• First Bank Announces Third Quarter of 2023 Net Loss of $1.3 Million driven by one-time costs associated with Malvern Bancorp acquisition

    Source: Nasdaq GlobeNewswire / 25 Oct 2023 15:35:01   America/Chicago

    HAMILTON, N.J., Oct. 25, 2023 (GLOBE NEWSWIRE) -- First Bank (Nasdaq Global Market: FRBA) (the Bank) today announced its third quarter 2023 financial results with a net loss of $1.3 million, or a loss of $0.05 per diluted share, and losses on average assets, equity, and tangible equityi of 0.14%, 1.43%, and 1.66%, respectively. Excluding merger-related expenses and other one-time expenses, First Bank’s third quarter 2023 adjusted diluted earnings per shareii were $0.42, adjusted return on average assetsii was 1.13% and adjusted return on average tangible equityii was 13.23%.

    Compared to the same period of last year, the Bank's adjusted net income and adjusted returns on assets, equity, and tangible equity were lower, reflecting broader industry headwinds, primarily due to increased funding costs. However, the Malvern Bank acquisition will provide opportunities for stronger earnings and profitability metrics going forward.

    Third Quarter 2023 Performance Highlights:

    • Completion of the Malvern Bancorp (Malvern) acquisition on July 17, 2023. At the acquisition date, Malvern contributed approximately $953.8 million in total assets, $727.7 million in loans and $671.9 million in deposits, after acquisition accounting adjustments.
    • Total loans were $3.02 billion at September 30, 2023, marking a 24.0% increase from the end of the linked quarter at June 30, 2023.
    • Total deposits ended the quarter at $2.97 billion at September 30, 2023, a 23.6% increase from the end of the linked quarter at June 30, 2023.
    • Improvement in net interest margin and adjusted profitability metrics, primarily due to the benefits of the Malvern acquisition.
    • Sales of certain loans and investments acquired from Malvern during the current quarter with net proceeds of approximately $165.5 million allowed for the reduction of $130.0 million in higher cost FHLB advances.

    Patrick L. Ryan, President and CEO of First Bank, reflected on the quarterly results, stating, “We are excited about the successful closing of the Malvern acquisition. The transaction has expanded our presence in Southeastern Pennsylvania, creating critical mass in one of the most attractive markets in the Northeast. The acquisition also provided an opportunity to reshape the combined balance sheet and should drive significant earnings growth heading into 2024. We continue to operate in a difficult rate environment which continues to impact our margin. The combination of the rate environment, merger-related costs and the continued ramp up of new business units and information technology investments led to a net loss during the third quarter. Those strategic investments, combined with the Malvern acquisition, position us for strong financial results despite this difficult operating environment. During the third quarter our adjusted return on average assets improved 14 basis points from the second quarter to 1.13% and we believe our earnings performance can continue to improve as we realize the full impact of cost savings from the acquisition.”

    Mr. Ryan added that, “I am pleased that we were able to reshape our balance sheet by executing some strategic asset sales during the third quarter that allowed us to reduce our reliance on higher cost deposits and borrowings which should positively impact our margin, efficiency ratio, and return on capital in the fourth quarter and beyond.”

    Mr. Ryan concluded that, “I continue to be excited about the opportunities that lie ahead of us. The completion of the Malvern acquisition and the reshaping of our balance sheet during the quarter has allowed us to optimize our liquidity and interest rate risk positions while also enhancing future earnings potential. The current rate environment will continue to be a challenge but the Malvern acquisition, coupled with our strong team of bankers, should lead to a leaner and highly efficient company.”

    Malvern Acquisition

    First Bank acquired Malvern Bancorp, Inc. and its wholly owned subsidiary Malvern Bank, National Association on July 17, 2023. The combined stock and cash transaction was valued at approximately $129.7 million and expanded First Bank’s footprint in the highly affluent and desirable Mainline Philadelphia market. After acquisition accounting adjustments, at the time of the acquisition, First Bank added $953.8 million in assets, $92.0 million in investments, $727.7 million in loans, $671.9 million in deposits, $130.0 million in Federal Home Loan Bank advances, and $25.5 million in subordinated debt, and the acquisition resulted in $26.3 million in goodwill. The Malvern acquisition led to a 15% dilution in our tangible book value per shareiii from June 30, 2023 to September 30, 2023, however, the primary cause of the dilution was interest rate-related fair value adjustments. These fair value adjustments will accrete back through income and should lead to earnings per share accretion moving forward. Because the dilution was driven by interest rate adjustments, First Bank anticipates that the dilution will be earned back as loans and securities come to maturity.

    Income Statement

    In the third quarter of 2023, the Bank’s net interest income increased to $28.6 million, representing an increase of $4.0 million, or 16.4%, compared to the same period in 2022. The increase was primarily driven by an increase of $19.4 million in interest income on loans which outpaced the $15.7 million increase in interest expense on deposits in the third quarter of 2023 compared to the same quarter in 2022.

