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First Resource Bank Announces Record Third Quarter Results; Net Income Grew 20% Over The Prior Quarter

·18 min read

EXTON, Pa., Oct. 29, 2020 /PRNewswire/ -- First Resource Bank (OTCQX: FRSB) announced financial results for the three months ended September 30, 2020.

First Resource Bank is proud to be a community bank that believes in providing exceptional service, managing your banking needs responsibly, and treating you with respect. We are committed to supporting our surrounding towns and neighborhoods. At First Resource Bank, our driving goal is to be your first resource when you want to save, invest or manage your hard-earned dollars, or when you need a lending partner to help you achieve a personal or business goal. (PRNewsFoto/First Resource Bank)
First Resource Bank is proud to be a community bank that believes in providing exceptional service, managing your banking needs responsibly, and treating you with respect. We are committed to supporting our surrounding towns and neighborhoods. At First Resource Bank, our driving goal is to be your first resource when you want to save, invest or manage your hard-earned dollars, or when you need a lending partner to help you achieve a personal or business goal. (PRNewsFoto/First Resource Bank)

Highlights through the third quarter of 2020 included:

  • Net income of $815,406 was the highest quarterly profit in the Bank's history

  • Third quarter net income grew 20% over the second quarter and 18% over the third quarter of the prior year

  • Total loans grew 24% over the last nine months

  • Total deposits increased 22% over the last nine months

  • Non-interest bearing deposits grew 61% over the last nine months

  • Subordinated debt offering was completed totaling $6 million

  • First Resource Bank was named Best Bank in Chester County by readers of the Daily Local News for the fourth consecutive year

Glenn B. Marshall, CEO, stated, "While 2020 has been challenging on many fronts, I am pleased to report record quarterly earnings, strong asset quality and tremendous growth in core deposits. The successful subordinated debt offering completed in September establishes the foundation for continued growth without having to access capital markets again in the near future. First Resource Bank is well-positioned for continued balance sheet growth, with technology enhancements on the horizon to aid in those efforts. The high-touch, high-tech, limited physical locations, "hybrid community bank" model that we have developed and enhanced continues to be not only relevant now, but the way community banks will operate in the future."

Marshall continued, "During the coronavirus pandemic, the Bank immediately adjusted to operating its three branches through the drive-through service for every banking activity, for every customer. We protected the health and welfare of all employees and all customers, while accomplishing every banking activity such as opening new accounts, wire transfers, purchasing certificates of deposit, and signing new loan documents. We reached out to First Resource Bank customers through email, telephone and news blasts to advise the community regarding additional products and services available during the pandemic such as expanding our free desktop deposit scanning network, and Paycheck Protection Program (PPP) loans to fund businesses' payroll and critical expenses. First Resource Bank funded over $58 million in 373 PPP loans ranging from $6.8 million to $300, with 88% of those loans assisting businesses and individuals in the Delaware Valley. We are actively submitting customer PPP loans for forgiveness and have successfully submitted over 37% to the SBA thus far. For those customers that experienced forced closures during the pandemic, First Resource Bank worked to modify their existing loans and defer payments during the crucial closure times. Our customers tell us that First Resource Bank reminds them of how banking should be, with a true focus on relationships."

Net income for the quarter ended September 30, 2020 was $815,406, which compares to $676,987 for the previous quarter and $690,729 for the third quarter of the prior year.

Total interest income grew 4% when comparing the third quarter to the second quarter of 2020. This increase was driven by 2% loan growth during the third quarter.

Total interest income rose 4% from $3,998,838 for the three months ended September 30, 2019 to $4,142,927 for the three months ended September 30, 2020. This increase was the result of 26% loan growth when comparing September 30, 2020 to a year prior, partially mitigated by a 91 basis point decline in loan yields when comparing the third quarter of 2019 to the third quarter of 2020. This loan yield decline is a result of lower yielding PPP loans booked in the second and third quarters of 2020 and the impact of the Federal Reserve 150 basis point rate cuts in March 2020.

Total interest income was $12,109,694 for the nine months ended September 30, 2020, a 6% increase over the same period in the prior year.

Total interest expense decreased 9% when comparing the third quarter to the second quarter of 2020. This decrease was driven by a 33 basis point decrease in the cost of certificates of deposit during the quarter. Interest expense on deposits continues to be actively managed to lower costs.

Total interest expense decreased 25% from $1,137,328 for the three months ended September 30, 2019 to $851,505 for the three months ended September 30, 2020. The vast majority of this decreased expense was related to a 70 basis point decrease in the cost of money market accounts and a 49 basis point decrease in the cost of certificates of deposit, year over year. Overall interest expense was also mitigated by strong growth in non-interest bearing deposits, which increased 71% when comparing September 30, 2020 to the year prior.

