First Resource Bank Achieves Record Quarterly Net Income; a 9% Increase Over the Previous Quarter

EXTON, PA / ACCESSWIRE / October 24, 2019 / First Resource Bank (OTCQX:FRSB) announced financial results for the three months ended September 30, 2019. Net income for the quarter ended September 30, 2019 was $690,729, which compares to $631,520 for the previous quarter and $554,653 for the third quarter of the prior year.

Highlights for the third quarter of 2019 included:

Net income of $690,729 was the highest quarterly profit in the Bank's history
Net income grew 9% over the quarter ended June 30, 2019 and 25% over the quarter ended September 30, 2018
Total interest income grew 5% over the quarter ended June 30, 2019 and 21% over the quarter ended September 30, 2018
Completed construction on the Wayne branch in anticipation of the October 15 opening
Named a 2019 Best Place to Work by the Philadelphia Business Journal

Glenn B. Marshall, President & CEO, stated, "The record profitability we experienced in the third quarter was remarkable as we fight margin compression and add overhead associated with our third branch location in Wayne. Intense competition in our market has created irrational pricing for both loans and deposits, yet we have minimized our margin compression while continuing to grow the bank. Year-over-year loan growth of $40 million, or 17%, was funded by deposit growth of $41.8 million, or 19%. This balance sheet growth is critical to our long term success and we are very pleased with the growth we have demonstrated over the past year."

Total interest income grew 5% when comparing the third quarter to the second quarter of 2019. This increase was driven by 2% loan growth during the third quarter.

Total interest income rose 21% from $3,315,762 for the three months ended September 30, 2018 to $3,998,838 for the three months ended September 30, 2019. This increase was supported by 17% loan growth when comparing September 30, 2019 to a year prior and a 15 basis point improvement in loan yields when comparing the third quarter of 2018 to the third quarter of 2019.

Total interest income was $11,414,647 for the nine months ended September 30, 2019, a 20% increase over the same period in the prior year. This increase was driven by 17% loan growth when comparing September 30, 2019 to a year prior and a 24 basis point increase in loan yields when comparing the nine months ended September 30, 2019 to the same period in the prior year.

Total interest expense rose 7% when comparing the third quarter to the second quarter of 2019. This increase was driven by a 5 basis point increase in the cost of money market accounts and a 3 basis point increase in the cost of certificates of deposit during the quarter, as well as an 8% increase in certificate of deposit balances as compared to the prior quarter.

Total interest expense rose 38% from $822,866 for the three months ended September 30, 2018 to $1,137,328 for the three months ended September 30, 2019. The vast majority of this increased expense was related to a 34 basis point increase in the cost of money market accounts and a 44 basis point increase in the cost of certificates of deposit, year over year. Overall interest expense was mitigated by strong growth in noninterest bearing deposits, which increased 69% when comparing September 30, 2019 to the year prior.

Total interest expense for the nine months ended September 30, 2019 was $3,172,700, a 50% increase over the same period in the prior year. The bulk of this increase is attributed to a 34 basis point increase in the cost of money market accounts and a 68 basis point increase in the cost of certificates of deposit when comparing the nine months ended September 30, 2019 to the same period in the prior year.

Net interest income was $2,861,510 for the quarter ended September 30, 2019 as compared to $2,754,410 for the previous quarter, an improvement of 4%. The net interest margin declined 4 basis points from 3.85% for the quarter ended June 30, 2019 to 3.81% for the quarter ended September 30, 2019. The overall yield on interest earning assets decreased 2 basis points during the third quarter led by a 2 basis point decrease in loan yields to 5.57%. The cost of interest bearing deposits increased 5 basis points during the third quarter to 1.74%, with the majority of that increase attributed to higher cost money market accounts and certificates of deposit. Strong growth in non-interest bearing deposits partially offset the increased cost of interest bearing deposits. The total cost of deposits increased 2 basis points from 1.42% in the second quarter of 2019 to 1.44% in the third quarter of 2019.

Net interest income for the nine months ended September 30, 2019 was $8,241,947 a 12% improvement over net interest income of $7,384,069 for the nine months ended September 30, 2018. This growth was driven by a 21% increase in loan interest income.

