Financial Data and Key Metrics Changes - The company reported a net income of $6.8 million for Q2 2023, translating to $0.35 per diluted share, with a return on average assets of 0.97% [24] - Net income declined by $190,000 from the previous quarter and by $2.0 million compared to Q2 2022 [6] - The tax equivalent net interest margin decreased to 3.28% in Q2 2023 from 3.52% in the previous quarter [7] Business Line Data and Key Metrics Changes - Loans increased by $44 million in Q2 2023, compared to an increase of $55 million in Q1 2023 [25] - C&I loans represented 73% of new loans closed and funded in Q2, slightly down from 74% in Q1 [15] - Noninterest expenses were $13.8 million in Q2 2023, up 2.4% from Q1 2023 [9] Market Data and Key Metrics Changes - Total deposits grew by $158 million in Q2 2023, recovering from a decline of $52 million in Q1 2023 [25] - Noninterest-bearing deposits increased by $13 million in Q2 2023, rebounding from a decrease of $40 million in Q1 [7] - The cost of deposits increased by 50 basis points from Q1 2023 due to competitive pressures [11] Company Strategy and Development Direction - The company aims to leverage the Malvern Bank acquisition to enhance its presence in Southeastern Pennsylvania and improve balance sheet management [3] - Strategic investments in people and technology are expected to yield long-term benefits despite causing near-term earnings drag [3] - The focus is on optimizing the balance sheet for better risk-adjusted profitability and shareholder value [21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining strong asset quality metrics despite industry headwinds [2] - The current interest rate environment is expected to continue exerting pressure on margins, but the company is focused on maintaining loan pricing to improve yields [7] - The integration of Malvern Bank is anticipated to provide significant liquidity and balance sheet flexibility [7] Other Important Information - The company plans to incur the majority of merger-related expenses in Q3 2023, with expected cost savings to be realized by the end of Q4 2023 [10] - The allowance for credit losses to total loans remained steady at 1.25%, with modest net charge-offs year-to-date [26] Q&A Session Summary Question: When is the systems conversion scheduled to take place? - The systems conversion is scheduled for the weekend of September 9, 10, and 11 [43] Question: What is the organic loan growth target for the full year? - The typical target for organic growth is around $200 million, with flexibility based on market conditions and quality of deals [44] Question: Can you discuss general demand for loans? - There is less activity in the market, but businesses are still engaging in deliberate borrowing, with a slowdown in payoffs contributing to net loan growth [45] Question: What is the focus within C&I lending? - The focus is broad-based within C&I, including small micro-business lending and asset-based lending, alongside core market teams seeking quality opportunities [66] Question: How is the company approaching deposit growth? - The company is reallocating staff to focus more on market engagement and relationship building to drive deposit growth [75]
First Bank(FRBA) - 2023 Q2 - Earnings Call Transcript