First Bank (NASDAQ:FRBA) reported its third-quarter 2024 earnings, surpassing analysts' expectations with an earnings per share (EPS) of $0.42, compared to the forecasted $0.39. The bank's revenue also exceeded projections, coming in at $33.77 million against an anticipated $33.07 million. Following the earnings announcement, First Bank's stock experienced a notable rise, climbing 5.45% in premarket trading to $14.70.
Key Takeaways
- First Bank's EPS and revenue both surpassed analyst expectations.
- The stock price increased significantly in premarket trading.
- The bank reported strong loan and deposit growth despite a declining net interest margin.
Company Performance
First Bank demonstrated robust performance in the third quarter of 2024, with net income of $8.2 million or $0.32 per diluted share. The bank achieved nearly 12% annualized loan growth and 11% deposit growth, indicating strong customer acquisition and retention. Despite a decline in net interest margin to 3.49% from 3.62% in the previous quarter, the tangible book value increased by 3% quarter-over-quarter.
Financial Highlights
- Revenue: $33.77 million (exceeded forecast of $33.07 million)
- Earnings per share: $0.42 (exceeded forecast of $0.39)
- Return on average assets: 88 basis points
- Loan growth: Nearly 12% annualized
- Deposit growth: 11% annualized
Earnings vs. Forecast
First Bank's actual EPS of $0.42 outperformed the forecast of $0.39 by approximately 7.7%. This positive surprise is a continuation of the bank's trend in beating earnings expectations, reinforcing investor confidence. The revenue of $33.77 million also surpassed the forecast by $700,000, marking a solid performance for the quarter.
Market Reaction
Following the earnings release, First Bank's stock saw a 5.45% increase in premarket trading, reaching $14.70. This upward movement reflects a positive investor response to the bank's earnings beat and strong financial metrics. The stock remains below its 52-week high of $15.87, indicating room for further growth as the market digests the latest results.
Outlook & Guidance
Looking ahead, First Bank anticipates stable net interest margins and continued focus on reducing deposit costs. The bank projects solid loan funding for the fourth quarter, aligning with historical growth patterns. The forward guidance suggests a cautious yet optimistic outlook for the remainder of 2024.
Executive Commentary
"We're generating quality earnings and growing book value," stated Patrick Ryan, CEO, emphasizing the bank's strong financial position. Darlene Gillespie, Chief Retail Banking Officer, added, "We continue to prioritize full banking relationships and this approach has proven successful," highlighting the bank's strategic focus on relationship banking.
Q&A
During the earnings call, analysts inquired about the bank's strategies for margin stabilization and loan yield dynamics. Executives addressed these concerns by outlining their plans for managing deposit costs and exploring opportunities for margin expansion through strategic initiatives.
Risks and Challenges
- Declining net interest margins could pressure future profitability.
- Economic uncertainty may impact loan demand and asset quality.
- Competitive pressures in the banking sector could affect market share.
- Regulatory changes could impose additional compliance costs.
- Market volatility may influence investor sentiment and stock performance.
Full transcript - First Bank (FRBA) Q3 2024:
Ian, Conference Operator: Thank you for standing by. My name is Ian, and I will be your conference operator today. At this time, I would like to welcome everyone to the First Bank Earnings Conference Call, Third Quarter 2024. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
Thank you. I will now turn the call over to Patrick Ryan, President and CEO. You may begin your conference.
Patrick Ryan, President and CEO, First Bank: Thank you. I'd like to welcome everyone today to First Bank's Q3 2024 earnings call. I am joined by Andrew Huebschmann, our Chief Financial Officer Darlene Gillespie, our Chief Retail Banking and Peter Cahill, our Chief Lending Officer. Before we begin, however, Andrew will read the Safe Harbor statement.
Andrew Huebschmann, Chief Financial Officer, First Bank: Thanks, Pat. 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 ks for the year ended December 31, 2023 filed with the FDIC.
Pat, back to you.
Patrick Ryan, President and CEO, First Bank: Thanks, Andrew. I'll kick it off with some high level summary comments and then the team will get into a little more details. Overall, I was happy to see return of solid loan and deposit growth during the quarter. After a couple of flattish quarters in the first half of the year based on a little bit of a slowdown in activity and some elevated pay downs, It was nice to see some robust loan and deposit growth in the quarter. So we felt very good about that.
