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Press Release

First Bank Reports Fourth Quarter 2020 Net Income of $6.2 Million

Company Release - 1/27/2021 4:30 PM ET

Full Year 2020 Net Income of $19.4 Million

For the Fourth Quarter 2020: Strong Revenue and Earnings Growth, Stable and Solid Asset Quality Metrics Continued Effective Expense Management with an Efficiency Ratio1 of 52.5%

HAMILTON, N.J., Jan. 27, 2021 (GLOBE NEWSWIRE) -- First Bank (Nasdaq Global Market: FRBA) today announced results for the fourth quarter and full year 2020. Net income for fourth quarter 2020 was $6.2 million, or $0.31 per diluted share, compared to $5.2 million, or $0.25 per diluted share, for the fourth quarter of 2019. Return on average assets and return on average equity for the fourth quarter of 2020 were 1.06% and 10.44%, respectively, compared to fourth quarter 2019 return on average assets and return on average equity of 1.02% and 9.24%, respectively. First Bank’s fourth quarter 2020 adjusted diluted earnings per share2 were $0.31, adjusted return on average assets2 was 1.06% and adjusted return on average equity2 was 10.44% compared to fourth quarter 2019 adjusted diluted earnings per share of $0.29, adjusted return on average assets of 1.16% and adjusted return on average equity of 10.53%.

Net income for 2020 was $19.4 million, or $0.97 per diluted share, compared to $13.4 million, or $0.69 per diluted share, for 2019. Net income for 2019 was adversely impacted by merger-related expenses and a deferred tax asset revaluation. Excluding the impact of these expenses, adjusted diluted earnings per share was $0.88 for 2019.

Fourth Quarter and Full Year 2020 Performance Highlights:

  • Total net revenue (net interest income plus non-interest income) of $21.0 million for the fourth quarter of 2020 grew $3.4 million or 19.0% compared to the prior year quarter. Total net revenue for 2020 was $75.9 million, an increase of $13.5 million, or 21.7% compared to 2019
  • Total loans of $2.05 billion at December 31, 2020, an increase of $324.0 million, or 18.8%, from December 31, 2019
  • Total deposits of $1.90 billion at 2020 yearend, up $262.8 million, or 16.0%, from December 31, 2019, with a $148.3 million, or 53.8%, increase in non-interest bearing deposits
  • Continued effective non-interest expense management was reflected in the fourth quarter 2020 efficiency ratio of 52.54%, compared to 52.64% for fourth quarter 2019 and 49.31% for the linked third quarter of 2020
  • Asset quality metrics remained solid and stable during the quarter, despite the ongoing economic uncertainty associated with the COVID-19 pandemic, with net charge-offs of $465,000, or an annualized 0.09% of average loans, for fourth quarter 2020 and nonperforming loans of $10.2 million on December 31, 2020, or 0.50% of total loans at year-end
  • Fourth quarter 2020 tax equivalent net interest margin of 3.56% increased by 22 basis points compared to fourth quarter 2019 and 33 basis points compared to the linked quarter

“Despite the considerable operational challenges that 2020 presented to all financial institutions, the First Bank team was able to produce strong results highlighted by double-digit loan and deposit growth, continued solid asset quality metrics, net revenue growth of 22%, and a well-managed operating expense profile,” said Patrick L. Ryan, President and Chief Executive Officer.

“Our lenders had a strong year, adding $324 million to the loan portfolio at yearend, with approximately $187 million coming from non-PPP-related organic opportunities. Fourth quarter net loan growth, excluding PPP loans, exceeded $96 million, helping to offset $53.6 million of PPP loan forgiveness in the quarter. Despite this very strong growth to finish the year, we are not changing our expectations for loan growth next year. Net loan growth in any particular quarter can be unpredictable given the timing of new loan funding and payoffs, but we expect annual loan growth in 2021 in the 5% to 7% range.”

“2020 was an important year as we transitioned from an early-stage enterprise focused on growth and scale to a more mature model focused on margin and profitability. To help achieve this transformation, we became laser-focused on two primary goals: i) driving down deposit costs, and ii) improving our deposit mix. We made a concerted effort to reduce our dependence on higher-cost time deposits and to focus on attracting and retaining lower-cost checking and money market accounts. For the quarter ended December 31, 2020, our total deposit cost was 0.50%, significantly improved from 1.39% one year prior, and time deposits were just 27.5% of total deposits, down from 41.0% at the end of 2019. Even more important, our non-interest bearing deposits were 22.3% at year-end compared to 16.8% at the end of 2019. At the same time, our team’s commitment and effort resulted in a more than $262 million increase in total deposits.”

