First Bank (Hamilton, New Jersey) Q3 FY2026 earnings call

• Balance Sheet Growth: Loans grew by $50.2 million (approx. 6% annualized), driven by C&I, owner-occupied CRE, and construction lending. Deposits increased by $43 million (approx. 5% annualized), excluding broker deposit declines.
• Margin Expansion: Tax-equivalent net interest margin expanded 6 basis points to 3.74%. Loan yields rose 15 basis points to 6.48%, while the cost of deposits increased only 5 basis points to 2.47%.
• Capital Management: Tangible book value per share grew nearly 8% to $16.59. The Board approved a 33% dividend increase to 12 cents per share and authorized a new share repurchase program for up to 1.2 million shares ($24 million value).
• Efficiency: The efficiency ratio improved to 52.4% from 54.5% in Q2, marking the 29th consecutive quarter below 60%. Non-interest expense-to-average assets ratio decreased to 1.97%.
• Credit Quality: Provision expense was stable at $2.2 million. Business Express portfolio charge-offs were slightly higher ($1.9M vs $1.6M) but expected to moderate. Post-quarter-end improvements included a $5.5M paydown on one problem loan and court acceptance of an agreement for another senior living facility loan.

The provided transcript does not break down financial performance by specific product segments (e.g., Commercial, Consumer, Retail). The bank reports consolidated figures: Net Income of $12.2 million (Return on Average Assets of 1.18%); Net Interest Income of approximately $37.8 million (implied from $35.8M + $2M growth, up 5.6% QoQ); Non-Interest Income of $2 million; and Non-Interest Expense of $20.3 million.

• Loan Growth Target: Raised the targeted total loan growth for 2027 from $200 million annually to approximately $300 million, citing strong pipelines and reduced investor real estate concentration.
• Expense Ratio: Aiming to reduce the non-interest expense to average assets ratio to 1.90% during 2027, with potential long-term movement toward 1.80% as niche businesses scale.
• Tax Rate: Maintaining guidance for an effective tax rate at or below 25%.
• Dividends and Buybacks: Commitment to continue shareholder value return via healthy cash dividends and opportunistic share repurchases through September 2027.

• Deposit Pricing Pressure: Intensified competition and rising rates are increasing the cost of interest-bearing deposits and pressuring non-interest-bearing balances.
• Credit Stress in Business Express: While improving, this portfolio has contributed significantly to year-to-date charge-offs (approx. $8.5M total, with 95% from this segment). Future losses may persist until the portfolio fully runs down.
• Asset Sensitivity Risks: While currently asset-sensitive (benefiting from higher rates), management acknowledges that deposit pricing pressures could offset some margin gains if rates rise further.
• CRE Market Volatility: Potential slowdowns in commercial real estate origination due to renegotiations or tighter debt service coverage requirements following recent rate shifts.

Q: Analyst asked about deposit strategy amidst rising competition and how the bank plans to fund loan growth while managing funding costs. / A: Management stated they are focused on growing relationship-based deposits in the CNI book and using targeted promos in retail CD/money markets. CFO noted that while deposit pricing pressure is stiff due to rate hikes, the bank expects to offset higher funding costs through higher-yielding loan spreads and maintaining a stable margin with slight upside potential.

Q: Analyst asked about the remaining exposure in the Business Express portfolio and when credit costs would normalize. / A: CEO indicated that new issues are slowing and delinquencies are improving, suggesting incremental improvement ahead. He noted that new originations follow tighter standards and projected that annualized charge-offs could return to a reasonable 2-3%, restoring profitability to the segment. Year-to-date charge-offs were largely concentrated here, but other segments remain strong.

Q: Analyst inquired about the operating expense ratio targets for 2027 and long-term efficiency goals. / A: CEO confirmed the primary goal is to reach the 1.90% expense-to-assets ratio in 2027. He mentioned that pre-COVID levels were in the 1.80 range, and while possible long-term, the immediate focus is balancing cost containment with asset growth to hit 1.90%, potentially mid-year.

Q: Analyst asked about new loan origination yields and whether the Q3 yield increase provides a good baseline for modeling. / A: CFO and CEO explained that most loans spread over Treasuries/FHLB with spreads north of 200bps. New originations averaged high sixes to low sevens percent recently. With significant asset sensitivity, the bank expects continued yield improvement in Q4 as repricing flows through, providing a positive tailwind.

Q: Analyst asked if recent rate volatility caused a pullback in commercial real estate deal flow or refinancing activity. / A: CEO responded that while some borrowers may renegotiate deals in process, there has been no significant general slowdown in traditional refinancing or new project starts. However, he acknowledged that further rate moves could pose a risk if projects require more equity or face tougher underwriting.