First Resource Bank Announces Second Quarter Results; Achieves Organic Loan Growth Of 7% For The Quarter, 17% Year-to-date
07/30/2021 - 08:00 AM
EXTON, Pa. , July 30, 2021 /PRNewswire/ -- First Resource Bank (OTCQX: FRSB) announced financial results for the three months ended June 30, 2021 .
Glenn B. Marshall , CEO, stated, "We continue to see a reopening of our trade area as the economy recovers from the shutdowns that we all experienced in the second quarter of 2020. We were honored to participate in both rounds of the Paycheck Protection Program (PPP) which saved thousands of jobs and families in our community. First Resource Bank operates in a great market with a strong local economy and we are thrilled to see our customer base thrive and grow along with us."
Highlights for the second quarter of 2021 included:
Net income of $1.1 million 56% 7% loan growth during the second quarter, excluding PPP loan activity Total interest income grew 19% over the prior year second quarter Total interest expense declined 28% over the prior year second quarter Net interest margin improved 18 basis points during the quarter Named the Best Community Bank on the Main Line by readers of Main Line Today Earned the #1 ranking among medium-sized companies as a "Best Place to Work" by the Philadelphia Business Journal Completed a 5% stock dividend Marshall stated, "As our region embraced the vaccine, we saw a surge of loan opportunity in our market area. Our outstanding second quarter and six-month period loan growth came at a time when our PPP team was seeing positive results from their forgiveness efforts. During the second quarter we replaced our PPP loans that were forgiven with new organic loan growth. We are hopeful that both teams can continue to balance one another over the remainder of 2021."
Net income for the quarter ended June 30, 2021 was $1,056,574 $905,664 $676,987
Total interest income increased 11% when comparing the second quarter of 2021 to the first quarter of 2021. This increase was driven by 7% organic growth in loans, excluding PPP loans, as well as higher fees recognized as interest income in association with PPP loan forgiveness during the second quarter of 2021 as compared to the prior quarter. The Bank recognized $384 thousand $614 thousand
Total interest income rose 19% from $3,987,232 June 30, 2020 to $4,742,205 June 30, 2021 . This increase was the result of 12% loan growth when comparing June 30, 2021 to a year prior, which increases to 26% loan growth when excluding PPP loans for both periods. Increased interest income from loan growth was offset by a 7 basis point decline in loan yields when comparing the second quarter of 2020 to the second quarter of 2021.
Total interest expense decreased 3% when comparing the second quarter of 2021 to the first quarter of 2021. This decrease was driven by an 8 basis point decrease in the cost of interest-bearing deposits during the quarter. Interest expense on deposits continues to be actively managed to lower costs.
Total interest expense decreased 28% from $937,509 June 30, 2020 to $678,419 June 30, 2021 . The vast majority of this decreased expense was related to an overall 61 basis point decline in the cost of interest-bearing deposits, led by a 25 basis point decrease in the cost of money market accounts and a 78 basis point decrease in the cost of certificates of deposit, year over year. Overall interest expense was also mitigated by strong growth in noninterest-bearing deposits, which increased 46% when comparing June 30, 2021 to the year prior.
Net interest income was $4,063,786 June 30, 2021 as compared to $3,570,705 14% increase. The net interest margin increased 18 basis points from 3.59% for the quarter ended March 31, 2021 to 3.77% for the quarter ended June 30, 2021 . The overall yield on interest earning assets increased 10 basis points during the second quarter led by a 3 basis point increase in loan yields to 4.77% , aided by a higher loan to asset ratio at June 30, 2021 as compared to March 31, 2021 . The cost of interest-bearing deposits decreased 8 basis points during the first quarter to 0.69% , with the majority of that decrease attributed to lower cost money market accounts and certificates of deposit. Continued growth in noninterest-bearing deposits fueled a decline in the total cost of deposits from 0.57% at March 31, 2021 to 0.50% at June 30, 2021 .
Net interest income for the six months ended June 30, 2021 was $7,634,491 28% improvement over net interest income of $5,953,742 June 30, 2020 . This growth was driven by a 15% increase in loan interest income and a 40% decrease in deposit interest expense.
The provision for loan losses increased from $240,153 March 31, 2021 to $270,453 June 30, 2021 . The provision for loan losses increased from $51,045 June 30, 2020 , to $270,453 June 30, 2021 .
Marshall noted, "The provision for loan losses in the second quarter may look odd at first when you consider that credit quality is as strong as it's been since 2007 and total loans are almost level with the first quarter. When you get behind the numbers, the paid-off SBA guaranteed PPP loans required a very low reserve ratio as compared to organic loans that replaced them. The increased provision for loan losses in the second quarter is reflective of the strong organic loan growth in the quarter."
The allowance for loan losses to total loans was 0.87% at June 30, 2021 as compared to 0.83% at March 31, 2021 , 0.86% at December 31, 2020 and 0.76% at June 30, 2020 . Excluding PPP loans, which are 100% guaranteed by the SBA, the allowance for loan losses to total loans was 0.93% at June 30, 2021 , 0.95% at March 31, 2021 and December 31, 2020 and 0.91% at June 30, 2020 . Non-performing assets consisted of non-performing loans of $164 thousand June 30, 2021 , a 57% decline from the prior quarter. Non-performing assets to total assets were 0.04% at June 30, 2021 , down from 0.09% in the prior quarter.