The provision for loan losses decreased from $158,992 for the three months ended June 30, 2019 to $84,557 for the three months ended September 30, 2019 due to a decrease in new loan volume. The provision for loan losses decreased from $109,544 for the three months ended September 30, 2018, to $84,557 for the three months ended September 30, 2019.

The provision for loan losses increased from $435,187 for the nine months ended September 30, 2018 to $719,501 for the nine months ended September 30, 2019 as a result of one problem loan that required specific reserves due to new information obtained regarding the value of the collateral during the first quarter of 2019.

Non-interest income for the quarter ended September 30, 2019 was $226,669, as compared to $262,597 for the previous quarter and $127,457 for the third quarter of the prior year. Swap referral fee income of $107,160 was received in the third quarter of 2019, as compared to $114,100 in the second quarter of 2019 and none in the third quarter of 2018. There were no gains on sales of SBA loans recognized during the third or second quarter of 2019, as compared to $12,631 during the third quarter of 2018.

Non-interest income for the nine months ended September 30, 2019 was $645,521 as compared to $382,929 for the same period in the prior year. Swap referral fee income of $221,260 was received in the first nine months of 2019 as compared to none in the first nine months of 2018. There was $24,463 in gains on sales of SBA loans in the first nine months of 2019 as compared to $41,356 in the first nine months of 2018.

Non-interest expense increased $70 thousand, or 3%, in the three months ended September 30, 2019 as compared to the prior quarter. The increase was primarily due to an increase in salaries and benefits, advertising and data processing costs, partially offset by a decrease in professional fees. Non-interest expense increased $320 thousand, or 18%, when comparing the third quarter of 2019 to the third quarter of 2018, with all expense categories increasing during this time period.

Non-interest expense increased $653 thousand, or 12%, in the nine months ended September 30, 2019 as compared to the same period in the prior year. This increase was due to higher salaries and benefits expense, occupancy, professional fees, data processing and other costs, partially offset by lower advertising expenses.

Deposits grew a net $11.2 million, or 4%, from $253.3 million at June 30, 2019 to $264.4 million at September 30, 2019. During the third quarter, non-interest bearing deposits increased $460 thousand, or 1%, from $47.4 million at June 30, 2019 to $47.8 million at September 30, 2019. Interest-bearing checking balances decreased $320 thousand, or 3%, from $10.1 million at June 30, 2019 to $9.8 million at September 30, 2019. Money market deposits increased $3.1 million, or 3%, from $98.8 million at June 30, 2019 to $101.9 million at September 30, 2019. Certificates of deposit increased $7.9 million, or 8%, from $97.0 million at June 30, 2019 to $104.9 million at September 30, 2019. The deposit portfolio grew $28.2 million, or 12%, in the first nine months of 2019, with a $14.7 million increase in total checking balances, a $16 thousand increase in money market balances and a $13.5 million increase in certificates of deposit.

Total deposits grew $41.8 million, or 19%, from $222.6 million at September 30, 2018 to $264.4 million at September 30, 2019, with 69% growth in non-interest bearing deposits, 8% growth in money market balances, and 17% growth in certificates of deposit, partially offset by a 6% decline in interest bearing checking account balances. Total checking balances represented 22% of total deposits at September 30, 2019, a significant increase from 18% at December 31, 2018.

The loan portfolio grew $4.3 million, or 2%, during the third quarter from $270.5 million at September 30, 2019 to $274.8 million at September 30, 2019, with 5% growth in commercial real estate loans, partially offset by declines in commercial business, construction, and consumer loans. Year-to-date net loan growth in 2019 was $30.1 million, or 12%, with the majority of that growth in commercial real estate and construction loans.

The loan portfolio grew $40.4 million, or 17%, from $234.4 million at September 30, 2018 to $274.8 million at September 30, 2019, with the majority of that growth in commercial real estate and construction loans.

