First Resource Bank Announces Most Profitable Quarter to Date; Quarterly Net Income Increased 39% Over the Prior Year Third Quarter

EXTON, Pa., Oct. 24, 2017 /PRNewswire/ -- First Resource Bank (OTCQX: FRSB) announced financial results for the three months ended September 30, 2017.

Highlights for the third quarter of 2017 included:

• Net income was $461,704, an increase of 11% over the second quarter of 2017 and 39% over the third quarter of 2016
• Non-interest bearing deposits grew 8%
• The net interest margin expanded from 3.87% in the second quarter to 3.96% in the third quarter
• $42 thousand in gains on sales of SBA loans were recognized

Glenn B. Marshall, President & CEO, stated, "The third quarter of 2017 was the seventh consecutive quarter with increasing profitability. In the first nine months of 2017 we have already surpassed net income for the entire year in 2016. Our deposit growth has been focused on business checking and strategies implemented are yielding solid results. We are very happy with the performance of our West Chester branch which has grown in excess of $55 million in deposits since opening in April 2014."

Net income for the quarter ended September 30, 2017 was $461,704, which compares to $417,701 for the previous quarter and $332,009 for the third quarter of the prior year.

Net income for the nine months ended September 30, 2017 was $1,285,958, a 44% increase over the same period in the prior year. The increase in net income is primarily attributable to a $999 thousand, or 18%, increase in net interest income as well as $197 thousand in gains on sales of SBA loans in the first nine months of 2017, where there were none in the same period of 2016. Net income available to common shareholders increased 45% as compared to the prior year, increasing from $887,666 for the nine months ended September 30, 2016 to $1,285,958 for the nine months ended September 30, 2017. The first quarter of 2016 was the last quarter to incur preferred stock dividends due to the redemption of all preferred stock during that quarter.

Net interest income was $2,311,949 for the quarter ended September 30, 2017 as compared to $2,203,685 for the previous quarter, an improvement of 5%.  The net interest margin increased 9 basis points from 3.87% for the quarter ended June 30, 2017 to 3.96% for the quarter ended September 30, 2017. The overall yield on interest earning assets increased 7 basis points during the third quarter led by a 4 basis point improvement in loan yields to 5.22%. The total cost of interest bearing liabilities was unchanged from the prior quarter at 0.91%. 

Net interest income for the nine months ended September 30, 2017 was $6,612,025, an 18% improvement over net interest income of $5,613,411 for the nine months ended September 30, 2016. This growth was driven by a 14% increase in loan interest income.

Non-interest income for the quarter ended September 30, 2017 was $135,806, as compared to $99,552 for the previous quarter and $77,946 for the third quarter of the prior year. There were $42 thousand in gains on sales of SBA loans recognized during the third quarter of 2017, as compared to no gains in the prior quarter and the third quarter of 2016.

Non-interest income for the nine months ended September 30, 2017 was $496,628 as compared to $231,623 for the same period in the prior year. There was $197 thousand in gains on sales of SBA loans in the first nine months of 2017 and none in the first nine months of 2016.

Non-interest expense decreased $22 thousand, or 1%, in the three months ended September 30, 2017 as compared to the prior quarter. The decrease was primarily due to a decline in professional fees, advertising and data processing costs, partially offset by an increase in salaries and benefits expense.

Non-interest expense increased $544 thousand, or 12%, in the nine months ended September 30, 2017 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, as well as higher professional fees, advertising, data processing, software and SBA loan expenses, partially offset by lower occupancy costs.

Deposits grew a net $5.3 million from $204.2 million at June 30, 2017 to $209.5 million at September 30, 2017. During the third quarter, non-interest bearing deposits increased $1.9 million, or 8%, from $23.0 million at June 30, 2017 to $24.9 million at September 30, 2017. Interest-bearing checking balances decreased $1.2 million, or 14%, from $9.1 million at June 30, 2017 to $7.9 million at September 30, 2017. Money market deposits grew $7.3 million, or 7%, from $98.4 million at June 30, 2017 to $105.7 million at September 30, 2017. Certificates of deposit decreased $2.6 million, or 4%, from $73.8 million at June 30, 2017 to $71.1 million at September 30, 2017. The deposit portfolio grew $6.9 million, or 3%, in the first nine months of 2017, with a $5.8 million increase in total checking balances and a $13.7 million increase in money market deposits offset by a $12.6 million decline in certificates of deposit. Strong growth in checking and money market deposit balances have allowed the Bank to strategically shed higher cost certificates of deposit throughout the first nine months of 2017.

The loan portfolio grew $3.1 million, or 2%, during the third quarter from $205.1 million at June 30, 2017 to $208.2 million at September 30, 2017, with growth in commercial business loans, commercial real estate loans, and construction loans, partially offset by a decline in consumer loans. Year-to-date net loan growth in 2017 was $10.4 million, or 5%, led by increases in commercial business, commercial real estate and construction lending, offset by a decline in consumer lending.

The following table illustrates the composition of the loan portfolio:

The allowance for loan losses to total loans was 0.86% at September 30, 2017 as compared to 0.80% at June 30, 2017, 0.80% at December 31, 2016 and 0.79% at September 30, 2016. Non-performing assets consisted of non-performing loans of $3.2 million at September 30, 2017, a 58% increase as compared to the prior quarter. This increase is due to two loan relationships being placed on non-accrual during the quarter. Non-performing assets to total assets increased from 0.83% at June 30, 2017 to 1.28% at September 30, 2017.

Marshall stated, "While non-performing loans increased during the third quarter, the specific credits involved have action plans in place to minimize losses and exit the relationships in an efficient manner. The vast majority of the increase in non-performing assets is due to one loan relationship that was underwritten 10+ years ago and we do not believe it is indicative of a trend. The provision for loan losses increased significantly during the third quarter as a result of the increase in non-performing loans, and the Bank still achieved record quarterly profitability."

Total stockholder's equity increased 2.1% from $22.4 million at June 30, 2017 to $22.8 million at September 30, 2017, primarily due to net income generated. Book value per share increased 17 cents during the third quarter of 2017 to $8.72.

About First Resource Bank

First Resource Bank is a locally owned and operated Pennsylvania state-chartered bank with two 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.                                

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SOURCE First Resource Bank