Non-interest income for the quarter ended June 30, 2021 was $181,213 $177,761 $136,534 $27,100
Non-interest income for the six months ended June 30, 2021 was $358,974 $420,540 $175,100
Non-interest expense increased $275 thousand 12% , in the three months ended June 30, 2021 as compared to the prior quarter. The increase was primarily due to an increase in salaries and benefits, advertising, data processing, and other costs, partially offset by a decrease in occupancy costs. Part of the increase in salaries and benefits expenses, data processing expenses and other costs are attributed to a significant technology enhancement project during the second quarter. Non-interest expense increased $358 thousand 16% , when comparing the second quarter of 2021 to the second quarter of 2020. This increase was primarily attributed to an increase in salaries and benefits costs, data processing and other costs. The technology enhancement project during the second quarter of 2021 included numerous one-time expenses in each of those categories.
Deposits grew a net $12.3 million 3% , from $382.1 million March 31, 2021 to $394.4 million June 30, 2021 . During the second quarter, noninterest-bearing deposits increased $18.0 million 17% , from $105.6 million March 31, 2021 to $123.5 million June 30, 2021 . Interest-bearing checking balances decreased $1.6 million 5% , from $31.8 million March 31, 2021 to $30.2 million June 30, 2021 . Money market deposits increased $4.6 million 3% , from $154.1 million March 31, 2021 to $158.8 million June 30, 2021 . Certificates of deposit decreased $8.7 million 10% , from $90.6 million March 31, 2021 to $81.9 million June 30, 2021 . Between June 30, 2021 and June 30, 2020 , total deposits grew 22% , with tremendous checking and money market growth partially offset by a decline in certificates of deposit.
President and Chief Financial Officer, Lauren C. Ranalli , stated, "We continue to focus internal resources on checking growth and those efforts continue to pay off. Growth in checking and money market deposits have allowed us to shed higher cost certificates of deposit as they mature, lowering our overall cost of funds and increasing our net interest margin. We continue to benefit from disruption in the market to gain checking relationships. Our success in this area is attributed to our award-winning customer service as evidenced by our 46% increase in noninterest-bearing checking balances year over year."
The loan portfolio increased by $921 thousand $379.8 million March 31, 2021 to $380.8 million June 30, 2021 . Excluding PPP loan activity, the loan portfolio increased $23.1 million 7% , from $333.2 million March 31, 2021 to $356.4 million June 30, 2021 , with strong growth in commercial real estate, construction loans and commercial business loans partially offset by a decline in consumer loans. Year-to-date loan growth in 2021 was $41.8 million 12% . Excluding PPP loan activity, year-to-date loan growth was $51.8 million 17% . The loan portfolio grew $41.8 million 12% from $339.0 million June 30, 2020 to $380.8 million June 30, 2021 . Excluding PPP loans, the loan portfolio grew $74.0 million 26% from June 30, 2020 to June 30, 2021 .
The following table illustrates the composition of the loan portfolio:
June 30,
2021
Dec. 31,
2020
June 30,
2020
Commercial real estate
$ 277,919,949
$ 227,224,196
$ 209,771,247
Commercial construction
30,724,320
24,925,050
24,698,846
Commercial business
56,477,796
66,555,149
87,958,509
Consumer
15,644,478
20,235,647
16,571,930
Total loans
$ 380,766,543
$ 338,940,042
$ 339,000,532
Total stockholder's equity increased $1.1 million 3% , from $32.3 million March 31, 2021 to $33.4 million June 30, 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 June 30, 2021 , book value per share grew 35 cents , or 3% , to $11.42
Total assets increased $13.2 million 3% during the second quarter of 2021, with growth in cash and due from banks funded by deposit growth. PPP loan activity of $22.2 million $23.1 million
Selected Financial Data:
Balance Sheets (unaudited)
June 30, 2021
December 31, 2020
Cash and due from banks
$ 41,245,286
$ 26,008,820
Time deposits at other banks
599,000
599,000
Investments
17,957,320
43,060,035
Loans
380,766,543
338,940,042
Allowance for loan losses
(3,326,784)
(2,907,023)
Premises & equipment
8,259,701
8,380,269
Other assets
12,071,297
10,353,164
Total assets
$ 457,572,363
$ 424,434,307
Noninterest-bearing deposits
$ 123,545,865
$ 99,898,323
Interest-bearing checking
30,177,054
23,726,721
Money market
158,758,776
140,480,421
Time deposits
81,906,722
93,919,651
Total deposits
394,388,417
358,025,116
Short term borrowings
-
-
Long term borrowings
21,158,000
24,206,000
Subordinated debt
5,946,896
7,940,649
Other liabilities
2,682,324
2,806,732
Total liabilities
424,175,637
392,978,497
Total stockholders' equity
33,396,726
31,455,810
Total Liabilities &
Stockholders' Equity
$ 457,572,363
$ 424,434,307
Performance Statistics (unaudited)
Qtr Ended
June 30,
2021
Qtr Ended
Mar. 31,
2021
Qtr Ended
Dec. 31,
2020
Qtr Ended
Sept. 30,
2020
Qtr Ended
June 30,
2020
Net interest margin
3.77%
3.59%
3.69%
3.53%
3.50%
Nonperforming loans/
Total loans
0.04%
0.10%
0.11%
0.40%
0.41%
Nonperforming assets/
Total assets
0.04%
0.09%
0.09%
0.35%
0.36%
Allowance for loan losses/
Total loans
0.87% **
0.83% **
0.86% **
0.78% **
0.76% **
Average loans/Average
assets
86.4%
84.4%
81.4%
88.7%
87.4%
Non-interest expenses*/
Average assets
2.36%
2.29%
2.20%
2.34%
2.50%
Earnings per share – basic
and diluted***
$0.31
$0.31
$0.39
$0.28
$0.23
Book value per share***
$11.42
$11.07
$10.78
$10.41
$10.14
Total shares outstanding
2,923,777
2,782,251
2,779,607
2,776,551
2,773,686
* Annualized
** Excluding PPP loans, the allowance for loan losses/total loans was 0.93% at June 30, 2021, 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.
