FIRST RESOURCE BANCORP, INC. ANNOUNCES SECOND QUARTER RESULTS; NET INTEREST MARGIN EXPANDS, LOANS GREW 21% AND DEPOSITS GREW 14% OVER THE PAST 12 MONTHS
EXTON, Pa., July 27, 2023 /PRNewswire/ -- First Resource Bancorp, Inc. (OTCQX: FRSB), the holding company for First Resource Bank, announced financial results for the three months ended June 30, 2023.
Glenn B. Marshall, CEO, stated, "Our successful results in the first half of the year can be attributed to the sustained expansion of loans and deposits. Despite the challenges of rising deposit costs, our net interest income has continued to rise, primarily fueled by the significant growth of our loan portfolio. Loan pricing has improved to offset deposit pricing pressures and credit quality remains very strong."
Highlights for the second quarter of 2023 included:
Net income of $1.5 million, exceeding the prior quarter by 15%
Total interest income grew 50% over the prior year second quarter
Net interest income grew 12% over the prior year second quarter
The net interest margin expanded from 3.57% in the first quarter to 3.64% in the second quarter
Total loans grew 4% during the second quarter and 10% year-to-date
Total deposits grew 2% during the second quarter and 10% year-to-date
Noninterest-bearing deposits grew 16% during the second quarter and 20% year-to-date
Total assets grew $26 million, or 5%, ending the quarter at $565 million
Nonperforming assets to total assets remained low at 0.14%
Completed a 5% stock dividend in June 2023
Named a "Best Places to Work" company by the Philadelphia Business Journal
Named Best Commercial Bank and Best Community Bank by the readers of the Main Line Times
Recognized as one of the top 200 performing bank holding companies under $2 billion in assets in the US by American Banker
President and Chief Financial Officer, Lauren C. Ranalli, stated, "The net interest margin expansion we experienced during the second quarter is largely attributed to the 16% growth in noninterest-bearing deposits we achieved during that timeframe. Growing deposits at this point in the rate cycle in an incredibly competitive, well-banked, market is a significant accomplishment. Our year-to-date net income remains level with the previous year, which is noteworthy considering that there has been no swap referral fee income or gains on sales of SBA loans in 2023 so far, mainly due to less attractive pricing of these products."
Net income for the quarter ended June 30, 2023 was $1.5 million, or $0.47 per common share, compared to $1.3 million, or $0.41 per common share, for the previous quarter and $1.4 million, or $0.45 per common share, for the second quarter of the prior year. Annualized return on average assets was 1.08% for the second quarter of 2023 compared to 1.19% for the second quarter of 2022. Annualized return on average equity was 13.78% for the second quarter of 2023 compared to 15.03% for the same period a year prior.
Total interest income increased $728 thousand, or 11%, from $6.4 million for the first quarter of 2023 to $7.1 million for the second quarter of 2023. This increase was driven by a 4% growth in loans, coupled with an increased rate environment, favorably affecting interest-earning assets.
Total interest income increased $2.4 million, or 50%, from $4.7 million for the second quarter of 2022 to $7.1 million for the second quarter of 2023. This increase was the result of a 21% growth in loans when comparing June 30, 2023 to the year prior. Increased interest income from loan growth was coupled with an increased rate environment, favorably affecting interest-earning assets.
Total interest expense increased 19% when comparing the second quarter of 2023 to the first quarter of 2023. This increase was the result of a 38 basis point increase in the cost of money market accounts and a 53 basis point increase in the cost of time deposits, in addition to a higher volume of money market accounts and time deposits quarter over quarter. Interest expense on FHLB borrowings decreased 49% due to a decrease in the average balance and cost of advances during the second quarter. During the second quarter of 2023 the Federal Reserve increased interest rates by 25 basis points.
Total interest expense increased 340% from $551 thousand for the second quarter of 2022 to $2.4 million for the second quarter of 2023. The majority of this increased expense was related to a 211 basis point increase in the cost of money market deposits along with a higher volume of money market accounts, and a 188 basis point increase in the cost of time deposits as well as a higher volume of time deposits year over year. During the twelve months ended June 30, 2023, the Federal Reserve increased interest rates by 350 basis points.
Net interest income increased $343 thousand, or 8%, to $4.7 million in the second quarter of 2023 as compared to the previous quarter. The net interest margin increased 7 basis points from 3.57% in the first quarter of 2023 to 3.64% in the second quarter of 2023. The overall yield on interest-earning assets increased 27 basis points during the second quarter, primarily due to a 27 basis point increase in yield as well as a higher volume of loans, and an increase in yield on interest-earning cash equivalents. With an increase in both volume and costs for money market accounts and time deposit accounts, the cost of interest-bearing deposits increased 41 basis points during the second quarter to 2.44%. The total cost of deposits increased 26 basis points from 1.66% during the first quarter of 2023 to 1.92% during the second quarter of 2023.
