First Resource Bank Announces Record Annual Earnings; Net Income Grew 7% Over The Prior Year

EXTON, PA / ACCESSWIRE / January 30, 2020 / First Resource Bank (OTCQX:FRSB) announced financial results for the three months and year ended December 31, 2019.

Highlights for the year ended December 31, 2019 included:

Net income grew 7%
Non-interest bearing deposits grew 59%
Total deposits grew 14%
Loans grew 15%
Nonperforming assets to total assets declined 54%
Opened a third branch location in Wayne, Pennsylvania

Glenn B. Marshall, CEO, stated, "2019 was a remarkable year at First Resource Bank. We opened our third retail branch, experienced significant balance sheet growth funded by core deposits, shed legacy problem loans and achieved record profitability. Investments that were made in 2019 increased overhead expenses; however, those decisions were made with the ultimate goal of continuing to increase profitability."

Net income for the quarter ended December 31, 2019 was $628,299, which compares to $690,729 for the previous quarter and $608,737 for the fourth quarter of the prior year.

Net income for the year ended December 31, 2019 was $2,321,768, a 7% increase as compared to the prior year. The increase in net income is primarily attributable to a 12% increase in net interest income and higher non-interest income, partially offset by a higher provision for loan losses and higher non-interest expense. Swap referral fee income totaled $303 thousand in 2019 as compared to none in 2018. Gains on sales of SBA loans totaled $24 thousand in 2019 as compared to $96 thousand in 2018.

Net interest income was $2,871,683 for the quarter ended December 31, 2019 as compared to $2,861,510 for the previous quarter. The net interest margin decreased 8 basis points from 3.81% for the quarter ended September 30, 2019 to 3.73% for the quarter ended December 31, 2019. The overall yield on interest earning assets decreased 14 basis points during the fourth quarter led by a 5 basis point decrease in loan yields to 5.52%. The cost of deposits decreased 6 basis points during the fourth quarter to 1.38%.

Net interest income for the year ended December 31, 2019 was $11,113,630 as compared to $9,927,714 for the year ended December 31, 2018, a 12% improvement. The net interest margin for the year ended December 31, 2019 was 3.81% as compared to 3.89% for the prior year. Loan yields increased 18 basis points to 5.56% in 2019, as compared to 5.38% in the prior year, and the cost of deposits increased 33 basis points to 1.40% in 2019, as compared to 1.07% in 2018.

Non-interest income for the quarter ended December 31, 2019 was $219,674 as compared to $226,669 for the previous quarter and $178,337 for the fourth quarter of the prior year. Swap referral fee income of $81,500 was received in the fourth quarter of 2019, as compared to $107,160 in the third quarter of 2019 and none in the fourth quarter of 2018. There were no gains on sales of SBA loans recognized during the fourth quarter of 2019 or the third quarter of 2019, as compared to $55,075 in the fourth quarter of 2018.

Non-interest income for the year ended December 31, 2019 was $865,195 as compared to $561,266 for the prior year. The increase is mainly attributed to $302,760 in swap referrals fees received in 2019 as compared to none in 2018.

Non-interest expense increased $99 thousand, or 5%, in the three months ended December 31, 2019 as compared to the prior quarter. The increase was primarily due to an increase in salaries and benefits, occupancy, depreciation, professional fees and other costs, partially offset by a decrease in advertising and data processing costs.

Non-interest expense increased $1.0 million, or 14%, in the year ended December 31, 2019 as compared to the prior year. All expense categories increased from the prior year. Marshall stated, "In 2019 we invested in people and the physical expansion of our branch network. This carefully planned increase in expenses did not inhibit the Bank from achieving record annual profitability for 2019."

Deposits grew $5.4 million from $264.4 million at September 30, 2019 to $269.8 million at December 31, 2019. During the fourth quarter, non-interest bearing deposits increased $2.8 million, or 6%, from $47.8 million at September 30, 2019 to $50.6 million at December 31, 2019. Interest-bearing checking balances increased $2.0 million, or 21%, from $9.8 million at September 30, 2019 to $11.8 million at December 31, 2019. Money market deposits increased $530 thousand, or 1%, from $101.9 million at September 30, 2019 to $102.4 million at December 31, 2019. Certificates of deposit increased $10 thousand, or 0%, from $104.9 million at September 30, 2019 to $105.0 million at December 31, 2019.

