First Bank (Williamstown NJ) (FRBA)

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First Bank Reports First Quarter 2014 Earnings of $3.2 Million; Total Assets Reach $599 Million

Company Release - 05/15/2014

HAMILTON, NJ -- (Marketwired) -- 05/15/14 -- First Bank (NASDAQ: FRBA) today announced first quarter 2014 results. Net income for the quarter was $3.2 million or $0.37 per diluted share, compared to net income of $380,000 or $0.08 per diluted share for the first quarter of 2013 and $311,000 or $0.05 per diluted share for the fourth quarter of 2013.

First quarter net income included $2.6 million in non-interest income associated with a bargain purchase gain from the acquisition of Heritage Community Bank (HCB). First quarter results also included $207,000 in merger related expenses. Book value per share was $6.54 at the end of the first quarter, an increase of 6.2% compared to book value per share of $6.16 at year-end.

President and Chief Executive Officer Patrick L. Ryan discussed the results: "Our results in the quarter were driven primarily by merger-related items. The bargain purchase gain was obviously the largest component of first quarter profit. While that is clearly a one-time income boost, the resultant increase in EPS and book value are certainly welcome. Beyond the financial benefits, the merger provides several strategic benefits: i) a larger, more scalable platform with eight branches in four counties with opportunities for enhanced operating leverage; ii) a jumping off point for penetration into the North Jersey market; and iii) a larger legal lending limit which will allow the bank to provide additional credit to existing customers and to target larger borrowers.

"In addition to the merger-related highlights, our core banking platform continues to perform well. The loan pipeline remains very active and we continue to add new deposit customers. Strong growth in non-interest bearing balances continued in the first quarter, which reached 14.1% of total deposits."

Ryan continued, "Importantly, we welcomed several strategic new hires recently. In addition to our new Chief Operating Officer, Ryan Manville, we added David Lidster as our new Chief Technology Officer. Dave brings tremendous breadth and depth of bank IT experience, having served most recently as the Chief Technology Officer of Somerset Hills Bank, prior to their acquisition last year. To help round out our team in the Finance Department, Don Theobald was hired as Controller. Don brings great finance, public company reporting, accounting and banking experience to the organization. We also hired two, seasoned commercial lending relationship managers, Tony Santoro and Brian Collins, to help us build out our presence in Bucks County, Pennsylvania. Both gentlemen have hit the ground running and have active pipelines of new business. As an organization, we are very excited about the growth prospects in Bucks County."

First Quarter 2014 Highlights

As a result of the acquisition of HCB on March 7, 2014, First Bank added total assets, loans and deposits of $132.3 million, $98.2 million and $123.4 million respectively.

Balance Sheet

Total assets at March 31, 2014 were $599.2 million, an increase of $132.4 million or 28.4% compared to December 31, 2013, and an increase of $226.3 million or 60.7% compared to March 31, 2013.

Total loans reached $450.4 million at March 31, 2014, an increase of $110.4 million or 32.5% compared to December 31, 2013 and an increase of $170.3 million or 60.8% compared to March 31, 2013. Loan growth occurred across all product categories consistent with our current loan mix.

Total deposits reached $522.1 million, an increase of $123.0 million or 30.8% compared to December 31, 2013 and an increase of $191.4 million or 57.9% compared to March 31, 2013.

Book equity increased to $61.5 million at March 31, 2014, driven by the 875,193 new shares issued in the Heritage deal and by strong first quarter profits.

Book value per share was $6.54 at March 31, 2014 compared to $6.16 per share at December 31, 2013 and $6.68 per share at March 31, 2013. Tangible book value per share was $6.50 at March 31, 2014, compared to $6.16 per share at December 31, 2013 and $6.68 per share at March 31, 2013. Note: shares outstanding at March 31, 2014 were 9,395,492 compared to 4,686,965 shares outstanding at March 31, 2013. The increase in shares relates to 3,833,334 shares issued in the November IPO and 875,193 shares issued in the HCB transaction.

