First Resource Bank Announces First Quarter Results; Net Income Grew 41% 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, 2021.

Highlights for the first quarter of 2021 included:

  • Net income grew 41% over the first quarter of the prior year
  • Total interest income grew 7% over the prior year, while total interest expense declined 35% in that same time period
  • Total deposits grew 7% in the quarter, led by total checking deposit growth of 11%
  • Total loans grew 12%
  • $23.3 million of new Paycheck Protection Program (PPP) loans completed
  • Total assets increased 5%, ending the quarter at $444 million

Glenn B. Marshall, CEO, stated, “Growth is the word that best summarizes the first quarter of 2021 at First Resource Bank. Loan and deposit growth started the year incredibly strong and we continue to see tangible benefits on both sides of the balance sheet from our participation in this latest round of the Paycheck Protection Program. The first quarter 41% increase in profitability over the prior year, coupled with significant balance sheet growth during the quarter, sets the year up for success.”

Net income for the quarter ended March 31, 2021 was $905,664, which compares to $1,118,435 for the previous quarter and $640,139 for the first quarter of the prior year.

Total interest income decreased 6% when comparing the first quarter of 2021 to the fourth quarter of 2020. This decrease was driven by lower fees recognized as interest income in association with PPP loan forgiveness during the first quarter of 2021 as compared to the prior quarter.

Total interest income rose 7% from $3,979,535 for the three months ended March 31, 2020 to $4,272,194 for the three months ended March 31, 2021. This increase was the result of 34% loan growth when comparing March 31, 2021 to a year prior, partially mitigated by a 68 basis point decline in loan yields when comparing the first quarter of 2020 to the first quarter of 2021. This loan yield decline is a result of lower yielding PPP loans booked in the second and third quarters of 2020 and the first quarter of 2021 and the impact of the Federal Reserve 150 basis point rate cuts in March 2020, partially offset by fees recognized in association with PPP loan forgiveness during the first quarter.

Total interest expense decreased 15% when comparing the first quarter of 2021 to the fourth quarter of 2020. This decrease was driven by a 13 basis point decrease in the cost of deposits during the quarter. Interest expense on deposits continues to be actively managed to lower costs.

Total interest expense decreased 35% from $1,075,516 for the three months ended March 31, 2020 to $701,489 for the three months ended March 31, 2021. The vast majority of this decreased expense was related to an overall 84 basis point decline in the cost of interest bearing deposits, led by a 63 basis point decrease in the cost of money market accounts and an 81 basis point decrease in the cost of certificates of deposit, year over year. Overall interest expense was also mitigated by strong growth in non-interest bearing deposits, which increased 108% when comparing March 31, 2021 to the year prior.

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Net interest income was $3,570,705 for the quarter ended March 31, 2021 as compared to $3,718,405 for the previous quarter, a decline of 4%.  The net interest margin decreased 10 basis points from 3.69% for the quarter ended December 31, 2020 to 3.59% for the quarter ended March 31, 2021. The overall yield on interest earning assets decreased 21 basis points during the first quarter led by a 44 basis point decrease in loan yields to 4.74%, which was partially mitigated by lower cash balances in the first quarter of 2021 as compared to the fourth quarter of 2020. The cost of interest bearing deposits decreased 13 basis points during the first quarter to 0.77%, with the majority of that decrease attributed to lower cost money market accounts and certificates of deposit.

The provision for loan losses increased from $229,538 for the three months ended December 31, 2020 to $240,153 for the three months ended March 31, 2021. The provision for loan losses increased from $144,033 for the three months ended March 31, 2020, to $240,153 for the three months ended March 31, 2021.

Marshall noted, “The increase in provision for loan loss expense is directly attributed to higher growth in loans. Credit quality remains incredibly strong and there were no new issues noted during the quarter.”

The allowance for loan losses to total loans was 0.83% at March 31, 2021 as compared to 0.86% at December 31, 2020 and 0.89% at March 31, 2020. Excluding PPP loans, which are 100% guaranteed by the SBA, the allowance for loan losses to total loans was 0.95% at March 31, 2021 and December 31, 2020. Non-performing assets consisted of non-performing loans of $382 thousand at March 31, 2021, unchanged from the prior quarter. Non-performing assets to total assets were 0.09% at March 31, 2021, unchanged from the prior quarter.

