First Bank(US:FRBA)2021-01-28 19:44Financial Data and Key Metrics Changes - 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, reflecting an increase of $6 million [20] - Net interest income for the year increased by almost 20%, driven by a significant reduction in deposit costs [8][24] - Non-interest income grew almost 60% in 2020 compared to 2019, with loan swap fee income and gains from the recovery of acquired loans contributing to this growth [9] - Total provisions for loan losses were $9.5 million, up about $5.5 million from the prior year, marking a 140% increase [10] Business Line Data and Key Metrics Changes - Total loans reached $2.05 billion in 2020, with $190 million in PPP loans funded [31] - Excluding PPP, loans grew by $187 million, representing over 10% growth for the year [32] - Net interest income for Q4 2020 was $19.7 million, an increase of 21.8% compared to Q4 2019 [24] - Non-interest expense for the year was up only 2.6%, indicating strong expense control [9] Market Data and Key Metrics Changes - Cost of deposits dropped to 0.50% by year-end, down from 1.39% in Q4 2019, marking a reduction of 89 basis points [24][44] - Non-interest bearing deposits increased to over 22% of total deposits, up from 16.8% at the start of the year [7][46] - Total deposits grew by 16% in 2020, with significant growth in non-interest bearing and money market balances [46] Company Strategy and Development Direction - The company shifted focus from aggressive customer acquisition to a more mature model emphasizing bottom-line results and expense control [5][6] - Plans for 2021 include continued strong net interest income growth and a modestly higher margin driven by lower interest expenses [30] - The company aims to maintain effective expense management with a projected quarterly run rate of about $10.5 million for non-interest expenses [30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the economic rebound and expects EPS growth for 2021 to be 20% to 25% higher than 2019 [17] - The impact of COVID-19 remains a concern, but the downside risk is considered manageable compared to earlier stress test scenarios [14] - The company anticipates continued loan growth and a stable asset quality outlook as it navigates the ongoing pandemic [41] Other Important Information - The efficiency ratio improved to 52.54% for Q4 2020, compared to 57.28% for 2019, reflecting better expense management [29][30] - The company closed two branches in Hamilton, New Jersey, but does not expect material attrition due to these closures [48] Q&A Session Summary Question: Inquiry about expense levels and performance-related compensation - Management clarified that the increase in expenses in Q4 was due to a catch-up in accruals after earlier reductions in response to pandemic uncertainties [53] Question: Loan growth and diversification from commercial real estate - Management indicated that while there will be continued activity in commercial real estate, there is optimism for growth in C&I and owner-occupied loans, aided by relationships developed through PPP [55][56] Question: Expectations for swap fees and loan growth - Management expects a bounce back in swap fees, although it remains unpredictable due to the nature of large deals [58] Question: Liquidity position and timing of deployment - The company is managing excess liquidity levels between $60 million to $65 million and has been retiring more expensive funding sources [60] Question: Loan growth outlook and impact of PPP - The loan growth outlook of 5% to 7% is exclusive of PPP loans, focusing on core business growth [92]