“Despite challenges from COVID-19, our overall asset quality profile actually improved during 2020. Net charge-offs to average loans for the full year 2020 of 0.15% were comparable to 0.12% in 2019 which we consider a solid performance during a year marked by considerable economic uncertainty. When looking at non-performing assets, our ratio actually improved considerably, dropping from 1.20% of average assets at the end of 2019 to 0.46% at the end of 2020. Despite very manageable charge-offs and a reduction in nonperforming loans throughout 2020, we set aside significant additional reserves for potential loan losses in response to the ongoing business disruption that has resulted from the pandemic. While the COVID-19 pandemic has not had a significant impact on charge-offs to-date, we may see some level of charge-offs in 2021 related to the continued challenges facing many business and individual borrowers. With our ALLL/Loans of 1.25%, excluding PPP loans, we feel we have done a good job making sure we’re adequately reserved for potential problems that could arise.”

“Our top and bottom line performance for both the fourth quarter and full year would be considered strong in a normal economic environment, but it’s particularly satisfying in the current period of uncertainty. With net revenue growth of 19% for the quarter and 22% for the year, it appears that we were pulling the right levers. We remain equally focused on maintaining our operating expense at a level that’s appropriate for the size of our organization. With an efficiency ratio in the low 50s during 2020, we were able to take our top line growth and translate it into strong earnings improvement for the quarter and the full year. With an return on average assets over 1% in each of the past two quarters, and a return on average tangible equity3 over 11%, we believe our focus on driving bottom line results is bearing fruit. Importantly, we expect these strong improvements in profitability can continue in to 2021 as we further improve our funding mix, improve our margin and gain further operating leverage.”   

Income Statement

Net interest income for fourth quarter 2020 was $19.7 million, an increase of $3.5 million, or 21.8%, compared to $16.2 million in the fourth quarter of 2019. This increase was primarily the result of a $3.5 million decrease in total interest expense compared to fourth quarter 2019, while interest and dividend income modestly increased. The decrease in total interest expense for fourth quarter 2020 was primarily a result of a $158.7 million decrease in average time deposits coupled with a 112-basis point reduction in the interest rate paid on these deposits, along with a 106-basis point decline in the rate paid on money market deposits. Fourth quarter 2020 interest income on loans increased by $542,000, compared to fourth quarter 2019, reflecting an increase in the average loan balance of $278.6 million, partially offset by a 57-basis point decline in the average yield. The yield on the loan portfolio was impacted by lower rates paid on Paycheck Protection Program (“PPP”) loans, partially offset by amortization of deferred PPP loan fees.

Net interest income of $69.6 million for 2020 increased by $11.2 million, or 19.2%, compared to $58.4 million for 2019. Interest and dividend income for 2020 increased by $5.0 million to $89.2 million, compared to $84.2 million for 2019. Net interest income also benefitted from a $6.2 million decline in interest expense which dropped from $25.8 million in 2019 to $19.6 million in 2020. The increase in interest and dividend income for 2020 was primarily driven by significant growth in average loans, which increased by $336.1 million, but partially offset by a 56-basis point decrease in the average interest rate on loans compared to the prior year. As with the fourth quarter of 2020, the average yield on loans reflected lower rates paid on PPP loans, partially offset by amortization of deferred PPP loan fees. The decline in interest expense for 2020 also was a result of a decrease in the average balance of time deposits, coupled with lower average interest rates paid, and a lower average rate paid on money market deposits.

The fourth quarter 2020 tax equivalent net interest margin of 3.56% increased by 22 basis points compared to 3.34% for the prior-year quarter and increased by 33 basis points from the linked third quarter 2020. The increase in the 2020 fourth quarter margin compared to 2019 was primarily the result of lower average rates paid for interest-bearing liabilities, primarily time and money market deposits, in addition to a significant decline in the average balance of time deposits. The increase in the net interest margin compared to third quarter 2020 was a result of a 15-basis point increase in the yield on average earning assets driven by a higher yield on loans, along with a 25-basis point decline in the cost of interest-bearing liabilities. The higher yield on the loan portfolio reflected the amortization of PPP loan fees during the fourth quarter.

The net interest margin for 2020 was 3.29%, a decrease of 3 basis points compared to 3.32% for the prior year, primarily a result of a 57-basis point decline in the yield on average interest earning assets, mostly offset by a 62-basis point decline in the rate paid on interest bearing liabilities. A decline in the average balance of time deposits along with a 52-basis point decrease in the interest rate was primarily responsible for the lower cost of interest-bearing liabilities in 2020.   

The provision for loan losses for the fourth quarter of 2020 was $1.6 million, an increase of $1.3 million compared to $340,000 in the fourth quarter of 2019, and a decrease of $364,000 compared to the linked third quarter of 2020. The increase in the provision compared to fourth quarter 2019 is primarily attributable to the strong loan growth during the quarter ended December 31, 2020. The provision for loan losses for 2020 totaled $9.5 million compared to $4.0 million for the same period in 2019. The more than two-fold increase in the 2020 provision for loan losses reflected our assessment of the economic uncertainty caused by the ongoing COVID-19 pandemic and its impact on potential credit losses.

