First Bank(US:FRBA)2025-04-23 17:51Financial Data and Key Metrics Changes - The cost of deposits decreased by 14 basis points, leading to an improvement in net interest margin by 11 basis points [7] - Net income for Q1 2025 was $9.4 million or $0.37 per diluted share, with a return on average assets (ROA) of 1% [12] - Excluding the OREO write-down, EPS would have been $0.40 per share or an ROA of 1.07% [12] - Return on tangible common equity was above 10%, and the efficiency ratio remained below 60% [11][22] - Non-performing assets (NPAs) to total assets declined to 0.42% from 0.46% at the end of Q4 2024 [17] Business Line Data and Key Metrics Changes - Strong loan growth of $92 million, representing a 12% annualized increase, with total loans up approximately $244 million over the last 12 months [13][34] - The asset-based lending portfolio increased by almost $30 million to just over $90 million [10] - Private equity fund banking portfolio grew to $128 million, while small business lending, including Business Express and SBA loans, reached $91 million [10][102] - Non-interest bearing demand deposits increased to 17.2% of total deposits, up from 15.8% a year ago [28] Market Data and Key Metrics Changes - Total deposits increased by $64 million or 8% from Q4 2024, and grew $150 million or 5% from Q1 2024 [26] - The lending pipeline at the end of Q1 stood at $326 million, up 33% from the previous quarter [38] Company Strategy and Development Direction - The company aims to focus on C&I lending, with 81% of new loans closed in Q1 being C&I loans [35] - Plans to open new branches in New Jersey and relocate a Florida branch to enhance customer engagement [30][31] - The company is committed to maintaining a low-risk balance sheet while pursuing growth opportunities in new business units [23][130] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding loan demand, expecting continued activity in construction and refinancing despite economic uncertainties [61] - The company is focused on deposit generation and maintaining strong customer relationships to support growth [51] - Management indicated that the allowance for credit losses is at a comfortable level, with a conservative approach to credit risk [72][74] Other Important Information - Non-interest expenses for Q1 2025 were $20.4 million, including an $815,000 impairment of an OREO asset [19] - The effective tax rate for Q1 was 22.7%, with expectations to remain in the range of 23% to 24% going forward [22] Q&A Session Summary Question: Thoughts on the lending environment moving forward - Management noted that ongoing construction projects will continue, and while there may be a slowdown in the future, current loan demand remains strong [60] Question: Regarding stock buybacks and future activity - The company is actively considering stock buybacks, especially while the stock is trading at lower levels [66][69] Question: Credit reserves and potential economic downturns - Management feels comfortable with the current allowance for credit losses, indicating it is higher than most peers [72][74] Question: Details on the OREO write-down - The write-down was related to an acquired loan from a merger, and management is focused on selling the asset promptly [78] Question: Insights on new loan yields and brokered deposits - New loan yields averaged around 7.25% to 7.50%, with broker deposits added at rates between 4% and 4.5% [95][96] Question: Growth targets for C&I lending and private equity banking - The company anticipates significant growth in asset-based lending and private equity banking, targeting $150 million to $200 million in outstandings over the next few years [101][102] Question: Expectations for M&A activity - Management remains open to M&A opportunities but sees current market conditions as a barrier to significant activity [123] Question: Deposit pricing strategies - The company is actively reviewing exception-based pricing to manage deposit costs amid competitive pressures [132]