KBRA Affirms Ratings for First Bank

KBRA affirms the deposit and senior unsecured debt ratings of BBB+, the subordinated debt rating of BBB, and the short-term deposit and debt ratings of K2 for Hamilton, NJ-based First Bank (NASDAQ: FRBA) ("the bank"). The Outlook for all long-term ratings is Stable.

The ratings continue to reflect First Bank’s effective execution of its strategic plan under an experienced and disciplined leadership team that has repeatedly absorbed underperforming franchises, most recently, Malvern Bancorp, Inc. ("Malvern"), which extended First Bank's footprint into the Philadelphia metro region, while capturing meaningful cost-savings and resolving inherited credit issues with immaterial loss content. The bank's earnings profile remains solid, supported by a resilient NIM, which tracked at 3.74% in 3Q25. The margin is sustained by the bank’s loan heavy balance sheet mix (loans comprise 88% of earning assets) and only modest pressure on yields in recent periods despite a decrease in benchmark rates following the Fed's rate cuts. As a result, the strong margin has driven the ROA just above 1.0% through 9M25. With respect to funding, the steady build out of full relationship accounts has incrementally lifted NIB balances even as the share of higher cost time deposits have drifted toward 25% of total deposits, helping ease the average deposit cost to ~2.7% in 3Q25, a figure that, while above similarly rated peers, is trending lower with the recent easing cycle. First Bank also appears well positioned for the recent and additional Fed rate cuts; the bank runs a slightly liability-sensitive balance sheet, so initial Fed cuts could cause a small dip in NIM, but over the medium term, lower deposit costs should likely boost profitability. Furthermore, management noted that NIM would likely remain stable around the mid-3% level prospectively as the core margin expands and Malvern-related purchase accounting accretion income decreases.

Elsewhere, on- and off-balance sheet liquidity sources are deemed sufficient despite a loan-to-deposit ratio consistently above 100%. Management has indicated the preference to reduce the loan-to-deposit ratio to 95%-100% over time, which we view favorably. Management’s aim to push the loan‑to‑deposit ratio from its present level should also incrementally enhance on‑balance‑sheet liquidity, which is already backed by ample contingent capacity and a comparatively small securities portfolio that limits exposure to valuation marks. Uninsured deposits represent a relatively low 21% of total deposits (excluding collateralized relationships), adding stability to the funding profile. Credit quality remains solid; NPAs have edged lower through 9M25, while recent charge‑offs are confined to a small‑business niche, all against a reserve that offers nearly three times coverage of remaining non-performing assets. Exposure to the office sector is also considered minimal at just 4% of total loans, which is diversified across its footprint and largely consists of smaller buildings in Central NJ, with no exposure to Philadelphia or NYC. The investor CRE concentration, though still elevated at 370% of risk-based capital, continues to deliberately decline as the management team has recently been emphasizing its newly established C&I verticals (PE, ABL, and small business). Capital metrics have continued to rebound post-Malvern, with CET1 and TCE ratios climbing to 10.2% and 9.6%, respectively, as of 3Q25, stemming from earnings retention and minimal shareholder distributions. Additionally, a small but opportunistic subordinated debt raise in June 2025 refinanced higher cost legacy notes, enabling the bank to support measured growth while preserving regulatory headroom.

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