    The Bank’s tax equivalent net interest margin in the third quarter of 2023 decreased by 61 basis points to 3.36% compared to the prior year quarter but increased by 8 basis points from the second quarter of 2023. The decrease from the prior year quarter was primarily driven by the increase in deposit costs, which was partially offset by an increase in average loan yields. The increase in the margin from the second quarter of 2023 was primarily due to the impact of the Malvern acquisition. The repositioning of the balance sheet, primarily through the aforementioned asset sales, coupled with a full quarter of accretion income from the Malvern fair value adjustments will have a positive impact on the margin moving forward, however, the inverted yield curve and deposit pricing pressures may negate some of the positive impact.

    The Bank's provision for credit losses was $6.7 million in the third quarter of 2023, compared to $216,000 in the same period of the previous year and $496,000 in the preceding quarter of 2023. The increase in provision for credit losses during the current quarter was primarily due to a $5.5 million credit loss recorded to establish the allowance for credit losses on the acquired Malvern loan portfolio.

    In the third quarter of 2023, non-interest income was $193,000, compared to $944,000 during the same period in 2022 and $1.1 million during the second quarter of 2023. The decrease was primarily due to losses on the sale of investments and loans of $527,000 and $704,000, respectively, which are net against non-interest income on the income statement. The losses were primarily related to the aforementioned sale of Malvern investments and residential loans.

    Non-interest expense for the third quarter of 2023 was $23.5 million, an increase of $11.7 million, or 100.1%, compared to $11.7 million for the prior year quarter. The higher non-interest expense was largely due to the $7.0 million in merger-related expenses recorded during the third quarter of 2023. Merger-related expenses primarily included severance costs, data processing system termination and conversion costs, investment banker fees and legal and other professional fees. The increase was also due to salaries and employee benefits increasing $2.4 million, or 35.6%, and to a lesser extent, a $438,000 increase in occupancy and equipment expense, a $343,000 increase in regulatory fees, a $233,000 increase in data processing costs, and an increase of $997,000 in other expense. The increases were primarily due to the new employees and locations from the Malvern acquisition.

    On a linked quarter basis, third quarter 2023 non-interest expense of $23.5 million increased $9.7 million, or 70.5%, compared to $13.8 million for the second quarter of 2023. The increase was also primarily attributable to an increase in merger-related expenses and, to a lesser extent, increased salaries and employee benefits, occupancy and equipment costs, data processing and other expense. These increases were also primarily due to the Malvern acquisition.

    The Bank recorded an income tax benefit of $78,000 for the third quarter of 2023 compared to a $2.2 million tax expense for the second quarter of 2023. The year to date effective tax rate for the nine months ended September 30, 2023 was 25.50% compared to 24.21% for the first nine months of 2022. Income tax expense in 2023 was impacted by a $506,000 tax expense recorded due to the revaluation of the Bank’s deferred tax assets, primarily due to the impact on state taxes from the Malvern acquisition. Excluding this expense, the effective tax rate for the first nine months of 2023 would have been 22.49%. The lower adjusted effective tax rate is primarily due to the impact of the Malvern acquisition on state income tax expense.

    Balance Sheet

    The Bank reported total assets of $3.56 billion as of September 30, 2023, an increase of $684.0 million, or 23.8%, from $2.87 billion at June 30, 2023. The Bank’s assets grew $825.5 million, or 30.2%, for the nine months ended September 30, 2023.

    The Bank's increase in loans during the three and nine month periods ended September 30, 2023 were $584.1 million and $683.0 million, respectively. Excluding the $626.3 million in loans acquired from Malvern at September 30, 2023, which is net of loan sales and pay-downs since the acquisition, net loan growth was $56.7 million during the nine months ended September 30, 2023 compared to a decline of $42.2 million during the quarter ended September 30, 2023. The decline during the current quarter was primarily due to the Bank being more selective as it relates to new relationships, as well as more active loan repayments on the part of a few existing customers due to increasing interest rates.

    As of September 30, 2023, the Bank's total deposits were $2.97 billion, an increase of $673.5 million, or 29.4%, from $2.29 billion at December 31, 2022. Excluding the $671.9 million in deposits acquired from Malvern, deposit balances increased $1.6 million for the first nine months of 2023 but declined by $104.3 million during the three months ended September 30, 2023. The decline during the quarter ended September 30, 2023 was primarily due to the Bank allowing some higher cost brokered and non-core funding to leave the Bank, but the overall industry wide deposit declines and competitive pricing pressures are also impacting our total deposit levels.

    As of September 30, 2023, the Bank's stockholders' equity totaled $361.0 million, an increase of $71.5 million, or 24.7%, compared to $289.6 million at December 31, 2022 and an increase of $66.9 million compared to June 30, 2023 primarily due to the equity issued in the Malvern acquisition.

    As of September 30, 2023, the Bank continued to exceed all regulatory capital requirements to be considered well-capitalized with a Tier 1 Leverage ratio of 8.92%, a Tier 1 Risk-Based capital ratio of 9.00%, a Common Equity Tier 1 Capital ratio of 9.00%, and a Total Risk-Based capital ratio of 11.54%. The tangible stockholders' equity to tangible assets ratioiv was 8.72% as of September 30, 2023. All of the Bank’s capital ratios declined during the quarter due to the Malvern acquisition, however, all capital ratios remain above well-capitalized minimums. In addition, the Bank anticipates that the earnings accretion from the Malvern acquisition will contribute to enhanced capital ratios in future periods.

