Oct 30, 2023 By Pr Newswire 89 min read

EXTON, Pa., Oct. 30, 2023 /PRNewswire/ — First Resource Bancorp, Inc. (OTCQX: FRSB), the holding company for First Resource Bank (“Bank”), announced financial results for the three months ended September 30, 2023.

Glenn B. Marshall, CEO, stated, “It has been an interesting 12 to 18 months in the banking industry with rising interest rates placing downward pressure on investment portfolio valuations and increasing funding costs. We are not immune from these trends but we have continued to increase book value and profitability for shareholders even with these strong headwinds. We have historically kept our focus on smart overhead growth by keeping expense growth in line with the Bank’s asset growth. In these times of rapid increases in funding costs, our expense controls are a solid foundation to support increased profitability both quarter over quarter and year over year.”

Highlights for the third quarter of 2023 included:

• Net income of $1.6 million, exceeding the prior quarter by 8%
• Total interest income grew 43% over the prior year third quarter
• Net interest income grew 5% over the prior year third quarter
• Provision for credit losses decreased 56% over the prior year third quarter
• Total loans grew 3% during the third quarter and 13% year-to-date
• Total deposits grew 2% during the third quarter and 13% year-to-date
• Total assets grew $15.8 million, or 3%, ending the quarter at $580.8 million
• Nonperforming assets to total assets decreased 1 basis point during the third quarter to 0.13%

President and Chief Financial Officer, Lauren C. Ranalli, stated, “While we are experiencing the net interest margin compression being felt by the entire industry this year, we are outgrowing that compression on a pure earnings basis. The third quarter of 2023 was our most profitable quarter to date despite the challenging interest rate environment. We continue to grow the Bank while many of our peers are pulling back on lending and overall growth due to funding challenges.”

Net income for the quarter ended September 30, 2023 was $1.6 million, or $0.51 per common share, compared to $1.5 million, or $0.47 per common share, for the previous quarter and $1.5 million, or $0.50 per common share, for the third quarter of the prior year. Annualized return on average assets was 1.12% for the third quarter of 2023 compared to 1.23% for the third quarter of 2022. Annualized return on average equity was 14.19% for the third quarter of 2023 compared to 15.91% for the same period a year prior.

Total interest income increased $682 thousand, or 10%, from $7.1 million for the second quarter of 2023 to $7.8 million for the third quarter of 2023. This increase was driven by a 3% growth in loans, coupled with an increased rate environment, favorably affecting interest-earning assets.

Total interest income increased $2.3 million, or 43%, from $5.4 million for the third quarter of 2022 to $7.8 million for the third quarter of 2023. This increase was the result of a 16% growth in loans when comparing September 30, 2023 to the year prior. Increased interest income from loan growth was coupled with an increased rate environment, favorably affecting interest-earning assets.

Total interest expense increased 23% when comparing the third quarter of 2023 to the second quarter of 2023. This increase was the result of a 35 basis point increase in the cost of money market accounts and a 59 basis point increase in the cost of time deposits, in addition to a higher volume of money market accounts and time deposits quarter over quarter. Interest expense on FHLB borrowings increased 204% due to an increase in the average balance and cost of advances during the third quarter. During the third quarter of 2023 the Federal Reserve increased interest rates by 25 basis points.

Total interest expense increased 238% from $884 thousand for the third quarter of 2022 to $3.0 million for the third quarter of 2023. The majority of this increased expense was related to a 202 basis point increase in the cost of money market deposits along with a higher volume of money market accounts, a 214 basis point increase in the cost of time deposits as well as a higher volume of time deposits year over year, and a 212 basis point increase in the cost of FHLB borrowings as well as a higher volume of FHLB borrowings year over year. During the twelve months ended September 30, 2023, the Federal Reserve increased interest rates by 225 basis points.