Total interest expense for the nine months ended September 30, 2020 was $2,864,530, a 10% decrease over the same period in the prior year.

Net interest income was $3,291,422 for the quarter ended September 30, 2020 as compared to $3,049,723 for the previous quarter, an improvement of 8%. The net interest margin increased 3 basis points from 3.50% for the quarter ended June 30, 2020 to 3.53% for the quarter ended September 30, 2020. The overall yield on interest earning assets decreased 13 basis points during the third quarter led by an 18 basis point decrease in loan yields to 4.66%. The cost of interest bearing deposits decreased 24 basis points during the third quarter to 1.06%, with the majority of that decrease attributed to lower cost money market accounts and certificates of deposit.

Net interest income for the nine months ended September 30, 2020 was $9,245,164, a 12% improvement over net interest income of $8,241,947 for the nine months ended September 30, 2019. This growth was driven by a 7% increase in loan interest income and a 13% decline in deposit interest expense.

The provision for loan losses increased from $51,045 for the three months ended June 30, 2020 to $129,894 for the three months ended September 30, 2020. The provision for loan losses increased from $84,557 for the three months ended September 30, 2019, to $129,894 for the three months ended September 30, 2020. The provision for loan losses decreased from $719,501 for the nine months ended September 30, 2019 to $324,972 for the nine months ended September 30, 2020. In the first quarter of 2019 one large legacy problem loan was resolved which led to an unusually high provision for loan losses in that period.

Marshall noted, "When the COVID-19 pandemic mandated business closures in our markets in mid-March, we proactively reached out to our borrowers to provide them assistance in the form of loan modifications. Since that time, over 94% of those modifications have ended and regularly scheduled loan payments have resumed. Our customers are faring well through this health crisis, with only a few exceptions and we continue to work with those borrowers. The fact that our loan portfolio was never focused on industries that are being hit particularly hard right now due to the pandemic has been a significant benefit during these trying times."

The allowance for loan losses to total loans was 0.78% at September 30, 2020 as compared to 0.90% at December 31, 2019 and 0.90% at September 30, 2019. Excluding PPP loans, which are 100% guaranteed by the SBA, the allowance for loan losses to total loans was 0.93% at September 30, 2020. Non-performing assets consisted of non-performing loans of $1.4 million at September 30, 2020 and was unchanged from the prior quarter. Non-performing assets to total assets decreased from 0.36% at June 30, 2020 to 0.35% at September 30, 2020.

Non-interest income for the quarter ended September 30, 2020 was $136,863, as compared to $136,534 for the previous quarter and $226,669 for the third quarter of the prior year. There was no swap referral fee income received in the third quarter, as compared to $27,100 in the second quarter of 2020 and $107,160 in the third quarter of 2019.

Non-interest income for the nine months ended September 30, 2020 was $557,403 as compared to $645,522 for the same period in the prior year. Swap referral fee income of $175,100 was received in the first nine months of 2020 as compared to $221,260 in the first nine months of 2019. There were no gains on sales of SBA loans in the first nine months of 2020 as compared to $24,463 in the first nine months of 2019.

Non-interest expense decreased $12 thousand, or 1%, in the three months ended September 30, 2020 as compared to the prior quarter. The decrease was primarily due to a decrease in other expenses, partially offset by increases in salaries and benefits, occupancy and advertising costs. Non-interest expense increased $139 thousand, or 6%, when comparing the third quarter of 2020 to the third quarter of 2019. This increase was primarily attributed to an increase in salaries and benefits and occupancy costs.

Non-interest expense increased $756 thousand, or 12%, in the nine months ended September 30, 2020 as compared to the same period in the prior year. This increase was due to higher salaries and benefits expense associated with a higher headcount, occupancy and advertising costs.

Deposits grew a net $5.9 million, or 2%, from $324.1 million at June 30, 2020 to $330.1 million at September 30, 2020. During the third quarter, non-interest bearing deposits decreased $2.8 million, or 3%, from $84.5 million at June 30, 2020 to $81.7 million at September 30, 2020. Interest-bearing checking balances increased $177 thousand, or 1%, from $22.6 million at June 30, 2020 to $22.7 million at September 30, 2020. Money market deposits increased $8.9 million, or 8%, from $119.5 million at June 30, 2020 to $128.4 million at September 30, 2020. Certificates of deposit decreased $351 thousand, or 0%, from $97.6 million at June 30, 2020 to $97.3 million at September 30, 2020.