Overall loans grew about $90,000,000 Unfortunately, a large portion of that came towards the back half of September, leading to a relatively small increase in the average balances outstanding. So from a quarterly results perspective, not ideal since we didn't get chance to earn much interest income on those loans and obviously had to book a full provision. But at the end of the day, we think that will serve us well heading into the Q4 and next year. We also saw deposits grow $82,000,000 which was a very nice quarter and $19,000,000 of that was coming in the non interest bearing category, which was great to see.
Peter Cahill, Chief Lending Officer, First Bank: We did have some margin compression during the quarter. Andrew will get into some
Patrick Ryan, President and CEO, First Bank: of the reasons about why Obviously, there was still pressure on the deposit funding side. We did take some significant actions in September when the Fed made their move, and we expect we'll be able to help keep the margin stable as we move forward. We continue to find incremental opportunities to fine tune our balance sheet. We sold about $12,000,000 in low yielding investment securities that had about a 2.41% weighted average rate. We did that during the quarter when the bond market rallied And we canceled $25,000,000 in lower yielding BOLI assets and purchased $20,000,000 in new policies with a net pickup of about 2.5% on those additional BOLI policies, which will certainly help as we move forward.
We estimate a sort of a normalized net income during the quarter of about $9,700,000 We calculate that by sort of smoothing out some of the unusual items during the quarter, whether that be one time non recurring revenue expense items or certain line items that may have been unusually high or low compared to what we normally see. And we try to take a look at that normalized number just to get a sense for the run rate going forward. That 9 point $7,000,000 estimate was basically in line, maybe a little bit lower than where we were in the 1st and the second quarter is doing the same analysis. So continuation of continued good performance on kind of a core normalized basis. And you know, we think we're well positioned for good results moving forward.
Importantly, the income from the strong growth in Q3 together with the balance sheet enhancements should help position us for a us for a good Q4 and for a strong start to next year. Dollars 56,000,000 of the loan growth or about 60% came from our C and I and owner occupied segments, which are two areas of emphasis for us. So that was nice to see. And the credit quality remained strong across the entire portfolio with all of our segments, including commercial real estate performing well. Last but not least, tangible book value grew significantly $0.38 during the quarter or about 3% quarter over quarter.
In summary, I think we're doing the right thing to create value in this environment. We're generating quality earnings and growing book value. We're optimizing our portfolios and driving growth in deposits and C and I lending. Future earnings profile looks strong and we expect a stable margin and growth and maturation of some of our new specialized lending businesses will help drive improved profitability as we move forward.
Peter Cahill, Chief Lending Officer, First Bank: So now I'd like to turn it over
Patrick Ryan, President and CEO, First Bank: to Andrew to get into a little more detail on the financial results for the quarter. Andrew?
Andrew Huebschmann, Chief Financial Officer, First Bank: Thanks, Pat. For the 3 months ended September 30, 2024, we recorded net income of $8,200,000 or $0.32 per diluted share and a 88 basis point return on average assets. Recall that we closed the Malvern acquisition in July of last year, so that is a big driver of the year over year comparisons for the period. We had an outstanding quarter for growth and our quarterly metrics were slightly obscured by some noisy items. The real highlight of the quarter was the growth of our loan and deposit portfolios.
Loans were up nearly 12% annualized and deposits up 11% annualized from the 2nd quarter. Loan growth was broad based, but the growth occurred late in the quarter with the effect of raising average loan balances only $12,200,000 while point to point they were up 89,500,000 dollars With such a high level of late quarter growth, our credit loss expense outpaced the loan interest earned on the new loans originated during the quarter. The 1,600,000 credit loss expense for the quarter was primarily related to provision build related to this growth as asset quality remained strong. On the other hand, net interest income actually declined by 446,000 due to some margin compression which was due to higher interest income being outpaced by increased deposit costs and higher borrowings. On the deposit side, balances were up total $82,400,000 with growth occurring across all categories.
Our net interest margin declined to 3.49% in the Q3 compared to 3.62% in the prior quarter. Interest bearing deposit costs continue to increase rising 6 basis points from Q2 as we saw some expected upward CD repricing and the competitive environment was still difficult. We also saw average loan yields decline by 8 basis points compared to the linked prior quarter due to a combination of approximately 200,000 in lower acquisition accounting accretion, approximately 60 $1,000 in lower prepayment penalties on loans and slightly lower average loan rates primarily due to the current market rate environment. Our margin was also impacted by the higher level of on balance sheet liquidity maintained during the quarter. Looking ahead, interest income will be negatively impacted by those late September fed rate cut.
