Release Date: January 24, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- First Bank (FRBA, Financial) reported a strong financial performance for 2024, with a net income of $42.2 million, reflecting a 13% annualized increase in core EPS over the past decade.
- The bank's tangible book value has more than doubled over the past ten years, indicating a 7.5% annualized growth rate.
- First Bank (FRBA) achieved a return on assets (ROA) of 1.15% and a return on average tangible common equity of 12.5%, despite a challenging interest rate environment.
- The bank's net interest margin grew by 6 basis points in the fourth quarter, with potential for further expansion if the yield curve steepens.
- First Bank (FRBA) successfully initiated a buyback program and maintained a stable cash dividend, enhancing shareholder value.
Negative Points
- The bank's noninterest income decreased from $2.5 million in Q3 2024 to $2.2 million in Q4 2024, with no significant increase expected as 2025 begins.
- Operating expenses increased to $19.1 million in Q4 2024 from $18.6 million in Q3 2024, primarily due to higher salaries, benefits, and branch-related costs.
- The effective tax rate is expected to rise to 25%-26% due to the New Jersey corporate transit fee, up from the previous 23%-24% range.
- First Bank (FRBA) experienced a decline in investor real estate loans, which could impact future growth in this segment.
- The bank's pipeline of probable loan fundings decreased by 11% from the previous quarter, indicating potential challenges in sustaining loan growth.
Q & A Highlights
Q: Can you provide insights on how you expect deposit costs to progress over the year, especially with potential rate cuts?
A: Patrick Ryan, CEO, explained that the biggest variable affecting the margin is the shape of the yield curve. They saw some steepening in the fourth quarter, which could drive margin expansion if it continues. The bank is focused on keeping deposit costs low, and they expect flat to improving margins, depending on the pace of rate cuts and the relationship between short and long-term rates.
Q: What is the expected trend for purchase accounting adjustments going forward?
A: Andrew Hibshman, CFO, noted that purchase accounting adjustments will continue to decrease over the next year and a half, with a more significant drop expected around July 2026.
Q: Are you expecting continued growth in C&I and owner-occupied CRE loans, and how are you managing CRE concentration?
A: Patrick Ryan, CEO, and an unidentified company representative confirmed that they are focused on reducing CRE concentrations while maintaining good relationships. They expect the pipeline to build and are optimistic about loan volume growth. They believe commercial real estate lending is a good business but are cautious about concentration levels.
Q: Can you elaborate on the banking as a service initiative and the types of fintech partners you are targeting?
A: Patrick Ryan, CEO, stated that they have invested in technology and engaged consultants to ensure compliance and risk management. They are starting with lower-risk programs, such as prefunded cards, and will evaluate the initiative's success over the next 12 to 18 months.
Q: What are your plans for CD maturities in 2025, and how do you plan to manage their renewal rates?
A: Patrick Ryan, CEO, mentioned that they have a significant amount of CDs maturing in the first quarter, with an opportunity to reduce costs by about 50 basis points. Andrew Hibshman, CFO, added that approximately $130 million to $140 million of CDs will reprice in the first quarter, with most CDs maturing within the next 12 months.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
