First Bank (FRBA) Q2 2025 Earnings Call Transcript
Key Takeaways
Image source: The Motley Fool. Conversely, DATEWednesday, July 23, 2025, at 9 a. EDTCALL PARTICIPANTSPresident & Chief Executive Officer — Patrick L. Additionally, RyanExecutive Vice President & Chief Financial Officer...
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real estate
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July 23, 2025
01:27 PM
The Motley Fool
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Image source: The Motley Fool
Conversely, DATEWednesday, July 23, 2025, at 9 a
EDTCALL PARTICIPANTSPresident & Chief Executive Officer — Patrick L
Additionally, RyanExecutive Vice President & Chief Financial Officer — Andrew HibshmanChief Retail Banking Officer — Darleen GillespieChief Lending Officer — Peter CahillNeed a quote from one of our analysts (fascinating analysis). [ tected]TAKEAWAYSNet Income: $10. 2 million, or $0. 41 per diluted, in Q2 2025, in today's financial world
Loans: Increased $91 million sequentially (11% annualized) in the first quarter of 2025, $329 million growth (11%) in loans over the twelve months June 30, 2025 (noteworthy indeed)
Loan Mix: Nearly 75% of loan growth over the past twelve months was in commercial & industrial (C&I) and owner-occupied segments (noteworthy indeed)
C&I increased by $176 million and owner-occupied commercial real estate by $60 million in the twelve months Q2 2025
Additionally, Deposits: Grew $48 million in Q2 2025 (6. 2% annualized)
Additionally, All growth was in noninterest-bearing balances in Q2 2025
Noninterest-Bearing Deposit : Reached 19% of total deposits as of June 30, 2025, up from 17% as of June 30, 2024
Nevertheless, Net Interest Income: Increased $1. 9 million from the prior quarter (6%) in Q2 2025, driven by margin stability and balance sheet expansion
Net Interest Margin: Remained steady at 3. 65% in Q2 2025, with higher loan yields offset by increased subordinated debt costs (noteworthy indeed)
Pre-vision Net Revenue: Pre-vision net revenue increased by $2
However, 9 million in Q2 2025 compared to Q1 2025, representing 21% linked quarter growth
Noninterest Income: $2, amid market uncertainty. 7 million in noninterest income for Q2 2025
Up from $2 million in Q1 2025, given the current landscape
Additionally, This reflects higher loan fees and a $397,000 gain from a branch sale in Q2 2025, in today's market environment
Noninterest Expense: $20, given the current landscape. 9 million in the second quarter of 2025, $0, in light of current trends
However, Conversely, 5 million higher than the previous quarter
Largely due to $862,000 in executive severance costs in Q2 2025
However, Efficiency Ratio: Imved to 56 (fascinating analysis)
Moreover, 24% in Q2 2025
Marking the 24th consecutive quarter below 60%
Return on Average Assets (ROA): 1
Moreover, 04% for the quarter; Core fitability is tracking closer to 1. 10% ROA in Q2 2025
Conversely, Tangible Book Value per : Increased $0. 40 in Q2 2025
Conversely, Subordinated Debt Issuance: $35 million at a 7, in today's financial world
Furthermore, 18% interest rate, with existing $30 million higher-rate sub debt to be repaid in September
Allowance for Credit Losses: Coverage to total loans edged up to 1
Furthermore, 23% from 1, given current economic conditions. 21% sequentially in Q2 2025
Allowance to nonperforming loans coverage was 255% in Q2 2025
Additionally, Credit Loss Expense: $2, amid market uncertainty. 6 million in the second quarter of 2025
Moreover, In contrast, Up from $1
Conversely, 5 million in Q1 2025
Furthermore, Moreover, Primarily linked to loan growth and a modest net charge-off increase in Q2 2025
Nonperforming Assets (NPA) Ratio: Declined to 0, in this volatile climate
Additionally, On the other hand, 40% of total assets in Q2 2025, given the current landscape
Nevertheless, Down from 0. 42% at March 31, 2025, and 0. 56% at June 30, 2024
However, On the other hand, Deposit Cost Management: Average money market deposit costs declined nearly 60 basis points in the first half of 2025 compared to the first half of 2024 (this bears monitoring)
This reduced interest expense by $2. 8 million in the first half of 2025 compared to the prior year period
Lending Pipeline: Stood at $31 million in bable fundings at the end of Q2 2025, in today's market environment
Down 8% from March 31, 2025
Additionally, Pipeline Mix: C&I comprised 68% of the quarter-end lending pipeline in Q2 2025, up from 63% previous quarter-end (noteworthy indeed)