However, we still have loans that were originated in a lower rate environment that will be repricing higher. We also successfully moved rates lower on a significant portion of our deposit base after the recent Fed cut. We continue to manage a well balanced asset and liability position, which we expect will lead to a relatively stable margin with opportunities for improvement regardless of how quickly the Fed reduces rates. As I mentioned, our asset quality continues to be strong. NPAs to total assets declined from 56 basis points to 47 and our allowance for credit losses to total loans remained steady at 1.21%.
Including general acquisition accounting credit marks that are not included in the allowance, our ratio increases to 1.47%. As we continue our ongoing work to prioritize our balance sheet or optimize our balance sheet, we executed sales of certain lower yielding investment securities. During the Q3, we sold approximately $11,700,000 in additional investment securities, resulting in a $555,000 net loss on the sale of investments. Another balance sheet optimization strategy that impacted income was the BOLI restructuring transaction we completed during the quarter. We recorded a one time enhancement fee of approximately $1,100,000 related to the restructuring and on the flip side of this benefit was additional tax expense totaling approximately $1,200,000 Non interest expenses were $18,600,000 for the Q3 compared to $18,000,000 in Q2 2024.
The increase primarily reflects an increase of $533,000 in OREO expense which was primarily related to the write down of an OREO asset during the quarter. We continue to prioritize expense management and expect the core expense base to be relatively stable over the next several quarters. As I mentioned earlier, our tax rate was affected by a one time basis by the BOLI restructuring. Without that impact our effective tax rate would have been approximately 24% for the quarter. We anticipate that our effective tax rate going forward will be in the range of 24% to 25%.
Stripping away some of these noisy factors you see a very positive story for this quarter. We reported an efficiency ratio of around 58%, once again remaining below 60% for the 21st consecutive quarter. We also expanded our tangible book value per share as Pat mentioned. We are very pleased with our business growth and the continued balance sheet repositioning we executed during the quarter despite the short term impact it had on earnings. We believe we are positioned to perform very well for the remainder of 2024 and beyond.
At this time, I'll turn it over to Darlene Gillespie, our Chief Retail Banking Officer for her remarks. Darlene, go ahead.
Darlene Gillespie, Chief Retail Banking Officer, First Bank: Sure. Thanks. Thank you, Andrew, and good morning, everyone. As Pat and Andrew have mentioned, deposit growth was robust during the Q3 of this year. We attribute this to our team's outstanding ability to build and maintain deep customer relationships, as well as our very proactive efforts to manage deposit pricing in anticipation of the Fed's rate reduction in September.
As mentioned, our total deposits were up approximately $82,400,000 or over 11% annualized from the Q2 of 2024 and the expansion was across the board. Non interest bearing demand and interest bearing demand showed tremendous growth in a very dynamic rate environment, up $19,300,000 $23,300,000 respectively during the quarter. Money market and savings grew $36,300,000 and time deposits grew $3,600,000 from the Q2 of 2024. The majority of this growth was in our commercial portfolio. Predominantly
Patrick Ryan, President and CEO, First Bank: all
Darlene Gillespie, Chief Retail Banking Officer, First Bank: of the banks year to date deposit growth occurred during the Q3 as a result of onboarding some larger commercial relationships, which aligns with the quarter's loan growth. We have been working to strike the balance of achieving profitable pricing, while also maintaining desirable customer relationships. And our 3rd quarter outcome suggests our bankers are doing this skillfully and effectively. This comes even as we continue to let costlier and non relationship funding leave the bank. The key word for us here is relationship, and that's our marching order.
We continue to prioritize full banking relationships and this approach has proven successful. While we started to move some rates lower earlier in the year in anticipation of the Fed rate cut, With the cut actually taken place in late September, it gave us the opportunity to move rates down in a more aggressive manner. We have not experienced any significant attrition to date and we actually saw an increase in our deposit balances. Given the interest in high yielding products throughout the year and our large growth in volume during the quarter, we're happy to see our overall total deposit costs only increased by 4 basis points from the Q2. We continue to effectively manage our funding costs to support lowering this metric and maintaining a stable net interest margin.
