First Resource Bank Announces Third Quarter Results

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Oct 24, 2011, 12:48 ET

EXTON, Pa., Oct. 24, 2011 /PRNewswire/ -- First Resource Bank (OTC Bulletin Board: FRSB) announced net income of $259,350 for the quarter ended September 30, 2011 as compared to net income of $177,047 for the quarter ended June 30, 2011 and net income of $152,577 for the quarter ended September 30, 2010.

Glenn B. Marshall, President & CEO, stated, "The third quarter was the eighth consecutive quarter of profitability and the highest in the Bank's history. Record profits combined with the repayment of TARP Capital Purchase Plan preferred stock continued the positive momentum that the Bank has created."

Net income for the nine months ended September 30, 2011 was $610,517 as compared to net income of $381,499 for the nine months ended September 30, 2010. This increase is attributed to higher net interest income offset by higher salaries and benefits expenses and higher other real estate owned expenses.

Net interest income was $1,271,686 for the quarter ended September 30, 2011 as compared to $1,208,174 for the previous quarter. The net interest margin widened 2 basis points, from 3.75% for the three months ended June 30, 2011 to 3.77% for the three months ended September 30, 2011. This net interest margin improvement resulted from lower deposit interest costs, offset by an increase in low yielding average cash and short term investments held during the third quarter. The loan portfolio yield increased 2 basis points, while the deposit cost of funds declined 9 basis points.

The allowance for loan losses to total loans was 1.24% at September 30, 2011 as compared to 1.28% at June 30, 2011, 1.24% at December 31, 2010 and 1.23% at September 30, 2010. Non-performing assets, which include non-performing loans of $2.6 million and other real estate owned of $1.1 million, totaled $3.7 million at September 30, 2011. Non-performing assets to total assets decreased from 2.95% at June 30, 2011 to 2.71% at September 30, 2011 primarily due to charge-offs and the sale of one other real estate owned property during the quarter. Marshall stated, "The economy is absolutely the overriding factor in loan quality. Quality underwriting has shown stress points that never were apparent in the past. We continue to see a quarter by quarter improvement in the stressed pool of loans as we work through the legal system and dispose of the assets."

The loan portfolio grew $1.7 million, or 1.5%, during the third quarter from $112.7 million at June 30, 2011 to $114.4 million at September 30, 2011. Total loans increased a net $1.4 million during the first nine months of 2011, growing from $113.0 million at December 31, 2010 to $114.4 million at September 30, 2011.

The following table illustrates the composition of the loan portfolio:


	Sept. 30, 2011	Dec. 31, 2010	Sept. 30, 2010

Commercial real estate	$ 69,723,326	$ 71,538,599	$ 67,828,719
Commercial construction	5,867,000	2,840,605	3,757,082
Commercial business	12,723,271	12,276,455	12,633,286
Consumer	26,108,408	26,331,755	25,428,264

Total loans	$114,422,005	$112,987,414	$109,647,351

Deposits increased $1.1 million, or 0.9% from $118.0 million at June 30, 2011 to $119.1 million at September 30, 2011. During the third quarter, certificates of deposit increased $913 thousand, or 1.3%, from $67.8 million at June 30, 2011 to $68.7 million at September 30, 2011. Money market deposits declined $2.8 million, or 6.3%, from $45.3 million at June 30, 2011 to $42.4 million at September 30, 2011. During the nine months ended September 30, 2011, total deposits increased $9.6 million, or 8.8%, with significant growth in the certificate of deposit portfolio offset by decline in money market deposits. Certificates of deposit have been used to lock in longer term funding at historic low interest rates.