Fourth quarter 2020 non-interest income was $1.3 million, a decrease of $181,000 compared to $1.5 million in fourth quarter 2019. The decline was primarily the result of a $323,000 decrease in loan fees (primarily loan swap fees), along with a $121,000 decrease in gains on sale of loans. This was partially offset by a $225,000 increase in gains on recovery of acquired loans. Non-interest income totaled $6.4 million for 2020, an increase of $2.4 million compared to $4.0 million for the same period in 2019. This increase in non-interest income for 2020 was primarily a result of a $1.0 million increase in loan fees (primarily loan swap fees), a $613,000 increase on gains on recovery of acquired loans, and a $459,000 increase in income from bank-owned life insurance.

Non-interest expense for fourth quarter 2020 totaled $11.1 million, an increase of $1.7 million compared to $9.3 million for the prior-year quarter and an increase of $1.4 million compared to the third quarter of 2020. The increase in non-interest expense compared to fourth quarter 2019 was primarily a result of increased salaries and employee benefits reflecting an increase in performance-related compensation expense which was updated based on actual 2020 year-end results, along with increased regulatory and other professional fees.

Non-interest expense for 2020 totaled $40.4 million, an increase of $1.0 million, or 2.6%, compared to $39.4 million for 2019. Excluding $3.6 million in merger-related expenses in 2019, the increase in non-interest expense was $4.7 million, or 13.1%. The 2020 increase in non-interest expense over the prior year was also primarily a result of increased salaries and employee benefits expense, along with an increase in occupancy and equipment costs, which, in addition to other certain non-interest expense categories, reflects a full year of the additional expense related to the acquisition of Grand Bank.

The Bank’s efficiency ratio for the fourth quarter of 2020 was 52.54%, a reduction of 10 basis points compared to 52.64% in the fourth quarter of 2019 and an increase of 323 basis points compared to 49.31% for the linked third quarter of 2020. The efficiency ratio for the full year 2020 was 53.21% compared to 57.28% in 2019.

Pre-provision net revenue4 for fourth quarter 2020 was $10.0 million, an increase of $1.6 million, or 19.2%, compared to $8.4 million for the fourth quarter 2019, and up $61,000, or 0.61%, compared to $9.9 million in the linked third quarter of 2020.

Income tax expense for the three months ended December 31, 2020 was $2.2 million, with an effective tax rate of 25.8%, compared to $2.8 million and an effective tax rate of 34.7% for the fourth quarter of 2019 and $2.0 million with an effective tax rate of 25.5% for the third quarter of 2020. Income tax expense for 2020 was $6.5 million, with an effective tax rate of 25.1% compared to $5.6 million for 2019, with an effective tax rate of 29.3%. Income tax expense for the quarter and full year included an increase in the New Jersey state income tax surcharge from 1.5% to 2.5%. Income tax expense for the quarter and full year ended December 31, 2019 included an expense of approximately $730,000 due to a revaluation of the Bank’s deferred tax assets.

Balance Sheet

Total assets at December 31, 2020 were $2.35 billion, an increase of $334.7 million, or 16.6%, compared to $2.01 billion at December 31, 2019, primarily due to the origination of PPP loans and commercial loan growth. Total loans were $2.05 billion at December 31, 2020, an increase of $324.0 million, or 18.8%, compared to $1.72 billion at December 31, 2019, and an increase of $42.9 million, or 2.1%, from $2.00 billion at end of the linked third quarter of 2020. During the fourth quarter $53.6 million in PPP loans were forgiven. As a result, organic loan growth was $96.5 million, mainly derived from commercial real estate loan activity with existing and new relationships.

Total deposits were $1.90 billion at December 31, 2020, an increase of $262.7 million, or 16.0%, compared to $1.64 billion at December 31, 2019. Non-interest-bearing deposits totaled $424.1 million at December 31, 2020, an increase of $148.3 million, or 53.8%, from December 31, 2019, primarily a result of the Bank’s participation in the PPP lending program and continued growth in commercial banking relationships. Borrowings at December 31, 2020 were $161.1 million, an increase of $55.7 million, or 52.8%, compared to the 2019 yearend. The increase in deposits and borrowings provided additional liquidity to support strong commercial loan growth as well as PPP lending.