    Asset Quality

    First Bank's asset quality metrics for the third quarter of 2023 remained favorable with nonperforming loans, excluding $17.2 million of purchase credit deteriorated (PCD) loans, decreasing slightly from $8.0 million at June 30, 2023, to $7.0 million at September 30, 2023. Nonperforming loans, excluding PCD loans, as a percentage of total loans were 0.23% at September 30, 2023, compared to 0.33% at June 30, 2023. The Bank recorded net charge-offs of $1.1 million during the third quarter of 2023 compared to net recoveries of $109,000 in the second quarter of 2023 and net charge-offs of $705,000 in the in the third quarter of 2022. The allowance for credit losses on loans as a percentage of total loans increased to 1.42% at September 30, 2023 compared to 1.25% at June 30, 2023, primarily due to the impact of the allowance for credit losses on the acquired Malvern loan portfolio. The allowance for credit losses at September 30, 2023 included $6.0 million in reserves on the Bank’s PCD loans.

    Liquidity and Borrowings

    The Bank maintained a strong liquidity position in the third quarter of 2023. Total cash and cash equivalents declined slightly by $2.1 million during the third quarter to $180.2 million at September 30, 2023. The Bank utilized asset sales to allow some higher cost deposits to run-off and paid off a significant amount of borrowings during the third quarter of 2023. The reduction in outstanding borrowings has also increased the Bank’s available borrowing capacity. The Bank’s current liquidity position coupled with the balance sheet flexibility gained after the Malvern Bancorp acquisition provides the Bank with a strong liquidity base and a diverse source of funding options.

    Overall, the Bank has a capital, liquidity, and asset quality position, which provides a solid foundation to navigate future challenges that may arise. The Bank is committed to managing risk prudently while pursuing growth opportunities and delivering value to its shareholders.

    Cash Dividend Declared

    On October 17, 2023, the Bank’s Board of Directors declared a quarterly cash dividend of $0.06 per share to common stockholders of record at the close of business on November 10, 2023, payable on November 24, 2023.

    Conference Call and Earnings Release Supplement

    Additional details on the quarterly results and the Bank are included in the attached earnings release supplement: http://ml.globenewswire.com/Resource/Download/3e846bda-0f73-493b-bc6c-c5c63f65f218 

    First Bank will host its earnings call on Thursday, October 26, 2023 at 9:00 AM Eastern Time. The direct dial toll free number for the live call is 1-888-330-3273 and the access code is 7660423. For those unable to participate in the call, a replay will be available by dialing 1-800-770-2030 (access code 7660423) from one hour after the end of the conference call until January 25, 2024. Replay information will also be available on First Bank’s website at www.firstbanknj.com under the “About Us” tab. Click on “Investor Relations” to access the replay of the conference call.

    About First Bank

    First Bank is a New Jersey state-chartered bank with 26 full-service branches in Cinnaminson, Delanco, Denville, Ewing, Fairfield, Flemington (2), Hamilton, Lawrence, Monroe, Morristown, Pennington, Randolph, Somerset and Williamstown, New Jersey; and Coventry, Devon, Doylestown, Glenn Mills, Lionville, Malvern, Paoli, Trevose, Warminster and West Chester, Pennsylvania; and Palm Beach, Florida. With $3.56 billion in assets as of September 30, 2023, First Bank offers a full range of deposit and loan products to individuals and businesses throughout the New York City to Philadelphia corridor. First Bank's common stock is listed on the Nasdaq Global Market under the symbol “FRBA.”

    Forward-Looking Statements

    This press release contains certain forward-looking statements, either express or implied, within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include information regarding First Bank’s future financial performance, business and growth strategy, projected plans and objectives, and related transactions, integration of acquired businesses, ability to recognize anticipated operational efficiencies, and other projections based on macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact economic trends, and any such variations may be material. Such forward-looking statements are based on various facts and derived utilizing important assumptions, current expectations, estimates and projections about First Bank, any of which may change over time and some of which may be beyond First Bank’s control. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could” are generally forward-looking in nature and not historical facts, although not all forward-looking statements include the foregoing. Further, certain factors that could affect our future results and cause actual results to differ materially from those expressed in the forward-looking statements include, but are not limited to: whether First Bank can: successfully implement its growth strategy, including identifying acquisition targets and consummating suitable acquisitions, integrate acquired entities and realize anticipated efficiencies, sustain its internal growth rate, and provide competitive products and services that appeal to its customers and target markets; difficult market conditions and unfavorable economic trends in the United States generally, and particularly in the market areas in which First Bank operates and in which its loans are concentrated, including the effects of declines in housing market values; the effects of the recent turmoil in the banking industry (including the failures of two financial institutions in early 2023); the impact of 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; and possible changes in trade, monetary and fiscal policies, laws and regulations and other activities of governments, agencies, and similar organizations. For discussion of these and other risks that may cause actual results to differ from expectations, please refer to “Forward-Looking Statements” and “Risk Factors” in First Bank’s Annual Report on Form 10-K and any updates to those risk factors set forth in First Bank’s proxy statement, subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K. If one or more events related to these or other risks or uncertainties materialize, or if First Bank’s underlying assumptions prove to be incorrect, actual results may differ materially from what First Bank anticipates. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and First Bank does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. All forward-looking statements, expressed or implied, included in this communication are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that First Bank or persons acting on First Bank’s behalf may issue.

