PR Newswire | Oct 29, 2021 08:01AM EDT

Loan Growth Year-To-Date

10/29 07:00 CDT

First Resource Bank Announces Record Quarterly Net Income; Achieves 22% Organic Loan Growth Year-To-Date EXTON, Pa., Oct. 29, 2021

EXTON, Pa., Oct. 29, 2021 /PRNewswire/ -- First Resource Bank (OTCQX: FRSB) announced financial results for the three and nine months ended September 30, 2021.

Glenn B. Marshall, CEO, stated, "First Resource Bank has experienced monumental growth in the first nine months of 2021 despite continued disruptions in the world caused by the pandemic. Year-over-year loan growth, excluding PPP loans, was 28%, and total checking deposits increased 51% over that same timeframe. This growth acceleration, coupled with a core processing technology conversion completed during the third quarter, has fueled a transformation of the bank over the past 18 months."

Highlights for the three and nine months ended September 30, 2021 included:

* Third quarter net income of $1.3 million was the highest quarterly profit in the Bank's history * 22% loan growth achieved during the first nine months of 2021, excluding PPP loan activity * Approximately 89% of PPP loans have been forgiven as of September 30, 2021 * Non-interest bearing checking deposits grew 25% year to date * Total checking deposits grew 27% year to date * Total interest income grew 13% over the prior year third quarter * Total interest expense declined 27% over the prior year third quarter * Named the Best Bank in Chester County for the fifth consecutive year by the readers of The Daily Local News

President and Chief Financial Officer, Lauren C. Ranalli, stated, "Improving our deposit mix has enabled First Resource Bank to be more competitive on loan pricing to help continue to grow the loan portfolio. The liquidity surge that we experienced in 2020 has remained and we have turned many of those PPP opportunities into full relationships, including business operating checking accounts. We continue to capitalize on disruption in our local market due to merger activity and we anticipate increased opportunities in the future. First Resource Bank is well positioned to earn new customers that have become disenfranchised after a merger of their existing bank. We've upgraded our internal technology, have plans to continue to enhance our customer facing technology in the near term and are actively engaged in the community to help those businesses find a new banking home."

Net income for the quarter ended September 30, 2021 was $1,293,398, which compares to $1,056,574 for the previous quarter and $815,406 for the third quarter of the prior year.

Total interest income decreased 1% when comparing the third quarter of 2021 to the second quarter of 2021. This decrease was driven by lower fees recognized as interest income in association with PPP loan forgiveness during the third quarter of 2021 as compared to the prior quarter, offset by a 4% organic growth in loans, excluding PPP loans. The Bank recognized $614 thousand in PPP fees in the second quarter of 2021 and $459 thousand in the third quarter of 2021 which represents both the amortization of fees for individual loans based on the original maturity schedule and the balance of fees recognized when the loan is forgiven by the Small Business Administration.

Total interest income rose 13% from $4,142,927 for the three months ended September 30, 2020 to $4,672,144 for the three months ended September 30, 2021. This increase was the result of 9% loan growth when comparing September 30, 2021 to a year prior, which increases to 28% loan growth when excluding PPP loans for both periods. Increased interest income from loan growth was aided by a 15 basis point increase in loan yields when comparing the third quarter of 2020 to the third quarter of 2021. The Bank recognized $205 thousand in PPP fees in the three months ended September 30, 2020 as compared to $459 thousand in the three months ended September 30, 2021. The Bank recognized $363 thousand in PPP fees in the nine months ended September 30, 2020 as compared to $1.5 million for the nine months ended September 30, 2021.

Total interest expense decreased 8% when comparing the third quarter of 2021 to the second quarter of 2021. This decrease was driven by a 7 basis point decrease in the cost of interest-bearing deposits during the quarter. Interest expense on deposits continues to be actively managed to lower costs.

Total interest expense decreased 27% from $851,505 for the three months ended September 30, 2020 to $622,653 for the three months ended September 30, 2021. The vast majority of this decreased expense was related to an overall 44 basis point decline in the cost of interest-bearing deposits, led by a 19 basis point decrease in the cost of money market accounts and a 54 basis point decrease in the cost of certificates of deposit, year over year. Overall interest expense was also mitigated by strong growth in noninterest-bearing deposits, which increased 53% when comparing September 30, 2021 to the year prior.