As I've mentioned in recent quarters, our branch strategy is aimed at supporting engagement in our current markets and opportunistic expansion in adjacent markets. We currently have 26 branches and in Q4 we're completing a relocation from our Glen Mills, Pennsylvania location to Media, Pennsylvania. And we're excited about our new branch opening in Trenton, New Jersey. We will also be consolidating our 2 Flemington, New Jersey locations into 1. Net, there is no change in the number of locations, but we are excited about the deposit and overall opportunities that will present itself by expanding into these markets.
Lastly, I want to mention we recently launched our online account opening platform as part of our digital banking initiative to support our deposit growth efforts. We continue to see an increased preference for digital banking and we're excited about the momentum we have built in offering easy and convenient solutions for our customers. Overall, we are very pleased with the performance of our deposit portfolio this quarter and confident that our continued focus on customer service, competitive product offerings and innovation will support sustained deposit growth into the next quarter and beyond. At this time, I'll turn it over to Peter Cahill, our Chief Lending Officer, for his remarks. Peter?
Peter Cahill, Chief Lending Officer, First Bank: Thanks, Darlene. The lending area in Q3 had a quarter where our work over the past few quarters was a lot more evident. As you know, we've been focused on developing business where relationships are shared with our customers. That's where deposits and other ancillary business lies. Transaction (JO:TCPJ) business is something we're just not looking to do.
As we've mentioned before, we are seeing more relationship business in commercial and industrial than elsewhere. Our regional teams are doing well and the C and I related specialized business areas are also doing very well. Private equity banking after a slower start than planned this year has picked up steam significantly and our asset based lending area is on track to meet its goals for the year. All of this is not to say that we are no longer in the market for investor real estate relationships. We've always done a good bit of investor real estate lending and we'll continue to do so.
Historically, slightly more than half of our lending business has been in that area. Investor real estate loans, as you know, tend to be more transactional as properties are bought and sold. Our focus on investor real estate has been with investors and developers who want to maintain a relationship with us over the long term. The earnings release details lending activities year to date. Loan growth was essentially flat through the 1st 6 months, absent the sale of approximately $24,000,000 in non strategic investor real estate loans in Q2.
In the Q3, we converted our very strong loan pipeline into outstanding loans that resulted in growth for the quarter of almost $90,000,000 The schedules in the earnings release break down the loan portfolio into their various segments and show the changes from quarter to quarter. We saw growth in all key areas led by C and I CREO and owner occupied and including investor real estate as well as residential and consumer. A positive factor in all this growth as was pointed out by I think both Pat and Andrew was that growth in C and I loans outpaced growth in investor real estate by a factor of 2 to 1. Overall for Q3, we closed and funded new loans of $122,000,000 and experienced loan payoffs of $43,000,000 Other factors impacting overall loan growth are borrowings and pay downs underlines of credit as well as the amortization of term debt. Worth mentioning, I think, is that Q3 represented our largest quarter in terms of new loans funded and our smallest quarter in terms of loan payoffs in over 2 years.
I don't really have a specific reason for this happening other than the build of a strong and growing loan pipeline heading into Q3, coupled with experiencing out of the ordinary levels of payoffs in recent quarters. The bottom line is that quarter to quarter results can be bumpy, but they should even out in the long run. C and I loans made up 70% of new loans funded over the 1st 9 months of the year. This well exceeds what we've done in previous years and is evidence, I think, that we're executing on our plan to go where the relationship business is. We always track the reasons that loans get paid off and the number one reason through the 1st 9 months of the year was that the asset underlying the loan was sold, kind of an out of control occurrence source.
Very close second was where loans are refinanced out of the bank. And the good news is with some of these payoffs that the majority in over 70% have been investor real estate loans. The turnover in this segment helps us manage the makeup of the overall portfolio. In fact, there's a slide in the earnings supplement that reflects our level of investor real estate loans to capital. One can see an increase after the acquisition of Malvern last September, but then decreasing since.
Now on our loan pipeline, our pipeline at the end of the Q3 stood at $276,000,000 of probable fundings, down 19% from the June 30th level of $342,000,000 This was expected after the loan closings we had in Q3, most of which were at the very end of the quarter as Andrew and Pat mentioned. Overall, I continue to be pleased with these results. We have an active calling effort and we're seeing good diversification between the groups. If one breaks down the components of the pipeline at quarter end, D and I loans are 49% of the pipeline, investor real estate 48% and consumer making up the balance of 2% or 3%. Looking at how this might impact the rest of the year, our level of projected loan funding for Q4 is solid and in line with historic quarterly loan growth projections.