    ________________________________

    i Return on average tangible equity is a non-U.S. GAAP financial measure and is calculated by dividing net income by average tangible equity (average equity minus average goodwill and other intangible assets). For a reconciliation of this non-U.S. GAAP financial measure, along with the other non-U.S. GAAP financial measures in this press release, to their comparable U.S. GAAP measures, see the financial reconciliations at the end of this press release.

    ii Adjusted diluted earnings per share, adjusted return on average assets and adjusted return on average tangible equity are non-U.S. GAAP financial measures and are calculated by dividing net income adjusted for certain merger-related expenses and other one-time gains or expenses by diluted weighted average shares, average assets and average tangible equity, respectively. For a reconciliation of these non-U.S. GAAP financial measures, along with the other non-U.S. GAAP financial measures in this press release, to their comparable U.S. GAAP measures, see the financial reconciliations at the end of this press release.

    iii Tangible book value per share is a non-U.S. GAAP financial measure and is calculated by dividing tangible equity (equity minus goodwill and other intangible assets) by common shares outstanding. 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.

    iv Tangible stockholders' equity to tangible assets ratio is a non-U.S. GAAP financial measure and is calculated by dividing tangible equity (equity minus goodwill and other intangible assets) by tangible assets (total assets minus goodwill and other intangible assets). For a reconciliation of this non-U.S. GAAP financial measure, along with the other non-U.S. GAAP financial measures in this press release, to their comparable U.S. GAAP measures, see the financial reconciliations at the end of this press release.

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

     
    FIRST BANK
    CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
    (in thousands, except for share data, unaudited)
     
      September 30, 2023 December 31, 2022
    Assets    
    Cash and due from banks $23,440  $17,577 
    Restricted cash  20,460   13,580 
    Interest bearing deposits with banks  136,310   94,759 
    Cash and cash equivalents  180,210   125,916 
    Interest bearing time deposits with banks  498   1,293 
    Investment securities available for sale, at fair value  87,728   98,956 
    Investment securities held to maturity, net of allowance for    
    credit losses of $227 at September 30, 2023 (fair value of $38,548 at    
    September 30, 2023 and $42,465 at December 31, 2022)  45,198   47,193 
    Restricted investment in bank stocks  8,106   6,214 
    Other investments  10,346   8,372 
    Loans, net of deferred fees and costs  3,020,778   2,337,814 
    Less: Allowance for credit losses  42,880   25,474 
    Net loans  2,977,898   2,312,340 
    Premises and equipment, net  21,414   10,550 
    Other real estate owned, net  -   - 
    Accrued interest receivable  14,778   8,164 
    Bank-owned life insurance  85,845   58,107 
    Goodwill  44,166   17,826 
    Other intangible assets, net  11,388   1,579 
    Deferred income taxes, net  23,861   13,155 
    Other assets  46,990   23,275 
    Total assets $3,558,426  $2,732,940 
         
    Liabilities and Stockholders' Equity    
    Liabilities:    
    Non-interest bearing deposits $493,703  $503,856 
    Interest bearing deposits  2,473,752   1,790,096 
    Total deposits  2,967,455   2,293,952 
    Borrowings  133,142   90,932 
    Subordinated debentures  55,263   29,731 
    Accrued interest payable  3,223   1,218 
    Other liabilities  38,306   27,545 
    Total liabilities  3,197,389   2,443,378 
    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; 27,107,983    
    shares issued and 24,926,919 shares outstanding at September 30, 2023 and    
    21,082,819 shares issued and 19,451,755 shares outstanding at December 31, 2022  134,362   104,512 
    Additional paid-in capital  122,416   80,695 
    Retained earnings  133,680   127,532 
    Accumulated other comprehensive loss  (8,043)  (7,334)
    Treasury stock, 2,181,064 shares at September 30, 2023 and 1,631,064 shares at    
    December 31, 2022  (21,378)  (15,843)
    Total stockholders' equity  361,037   289,562 
    Total liabilities and stockholders' equity $3,558,426  $2,732,940 


    FIRST BANK
    CONSOLIDATED STATEMENTS OF INCOME
    (in thousands, except for share data, unaudited)
             