Stockholders’ equity was $238.1 million at December 31, 2020, compared to $226.4 million at December 31, 2019. The increase in stockholders’ equity for 2020 was due to net income of $19.4 million, $2.0 million in stock option exercises and restricted stock grants or vesting and an increase in accumulated other comprehensive income of $812,000. The increase was partially offset by stock repurchase program activity, whereby slightly over 1.0 million shares have been repurchased during 2020 for an aggregate of $8.2 million or an average cost of $7.91 per share, along with $2.4 million paid in cash dividends. The Bank’s current share repurchase program received regulatory approval for the repurchase of up to 1.5 million shares of First Bank common stock in the open market. Of the shares repurchased during 2020, only 34,684 shares had been repurchased under this repurchase program which will run through September 30, 2021. So far in 2021, through January 25th, we have repurchased an additional 33,663 shares at an average cost of $9.41 per share.

Asset Quality and Capital Ratios

Net charge-offs for the fourth quarter 2020 were $465,000, compared to $325,000 for fourth quarter 2019 and $633,000 for the linked third quarter of 2020. Net charge-offs as an annualized percentage of average loans were 0.09% in fourth quarter 2020, compared to 0.07% for fourth quarter 2019 and 0.13% for the linked third quarter 2020. Nonperforming loans as a percentage of total loans at December 31, 2020, were 0.50%, compared with 1.32% at December 31, 2019, and 0.63% at September 30, 2020. Average and actual total loan balances in 2020 were impacted by the level of PPP loans. The allowance for loan losses to nonperforming loans was 234.3% at December 31, 2020, compared with 75.8% at December 31, 2019, and 179.7% at September 30, 2020.

As of December 31, 2020, the Bank exceeded all regulatory capital requirements to be considered well capitalized, with a Tier 1 Leverage ratio of 9.74%, a Tier 1 Risk-Based capital ratio of 10.36%, a Common Equity Tier 1 Capital ratio of 10.36%, and a Total Risk-Based capital ratio of 12.90%.

COVID-19 Response

First Bank participated in the PPP, established by the Coronavirus Aid, Relief, and Economic Securities Act (CARES Act), during 2020. PPP is a specialized low-interest loan program funded by the U.S. Treasury Department and administered by the U.S. Small Business Administration (SBA). The PPP provides borrower guarantees for lenders, as well as loan forgiveness incentives for borrowers that utilize the loan proceeds to cover compensation-related business operating costs. As of December 31, 2020, First Bank had 937 PPP loans with a current balance of $137.1 million. First Bank generated gross fees of $6.9 million from the SBA related to the origination of these loans. These fees, net of the associated direct origination costs of approximately $529,000, are being amortized through interest income over the life of the PPP loans. As of December 31, 2020, the Bank had $3.0 million in remaining unamortized fees associated with these loans with $3.3 million in income recorded during the year-ended December 31, 2020 from the amortization of these fees. During the fourth quarter of 2020 the Bank realized $1.8 million in fee income on these loans as any deferred fees remaining on the forgiven loans were accelerated. The Bank is also participating in the appropriations for new PPP loans and advances under the Consolidated Appropriations Act, 2021. Through January 26, 2021 we already have 255 PPP loans totaling $56.5 million approved by the SBA and have begun funding these loans. In addition, we have received another 283 applications totaling $35.9 million that are in various stages of the approval process.

First Bank continues to monitor and analyze its COVID-19 related financial hardship payment deferrals (COVID-19 deferrals) based on asset class and borrower type. As of December 31, 2020, the Bank’s population of COVID-19 deferrals was $37.2 million, or 1.8% of total loans, down from a peak of $433.7 million. The $37.2 million in COVID-19 deferrals is comprised of loans across a diverse list of industries and are primarily secured by real estate. The largest industry components are hospitality at $12.1 million, arts, entertainment and recreation at $8.3 million, multi-family $2.9 million, transportation at $2.6 million, and retail at $2.6 million.

Consistent with industry regulatory guidance, borrowers that were otherwise current on loan payments that were granted COVID-19 related financial hardship payment deferrals continue to be reported as current loans throughout the agreed upon deferral period, continue to accrue interest and are not required to be accounted for as a troubled debt restructuring.

Cash Dividend Declared

On January 19, 2021, 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 12, 2021, payable on February 26, 2021.

Conference Call

First Bank will host an earnings conference call on Thursday, January 28, 2021, at 9:00 a.m. Eastern Time. The direct dial toll free number for the call is 844-825-9784. For those unable to participate in the call, a replay will be available by dialing 877-344-7529 (access code 10150870) from one hour after the end of the conference call until April 28, 2021. Replay information will also be available on our website at www.firstbanknj.com under the “About Us” tab. Click on “Investor Relations” to access the replay information for 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, Hamilton, Hamilton Square, Lawrence, Mercerville, Pennington, Randolph, Somerset and Williamstown, New Jersey; and Doylestown, Trevose, Warminster and West Chester, Pennsylvania. With $2.3 billion in assets as of September 30, 2020, 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 market values; the impact of disease pandemics, such as the novel strain of coronavirus disease (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, 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 proxy statement, subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K. If one or more events related to these or other risks or uncertainties materialize, or if First Bank’s underlying assumptions prove to be incorrect, actual results may differ materially from what First Bank anticipates. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and First Bank does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. All forward-looking statements, expressed or implied, included in this communication are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that First Bank or persons acting on First Bank’s behalf may issue.

