability to predict results or the actual effects of our plans or strategies is inherently uncertain. Accordingly, actual results may differ materially from anticipated results.

In addition to the factors previously disclosed in prior Bank communications and those identified elsewhere, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: the impact of changes in interest rates and in the credit quality and strength of underlying collateral and the effect of such changes on the market value of First Commerce Bank's investment securities portfolio; changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; difficult market conditions and unfavorable economic trends in the United States generally, and particularly in the market areas in which First Commerce 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); inflation; customer acceptance of the Bank's products and services; customer borrowing, repayment, investment and deposit practices; customer disintermediation; the introduction, withdrawal, success and timing of business initiatives; competitive conditions; the inability to realize cost savings or revenues or to implement integration plans and other consequences associated with certain corporate initiatives; economic conditions; and the impact, extent and timing of technological changes, capital management activities, and actions of governmental agencies and legislative and regulatory actions and reforms and the impact of a potential shutdown of the federal government.

First Commerce Bancorp, Inc.
Consolidated Balance Sheets
(Unaudited)

First Commerce Bancorp, Inc.
Consolidated Statements of Income
For the three months ended December 31, 2023 and 2022
(Unaudited)

First Commerce Bancorp, Inc.
Consolidated Statements of Income
For the years ended December 31, 2023 and 2022
(Unaudited)

First Commerce Bancorp, Inc.
Net Interest Margin Analysis
(Unaudited)

First Commerce Bancorp, Inc.
Net Interest Margin Analysis
(Unaudited)

First Commerce Bancorp, Inc.
Selected Financial Data
(Unaudited)

SOURCE: First Commerce Bancorp, Inc.