First Commerce Bancorp, Inc. Reports the Second Quarter and Year-to-Date 2024 Results and Adopts Second Stock Repurchase Program

LAKEWOOD, NJ / ACCESSWIRE / July 30, 2024 / First Commerce Bancorp, Inc. (the "Company"), (OTC PINK:CMRB), the holding company for First Commerce Bank (the "Bank"), today reported net income of $1.1 million and $2.2 million for the three and six months ended June 30, 2024 respectively, as compared to $2.9 million and $6.2 million for the three and six months ended June 30, 2023 respectively. Basic earnings per common share for the three and six months ended June 30, 2024, was $0.05 and $0.10, respectively, compared to $0.12 and $0.26 for the three and six months ended June 30, 2023, respectively.

Several initiatives discussed in previous releases require an update. President & CEO Donald Mindiak commented, "The Board of Directors has determined that a more efficient method to deliver long term shareholder value is to suspend future cash dividends at this time and utilize portions of that capital to repurchase our common stock. Since all common stock repurchases executed at a discount to tangible book are accretive to our book value, this represents a good investment and creates additional value for our shareholders. As always, we will remain disciplined and regularly assess the utilization of our capital."

"Additionally, with respect to the possible move to the Nasdaq exchange, one of the primary drivers of this initiative was the possible inclusion in a variety of indices, which had the potential of providing a heightened degree of visibility and liquidity to our stock. Certain criteria are necessary to qualify for inclusion in these indices, one of which is reaching a certain market capitalization. Presently, the Company's market cap does not meet the threshold requirement for inclusion in the index and, as such, the Board has decided to delay this initiative at this time and reevaluate it on a regular basis. It is important to add that we are now better prepared for a move to the Nasdaq exchange in the future, since, as of the end of last year, the Bank reevaluated and strengthened its internal control review process."

In connection with the stock repurchase plan, the Company adopted its second program to repurchase up to 5% of its outstanding shares of common stock, or approximately 1.1 million shares of its common stock. This is the Company's second repurchase program since completing its holding company reorganization on May 31, 2023. Shares may be repurchased in open market or private transactions, through block trades or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission.

The repurchase program has no expiration date and may be suspended, terminated or modified at any time for any reason. The timing and amount of any repurchases will depend on a number of factors, including the availability of stock, general market conditions, the trading price of the stock, alternative uses for capital, and the Company's financial performance. Open market purchases will be made in accordance with applicable legal requirements. The Company is not obligated to repurchase any particular number of shares or any shares in any specific time period, and there is no guarantee as to the exact number of shares to be repurchased by the Company.

Financial Highlights

• Total interest income increased by $1.6 million or 9.0% in the second quarter of 2024 compared to the second quarter of 2023 as a result of the growth in average loans receivable year over year.

• Average yield on interest earning assets increased by sixteen basis points to 5.64% for the second quarter of 2024 as compared to 5.42% for the second quarter of 2023.

• Total cost of interest-bearing liabilities increased by 106 basis points to 4.12% for the second quarter of 2024 compared to 3.06% for the second quarter of 2023.

• Net interest margin decreased by seventy-eight basis points to 2.38% for the second quarter of 2024 as compared to 3.16% for the second quarter of 2023.

• The annualized return on average total assets for the quarter ended June 30, 2024 was 0.30% compared to 0.84% for the quarter ended June 30, 2023.

• The annualized return on average shareholders' equity for the quarter ended June 30, 2024 was 2.47% compared to 6.30% for the quarter ended June 30, 2023.

• The book value per common share was $8.19 at June 30, 2024 compared to $7.77 at June 30, 2023.

Balance Sheet Review

Total assets increased by $31.4 million or 2.2% to $1.47 billion at June 30, 2024 from $1.44 billion at December 31, 2023. The increase in total assets was primarily related to increases in total cash and cash equivalents, total investment securities and total loans receivable during the six months ended June 30, 2024.

Total cash and cash equivalents increased by $7.4 million or 12.0% to $69.1 million at June 30, 2024 from $61.7 million at December 31, 2023. This increase was primarily due to an increase in wholesale borrowings and total deposits.