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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 certain one-time 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.

2 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 other one-time gains or 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.

3 Return on average tangible equity is a non-U.S. GAAP financial measure and is calculated by dividing net income by average stockholders’ equity net of 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.

4 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.

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, 2020  
 (unaudited) December 31, 2019
Assets   
Cash and due from banks$24,203  $16,751
Federal funds sold -   40,000
Interest bearing deposits with banks 71,270   25,041
Cash and cash equivalents 95,473   81,792
Interest bearing time deposits with banks 4,371   6,087
Investment securities available for sale, at fair value 61,731   47,462
Investment securities held to maturity (fair value of $38,319 at December 31, 2020 and $47,100 at December 31, 2019) 37,593   46,612
Restricted investment in bank stocks 8,545   6,652
Other investments 6,498   6,388
Loans, net of deferred fees and costs 2,047,572   1,723,574
Less: Allowance for loan losses 23,974   17,245
Net loans 2,023,598   1,706,329
Premises and equipment, net 10,736   11,881
Other real estate owned, net 575   1,363
Accrued interest receivable 6,806   4,810
Bank-owned life insurance 50,197   49,580
Goodwill 16,253   16,253
Other intangible assets, net 1,745   2,083
Deferred income taxes 11,394   10,400
Other assets 10,755   13,895
Total assets$2,346,270  $2,011,587
    
Liabilities and Stockholders' Equity   
Liabilities:   
Non-interest bearing deposits$424,119  $275,778
Interest bearing deposits 1,479,498   1,365,089
Total deposits 1,903,617   1,640,867
Borrowings 161,135   105,476
Subordinated debentures 29,508   21,964
Accrued interest payable 561   1,076
Other liabilities 13,341   15,811
Total liabilities 2,108,162   1,785,194
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; 20,742,158 shares issued and 19,707,474 shares outstanding at December 31, 2020 and 20,458,665 shares issued and outstanding at December 31, 2019 103,135   101,887
Additional paid-in capital 78,887   78,112
Retained earnings 63,431   46,367
Accumulated other comprehensive income 839   27
Treasury stock, 1,034,684 shares at December 31, 2020 (8,184)  -
Total stockholders' equity 238,108   226,393
Total liabilities and stockholders' equity$2,346,270  $2,011,587
    



FIRST BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except for share data, unaudited)
 
        
 Three Months Ended Year Ended
 December 31,  December 31,
 2020  2019  2020 2019
Interest and Dividend Income       
Investment securities—taxable$500 $586  $2,229 $2,160
Investment securities—tax-exempt 57  84   277  360
Interest bearing deposits with banks, Federal funds sold and other 139  516   911  2,181
Loans, including fees 22,391  21,849   85,784  79,469
Total interest and dividend income 23,087  23,035   89,201  84,170
        
Interest Expense       
Deposits 2,357  5,816   15,573  21,750
Borrowings 565  630   2,260  2,461
Subordinated debentures 441  398   1,815  1,593
Total interest expense 3,363  6,844   19,648  25,804
Net interest income 19,724  16,191   69,553  58,366
Provision for loan losses 1,633  340   9,539  3,984
Net interest income after provision for loan losses 18,091  15,851   60,014  54,382
        
Non-Interest Income       
Service fees on deposit accounts 189  178   629  515
Loan fees 79  402   1,659  623
Income from bank-owned life insurance 352  347   1,624  1,165
Gains on sale of loans 71  192   289  264
Gains on recovery of acquired loans 415  190   1,389  776
Other non-interest income 206  184   762  652
Total non-interest income 1,312  1,493   6,352  3,995
        
Non-Interest Expense       
Salaries and employee benefits 6,601  5,306   22,809  20,460
Occupancy and equipment 1,533  1,377   6,130  5,221
Legal fees 191  159   864  595
Other professional fees 631  397   2,116  1,634
Regulatory fees 273  26   1,076  387
Directors' fees 220  199   869  785
Data processing 515  584   1,933  1,852
Marketing and advertising 89  147   427  822
Travel and entertainment 15  147   147  486
Insurance 168  61   673  334
Other real estate owned expense, net 73  (7)  57  152
Merger-related expenses -  -   -  3,646
Other expense 743  913   3,286  2,990
Total non-interest expense 11,052  9,309   40,387  39,364
Income Before Income Taxes 8,351  8,035   25,979  19,013
Income tax expense 2,156  2,789   6,531  5,568
Net Income$6,195 $5,246  $19,448 $13,445
        
