On Wednesday, Piper Sandler adjusted its financial outlook on First Bank (NASDAQ: NASDAQ:FRBA), reducing the price target to $17.00 from the previous $18.00. The firm maintained its Overweight rating on the stock. The adjustment follows First Bank's third-quarter earnings report, which revealed an earnings per share (EPS) of $0.32. After accounting for a securities loss and a restructuring of its Bank-Owned Life Insurance (BOLI) portfolio, the core EPS was slightly higher at $0.34. However, this was below Piper Sandler's expectation of $0.41 and the consensus estimate of $0.40.
The bank's shares experienced a downturn the day following the earnings announcement. Since that time, First Bank's performance has lagged behind the NASDAQ Bank Index by approximately 5%. The bank's net interest margin (NIM) compression, which declined by 13 basis points to 3.49%, along with management's projection of a stable margin going forward, are believed to be factors contributing to the stock's underperformance.
Piper Sandler had initially projected a 2025 exit NIM of 3.75%, aligning with the prior consensus. However, the firm has now revised its forecast, expecting a NIM of 3.53% for the fourth quarter of 2025. Despite the downward adjustments, Piper Sandler noted positive aspects in First Bank's report, including a resurgence in loan and deposit growth, very clean credit, and an anticipated stable expense base.
In other recent news, First Bank reported a significant increase in loans and deposits during its third quarter 2024 earnings call. The bank's loan growth was approximately $90 million, with deposits growing by $82 million. Commercial and industrial loans were a major driver of this growth, constituting about 60% of the loan increase. The bank's net income for the quarter was slightly lower at $8.2 million, or $0.32 per diluted share, due to margin compression.
Despite the slight decrease in net interest income, First Bank executed balance sheet optimizations and expanded its digital banking efforts. The bank sold $12 million in low-yielding securities and restructured $20 million in new BOLI policies for profitability. Non-interest expenses increased to $18.6 million, influenced by higher OREO expenses.
These are the recent developments for First Bank. The bank is enhancing its digital banking with a new online account opening platform and expanding its branch presence. Management is cautiously optimistic about net interest margin recovery and maintaining loan growth. They are closely monitoring deposit costs following recent Federal Reserve cuts.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on First Bank's (NASDAQ: FRBA) financial position and market performance. Despite the recent downward adjustment in Piper Sandler's price target, First Bank's stock appears to be trading at attractive valuation levels. The company's P/E ratio stands at 8.95, which is relatively low compared to its near-term earnings growth potential, as highlighted by one of the InvestingPro Tips.
Furthermore, First Bank has demonstrated strong revenue growth, with a 34.1% increase in the last twelve months as of Q3 2024. This robust growth, coupled with an operating income margin of 41.62%, suggests that the bank has been effective in managing its operations despite the challenges noted in the earnings report.
InvestingPro Tips also indicate that First Bank is expected to remain profitable this year, which aligns with the positive aspects mentioned by Piper Sandler, such as clean credit and anticipated stable expenses. However, it's worth noting that the company suffers from weak gross profit margins, which could be a factor to watch in future quarters.
For investors seeking a more comprehensive analysis, InvestingPro offers 5 additional tips for First Bank, providing a deeper understanding of the company's financial health and market position.
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