EXTON, PA — First Resource Bancorp Inc. (OTCQX: FRSB) reported a 30% increase in third-quarter profit as commercial real estate lending and deposit growth lifted interest income, although higher operating expenses and a slight decline in net interest margin pressured the Chester County bank holding company’s quarterly performance.
Net income rose to $2.9 million for the three months ended Sept. 30, 2026, from $2.3 million a year earlier and $2.8 million in the preceding quarter, according to financial results released Oct. 26.
Diluted earnings per share increased to $0.98 from $0.75 a year earlier and $0.92 in the second quarter.
For the first nine months of 2026, net income climbed 40% to $8.2 million from $5.8 million in the comparable period of 2025, reflecting an expanding loan portfolio and higher net interest income.
The bank’s deposit base increased $44.1 million, or 6%, during the third quarter, while loans grew $10.3 million, or 1%, to $737.1 million.
Compared with September 2025, deposits increased $158.8 million, or 25%, and loans rose $81.8 million, or 12%.
Commercial real estate and construction lending accounted for much of the annual loan growth, underscoring the bank’s exposure to property-related financing.
Net interest income before credit-loss provisions increased to $8.5 million, up 5% from the second quarter and 30% from a year earlier.
The net interest margin, a measure of the difference between interest earned on assets and interest paid on funding, narrowed to 4.06% from 4.09% in the preceding quarter but remained above the 3.87% recorded a year earlier.
Total interest income reached $13.4 million, increasing 5% sequentially and 22% year over year.
The quarterly increase reflected a 3% rise in average loan balances, with little change in overall loan yields. Compared with the prior year, average loan balances increased 15%, accompanied by higher yields.
Interest expense rose to $4.9 million, up 5% from the second quarter and 11% from the prior year.
Higher money market balances contributed to the quarterly increase, partially offset by declining time deposits and a 14-basis-point reduction in time deposit costs.
For the first nine months, net interest income increased 33% to $23.9 million, while total interest income rose 23% to $38.3 million and interest expense increased 10% to $14.3 million.
The bank’s deposit growth also changed its funding composition.
Increases in interest-bearing checking and money market accounts more than offset declines in non-interest-bearing deposits and time deposits during the quarter.
President and Chief Executive Officer Lauren C. Ranalli said the expanding customer deposit base allowed the bank to increase earning assets while reducing non-core deposits by another $10.2 million.
Approximately 79% of total deposits were insured or collateralized as of Sept. 30.
Credit quality remained relatively stable despite the expansion in commercial lending.
The provision for credit losses declined to $163,000 from $386,000 in the second quarter and $189,000 a year earlier.
Nonperforming assets totaled $705,000, representing 0.08% of total assets, compared with $881,000, or 0.10%, at June 30.
The ratio was 0.09% at the end of 2025 and zero at Sept. 30, 2025.
The bank reported five nonaccrual credit relationships, all secured by real estate, with no specific reserves required during the quarter.
Its allowance for credit losses represented 0.78% of outstanding loans, compared with 0.73% at the end of 2025.
Noninterest income declined 23% from the second quarter and 4% from a year earlier to $337,000.
The bank recorded no gains from Small Business Administration loan sales during the quarter, compared with $108,000 in the preceding period.
Swap referral fees totaled $53,000, compared with none in the second quarter and $97,000 a year earlier.
Service charge income declined 27% sequentially, primarily because the previous quarter included late fees collected in connection with the resolution of a nonaccrual loan.
For the first nine months, noninterest income increased 23% to $1.3 million, supported partly by $383,000 in SBA loan-sale gains, compared with $113,000 a year earlier.
Swap referral income for the nine-month period fell to $53,000 from $229,000.
Operating costs continued to increase as the bank expanded.
Noninterest expenses rose 7% from the preceding quarter and 29% from the third quarter of 2025, driven by higher compensation, data processing costs and Federal Deposit Insurance Corp. premiums.
Those increases were partially offset by lower occupancy, equipment and professional expenses. The second quarter included repairs and renovation work at the bank’s Exton branch, which was built in 2014.
The efficiency ratio increased to 56.28% from 54.39% in the second quarter and 56.11% a year earlier, indicating that expenses consumed a larger share of operating revenue than in the immediately preceding period.
For the first nine months, noninterest expenses increased 25%, although the efficiency ratio improved to 55.48% from 58.93% in the comparable period of 2025.
The ratio of noninterest expenses to average assets was 2.31% in the third quarter, compared with 2.27% in the second quarter and 2.21% a year earlier.
Annualized return on average assets reached 1.36%, unchanged from the preceding quarter and above the 1.29% reported a year earlier.
Annualized return on average equity increased to 17.88% from 17.82% sequentially and 16.19% in the third quarter of 2025.
The company’s investment securities portfolio totaled $36.5 million at Sept. 30, compared with $31.1 million three months earlier.
Its held-to-maturity securities had an amortized cost of $9 million and a fair value of $8.2 million, producing an unrealized loss of $804,000, compared with $561,000 at June 30.
The after-tax unrealized loss on those securities was $635,000, equivalent to approximately 1% of stockholders’ equity.
Available-for-sale securities had a book value of $29.4 million and a fair value of $27.6 million, resulting in an unrealized loss of $1.8 million, up from $1.1 million in the previous quarter.
The after-tax loss of $1.4 million was reflected in accumulated other comprehensive loss within stockholders’ equity.
Total assets increased 6% during the quarter, supported by loan and securities growth and higher cash balances associated with deposit inflows.
Stockholders’ equity increased $2.4 million, or 4%, to $66.2 million from $63.8 million at June 30, primarily reflecting quarterly earnings.
Book value per common share rose to $21.98 from $21.19, a 4% quarterly increase equivalent to approximately 15% annualized growth.
First Resource also paid its third consecutive quarterly cash dividend of $0.02 per common share.
The results reflect continued expansion in the bank’s lending and deposit businesses, with higher interest income supporting earnings growth while rising operating costs and modest quarterly margin compression remain factors in profitability.
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