Net interest income increased $122 thousand, or 3%, to $4.8 million in the third quarter of 2023 as compared to the previous quarter. The net interest margin decreased 7 basis points from 3.64% in the second quarter of 2023 to 3.57% in the third quarter of 2023. The overall yield on interest-earning assets increased 27 basis points during the third quarter, primarily due to a 26 basis point increase in yield on loans as well as a higher volume of loans, and an increase in yield on interest-earning cash equivalents and investments. With an increase in both volume and costs for money market accounts and time deposit accounts, the cost of interest-bearing deposits increased 41 basis points during the third quarter to 2.85%. The total cost of deposits increased 31 basis points from 1.92% during the second quarter of 2023 to 2.23% during the third quarter of 2023.

Net interest income for the nine months ended September 30, 2023 was $13.8 million, a 9% improvement over net interest income of $12.7 million for the nine months ended September 30, 2022. This growth was driven by a $6.6 million, or 46%, increase in loan interest income, offset by a $5.2 million, or 336%, increase in deposit interest expense and a $241 thousand, or 166%, increase in borrowings interest expense.

The provision for credit losses increased to $74 thousand in the third quarter of 2023 compared to $17 thousand in the second quarter of 2023. Year over year the provision for credit losses decreased from $168 thousand in the third quarter of 2022 to $74 thousand in the third quarter of 2023.

The allowance for loan losses to total loans was 0.88% at September 30, 2023, compared to 0.92% at December 31, 2022, and 0.85% at September 30, 2022. Non-performing assets consisted of non-performing loans of $735 thousand at September 30, 2023, and $898 thousand at December 31, 2022. Non-performing assets to total assets were 0.13% at September 30, 2023 and 0.17% at December 31, 2022.

Non-interest income for the third quarter of 2023 was $297 thousand compared to $213 thousand for the previous quarter and $204 thousand for the third quarter of the prior year. Swap referral fee income was $76 thousand for the third quarter of 2023 compared to none in the second quarter of 2023. No gain on the sale of SBA loans was received in either the third quarter of 2023 or the second quarter of 2023. In the third quarter of 2022, no swap referral fee income and no gain on the sale of SBA loans was received.

Non-interest income for the nine months ended September 30, 2023 was $710 thousand as compared to $853 thousand for the same period in the prior year. Swap referral fee income of $187 thousand was received in the first nine months of 2022 as compared to $76 thousand in the first nine months of 2023. Gain on sale of SBA loans was $94 thousand for the first nine months of 2022 as compared to none in the first nine months of 2023.

Non-interest expenses increased nominally in the third quarter of 2023 compared to the prior quarter. Increases in salaries & employee benefits, occupancy & equipment, and data processing were partially offset by a decreases in advertising and other expenses.

Non-interest expenses increased $401 thousand, or 15%, when comparing the third quarter of 2023 to the third quarter of 2022. Increases in salaries & employee benefits, occupancy & equipment, professional fees, data processing, and other costs were partially offset by a decrease in advertising. Non-interest expenses to average assets were 2.19% for the third quarter of 2023 compared to 2.29% for the previous quarter and 2.14% for the third quarter of the prior year.

Deposits increased a net $10.3 million, or 2%, from $475.7 million at June 30, 2023 to $486.0 million at September 30, 2023. During the third quarter, non-interest-bearing deposits decreased $4.3 million, or 4%, from $105.6 million at June 30, 2023 to $101.3 million at September 30, 2023. Interest-bearing checking balances decreased $3.7 million, or 8%, from $45.2 million at June 30, 2023 to $41.5 million at September 30, 2023. Money market deposits increased $16.8 million, or 8%, from $203.0 million at June 30, 2023 to $219.8 million at September 30, 2023. Certificates of deposit increased $1.5 million, or 1%, from $121.9 million at June 30, 2023 to $123.4 million at September 30, 2023. Between September 30, 2022 and September 30, 2023, total deposits grew 11%, with strong non-interest-bearing checking, money market, and time deposit growth partially offset by a decline in interest-bearing checking. At September 30, 2023, approximately 81% of total deposits were insured or otherwise collateralized, consistent with the prior quarter.

With strong growth in commercial real estate loans, construction loans, and commercial business loans, partially offset by a decline in consumer loans, the loan portfolio increased $13.6 million, or 3%, from $504.7 million at June 30, 2023 to $518.3 million at September 30, 2023.