Line Utilization Rate: Remained stable at a 41%-42% line utilization rate across quarters (something worth watching), given the current landscape
Branch Network Expansion: Opened a new branch in Summit, New Jersey, with another apved for Ocean Port, New Jersey; relocating Palm Beach, Florida, branch to Wellington, Florida by Q3 end
Moreover, Time Deposits: Increased $26 million in Q2 2025 due to targeted motions
Effective Tax Rate: 22
In contrast, 9%, up 20 basis points from the prior quarter, with no material impact expected from legislative changes
Meanwhile, Repurchase and Dividend grams: Management confirmed buybacks and maintained a stable dividend policy
M&A Strategy: Management said strategy and philosophy on M&A haven't changed, and it actively surveys opportunities for both scale and cost-saving transactions
PAA (Purchase Accounting Accretion) Income: Declined by $100,000 sequentially to $2
On the other hand, 7 million in Q2 2025; anticipated to decline $200,000 per quarter in the second half of 2025, with a steeper decline in 2026
SUMMARYFirst Bank (NASDAQ: FRBA) management underscored stable net interest margin and strong core fitability, supported by disciplined expense control and a sustained low efficiency ratio
Capital ratios are described as robust and flexible, bolstered by the subordinated debt raise and upcoming repayment of older, higher-cost sub debt
Strategic expansion into new branch combined with a shift towards a higher portion of noninterest-bearing deposits is cited as critical to future funding and cost management
On the other hand, Credit quality metrics remain above industry averages, with allowance and nonperforming ratios at conservative levels during the growth period in Q2 2025
Nevertheless, Margin outlook is guided as stable, with management expressing confidence in their ability to control deposit costs regardless of Federal Reserve policy changes
We could do more quality loans if we found the good, you know, low-cost funding to support it
Additionally, Highlighting that funding -- not loan demand -- is the current growth constraint
Specialty units, including private equity fund banking and asset-based lending, are "significantly ahead of plan" in net loan growth through June 2025
The portion of investor real estate loans to total capital decreased from 420% (early 2024) to 380% in Q2 2025 after adjusting for normal sub debt, lowering potential concentration risk, considering recent developments
Commercial deposit pipelines remain strong, and management reports an 85% retention rate for CDs maturing into new lower-rate pricing (this bears monitoring)
Management expects core loan growth to slow in the back half of 2025 as pipeline replenishment s two above-average quarters and paydown activity normalizes
Furthermore, Outlook for M&A emphasizes continued evaluation of both scale and low-cost deposit opportunities, with no fixed size threshold
No significant asset quality deterioration is reported within the specialty lending units or SBA segment; The recent increase in nonperforming loans in Q2 2025 is attributed to loan volume, not systemic issues
Additionally, INDUSTRY GLOSSARYC&I (Commercial and Industrial Loans): Loans made to es for purposes other than the purchase of real estate, typically used for working capital or capital expenditures (fascinating analysis)
Additionally, NPA (Nonperforming Assets): Loans or assets that are not generating expected interest income, generally 90 days or more past due or not earning (which is quite significant)
OREO (Other Real Estate Owned): perty owned by the bank after foreclosure, not including perty used for normal operations
PAA (Purchase Accounting Accretion): Incremental interest income recognized as previously discounted loans from acquisitions are repaid or mature, in today's market environment
On the other hand, Subordinated Debt: Debt that ranks below other loans or securities with respect to claims on assets or earnings in the event of liquidation, given the current landscape
Full Conference Call TranscriptPatrick Ryan: Thanks, Andrew (something worth watching), in today's market environment
Market analysis shows 2025 was another quarter of strong balance sheet growth in the right
Meanwhile, Loans grew over $90 million during the quarter, and deposits grew by $50 million