      Three Months Ended Nine Months Ended
      September 30, September 30,
       2023   2022   2023   2022 
    Interest and Dividend Income        
    Investment securities—taxable $1,151  $788  $3,128  $2,053 
    Investment securities—tax-exempt  86   39   158   109 
    Interest bearing deposits with banks,        
    Federal funds sold and other  2,593   498   6,029   888 
    Loans, including fees  46,088   26,673   111,536   72,697 
    Total interest and dividend income  49,918   27,998   120,851   75,747 
             
    Interest Expense        
    Deposits  18,470   2,737   40,574   5,008 
    Borrowings  1,914   258   4,939   796 
    Subordinated debentures  940   440   1,821   1,321 
    Total interest expense  21,324   3,435   47,334   7,125 
    Net interest income  28,594   24,563   73,517   68,622 
    Credit loss expense  6,650   216   8,237   2,156 
    Net interest income after credit loss expense  21,944   24,347   65,280   66,466 
             
    Non-Interest Income        
    Service fees on deposit accounts  280   236   741   731 
    Loan fees  152   (33)  259   314 
    Income from bank-owned life insurance  544   369   1,291   1,112 
    Losses on sale of investment securities, net  (527)  -   (734)  - 
    Losses on sale of loans, net  (704)  2   (393)  292 
    Gains on recovery of acquired loans  24   122   95   456 
    Other non-interest income  424   248   1,026   769 
    Total non-interest income  193   944   2,285   3,674 
             
    Non-Interest Expense        
    Salaries and employee benefits  9,326   6,880   25,320   20,122 
    Occupancy and equipment  1,915   1,477   5,107   4,282 
    Legal fees  270   188   671   502 
    Other professional fees  631   619   1,880   1,998 
    Regulatory fees  595   252   1,345   678 
    Directors' fees  224   172   631   570 
    Data processing  907   674   2,206   1,859 
    Marketing and advertising  220   164   693   505 
    Travel and entertainment  140   91   519   290 
    Insurance  272   187   624   538 
    Other real estate owned expense, net  -   72   38   269 
    Merger-related expenses  7,028   -   7,710   - 
    Other expense  1,958   961   4,020   2,655 
    Total non-interest expense  23,486   11,737   50,764   34,268 
    Income Before Income Taxes  (1,349)  13,554   16,801   35,872 
    Income tax expense  (78)  3,348   4,284   8,685 
    Net Income $(1,271) $10,206  $12,517  $27,187 
             
    Basic earnings per common share $(0.05) $0.52  $0.60  $1.39 
    Diluted earnings per common share $(0.05) $0.52  $0.59  $1.38 
    Cash dividends per common share $0.06  $0.06  $0.18  $0.18 
             
    Basic weighted average common shares outstanding  23,902,478   19,451,189   20,928,847   19,523,069 
    Diluted weighted average common shares outstanding  23,902,478   19,668,133   21,057,655   19,742,399 


    FIRST BANK
    AVERAGE BALANCE SHEETS WITH INTEREST AND AVERAGE RATES
    (dollars in thousands, unaudited)
                 
      Three Months Ended Sepember 30,
       2023   2022 
      Average   Average
     Average   Average
      Balance Interest Rate (5) Balance Interest Rate (5)
    Interest earning assets            
    Investment securities (1) (2) $169,244  $1,255  2.94% $145,783  $835  2.27%
    Loans (3)  3,003,703   46,088  6.09%  2,224,829   26,673  4.76%
    Interest bearing deposits with banks,            
    Federal funds sold and other  182,128   2,395  5.22%  74,493   406  2.16%
    Restricted investment in bank stocks  10,284   196  7.56%  5,248   72  5.44%
    Other investments  9,162   2  0.09%  8,223   20  0.96%
    Total interest earning assets (2)  3,374,521   49,936  5.87%  2,458,576   28,006  4.52%
    Allowance for loan losses  (41,216)      (25,283)    
    Non-interest earning assets  232,045       142,449     
    Total assets $3,565,350      $2,575,742     
                 
    Interest bearing liabilities            
    Interest bearing demand deposits $674,417  $4,038  2.38% $338,639  $397  0.47%
    Money market deposits  952,042   8,386  3.49%  713,594   1,458  0.81%
    Savings deposits  174,412   490  1.11%  182,771   228  0.49%
    Time deposits  655,288   5,556  3.36%  350,859   654  0.74%
    Total interest bearing deposits  2,456,159   18,470  2.98%  1,585,863   2,737  0.68%
    Borrowings  163,746   1,914  4.64%  64,330   258  1.59%
    Subordinated debentures  51,101   940  7.36%  29,685   440  5.93%
    Total interest bearing liabilities  2,671,006   21,324  3.17%  1,679,878   3,435  0.81%
    Non-interest bearing deposits  507,866       590,421     
    Other liabilities  33,106       25,350     
    Stockholders' equity  353,372       280,093     
    Total liabilities and stockholders' equity $3,565,350      $2,575,742     
    Net interest income/interest rate spread (2)    28,612  2.70%    24,571  3.71%
    Net interest margin (2) (4)     3.36%     3.97%
    Tax equivalent adjustment (2)    (18)      (8)  
    Net interest income   $28,594      $24,563   
                 
    (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)
                 
