Republic First Bancorp, Inc. Reports Fourth Quarter Financial Results Deposits Grow 34% and Earnings Continue to Improve as Momentum Builds
01/25/2021 - 08:30 AM
PHILADELPHIA, Jan. 25, 2021 (GLOBE NEWSWIRE) -- Republic First Bancorp, Inc. (NASDAQ: FRBK), the holding company for Republic Bank, today announced its financial results for the period ended December 31, 2020.
Q4-2020 Financial Highlights
Net income was $4.1 million , or $0.05 per share, during the fourth quarter of 2020 compared to a net loss of $2.5 million , or ($0.04) per share, during the fourth quarter of 2019. This represents an increase of 265% when comparing the two quarters. Core earnings improved for the fourth consecutive quarter as positive momentum continues to build. Net income for the year ended December 31, 2020 was $5.1 million , or $0.07 per share, compared to a net loss of $3.5 million , or $(0.06) per share, for the year ended December 31, 2019 representing improvement of 244% year over year. Results for the twelve month period ended December 31, 2020 were impacted by a one-time goodwill impairment charge of $5.0 million . Excluding this charge, core earnings before tax were $11.5 million during the year ended December 31, 2020 compared to a net loss before tax of $4.9 million during the year ended December 31, 2019. The improvement in earnings was driven by the Company’s focus on cost control initiatives while driving revenue growth. During the fourth quarter of 2020 total revenue increased 48% and non-interest expense increased 10% compared to the fourth quarter of 2019. During the twelve month period ended December 31, 2020 total revenue increased 26% and non-interest expense, excluding goodwill impairment, increased by 8% compared to the twelve month period ended December 31, 2019. Total deposits increased by $1.0 billion , or 34% , to $4.0 billion as of December 31, 2020 compared to $3.0 billion as of December 31, 2019. Total loans grew $897 million , or 51% , to $2.6 billion as of December 31, 2020 compared to $1.7 billion at December 31, 2019. This growth includes more that $600 million in PPP loans. Excluding the impact of the PPP loan program loans grew $273 million , or 16% , year over year. Asset quality remains strong as the ratio of non-performing assets to total assets declined to 0.28% as of December 31, 2020. Only twenty-one loan customers were deferring loan payments at the end of the year. These deferrals relate to approximately $16 million of outstanding loan balances which is less than 1% of total loans. Vernon W. Hill, II, Chairman of Republic First Bancorp said:
“The fourth quarter of 2020 marks the end of a year filled with unprecedented challenges and economic uncertainty. During this time the Republic Bank Team maintained its commitment to outstanding customer service and satisfaction while driving positive momentum. We are extremely proud of our performance and participation in the PPP loan program which provided crucial funding to businesses throughout our footprint during a time of extreme economic distress. In recognition of our commitment to FAN atical customer service we were named America’s #1 Bank for Service as a result of a survey conducted by Forbes during 2020. As we put an incredibly challenging year behind us we look forward to growing our rapidly expanding network of FANS in the future. We clearly believe the best is yet to come.”
Harry D. Madonna, President and Chief Executive Officer of Republic First Bancorp added:
“During 2020 we continued to demonstrate our ability to produce strong organic growth in asset, loan and deposit balances even in a challenging economic environment inhibited by governmental restrictions and the ongoing effects of the COVID-19 pandemic. We were also able to drive significant improvement in earnings despite the challenges faced in the current year. Our focus on cost control measures continues to drive positive operating leverage. We have consistently stated that it is our goal to deliver best in class service across all delivery channels…..in-store, by phone, online and mobile options....as we strive to create new FANS each and every day. We are focused on meeting that goal in the most efficient manner possible.”
