PR Newswire | Jul 20, 2020 08:01AM EDT

Grew 31% Over The Prior Year

07/20 07:00 CDT

First Resource Bank Announces Second Quarter Results; Year To Date Net Income Grew 31% Over The Prior Year EXTON, Pa., July 20, 2020

EXTON, Pa., July 20, 2020 /PRNewswire/ -- First Resource Bank (OTCQX: FRSB) announced financial results for the three months ended June 30, 2020.

Highlights for the second quarter of 2020 included:

* Year-to-date net income grew 31% over the prior year * Second quarter net income grew 6% over the prior quarter * Total loans grew 21% over the last six months * PPP loans totaling $58 million closed during the second quarter * Total deposits increased 20% over the last six months * Non-interest bearing deposits grew 67% over the last six months * First Resource Bank was named a "Best Place to Work" by the Philadelphia Business Journal for the second consecutive year

Glenn B. Marshall, CEO, stated, "The second quarter was unique as we continued to operate and grow First Resource Bank through a global pandemic. We embraced the opportunity to help our existing customers and new customers through the Paycheck Protection Program (PPP) and were highly successful in doing so. Approximately 36% of our PPP loans were for new customers to the Bank and we are working to expand those relationships. Additionally, our disaster recovery plans, which had been in place for years, worked flawlessly as we were abruptly transitioned to working remotely in mid-March. I am extremely proud of the First Resource Bank team for their hard work and successful outcomes that were generated in the second quarter."

Net income for the quarter ended June 30, 2020 was $676,987, which compares to $640,139 for the previous quarter and $631,520 for the second quarter of the prior year.

Total interest income grew slightly when comparing the second quarter to the first quarter of 2020. Interest earned from the tremendous loan growth during the second quarter was partially offset by the impact of the Federal Reserve rate cuts in March.

Total interest income rose 4% from $3,819,446 for the three months ended June 30, 2019 to $3,987,232 for the three months ended June 30, 2020. This increase was the result of 25% loan growth when comparing June 30, 2020 to a year prior, partially mitigated by a 75 basis point decline in loan yields when comparing the second quarter of 2019 to the second quarter of 2020. This loan yield decline is a result of lower yielding PPP loans booked in the second quarter of 2020 and the full quarter's impact of the Federal Reserve 150 basis point rate cuts in March 2020.

Total interest income was $7,966,767 for the six months ended June 30, 2020, a 7% increase over the same period in the prior year.

Total interest expense decreased 13% when comparing the second quarter to the first quarter of 2020. This decrease was driven by a 38 basis point decrease in the cost of money market accounts and a 14 basis point decrease in the cost of certificates of deposit during the quarter.

Total interest expense decreased 12% from $1,065,036 for the three months ended June 30, 2019 to $937,509 for the three months ended June 30, 2020. The vast majority of this decreased expense was related to a 58 basis point decrease in the cost of money market accounts, year over year. Overall interest expense was also mitigated by strong growth in non-interest bearing deposits, which increased 78% when comparing June 30, 2020 to the year prior.

Total interest expense for the six months ended June 30, 2020 was $2,013,025, a 1% decrease over the same period in the prior year.

Net interest income was $3,049,723 for the quarter ended June 30, 2020 as compared to $2,904,019 for the previous quarter, an improvement of 5%. The net interest margin declined 19 basis points from 3.69% for the quarter ended March 31, 2020 to 3.50% for the quarter ended June 30, 2020. The overall yield on interest earning assets decreased 49 basis points during the second quarter led by a 58 basis point decrease in loan yields to 4.84%. The cost of interest bearing deposits decreased 31 basis points during the second quarter to 1.30%, with the majority of that decrease attributed to lower cost money market accounts and certificates of deposit.

Net interest income for the six months ended June 30, 2020 was $5,953,742, an 11% improvement over net interest income of $5,380,437 for the six months ended June 30, 2019. This growth was driven by an 8% increase in loan interest income.

The provision for loan losses decreased from $144,033 for the three months ended March 31, 2020 to $51,045 for the three months ended June 30, 2020. The provision for loan losses decreased from $158,992 for the three months ended June 30, 2019, to $51,045 for the three months ended June 30, 2020. The provision for loan losses decreased from $634,944 for the six months ended June 30, 2019 to $195,078 for the six months ended June 30, 2020.

Marshall noted, "Management has worked to resolve loan delinquencies and to anticipate future credit challenges. In the first half of 2019, we resolved one large legacy problem loan which led to an unusually high provision for loan losses during that period."

The allowance for loan losses to total loans was 0.76% at June 30, 2020 as compared to 0.90% at December 31, 2019 and 0.93% at June 30, 2019. Excluding PPP loans, which are 100% guaranteed by the SBA, the allowance for loan losses to total loans was 0.91% at June 30, 2020. Non-performing assets consisted of non-performing loans of $1.4 million at June 30, 2020 and was unchanged from the prior quarter. Non-performing assets to total assets decreased from 0.41% at March 31, 2020 to 0.36% at June 30, 2020, primarily due to growth in total assets related to PPP loans.

