First Bank(US:FRBA)2019-07-26 10:19Financial Data and Key Metrics Changes - The pro forma net income for Q2 2019 was estimated at approximately $4.1 million, consistent with prior quarters, after adjusting for provisions and tax rates [7][27] - Net income for Q2 2019 was reported at $2.8 million or $0.15 per diluted share, down from $4 million or $0.22 per diluted share in Q2 2018 [26] - The tax equivalent net interest margin for Q2 2019 was 3.37%, a decline of 26 basis points from 3.63% in Q2 2018 [19] Business Line Data and Key Metrics Changes - Loan growth in Q2 was $51.5 million, a 15% improvement from the previous quarter, with a year-over-year growth of 13% [31] - Noninterest income increased by 20% compared to prior quarters, while net interest income rose by over $500,000 from the prior year quarter [14] Market Data and Key Metrics Changes - The company experienced a decline in total deposits of $7.3 million during the quarter, but noninterest-bearing deposits grew by $22.8 million [28][45] - The loan-to-deposit ratio stood at 107%, indicating a need for core deposit growth to bring this ratio closer to 100% [56] Company Strategy and Development Direction - The company is focusing on core commercial deposit gathering initiatives to improve the cost of funds and is exploring M&A opportunities for EPS accretion [13] - Cost management strategies have been implemented, including closing underperforming branches and reviewing staff structure for efficiency [30] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges from a flat-inverted treasury yield curve and competitive deposit environment, but expressed optimism about future loan growth and asset quality [18][28] - The effective tax rate is expected to normalize around 24% for the year, with ongoing efforts to implement tax planning strategies [24] Other Important Information - The company has made strategic hires in Pennsylvania and expanded its commercial deposit gathering team, which is expected to enhance earnings moving forward [9][10] - A significant portion of Q2 expenses included nonrecurring items related to system conversion and merger-related costs [12] Q&A Session Summary Question: Can you share details about the C&I credit that moved to nonaccrual? - Management refrained from specifics but indicated that the collateral includes high-quality real estate, and they are prepared for various outcomes [50] Question: Is the mid-teens growth rate for the full year still a target? - Management remains committed to the target but indicated that a range of 10% to 15% would be acceptable given current conditions [51] Question: What is the outlook for operating expenses? - Management is focused on reducing expenses but has not set a specific target yet [52] Question: Can you clarify the NIM guidance? - A slight reduction in the coming quarter is expected, with stability anticipated as deposit costs are lowered [53] Question: Are there M&A opportunities due to recent activity in New Jersey? - Management sees M&A activity as creating opportunities for customer acquisition amid uncertainty [55] Question: How does the loan-to-deposit ratio impact loan growth guidance? - Management indicated that core deposit growth will influence decisions on loan growth to avoid increasing the loan-to-deposit ratio further [56] Question: What is the size of the loan relationship in question? - The loan relationship in question is approximately $8 million [61]