While a lot of banks in the market are experiencing weak loan demand, we're seeing good activity in most areas. Regarding asset quality, I don't have anything to add to what's in the earnings release or what's already been mentioned. The portfolio continues to look good to me. Charge offs for minimal non performing loans continue to decline and delinquent loans continue to be very small. To wrap things up, there weren't any significant changes this quarter with our regional teams or specialty banking areas.
They all continue to perform fairly well. This concludes my remarks about lending and I'll turn things back now to Pat Ryan for some final comment.
Patrick Ryan, President and CEO, First Bank: Thank you, Peter. Thank you, Andrew and Darlene. At this point, we will open it up for the Q and A portion of the call.
Ian, Conference Operator: Our first question comes from the line of
Justin, Analyst: Wondering if you could talk through a little more of the commentary on a stable margin from here. And I guess to start with the lower loan yields in the quarter, just where new loan production is coming on that and how that compares to what's rolling off?
Patrick Ryan, President and CEO, First Bank: Yes, Justin, great question. Obviously, we're keeping a close eye on it. On the kind of the term side, as I'm sure you know, a lot of that gets priced off of kind of the middle of the curve. And so when things dipped for a while, we did see loans on the term side moving closer to the mid low 6s, which was down a fair bit from where we were a few months ago when we were getting yields in the 7s. That being said, our floating rate stuff, whether it's construction or prime based lines of credit are still earning prime, prime plus half, prime plus 1 and even with the Fed move, the yields on those are still in the 8s or 9s sometimes.
So sometimes it's a little bit of the mix that can help drive the impact within any given quarter. But the big thing for overall margin stabilization is our commitment to continue to move deposit costs lower to make sure that we're at least matching, if not doing better than what we're seeing on the asset side. We did take some steps during the quarter in terms of funding. Obviously, you saw based on what happened with loan yields, we didn't quite keep pace, but we're keeping a close eye on it and we're going to continue to drive liability costs down based on what we need to do to preserve the margins. So hard to say specifically how it will play out, but it's obviously a key goal of ours and we're happy to say that what we're seeing in the market and what we're hearing from customers and we have lower rates is not necessarily excitement, but we're not getting a ton of pushback and it doesn't appear to be anybody in the market who's really trying to continue to push growth with higher yield and deposit products.
So I think we will have the opportunity to see things stabilize as we move forward.
Justin, Analyst: Okay. And then on just levers to pull on the funding side, what is sort of and I'm not sure if you're able to quantify it, but as far as betas on the way down, what's embedded in there? And is there any element of conservatism as far as that goes? And might there be opportunity to do better there to perhaps see or outperform a stable margin and see margin expansion as rates continue to come down?
Patrick Ryan, President and CEO, First Bank: Yes, I mean, listen, there's certainly a scenario where that plays out, right? I don't think we're forecasting it, not because it can happen, but there's obviously a scenario where competitive pressures on the deposit side make it harder to keep it stable. So I think we figured the safest guidance was the middle of the road guidance. But yes, and obviously the other piece of this is what's happening with the yield curve. There's been a lot of talk about the spread between 2 and 10s and the curve is not inverted anymore.
Well, yes, I guess at the 2 and the 10 level, but what about the 0 to 5, which is probably more meaningful for banks that do commercial lending like us. And so if we start to see some extension and some steepening within the lower part of the curve, that could obviously lead to some margin expansion. But I think it's a little early to predict that at this point. So we're going to work towards stable and obviously take advantage of opportunities to make it move higher if we see them.
Justin, Analyst: Okay, got it. That's helpful. And then shifting gears a little, with the loan growth so back loaded, not sure if you think there is any correlation to the Fed having moved and borrowers making decisions based off that, however expected it was. But what are your expectations on how loan growth could trend over more so like the medium and longer term for the bank?
Patrick Ryan, President and CEO, First Bank: Yes. I'll let Peter give you a little bit of data just in terms of the historical trends. I think it's worth mentioning that we obviously spend our time looking at the world in quarterly 90 day increments. But in our business, it's a little crazy to think about things in that short of time horizon. So the short answer to the first part of your question is loans close at the end because that's where they happen to close, right.