The following table illustrates the composition of the loan portfolio:

Sept. 30,
2019

Dec. 31,

2018

Sept. 30,
2018

Commercial real estate

 
$
197,100,951
 
 
$
170,738,479
 
 
$
162,293,415
 

Commercial construction

 
 
27,175,769
 
 
 
20,377,108
 
 
 
19,677,666
 

Commercial business

 
 
31,927,054
 
 
 
31,738,443
 
 
 
30,502,311
 

Consumer

 
 
18,598,371
 
 
 
21,843,647
 
 
 
21,972,580
 

Total loans

 
$
274,802,145
 
 
$
244,697,677
 
 
$
234,445,972
 

The allowance for loan losses to total loans was 0.90% at September 30, 2019 as compared to 0.81% at December 31, 2018 and 0.85% at September 30, 2018. Non-performing assets consisted of non-performing loans of $2.4 million and other real estate owned of $590 thousand, totaling $3.0 million at September 30, 2019, a 7% increase as compared to the prior quarter. Non-performing assets to total assets increased from 0.91% at June 30, 2019 to 0.94% at September 30, 2019. These increases were due to an increase in loans past due over 90 days, partially offset by a decrease in non-accrual loans during the quarter.

Total stockholder's equity increased $720 thousand, or 3%, from $26.6 million at June 30, 2019 to $27.3 million at September 30, 2019, primarily due to net income generated in the third quarter. Book value per share increased 25 cents during the third quarter of 2019 to $9.88 per share at September 30, 2019.

Selected Financial Data:
Balance Sheets (unaudited)

September 30,

2019

December 31,

2018

Cash and due from banks

 
$
13,350,517
 
 
$
5,734,677
 

Time deposits at other banks

 
 
599,000
 
 
 
599,000
 

Investments

 
 
17,948,502
 
 
 
37,762,190
 

Loans

 
 
274,802,145
 
 
 
244,697,677
 

Allowance for loan losses

 
 
(2,473,760
)
 
 
(1,990,253
)

Premises & equipment

 
 
8,775,173
 
 
 
6,647,166
 

Other assets

 
 
9,309,420
 
 
 
8,996,941
 

Total assets

 
$
322,310,997
 
 
$
302,447,398
 

Non-interest bearing deposits

 
$
47,822,551
 
 
$
31,788,359
 

Interest-bearing checking

 
 
9,766,418
 
 
 
11,069,325
 

Money market

 
 
101,903,972
 
 
 
101,887,847
 

Time deposits

 
 
104,942,229
 
 
 
91,456,365
 

Total deposits

 
 
264,435,170
 
 
 
236,201,896
 

Short term borrowings

 
 
3,125,000
 
 
 
17,000,400
 

Long term borrowings

 
 
21,782,873
 
 
 
18,515,500
 

Subordinated debt

 
 
3,992,468
 
 
 
3,986,097
 

Other liabilities

 
 
1,640,926
 
 
 
1,466,037
 

Total liabilities

 
 
294,976,437
 
 
 
277,169,930
 

Total stockholders' equity

 
 
27,334,560
 
 
 
25,277,468
 

Total Liabilities & Stockholders' Equity

 
$

322,310,997
 
 

$

302,447,398
 

Performance Statistics
(unaudited)

Qtr Ended

Sept. 30,

2019

Qtr Ended

June 30,

2019

Qtr Ended

Mar. 31,

2019

Qtr Ended

Dec. 31,

2018

Qtr Ended

Sept. 30,

2018

Net interest margin

 
 
3.81
%
 
 
3.85
%
 
 
3.87
%
 
 
3.78
%
 
 
3.85
%

Nonperforming loans/Total loans

 
 
0.89
%
 
 
0.83
%
 
 
0.87
%
 
 
1.14
%
 
 
1.21
%

Nonperforming assets/Total assets

 
 
0.94
%
 
 
0.91
%
 
 
0.74
%
 
 
0.92
%
 
 
1.12
%

Allowance for loan losses/Total loans

 
 
0.90
%
 
 
0.93
%
 
 
0.95
%
 
 
0.81
%
 
 
0.85
%

Average loans/Average assets

 
 
87.2
%
 
 
87.4
%
 
 
86.5
%
 
 
84.9
%
 
 
86.1
%

Non-interest expenses*/ Average assets

 
 
2.71
%
 
 
2.75
%
 
 
2.60
%
 
 
2.67
%
 
 
2.68
%

Earnings per share – basic and diluted **

 
$
0.25
 
 
$
0.23
 
 
$
0.13
 
 
$
0.22
 
 
$
0.20
 

Book value per share**

 
$
9.88
 
 
$
9.63
 
 
$
9.35
 
 
$
9.16
 
 
$
8.91
 

Total shares outstanding

 
 
2,766,330
 
 
 
2,764,241
 
 
 
2,630,418
 
 
 
2,628,316
 
 
 
2,626,633
 

* Annualized
** Per share data has been restated to reflect 5% stock dividend paid in May 2019.

