First Bank Calls the Turn on Business Express — and Quietly Raises Its Own Bar
A 33% dividend hike, a $300 million loan-growth target and a margin guide that flipped from 'flat to down' to 'stable with upside' — the small-business credit drag is finally fading into the background of this New Jersey lender's story
FRBA · Earnings Call · 2026-10-23
The last shoe, dropping more quietly
For roughly six quarters, First Bank's story has been one portfolio. Business Express — the credit-scored small-business product that management spent 2026 walking back — showed up again at the top of this quarter's keyword list, and again in the charge-off line: $1.9 million of net charge-offs versus $1.6 million in the linked quarter. But the cadence of the conversation has changed. In April, the framing was defensive: “this is not a brand new product. It is one that we have been using for a while, and it felt like the scoring became a little less predictable” — Patrick Ryan, CEO · 2026-04-28. On Thursday, it was forward-looking — Pat Ryan sizing the endpoint rather than the problem: “if we can get it back down to a more reasonable sort of 2%, even 3% annualized, I think we'll be back to generating profitability out of that segment” — Patrick Ryan, President and CEO · 2026-10-23. The supporting facts are concrete rather than rhetorical. Nonperforming assets ticked up to $35.7 million, but since quarter-end the bank collected a $5.5 million paydown on a problem real estate credit — which, recalculated, takes the criticized-and-classified ratio to roughly 2.24%, below the eight-quarter average of about 240 basis points — and the $9.5 million senior living participation that has hung over the credit narrative for two calls now has a court-accepted agreement pointing to full repayment in Q4. Management also stressed that everything renewed is being written under tighter standards, and that non-Business-Express charge-offs year-to-date are close to zero against roughly $8.5 million of total losses. Andrew Hibshman's summary line was the one that matters for anyone modeling the ACL: “We are not seeing any meaningful signs of stress in our other loan segments” — Andrew Hibshman, Chief Financial Officer · 2026-10-23. The reserve — 1.37% of loans, about 132% of nonperforming loans — is the buffer that lets them say that.Two guidance lines that moved in opposite directions
The genuinely new item on this call is the margin. In July, the language was cautious — “we are targeting flat to down slightly on the margin as we move through this year” — Patrick L. Ryan, Chief Executive Officer · 2026-07-24. In October, after a 6 basis point linked-quarter expansion in tax-equivalent NIM to 3.74%, the tone inverted:The mechanics are legible. Loan yields rose 15 basis points linked-quarter to 6.48%, while the total cost of deposits rose only 5 basis points to 2.47% — disciplined deposit pricing and balance-sheet optimization doing the work. Over 25% of assets reprice immediately when the Fed moves, and the Fed did move in mid-September. That places First Bank squarely on a market-wide theme: Fed rate hike ranked near the very top of the editor-curated market keyword list this quarter, and regional-bank transcripts over the past five days are littered with rate-hike language — SMBK's "potential Fed rate hike," BWB's "recent rate hikes," basically every conference call in the rising rate environment bucket. First Bank is modestly asset-sensitive, so the sector's funding headache is, at the margin, its tailwind. Except for one thing. Deposit pricing pressure has accelerated, and Hibshman said so plainly: “deposit pricing pressure has continued to be stiff... I do expect that deposit pricing is going to be tough and it's going to move higher” — Andrew Hibshman, Chief Financial Officer · 2026-10-23. Point-to-point noninterest-bearing deposits fell $48.7 million from June 30 to September 30 (averages rose $32 million, so part of this is timing). The deposit side is where the margin guide can break, and the pressure is showing up across the sector — deposit beta, deposit cost, competitive environment for deposits are all recurring phrases in this week's bank prints. First Bank did help itself structurally, paying down $90 million of wholesale borrowings and letting $44 million of broker deposits run off while redeploying about $57 million into higher-yielding securities. Total deposits still grew $43 million, or $87 million excluding the brokered runoff.I think we can confidently say that we can... maintain a stable margin with some upside.
The number that actually changed
Buried in the lending section was the most consequential line of the call. After two years of guiding to roughly $200 million of annual net loan growth — a target that showed up repeatedly across prior quarters — Peter Cahill raised it:That is a 50% step-up in ambition, and it is backed by pipeline rather than hope: probable funding stood at $363 million at September 30 versus $326 million in March and $323 million in June. Q3 loans grew $50.2 million (about 6% annualized), with C&I plus owner-occupied real estate at 65% of new business. New money is being written at a weighted-average spread of roughly 6.90%, with monthly originations ranging from about 6.75% to 7.25% — comfortably above the 2.47% deposit cost. The investor real estate to capital ratio has come down enough that Cahill explicitly frames CRE as reclaimed capacity rather than a runoff bucket. Note, too, what has dropped out of the conversation: the hand-wringing over abnormally high loan payoffs that dominated the January call — “almost always snap back with strong growth” — Patrick Ryan, President and Chief Executive Officer · 2026-01-27 — is gone. Payoffs normalized to $53 million and growth showed up.as we think about 2027, we're setting our sights on total loan growth that's up from the $200 million annual number that we've targeted the past couple of years to a targeted growth rate closer to $300 million.