Non-interest income for the quarter ended March 31, 2021 was $177,761, as compared to $224,391 for the previous quarter and $284,006 for the first quarter of the prior year. There was no swap referral fee income received in the first quarter of 2021, as compared to $69,000 in the fourth quarter of 2020 and $148,000 in the first quarter of 2020.

Non-interest expense increased $65 thousand, or 3%, in the three months ended March 31, 2021 as compared to the prior quarter. The increase was primarily due to an increase in salaries and benefits, occupancy, and other costs, partially offset by a decrease in advertising costs. Non-interest expense increased $129 thousand, or 6%, when comparing the first quarter of 2021 to the first quarter of 2020. This increase was primarily attributed to an increase in salaries and benefits costs.

Deposits grew a net $24.1 million, or 7%, from $358.0 million at December 31, 2020 to $382.1 million at March 31, 2021. During the first quarter, non-interest bearing deposits increased $5.7 million, or 6%, from $99.9 million at December 31, 2020 to $105.6 million at March 31, 2021. Interest-bearing checking balances increased $8.1 million, or 34%, from $23.7 million at December 31, 2020 to $31.8 million at March 31, 2021. Money market deposits increased $13.6 million, or 10%, from $140.5 million at December 31, 2020 to $154.1 million at March 31, 2021. Certificates of deposit decreased $3.3 million, or 4%, from $93.9 million at December 31, 2020 to $90.6 million at March 31, 2021. Between March 31, 2021 and March 31, 2020, total deposits have grown 41% with tremendous checking and money market growth partially offset by a decline in certificates of deposit.

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President and Chief Financial Officer, Lauren C. Ranalli, stated, “Total checking deposits increased 11% in the first quarter, reducing our reliance on higher cost forms of funding. We continue to expand new relationships we have earned through our participation in the Paycheck Protection Program as well as referrals from existing customers. The disruption in our market is palpable and we are well positioned to continue to earn new customers.”

The loan portfolio increased $40.9 million, or 12%, during the first quarter from $338.9 million at December 31, 2020 to $379.8 million at March 31, 2021, with strong growth in commercial real estate, construction loans and commercial loans partially offset by a decline in consumer loans. Excluding PPP activity, net loan growth was 9.4% for the quarter.

The following table illustrates the composition of the loan portfolio:

Mar. 31,

2021

Dec. 31,

2020

Mar. 31,

2020

Commercial real estate

$  258,294,933

$  227,224,196

$  207,501,619

Commercial construction

28,258,507

24,925,050

24,410,257

Commercial business

75,300,652

66,555,149

34,845,303

Consumer

17,991,186

20,235,647

17,518,022

Total loans

$  379,845,278

$  338,940,042

$  284,275,201

Total stockholder’s equity increased $884 thousand, or 3%, from $31.5 million at December 31, 2020 to $32.3 million at March 31, 2021, primarily due to net income generated, partially offset by a decline in the unrealized gain/loss position of the investment portfolio. During the quarter ended March 31, 2021, book value per share grew 30 cents, or 3%, to $11.62.

Total assets increased $20.0 million, or 5% during the first quarter of 2021, with growth in loans primarily funded by deposit growth and investment maturities.

Selected Financial Data:

Balance Sheets (unaudited)

March 31,   

2021

December 31,  

2020

Cash and due from banks

$   29,235,562

$   26,008,820

Time deposits at other banks

599,000

599,000

Investments

17,189,160

43,060,035

Loans

379,845,278

338,940,042

Allowance for loan losses

(3,164,133)

(2,907,023)

