Digital Platform Investments And Branch Expansion Will Unlock New Markets

Key Takeaways

• Strong loan and deposit growth, digital investment, and geographic expansion position First Bank for sustainable revenue and customer base gains.
  
• Enhanced risk management, expense control, and lower funding costs support consistent profitability and long-term margin improvement.
  
• Slowing loan and deposit growth, rising funding costs, geographic concentration, and increased expenses threaten future margins, profitability, and expose the bank to elevated economic risk.

Catalysts

Provides various banking products and services to small and mid-sized businesses and individuals.

• First Bank's success in driving robust loan and deposit growth-particularly through expanding C&I, owner-occupied, and specialty lending segments, as well as entering new geographic markets-positions it to capitalize on growing demand for consumer and SME credit, supporting above-average, sustainable revenue growth.
  
• The company's ongoing focus on deepening digital platform investments, branch expansion, and effective margin management aligns with the accelerating shift toward digital payments and branchless delivery, laying the groundwork for improved scalability and long-term margin enhancement.
  
• Government and policy efforts towards increasing banking penetration and financial inclusion, supported by First Bank's branch openings in new and underbanked markets, are expected to unlock access to a broader customer base, expanding opportunities for deposit and fee income growth.
  
• Disciplined expense control, targeted promotional strategies to gather core deposits, and upcoming reductions in funding costs (e.g., retiring higher-rate sub debt in September) should drive net margin and earnings accretion as operating leverage improves.
  
• Stable asset quality, supported by improved risk management practices and a diversified loan portfolio, underpins earnings consistency and reduces the risk of future credit losses-providing an additional tailwind to long-term profitability.

First Bank Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming First Bank's revenue will grow by 10.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 29.2% today to 32.1% in 3 years time.
• Analysts expect earnings to reach $57.4 million (and earnings per share of $2.32) by about July 2028, up from $38.3 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 9.6x on those 2028 earnings, down from 9.8x today. This future PE is lower than the current PE for the US Banks industry at 11.3x.
• Analysts expect the number of shares outstanding to decline by 1.09% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.11%, as per the Simply Wall St company report.

First Bank Future Earnings Per Share Growth

Risks

• Slowing loan growth expected in the back half of the year, combined with constraints on low-cost funding, could limit revenue growth and compress future net margins if loan demand cannot keep pace with funding availability.
  
• Ongoing reliance on promotional CD rates and branch expansion to drive deposit growth may raise funding costs and erode net interest margins, especially as competitive pressure for deposits intensifies within the industry.
  
• The gradual runoff of acquisition accounting accretion income and temporary increases in interest expense (from carrying two subordinated debt instruments through Q3) signal that net interest income and margins are likely to face headwinds before potential recovery in 2026, impacting near-to-mid-term earnings.
  
• Geographic concentration, with a heavy footprint in New Jersey and a focus on C&I and owner-occupied real estate loans, could reduce diversification benefits and increase exposure to local economic downturns-heightening risk to both revenue and asset quality if regional conditions weaken.
  
• The company's growth strategy hinges on continued successful new business unit launches and scaling, but higher noninterest expense ratios from technology, branch investments, and management changes may outpace efficiency improvements, pressuring future profitability and net margins if execution falls short.

Valuation

• The analysts have a consensus price target of $18.667 for First Bank based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $178.6 million, earnings will come to $57.4 million, and it would be trading on a PE ratio of 9.6x, assuming you use a discount rate of 7.1%.
• Given the current share price of $15.11, the analyst price target of $18.67 is 19.1% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.