First Resource Bank

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July 4, 2016 Issue

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High-Tech Community Bank with Traditional Values offering Personal and Business Banking, Remote Capture Deposit and Mobile Banking and a focus on Community Lending

Glenn B. Marshall

President & CEO

First Resource Bank

(OTCQX: FRSB)

www.firstresourcebank.com

Interview conducted by:

Lynn Fosse, Senior Editor, CEOCFO Magazine, Published – July 4, 2016

CEOCFO: Mr. Marshall, would you tell us the philosophy at First Resource Bank?

Mr. Marshall: We have traditional community bank values but we are high tech. Right now, about 50% of our deposits are coming in electronically through either remote capture or through mobile banking. We think that gives us the ability to have fewer locations but still have that same high-touch community bank flavor in those locations. On our lending side, we are the same high-touch trusted advisor that you expect from a community bank that I think has gotten a little lost out there in the landscape with all of the consolidations.

CEOCFO: Is it a deliberate strategy to encompass the best of both worlds?
Mr. Marshall: We are eleven years old so we have the ability to be a little more nimble than that classic community bank that is $500 million and has eight to eleven branches, and wishes it only had five in five years from now. The branch landscape is materially changing. Branches will continue to exist. Customers still want to see them. They want to drive by and say ooh and ahh. You also do not need as many physical branches to deliver the same level of service. On the lending side, a great deal of that is at the customer’s location.  They are going to come to the bank if they have to but they love being able to make their deposits from their desk and having their account officer come to them. In their cases, they do not really care where the bank is; when Bob walks in the door for the meeting; that is the bank. I think that some of those expensive physical locations are going to diminish in value going forward if you are stuck with them; I think it is really going to affect your performance.

CEOCFO: One of the items on your site is ‘making an impact on minority and veteran owned businesses.’ How are you doing that?

Mr. Marshall: We had the benefit of being in SBLF and we are also in a county that has a fairly decent level of veteran organizations; the Marine Corp League of Chester County is very active. We have a VA hospital in Coatesville. We just seem to have a bigger presence in veterans that are from here and settled here. We have tried to push to get some of that business. The county has also formed a group that gives discounts to veterans and issues veteran discount cards. We were one of the early adopters of that program and it is well deserved. We have so many people that have come back and are out of uniform but have not gotten the fanfare that they deserve for defending us.

CEOCFO: Giving back to the community is important for First Resource Bank. How do you choose where to give back?

Mr. Marshall: We do many causes that involve kids. There is a tax credit program in Pennsylvania called EITC, which is for educational enrichments and scholarships. As a result of that, many of the things that we are doing on our own involve the kids in our community, our future leaders. Our line is that we would much rather not send our money to Harrisburg from a tax standpoint but spend it in Chester County as an incubator for these people that are going to take over for us so we can actually at some point retire and let them run the businesses and the county. We do many things that revolve around raising money for kids and helping some of these sports organizations that are giving kids things to do other than doing stupid things that are just going to get them in trouble.

CEOCFO: You had good results the last quarter, which you announced recently. How are you succeeding when banking is still so challenging?
Mr. Marshall: We look at it as hand-to-hand combat, both on the loan side and the deposit side. You are hiring really good people that have been around the banking landscape in Chester County for years. You have just given them the tools to connect and do their thing. We have really always wanted to work ourselves into that trusted advisor role. If they are going to tell somebody no about something, that generally perks its way up to the top. We want to figure out a way to get the deal done or to get the deposits or customize something to fit their needs, which is that old school traditional community banking that I think customers love. There are still many banks that want to say they do that, but when it comes down to each particular deal, transaction, customer, it does not always happen.

CEOCFO: Would you give us a concrete example of how you went above and beyond for a customer?
Mr. Marshall: I have met a customer who had a series of small partnership accounts at a large bank. I was obviously trying to get his deposits over to our bank. I asked what kind of rates he was getting on those particular accounts. He said because they were at the lowest tier, they were only getting x. I told him he had millions of dollars with them. He said he could not get them to see that it is millions of dollars, they just look at it as being 20 thousand here and 20 thousand there. I asked him if I could get him the upper tier for all his deposits if he would move and he said absolutely he would. We actually did not have that product. I had just sold a product that we did not actually have. I realized we needed to do this because this is a need in our market. We can take advantage and compete with these larger institutions because they do not see what the customer sees, which is why do you treat me differently because I have a total of x. We literally sold that product before it existed. In about a week we created the product, went back out to that customer and sold it and got a couple million dollars in deposits from this particular gentleman that had all these various partnership accounts and got them out of a big bank. He was happy because somebody actually recognized his relationship for what it really was, which was an excellent relationship, he just was not getting credit for it.

CEOCFO: Your site features consumer resources and fraud awareness. Are your customers, in general, concerned and how do you help?

Mr. Marshall: We have many conversations with our customers whether they are in the branch or we are on the phone. If we have cards that get compromised, we call each customer to tell them their card got compromised. We do not want them to get hot-carded without their knowledge which is what Visa wants you to do to the card. There was an incident with Target and we actually called all the people that were our customers that got caught up in that as opposed to other institutions in our area that stopped the card but did not tell them. They were out trying to use their card and they were being denied, so they were totally embarrassed. Then they have to call the bank and ask why they are being denied. We are calling them and telling them what is going on and telling them to be careful. Some of it you just cannot avoid. There are scary things out there and as big a pain in the butt it is, we still make people change their passwords on a regular basis. People hate it but it is one of the safest ways to secure your data and if you keep the same password of your dog or your cat’s name for three years, at some point somebody is going to figure out what it is and steal it from you, and then you are in trouble. We are trying to educate some of the basic things and then we are also trying to get them some information about the more sophisticated fraud attempts being used. We have had a couple of incidents with corporate customers where people have gotten into their computers. Our IT guys are talking to their IT guys, helping them troubleshoot the issue, because our guys are getting to go to some of the seminars with the FBI and other cyber security experts. We are trying to push that information down to our larger customers to get them smarter in the way they do things too.