The deposit portfolio grew $60.3 million, or 22%, in the first nine months of 2020, with a $42.0 million increase in total checking balances and a $26.0 million increase in money market balances, partially offset by a $7.7 million decline in certificates of deposit balances. Total deposits grew $65.6 million, or 25%, from $264.4 million at September 30, 2019 to $330.1 million at September 30, 2020, with a $46.8 million increase in total checking balances and a $26.5 million increase in money market balances, partially offset by a $7.7 million decline in certificates of deposit balances. Checking balances represented 32% of total deposits at September 30, 2020, a significant increase from 23% at December 31, 2019.

President and Chief Financial Officer, Lauren C. Ranalli, stated, "Core deposit growth in 2020 has surpassed our expectations and we are thrilled with the relationships we were able to earn through the Paycheck Protection Program (PPP) process. We funded 100% of our PPP loans through core deposit growth and those deposits have stuck with us even after the PPP funds have been spent. There is tremendous momentum on the deposit side of the balance sheet which has allowed us to reduce deposit costs aggressively to help offset loan yield declines."

The loan portfolio grew $8.0 million, or 2%, during the third quarter from $339.0 million at June 30, 2020 to $347.0 million at September 30, 2020, with the majority of that growth in commercial real estate and consumer loans. Year-to-date net loan growth in 2020 was $66.8 million, or 24%, with the majority of that growth in commercial business loans as a result of the SBA's Paycheck Protection Program and commercial real estate loans. Commercial construction loans consist primarily of suburban residential construction which declined 22% in 2020 due to strong demand in local residential housing markets that caused the construction project cycle to be accelerated creating less outstanding loan balances and faster payoffs. Residential inventory has been extremely limited in 2020 causing these construction projects to sell quickly. The loan portfolio grew $72.2 million, or 26%, from $274.8 million at September 30, 2019 to $347.0 million at September 30, 2020, with the majority of that growth in commercial business and commercial real estate loans.

The following table illustrates the composition of the loan portfolio:


September 30,

2020

Dec. 31,

2019

September 30,

2019





Commercial real estate

$ 214,601,741

$ 203,427,712

$ 197,100,951

Commercial construction

22,869,475

29,353,830

27,175,769

Commercial business

88,868,441

30,805,290

31,927,054

Consumer

20,680,420

16,615,540

18,598,371





Total loans

$ 347,020,077

$ 280,202,372

$ 274,802,145







Total stockholder's equity increased $798 thousand, or 3%, from $29.5 million at June 30, 2020 to $30.3 million at September 30, 2020, primarily due to net income generated, partially offset by a decline in the unrealized gain/loss position of the investment portfolio. During the quarter ended September 30, 2020, book value per share grew 28 cents, or 3%, to $10.93.

Total assets increased $10.0 million, or 3% during the third quarter of 2020, with growth in loans primarily funded by deposit growth.

Selected Financial Data:

Balance Sheets (unaudited)



September 30,
2020

December 31,
2019




Cash and due from banks

$ 16,815,844

$ 2,516,374

Time deposits at other banks

599,000

599,000

Investments

15,193,940

37,120,798

Loans

347,020,077

280,202,372

Allowance for loan losses

(2,712,075)

(2,507,845)

Premises & equipment

8,421,416

8,675,596

Other assets

9,976,325

9,812,630




Total assets

$ 395,314,527

$ 336,418,925




Non-interest bearing deposits

$ 81,678,013

$ 50,616,321

Interest-bearing checking

22,733,378

11,797,456

Money market

128,399,246

102,433,910

Time deposits

97,256,707

104,952,207

Total deposits

330,067,344

269,799,894

Short term borrowings

-

10,896,000

Long term borrowings

24,206,000

21,045,500

Subordinated debt

7,949,283

3,994,591

Other liabilities

2,748,380

2,705,583




Total liabilities

364,971,007

308,441,568




Total stockholders' equity

30,343,520

27,977,357




Total Liabilities &

Stockholders' Equity

$ 395,314,527

$ 336,418,925

Performance Statistics
(unaudited)