During 2019, total deposits increased $33.6 million, or 14%, from $236.2 million at December 31, 2018 to $269.8 million at December 31, 2019. During 2019, non-interest bearing deposits grew 59%, interest checking deposits grew 7%, money market deposits grew 1% and certificates of deposit grew 15%.

Marshall stated, "Over the past few years we have invested in the retail team and this tremendous core deposit growth is attributed to that investment. All employees across the Bank are focused on generating core deposits and the team had some major successes in 2019."

The loan portfolio grew $5.4 million during the fourth quarter from $274.8 million at September 30, 2019 to $280.2 million at December 31, 2019, with growth in commercial real estate loans and construction loans partially offset by a decline in commercial business and consumer loans.

During 2019, the loan portfolio grew $35.5 million, or 15%, from $244.7 at December 31, 2018 to $280.2 million at December 31, 2019, with the majority of that growth in commercial real estate loans.

The following table illustrates the composition of the loan portfolio:

Dec. 31,

2019

Dec. 31,

2018

Commercial real estate

 
$ 
203,427,712
 
 
$ 
170,738,479
 

Commercial construction

 
 
29,353,830
 
 
 
20,377,108
 

Commercial business

 
 
30,805,290
 
 
 
31,738,443
 

Consumer

 
 
16,615,540
 
 
 
21,843,647
 

Total loans

 
$ 
280,202,372
 
 
$ 
244,697,677
 

The allowance for loan losses to total loans was 0.90% at December 31, 2019 as compared to 0.90% at September 30, 2019 and 0.81% at December 31, 2018. Non-performing assets consisted of non-performing loans of $1.4 million at December 31, 2019, a 54% decrease as compared to the prior quarter primarily due to a decrease in non-performing loans and the sale of other real estate owned during the fourth quarter. Non-performing assets to total assets improved 55% from 0.94% at September 30, 2019 to 0.42% at December 31, 2019.

During the year ended December 31, 2019, total stockholder's equity increased $2.7 million, or 11%, from $25.3 million at December 31, 2018 to $28.0 million at December 31, 2019, primarily due to net income generated. During the year ended December 31, 2019 book value per share has grown 94 cents, or 10%, to $10.10.

During the year ended December 31, 2019, total assets grew $34.0 million, or 11%. This growth was primarily the result of $35.5 million in loan growth funded by a $33.6 million increase in deposits.

Selected Financial Data:
Balance Sheets (unaudited)

December 31,

2019

December 31,

2018

Cash and due from banks

 
$ 
2,516,374
 
 
$ 
5,734,677
 

Time deposits at other banks

 
 
599,000
 
 
 
599,000
 

Investments

 
 
37,120,798
 
 
 
37,762,190
 

Loans

 
 
280,202,372
 
 
 
244,697,677
 

Allowance for loan losses

 
 
(2,507,845
)
 
 
(1,990,253
)

Premises & equipment

 
 
8,675,596
 
 
 
6,647,166
 

Other assets

 
 
9,812,630
 
 
 
8,996,941
 

Total assets

 
$ 
336,418,925
 
 
$ 
302,447,398
 

Non-interest bearing deposits

 
$ 
50,616,321
 
 
$ 
31,788,359
 

Interest-bearing checking

 
 
11,797,456
 
 
 
11,069,325
 

Money market

 
 
102,433,910
 
 
 
101,887,847
 

Time deposits

 
 
104,952,207
 
 
 
91,456,365
 

Total deposits

 
 
269,799,894
 
 
 
236,201,896
 

Short term borrowings

 
 
10,896,000
 
 
 
17,000,400
 

Long term borrowings

 
 
21,045,500
 
 
 
18,515,500
 

Subordinated debt

 
 
3,994,591
 
 
 
3,986,097
 

Other liabilities

 
 
2,705,583
 
 
 
1,466,037
 

Total liabilities

 
 
308,441,568
 
 
 
277,169,930
 

Total stockholders' equity

 
 
27,977,357
 
 
 
25,277,468
 

Total liabilities & stockholders' equity

 
$ 
336,418,925
 
 
$ 
302,447,398
 

Performance Statistics
(unaudited)

Qtr Ended

Dec. 31,

2019

Qtr Ended

Sept. 30,

2019

Qtr Ended

June 30,

2019

Qtr Ended

Mar. 31,

2019

Qtr Ended

Dec. 31,

2018

Net interest margin

 
 