So we tend to see very consistent performance over time in terms of loan production, but whether they close in the beginning of the quarter, the end of the quarter, the beginning of the year, the end of the year, there's just a lot of variability across the hundreds of conversations that we're having with our different borrowers and different projects that it's very rare that some outside factor would be the key driver. It just tends to be more the timing of the specific project or the renewal of the line or what have you. But Peter, why don't you jump in and maybe share with Justin some of the kind of the historical numbers you've looked at, not quarter to quarter per se, but how it kind of averages out over time?
Peter Cahill, Chief Lending Officer, First Bank: Yes. Justin, what that said is correct. I mean deals end up in the pipeline for quarters on end. In fact, we just went through the end of September and kind of did a very modest scrub of the pipeline and said, hey, look, if deals you go through deals that have been in the pipeline for 3 60 days or more, and there was only a handful of them, but it was amazing to me that most of them were still live deals. In fact, one was closing within 2 weeks.
So they can get delayed as to the various stages they go through. But when you look back at the $276,000,000 of what we call probable funding and you've been on our calls, that's where we kind of waited as to likelihood and where it is in the approval process. So, dollars 276,000,000 compared to an average for this year, for the 9 months was over $315,000,000 So we're down, but we're down because we had our biggest quarter and our biggest month in September in loan fundings. If you took that $315,000,000 average for the 9 months and compared it to last year, last year we were at $214,000,000 So we're $100,000,000 in average pipeline this year greater than where we were last year. So our folks are finding business out there.
It's just a question sometimes of getting across the finish line.
Justin, Analyst: Okay, great. I appreciate it. Yes, no, totally. I appreciate the detail there. And then Pat, I guess just one on the buyback.
I think in the past you've spoken about perhaps wanting to get to a point where you're operating with, call it, excess capital, if you will, before thinking about getting real active there. Just directionally, we saw capital ratios move lower with some of the growth. So just, I guess looking for an update there and if the new authorization is more of a just let's put it in place so we have it?
Patrick Ryan, President and CEO, First Bank: Yes. I mean, I'd say it's both, right? I mean, obviously, we think there's value in having a program in place regardless of the environment or the situation. But as far as how do we think about when we're going to jump in, obviously, key factor is where are we trading, right? And the closer we get to book value, the more interesting the stock buyback looks to us.
Obviously, some of it has to do with what we're seeing in our own pipeline and our growth prospects and overall capital levels. But I think we're at a point with current capital where we can be opportunistic. So I don't think we are in a let's wait till we get to some much higher level than we are. I think the levels that we're at are adequate and therefore, we can be in the market looking if we think the time is right. But at the same time, it's not a progressive strategy of ours to buy back every share we can that's in the plan.
I think it's more an opportunistic vehicle, if you will.
Justin, Analyst: Okay, helpful. I will leave it there. Appreciate you guys taking the questions.
Patrick Ryan, President and CEO, First Bank: Yes. Thank you, Justin.
Ian, Conference Operator: Our next question comes from the line of Manuel Neves with D. A. Davidson. Your line is open.
Manuel Neves, Analyst, D.A. Davidson: Hey, good morning. What is the kind of the right level of purchase accounting accretion going forward? Or could you just kind of it should be writing down? Was this quarter that different than expectations? Just can you kind of help with that?
Patrick Ryan, President and CEO, First Bank: Yes, I think Andrew can give you some visibility there. I mean it's a set schedule that does slowly work its way down over time. So Andrew, you want to jump in?
Andrew Huebschmann, Chief Financial Officer, First Bank: Yes, I think we talked about this. The level will drop and it does depend sometimes on paid prepayments of loans and things like that. Loan accretion is the primary driver of this. There is some other things going on in there, but it's mainly loan mark accretion. So it will drop slightly over the next few years and most of it gets earned in the 1st 3 years and then it drops off fairly significantly after that.
So there will continue to be small declines over the next 2 years and then it drops off kind of after that. But it should again, it will continue to drop slowly over approximately the next 24 months.
Manuel Neves, Analyst, D.A. Davidson: And do you have an exact number for what the new loan yield was? I know a lot of it came on at the end of the quarter. I just was trying to compare it to the loan yield that you booked for the whole quarter.
Andrew Huebschmann, Chief Financial Officer, First Bank: Yes, Mamaw, sorry. This is Andrew. Peter, do you I know you keep track of the kind of the weighted average yields. I don't have that data in front of me, but do you have some just kind of at least an estimate of what the loan yields were for the quarter?