Qtr Ended

Sept. 30,

2020

Qtr Ended

June 30,

2020

Qtr Ended

Mar. 31,

2020

Qtr Ended

Dec. 31,

2019

Qtr Ended

Sept. 30,

2019







Net interest margin

3.53%

3.50%

3.69%

3.73%

3.81%







Nonperforming loans/

Total loans

0.40%

0.41%

0.49%

0.50%

0.89%







Nonperforming assets/

Total assets

0.35%

0.36%

0.41%

0.42%

0.94%







Allowance for loan losses/

Total loans

0.78%**

0.76%**

0.89%

0.90%

0.90%







Average loans/Average

assets

88.7%

87.4%

84.9%

84.9%

87.2%







Non-interest expenses*/

Average assets

2.34%

2.50%

2.71%

2.75%

2.71%







Earnings per share – basic

and diluted

$0.29

$0.24

$0.23

$0.23

$0.25







Book value per share

$10.93

$10.65

$10.39

$10.10

$9.88







Total shares outstanding

2,776,551

2,773,686

2,770,755

2,768,729

2,766,330







* Annualized


** Excluding PPP loans, the allowance for loan losses/total loans was 0.93% at September 30, 2020 and 0.91% at June 30, 2020.

Income Statements (unaudited)



Qtr. Ended

Sept. 30,

2020

Qtr. Ended

June 30,

2020

Qtr. Ended

Mar. 31,

2020

Qtr. Ended

Dec. 31,

2019

Qtr. Ended

Sept. 30,

2019







INTEREST INCOME






Loans, including fees

$4,038,794

$3,879,732

$3,814,235

$3,819,667

$3,855,582

Securities

101,768

104,900

118,005

129,178

124,908

Other

2,365

2,600

47,295

38,987

18,348

Total interest income

4,142,927

3,987,232

3,979,535

3,987,832

3,998,838







INTEREST EXPENSE






Deposits

653,243

742,578

885,915

930,953

938,804

Borrowings

120,795

127,446

122,116

117,350

130,679

Subordinated debt

77,467

67,485

67,485

67,846

67,845

Total interest expense

851,505

937,509

1,075,516

1,116,149

1,137,328







Net interest income

3,291,422

3,049,723

2,904,019

2,871,683

2,861,510







Provision for loan losses

129,894

51,045

144,033

66,628

84,557







Net interest income after provision for loan losses

3,161,528

2,998,678

2,759,986

2,805,055

2,776,953







NON-INTEREST INCOME






BOLI income

37,125

37,067

37,050

38,067

38,205

Referral fee income

-

27,100

148,000

81,500

107,160

Gain on sale of SBA loans

-

-

-

-

-

Other

99,738

72,367

98,956

100,107

81,304

Total non-interest income

136,863

136,534

284,006

219,674

226,669







NON-INTEREST EXPENSE






Salaries & benefits

1,386,212

1,373,036

1,328,471

1,267,867

1,266,493

Occupancy & equipment

261,166

228,216

252,370

251,297

189,381

Professional fees

96,936

98,492

92,161

94,744

88,083

Advertising

72,390

64,011

66,278

54,660

82,357

Data processing

131,351

135,936

139,483

127,721

142,587

Other

336,144

396,808

371,641

447,905

376,707

Total non-interest

expense

2,284,199

2,296,499

2,250,404

2,244,194

2,145,608







Income before income tax expense

1,014,192

838,713

793,588

780,535

858,014







Federal income tax expense

198,786

161,726

153,449

152,236

167,285







Net income

$ 815,406

$ 676,987

$ 640,139

$ 628,299

$ 690,729







Income Statements (unaudited)



Nine Months

Ended
September 30,

2020

Nine Months

Ended
September 30,

2019




INTEREST INCOME



Loans

$ 11,732,761

$ 10,973,471

Investments

324,673

380,090

Other

52,260

61,086

Total interest income

12,109,694

11,414,647




INTEREST EXPENSE



Deposits

2,281,736

2,625,625

Borrowings

370,357

344,621

Subordinated debt

212,437

202,454

Total interest expense

2,864,530

3,172,700




Net interest income

9,245,164

8,241,947




Provision for loan losses

324,972

719,501




Net interest income after provision for loan losses

8,920,192

7,522,446




NON-INTEREST INCOME



BOLI income

111,242

113,625

Referral fee income

175,100

221,260

Gain on sale of SBA loans

-

24,463

Other

271,061

286,173

Total non-interest income

557,403

645,521




NON-INTEREST EXPENSE



Salaries & benefits

4,087,719

3,558,193

Occupancy & equipment

741,752

566,355

Professional fees

287,589

289,369

Advertising

202,679

151,522

Data processing

406,770

404,857

Other non-interest expense

1,104,593

1,104,395

Total non-interest expense

6,831,102

6,074,691




Pre-tax income

2,646,493

2,093,276




Tax expense

513,961

399,807




Net income

$ 2,132,532

$ 1,693,469




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 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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