3.73
%
 
 
3.81
%
 
 
3.85
%
 
 
3.87
%
 
 
3.78
%

Nonperforming loans/

Total loans

 
 
0.50
%
 
 
0.89
%
 
 
0.83
%
 
 
0.87
%
 
 
1.14
%

Nonperforming assets/

Total assets

 
 
0.42
%
 
 
0.94
%
 
 
0.91
%
 
 
0.74
%
 
 
0.92
%

Allowance for loan losses/

Total loans

 
 
0.90
%
 
 
0.90
%
 
 
0.93
%
 
 
0.95
%
 
 
0.81
%

Average loans/Average

assets

 
 
84.9
%
 
 
87.2
%
 
 
87.4
%
 
 
86.5
%
 
 
84.9
%

Non-interest expenses*/

Average assets

 
 
2.75
%
 
 
2.71
%
 
 
2.75
%
 
 
2.60
%
 
 
2.67
%

Earnings per share – basic

and diluted **

 
$
0.23
 
 
$
0.25
 
 
$
0.23
 
 
$
0.13
 
 
$
0.22
 

Book value per share **

 
$
10.10
 
 
$
9.88
 
 
$
9.63
 
 
$
9.35
 
 
$
9.16
 

Total shares outstanding **

 
 
2,768,729
 
 
 
2,766,330
 
 
 
2,764,241
 
 
 
2,761,910
 
 
 
2,759,808
 

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

Year Ended

Dec. 31,

2019

Year Ended

Dec. 31,

2018

Net interest margin

 
 
3.81
%
 
 
3.89
%

Return on assets

 
 
0.76
%
 
 
0.81
%

Return on equity

 
 
8.72
%
 
 
9.02
%

Earnings per share-basic and diluted

 
$
0.84
 
 
$
0.79
 

Income Statements (unaudited)

Qtr. Ended

Dec. 31,

2019

Qtr. Ended

Sept. 30,

2019

Qtr. Ended

June 30,

2019

Qtr. Ended

Mar. 31,

2019

Qtr. Ended

Dec. 31,

2018

INTEREST INCOME

Loans, including fees

 
$ 
3,819,667
 
 
$ 
3,855,582
 
 
$ 
3,679,137
 
 
$ 
3,438,752
 
 
$ 
3,297,459
 

Securities

 
 
129,178
 
 
 
124,908
 
 
 
126,881
 
 
 
128,301
 
 
 
124,207
 

Other

 
 
38,987
 
 
 
18,348
 
 
 
13,428
 
 
 
29,310
 
 
 
37,950
 

Total interest income

 
 
3,987,832
 
 
 
3,998,838
 
 
 
3,819,446
 
 
 
3,596,363
 
 
 
3,459,616
 

INTEREST EXPENSE

Deposits

 
 
930,953
 
 
 
938,804
 
 
 
886,280
 
 
 
800,541
 
 
 
739,464
 

Borrowings

 
 
117,350
 
 
 
130,679
 
 
 
111,271
 
 
 
102,671
 
 
 
108,664
 

Subordinated debt

 
 
67,846
 
 
 
67,845
 
 
 
67,485
 
 
 
67,124
 
 
 
67,843
 

Total interest expense

 
 
1,116,149
 
 
 
1,137,328
 
 
 
1,065,036
 
 
 
970,336
 
 
 
915,971
 

Net interest income

 
 
2,871,683
 
 
 
2,861,510
 
 
 
2,754,410
 
 
 
2,626,027
 
 
 
2,543,645
 

Provision for loan losses

 
 
66,628
 
 
 
84,557
 
 
 
158,992
 
 
 
475,952
 
 
 
78,051
 

Net interest income after provision for loan losses

 
 
2,805,055
 
 
 
2,776,953
 
 
 
2,595,418
 
 
 
2,150,075
 
 
 
2,465,594
 

NON-INTEREST INCOME

BOLI income

 
 
38,067
 
 
 
38,205
 
 
 
37,965
 
 
 
37,455
 
 
 
38,315
 

Swap referral fee income

 
 
81,500
 
 
 
107,160
 
 
 
114,100
 
 
 
–
 
 
 
–
 

Gain on sale of SBA loans

 
 
–
 
 
 
–
 
 
 
