First Resource Bank Announces Most Profitable Quarter to Date; Net Income Grew 6% Over the Prior Quarter and 20% Over the Prior Year Third Quarter

EXTON, Pa., Oct. 26, 2018 First Resource Bank (OTCQX: FRSB) announced financial results for the three months ended September 30, 2018.

Highlights for the third quarter of 2018 included:

• Net income of $554,653 was the highest quarterly profit in the Bank's history
• Net income grew 6% over the quarter ended June 30, 2018 and 20% over the quarter ended September 30, 2017
• Total interest income grew 3% over the quarter ended June 30, 2018 and 17% over the quarter ended September 30, 2017
• Total loans grew $17.0 million, or 8%, in the first nine months of 2018 to a total of $234.4 million at September 30, 2018
• Total deposits grew $11.7 million, or 6%, in the first nine months of 2018 to a total of $222.6 million at September 30, 2018
• Finalist nominated for "Best Investor Relations by a Micro-Cap Company (less than $500mm)" hosted by IR Magazine and in association with OTC Markets Group
• Acquired the site for the third branch location in Wayne, Pennsylvania

Glenn B. Marshall, President & CEO, stated, "While the third quarter of 2018 was our most profitable quarter to date, we are not content unless our balance sheet growth continues to drive increasing profitability. Growth has always been our focus and that is currently challenged by high levels of loan payoffs offsetting strong current loan production and rising interest rates for deposits. We focus on "smart growth" rather than growth at any cost that could hurt the Bank in the future. We are very excited about the opportunity to open our third branch in an incredible market along the Main Line in Wayne, Pennsylvania. This new market significantly enhances the Bank's market area and creates a $12 billion deposit market when combined with our existing branches."  

Net income for the quarter ended September 30, 2018 was $554,653, which compares to $520,825 for the previous quarter and $461,704 for the third quarter of the prior year.

Net income for the nine months ended September 30, 2018 was $1,556,470, a 21% increase over the same period in the prior year. The increase in net income is primarily attributable to a 12% increase in net interest income and lower income tax expense as a result of the passage of the Tax Cuts and Jobs Act in 2017, partially offset by lower non-interest income and a higher provision for loan losses and higher non-interest expense.

Net interest income was $2,492,896 for the quarter ended September 30, 2018 as compared to $2,493,870 for the previous quarter, a slight decline. The net interest margin decreased 12 basis points from 3.97% for the quarter ended June 30, 2018 to 3.85% for the quarter ended September 30, 2018. The overall yield on interest earning assets increased 2 basis points during the third quarter led by a 6 basis point increase in loan yields to 5.42%. The cost of interest bearing deposits increased 23 basis points during the third quarter to 1.35%. 

Net interest income for the nine months ended September 30, 2018 was $7,384,069, a 12% improvement over net interest income of $6,612,025 for the nine months ended September 30, 2017. This growth was led by a 16% increase in loan interest income.

Non-interest income for the quarter ended September 30, 2018 was $127,457, as compared to $139,730 for the previous quarter and $135,806 for the third quarter of the prior year. There were $12,631 in gains on sales of SBA loans recognized during the third quarter of 2018, as compared to $28,725 in the prior quarter and $41,536 in the third quarter of 2017.

Non-interest income for the nine months ended September 30, 2018 was $382,929 as compared to $496,628 for the same period in the prior year. There was $41,356 in SBA loan sale income in the first nine months of 2018 as compared to $196,873 in the first nine months of 2017.

Non-interest expense increased $25 thousand, or 1%, in the three months ended September 30, 2018 as compared to the prior quarter. The increase was primarily due to an increase in salaries and benefits, advertising and other costs, partially offset by a decrease in data processing costs and professional fees.

Non-interest expense increased $468 thousand, or 9%, in the nine months ended September 30, 2018 as compared to the same period in the prior year. This increase was due to higher salaries and benefits expense, advertising, data processing and other costs, partially offset by lower occupancy costs and professional fees.

Deposits declined a net $1.2 million from $223.8 million at June 30, 2018 to $222.6 million at September 30, 2018. During the third quarter, non-interest bearing deposits decreased $1.4 million, or 5%, from $29.8 million at June 30, 2018 to $28.4 million at September 30, 2018. Interest-bearing checking balances increased $592 thousand, or 6%, from $9.8 million at June 30, 2018 to $10.4 million at September 30, 2018. Money market deposits increased $485 thousand, or 1%, from $93.9 million at June 30, 2018 to $94.4 million at September 30, 2018. Certificates of deposit decreased $829 thousand, or 1%, from $90.3 million at June 30, 2018 to $89.5 million at September 30, 2018. The deposit portfolio grew $11.7 million, or 6%, in the first nine months of 2018, with a $4.0 million increase in total checking balances and a $21.8 million increase in certificates of deposit, partially offset by a $14.1 million decline in money market balances. The deposit portfolio experienced year-over-year growth of $13.1 million, or 6%, from September 30, 2017 to September 30, 2018.

The loan portfolio grew $805 thousand during the third quarter from $233.6 million at June 30, 2018 to $234.4 million at September 30, 2018. Year-to-date net loan growth in 2018 was $17.0 million, or 8%, with the vast majority of that growth in commercial real estate loans. Year-over-year net loan growth was $26.2 million, or 13%.

The following table illustrates the composition of the loan portfolio:

The allowance for loan losses to total loans was 0.85% at September 30, 2018 as compared to 0.81% at December 31, 2017 and 0.86% at September 30, 2017. Non-performing assets, which include non-performing loans of $2.8 million and other real estate owned of $199 thousand, totaled $3.0 million at September 30, 2018, a 14% decrease as compared to the prior quarter primarily due to one loan relationship returning to accrual status during the quarter. Non-performing assets to total assets decreased from 1.30% at June 30, 2018 to 1.12% at September 30, 2018.

Total stockholder's equity increased 2% from $24.0 million at June 30, 2018 to $24.6 million at September 30, 2018, primarily due to net income generated. Book value per share increased 20 cents, or 2% during the third quarter of 2018 to $9.35 per share at September 30, 2018. In the first nine months of 2018 book value per share has grown 52 cents, or 6%.

Total assets decreased $457 thousand during the third quarter of 2018. Loan growth was offset by a decline in the investment portfolio during the third quarter.

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. 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