Income Statements (unaudited)

Qtr. Ended

Sept. 30,

2019

Qtr. Ended

June 30,

2019

Qtr. Ended

Mar. 31,

2019

Qtr. Ended

Dec. 31,

2018

Qtr. Ended

Sept. 30,

2018

INTEREST INCOME

Loans, including fees

 
$
3,855,582
 
 
$
3,679,137
 
 
$
3,438,752
 
 
$
3,297,459
 
 
$
3,179,807
 

Securities

 
 
124,908
 
 
 
126,881
 
 
 
128,301
 
 
 
124,207
 
 
 
115,250
 

Other

 
 
18,348
 
 
 
13,428
 
 
 
29,310
 
 
 
37,950
 
 
 
20,705
 

Total interest income

 
 
3,998,838
 
 
 
3,819,446
 
 
 
3,596,363
 
 
 
3,459,616
 
 
 
3,315,762
 

INTEREST EXPENSE

Deposits

 
 
938,804
 
 
 
886,280
 
 
 
800,541
 
 
 
739,464
 
 
 
655,163
 

Borrowings

 
 
130,679
 
 
 
111,271
 
 
 
102,671
 
 
 
108,664
 
 
 
99,856
 

Subordinated debt

 
 
67,845
 
 
 
67,485
 
 
 
67,124
 
 
 
67,843
 
 
 
67,847
 

Total interest expense

 
 
1,137,328
 
 
 
1,065,036
 
 
 
970,336
 
 
 
915,971
 
 
 
822,866
 

Net interest income

 
 
2,861,510
 
 
 
2,754,410
 
 
 
2,626,027
 
 
 
2,543,645
 
 
 
2,492,896
 

Provision for loan losses

 
 
84,557
 
 
 
158,992
 
 
 
475,952
 
 
 
78,051
 
 
 
109,544
 

Net interest income after provision for loan losses

 
 
2,776,953
 
 
 
2,595,418
 
 
 
2,150,075
 
 
 
2,465,594
 
 
 
2,383,352
 

NON-INTEREST INCOME

BOLI income

 
 
38,205
 
 
 
37,965
 
 
 
37,455
 
 
 
38,315
 
 
 
38,163
 

Swap referral fee income

 
 
107,160
 
 
 
114,100
 
 
 
–
 
 
 
–
 
 
 
–
 

Gain on sale of SBA loans

 
 
–
 
 
 
–
 
 
 
24,463
 
 
 
55,075
 
 
 
12,631
 

Other

 
 
81,304
 
 
 
110,532
 
 
 
94,337
 
 
 
84,947
 
 
 
76,663
 

Total non-interest income

 
 
226,669
 
 
 
262,597
 
 
 
156,255
 
 
 
178,337
 
 
 
127,457
 

NON-INTEREST EXPENSE

Salaries & benefits

 
 
1,266,493
 
 
 
1,238,114
 
 
 
1,053,586
 
 
 
1,121,757
 
 
 
1,089,077
 

Occupancy & equipment

 
 
189,381
 
 
 
185,402
 
 
 
191,572
 
 
 
179,256
 
 
 
178,176
 

Professional fees

 
 
88,083
 
 
 
101,117
 
 
 
100,169
 
 
 
94,756
 
 
 
84,445
 

Advertising

 
 
82,357
 
 
 
35,401
 
 
 
33,764
 
 
 
34,689
 
 
 
52,808
 

Data processing

 
 
142,587
 
 
 
135,151
 
 
 
127,119
 
 
 
121,363
 
 
 
107,734
 

Other

 
 
376,707
 
 
 
380,297
 
 
 
347,391
 
 
 