Net interest income for the six months ended June 30, 2023 was $9.0 million, an 11% improvement over net interest income of $8.2 million for the six months ended June 30, 2022. This growth was driven by a $4.1 million, or 46%, increase in loan interest income, offset by a $3.3 million, or 407%, increase in deposit interest expense.
The provision for credit losses decreased to $17 thousand in the second quarter of 2023 compared to $64 thousand in the first quarter of 2023. Year over year the provision for credit losses decreased from $19 thousand in the second quarter of 2022 to $17 thousand in the second quarter of 2023. The second quarter of 2023 benefitted from a $71 thousand loan recovery which lowered the required provision for credit losses that quarter.
The allowance for loan losses to total loans was 0.89% at June 30, 2023, compared to 0.92% at December 31, 2022, and 0.87% at June 30, 2022. Non-performing assets consisted of non-performing loans of $780 thousand at June 30, 2023, and $898 thousand at December 31, 2022. Non-performing assets to total assets were 0.14% at June 30, 2023 and 0.17% at December 31, 2022.
Non-interest income for the second quarter of 2023 was $213 thousand compared to $200 thousand for the previous quarter and $266 thousand for the second quarter of the prior year. No swap referral fee income or gain on the sale of SBA loans was received in either the second quarter of 2023 or the first quarter of 2023. In the second quarter of 2022, swap referral fee income was $85 thousand, and no gain on the sale of SBA loans was received.
Non-interest income for the six months ended June 30, 2023 was $413 thousand as compared to $649 thousand for the same period in the prior year. Swap referral fee income of $187 thousand was received in the first six months of 2022 as compared to none in the first six months of 2023. Gain on sale of SBA loans was $94 thousand for the first six months of 2022 as compared to none in the first six months of 2023.
Non-interest expense increased $171 thousand, or 6%, in the second quarter of 2023 compared to the prior quarter. Increases in salaries & employee benefits, occupancy & equipment, professional fees, data processing, and other costs were partially offset by a decrease in advertising.
Non-interest expenses increased $367 thousand, or 14%, when comparing the second quarter of 2023 to the second quarter of 2022. Increases in salaries & employee benefits, occupancy & equipment, data processing, and other costs were partially offset by decreases in professional fees and advertising. Non-interest expenses to average assets were 2.29% for the second and first quarters of 2023 compared to 2.32% for the second quarter of the prior year.
Deposits increased a net $9.5 million, or 2%, from $466.2 million at March 31, 2023 to $475.7 million at June 30, 2023. During the second quarter, non-interest-bearing deposits increased $14.6 million, or 16%, from $91.0 million at March 31, 2023 to $105.6 million at June 30, 2023. Interest-bearing checking balances increased $193 thousand, from $45.0 million at March 31, 2023 to $45.2 million at June 30, 2023. Money market deposits decreased $12.6 million, or 6%, from $215.6 million at March 31, 2023 to $203.0 million at June 30, 2023. Certificates of deposit increased $7.3 million, or 6%, from $114.6 million at March 31, 2023 to $121.9 million at June 30, 2023. Between June 30, 2022 and June 30, 2023, total deposits grew 14%, with strong interest-bearing checking, money market, and time deposit growth partially offset by a decline in non-interest-bearing checking. At June 30, 2023, approximately 81% of total deposits were insured or otherwise collateralized.
With strong growth across all loan categories, the loan portfolio increased $21.6 million during the second quarter of 2023 to $504.7 million, compared to $483.1 million during the previous quarter.
The following table illustrates the composition of the loan portfolio:
Jun. 30, 2023 | Dec. 31, 2022 | Jun. 30, 2022 | |
Commercial real estate | $ 390,330,435 | $ 364,523,848 | $ 344,077,132 |
Commercial construction | 50,482,296 | 35,120,763 | 23,651,993 |
Commercial business | 46,023,011 | 43,005,663 | 36,531,634 |
Consumer | 17,843,210 | 16,035,503 | 14,400,492 |
Total loans | $ 504,678,952 | $ 458,685,777 | $ 418,661,251 |
Investment securities totaled $18.7 million at June 30, 2023 as compared to $19.4 million at March 31, 2023. At June 30, 2023, the held-to-maturity investment portfolio book value was $8.9 million, with a fair market value of $7.8 million, resulting in an unrealized loss of $1.0 million. This unrealized loss, net of tax, of $824 thousand is less than 2% of total equity at June 30, 2023. The remainder of the investment portfolio was classified as available for sale with a book value of $11.3 million and a fair value of $9.8 million, resulting in an unrealized loss of $1.4 million. This unrealized loss, net of tax, of $1.1 million is included in accumulated other comprehensive loss on the balance sheet.
