First Commerce Bancorp, Inc. Reports the Third Quarter and Year-to-Date 2024 Results

LAKEWOOD, NJ / ACCESSWIRE / October 31, 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 $3.4 million for the three and nine months ended September 30, 2024 respectively, as compared to $1.7 million and $7.9 million for the three and nine months ended September 30, 2023 respectively. Basic earnings per common share for the three and nine months ended September 30, 2024, were $0.05 and $0.15, respectively, compared to $0.07 and $0.33 for the three and nine months ended September 30, 2023, respectively.

President & CEO Donald Mindiak commented, "Our earnings continue to be impacted by higher cost of funds which in turn affected our net interest margin. In September, the Federal Reserve took action to cut its benchmark rate, signaling a potential tail-wind for bank fundamentals. We believe this will benefit us in the future given our interest rate sensitivity as well as our retail and wholesale funding structure. Our liquidity profile, credit metrics and capital position continue to be strong. We are focused on strengthening our balance sheet, enhancing our funding strategy and monitoring our operating expenses to achieve sustained growth and profitability."

Continuing, Mr. Mindiak remarked that, "with respect to the on-going stock repurchase plan, the Company has availed itself to advantageous market conditions in continuing to repurchase common shares at a discount to our book value. During the quarter ended September 30, 2024, we have repurchased just over 800,381 shares at an average price of $6.15/share which is a discount of $2.16/share or 26% of our book value of $8.31/share as of September 30, 2024. We remain committed to leveraging our capital organically and through corporate initiatives that have the capacity to enhance value for our shareholders."

Financial Highlights

Balance Sheet Review

Total assets increased by $40.2 million or 2.8% to $1.48 billion at September 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 nine months ended September 30, 2024.

Total cash and cash equivalents increased by $12.9 million or 20.9% to $74.6 million at September 30, 2024 from $61.7 million at December 31, 2023. This increase was primarily due to an increase in wholesale borrowings which were used for standard operational purposes.

Total loans receivable, net of allowance for credit losses increased by $10.9 million or 0.9% to $1.25 billion at September 30, 2024 from $1.24 billion at December 31, 2023. Commercial real estate loans, commercial loans and construction loans increased $7.6 million, $4.0 million and $3.6 million, respectively, partially offset by a $3.3 million decrease in small business administration loans and a $1.1 million decrease in residential mortgage loans. The allowance for credit losses increased by $399,000 to $14.9 million or 1.18% of gross loans at September 30, 2024 as compared to $14.5 million or 1.16% of gross loans at December 31, 2023.

Total investment securities increased by $12.6 million or 18.3% to $81.7 million at September 30, 2024 from $69.1 million at December 31, 2023. The increase in investment securities resulted primarily from $21.3 million in purchases of investment securities, partially offset by $7.2 million in total paydowns and $1.5 million in maturities of investment securities.

Total deposits were $1.10 billion at September 30, 2024, almost unchanged from 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 $11.4 million or 6.2% to $172.6 million at September 30, 2024 from $184.0 million at December 31, 2023. The decrease in stockholders' equity was primarily due to a $13.5 million in purchase of outstanding shares of common stock, offset by an increase of $1.6 million in retained earnings and an increase of $453,000 in additional paid-in-capital. During the first nine months of 2024, the Company repurchased 2.2 million shares for approximately $13.5 million, or a weighted average price of approximately $6.27 per share.

Three Months of Operations

Net interest income decreased by $1.1 million or 11.9% to $8.4 million for the three months ended September 30, 2024 from $9.5 million for the three months ended September 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 trend higher than medium and long-term maturities.

Total interest income increased by $1.4 million or 7.7% to $20.1 million for the three months ended September 30, 2024 from $18.7 million for the three months ended September 30, 2023. Interest income on loans, including fees, increased $945,000 or 5.4% to $18.3 million for the three months ended September 30, 2024, compared to $17.3 million for the three months ended September 30, 2023. The increase in interest income on loans, including fees, resulted primarily from an increase in the average balance of loans receivable of $11.9 million or 1.0% to $1.26 billion for the three months ended September 30, 2024 compared to $1.25 billion for the three months ended September 30, 2023 and an increase of twenty-seven basis points in the average yield on loans to 5.79% for the three months ended September 30, 2024 compared to 5.52% for the same period in the prior year. Interest income on interest-bearing deposits with other banks increased $158,000 or 23.3% to $834,000 for the three months ended September 30, 2024 as compared to $677,000 for the same period in the prior year. This increase resulted from a higher average balance of interest-bearing deposits with banks of $12.7 million or 23.3% to $67.5 million for the three months ended September 30, 2024 compared to $54.8 million for the same period in the prior year. Interest income on investment securities increased $294,000 or 55.5% to $824,000 for the three months ended September 30, 2024 as compared to $530,000 for the same period in the prior year, as a result of purchasing and replacing paydowns of investment securities with higher yielding corporate bonds. Average yield on investment securities increased by 112 basis points to 4.02% for the three months ended September 30, 2024 compared to 2.90% for the same period in the prior year. Dividend income on restricted stock increased $45,000 to $198,000 for the three months ended September 30, 2024 as compared to $154,000 for the same period in the prior year, primarily as a result of an increase of $2.8 million in average balance of restricted stock outstanding year over year.