CEOCFO: Are there any other services you think you need to add?
Mr. Marshall: No I do not think so. It sounds crazy when you look at the size of the bank and there is not anything that we cannot do. We have a great core processor in Jack Henry. We have instant issue debit cards, we have mobile banking and people are depositing images of their checks. We have had remote capture on commercial checks for seven or eight years. We adopted that program early. We are currently working on person to person payments which we will have out in the fall. There really is not a product that we cannot access and provide to our customers, the question is picking the right ones that sort of go with your customer base because you can pick a product that your customers may not be adaptors of and then that is a waste because there is nobody on it. We used to have call-in on the telephone to check your balance and a couple of years ago we dropped it because we only had a few people calling in. We called them and said we are going to get rid of this service because nobody is using it but you, can we come over and show you how to use your computer and the internet and they said sure. We just educated them and weeded out the services that were not being used. If you are overdrawn, we call you. As a result, we are touching the customers. If you have a returned check and you deposited a check that somebody gave you that was bad, we are going to call you and say hey we got a returned item so then they can call their customer. They love the level of service and the interaction and they just do not feel like a number, they feel like they are part of the team.

CEOCFO: What is the competitive landscape for community banks?

Mr. Marshall: There is a lot of noise going on right now in our market. I think some other places along the east coast had more consolidation earlier and we just had this huge pop of consolidation. The landscape now is a little frazzled because there are banks that are going away and banks that are trying to get approval to go away. We are excited about being an independent community bank because right now so many of the new players and old players are getting rolled up. BB&T bought Susquehanna and National Penn. That is a major thing in this part of the world in Pennsylvania, you are taking two larger community banks and rolling them into a large national bank, and that is great for us.

CEOCFO: Did you always have the philosophy you have now of being ahead of the curve with technology, of being so responsive to your customers or did some of that evolve as time went on?
Mr. Marshall: The bank is eleven years old. When we started, we saw remote capture and we just thought this is the next debit card kind of thing. This is a big product. We had two or three products on our radar screen and we moved that up a couple years because we just thought it was going to be a big deal. With half of our deposits coming in that way, it is a big deal. Customers love it and they do not want to go out in traffic. It is easy to sell the president of the company but it is harder to sell the bookkeeper because they want to go out and do whatever at lunch. It is still a product that we have had great inroads in and it touches our largest customers. Early on, we were kind of sporadic in who we were charging when we made the decision it should be free. We own the machine, we give you the service for free and we decided then that was going to be our cheapest branch. We were always going to limit the number of physical locations but we were never going to limit the technology. As a result, we have two branches but I do not know that we need eight branches to be $500 million. We probably need four or five. The technology is going to be so prevalent in what happens in the next couple of years. I think five years from now you are just going to see people shedding branches like crazy because they are not going to need them because of all the electronic deposits.

CEOCFO: Where do you see yourself in the consolidation?

Mr. Marshall: If you can continue to perform and grow, I think we can stay independent. We were an independently minded board. We had a stock symbol from the first day we opened because Ryan Beck did a back-end offering. The interesting thing was we do not have a shareholder base that has been in the stock and their situation changed and they wanted to get out of the stock. They have been able to get in and out anytime they wanted. The people that own our shares now get what we are talking about and they want to be in. That is interesting when you look at an eleven year old bank because with a lot of eleven year old banks there is this sort of undercurrent of can we have a cash event. There were people that sold when they were in a panic early on but now there have been people that have been adding at the right price. I think that is an interesting dynamic because we do not get a lot of clamor to when are we going to sell the bank. We get more how are we going to grow and how are we going to get the stock price up and how are we going to add value to the shareholders here as opposed to how do we bale out of this. I think we are committed to growing it to the next level, and continue to acquire capital. It is always about performing and acquiring capital. If we can continue to attract capital and grow the bank, I think that in the landscape we become a bigger player in Chester County, which is one of the top ten counties in the country. When you look at some of these Forbes things, it is a great market and I do not know why you would walk away from a great market when there are less and less players in that market and you can take advantage of it. Everybody we have here has worked for other banks in this county, is a resident in the county that is involved in that organization or this organization. It is very much a community of people that are helping their community. We are not in a single industry dependent market, we have a very good market and a very good employment even in the worst of the great recession.

CEOCFO: Why pay attention to First Resource Bank?

Mr. Marshall: I think that First Resource Bank, what we call the hybrid community bank concept, is the future of community banking. This concept, a combination of a limited number of high-touch branches and access to customer friendly, leading technology, is where community banking is going to excel. We are there and we think that is where all community banks have to get to in the next five or ten years and we already have a leg up on everybody else.

“I think that First Resource Bank, what we call the hybrid community bank concept, is the future of community banking.”- Glenn B. Marshall

First Resource Bank

(OTCQX: FRSB)

www.firstresourcebank.com

Contact:

Glenn B. Marshall

610-561-6013

GMarshall@FirstResourceBank.com

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