Net interest income was $4,049,491 for the quarter ended September 30, 2021 as compared to $4,063,786 for the previous quarter, a nominal decrease. The net interest margin decreased 10 basis points from 3.77% for the quarter ended June 30, 2021 to 3.67% for the quarter ended September 30, 2021. The overall yield on interest earning assets decreased 17 basis points during the third quarter primarily due to a lower loan to asset ratio at September 30, 2021 as compared to June 30, 2021. The cost of interest-bearing deposits decreased 7 basis points during the third quarter to 0.62%, with the majority of that decrease attributed to lower cost certificates of deposit. Continued growth in noninterest-bearing deposits fueled a decline in the total cost of deposits from 0.50% at June 30, 2021 to 0.43% at September 30, 2021.

Net interest income for the nine months ended September 30, 2021 was $11,683,982, a 26% improvement over net interest income of $9,245,164 for the nine months ended September 30, 2020. This growth was driven by a 14% increase in loan interest income, higher fee recognition on PPP loans and a 38% decrease in deposit interest expense.

The provision for loan losses decreased from $270,453 for the three months ended June 30, 2021 to $6,834 for the three months ended September 30, 2021. The provision for loan losses decreased from $129,894 for the three months ended September 30, 2020, to $6,834 for the three months ended September 30, 2021.

Marshall stated, "Credit quality continues to be incredibly strong and as uncertainty related to the pandemic continues to wane, increased reserves related to that event decline as well. Our customers have performed strongly throughout the pandemic requiring smaller additions to the allowance for loan losses this quarter."

The allowance for loan losses to total loans was 0.86% at September 30, 2021 as compared to 0.87% at June 30, 2021, 0.86% at December 31, 2020 and 0.78% at September 30, 2020. Excluding PPP loans, which are 100% guaranteed by the SBA, the allowance for loan losses to total loans was 0.88% at September 30, 2021, 0.93% at June 30, 2021, 0.95% at December 31, 2020 and 0.93% at September 30, 2020. Non-performing assets consisted of non-performing loans of $97 thousand at September 30, 2021, a 41% decline from the prior quarter. Non-performing assets to total assets were 0.02% at September 30, 2021, down from 0.04% in the prior quarter.

Non-interest income for the quarter ended September 30, 2021 was $179,004, as compared to $181,213 for the previous quarter and $136,863 for the third quarter of the prior year.

Non-interest income for the nine months ended September 30, 2021 was $537,978 as compared to $557,403 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 none in the first nine months of 2021. This decline in swap fee income is attributed to lower customer demand in 2021 due to the interest rate environment.

Non-interest expense decreased $52,856, or 2%, in the three months ended September 30, 2021 as compared to the prior quarter. The decrease was primarily due to decreases in salaries and benefits, occupancy, advertising, and data processing, partially offset by increases in professional fees, and other operating expenses. Part of the decrease in salaries and benefits expenses and data processing expenses are attributed to a significant technology enhancement project during the second quarter. Non-interest expense increased $318 thousand, or 14%, when comparing the third quarter of 2021 to the third quarter of 2020. This increase was primarily attributed to an increase in salaries and benefits costs, data processing and other costs. The technology enhancement project during the second quarter of 2021 included numerous one-time expenses in each of those categories.

Deposits grew a net $7.4 million, or 2%, from $394.4 million at June 30, 2021 to $401.8 million at September 30, 2021. During the third quarter, noninterest-bearing deposits increased $1.1 million, or 1%, from $123.5 million at June 30, 2021 to $124.6 million at September 30, 2021. Interest-bearing checking balances increased $2.6 million, or 9%, from $30.2 million at June 30, 2021 to $32.8 million at September 30, 2021. Money market deposits increased $12.1 million, or 8%, from $158.8 million at June 30, 2021 to $170.9 million at September 30, 2021. Certificates of deposit decreased $8.3 million, or 10%, from $81.9 million at June 30, 2021 to $73.6 million at September 30, 2021. Between September 30, 2020 and September 30, 2021, total deposits grew 22%, with tremendous checking and money market growth partially offset by a decline in certificates of deposit.