Total interest expense increased by $2.6 million or 27.9% to $11.8 million for the three months ended September 30, 2024 from $9.2 million for the three months ended September 30, 2023. The increase in interest expense occurred primarily as a result of a sixty-seven basis points increase in the average cost of interest-bearing liabilities to 4.18% for the three months ended September 30, 2024 from 3.51% for the three months ended September 30, 2023 and an increase in average balance of interest-bearing liabilities of $79.6 million or 7.6%, to $1.12 billion for the three months ended September 30, 2024 from $1.04 billion for the three months ended September 30, 2023. The increase in average balance of interest-bearing liabilities included a $58.5 million increase in average wholesale borrowings and a $21.1 million increase in average interest-bearing deposit liabilities for the three months ended September 30, 2024. The increase in the average cost of interest-bearing liabilities resulted primarily from the continued higher interest rate environment. The increase in interest-bearing liabilities was primarily used to support loan growth and to maintain liquidity.

During the third quarter of 2024, the Company recorded a net $54,000 provision for credit losses as compared to a net $600,000 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 third quarter of 2024, the Company recorded a provision for credit losses of $73,000 on loans and corporate securities held-to-maturity, which was partially offset by a $19,000 reversal of credit losses for unfunded commitments. Management believes that the allowance for credit losses on loans was appropriate at September 30, 2024.

Net interest margin decreased by thirty-eight basis points to 2.35% for the three months ended September 30, 2024 compared to 2.73% for the three months ended September 30, 2023. The decrease in the net interest margin is primarily due to an increase in the average cost of interest-bearing liabilities to 4.18% for the three months ended September 30, 2024 from 3.51% for the three months ended September 30, 2023 and an increase in the average balance of interest-bearing liabilities to $1.12 billion for the three months ended September 30, 2024 from $1.04 billion for the three months ended September 30, 2023. This increase was partially offset by an increase in average balance of interest earning assets of $36.2 million or 2.6% to $1.42 billion for the three months ended September 30, 2024 compared to $1.38 billion for the three months ended September 30, 2023 and an increase in the average yield of interest earning assets to 5.66% for the three months ended September 30, 2024 from 5.38% for the three months ended September 30, 2023.

Non-interest expense increased by $392,000 or 5.5% to $7.5 million for the three months ended September 30, 2024 compared to $7.1 million for the three months ended September 30, 2023. Salaries and employee benefits increased by $185,000 or 4.2% to $4.6 million for the three months ended September 30, 2024 as compared to $4.4 million for the three months ended September 30, 2023. The increase in salaries and employee benefits resulted primarily from annual increase in health benefit costs year over year. Professional fees decreased by $139,000 or 23.6% to $451,000 for the three months ended September 30, 2024 as compared to $590,000 for the three months ended September 30, 2023, primarily due to a reduction in legal services related to the formation of the holding company and a reduction in audit fees compared to the same period in the prior year. Data processing costs increased by $112,000 or 51.2% to $330,000 for the three months ended September 30, 2024 from $218,000 for the three months ended September 30, 2023, as a result of annual fee increase, and additional cost related to new products and services. Other operating expenses increased by $277,000 or 36.4% to $1.0 million for the three months ended September 30, 2024 from $760,000 for the three months ended September 30, 2023. Other operating expenses are primarily comprised of loan related expenses, dues and subscriptions, digital banking expenses, sponsorships, training and education, software maintenance and depreciation, and miscellaneous expenses. Management will continue to monitor its operating expenses to enhance shareholder value.

The income tax provision decreased by $296,000 or 55.2% to $240,000 for the three months ended September 30, 2024 from $536,000 for the three months ended September 30, 2023. This decrease in the income tax provision resulted primarily from a decrease in the pre-tax income year over year. In addition, the effective tax yield declined year over year as a result of a reduction in New York state tax apportionment.