Peter Cahill, Chief Lending Officer, First Bank: Yes. If you look at the new loans funded, closed and funded, not advances under existing lines, things like that. But new loans funded for the quarter, the weighted average was around 7.65 and that was down about a quarter, maybe 30 basis points from the same similar number the quarter before. So, I'd say the loans some of that gets pushed by larger loans that might be at a tighter spread or whatever, but quarter to quarter went down it went from about 8% to around 7.65%, 7.70 Does that help?
Manuel Neves, Analyst, D.A. Davidson: Yes, it does help. So that's where the commentary that the NIM would have been a little better if those loans were fully in there the whole quarter. Why isn't there kind of a bias for UP NIM given that they are
Peter Cahill, Chief Lending Officer, First Bank: up Some of the smaller loans that we do, we have business banking teams that are out doing a couple of $100,000 lines of credit and term loans to smaller businesses. They're going to be at prime plus 1, where a larger owner occupied real estate loan, dollars 10,000,000 $15,000,000 loan is going to be at 2 50 basis points or 2.50, 2.75 over treasuries, 5 year treasuries, as you know, are right around 4. So there's a different mix in there, different sizes, different mixes and it impacts that quarter to quarter number a little bit.
Manuel Neves, Analyst, D.A. Davidson: Okay. Yes.
Patrick Ryan, President and CEO, First Bank: And I also think, Manuel, there's as Justin talked about, there is a scenario where the margin can tick back up a little bit. I think we're a little hesitant to predict it just because, A, we don't know what the Fed is going to do. We got 25% of our balance sheet that flows down every time the Fed moves. And you get into the unknowns around what will the market absorb in terms of deposit reductions. And so I think there's a scenario where that plays out to our benefit, but I'd be hesitant to predict it until we get a little more visibility and how quickly we can lower the deposit costs.
Andrew Huebschmann, Chief Financial Officer, First Bank: On deposit costs, do you have an
Manuel Neves, Analyst, D.A. Davidson: end of period total deposit costs after the Fed cut? Your average was at 3.05. What were you at?
Patrick Ryan, President and CEO, First Bank: I don't know if we did that calculation. I know we what we did was we took a look at the asset side and we figured out the dollar amount that was going to reprice with the Fed move and then we came up with a reduction across a variety of our deposit portfolios that once fully implemented would have a similar impact to the loss interest income from the asset side. But I'm not sure we sort of calculated what does that mean in terms of the funding costs for the last 2 or 3 weeks of the quarter. But obviously, it's something we're keeping a close eye on.
Manuel Neves, Analyst, D.A. Davidson: Okay. And then the OpEx run rate, you did call out the OREO write down. Should we think of OpEx being stable with the write down or without? So it's like $18,000,000 or 18,600,000
Patrick Ryan, President and CEO, First Bank: dollars Yes, probably in between, but I don't know, Andrew, if you want to give a little more color there.
Andrew Huebschmann, Chief Financial Officer, First Bank: Yes, I think that's about right. Obviously, there's that's assuming kind of a core and they're very rarely do we not have some kind of one time unusual item during the quarter. But yes, I think we're thinking somewhere kind of in between that is the kind of core run rate over the next couple of quarters outside of any kind of unusual or one time items.
Manuel Neves, Analyst, D.A. Davidson: Okay. And is the right way to think of the fee side? Is that like $1,800,000 stripping out securities, stripping out some of the fully? Is that the right run rate going forward and what could kind of take it down?
Andrew Huebschmann, Chief Financial Officer, First Bank: The question is on non interest income?
Manuel Neves, Analyst, D.A. Davidson: Yes, fee income.
Justin, Analyst: Yes, I mean I think
Andrew Huebschmann, Chief Financial Officer, First Bank: if you strip out some of the noise from this quarter, that's a decent expectation for what we expect the numbers to look like going forward. Okay.
Manuel Neves, Analyst, D.A. Davidson: Thank you. I'll step back into the queue.
Ian, Conference Operator: There are no further questions at this time. I will hand the call back over to Patrick Ryan for closing remarks.
Patrick Ryan, President and CEO, First Bank: Okay, great. Well, again, thanks everybody taking the time to join the call. We appreciate the interest in First Bank and we'll look forward to regrouping with everybody at the end of next quarter. I hope everybody has a wonderful day.
Ian, Conference Operator: This concludes today's conference call. You may now disconnect. Have a good day.
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