First Resource Bank Announces First Quarter Results; Net Income Grew 72% Over The First Quarter Of The Prior Year

First Resource Bank (OTCQX FRSB)

EXTON, PA — First Resource Bank (OTCQX: FRSB) announced financial results for the three months ended March 31, 2020.

Highlights for the first quarter of 2020 included:

  • Net income grew 72% over the first quarter of the prior year
  • Total checking deposits grew 34% over the past 12 months
  • Loans grew 10% over the past 12 months
  • Credit quality continued to improve, with non-performing assets to total assets of 0.41%

Glenn B. Marshall, CEO, stated, “The first quarter started off very strong despite the onset of the global pandemic taking hold in the last month of the quarter.  The effect of the Coronavirus has fundamentally altered how the Bank is operating today as compared to last quarter. I’m pleased to report that First Resource Bank has not only remained fully operational through this health crisis, but that we have embraced opportunities in our market to help businesses retain their employees.  We have faithfully served our existing customers, and have helped businesses that had not previously been customers. Our participation in the Paycheck Protection Program has been an incredibly rewarding opportunity to expand our reach throughout our markets.”

Net income for the quarter ended March 31, 2020 was $640,139, which compares to $628,299 for the previous quarter and $371,220 for the first quarter of the prior year.

Total interest income declined slightly when comparing the first quarter of 2020 to the fourth quarter of 2019 as a result of the Federal Reserve rate cuts that occurred in March.

Total interest income rose 11% from $3,596,363 for the three months ended March 31, 2019 to $3,979,535 for the three months ended March 31, 2020. This increase was supported by 10% loan growth when comparing March 31, 2020 to a year prior.

Total interest expense decreased 4% when comparing the first quarter of 2020 to the fourth quarter of 2019. This decrease was the result of a 13 basis point decrease in the cost of money market deposits and a 6 basis point decrease in the cost of certificates of deposit during the quarter.

Total interest expense rose 11% from $970,336 for the three months ended March 31, 2019 to $1,075,516 for the three months ended March 31, 2020. The majority of this increased expense was related to an 8% increase in certificates of deposit balances as well as a 12 basis point increase in the cost of certificates of deposit, year over year.

Net interest income was $2,904,019 for the quarter ended March 31, 2020 as compared to $2,871,683 for the previous quarter. The net interest margin decreased 4 basis points from 3.73% for the quarter ended December 31, 2019 to 3.69% for the quarter ended March 31, 2020. The overall yield on interest earning assets decreased 12 basis points during the first quarter led by a 10 basis point decrease in loan yields to 5.42%. The cost of deposits decreased 8 basis points during the first quarter to 1.30%.

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The provision for loan losses increased from $66,628 for the three months ended December 31, 2019 to $144,033 for the three months ended March 31, 2020. The provision for loan losses decreased from $475,952 for the three months ended March 31, 2019 to $144,033 for the three months ended March 31, 2020.

Non-interest income for the quarter ended March 31, 2020 was $284,006 as compared to $219,674 for the previous quarter and $156,255 for the first quarter of the prior year. Swap referral fee income of $148,000 was received in the first quarter of 2020, as compared to $81,500 in the fourth quarter of 2019 and none in the first quarter of 2019. There were no gains on sales of SBA loans recognized during the first quarter of 2020 or the fourth quarter of 2019, as compared to $24,463 in the first quarter of 2019.

Non-interest expense increased $6 thousand, in the three months ended March 31, 2020 as compared to the prior quarter. The increase was primarily due to an increase in salaries and benefits, occupancy, depreciation, advertising and data processing costs, partially offset by a decrease in professional fees and other costs. Non-interest expense increased $397 thousand, or 21%, when comparing the first quarter of 2020 to the first quarter of 2019. This increase was attributed to an increase in salaries and benefits, occupancy, depreciation, advertising, data processing and other costs, offset by lower professional fees.

Deposits grew $949 thousand from $269.8 million at December 31, 2019 to $270.7 million at March 31, 2020. During the first quarter, non-interest bearing deposits increased $125 thousand, from $50.6 million at December 31, 2019 to $50.7 million at March 31, 2020. Interest-bearing checking balances increased $4.5 million, or 39%, from $11.8 million at December 31, 2019 to $16.3 million at March 31, 2020. Money market deposits decreased $3.7 million, or 4%, from $102.4 million at December 31, 2019 to $98.7 million at March 31, 2020. Certificates of deposit increased $16 thousand, for a total of $105.0 million at December 31, 2019 and March 31, 2020. Between March 31, 2019 and March 31, 2020, total deposits have grown 9%, with the vast majority of that growth in total checking balances which increased 34%.

Marshall stated, “This tremendous growth in checking account balances year-over-year is a direct result of the ‘checking, checking, checking’ focus that has been paramount over the past few years. Our efforts in this area have been supported across the organization and the result has been strong growth in business checking relationships. We view these new relationships as long-term customers that value the level of service that a true community bank like ours can provide.”

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The loan portfolio grew $4.1 million during the first quarter from $280.2 million at December 31, 2019 to $284.3 million at March 31, 2020, with growth in commercial real estate loans, commercial business loans and consumer loans partially offset by a decline in construction loans.