Total loans receivable, net of allowance for credit losses increased by $8.6 million or 0.7% to $1.25 billion at June 30, 2024 from $1.24 billion at December 31, 2023. Commercial loans and commercial real estate loans increased $4.1 million and $8.7 million, respectively, partially offset by a $2.0 million decrease in small business administration loans and a $1.7 million decrease in construction loans. The allowance for credit losses increased by $452,000 to $14.9 million or 1.18% of gross loans at June 30, 2024 as compared to $14.5 million or 1.16% of gross loans at December 31, 2023.

Total investment securities increased by $13.4 million or 19.4% to $82.4 million at June 30, 2024 from $69.1 million at December 31, 2023. The increase in investment securities resulted primarily from $19.3 million in purchases of investment securities, partially offset by $4.7 million in total paydowns and $1.2 million in maturities of investment securities.

Total deposits were $1.11 billion at June 30, 2024, compared to $1.10 billion at December 31, 2023. Within the components of total deposits, money market deposits increased $17.2 million, NOW and interest checking account deposits increased $17.1 million and brokered deposits increased $48.2 million, partially offset by a decrease of $60.9 million in time deposits, a $7.3 million decrease in non-interest bearing demand deposits and a $4.9 million decrease in savings deposits.

Stockholders' equity decreased by $8.1 million or 4.4% to $175.9 million at June 30, 2024 from $184.0 million at December 31, 2023. The decrease in stockholders' equity was attributable to a $8.6 million reduction as a result of the successful execution of the Company's stock repurchase plan. During the first six months of 2024, the Company repurchased 1.4 million shares for approximately $8.6 million, or a weighted average price of approximately $6.34 per share.

Three Months of Operations

Net interest income decreased by $2.3 million or 21.3% to $8.3 million for the three months ended June 30, 2024 from $10.6 million for the three months ended June 30, 2023. The decrease in net interest income was primarily due to an increase in funding costs as a result of the inverted yield curve where short-term rates continue to outprice medium and long-term maturities.

Total interest income increased by $1.6 million or 9.0% to $19.8 million for the three months ended June 30, 2024 from $18.2 million for the three months ended June 30, 2023. Interest income on loans, including fees, increased $933,000 or 5.5% to $18.0 million for the three months ended June 30, 2024, compared to $17.0 million for the three months ended June 30, 2023. The increase in interest income on loans, including fees, resulted primarily from an increase in the average balance of loans receivable of $34.9 million or 2.9% to $1.25 billion for the three months ended June 30, 2024 compared to $1.21 billion for the three months ended June 30, 2023 and an increase of sixteen basis points in the average yield on loans to 5.78% for the three months ended June 30, 2024 compared to 5.62% for the same period in the prior year. In addition, the increase in interest income on loans included recovery of approximately $200,000 of past due interest on commercial real estate loans. Interest income on interest-bearing deposits with other banks increased $418,000 or 79.3% to $945,000 for the three months ended June 30, 2024 as compared to $527,000 for the same period in the prior year. This increase resulted from a higher average yield on interest-bearing deposits with banks of 5.03% for the three months ended June 30, 2024 compared to 4.48% for the same period in the prior year, and an increase of $28.4 million in average balances of interest-bearing deposits with banks year over year. Interest income on investment securities increased $177,000 or 33.1% to $712,000 for the three months ended June 30, 2024 as compared to $535,000 for the same period in the prior year, as a result of replacing the maturities and paydowns of investment securities with higher yielding corporate bonds. Average yield on investment securities increased by eighty-eight basis points to 3.71% for the three months ended June 30, 2024 compared to 2.83% for the same period in the prior year. Dividend income on restricted stock increased $102,000 to $183,000 for the three months ended June 30, 2024 as compared to $81,000 for the same period in the prior year, primarily as a result of higher average yield on restricted stock of 8.64% for the three months ended June 30, 2024 compared to 4.43% for the same period in the prior year.