Income Statement

Net interest income for the first quarter of 2014 totaled $4.2 million, an increase of $614 thousand or 17.0% compared to $3.6 million for the fourth quarter of 2013. Strong loan growth led net interest income higher during the first quarter of 2014.

Non-interest income for the first quarter of 2014 totaled $2.7 million. $2.6 million of non-interest income for the quarter relates to the bargain purchase gain from the HCB acquisition. The largest components of the bargain purchase gain included a $2.4 million general credit fair value reduction to non-impaired loans, a $7.6 million fair value reduction for identified impaired loans, and a $5.2 million increase to the value of the deferred tax assets. In aggregate, the reduction in fair value to the HCB loan portfolio was $10.0 million or 9.3% of HCB gross loans at closing. When excluding the bargain purchase gain, core non-interest income of $133 thousand in the first quarter of 2014 was up slightly compared to $102 thousand in the fourth quarter of 2013 and $106 thousand in the first quarter of 2013.

Non-interest expense for the first quarter of 2014 totaled $3.2 million, an increase of $751 thousand or 30.4% compared to $2.5 million for the fourth quarter of 2013.

Pre-tax income for the first quarter of 2014 totaled $3.6 million, an increase of $3.1 million or approximately 600% compared to $507 thousand for the fourth quarter of 2013. When excluding the $2.6 million in non-interest income from the bargain purchase and adding back in $207 thousand in merger-related costs and $107 thousand in other non-recurring expenses, pre-tax income was $1.2 million for the first quarter.

The provision for loan losses in the first quarter of 2014 totaled $178 thousand, a decrease of $555 thousand or 75.7% compared to $733 thousand for the fourth quarter of 2013. The provision for loan losses reflects the impact of loan growth and a sound asset quality profile.

Other items

The net interest margin (NIM) for the first quarter of 2014 was 3.61% compared to 3.38% for the fourth quarter of 2013 and 3.48% for the first quarter of 2013.

Non-performing assets (NPAs) were $8.5 million or 1.42% of total assets at March 31, 2014 compared to $5.1 million or 1.09% of total assets at December 31, 2013. Non-accrual loans totaled $6.1 million at March 31, 2014. Loans 30-89 days past due totaled $8.8 million. We had no loans over 90 days past due and still accruing at March 31, 2014. OREO (including other repossessed assets) totaled $2.4 million. The increase relates to higher levels of non-performing assets at HCB. Non-performing assets at March 31, 2014 included $3.0 million of loans acquired from HCB with deteriorated credit quality which were recorded at their fair value at acquisition.

Regulatory capital ratios at March 31, 2014:

Tier 1 Leverage ratio of 12.09%

Tier 1 Risk-Based capital ratio of 12.08%

Total Risk-Based capital ratio of 13.03%

The allowance for loan losses (ALLL) to total loans at March 31, 2014 was 1.05% compared to 1.38% at December 31, 2013. The reduction in the ALLL ratio relates primarily to the purchase accounting adjustments required for the merger. The Heritage loans were marked to fair value and the ALLL for the Heritage loans was eliminated.

91 full-time equivalent employees (FTEs) at March 31, 2014, compared to 59 FTEs at December 31, 2013.

Non-interest bearing deposits totaled $73.7 million at March 31, 2014 or 14.1% of total deposits.

About First Bank

First Bank (www.firstbanknj.com) is a New Jersey state-chartered bank with eight full-service branches in Denville, Ewing, Hamilton, Lawrence, Randolph (2), Somerset and Williamstown, New Jersey. With $599 million in assets as of March 31, 2014, First Bank offers a traditional range of deposit and loan products to individuals and businesses throughout the New York City to Philadelphia, PA corridor. First Bank's common stock is listed on the Nasdaq Global Market under the symbol "FRBA".

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*No TARP and the bank is selling below BV.

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