      Nine Months Ended September 30,
       2023   2022 
      Average   Average
     Average   Average
      Balance Interest Rate (5) Balance Interest Rate (5)
    Interest earning assets            
    Investment securities (1) (2) $155,128  $3,319  2.86% $140,452  $2,185  2.08%
    Loans (3)  2,590,409   111,536  5.76%  2,179,357   72,697  4.46%
    Interest bearing deposits with banks,            
    Federal funds sold and other  143,922   5,403  5.02%  101,101   627  0.83%
    Restricted investment in bank stocks  9,327   454  6.51%  5,428   200  4.93%
    Other investments  8,902   172  2.58%  8,129   61  1.00%
    Total interest earning assets (2)  2,907,688   120,884  5.56%  2,434,467   75,770  4.16%
    Allowance for loan losses  (33,664)      (24,608)    
    Non-interest earning assets  174,246       145,989     
    Total assets $3,048,270      $2,555,848     
                 
    Interest bearing liabilities            
    Interest bearing demand deposits $445,318  $6,492  1.95% $322,353  $595  0.25%
    Money market deposits  840,688   20,177  3.21%  719,028   2,548  0.47%
    Savings deposits  155,370   1,202  1.03%  184,767   572  0.41%
    Time deposits  586,827   12,703  2.89%  340,822   1,293  0.51%
    Total interest bearing deposits  2,028,203   40,574  0.21%  1,566,970   5,008  0.43%
    Borrowings  149,042   4,939  4.43%  69,571   796  1.53%
    Subordinated debentures  36,949   1,821  6.57%  29,659   1,321  5.94%
    Total interest bearing liabilities  2,214,194   47,334  2.86%  1,666,200   7,125  0.57%
    Non-interest bearing deposits  490,211       593,638     
    Other liabilities  29,939       21,284     
    Stockholders' equity  313,926       274,726     
    Total liabilities and stockholders' equity $3,048,270      $2,555,848     
    Net interest income/interest rate spread (2)    73,550  2.70%    68,645  3.59%
    Net interest margin (2) (4)     3.38%     3.77%
    Tax equivalent adjustment (2)    (33)      (23)  
    Net interest income   $73,517      $68,622   
                 
    (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
    QUARTERLY FINANCIAL HIGHLIGHTS
    (in thousands, except for share and employee data, unaudited)
                
       As of or For the Quarter Ended
       9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022
    EARNINGS          
     Net interest income $28,594  $22,128  $22,795  $23,751  $24,563 
     Credit loss expense / Provision for loan losses  6,650   496   1,091   716   216 
     Non-interest income  193   1,128   964   1,446   944 
     Non-interest expense  23,486   13,775   13,503   12,465   11,737 
     Income tax expense  (78)  2,186   2,176   2,916   3,348 
     Net income  (1,271)  6,799   6,989   9,100   10,206 
                
    PERFORMANCE RATIOS          
     Return on average assets (1)  (0.14%)  0.97%  1.03%  1.35%  1.57%
     Adjusted return on average assets (1) (2)  1.13%  0.99%  1.11%  1.40%  1.57%
     Return on average equity (1)  (1.43%)  9.23%  9.70%  12.61%  14.46%
     Adjusted return on average equity (1) (2)  11.38%  9.46%  10.43%  13.11%  14.46%
     Return on average tangible equity (1) (2)  (1.66%)  9.87%  10.39%  13.53%  15.55%
     Adjusted return on average tangible equity (1) (2)  13.23%  10.13%  11.17%  14.07%  15.55%
     Net interest margin (1) (3)  3.36%  3.28%  3.52%  3.69%  3.97%
     Total cost of deposits (1)  2.47%  2.19%  1.69%  1.21%  0.50%
     Efficiency ratio (2)  54.71%  58.28%  54.42%  47.68%  46.01%
                
    SHARE DATA          
     Common shares outstanding  24,926,919   19,041,343   19,569,334   19,451,755   19,447,206 
     Basic earnings per share $(0.05) $0.35  $0.36  $0.47  $0.52 
     Diluted earnings per share  (0.05)  0.35   0.36   0.46   0.52 
     Adjusted diluted earnings per share (2)  0.42   0.36   0.38   0.48   0.52 
     Book value per share  14.48   15.45   15.03   14.89   14.44 
     Tangible book value per share (2)  12.26   14.44   14.05   13.89   13.43 
                
    MARKET DATA          
     Market value per share $10.78  $10.38  $10.10  $13.76  $13.67 
     Market value / Tangible book value  87.96%  71.91%  71.90%  99.07%  101.80%
     Market capitalization $268,712  $197,649  $197,650  $267,656  $265,843 
                
    CAPITAL & LIQUIDITY          
     Stockholders' equity / assets  10.15%  10.23%  10.44%  10.60%  10.64%
     Tangible stockholders' equity / tangible assets (2)  8.72%  9.63%  9.83%  9.96%  9.97%
     Loans / deposits  101.80%  101.53%  106.73%  101.91%  103.34%
                