Nine Months of Operations

Net interest income decreased by $5.7 million or 18.5% to $24.9 million for the nine months ended September 30, 2024 from $30.6 million for the nine months ended September 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 trend higher than medium and long-term maturities.

Total interest income increased by $5.9 million or 11.1% to $59.0 million for the nine months ended September 30, 2024 from $53.1 million for the nine months ended September 30, 2023. Interest income on loans, including fees, increased $4.4 million or 8.8% to $53.9 million for the nine months ended September 30, 2024, compared to $49.6 million for the nine months ended September 30, 2023. The increase in interest income on loans, including fees, resulted primarily from an increase in the average balance of loans receivable of $49.7 million or 4.1% to $1.25 billion for the nine months ended September 30, 2024 compared to $1.20 billion for the nine months ended September 30, 2023 and an increase of twenty-five basis points in the average yield on loans to 5.75% for the nine months ended September 30, 2024 compared to 5.50% 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 and approximately $400,000 in pre-payment penalties. Interest income on interest-bearing deposits with other banks increased $779,000 or 47.1% to $2.4 million for the nine months ended September 30, 2024 as compared to $1.7 million for the same period in the prior year. This increase resulted from a higher average yield on interest-bearing deposits with banks of 4.94% for the nine months ended September 30, 2024 compared to 4.50% for the same period in the prior year, and an increase of $16.5 million in average balances of interest-bearing deposits with banks year over year. Interest income on investment securities increased $482,000 or 29.8% to $2.1 million for the nine months ended September 30, 2024 as compared to $1.6 million for the same period in the prior year, as a result of purchasing and replacing paydowns of investment securities with higher yielding corporate bonds. Average yield on investment securities increased by eighty-three basis points to 3.67% for the nine months ended September 30, 2024 compared to 2.84% for the same period in the prior year. Dividend income on restricted stock increased $244,000 to $538,000 for the nine months ended September 30, 2024 as compared to $295,000 for the same period in the prior year, primarily as a result of significantly higher average yield on restricted stock of 8.54% for the nine months ended September 30, 2024 compared to 6.64% for the same period in the prior year, and an increase of $2.5 million in average restricted stock balance year over year.

Total interest expense increased by $11.5 million or 51.3% to $34.0 million for the nine months ended September 30, 2024 from $22.5 million for the nine months ended September 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 4.11% for the nine months ended September 30, 2024 from 3.05% for the nine months ended September 30, 2023 and an increase in average balance of interest-bearing liabilities of $121.4 million or 12.3%, to $1.10 billion for the nine months ended September 30, 2024 from $985.5 million for the nine months ended September 30, 2023. The increase in average balance of interest-bearing liabilities included a $70.5 million increase in average interest-bearing deposit liabilities and a $50.9 million increase in average wholesale borrowings for the nine months ended September 30, 2024. The increase in the average cost of interest-bearing liabilities resulted primarily from the continued higher interest rate environment. The increase in interest-bearing liabilities was primarily used to support loan growth and to maintain liquidity.

During the first nine months of 2024 the Company recorded a net $362,000 provision for credit losses as compared to a net $971,000 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 nine months of 2024, the Company recorded a provision for credit losses on loans and corporate securities held-to-maturity of $505,000, which was offset by a $143,000 reversal of credit losses for unfunded commitments. Unfunded commitment balances declined by $55.1 million during the first nine 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 September 30, 2024.

Net interest margin decreased by seventy basis points to 2.37% for the nine months ended September 30, 2024 compared to 3.07% for the nine months ended September 30, 2023. The decrease in the net interest margin is primarily attributable to a significant increase in the cost of interest-bearing liabilities to 4.11% for the nine months ended September 30, 2024 from 3.05% for the nine months ended September 30, 2023 and increase in the average balance of interest-bearing liabilities to $1.10 billion for the nine months ended September 30, 2024 from $985.5 million for the nine months ended September 30, 2023, partially offset by an increase in the average balance of interest earning assets $1.40 billion for the nine months ended September 30, 2024 compared to $1.33 billion for the nine months ended September 30, 2023, as well as an increase of twenty-nine basis points on the yield of average interest earning assets to 5.61% for the nine months ended September 30, 2024 from 5.32% for the nine months ended September 30, 2023.