Total interest expense increased by $3.9 million or 51.5% to $11.5 million for the three months ended June 30, 2024 from $7.6 million for the three months ended June 30, 2023. The increase in interest expense occurred primarily as a result of a 106 basis points increase in the average cost of interest-bearing liabilities to 4.12% for the three months ended June 30, 2024 from 3.06% for the three months ended June 30, 2023 and an increase in average balance of interest-bearing liabilities of $125.1 million or 12.6%, to $1.12 billion for the three months ended June 30, 2024 from $991.5 million for the three months ended June 30, 2023. The increase in average balance of interest-bearing liabilities included a $103.2 million increase in average interest-bearing deposit liabilities and a $22.0 million increase in average wholesale borrowings for the three months ended June 30, 2024. The increase in the average cost of interest-bearing liabilities resulted primarily from continued higher market interest rates for over a year. The increase in interest-bearing liabilities was primarily used to support the loan growth and maintain adequate liquidity.

During the second quarter of 2024, the Company recorded a net $300,000 provision for credit losses as compared to a net $182,000 provision for credit losses for the same period in the prior year. Based on the results of the CECL model and management's evaluation of both quantitative and qualitative factors for the second quarter of 2024, the Company recorded a provision for credit losses of $305,000 on loans and corporate securities held-to-maturity, which was offset by a $5,000 reversal of credit losses for unfunded commitments. Management believes that the allowance for credit losses on loans was appropriate at June 30, 2024.

Net interest margin decreased by seventy-eight basis points to 2.38% for the three months ended June 30, 2024 compared to 3.16% for the three months ended June 30, 2023. The decrease in the net interest margin is primarily due to a significant increase in the average cost of interest-bearing liabilities to 4.12% for the three months ended June 30, 2024 from 3.06% for the three months ended June 30, 2023 and an increase in the average balance of interest-bearing liabilities to $1.12 billion for the three months ended June 30, 2024 from $991.5 million for the three months ended June 30, 2023. This increase was partially offset by an increase in average balance of interest earning assets of $65.5 million or 4.9% to $1.41 billion for the three months ended June 30, 2024 compared to $1.34 billion for the three months ended June 30, 2023 and an increase in the average yield of interest earning assets to 5.64% for the three months ended June 30, 2024 from 5.42% for the three months ended June 30, 2023.

Non-interest income increased by $98,000 or 21.1% to $562,000 for the three months ended June 30, 2024 from $464,000 for the three months ended June 30, 2023. The increase in total non-interest income resulted primarily from an increase in bank owned life insurance ("BOLI") of $65,000 as a result of higher yield recorded in the second quarter of 2024 and an increase of $62,000 in service charges and fees, partially offset by a decrease of $29,000 in other income primarily due to a decrease in rental income of leased office space in offices owned by the Bank during the second quarter of 2024 compared to the same period in the prior year.

Non-interest expense increased by $159,000 or 2.2% to $7.2 million for the three months ended June 30, 2024 compared to $7.1 million for the three months ended June 30, 2023. Salaries and employee benefits increased by $149,000 or 3.4% to $4.5 million for the three months ended June 30, 2024 as compared to $4.3 million for the three months ended June 30, 2023. The increase in salaries and employee benefits resulted primarily from annual merit increases and an increase in health benefit costs year over year. Professional fees decreased by $119,000 or 20.1% to $474,000 for the three months ended June 30, 2024 as compared to $593,000 for the three months ended June 30, 2023, primarily due to a reduction in legal services related to the formation of the holding company compared to the same period in the prior year. Data processing costs increased by $81,000 or 37.0% to $300,000 for the three months ended June 30, 2024 from $219,000 for the three months ended June 30, 2023, as a result of annual fee increase and additional cost related to new products and services. FDIC insurance assessment decreased $55,000 to $175,000 for the three months ended June 30, 2024, compared to $230,000 for the same period in the prior year, primarily due to over-estimating the expense in the first quarter of 2024 based on the FDIC's assessment rate in place at year end 2023. Other operating expenses increased by $117,000 or 17.9% to $769,000 for the three months ended June 30, 2024 from $652,000 for the three months ended June 30, 2023. Other expenses are primarily comprised of miscellaneous loan expense, telephone, subscriptions, software maintenance and depreciation, office supplies and computer supplies.