The following table illustrates the composition of the loan portfolio:

Sep. 30,

2023

	Dec. 31, 2022		Sep. 30, 2022
Commercial real estate	$ 398,628,133		$ 364,523,848		$ 360,325,089
Commercial construction	55,305,574		35,120,763		31,681,479
Commercial business	46,657,956		43,005,663		40,041,080
Consumer	17,714,146		16,035,503		16,453,602
Total loans	$ 518,305,809		$ 458,685,777		$ 448,501,250

Investment securities totaled $18.0 million at September 30, 2023 as compared to $18.7 million at June 30, 2023. At September 30, 2023, the held-to-maturity investment portfolio book value was $8.8 million, with a fair market value of $7.5 million, resulting in an unrealized loss of $1.3 million. This unrealized loss, net of tax, of $1.1 million is less than 2.5% of total equity at September 30, 2023. The remainder of the investment portfolio was classified as available for sale with a book value of $10.8 million and a fair value of $9.2 million, resulting in an unrealized loss of $1.6 million. This unrealized loss, net of tax, of $1.3 million is included in accumulated other comprehensive loss on the balance sheet.

Total stockholders’ equity increased $1.5 million, or 3%, from $42.8 million at June 30, 2023 to $44.2 million at September 30, 2023, primarily due to net income generated. At September 30, 2023, book value per share was $14.31.

Selected Financial Data:

Balance Sheets (unaudited)

	September 30, 2023		December 31, 2022
Cash and due from banks	$ 23,496,322		$ 5,600,869
Time deposits at other banks	100,000		100,000
Investments	18,027,412		34,781,542
Loans	518,305,809		458,685,777
Allowance for loan losses	(4,568,310)		(4,238,927)
Premises & equipment	7,765,045		7,967,246
Other assets	17,661,984		13,828,477
Total assets	$ 580,788,262		$ 516,724,984
Noninterest-bearing deposits	$ 101,323,193		$ 87,888,933
Interest-bearing checking	41,498,904		46,526,732
Money market	219,814,412		207,184,086
Time deposits	123,366,029		89,364,726
Total deposits	486,002,538		430,964,477
Short term borrowings	28,641,800		27,196,000
Long term borrowings	9,530,000		9,530,000
Subordinated debt	5,975,010		5,965,639
Other liabilities	6,395,320		2,972,488
Total liabilities	536,544,668		476,628,604
Common stock	3,090,838		2,936,756
Surplus	19,740,509		18,156,784
Accumulated other comprehensive loss	(1,253,659)		(1,108,493)
Retained earnings	22,665,906		20,111,333
Total stockholders’ equity	44,243,594		40,096,380
Total liabilities & stockholders’ equity	$ 580,788,262		$ 516,724,984

Performance Statistics

(unaudited)

	Qtr Ended Sep. 30, 2023	Qtr Ended Jun. 30, 2023	Qtr Ended Mar. 31, 2023	Qtr Ended Dec. 31, 2022	Qtr Ended Sep. 30, 2022
Net interest margin	3.57 %	3.64 %	3.57 %	3.81 %	3.79 %
Nonperforming loans/ total loans	0.14 %	0.15 %	0.16 %	0.20 %	0.04 %
Nonperforming assets/ total assets	0.13 %	0.14 %	0.14 %	0.17 %	0.04 %
Allowance for loan losses/ total loans	0.88 %	0.89 %	0.91 %	0.92 %	0.85 %
Average loans/average assets	92.2 %	91.6 %	91.6 %	90.8 %	87.8 %
Non-interest expenses*/ average assets	2.19 %	2.29 %	2.29 %	2.11 %	2.14 %
Efficiency ratio	60.1 %	62.6 %	63.7 %	55.2 %	56.0 %
Earnings per share – basic and diluted**	$0.51	$0.47	$0.41	$0.45	$0.50
Book value per share**	$14.31	$13.85	$13.43	$13.00	$12.54
Total shares outstanding**	3,090,838	3,088,019	3,085,576	3,083,654	3,081,555
Weighted average shares outstanding**	3,089,441	3,086,782	3,084,634	3,082,556	3,080,540
* Annualized ** Per share data for prior periods was restated to reflect the 5% stock dividend paid in June 2023.