Total stockholders' equity increased $1.3 million, or 3%, from $41.4 million at March 31, 2023 to $42.8 million at June 30, 2023, primarily due to net income generated. At June 30, 2023, book value per share was $13.85.
Selected Financial Data: Balance Sheets (unaudited) | ||
June 30, 2023 | December 31, 2022 | |
Cash and due from banks | $ 24,208,417 | $ 5,600,869 |
Time deposits at other banks | 100,000 | 100,000 |
Investments | 18,710,916 | 34,781,542 |
Loans | 504,678,952 | 458,685,777 |
Allowance for loan losses | (4,483,275) | (4,238,927) |
Premises & equipment | 7,892,354 | 7,967,246 |
Other assets | 13,864,454 | 13,828,477 |
Total assets | $ 564,971,818 | $ 516,724,984 |
Noninterest-bearing deposits | $ 105,614,112 | $ 87,888,933 |
Interest-bearing checking | 45,181,430 | 46,526,732 |
Money market | 202,993,441 | 207,184,086 |
Time deposits | 121,911,865 | 89,364,726 |
Total deposits | 475,700,848 | 430,964,477 |
Short term borrowings | 28,000,000 | 27,196,000 |
Long term borrowings | 9,530,000 | 9,530,000 |
Subordinated debt | 5,971,886 | 5,965,639 |
Other liabilities | 2,993,396 | 2,972,488 |
Total liabilities | 522,196,130 | 476,628,604 |
Common stock | 3,088,019 | 2,936,756 |
Surplus | 19,711,472 | 18,156,784 |
Accumulated other comprehensive loss | (1,126,166) | (1,108,493) |
Retained earnings | 21,102,363 | 20,111,333 |
Total stockholders' equity | 42,775,688 | 40,096,380 |
Total liabilities & stockholders' equity | $ 564,971,818 | $ 516,724,984 |
Performance Statistics | |||||
Qtr Ended Jun. 30, 2023 | Qtr Ended Mar. 31, 2023 | Qtr Ended Dec. 31, 2022 | Qtr Ended Sep. 30, 2022 | Qtr Ended Jun. 30, 2022 | |
Net interest margin | 3.64 % | 3.57 % | 3.81 % | 3.79 % | 3.73 % |
Nonperforming loans/ total loans | 0.15 % | 0.16 % | 0.20 % | 0.04 % | 0.06 % |
Nonperforming assets/ total assets | 0.14 % | 0.14 % | 0.17 % | 0.04 % | 0.05 % |
Allowance for loan losses/ total loans | 0.89 % | 0.91 % | 0.92 % | 0.85 % | 0.87 % |
Average loans/average assets | 91.6 % | 91.6 % | 90.8 % | 87.8 % | 88.0 % |
Non-interest expenses*/ average assets | 2.29 % | 2.29 % | 2.11 % | 2.14 % | 2.32 % |
Efficiency ratio | 62.6 % | 63.7 % | 55.2 % | 56.0 % | 60.6 % |
Earnings per share – basic and diluted** | $0.47 | $0.41 | $0.45 | $0.50 | $0.45 |
Book value per share** | $13.85 | $13.43 | $13.00 | $12.54 | $12.14 |
Total shares outstanding** | 3,088,019 | 3,085,576 | 3,083,654 | 3,081,555 | 3,079,338 |
Weighted average shares outstanding** | 3,086,782 | 3,084,634 | 3,082,556 | 3,080,540 | 3,078,183 |
* | Annualized |
** | Per share data for prior periods was restated to reflect the 5% stock dividend paid in June 2023. |
Income Statements (unaudited) | |||||
Qtr. Ended Jun. 30, 2023 |
Qtr. Ended Mar. 31, 2023 |
Qtr. Ended Dec. 31, 2022 |
Qtr. Ended Sep. 30, 2022 |
Qtr. Ended Jun. 30, 2022 | |
INTEREST INCOME | |||||
Loans, including fees | $6,923,177 | $6,223,153 | $5,855,969 | $5,218,510 | $4,597,848 |
Securities | 120,133 | 131,350 | 138,544 | 116,783 | 115,791 |
Other | 67,207 | 28,174 | 32,055 | 107,483 | 26,483 |
Total interest income | 7,110,517 | 6,382,677 | 6,026,568 | 5,442,776 | 4,740,122 |
INTEREST EXPENSE | |||||
Deposits | 2,267,015 | 1,819,643 | 1,210,800 | 749,425 | 412,378 |