The Bank continues to prudently manage its non-interest expenses. The Bank has reduced its headcount of FTEs over the past 15 months from 166 to 152 by becoming more efficient in its workflow and processes as well as hiring talented staff. The Bank also recently closed its Montvale branch location and consolidated those deposit customers to the nearby branch located in Closter. The Bank has not seen significant deposit runoff due to it maintaining strong relationships with its customers. The Bank will continue to monitor its cost management and resource allocation to enhance profitability without losing the level of service that customers expect and deserve.

The income tax provision decreased by $627,000 or 68.6% to $287,000 for the three months ended June 30, 2024 from $914,000 for the three months ended June 30, 2023. This decrease in the income tax provision resulted primarily from a decrease in the pre-tax income year over year.

Six Months of Operations

Net interest income decreased by $4.5 million or 21.5% to $16.6 million for the six months ended June 30, 2024 from $21.1 million for the six months ended June 30, 2023. The decrease in net interest income was primarily due to an increase in funding costs as a result of the inverted yield curve where short-term rates continue to outprice medium and long-term maturities.

Total interest income increased by $4.4 million or 12.9% to $38.8 million for the six months ended June 30, 2024 from $34.4 million for the six months ended June 30, 2023. Interest income on loans, including fees, increased $3.4 million or 10.6% to $35.6 million for the six months ended June 30, 2024, compared to $32.2 million for the six months ended June 30, 2023. The increase in interest income on loans, including fees, resulted primarily from an increase in the average balance of loans receivable of $68.9 million or 5.8% to $1.25 billion for the six months ended June 30, 2024 compared to $1.18 billion for the six months ended June 30, 2023 and an increase of twenty-three basis points in the average yield on loans to 5.72% for the six months ended June 30, 2024 compared to 5.49% for the same period in the prior year. In addition, the increase in interest income on loans includes recovery of approximately $200,000 of past due interest on commercial real estate loans. Interest income on interest-bearing deposits with other banks increased $621,000 or 63.5% to $1.6 million for the six months ended June 30, 2024 as compared to $978,000 for the same period in the prior year. This increase resulted from a higher average yield on interest-bearing deposits with banks of 4.99% for the six months ended June 30, 2024 compared to 4.26% for the same period in the prior year, and an increase of $18.5 million in average balances of interest-bearing deposits with banks year over year. Interest income on investment securities increased $188,000 or 17.3% to $1.3 million for the six months ended June 30, 2024 as compared to $1.1 million for the same period in the prior year, as a result of replacing the maturities and paydowns of investment securities with higher yielding corporate bonds. Average yield on investment securities increased by sixty-six basis points to 3.48% for the six months ended June 30, 2024 compared to 2.82% for the same period in the prior year. Dividend income on restricted stock increased $199,000 to $340,000 for the six months ended June 30, 2024 as compared to $141,000 for the same period in the prior year, primarily as a result of significantly higher average yield on restricted stock of 8.37% for the six months ended June 30, 2024 compared to 4.87% for the same period in the prior year, and an increase of $2.3 million in average restricted stock balance year over year.

Total interest expense increased by $9.0 million or 67.5% to $22.3 million for the six months ended June 30, 2024 from $13.3 million for the six months ended June 30, 2023. The increase in interest expense occurred primarily as a result of a 127 basis points increase in the average cost of interest-bearing liabilities to 4.07% for the six months ended June 30, 2024 from 2.80% for the six months ended June 30, 2023 and an increase in average balance of interest-bearing liabilities of $142.7 million or 14.9%, to $1.10 billion for the six months ended June 30, 2024 from $957.2 million for the six months ended June 30, 2023. The increase in average balance of interest-bearing liabilities included a $95.7 million increase in average interest-bearing deposit liabilities and a $47.0 million increase in average wholesale borrowings for the six months ended June 30, 2024. The increase in the average cost of interest-bearing liabilities resulted primarily from continued higher market interest rates for over a year. The increase in interest-bearing liabilities was primarily used to support the loan growth and maintain adequate liquidity.

