First Bank (Hamilton, New Jersey) Q3 FY2024 earnings call

Key Points

• Return of solid loan and deposit growth after slow first half; loans up $90M, deposits up $82M (19M non-interest-bearing).
• Margin compression during the quarter due to deposit funding pressure, but actions taken in September to stabilize margin.
• Sold $12M low-yielding investment securities and canceled $25M lower-yielding BOLI, purchased $20M new BOLI policies with net pickup of ~2.5%.
• Normalized net income estimated at $9.7M, in line with prior quarters' normalized performance.
• Deposit growth driven by commercial portfolio, focusing on full banking relationships; no significant deposit attrition post-Fed cut.
• Lending growth with $90M loan growth in Q3, led by C&I and owner occupied segments; loan pipeline at $276M of probable fundings.

Overall loans grew about $90 million, with 60% of the loan growth (approximately $56 million) coming from C&I and owner occupied segments. Deposits grew $82 million, with $19 million of that in non-interest-bearing category. Loan yields declined, deposit costs saw some increase. Tangible book value grew significantly by $0.38 or about 3% quarter-over-quarter. Credit quality remained strong across all portfolio segments.

Forward-Looking

• Expect good results moving forward with income from Q3 growth and balance sheet enhancements helping Q4 and next year.
• Aim for stable margin despite Fed rate cuts, with opportunities to improve.
• Continued focus on growth in deposits and C&I lending.

Risks

• Margin compression risk due to ongoing deposit funding pressure.
• Uncertainty around impact of Fed rate cuts on interest income.
• Competitive pressures on deposit pricing affecting funding costs.

Q: Wondering if you could talk through a little more of the commentary on a stable margin from here, including loan yields, funding levers, and loan growth trends A: Patrick Ryan discussed margin stabilization efforts, loan yield mix (floating vs term), and funding cost management; Peter Cahill noted loan pipeline trends and historical funding averages Q: On purchase accounting accretion, loan yields, deposit costs, OpEx, and fee income A: Andrew Hibshman and Peter Cahill addressed loan yield changes, deposit cost estimates, OpEx run rate expectations, and fee income run rate considerations