    ASSET QUALITY          
     Net charge-offs (recoveries) $1,122  $(109) $315  $(213) $705 
     Nonperforming loans  24,158   8,023   7,820   6,250   5,107 
     Nonperforming assets  24,158   8,023   7,820   6,250   5,400 
     Net charge offs (recoveries) / average loans (1)  0.15%  (0.02%)  0.05%  (0.04%)  0.13%
     Nonperforming loans / total loans  0.80%  0.33%  0.33%  0.27%  0.23%
     Nonperforming assets / total assets  0.68%  0.28%  0.28%  0.23%  0.20%
     Allowance for credit losses on loans / total loans  1.42%  1.25%  1.25%  1.09%  1.08%
     Allowance for credit losses on loans / nonperforming loans  177.50%  379.55%  382.26%  407.58%  480.61%
                
    OTHER DATA          
     Total assets $3,558,426  $2,874,425  $2,816,897  $2,732,940  $2,638,060 
     Total loans  3,020,778   2,436,708   2,392,583   2,337,814   2,263,377 
     Total deposits  2,967,455   2,399,900   2,241,804   2,293,952   2,190,192 
     Total stockholders' equity  361,037   294,161   294,221   289,562   280,749 
     Number of full-time equivalent employees (4)  286   261   252   238   228 
                
    (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 5 and 8 full-time equivalent seasonal interns as of June 30, 2023 and 2022, respectively.
                
                
     Average assets  3,565,350   2,825,213   2,745,235   2,680,807   2,575,742 
     Average loans  3,003,703   2,397,121   2,363,365   2,277,238   2,224,829 
     Average stockholders' equity  353,372   295,560   292,174   286,283   280,093 


    FIRST BANK
    QUARTERLY FINANCIAL HIGHLIGHTS
    (dollars in thousands, unaudited)
               
      As of the Quarter Ended
      9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022
    LOAN COMPOSITION          
    Commercial and industrial $478,120  $419,836  $394,734  $354,203  $323,984 
    Commercial real estate:          
    Owner-occupied  607,888   560,878   539,112   533,426   517,448 
    Investor  1,269,134   965,339   958,574   951,115   942,151 
    Construction and development  168,192   136,615   143,955   142,876   126,206 
    Multi-family  275,825   223,784   220,101   215,990   214,819 
    Total commercial real estate  2,321,039   1,886,616   1,861,742   1,843,407   1,800,624 
    Residential real estate:          
    Residential mortgage and first lien home equity loans  158,487   91,260   94,060   93,847   96,194 
    Home equity–second lien loans and revolving lines of credit  46,239   29,983   29,316   33,551   31,670 
    Total residential real estate  204,726   121,243   123,376   127,398   127,864 
    Consumer and other  20,208   12,514   16,413   16,318   14,654 
    Total loans prior to deferred loan fees and costs  3,024,093   2,440,209   2,396,265   2,341,326   2,267,126 
    Net deferred loan fees and costs  (3,315)  (3,501)  (3,682)  (3,512)  (3,749)
    Total loans $3,020,778  $2,436,708  $2,392,583  $2,337,814  $2,263,377 
               
    LOAN MIX          
    Commercial and industrial  15.8%  17.2%  16.5%  15.2%  14.3%
    Commercial real estate:          
    Owner-occupied  20.1%  23.0%  22.5%  22.8%  22.9%
    Investor  42.0%  39.6%  40.1%  40.7%  41.6%
    Construction and development  5.6%  5.6%  6.0%  6.1%  5.6%
    Multi-family  9.1%  9.2%  9.2%  9.2%  9.5%
    Total commercial real estate  76.8%  77.4%  77.8%  78.8%  79.6%
    Residential real estate:          
    Residential mortgage and first lien home equity loans  5.3%  3.8%  3.9%  4.0%  4.3%
    Home equity–second lien loans and revolving lines of credit  1.5%  1.2%  1.2%  1.4%  1.4%
    Total residential real estate  6.8%  5.0%  5.1%  5.4%  5.7%
    Consumer and other  0.7%  0.5%  0.7%  0.7%  0.6%
    Net deferred loan fees and costs  (0.1%)  (0.1%)  (0.1%)  (0.1%)  (0.2%)
    Total loans  100.0%  100.0%  100.0%  100.0%  100.0%


    FIRST BANK
    QUARTERLY FINANCIAL HIGHLIGHTS
    (dollars in thousands, unaudited)
               
      As of the Quarter Ended
      9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022
    DEPOSIT COMPOSITION          
    Non-interest bearing demand deposits $493,703  $476,733  $463,926  $503,856  $584,025 
    Interest bearing demand deposits  623,338   376,948   310,140   322,944   343,042 
    Money market and savings deposits  1,228,832   979,524   914,063   935,311   860,577 
    Time deposits  621,582   566,695   553,675   531,841   402,549 
    Total Deposits $2,967,455  $2,399,900  $2,241,804  $2,293,952  $2,190,193 
               