During the first six months of 2024, the Company recorded a net $308,000 provision for credit losses as compared to a net $372,000 provision for credit losses for the same period in the prior year. Based on the results of the CECL model and management's evaluation of both quantitative and qualitative factors during the first six months of 2024, the Company recorded a provision for credit losses on loans and corporate securities held-to-maturity of $432,000, which was offset by a $124,000 reversal of credit losses for unfunded commitments. Unfunded commitment balances declined by $34.7 million during the first six months of 2024 compared to the year-end 2023, which resulted in recording a reversal in provision for credit losses for unfunded commitments. Management believes that the allowance for credit losses on loans was appropriate at June 30, 2024.

Net interest margin decreased by eighty-five basis points to 2.39% for the six months ended June 30, 2024 compared to 3.24% for the six months ended June 30, 2023. The decrease in the net interest margin is primarily attributable to a significant increase in the cost of interest-bearing liabilities to 4.07% for the six months ended June 30, 2024 from 2.80% for the six months ended June 30, 2023 and increase in the average balance of interest-bearing liabilities to $1.10 billion for the six months ended June 30, 2024 from $957.2 million for the six months ended June 30, 2023, partially offset by an increase in the average balance of interest earning assets $1.40 billion for the six months ended June 30, 2024 compared to $1.31 billion for the six months ended June 30, 2023, as well as an increase of thirty basis points on the yield of average interest earning assets to 5.59% for the six months ended June 30, 2024 from 5.29% for the six months ended June 30, 2023.

Non-interest income decreased by $378,000 or 25.8% to $1.1 million for the six months ended June 30, 2024 from $1.5 million for the six months ended June 30, 2023. The decrease in total non-interest income resulted primarily from a decrease in BOLI income of $379,000 or 44.6% to $470,000 for the six months ended June 30, 2024 from $849,000 for the six months ended June 30, 2023. The decrease in BOLI income resulted from a one-time benefit received on the Bank's investment in BOLI during the first six months of 2023. Services charges and fees increased $65,000 and other income decreased $64,000 in during the six months ended June 30, 2024 compared to the same period in the prior year.

Non-interest expense increased by $458,000 or 3.3% to $14.4 million for the six months ended June 30, 2024 compared to $14.0 million for the six months ended June 30, 2023. Salaries and employee benefits increased by $382,000 or 4.4% to $9.0 million for the six months ended June 30, 2024 as compared to $8.6 million for the six months ended June 30, 2023. The increase in salaries and employee benefits resulted primarily from annual merit increases, replacing staff at higher compensation levels and an increase in health benefit costs year over year. Occupancy and equipment expense decreased by $225,000 or 11.0% to $1.8 million for the six months ended June 30, 2024 as compared to $2.0 million for the six months ended June 30, 2023 primarily due to a decrease in other real estate owned expenses ("OREO") and service contract costs. Professional fees decreased by $84,000 or 8.0% to $970,000 for the six months ended June 30, 2024 from $1.1 million for the six months ended June 30, 2023 as a result of reduction in legal services related to the formation of the Holding Company. Data processing costs increased by $148,000 or 33.9% to $585,000 for the six months ended June 30, 2024 from $437,000 for the six months ended June 30, 2023 as a result of annual fee increase and additional cost related to new products and services. FDIC assessment increased by $91,000 or 32.6% to $370,000 for the six months ended June 30, 2024 from $279,000 for the six months ended June 30, 2023 primarily due to overall higher deposit insurance assessment rate in effect during the first six months of 2024 compared to the first six months of 2023. Other expenses increased by $205,000 or 15.6% to $1.5 million for the six months ended June 30, 2024 from $1.3 million for the six months ended June 30, 2023. Other expenses are primarily comprised of miscellaneous loan expense, telephone, subscriptions, software maintenance and depreciation, office supplies and computer supplies. There was no loss on valuation of OREO for the six months ended June 30, 2024 compared to a loss on sale of OREO of $59,000 recorded during the six months ended June 30, 2023.