*** Per share data restated to reflect the 5% stock dividend paid in May 2021.
Income Statements (unaudited)
Qtr. Ended
June 30,
2021
Qtr. Ended
Mar. 31,
2021
Qtr. Ended
Dec. 31,
2020
Qtr. Ended
Sept. 30,
2020
Qtr. Ended
June 30,
2020
INTEREST INCOME
Loans, including fees
$4,641,636
$4,169,912
$4,439,471
$4,038,794
$3,879,732
Securities
94,794
96,260
93,928
101,768
104,900
Other
5,775
6,022
10,990
2,365
2,600
Total interest income
4,742,205
4,272,194
4,544,389
4,142,927
3,987,232
INTEREST EXPENSE
Deposits
481,151
499,622
581,982
653,243
742,578
Borrowings
104,145
108,743
117,995
120,795
127,446
Subordinated debt
93,123
93,124
126,007
77,467
67,485
Total interest expense
678,419
701,489
825,984
851,505
937,509
Net interest income
4,063,786
3,570,705
3,718,405
3,291,422
3,049,723
Provision for loan losses
270,453
240,153
229,538
129,894
51,045
Net interest income after provision for loan losses
3,793,333
3,330,552
3,488,867
3,161,528
2,998,678
NON-INTEREST INCOME
BOLI income
47,505
44,523
36,852
37,125
37,067
Referral fee income
-
-
69,000
-
27,100
Gain on sale of SBA loans
-
-
-
-
-
Other
133,708
133,238
118,539
99,738
72,367
Total non-interest income
181,213
177,761
224,391
136,863
136,534
NON-INTEREST EXPENSE
Salaries & benefits
1,592,369
1,432,259
1,405,431
1,386,212
1,373,036
Occupancy & equipment
255,537
262,501
238,406
261,166
228,216
Professional fees
98,035
89,413
95,238
96,936
98,492
Advertising
87,788
61,683
80,279
72,390
64,011
Data processing
188,220
149,633
146,147
131,351
135,936
Other
432,851
383,951
349,074
336,144
396,808
Total non-interest
expense
2,654,800
2,379,440
2,314,575
2,284,199
2,296,499
Income before income tax expense
1,319,746
1,128,873
1,398,683
1,014,192
838,713
Federal income tax expense
263,172
223,209
280,248
198,786
161,726
Net income
$1,056,574
$905,664
$1,118,435
$ 815,406
$ 676,987
Income Statements (unaudited)
Six Months
Ended
2021
Six Months
Ended
2020
INTEREST INCOME
Loans
$ 8,811,548
$ 7,693,967
Investments
191,054
222,905
Other
11,797
49,895
Total interest income
9,014,399
7,966,767
INTEREST EXPENSE
Deposits
980,773
1,628,493
Borrowings
212,888
249,562
Subordinated debt
186,247
134,970
Total interest expense
1,379,908
2,013,025
Net interest income
7,634,491
5,953,742
Provision for loan losses
510,606
195,078
Net interest income after provision for loan losses
7,123,885
5,758,664
NON-INTEREST INCOME
BOLI income
92,028
74,117
Referral fee income
-
175,100
Gain on sale of SBA loans
-
-
Other
266,946
171,323
Total non-interest income
358,974
420,540
NON-INTEREST EXPENSE
Salaries & benefits
3,024,628
2,701,507
Occupancy & equipment
518,038
480,586
Professional fees
187,448
190,653
Advertising
149,471
130,289
Data processing
337,853
275,419
Other non-interest expense
816,802
768,449
Total non-interest expense
5,034,240
4,546,903
Pre-tax income
2,448,619
1,632,301
Tax expense
486,381
315,175
Net income
$ 1,962,238
$ 1,317,126
About 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