The Bank issued preferred stock in three different series in 2009 as part of the United States Department of the Treasury's Capital Purchase Program (CPP). Preferred stock dividends are accrued monthly and all dividend payments have been made in accordance with the terms of the preferred stock issued. On September 15, 2011, the Bank redeemed all CPP preferred stock outstanding and issued a new series of preferred stock under the United States Department of the Treasury's Small Business Lending Fund (SBLF). Chairman James B. Griffin stated, "CPP, at the time, was a significant benefit to common shareholders as we grew the bank beyond our then current capital. Our September repayment of CPP, through the SBLF, provides potential for a lower preferred dividend option which benefits the Bank and the common shareholders as we continue to grow."

Third quarter dividends and accretion of $132,455 included $62,833 specifically related to the redemption of CPP preferred stock as the warrant preferred accretion was accelerated to fully redeem all preferred shares issued. After accounting for preferred stock dividends and accretion, net income available to common shareholders for the quarter ended September 30, 2011 was $126,895. This compares to net income available to common shareholders of $104,909 for the quarter ended June 30, 2011 and $80,439 for the quarter ended September 30, 2010.

Non-interest income for the quarter ended September 30, 2011 was $39,849, as compared to $39,053 for the previous quarter. Non-interest income for the nine months ended September 30, 2011 of $131,117 was $64,162, or 95.8% higher than non-interest income of $66,955 for the nine months ended September 30, 2010. This increase was primarily due to rental income on other real estate owned properties.

Non-interest expense decreased $33,350, or 4% in the three months ended September 30, 2011 as compared to the three months ended June 30, 2011. This decrease was primarily due to lower professional fees and lower other real estate owned expenses. Non-interest expense for the nine months ended September 30, 2011 of $2.4 million was $262 thousand, or 12.1% higher than non-interest expense of $2.2 million for the nine months ended September 30, 2010. This increase was due to higher salaries and benefits associated with a higher headcount, higher losses on sales of other real estate owned properties and higher expenses of other real estate owned properties. During the nine months ended September 30, 2011, six other real estate owned properties were disposed of and two were added.

Selected Financial Data: Balance Sheets (unaudited)
	September 30, 2011	Dec. 31, 2010

Cash and due from banks	$ 5,607,716	$ 1,968,246
Investments	14,002,044	9,333,483
Loans	114,422,005	112,987,414
Allowance for loan losses	(1,418,460)	(1,399,993)
Premises & equipment	161,685	127,419
Other assets	2,679,590	3,341,266

Total assets	$ 135,454,580	$ 126,357,835

Non-interest bearing deposits	$ 6,557,860	$ 4,393,823
Interest-bearing checking	1,461,987	1,168,134
Money market	42,413,180	51,075,527
Time deposits	68,672,454	52,821,057
Total deposits	119,105,481	109,458,541
Borrowings	-	1,928,000
Other liabilities	1,270,691	395,402

Total liabilities	120,376,172	111,781,943

Preferred stock	5,083,000	5,066,833
Common stock	1,453,094	1,453,094
Surplus	9,639,185	9,635,586
Accumulated other comprehensive income (loss)	116,981	(31,982)
Accumulated deficit	(1,213,852)	(1,547,639)
Total stockholders' equity	15,078,408	14,575,892

Total Liabilities & Stockholders' Equity	$ 135,454,580	$ 126,357,835


Performance Statistics (unaudited)	Qtr Ended Sept. 30, 2011	Qtr Ended June 30, 2011	Qtr Ended Mar. 31, 2011	Qtr Ended Dec. 31, 2010	Qtr Ended Sept. 30, 2010

Net interest margin	3.77%	3.75%	3.91%	3.77%	3.40%
Nonperforming loans/total loans	2.23%	2.77%	2.35%	2.21%	3.10%
Nonperforming assets/ Total assets	2.71%	2.95%	3.32%	3.42%	3.36%
Allowance for loan losses/ Total loans	1.24%	1.28%	1.27%	1.24%	1.23%
Average loans/Average assets	84.9%	84.9%	88.0%	87.8%	84.3%
Non interest expenses*/ Average assets	2.32%	2.52%	2.58%	2.83%	2.15%