Income Statements (unaudited)

	Qtr. Ended Sep. 30, 2023		Qtr. Ended Jun. 30, 2023		Qtr. Ended Mar. 31, 2023		Qtr. Ended Dec. 31, 2022		Qtr. Ended Sep. 30, 2022
INTEREST INCOME
Loans, including fees	$7,633,163		$6,923,177		$6,223,153		$5,855,969		$5,218,510
Securities	125,882		120,133		131,350		138,544		116,783
Other	33,221		67,207		28,174		32,055		107,483
Total interest income	7,792,266		7,110,517		6,382,677		6,026,568		5,442,776
INTEREST EXPENSE
Deposits	2,696,301		2,267,015		1,819,643		1,210,800		749,425
Borrowings	195,150		64,267		126,620		93,773		41,337
Subordinated debt	93,124		93,123		93,124		93,124		93,123
Total interest expense	2,984,575		2,424,405		2,039,387		1,397,697		883,885
Net interest income	4,807,691		4,686,112		4,343,290		4,628,871		4,558,891
Provision for credit losses	73,930		17,129		63,957		444,833		167,671
Net interest income after provision for credit losses	4,733,761		4,668,983		4,279,333		4,184,038		4,391,220
NON-INTEREST INCOME
Service charges and other fees	109,894		107,841		99,570		97,480		103,253
BOLI income	50,237		49,281		47,691		47,849		48,413
Referral fee income	75,649		–		–		–		–
Gain on sale of SBA loans	–		–		–		–		–
Other	61,527		55,740		53,013		61,559		52,028
Total non-interest income	297,307		212,862		200,274		206,888		203,694
NON-INTEREST EXPENSE
Salaries & benefits	1,893,558		1,844,356		1,834,921		1,590,948		1,647,461
Occupancy & equipment	282,025		260,284		257,741		236,407		253,856
Professional fees	119,258		119,447		115,303		127,044		73,525
Advertising	58,354		65,917		67,195		88,772		83,724
Data processing	172,288		159,795		147,808		154,340		148,071
Other	540,552		614,534		470,567		471,560		458,443
Total non-interest expense	3,066,035		3,064,333		2,893,535		2,669,071		2,665,080
Income before federal income tax expense	1,965,033		1,817,512		1,586,072		1,721,855		1,929,834
Federal income tax expense	401,490		366,371		321,784		344,542		394,616
Net income	$1,563,543		$1,451,141		$1,264,288		$1,377,313		$1,535,218

Income Statements (unaudited)

	Nine Months Ended September 30, 2023		Nine Months Ended September 30, 2022
INTEREST INCOME
Loans, including fees	$ 20,779,493		$ 14,217,409
Securities	377,365		345,037
Other	128,602		145,665
Total interest income	21,285,460		14,708,111
INTEREST EXPENSE
Deposits	6,782,959		1,556,235
Borrowings	386,037		145,164
Subordinated debt	279,371		279,371
Total interest expense	7,448,367		1,980,770
Net interest income	13,837,093		12,727,341
Provision for credit losses	155,016		208,381
Net interest income after provision for credit losses	13,682,077		12,518,960
NON-INTEREST INCOME
Service charges and other fees	317,305		283,645
BOLI income	147,209		142,104
Referral fee income	75,649		186,699
Gain on sale of SBA loans	–		94,392
Other	170,280		146,052
Total non-interest income	710,443		852,892
NON-INTEREST EXPENSE
Salaries & benefits	5,572,835		4,919,677
Occupancy & equipment	800,050		740,810
Professional fees	354,008		356,358
Advertising	191,466		246,506
Data processing	479,891		418,869
Other	1,625,653		1,355,835
Total non-interest expense	9,023,903		8,038,055
Income before federal income tax expense	5,368,617		5,333,797
Federal income tax expense	1,089,645		1,086,009
Net income	$ 4,278,972		$ 4,247,788

About First Resource Bancorp, Inc.

First Resource Bancorp, Inc. is the holding company of First Resource Bank. 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. 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