Premises & equipment

8,326,566

8,380,269

Other assets

12,371,457

10,353,164

Total assets

$ 444,402,890

$ 424,434,307

Non-interest bearing deposits

$ 105,562,406

$   99,898,323

Interest-bearing checking

31,826,348

23,726,721

Money market

154,117,023

140,480,421

Time deposits

90,619,835

93,919,651

  Total deposits

382,125,612

358,025,116

Short term borrowings

Long term borrowings

21,158,000

24,206,000

Subordinated debt

5,943,773

7,940,649

Other liabilities

2,835,531

2,806,732

Total liabilities

412,062,916

392,978,497

Total stockholders’ equity

32,339,974

31,455,810

Total Liabilities &

     Stockholders’ Equity

$ 444,402,890

$ 424,434,307

Performance Statistics
(unaudited)

Qtr Ended

Mar. 31,

2021

Qtr Ended

Dec. 31,

2020

Qtr Ended

Sept. 30,

2020

Qtr Ended

June 30,

2020

Qtr Ended

Mar. 31,

2020

Net interest margin

3.59%

3.69%

3.53%

3.50%

3.69%

Nonperforming loans/

   Total loans

0.10%

0.11%

0.40%

0.41%

0.49%

Nonperforming assets/

   Total assets

0.09%

0.09%

0.35%

0.36%

0.41%

Allowance for loan losses/

   Total loans

0.83%**

0.86%**

0.78%**

0.76%**

0.89%

Average loans/Average

   assets

84.4%

81.4%

88.7%

87.4%

84.9%

Non-interest expenses*/

   Average assets

2.29%

2.20%

2.34%

2.50%

2.71%

Earnings per share – basic

   and diluted

$0.33

$0.41

$0.29

$0.24

$0.23

Book value per share

$11.62

$11.32

$10.93

$10.65

$10.39

Total shares outstanding

2,782,251

2,779,607

2,776,551

2,773,686

2,770,755

*  Annualized

** Excluding PPP loans, the allowance for loan losses/total loans was 0.95% at March 31, 2021, 0.95% at December 31, 2020, 0.93% at September 30, 2020 and 0.91% at June 30, 2020.

Income Statements (unaudited)

Qtr. Ended

Mar. 31,

2021

Qtr. Ended

Dec. 31,

2020

Qtr. Ended

Sept. 30,

2020

Qtr. Ended

June 30,

2020

Qtr. Ended

Mar. 31,

2020

INTEREST INCOME

Loans, including fees

$4,169,912

$4,439,471

$4,038,794

$3,879,732

$3,814,235

Securities

96,260

93,928

101,768

104,900

118,005

Other

6,022

10,990

2,365

2,600

47,295

 Total interest income

4,272,194

4,544,389

4,142,927

3,987,232

3,979,535

INTEREST EXPENSE

Deposits

499,622

581,982

653,243

742,578

885,915

Borrowings

108,743

117,995

120,795

127,446

122,116

Subordinated debt

93,124

126,007

77,467

67,485

67,485

 Total interest expense

701,489

825,984

851,505

937,509

1,075,516

Net interest income

3,570,705

3,718,405

3,291,422

3,049,723

2,904,019

Provision for loan losses

240,153

229,538

129,894

51,045

144,033

Net interest income after provision for loan losses

3,330,552

3,488,867

3,161,528

2,998,678

2,759,986

NON-INTEREST INCOME

BOLI income

44,523

36,852

37,125

37,067

37,050

Referral fee income

69,000

27,100

148,000

Gain on sale of SBA loans

Other

133,238

118,539

99,738

72,367

98,956

 Total non-interest income

177,761

224,391

136,863

136,534

284,006

NON-INTEREST EXPENSE

Salaries & benefits

1,432,259

1,405,431

1,386,212

1,373,036

1,328,471

Occupancy & equipment

262,501

238,406

261,166

228,216

252,370

Professional fees

89,413

95,238

96,936

98,492

92,161

Advertising

61,683

80,279

72,390

64,011

66,278

Data processing

149,633

146,147

131,351

135,936

139,483

Other

383,951

349,074

336,144

396,808

371,641

Total non-interest

     expense

2,379,440

2,314,575

2,284,199

2,296,499

2,250,404

Income before income tax expense

1,128,873

1,398,683

1,014,192

838,713

793,588

Federal income tax expense

223,209

280,248

198,786

161,726

153,449

Net income

$905,664

$1,118,435

$  815,406

$  676,987

$  640,139

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.

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