First Bank

I'd like to welcome everyone today to First Bank's first quarter 2023 earnings call. I'm joined today by Andrew Hibschman, our Chief Financial Officer, Darlene Gillespie, our Chief Retail Banking Officer, and Peter Cahill, our Chief Lending Officer. Before we begin, Andrew will read the Safe Harbor Statement.

The following discussion may contain forward-looking statements concerning the financial condition, results of operations, and business of First Bank. We caution that such statements are subject to a number of uncertainties, and actual results could differ materially, and therefore, you should not place undue reliance on any forward-looking statements we make. We may not update any forward-looking statements we make today for future events or developments. Information about risks and uncertainties are described under Item 1A, Risk Factors, in our annual report on Form 10-K for the year ended December 31st, 2022, filed with the FDIC. Pat, back to you.

Thank you, Andrew. I'll provide some high-level thoughts and observations on the quarter and then turn it over to the team to provide a little more detail. And as always, we'll have some time for question and answer at the end. Overall, I'm very proud of the resiliency displayed by our relationship-driven community banking model. Deposit outflows were there, but they weren't too bad, and they were largely driven by higher-yielding investment opportunities. Our NIM, our net interest margin, held up pretty well despite the heightened deposit competition and the inclusion of additional borrowings we took out just to provide some excess liquidity. Asset quality remained very good with minimal charge-offs and low levels of non-performing assets and delinquencies. Our expenses were up, and some of that increase is related to inflationary factors, but the bigger driver of the increase relates to key hires tied to strategic initiatives. Specifically, we added a group of great bankers from Investors Bank to help us continue to build and grow our presence in northern New Jersey. We built on a small team to help grow our small business lending units, and we hired a team to build out a new asset-based C&I lending group. The important point here is that these expenses will drive earnings and profits into the future. It is not simply a function of higher overhead. As a result of the elevated expenses, the return on assets was down, but it remained above 1 percent, and that's even after including the merger-related costs that were incurred during the quarter. Regarding the merger, we're very excited about the opportunity to meaningfully grow our presence in Pennsylvania. Plus, this deal gives us unique balance sheet management options. Specifically, the combined company could end up being leaner, maybe even smaller, but more profitable. As always, we'll be reviewing all options related to the size and makeup of the balance sheet of the combined companies, and we'll follow the path that will drive the best profitability and shareholder value. Also during Q1, we saw a meaningful increase in our allowance as a result of implementing CECL. Quick points on deposits and lending before we turn it over to the team for more detail. Overall, the deposit outflows during the quarter were manageable, with most of the decline coming prior to March 9th, a sign that alternative investment options, not concerns about banking industry stability, were driving the deposit declines. In Q1, our non-interest bearing balance is to continue to move lower, but the pace has slowed. and non-interest-bearing balances are flat so far in April. We believe our strategic investments and key hires, our growth of our small business and C&I lending units will help drive quality deposit growth moving forward. On the lending side, we saw $55 million in loan growth during the quarter, with over 80 percent of that growth coming in C&I and CREO. Those two categories are up approximately $100 million in outstanding in the past two quarters. Importantly, C&I loans provide diversification benefits, along with shorter durations, better yields, and more deposits. Our disciplined loan pricing and a focus on the most attractive segments helped drive a 33 basis point improvement in loan yields during the quarter. As I mentioned, asset quality and delinquency numbers were good. And overall, on the lending front, we saw continued evolution from a historically CRE-focused community bank to a evolving lower middle market commercial bank. In summary, I've renewed excitement and faith in the community bank model, and I'm even more optimistic about First Bank's ability to thrive as one of the top players in the community banking space. Once again, during periods of stress, the relationship-driven community bank model showed its resiliency and its value. When we look back over recent history, we saw that community banks made it through the Great Recession relatively unscathed, We showed tremendous value to our communities and our customers during the pandemic and PPP. And in March of 2023, we showed the stickiness of our deposits when others saw large outflows. At First Bank, our follow-through on important strategic investments, despite near-term profit headwinds, shows our commitment to being a leader in the community banking field and our commitment to creating lasting and sustaining value. Lastly, as I pointed out in our shareholder letter, we are in the midst of a gradual strategic transformation. Our business is evolving and diversifying in meaningful ways, both geographically and across lines of business. Our franchise will be more profitable, more valuable, and more attractive as a result of these strategic investments. At this time, I'd like Andrew to discuss the financial results in a little bit more detail.