    DEPOSIT MIX          
    Non-interest bearing demand deposits  16.6%  19.9%  20.7%  22.0%  26.7%
    Interest bearing demand deposits  24.5%  15.7%  13.8%  14.1%  15.7%
    Money market and savings deposits  37.9%  40.8%  40.8%  40.8%  39.3%
    Time deposits  21.0%  23.6%  24.7%  23.1%  18.3%
    Total Deposits  100.0%  100.0%  100.0%  100.0%  100.0%


    FIRST BANK
    NON-U.S. GAAP FINANCIAL MEASURES
    (in thousands, except for share data, unaudited)
               
      As of or For the Quarter Ended
      9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022
    Return on Average Tangible Equity          
    Net income (numerator) $(1,271) $6,799  $6,989  $9,100  $10,206 
               
    Average stockholders' equity $353,372  $295,560  $292,174  $286,283  $280,093 
    Less: Average Goodwill and other intangible assets, net  49,491   19,324   19,379   19,533   19,669 
    Average Tangible stockholders' equity (denominator) $303,881  $276,236  $272,795  $266,750  $260,424 
               
    Return on Average Tangible equity (1)  -1.66%  9.87%  10.39%  13.53%  15.55%
               
    Tangible Book Value Per Share          
    Stockholders' equity $361,037  $294,161  $294,221  $289,562  $280,749 
    Less: Goodwill and other intangible assets, net  55,554   19,289   19,322   19,405   19,599 
    Tangible stockholders' equity (numerator) $305,483  $274,872  $274,899  $270,157  $261,150 
               
    Common shares outstanding (denominator)  24,926,919   19,041,343   19,569,334   19,451,755   19,447,206 
               
    Tangible book value per share $12.26  $14.44  $14.05  $13.89  $13.43 
               
    Tangible Equity / Assets          
    Stockholders' equity $361,037  $294,161  $294,221  $289,562  $280,749 
    Less: Goodwill and other intangible assets, net  55,554   19,289   19,322   19,405   19,599 
    Tangible stockholders' equity (numerator) $305,483  $274,872  $274,899  $270,157  $261,150 
               
    Total assets $3,558,426  $2,874,425  $2,816,897  $2,732,940  $2,638,060 
    Less: Goodwill and other intangible assets, net  55,554   19,289   19,322   19,405   19,599 
    Tangible total assets (denominator) $3,502,872  $2,855,136  $2,797,575  $2,713,535  $2,618,461 
               
    Tangible stockholders' equity / tangible assets  8.72%  9.63%  9.83%  9.96%  9.97%
               
    Efficiency Ratio          
    Non-interest expense $23,486  $13,775  $13,503  $12,465  $11,737 
    Less: Merger-related expenses  7,028   221   461   452   - 
    Adjusted non-interest expense (numerator) $16,458  $13,554  $13,042  $12,013  $11,737 
               
    Net interest income $28,594  $22,128  $22,795  $23,751  $24,563 
    Non-interest income  193   1,128   964   1,446   944 
    Total revenue  28,787   23,256   23,759   25,197   25,507 
    Add: Losses on sale of investment securities, net  527   -   207   -   - 
    Add: Losses on sale of acquired loans  771         
    Adjusted total revenue (denominator) $30,085  $23,256  $23,966  $25,197  $25,507 
               
    Efficiency ratio  54.71%  58.28%  54.42%  47.68%  46.01%
               
    (1) Annualized.          


    FIRST BANK
    NON-U.S. GAAP FINANCIAL MEASURES
    (dollars in thousands, except for share data, unaudited)
               
      For the Quarter Ended
      9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022
               
    Adjusted diluted earnings per share,          
    Adjusted return on average assets, and          
    Adjusted return on average equity          
               
    Net income $(1,271) $6,799  $6,989  $9,100  $10,206 
    Add: Merger-related expenses (1)  5,552   175   364   357   - 
    Add: Credit loss expense on acquired loan portfolio (1)  4,323   -   -   -   - 
    Add: Losses on sale of acquired loans, net (1)  609   -   -   -   - 
    Add: Losses on sale of investment securities, net (1)  416   -   164   -   - 
    Add: Impact of tax rate change  506   -   -   -   - 
    Adjusted net income $10,135  $6,974  $7,517  $9,457  $10,206 
               
    Diluted weighted average common shares outstanding  24,029,910   19,434,522   19,667,194   19,649,282   19,668,133 
    Average assets $3,565,350  $2,825,213  $2,745,235  $2,680,807  $2,575,742 
    Average equity $353,372  $295,560  $292,174  $286,283  $280,093 
    Average Tangible Equity $303,881  $276,236  $272,795  $266,750  $260,424 
               
    Adjusted diluted earnings per share $0.42  $0.36  $0.38  $0.48  $0.52 
    Adjusted return on average assets (2)  1.13%  0.99%  1.11%  1.40%  1.57%
    Adjusted return on average equity (2)  11.38%  9.46%  10.43%  13.11%  14.46%
    Adjusted return on average tangible equity (2)  13.23%  10.13%  11.17%  14.07%  15.55%
               
    (1) Items are tax-effected using a federal income tax rate of 21%.
    (2) Annualized.

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