Basic earnings per common share$0.31 $0.26  $0.98 $0.70
Diluted earnings per common share$0.31 $0.25  $0.97 $0.69
Cash dividends per common share$0.03 $0.03  $0.12 $0.12
        
Basic weighted average common shares outstanding 19,721,653  20,377,478   19,885,699  19,098,464
Diluted weighted average common shares outstanding 19,827,708  20,666,729   20,005,432  19,392,429
        


FIRST BANK AND SUBSIDIARIES
AVERAGE BALANCE SHEETS WITH INTEREST AND AVERAGE RATES
(dollars in thousands, unaudited)
            
            
 Three Months Ended December 31,
 2020 2019
 Average    Average
 Average    Average
 Balance Interest Rate (5) Balance Interest Rate (5)
Interest earning assets           
Investment securities (1) (2)$103,736  $569  2.18% $92,875  $688  2.94%
Loans (3) 2,017,496   22,391  4.42%  1,738,847   21,849  4.99%
Interest bearing deposits with banks, Federal funds sold and other 69,015   40  0.23%  81,247   346  1.69%
Restricted investment in bank stocks 7,199   84  4.64%  7,078   122  6.84%
Other investments 6,493   15  0.92%  6,374   48  2.99%
Total interest earning assets (2) 2,203,939   23,099  4.17%  1,926,421   23,053  4.75%
Allowance for loan losses (23,323)      (17,547)    
Non-interest earning assets 135,433       128,253     
Total assets$2,316,049      $2,037,127     
            
Interest bearing liabilities           
Interest bearing demand deposits$178,190  $78  0.17% $159,936  $171  0.42%
Money market deposits 576,608   624  0.43%  397,248   1,488  1.49%
Savings deposits 149,946   207  0.55%  126,768   338  1.06%
Time deposits 531,495   1,448  1.08%  690,194   3,819  2.20%
Total interest bearing deposits 1,436,239   2,357  0.65%  1,374,146   5,816  1.68%
Borrowings 168,396   565  1.33%  114,965   630  2.17%
Subordinated debentures 29,491   441  5.98%  21,946   398  7.25%
Total interest bearing liabilities 1,634,126   3,363  0.82%  1,511,057   6,844  1.80%
Non-interest bearing deposits 429,604       283,112     
Other liabilities 16,220       17,758     
Stockholders' equity 236,099       225,200     
Total liabilities and stockholders' equity$2,316,049      $2,037,127     
Net interest income/interest rate spread (2)   19,736  3.35%    16,209  2.95%
Net interest margin (2) (4)    3.56%     3.34%
Tax equivalent adjustment (2)   (12)      (18)  
Net interest income  $19,724      $16,191   
            
(1) Average balance of investment securities available for sale is based on amortized cost.      
(2) Interest and average rates are presented on a tax equivalent basis 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,
 2020 2019
 Average    Average
 Average    Average
 Balance Interest Rate Balance Interest Rate
Interest earning assets           
Investment securities (1) (2)$103,859  $2,564  2.47% $94,185  $2,596  2.76%
Loans (3) 1,914,266   85,784  4.48%  1,578,174   79,469  5.04%
Interest bearing deposits with banks, Federal funds sold and other 83,840   425  0.51%  73,544   1,575  2.14%
Restricted investment in bank stocks 6,785   375  5.53%  6,848   421  6.15%
Other investments 6,462   111  1.72%  6,303   185  2.94%
Total interest earning assets (2) 2,115,212   89,259  4.22%  1,759,054   84,246  4.79%
Allowance for loan losses (20,768)      (16,458)    
Non-interest earning assets 132,466       115,695     
Total assets$2,226,910      $1,858,291     
            
Interest bearing liabilities           
Interest bearing demand deposits$165,346  $455  0.28% $148,234  $877  0.59%
Money market deposits 524,520   3,982  0.76%  355,046   5,619  1.58%
Savings deposits 139,091   1,047  0.75%  91,293   763  0.84%
Time deposits 600,447   10,089  1.68%  658,741   14,491  2.20%
Total interest bearing deposits 1,429,404   15,573  1.09%  1,253,314   21,750  1.74%
Borrowings 131,031   2,260  1.72%  113,740   2,461  2.16%
Subordinated debentures 28,367   1,815  6.40%  21,906   1,593  7.27%
Total interest bearing liabilities 1,588,802   19,648  1.24%  1,388,960   25,804  1.86%
Non-interest bearing deposits 391,686       244,820     
Other liabilities 16,257       17,173     
Stockholders' equity 230,165       207,338     
Total liabilities and stockholders' equity$2,226,910      $1,858,291     
Net interest income/interest rate spread (2)   69,611  2.98%    58,442  2.93%
Net interest margin (2) (4)    3.29%     3.32%
Tax equivalent adjustment (2)   (58)      (76)  
Net interest income  $69,553      $58,366   
            