The following table illustrates the composition of the loan portfolio:

Mar. 31,

2020

Dec. 31,

2019

Mar. 31,

2019

Commercial real estate

$  207,501,619

$  203,427,712

$  179,153,919

Commercial construction

24,410,257

29,353,830

24,295,518

Commercial business

34,845,303

30,805,290

33,544,929

Consumer

17,518,022

16,615,540

21,369,180

Total loans

$  284,275,201

$  280,202,372

$  258,363,546

The allowance for loan losses to total loans was 0.89% at March 31, 2020 as compared to 0.90% at December 31, 2019 and 0.95% at March 31, 2019. Non-performing assets consisted of non-performing loans of $1.4 million at March 31, 2020 and was unchanged from the prior quarter. Non-performing assets to total assets improved from 0.42% at December 31, 2019 to 0.41% at March 31, 2020. Non-performing assets to total assets have returned to levels the Bank has not seen since the first half of 2007.

During the quarter ended March 31, 2020, total stockholder’s equity increased $803 thousand, or 3%, from $28.0 million at December 31, 2019 to $28.8 million at March 31, 2020, primarily due to net income generated. During the quarter ended March 31, 2020, book value per share grew 29 cents, or 3%, to $10.39.

During the quarter ended March 31, 2020, total assets grew $4.4 million, or 1%. This growth was primarily the result of $4.1 million in loan growth funded by a $949 thousand increase in deposits and a $2.6 million increase in borrowings.

Selected Financial Data:

Balance Sheets (unaudited)

March 31,
2020

December 31, 
2019

Cash and due from banks

$   23,388,488

$     2,516,374

Time deposits at other banks

599,000

599,000

Investments

16,560,747

37,120,798

Loans

284,275,201

280,202,372

Allowance for loan losses

(2,525,010)

(2,507,845)

Premises & equipment

8,588,480

8,675,596

Other assets

9,919,118

9,812,630

Total assets

$ 340,806,024

$ 336,418,925

Non-interest bearing deposits

$   50,741,454

$   50,616,321

Interest-bearing checking

16,340,338

11,797,456

Money market

98,699,062

102,433,910

Time deposits

104,968,355

104,952,207

  Total deposits

270,749,209

269,799,894

Short term borrowings

7,256,200

10,896,000

Long term borrowings

27,295,500

21,045,500

Subordinated debt

3,996,715

3,994,591

Other liabilities

2,728,345

2,705,583

Total liabilities

312,025,969

308,441,568

Total stockholders’ equity

28,780,055

27,977,357

Total liabilities &

     stockholders’ equity

$ 340,806,024

$ 336,418,925

Performance Statistics
(unaudited)

Qtr Ended

Mar. 31,

2020

Qtr Ended

Dec. 31,

2019

Qtr Ended

Sept. 30,

2019

Qtr Ended

June 30,

2019

Qtr Ended

Mar. 31,

2019

Net interest margin

3.69%

3.73%

3.81%

3.85%

3.87%

Nonperforming loans/

   Total loans

0.49%

0.50%

0.89%

0.83%

0.87%

Nonperforming assets/

   Total assets

0.41%

0.42%

0.94%

0.91%

0.74%

Allowance for loan losses/

   Total loans

0.89%

0.90%

0.90%

0.93%

0.95%

Average loans/Average

   assets

84.9%

84.9%

87.2%

87.4%

86.5%

Non-interest expenses*/

   Average assets

2.71%

2.75%

2.71%

2.75%

2.60%

Earnings per share – basic

   and diluted **

$0.23

$0.23

$0.25

$0.23

$0.13

Book value per share **

$10.39

$10.10

$9.88

$9.63

$9.35

Total shares outstanding **

2,770,755

2,768,729

2,766,330

2,764,241

2,761,910

*  Annualized

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

Income Statements (unaudited)

Qtr. Ended

Mar. 31,

2020

Qtr. Ended

Dec. 31,

2019

Qtr. Ended

Sept. 30,

2019

Qtr. Ended

June 30,

2019

Qtr. Ended

Mar. 31,

2019

INTEREST INCOME

Loans, including fees

$3,814,235

$3,819,667

$3,855,582

$3,679,137

$3,438,752

Securities

118,005

129,178

124,908

126,881

128,301

Other

47,295

38,987

18,348

13,428

29,310

 Total interest income

3,979,535

3,987,832

3,998,838

3,819,446

3,596,363

INTEREST EXPENSE

Deposits

885,915

930,953

938,804

886,280

800,541

Borrowings

122,116

117,350

130,679

111,271

102,671

Subordinated debt

67,485

67,846

67,845

67,485

67,124

 Total interest expense

1,075,516

1,116,149

1,137,328

1,065,036

970,336

Net interest income

2,904,019

2,871,683

2,861,510

2,754,410

2,626,027

Provision for loan losses

144,033

66,628

84,557

158,992

475,952

Net interest income after
provision for loan losses

2,759,986

2,805,055

2,776,953

2,595,418

2,150,075

NON-INTEREST INCOME

BOLI income

37,050

38,067

38,205

37,965

37,455

Swap referral fee income

148,000

81,500

107,160

114,100

Gain on sale of SBA loans

24,463

Other

98,956

100,107

81,304

110,532

94,337

 Total non-interest income

284,006

219,674

226,669

262,597

156,255

NON-INTEREST EXPENSE

Salaries & benefits

1,328,471

1,267,867

1,266,493

1,238,114

1,053,586

Occupancy & equipment

252,370

251,297

189,381

185,402

191,572

Professional fees

92,161

94,744

88,083

101,117

100,169

Advertising

66,278

54,660

82,357

35,401

33,764

Data processing

139,483

127,721

142,587

135,151

127,119

Other

371,641

447,905

376,707

380,297

347,391

Total non-interest

     expense

2,250,404

2,244,194

2,145,608

2,075,482

1,853,601

Income before income tax expense

793,588

780,535

858,014

782,533

452,729

Federal income tax expense

153,449

152,236

167,285

151,013

81,509

Net income

$  640,139

$  628,299

$  690,729

$  631,520

$  371,220

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