The income tax provision decreased by $1.3 million or 66.2% to $668,000 for the six months ended June 30, 2024 from $2.0 million for the six months ended June 30, 2023. The decrease in the income tax provision resulted primarily from a decrease in earnings before income taxes of $5.3 million or 64.6%, to $2.9 million for the six months ended June 30, 2024 from $8.2 million for the six months ended June 30, 2023. The effective tax rate for the six months ended June 30, 2024 was 22.9% as compared to 24.0% for the six months ended June 30, 2023.

Asset Quality

The allowance for credit losses increased by $452,000 or 3.1% to $14.9 million or 1.18% of gross loans at June 30, 2024 as compared to $14.5 million or 1.16% of gross loans at December 31, 2023 and $18.8 million or 1.53% of gross loans at June 30, 2023. During the first six months of 2024, the Company added a $384,000 provision to the allowance for credit losses and recovered $68,000 in previously charged-off loans. Changes in the allowance for credit losses are calculated and adjusted quarterly and accordingly, relative to loan growth and quantitatively measured asset quality metrics.

The Bank had non-accrual loans totaling $15.3 million or 1.21% of gross loans at June 30, 2024 as compared to $18.4 million or 1.47% of gross loans at December 31, 2023 and $15.7 million or 1.28% of gross loans at June 30, 2023. Non-accrual loans decreased by $3.1 million or 16.8% from December 31, 2023. The allowance for credit losses was 97.8% of non-accrual loans at June 30, 2024, compared to 78.8% and 119.2% of non-accrual loans at December 31, 2023 and June 30, 2023, respectively.

About First Commerce Bancorp, Inc.

First Commerce Bancorp, Inc, is a financial services organization headquartered in Lakewood, New Jersey. The Bank, the Company's wholly owned subsidiary, provides businesses and individuals a wide range of loans, deposit products and retail and commercial banking services through its branch network located in Allentown, Bordentown, Closter, Englewood, Fairfield, Freehold, Jackson, Lakewood, Robbinsville and Teaneck, New Jersey. For more information, please go to www.firstcommercebk.com.

Forward-Looking Statements

This release, like many written and oral communications presented by First Commerce Bancorp Inc., and our authorized officers, may contain certain forward-looking statements regarding our prospective performance and strategies within the meaning of Section 27A of the Securities Act of 1933 as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and are including this statement for purposes of said safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies, and expectations of the Company, are generally identified by use of the words "anticipate," "believe," "estimate,""expect," "intend," "plan," "project,""seek," "strive," "try," or future or conditional verbs such as "could," "may," "should,""will," "would," or similar expressions. Our ability to predict results or the actual effects of our plans or strategies is inherently uncertain. Accordingly, actual results may differ materially from anticipated results.

In addition to the factors previously disclosed in prior Bank communications and those identified elsewhere, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: the impact of changes in interest rates and in the credit quality and strength of underlying collateral and the effect of such changes on the market value of First Commerce Bank's investment securities portfolio; changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; difficult market conditions and unfavorable economic trends in the United States generally, and particularly in the market areas in which First Commerce Bank operates and in which its loans are concentrated, including the effects of declines in housing market values; the effects of the recent turmoil in the banking industry (including the failures of two financial institutions); inflation; customer acceptance of the Bank's products and services; customer borrowing, repayment, investment and deposit practices; customer disintermediation; the introduction, withdrawal, success and timing of business initiatives; competitive conditions; the inability to realize cost savings or revenues or to implement integration plans and other consequences associated with certain corporate initiatives; economic conditions; and the impact, extent and timing of technological changes, capital management activities, and actions of governmental agencies and legislative and regulatory actions and reforms and the impact of a potential shutdown of the federal government.

First Commerce Bancorp, Inc.
Consolidated Statements of Financial Condition
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First Commerce Bancorp, Inc.
Consolidated Statements of Income
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First Commerce Bancorp, Inc.
Consolidated Statements of Income
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First Commerce Bancorp, Inc.
Net Interest Margin Analysis
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First Commerce Bancorp, Inc.
Net Interest Margin Analysis
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