Borrowings | 64,267 | 126,620 | 93,773 | 41,337 | 45,690 |
Subordinated debt | 93,123 | 93,124 | 93,124 | 93,123 | 93,125 |
Total interest expense | 2,424,405 | 2,039,387 | 1,397,697 | 883,885 | 551,193 |
Net interest income | 4,686,112 | 4,343,290 | 4,628,871 | 4,558,891 | 4,188,929 |
Provision for credit losses | 17,129 | 63,957 | 444,833 | 167,671 | 19,150 |
Net interest income after provision for credit losses | 4,668,983 | 4,279,333 | 4,184,038 | 4,391,220 | 4,169,779 |
NON-INTEREST INCOME | |||||
Service charges and other fees | 107,841 | 99,570 | 97,480 | 103,253 | 83,102 |
BOLI income | 49,281 | 47,691 | 47,849 | 48,413 | 47,100 |
Referral fee income | - | - | - | - | 84,725 |
Gain on sale of SBA loans | - | - | - | - | - |
Other | 55,740 | 53,013 | 61,559 | 52,028 | 51,481 |
Total non-interest income | 212,862 | 200,274 | 206,888 | 203,694 | 266,408 |
NON-INTEREST EXPENSE | |||||
Salaries & benefits | 1,844,356 | 1,834,921 | 1,590,948 | 1,647,461 | 1,643,403 |
Occupancy & equipment | 260,284 | 257,741 | 236,407 | 253,856 | 233,866 |
Professional fees | 119,447 | 115,303 | 127,044 | 73,525 | 151,939 |
Advertising | 65,917 | 67,195 | 88,772 | 83,724 | 81,856 |
Data processing | 159,795 | 147,808 | 154,340 | 148,071 | 134,463 |
Other | 614,534 | 470,567 | 471,560 | 458,443 | 452,282 |
Total non-interest expense | 3,064,333 | 2,893,535 | 2,669,071 | 2,665,080 | 2,697,809 |
Income before federal income tax expense | 1,817,512 | 1,586,072 | 1,721,855 | 1,929,834 | 1,738,378 |
Federal income tax expense | 366,371 | 321,784 | 344,542 | 394,616 | 352,887 |
Net income | $1,451,141 | $1,264,288 | $1,377,313 | $1,535,218 | $1,385,491 |
Income Statements (unaudited) | ||
Six Months Ended 2023 |
Six Months Ended 2022 | |
INTEREST INCOME | ||
Loans, including fees | $ 13,146,330 | $ 8,998,899 |
Securities | 251,483 | 228,254 |
Other | 95,381 | 38,182 |
Total interest income | 13,493,194 | 9,265,335 |
INTEREST EXPENSE | ||
Deposits | 4,086,658 | 806,810 |
Borrowings | 190,887 | 103,827 |
Subordinated debt | 186,247 | 186,248 |
Total interest expense | 4,463,792 | 1,096,885 |
Net interest income | 9,029,402 | 8,168,450 |
Provision for credit losses | 81,086 | 40,710 |
Net interest income after provision for credit losses | 8,948,316 | 8,127,740 |
NON-INTEREST INCOME | ||
Service charges and other fees | 207,411 | 180,392 |
BOLI income | 96,972 | 93,691 |
Referral fee income | - | 186,699 |
Gain on sale of SBA loans | - | 94,392 |
Other | 108,753 | 94,024 |
Total non-interest income | 413,136 | 649,198 |
NON-INTEREST EXPENSE | ||
Salaries & benefits | 3,679,277 | 3,272,216 |
Occupancy & equipment | 518,025 | 486,954 |
Professional fees | 234,750 | 282,833 |
Advertising | 133,112 | 162,782 |
Data processing | 307,603 | 270,798 |
Other | 1,085,101 | 897,392 |
Total non-interest expense | 5,957,868 | 5,372,975 |
Income before federal income tax expense | 3,403,584 | 3,403,963 |
Federal income tax expense | 688,155 | 691,393 |
Net income | $ 2,715,429 | $ 2,712,570 |
About First Resource Bancorp, Inc.
First Resource Bancorp, Inc. is the holding company of 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 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.
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