* Annualized

Income Statements (unaudited)
	Qtr Ended Sept. 30, 2011	Qtr Ended June 30, 2011	Qtr Ended Mar. 31, 2011	Qtr Ended Dec. 31, 2010	Qtr Ended Sept. 30, 2010

INTEREST INCOME
Loans	$1,628,005	$1,587,688	$1,585,435	$1,594,093	$1,575,193
Investments	71,048	63,007	55,056	28,027	39,327
Federal funds sold	-	-	147	704	822
Other	3,644	1,899	1,016	5,047	7,069
Total interest income	1,702,697	1,652,594	1,641,654	1,627,871	1,622,411

INTEREST EXPENSE
Borrowings	2,338	8,867	13,973	23,060	28,818
Checking	877	743	708	817	865
Money Market	111,541	128,543	137,358	145,307	204,531
Time deposits	316,255	306,267	281,783	270,011	290,097
Total interest expense	431,011	444,420	433,822	439,195	524,311

Net interest income	1,271,686	1,208,174	1,207,832	1,188,676	1,098,100

Provision for loan losses	126,065	151,933	179,756	120,888	202,576

NON INTEREST INCOME	39,849	39,053	52,215	22,428	23,332

NON INTEREST EXPENSE
Salaries & benefits	357,253	346,362	343,817	313,127	307,260
Occupancy & equipment	79,946	74,442	78,339	75,080	74,445
Data processing	53,041	51,552	50,909	49,154	46,908
Professional fees	87,042	103,308	91,089	99,816	78,435
Advertising	8,476	8,045	16,203	2,903	4,825
Other real estate owned expenses	52,502	97,676	71,806	237,791	14,387
Other non interest Expenses	153,718	143,943	162,796	146,188	160,288
Total non interest Expense	791,978	825,328	814,959	924,059	686,548

Pre-tax income	393,492	269,966	265,332	166,157	232,308

Tax expense	(134,142)	(92,919)	(91,212)	(57,296)	(79,731)

Net income	$ 259,350	$ 177,047	$ 174,120	$ 108,861	$ 152,577

Preferred stock dividends and accretion	(132,455)	(72,138)	(72,138)	(72,138)	(72,138)

Net income available to common shareholders	$ 126,895	$ 104,909	$ 101,982	$ 36,723	$ 80,439

Income Statements (unaudited)
	Nine Months Ended Sept. 30, 2011	Nine Months Ended Sept. 30, 2010

INTEREST INCOME
Loans	$4,801,128	$4,607,768
Investments	189,111	250,549
Federal funds sold	147	2,140
Other	6,559	14,621
Total interest income	4,996,945	4,875,078

INTEREST EXPENSE
Borrowings	25,178	102,275
Checking	2,328	2,448
Money Market	377,443	606,456
Time deposits	904,304	1,029,845
Total interest expense	1,309,253	1,741,024

Net interest income	3,687,692	3,134,054

Provision for loan losses	457,754	449,808

NON INTEREST INCOME	131,117	66,955

NON INTEREST EXPENSE
Salaries & benefits	1,047,432	954,173
Occupancy & equipment	232,727	238,931
Data processing	155,502	149,190
Professional fees	281,439	324,898
Advertising	32,724	17,922
Other real estate owned expenses	221,984	19,966
Other non interest expense	460,457	464,855
Total non interest expense	2,432,265	2,169,935

Pre-tax income	928,790	581,266

Tax expense	(318,273)	(199,767)

Net income	$ 610,517	$ 381,499

Preferred stock dividends and accretion	(276,731)	(216,412)

Net income available to common shareholders	$ 333,786	$ 165,087

About First Resource Bank

First Resource Bank is a locally owned and operated Pennsylvania state-chartered bank, serving the banking needs of businesses, professionals and individuals in Chester County, Pennsylvania. 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.

SOURCE First Resource Bank