The loan portfolio declined $1.6 million during the third quarter from $380.8 million at June 30, 2021 to $379.2 million at September 30, 2021. Excluding PPP loan activity, the loan portfolio increased $14.0 million, or 4%, from $356.4 million at June 30, 2021 to $370.4 million at September 30, 2021, with strong growth in commercial real estate loans and commercial business loans partially offset by a decline in construction loans and consumer loans. Year-to-date loan growth in 2021 was $40.3 million or 12%. Excluding PPP loan activity, year-to-date loan growth was $65.8 million, or 22%. The loan portfolio grew $32.2 million, or 9% from $347.0 million at September 30, 2020 to $379.2 million at September 30, 2021. Excluding PPP loans, the loan portfolio grew $80.2 million, or 28% from September 30, 2020 to September 30, 2021.

The following table illustrates the composition of the loan portfolio:

September 30, Dec. 31, September 30,

2021 2020 2020

Commercial real estate $ 295,356,032 $ 227,224,196 $ 214,601,741

Commercial construction 25,483,655 24,925,050 22,869,475

Commercial business 43,112,165 66,555,149 88,868,441

Consumer 15,245,369 20,235,647 20,680,420

Total loans $ 379,197,221 $ 338,940,042 $ 347,020,077

Total stockholder's equity increased $1.3 million, or 4%, from $33.4 million at June 30, 2021 to $34.7 million at September 30, 2021, primarily due to net income generated. During the quarter ended September 30, 2021, book value per share grew 44 cents, or 4%, to $11.86.

Total assets increased $10.4 million, or 2% during the third quarter of 2021, with growth in cash and due from banks funded by deposit growth. PPP loan activity of $15.6 million in net payoffs (forgiveness payments less new originations) in the third quarter of 2021 were replaced with $14.0 million in organic loan growth.

Selected Financial Data:

Balance Sheets (unaudited)

September 30, December 31, 2021 2020

Cash and due from banks $ 54,840,411 $ 26,008,820

Time deposits at other banks 100,000 599,000

Investments 17,098,565 43,060,035

Loans 379,197,221 338,940,042

Allowance for loan losses (3,268,906) (2,907,023)

Premises & equipment 8,176,244 8,380,269

Other assets 11,797,807 10,353,164

Total assets $ 467,941,342 $ 424,434,307

Noninterest-bearing deposits $ 124,606,595 $ 99,898,323

Interest-bearing checking 32,779,767 23,726,721

Money market 170,876,537 140,480,421

Time deposits 73,566,332 93,919,651

Total deposits 401,829,231 358,025,116

Short term borrowings - -

Long term borrowings 21,158,000 24,206,000

Subordinated debt 5,950,020 7,940,649

Other liabilities 4,293,197 2,806,732

Total liabilities 433,230,448 392,978,497

Total stockholders' equity 34,710,894 31,455,810

Total Liabilities & $ 467,941,342 $ 424,434,307 Stockholders' Equity



Performance Statistics (unaudited) Qtr Ended Qtr Ended Qtr Ended Qtr Ended Qtr Ended Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,

2021 2021 2021 2020 2020

Net interest margin 3.67% 3.77% 3.59% 3.69% 3.53%

Nonperforming loans/ 0.03% 0.04% 0.10% 0.11% 0.40% Total loans

Nonperforming assets/ 0.02% 0.04% 0.09% 0.09% 0.35% Total assets

Allowance for loan losses/ 0.86%** 0.87%** 0.83%** 0.86%** 0.78%** Total loans

Average loans/Average 82.8% 86.4% 84.4% 81.4% 88.7% assets

Non-interest expenses*/ 2.27% 2.36% 2.29% 2.20% 2.34% Average assets

Earnings per share - basic $0.44 $0.36 $0.31 $0.39 $0.28 and diluted***

Book value per share*** $11.86 $11.42 $11.07 $10.78 $10.41

Total shares outstanding*** 2,925,874 2,923,777 2,921,312 2,918,668 2,915,612

* Annualized

** Excluding PPP loans, the allowance for loan losses/total loans was 0.88% atSeptember 30, 2021, 0.93% at June 30, 2021, 0.95% at March 31, 2021, 0.95% atDecember 31, 2020, and 0.93% at September 30, 2020.