–
 
 
 
24,463
 
 
 
55,075
 

Other

 
 
100,107
 
 
 
81,304
 
 
 
110,532
 
 
 
94,337
 
 
 
84,947
 

Total non-interest income

 
 
219,674
 
 
 
226,669
 
 
 
262,597
 
 
 
156,255
 
 
 
178,337
 

NON-INTEREST EXPENSE

Salaries & benefits

 
 
1,267,867
 
 
 
1,266,493
 
 
 
1,238,114
 
 
 
1,053,586
 
 
 
1,121,757
 

Occupancy & equipment

 
 
251,297
 
 
 
189,381
 
 
 
185,402
 
 
 
191,572
 
 
 
179,256
 

Professional fees

 
 
94,744
 
 
 
88,083
 
 
 
101,117
 
 
 
100,169
 
 
 
94,756
 

Advertising

 
 
54,660
 
 
 
82,357
 
 
 
35,401
 
 
 
33,764
 
 
 
34,689
 

Data processing

 
 
127,721
 
 
 
142,587
 
 
 
135,151
 
 
 
127,119
 
 
 
121,363
 

Other

 
 
447,905
 
 
 
376,707
 
 
 
380,297
 
 
 
347,391
 
 
 
337,137
 

Total non-interest

expense

 
 
2,244,194
 
 
 
2,145,608
 
 
 
2,075,482
 
 
 
1,853,601
 
 
 
1,888,958
 

Income before income tax expense

 
 
780,535
 
 
 
858,014
 
 
 
782,533
 
 
 
452,729
 
 
 
754,973
 

Federal income tax expense

 
 
152,236
 
 
 
167,285
 
 
 
151,013
 
 
 
81,509
 
 
 
146,236
 

Net income

 
$ 
628,299
 
 
$ 
690,729
 
 
$ 
631,520
 
 
$ 
371,220
 
 
$ 
608,737
 

Income Statements (unaudited)

Year

Ended
December 31,

2019

Year

Ended
December 31,

2018

INTEREST INCOME

Loans

 
$ 
14,793,138
 
 
$ 
12,403,812
 

Investments

 
 
509,268
 
 
 
496,230
 

Other

 
 
100,073
 
 
 
62,951
 

Total interest income

 
 
15,402,479
 
 
 
12,962,993
 

INTEREST EXPENSE

Deposits

 
 
3,556,578
 
 
 
2,348,864
 

Borrowings

 
 
461,971
 
 
 
416,115
 

Subordinated debt

 
 
270,300
 
 
 
270,300
 

Total interest expense

 
 
4,288,849
 
 
 
3,035,279
 

Net interest income

 
 
11,113,630
 
 
 
9,927,714
 

Provision for loan losses

 
 
786,129
 
 
 
513,238
 

Net interest income after provision for loan losses

 
 
10,327,501
 
 
 
9,414,476
 

NON-INTEREST INCOME

BOLI income

 
 
151,692
 
 
 
149,082
 

Swap referral fee income

 
 
302,760
 
 
 
–
 

Gain on sale of SBA loans

 
 
24,463
 
 
 
96,431
 

Other

 
 
386,280
 
 
 
315,753
 

Total non-interest income

 
 
865,195
 
 
 
561,266
 

NON-INTEREST EXPENSE

Salaries & benefits

 
 
4,826,060
 
 
 
4,294,541
 

Occupancy & equipment

 
 
817,652
 
 
 
730,323
 

Professional fees

 
 
384,113
 
 
 
366,572
 

Advertising

 
 
206,182
 
 
 
195,357
 

Data processing

 
 
532,578
 
 
 
446,542
 

Other non-interest expense

 
 
1,552,300
 
 
 
1,277,305
 

Total non-interest expense

 
 
8,318,885
 
 
 
7,310,640
 

Pre-tax income

 
 
2,873,811
 
 
 
2,665,102
 

Tax expense

 
 
552,043
 
 
 
499,895
 

Net income

 
$ 
2,321,768
 
 
$ 
2,165,207
 

###

About First Resource Bank

First Resource Bank is a locally owned and operated Pennsylvania state-chartered bank with three full-service branches, serving the banking needs of businesses, professionals and individuals in Chester County, Pennsylvania. 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, CEO
610-561-6013

SOURCE: First Resource Bank

ReleaseID: 574640