Additionally, Nevertheless, Three-quarters of the net loan growth came from our strategic C&I and owner-occupied segments
Our deposit growth during the quarter was fueled by gains in the non-bearing category (remarkable data)
Loan growth in excess of deposit growth pushed our loan-to-deposit ratio up to 105%, something we'll be tracking and looking to move lower in the back half of the year
Strong balance sheet growth top line revenue growth, for example, net interest income was up $1. 9 million compared to the first quarter, which is 6% linked quarter growth
Pre-vision net revenue was up $2, in this volatile climate. 9 million compared to the first quarter, which was 21% linked quarter growth
And our pre-vision net revenue return on assets was 1, given current economic conditions. 65% annualized
Results for the quarter did include some non-core items (noteworthy indeed)
Specifically, we had a $397,000 pretax gain on the sale of our Paoli office building
And we had an $862,000 severance cost related to some management changes
On the other hand, Overall, credit quality seems to be holding up despite the economic and tariff-induced uncertainty (quite telling)
Net charge-offs remain relatively low, as do our nonperforming assets and nonperforming loans
Conversely, Our allowance to nonperforming loans sits at 255% coverage, well above industry average
Additionally, We achieved pretty good fitability over a 1% ROA in the quarter, despite the severance costs and the elevated vision, given the current landscape
Furthermore, Core fitability is tracking closer to 1
Our newer units continue to gain size and scale, driving fit imvement moving forward
Furthermore, we expect tighter expense containment to also help boost future fitability
New units, new branches, and nology expenses have driven our noninterest expense to average asset ratio above 2%
However, Historically, we've operated in the 1. 9 to 2% range, excluding merger-related charges
Nevertheless, Operating leverage and expense management will help us get back to those historical levels, given current economic conditions
We've also a successful subordinated debt offering during the quarter
We brought in $35 million in new debt at a 7. 18% interest rate, one of the lowest coupons on a new debt deal for a community bank this year
At June 30, we still held $30 million of our older higher rate sub debt, given the current landscape
Moreover, And we expect to pay that off on September 1
Additionally, In summary, core operating trends look good
Nevertheless, Our margin is holding in at high levels
Our strong asset growth will drive strong revenue growth during the second half of the year, and expense management will help drive better bottom-line results
At the same time, We're keeping a close eye on credit trends, but they appear stable (which is quite significant)
All in all, things should be shaping up for a good back half to the year
At this point, I'll turn it over to Andrew to get into some more details on the financial results (this bears monitoring), in light of current trends
Andrew Hibshman: Thanks, Pat
For the three months June 30, 2025, we recorded net income of $10
At the same time, 2 million or $0. 41 per diluted and a 1
On the other hand, 04% return on average assets
Furthermore, We saw another quarter of substantial loan growth
Loans were up $91 million for the first quarter or 11% annualized
Nevertheless, Over the last twelve months, loans have grown $329 million or 11% with our core areas of focus leading the way
C&I grew $176 million, and owner-occupied commercial real estate loans grew over $60 million
Growth was also solid again on the deposit side
Balances were up over $48 million during the quarter or an annualized 6. 2% as we continue to execute on adding and maintaining fitable relationships
However, This growth all came from noninterest-bearing deposits and was supplemented by additional FHLB advances to support our significant loan growth
Net interest income increased $1
Additionally, On the other hand, 9 million compared to the first quarter primarily due to margin stability on a growing balance sheet (remarkable data)
Our net interest margin remained at 3
Moreover, 65% in the second quarter, benefiting from slightly higher yields on loans, offset by slightly higher costs, primarily due to increased costs on our subordinated debt