Non-interest income decreased by $269,000 or 13.9% to $1.7 million for the nine months ended September 30, 2024 from $1.9 million for the nine months ended September 30, 2023. The decrease in total non-interest income resulted primarily from a decrease in BOLI income of $313,000 or 30.6% to $711,000 for the nine months ended September 30, 2024 from $1.0 million for the nine months ended September 30, 2023. The decrease in BOLI income resulted from a one-time benefit received on the Bank's investment in BOLI during the first nine months of 2023. Services charges and fees increased $114,000 and other income decreased $70,000 in during the nine months ended September 30, 2024 compared to the same period in the prior year.

Non-interest expense increased by $849,000 or 4.0% to $22.0 million for the nine months ended September 30, 2024 compared to $21.1 million for the nine months ended September 30, 2023. Salaries and employee benefits increased by $567,000 or 4.4% to $13.5 million for the nine months ended September 30, 2024 as compared to $13.0 million for the nine months ended September 30, 2023. The increase in salaries and employee benefits resulted primarily from annual increase in health benefit costs year over year. Occupancy and equipment expense decreased by $280,000 or 9.3% to $2.7 million for the nine months ended September 30, 2024 as compared to $3.0 million for the nine months ended September 30, 2023 primarily due to a decrease in other real estate owned expenses ("OREO"), other occupancy expenses and equipment service contract costs. Professional fees decreased by $224,000 or 13.6% to $1.4 million for the nine months ended September 30, 2024 from $1.6 million for the nine months ended September 30, 2023 as a result of reduction in legal services related to the formation of the Holding Company and audit fees. Data processing costs increased by $260,000 or 39.7% to $915,000 for the nine months ended September 30, 2024 from $655,000 for the nine months ended September 30, 2023 as a result of annual fee increase and additional cost related to new products and services. FDIC assessment increased by $102,000 or 23.8% to $531,000 for the nine months ended September 30, 2024 from $429,000 for the nine months ended September 30, 2023 primarily due to overall higher deposit insurance assessment rate in effect during the first nine months of 2024 compared to the same period in the prior year. Other expenses increased by $482,000 or 23.2% to $2.6 million for the nine months ended September 30, 2024 from $2.1 million for the nine months ended September 30, 2023. Other operating expenses are primarily comprised of loan related expenses, dues and subscriptions, digital banking expenses, sponsorships, training and education, software maintenance and depreciation, and miscellaneous expenses. There was no loss on valuation of OREO for the nine months ended September 30, 2024 compared to a loss on sale of OREO of $59,000 recorded during the nine months ended September 30, 2023.

The income tax provision decreased by $1.6 million or 63.9% to $908,000 for the nine months ended September 30, 2024 from $2.5 million for the nine months ended September 30, 2023. The decrease in the income tax provision resulted primarily from a decrease in earnings before income taxes of $6.2 million or 59.1%, to $4.3 million for the nine months ended September 30, 2024 from $10.5 million for the nine months ended September 30, 2023. The effective tax rate for the nine months ended September 30, 2024 was 21.2% as compared to 24.0% for the nine months ended September 30, 2023.

Asset Quality

The allowance for credit losses increased by $399,000 or 2.8% to $14.9 million or 1.18% of gross loans at September 30, 2024 as compared to $14.5 million or 1.16% of gross loans at December 31, 2023 and $19.6 million or 1.55% of gross loans at September 30, 2023. During the first nine months of 2024, the Company added a $423,000 provision to the allowance for credit losses and had net charge-offs of $24,000. 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 $14.5 million or 1.15% of gross loans at September 30, 2024 as compared to $18.4 million or 1.47% of gross loans at December 31, 2023 and $15.7 million or 1.24% of gross loans at September 30, 2023. Non-accrual loans decreased by $3.9 million or 21.1% from December 31, 2023. The allowance for credit losses was 102.7% of non-accrual loans at September 30, 2024, compared to 78.8% and 124.3% of non-accrual loans at December 31, 2023 and September 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.

Donald Mindiak
President and Chief Executive Officer
105 River Ave | Lakewood, NJ 08701
T: (732) 364-0032 x1224
[email protected]

First Commerce Bancorp, Inc.
Consolidated Statements of Financial Condition
(Unaudited)

First Commerce Bancorp, Inc.
Consolidated Statements of Income
For the three months ended September 30, 2024 and 2023
(Unaudited)

First Commerce Bancorp, Inc.
Consolidated Statements of Income
For the nine months ended September 30, 2024 and 2023
(Unaudited)

First Commerce Bancorp, Inc.
Net Interest Margin Analysis
(Unaudited)