Non-interest income for the quarter ended June 30, 2020 was $136,534, as compared to $284,006 for the previous quarter and $262,597 for the second quarter of the prior year. Swap referral fee income of $27,100 was received in the second quarter of 2020, as compared to $148,000 in the prior quarter and $114,100 in the second quarter of 2019.

Non-interest income for the six months ended June 30, 2020 was $420,540 as compared to $418,852 for the same period in the prior year. Swap referral fee income of $175,100 was received in the first six months of 2020 as compared to $114,100 in the first six months of 2019. There were no gains on sales of SBA loans in the first six months of 2020 as compared to $24,463 in the first six months of 2019.

Non-interest expense increased $46 thousand, or 2%, in the three months ended June 30, 2020 as compared to the prior quarter. The increase was primarily due to an increase in salaries and benefits and other costs, partially offset by a decrease in occupancy. Non-interest expense increased $221 thousand, or 11%, when comparing the second quarter of 2020 to the second quarter of 2019. This increase was primarily attributed to an increase in salaries and benefits, occupancy, advertising and other costs.

Non-interest expense increased $618 thousand, or 16%, in the six months ended June 30, 2020 as compared to the same period in the prior year. This increase was due to higher salaries and benefits expense, occupancy, advertising, data processing and other costs, partially offset by lower professional fees.

Deposits grew a net $53.4 million, or 20%, from $270.7 million at March 31, 2020 to $324.1 million at June 30, 2020. During the second quarter, non-interest bearing deposits increased $33.7 million, or 67%, from $50.7 million at March 31, 2020 to $84.5 million at June 30, 2020. Interest-bearing checking balances increased $6.2 million, or 38%, from $16.3 million at March 31, 2020 to $22.6 million at June 30, 2020. Money market deposits increased $20.8 million, or 21%, from $98.7 million at March 31, 2020 to $119.5 million at June 30, 2020. Certificates of deposit decreased $7.4 million, or 7%, from $105.0 million at March 31, 2020 to $97.6 million at June 30, 2020. The deposit portfolio grew $54.3 million, or 20%, in the first six months of 2020, with a $44.6 million increase in total checking balances and a $17.1 million increase in money market balances, partially offset by a $7.3 million decline in certificates of deposit balances. Total deposits grew $70.9 million, or 28%, from $253.3 million at June 30, 2019 to $324.1 million at June 30, 2020, with growth in all deposit categories, but notably an 86% increase in total checking deposits. Checking balances represented 33% of total deposits at June 30, 2020, a significant increase from 23% at December 31, 2019.

President and Chief Financial Officer, Lauren C. Ranalli, stated, "This tremendous deposit growth in the second quarter was aided by our success with the Paycheck Protection Program; however, ongoing efforts in this area are continuing to generate strong results separate from PPP. Our focus on growing low cost checking deposits has allowed us to reduce our reliance on higher cost certificates of deposit and mitigate compression in the net interest margin."

The loan portfolio grew $54.7 million, or 19%, during the second quarter from $284.3 million at March 31, 2020 to $339.0 million at June 30, 2020, with the majority of that growth in commercial business loans as a result of the SBA's Paycheck Protection Program. Year-to-date net loan growth in 2020 was $58.8 million, or 21%, with the majority of that growth in commercial business and commercial real estate loans. The loan portfolio grew $68.5 million, or 25%, from $270.5 million at June 30, 2019 to $339.0 million at June 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:

June 30, Dec. 31, June 30, 2020 2019 2019

Commercial real estate $ 209,771,247 $ 203,427,712 $ 187,706,105

Commercial construction 24,698,846 29,353,830 30,313,979

Commercial business 87,958,509 30,805,290 32,868,079

Consumer 16,571,930 16,615,540 19,627,636

Total loans $ 339,000,532 $ 280,202,372 $ 270,515,799

Total stockholder's equity increased $766 thousand, or 3%, from $28.8 million at March 31, 2020 to $29.5 million at June 30, 2020, primarily due to net income generated and an improvement in the unrealized gain/loss position of the investment portfolio. During the quarter ended June 30, 2020, book value per share grew 26 cents, or 3%, to $10.65.

Total assets increased $44.6 million, or 13% during the second quarter of 2020, with significant growth in loans funded by deposit growth and deployment of excess cash.

Selected Financial Data:Balance Sheets (unaudited)

June 30, December 31, 2020 2019

Cash and due from banks $ 13,947,416 $ 2,516,374

Time deposits at other banks 599,000 599,000

Investments 15,951,495 37,120,798

Loans 339,000,532 280,202,372

Allowance for loan losses (2,579,224) (2,507,845)

Premises & equipment 8,515,626 8,675,596

Other assets 9,924,279 9,812,630

Total assets $ 385,359,124 $ 336,418,925

Non-interest bearing deposits $ 84,483,667 $ 50,616,321

Interest-bearing checking 22,556,062 11,797,456

Money market 119,488,321 102,433,910

Time deposits 97,607,971 104,952,207

Total deposits 324,136,021 269,799,894

Short term borrowings - 10,896,000

Long term borrowings 24,858,000 21,045,500

Subordinated debt 3,998,838 3,994,591

Other liabilities 2,820,259 2,705,583

Total liabilities 355,813,118 308,441,568

Total stockholders' equity 29,546,006 27,977,357

Total Liabilities & $ 385,359,124 $ 336,418,925 Stockholders' Equity

Performance Statistics(unaudited)