Looking ahead, we continue to manage a well-balanced asset and liability position, which should result in continued strong net interest income generation with limited variability in the margin regardless of the Fed's actions on rates
Nevertheless, We will most ly see a larger decline in our acquisition accounting accretion income over the next several quarters than what we saw in Q2, and we will be negatively impacted in Q3 by carrying both of our sub debt interest instruments
Furthermore, Nevertheless, However, we believe that we will be able to maintain a stable margin with some potential upside due to our efforts to push deposit costs lower combined with lower-yielding assets continuing to run off our balance sheet, which are being replaced with higher-yielding loans
Our asset quality continues to be strong
NPA as a percentage of total assets declined to 40 basis points compared to 42 basis points at March 31, and 56 basis points at June 30, 2024
This reflects the second quarter sale of our OREO asset, which had an accounting value of $4
On the other hand, 8 million at March 31, offset somewhat by a net increase of $4, in today's financial world. 4 million in nonperforming loans
We recorded a $2. 6 million credit loss expense during the quarter compared to a credit loss expense of $1. 5 million for the first quarter
In contrast, The increase is primarily due to our loan growth during the quarter, a modest uptick in net charge-offs after several quarters of little to no charge-off activity, and a slight build in reserves in our C&I portfolio
Nevertheless, Our allowance for credit losses to total loans increased slightly from 1. 21% at March 31 to 1, in today's financial world
Meanwhile, 23% at June 30
On the other hand, Additionally, Noninterest income totaled $2, in today's market environment. 7 million in the second quarter of 2025, up from $2 million in Q1
Nevertheless, The increase reflects higher loan fees as well as a gain of $397,000 on the sale of our Paoli location, which included some excess corporate office space and the branch
And we have leased back just the branch space
Noninterest expenses were $20. 9 million for the second quarter, compared to $20
Moreover, 4 million in Q1, given the current landscape
Recall that Q1 expenses included an $815,000 impairment of an OREO asset during the quarter, which we sold for a gain of $34,000 in Q2, in this volatile climate
In Q2, salaries and employee benefits expenses grew by $841,000, primarily due to executive severance payments during the quarter
We're laser-focused on expense control and believe that we continue to drive growth without adding meaningfully to our expense base
Moreover, Tax expense totaled $3 million for the second quarter with an effective tax rate of 22
This compares to an effective tax rate of 22 (which is quite significant)
On the other hand, We anticipate our effective tax rate going forward will be relatively stable, and we do not expect the recent legislative changes to have a material impact on our tax rate
Our efficiency ratio imved to 56. 24% and remained below 60% for the twenty-fourth consecutive quarter
In contrast, We also continue to expand our tangible book value per, which grew $0. 40 during the quarter
Pat ed on this, but it's worth repeating that our $35 million subordinate debt offering was very positive for us in this rate environment
We priced below our expectations and below other comparable deals
The $30 million in sub debt that we issued in 2020 will be carried until August and will impact Q3 results because of the extra interest expense, but we'll see savings of apximately $240,000 monthly starting in September
I note that the extra subordinate debt is also included in our total risk-based capital ratio at June 30
Additionally, Even after the expected redemption, our capital ratios will remain strong, allowing for capital flexibility (which is quite significant)
We continue to be pleased with the momentum and very positive performance
We're executing our strategy to evolve into a middle-market commercial bank, and we are strengthening our core earnings file
We're also pleased this success allows us to drive holder value through the successful continuation of our buyback gram and a stable cash dividend
On the other hand, At this time, I'll turn it over to Darleen Gillespie, our Chief Retail Banking Officer, for her remarks (fascinating analysis) (which is quite significant)
Darleen Gillespie: Thanks, Andrew, and good morning, eve.
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