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

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