(1) Average balances of investment securities available for sale are based on amortized cost.      
(2) Interest and average rates are presented on a tax equivalent basis 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
  12/31/2020 9/30/2020 6/30/2020 3/31/2020 12/31/2019
EARNINGS          
Net interest income $19,724  $17,630  $16,328  $15,871  $16,191 
Provision for loan losses  1,633   1,997   2,977   2,932   340 
Non-interest income  1,312   1,946   1,880   1,214   1,493 
Non-interest expense  11,052   9,653   9,767   9,915   9,309 
Income tax expense  2,156   2,023   1,347   1,005   2,789 
Net income  6,195   5,903   4,117   3,233   5,246 
           
PERFORMANCE RATIOS           
Return on average assets (1)  1.06%  1.03%  0.74%  0.63%  1.02%
Adjusted return on average assets (1) (2)  1.06%  1.03%  0.74%  0.63%  1.16%
Return on average equity (1)  10.44%  10.20%  7.33%  5.69%  9.24%
Adjusted return on average equity (1) (2)  10.44%  10.20%  7.33%  5.69%  10.53%
Return on average tangible equity (1) (2)  11.30%  11.08%  7.97%  6.19%  10.06%
Adjusted return on average tangible equity (1) (2)  11.30%  11.08%  7.97%  6.19%  11.46%
Net interest margin (1) (3)  3.56%  3.23%  3.07%  3.30%  3.34%
Total cost of deposits (1)  0.50%  0.70%  0.98%  1.29%  1.39%
Efficiency ratio (2)  52.54%  49.31%  53.64%  58.03%  52.64%
Pre-provision net revenue (2) $9,984  $9,923  $8,441  $7,170  $8,375 
           
SHARE DATA          
Common shares outstanding  19,707,474   19,694,892   19,629,892   20,141,204   20,458,665 
Basic earnings per share $0.31  $0.30  $0.21  $0.16  $0.26 
Diluted earnings per share  0.31   0.30   0.21   0.16   0.25 
Adjusted diluted earnings per share (2)  0.31   0.30   0.21   0.16   0.29 
Tangible book value per share (2)  11.17   10.88   10.61   10.33   10.17 
Book value per share  12.08   11.79   11.54   11.23   11.07 
           
MARKET DATA          
Market value per share $9.38  $6.20  $6.52  $6.94  $11.05 
Market value / Tangible book value  83.98%  57.01%  61.46%  67.20%  108.66%
Market capitalization $184,856  $122,108  $127,987  $139,780  $226,068 
           
CAPITAL & LIQUIDITY          
Tangible stockholders' equity / tangible assets (2)  9.45%  9.35%  9.12%  10.03%  10.44%
Stockholders' equity / assets  10.15%  10.06%  9.84%  10.81%  11.25%
Loans / deposits  107.56%  109.22%  101.65%  101.90%  105.04%
           
ASSET QUALITY          
Net charge-offs $465  $633  $1,013  $699  $325 
Nonperforming loans  10,234   12,694   14,082   13,815   22,748 
Nonperforming assets  10,809   13,397   15,224   14,976   24,111 
Net charge offs / average loans (1)  0.09%  0.13%  0.21%  0.16%  0.07%
Nonperforming loans / total loans  0.50%  0.63%  0.72%  0.79%  1.32%
Nonperforming assets / total assets  0.46%  0.58%  0.66%  0.72%  1.20%
Allowance for loan losses / total loans  1.17%  1.14%  1.10%  1.11%  1.00%
Allowance for loan losses / total loans (excluding PPP loans) 1.25%  1.25%  1.20%  1.11%  1.00%
Allowance for loan losses / nonperforming loans  234.26%  179.66%  152.26%  140.99%  75.81%
           
OTHER DATA          
Total assets $2,346,270  $2,309,897  $2,300,594  $2,092,444  $2,011,587 
Total loans  2,047,572   2,004,650   1,955,007   1,758,364   1,723,574 
Total deposits  1,903,617   1,835,427   1,923,266   1,725,547   1,640,867 
Total stockholders' equity  238,108   232,300   226,450   226,259   226,393 
Number of full-time equivalent employees (4)  204   204   209   208   216 
           
(1) Annualized.          
(2) 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.
(3) Tax equivalent using a federal income tax rate of 21%.          
(4) Includes 4 full-time equivalent seasonal interns as of June 30, 2020.         
           