*** Per share data restated to reflect the 5% stock dividend paid in May 2021.

Income Statements (unaudited)



Qtr. EndedQtr. EndedQtr. EndedQtr. EndedQtr. Ended Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30, 2021 2021 2021 2020 2020



INTEREST INCOME

Loans, including fees $4,566,386$4,641,636$4,169,912$4,439,471$4,038,794

Securities 89,968 94,794 96,260 93,928 101,768

Other 15,790 5,775 6,022 10,990 2,365

Total interest income 4,672,144 4,742,205 4,272,194 4,544,389 4,142,927



INTEREST EXPENSE

Deposits 424,240 481,151 499,622 581,982 653,243

Borrowings 105,289 104,145 108,743 117,995 120,795

Subordinated debt 93,124 93,123 93,124 126,007 77,467

Total interest expense 622,653 678,419 701,489 825,984 851,505



Net interest income 4,049,491 4,063,786 3,570,705 3,718,405 3,291,422



Provision for loan losses 6,834 270,453 240,153 229,538 129,894



Net interest income after 4,042,657 3,793,333 3,330,552 3,488,867 3,161,528 provision for loan losses



NON-INTEREST INCOME

BOLI income 47,555 47,505 44,523 36,852 37,125

Referral fee income - - - 69,000 -

Gain on sale of SBA loans - - - - -

Other 131,449 133,708 133,238 118,539 99,738

Total non-interest income 179,004 181,213 177,761 224,391 136,863



NON-INTEREST EXPENSE

Salaries & benefits 1,559,849 1,592,369 1,432,259 1,405,431 1,386,212

Occupancy & equipment 253,349 255,537 262,501 238,406 261,166

Professional fees 104,768 98,035 89,413 95,238 96,936

Advertising 81,789 87,788 61,683 80,279 72,390

Data processing 160,971 188,220 149,633 146,147 131,351

Other 441,218 432,851 383,951 349,074 336,144

Total non-interest 2,601,944 2,654,800 2,379,440 2,314,575 2,284,199 expense



Income before income tax expense1,619,717 1,319,746 1,128,873 1,398,683 1,014,192



Federal income tax expense 326,319 263,172 223,209 280,248 198,786



Net income $1,293,398$1,056,574$905,664 $1,118,435$ 815,406



Income Statements (unaudited)



Nine Months Nine Months Ended Ended September 30,September 30, 2021 2020



INTEREST INCOME

Loans $ 13,377,934 $ 11,732,761

Investments 281,022 324,673

Other 27,587 52,260

Total interest income 13,686,543 12,109,694



INTEREST EXPENSE

Deposits 1,405,013 2,281,736

Borrowings 318,177 370,357

Subordinated debt 279,371 212,437

Total interest expense 2,002,561 2,864,530



Net interest income 11,683,982 9,245,164



Provision for loan losses 517,440 324,972



Net interest income after provision for11,166,542 8,920,192 loan losses



NON-INTEREST INCOME

BOLI income 139,583 111,242

Referral fee income - 175,100

Gain on sale of SBA loans - -

Other 398,395 271,061

Total non-interest income 537,978 557,403



NON-INTEREST EXPENSE

Salaries & benefits 4,584,477 4,087,719

Occupancy & equipment 771,387 741,752

Professional fees 292,216 287,589

Advertising 231,260 202,679

Data processing 498,824 406,770

Other non-interest expense 1,258,020 1,104,593

Total non-interest expense 7,636,184 6,831,102



Pre-tax income 4,068,336 2,646,493



Tax expense 812,700 513,961



Net income $ 3,255,636$ 2,132,532

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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