First Bank Announces Completion of $30 Million Subordinated Debt Offering

Rhea-AI Summary

First Bank (NASDAQ: FRBA) announced the closing of a $30 million private placement of fixed-to-floating rate subordinated notes. The proceeds will be used to redeem $22 million of existing subordinated notes and for general corporate purposes. The new notes will have a fixed interest rate of 5.50% for the first five years, transitioning to a floating rate thereafter. This capital will allow the bank to reduce interest expenses and support growth without issuing new shares. The notes qualify as Tier 2 capital for regulatory needs.

Positive

• Successful completion of $30 million subordinated debt offering.
• Lower interest expense through redemption of existing subordinated notes.
• Strengthened capital base for growth without share dilution.
• Interest rate structure offers potential cost-effectiveness.

Negative

• None.

News Market Reaction – FRBA

-2.95%

1 alert

-2.95% News Effect

On the day this news was published, FRBA declined 2.95%, reflecting a moderate negative market reaction.

Data tracked by StockTitan Argus on the day of publication.

HAMILTON, N.J., May 29, 2020 (GLOBE NEWSWIRE) -- First Bank (NASDAQ: FRBA) today announced the closing of a $30.0 million private placement of fixed-to-floating rate subordinated notes.  The Bank plans to use the proceeds to redeem $22.0 million outstanding subordinated notes and for general corporate purposes.

The notes have a maturity date of June 1, 2030, and carry a fixed rate of interest of 5.50% for the first five years. Thereafter, the notes will pay interest at a floating rate, reset quarterly, equal to the then current three-month SOFR plus 538 basis points.  The notes may be redeemed at the option of the Bank, without penalty, on or after June 1, 2025.  The subordinated notes have been structured to qualify as Tier 2 capital for regulatory purposes.

President and Chief Executive Officer Patrick L. Ryan discussed the offering: "We are pleased to announce the successful completion of our subordinated debt offering. This new capital will allow us to retire our existing subordinated notes at a lower interest rate and provide a strong base for continued growth without the dilutive impact of issuing new shares of stock. Furthermore, the tax-deductible nature of the instrument, combined with low interest rate, makes the overall cost of capital quite attractive."

Piper Sandler & Co. served as lead placement agent for the private offering with co-managers of Hovde Group, LLC, Boenning & Scattergood and D.A. Davidson & Co. First Bank was advised by Pepper Hamilton LLP and Piper Sandler & Co. was advised by Goodwin Procter LLP.

About First Bank
First Bank is a New Jersey state-chartered bank with 18 full-service branches in Cinnaminson, Cranbury, Delanco, Denville, Ewing, Flemington, Hamilton, Hamilton Square, Lawrence, Mercerville, Pennington, Randolph, Somerset and Williamstown, New Jersey; and Doylestown, Trevose, Warminster and West Chester, Pennsylvania. With $2.1 billion in assets as of March 31, 2020, First Bank offers a full range of deposit and loan products to individuals and businesses throughout the New York City to Philadelphia corridor. First Bank's common stock is listed on the Nasdaq Global Market under the symbol “FRBA”.

This news release contains certain forward-looking statements, either expressed or implied, which are provided to assist the reader in understanding anticipated future financial performance. These statements involve certain risks, uncertainties, estimates and assumptions made by management, which are subject to factors beyond First Bank's control and could impede its ability to achieve these goals. These factors include those listed under Item 1A-Risk Factors in our Annual Report on Form 10 K for the period ended December 31 2019 and our Quarterly Report on Form 10 Q for the period ended March 31 2020, impacts of the COVID 19 pandemic on the Bank and the economy, the general state of the economy, the direction and timing of changes in interest rates, changes in laws or regulatory policies, our ability to attract and retain customers in a new market, our ability to integrate new technology into operations, and many other factors, many of which are completely out of our control. If one or more events related to these or other risks or uncertainties materialize, or if First Bank’s underlying assumptions prove to be incorrect, actual results may differ materially from what First Bank anticipates. Accordingly, you should not place undue reliance on any such forward-looking statements.

Contact
Patrick L. Ryan, President and CEO
(609) 643-0168, partrick.ryan@firstbanknj.com

FAQ

What are the details of the subordinated notes offering by First Bank (FRBA) announced on May 29, 2020?

First Bank announced a $30 million subordinated notes offering with a fixed interest rate of 5.50% for the first five years, transitioning to a floating rate thereafter. It plans to use proceeds to redeem existing subordinated notes.

What will First Bank (FRBA) do with the proceeds from the subordinated notes?

The proceeds will be used to redeem $22 million of outstanding subordinated notes and for general corporate purposes.

What is the maturity date of the new subordinated notes issued by First Bank (FRBA)?

The new subordinated notes have a maturity date of June 1, 2030.

How do the new subordinated notes issued by First Bank (FRBA) impact its capital structure?

The new subordinated notes qualify as Tier 2 capital, strengthening the bank's capital structure for regulatory purposes.