FIRST BANK AND SUBSIDIARIES
QUARTERLY FINANCIAL HIGHLIGHTS
(dollars in thousands, unaudited)
           
  As of the Quarter Ended
  12/31/2020 9/30/2020 6/30/2020 3/31/2020 12/31/2019
LOAN COMPOSITION          
Commercial and industrial $388,886  $430,722  $428,494  $247,654  $239,090 
Commercial real estate:          
Owner-occupied  407,089   402,147   392,096   387,217   395,995 
Investor  778,958   721,029   689,891   678,568   673,300 
Construction and development  149,284   146,057   131,791   124,496   105,709 
Multi-family  144,527   133,778   132,942   131,566   119,005 
Total commercial real estate  1,479,858   1,403,011   1,346,720   1,321,847   1,294,009 
Residential real estate:          
Residential mortgage and first lien home equity loans  120,018   117,530   117,796   118,020   123,917 
Home equity–second lien loans and revolving lines of credit  33,575   27,600   29,371   33,764   32,555 
Total residential real estate  153,593   145,130   147,167   151,784   156,472 
Consumer and other  30,368   32,531   40,230   38,902   35,810 
Total loans prior to deferred loan fees and costs  2,052,705   2,011,394   1,962,611   1,760,187   1,725,381 
Net deferred loan fees and costs  (5,133)  (6,744)  (7,604)  (1,823)  (1,807)
Total loans $2,047,572  $2,004,650  $1,955,007  $1,758,364  $1,723,574 
           
LOAN MIX          
Commercial and industrial  19.0%  21.5%  21.9%  14.1%  13.9%
Commercial real estate:          
Owner-occupied  19.9%  20.1%  20.1%  22.0%  23.0%
Investor  38.0%  36.0%  35.3%  38.6%  39.1%
Construction and development  7.3%  7.3%  6.7%  7.1%  6.1%
Multi-family  7.0%  6.6%  6.8%  7.5%  6.9%
Total commercial real estate  72.2%  70.0%  68.9%  75.2%  75.1%
Residential real estate:          
Residential mortgage and first lien home equity loans  5.9%  5.8%  6.0%  6.7%  7.2%
Home equity–second lien loans and revolving lines of credit  1.6%  1.4%  1.5%  1.9%  1.9%
Total residential real estate  7.5%  7.2%  7.5%  8.6%  9.1%
Consumer and other  1.6%  1.6%  2.1%  2.2%  2.0%
Net deferred loan fees and costs  (0.3%)  (0.3%)  (0.4%)  (0.1%)  (0.1%)
Total loans  100.0%  100.0%  100.0%  100.0%  100.0%
           


FIRST BANK AND SUBSIDIARIES
QUARTERLY FINANCIAL HIGHLIGHTS
(dollars in thousands, unaudited)
           
  As of the Quarter Ended
  12/31/2020 9/30/2020 6/30/2020 3/31/2020 12/31/2019
DEPOSIT COMPOSITION          
Non-interest bearing demand deposits $424,119  $445,514  $459,123  $291,949  $275,778 
Interest bearing demand deposits  201,881   156,059   165,081   161,726   170,951 
Money market and savings deposits  753,640   695,224   703,365   611,098   521,263 
Time deposits  523,977   538,630   595,697   660,774   672,875 
Total Deposits $1,903,617  $1,835,427  $1,923,266  $1,725,547  $1,640,867 
           
DEPOSIT MIX          
Non-interest bearing demand deposits  22.3%  24.3%  23.9%  16.9%  16.8%
Interest bearing demand deposits  10.6%  8.5%  8.6%  9.4%  10.4%
Money market and savings deposits  39.6%  37.9%  36.5%  35.4%  31.8%
Time deposits  27.5%  29.3%  31.0%  38.3%  41.0%
Total Deposits  100.0%  100.0%  100.0%  100.0%  100.0%
           


FIRST BANK AND SUBSIDIARIES
NON-U.S. GAAP FINANCIAL MEASURES
(in thousands, except for share data, unaudited)
          
 As of or For the Quarter Ended
 12/31/2020 9/30/2020 6/30/2020 3/31/2020 12/31/2019
Return on Average Tangible Equity         
Net income (numerator)$6,195  $5,903  $4,117  $3,233  $5,246 
          
Average stockholders' equity$236,099  $230,122  $225,905  $228,471  $225,200 
Less: Average Goodwill and other intangible assets, net 18,062   18,156   18,236   18,309   18,377 
Average Tangible stockholders' equity (denominator)$218,037  $211,966  $207,669  $210,162  $206,823 
          
Return on Average Tangible equity 11.30%  11.08%  7.97%  6.19%  10.06%
          
Tangible Book Value Per Share         
Stockholders' equity$238,108  $232,300  $226,450  $226,259  $226,393 
Less: Goodwill and other intangible assets, net 17,998   18,108   18,192   18,245   18,336 
Tangible stockholders' equity (numerator)$220,110  $214,192  $208,258  $208,014  $208,057 
          
Common shares outstanding (denominator) 19,707,474   19,694,892   19,629,892   20,141,204   20,458,665 
          
Tangible book value per share$11.17  $10.88  $10.61  $10.33  $