337,137
 
 
 
313,657
 

Total non-interest expense

 
 
2,145,608
 
 
 
2,075,482
 
 
 
1,853,601
 
 
 
1,888,958
 
 
 
1,825,897
 

Income before income tax expense

 
 
858,014
 
 
 
782,533
 
 
 
452,729
 
 
 
754,973
 
 
 
684,912
 

Federal income tax expense

 
 
167,285
 
 
 
151,013
 
 
 
81,509
 
 
 
146,236
 
 
 
130,259
 

Net income

 
$
690,729
 
 
$
631,520
 
 
$
371,220
 
 
$
608,737
 
 
$
554,653
 

Income Statements (unaudited)

Nine Months

Ended
September 30,

2019

Nine Months

Ended
September 30,

2018

INTEREST INCOME

Loans

 
$
10,973,471
 
 
$
9,106,353
 

Investments

 
 
380,090
 
 
 
372,023
 

Other

 
 
61,086
 
 
 
25,001
 

Total interest income

 
 
11,414,647
 
 
 
9,503,377
 

INTEREST EXPENSE

Deposits

 
 
2,625,625
 
 
 
1,609,400
 

Borrowings

 
 
344,621
 
 
 
307,451
 

Subordinated debt

 
 
202,454
 
 
 
202,457
 

Total interest expense

 
 
3,172,700
 
 
 
2,119,308
 

Net interest income

 
 
8,241,947
 
 
 
7,384,069
 

Provision for loan losses

 
 
719,501
 
 
 
435,187
 

Net interest income after provision for loan losses

 
 
7,522,446
 
 
 
6,948,882
 

NON-INTEREST INCOME

BOLI income

 
 
113,625
 
 
 
110,767
 

Swap referral fee income

 
 
221,260
 
 
 
–
 

Gain on sale of SBA loans

 
 
24,463
 
 
 
41,356
 

Other

 
 
286,173
 
 
 
230,806
 

Total non-interest income

 
 
645,521
 
 
 
382,929
 

NON-INTEREST EXPENSE

Salaries & benefits

 
 
3,558,193
 
 
 
3,172,784
 

Occupancy & equipment

 
 
566,355
 
 
 
551,067
 

Professional fees

 
 
289,369
 
 
 
271,816
 

Advertising

 
 
151,522
 
 
 
160,668
 

Data processing

 
 
404,857
 
 
 
325,179
 

Other non-interest expense

 
 
1,104,395
 
 
 
940,168
 

Total non-interest expense

 
 
6,074,691
 
 
 
5,421,682
 

Pre-tax income

 
 
2,093,276
 
 
 
1,910,129
 

Tax expense

 
 
399,807
 
 
 
353,659
 

Net income

 
$
1,693,469
 
 
$
1,556,470
 

About First Resource Bank

First Resource Bank is a locally owned and operated Pennsylvania state-chartered bank with two full-service branches, serving the banking needs of businesses, professionals and individuals in the Delaware Valley. The Bank offers a full range of deposit and credit services with a high level of personalized service. First Resource Bank also offers a broad range of traditional financial services and products, competitively priced and delivered in a responsive manner to small businesses, professionals and residents in the local market. For additional information visit our website at www.firstresourcebank.com. Member FDIC.

This press release contains statements that are not of historical facts and may pertain to future operating results or events or management's expectations regarding those results or events. These are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934. These forward-looking statements may include, but are not limited to, statements about our plans, objectives, expectations and intentions and other statements contained in this press release that are not historical facts. When used in this press release, the words "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," or words of similar meaning, or future or conditional verbs, such as "will," "would," "should," "could," or "may" are generally intended to identify forward-looking statements. These forward-looking statements are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are either beyond our control or not reasonably capable of predicting at this time. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results may differ materially from the results discussed in these forward-looking statements. Readers of this press release are accordingly cautioned not to place undue reliance on forward-looking statements. First Resource Bank disclaims any intent or obligation to update publicly any of the forward-looking statements herein, whether in response to new information, future events or otherwise.

Media Contact:

Glenn Marshall
President & CEO
610-561-6013

SOURCE: First Resource Bank

ReleaseID: 564036