Qtr Ended Qtr Ended Qtr Ended Qtr Ended Qtr Ended June 30, Mar. 31, Dec. 31, Sept. 30, June 30, 2020 2020 2019 2019 2019

Net interest margin 3.50% 3.69% 3.73% 3.81% 3.85%

Nonperforming loans/ 0.41% 0.49% 0.50% 0.89% 0.83% Total loans

Nonperforming assets/ 0.36% 0.41% 0.42% 0.94% 0.91% Total assets

Allowance for loan losses/ 0.76%*** 0.89% 0.90% 0.90% 0.93% Total loans

Average loans/Average 87.4% 84.9% 84.9% 87.2% 87.4% assets

Non-interest expenses*/ 2.50% 2.71% 2.75% 2.71% 2.75% Average assets

Earnings per share - basic $0.24 $0.23 $0.23 $0.25 $0.23 and diluted **

Book value per share $10.65 $10.39 $10.10 $9.88 $9.63

Total shares outstanding 2,773,686 2,770,755 2,768,729 2,766,330 2,764,241

* Annualized

** Per share data has been restated to reflect a 5% stock dividend paid inMay 2019.

*** Excluding PPP loans, the allowance for loan losses/total loans was 0.91%

Income Statements (unaudited)



Qtr. EndedQtr. EndedQtr. EndedQtr. EndedQtr. Ended June 30, Mar. 31, Dec. 31, Sept. 30, June 30, 2020 2020 2019 2019 2019



INTEREST INCOME

Loans, including fees $3,879,732$3,814,235$3,819,667$3,855,582$3,679,137

Securities 104,900 118,005 129,178 124,908 126,881

Other 2,600 47,295 38,987 18,348 13,428

Total interest income 3,987,232 3,979,535 3,987,832 3,998,838 3,819,446



INTEREST EXPENSE

Deposits 742,578 885,915 930,953 938,804 886,280

Borrowings 127,446 122,116 117,350 130,679 111,271

Subordinated debt 67,485 67,485 67,846 67,845 67,485

Total interest expense 937,509 1,075,516 1,116,149 1,137,328 1,065,036



Net interest income 3,049,723 2,904,019 2,871,683 2,861,510 2,754,410



Provision for loan losses 51,045 144,033 66,628 84,557 158,992



Net interest income after 2,998,678 2,759,986 2,805,055 2,776,953 2,595,418 provision for loan losses



NON-INTEREST INCOME

BOLI income 37,067 37,050 38,067 38,205 37,965

Referral fee income 27,100 148,000 81,500 107,160 114,100

Gain on sale of SBA loans - - - - -

Other 72,367 98,956 100,107 81,304 110,532

Total non-interest income136,534 284,006 219,674 226,669 262,597



NON-INTEREST EXPENSE

Salaries & benefits 1,373,036 1,328,471 1,267,867 1,266,493 1,238,114

Occupancy & equipment 228,216 252,370 251,297 189,381 185,402

Professional fees 98,492 92,161 94,744 88,083 101,117

Advertising 64,011 66,278 54,660 82,357 35,401

Data processing 135,936 139,483 127,721 142,587 135,151

Other 396,808 371,641 447,905 376,707 380,297

Total non-interest 2,296,499 2,250,404 2,244,194 2,145,608 2,075,482 expense



Income before income tax 838,713 793,588 780,535 858,014 782,533 expense



Federal income tax expense161,726 153,449 152,236 167,285 151,013



Net income $ 676,987$ 640,139$ 628,299$ 690,729$ 631,520



Income Statements (unaudited)



Six Months Six Months Ended Ended June 30, June 30, 2019 2020



INTEREST INCOME

Loans $ 7,693,967$ 7,117,889

Investments 222,905 255,182

Other 49,895 42,738

Total interest income 7,966,767 7,415,809



INTEREST EXPENSE

Deposits 1,628,493 1,686,821

Borrowings 249,562 213,942

Subordinated debt 134,970 134,609

Total interest expense 2,013,025 2,035,372



Net interest income 5,953,742 5,380,437



Provision for loan losses 195,078 634,944



Net interest income after provision for5,758,664 4,745,493 loan losses



NON-INTEREST INCOME

BOLI income 74,117 75,420

Referral fee income 175,100 114,100

Gain on sale of SBA loans - 24,463

Other 171,323 204,869

Total non-interest income 420,540 418,852



NON-INTEREST EXPENSE

Salaries & benefits 2,701,507 2,291,700

Occupancy & equipment 480,586 376,974

Professional fees 190,653 201,286

Advertising 130,289 69,165

Data processing 275,419 262,270

Other non-interest expense 768,449 727,688

Total non-interest expense 4,546,903 3,929,083



Pre-tax income 1,632,301 1,235,262



Tax expense 315,175 232,522



Net income $ 1,317,126$ 1,002,740



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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