Financial Summary for the Period Ended December 31, 2020
The changes in the balance sheet as of December 31, 2020 were significantly impacted by the effect of the PPP loan program. A portion of the increase in cash balances, outstanding loans, and outside borrowings will be short-term in nature and will change as the borrowers that received PPP loans submit applications for forgiveness to the SBA in the coming months. A summary of the balance sheet presented with and without the impact of the PPP loan program for the period ended December 31, 2020 can be found in the following table:
Excluding PPP YOY Growth YOY Growth Actual Program Actual (Including PPP) (Excluding PPP) ($ in millions) 12/31/20 12/31/20 12/31/19 ($) (%) ($) (%) Assets $ 5,066 $ 4,432 $ 3,341 $ 1,725 52 % $ 1,091 33 % Loans 2,645 2,021 1,748 897 51 % 273 16 % Deposits 4,014 4,014 2,999 1,015 34 % 1,015 34 % PPPLF Borrowings 634 - - 634 100 % - - %
A summary of the income statement for the period ended December 31, 2020 can be found in the following table:
($ in millions, except per share data) Three Months Ended Twelve Months Ended 12/31/20 12/31/19 Change 12/31/20 12/31/19 Change Total Revenue $ 37.3 $ 25.1 48 % $ 128.4 $ 101.5 26 % Non-Interest Expense 30.2 27.5 10 % 112.7 104.5 8 % Goodwill Impairment - - - % 5.0 - 100 % Income (Loss) Before Tax 5.7 (3.5 ) 261 % 6.4 (4.9 ) 233 % Net Income (Loss) 4.1 (2.5 ) 265 % 5.1 (3.5 ) 244 % Earnings per share (diluted) $ 0.05 $ (0.04 ) 225 % $ 0.07 $ (0.06 ) 217 %
Earnings in the current year were impacted by a one-time goodwill impairment charge which was recorded in the third quarter of 2020. A summary of core earnings on a quarterly basis during 2020 excluding the goodwill impairment charge can be found in the following table:
($ in millions) 1Q20 2Q20 3Q20 4Q20 YTD 2020 Total Revenue $ 27.3 $ 30.9 $ 33.0 $ 37.3 $ 128.4 Provision for Loan Losses 0.9 1.0 0.9 1.4 4.2 Non-Interest Expense* 27.3 26.7 28.6 30.2 112.7 Core Earnings Before Tax* (0.9 ) 3.2 3.5 5.7 11.5 Core Earnings After Tax* (0.6 ) 2.5 2.8 4.1 8.8
*Note: Results for 2020 exclude a one-time goodwill impairment charge recorded in Q3-2020. See disclosure related to non-GAAP financial measures at the end of this release.
Core earnings improved for the fourth consecutive quarter as positive momentum continues to build. Excluding the impact of goodwill impairment, profitability improved quarter to quarter as core earnings before tax increased to $5.7 million in the fourth quarter of 2020 compared to $3.5 million in the third quarter of 2020 and a net loss before tax of $3.5 million in the fourth quarter of 2019. Profitability also improved year over year. Excluding the impact of goodwill impairment, core earnings before tax for the twelve month period ended December 31, 2020 were $11.5 million compared to a net loss before tax of $4.9 million for the twelve months ended December 31, 2019. This represents an increase of $16.3 million , or 336% , year over year. The goodwill impairment charged recorded during 2020 represents a complete write-off of all goodwill on the balance sheet at the present time. PPP Loan Program
The Paycheck Protection Program (“PPP”) included in the CARES Act authorized financial institutions to make loans to companies that have been impacted by the devastating economic effects of the coronavirus (COVID-19) pandemic. We responded by quickly developing a process to accept applications for the program not only from our valued small business customers, but from non-customers throughout our community as well.
During 2020 we originated more than $680 million in the first round of the PPP loan program related to nearly 5,000 small businesses. More than 50% of the applications received were from businesses that were not existing customers of Republic Bank, many of which have switched their primary banking relationship to Republic. Gross origination fees of $22 million were received by Republic which is being recognized as income over the life of the loans. Approximately $13 million in fees have been deferred and are expected to be recognized during 2021. As a percentage of existing loan balances as of March 31, 2020, the $680 million in PPP loans originated amounted to 36% making Republic one of the top PPP lenders in the entire country. We are now assisting all of our PPP loan customers with the application process for forgiveness through the SBA. The Economic Aid Act approved by Congress in December 2020 provided funding for a second round of the PPP program. We are actively preparing to assist not only our existing business customers with the application process for this next round, but will again welcome non-customers to apply through Republic Bank as well. We began processing applications for the second round in January 2021.
Loss Mitigation and Loan Portfolio Analysis
Our emphasis on asset quality with every loan that we underwrite has demonstrated positive results in this challenging economic environment. Our commercial lending team has maintained regular contact with many of our loan customers to discuss the impact that the pandemic has had on their businesses to date and the expected ramifications that may be felt in the future. During 2020 we granted payment deferrals for customers that made a request and had an immediate need for assistance.
Management believes exposure in the loan portfolio to the high risk industries most impacted by the current economic conditions is limited. Loans to customers in the accommodations and food services industry (i.e. hotels and restaurants) amount to 7% of the total loans outstanding as of December 31, 2020.
We believe the combination of ongoing communication with our customers, loan payment deferrals, increased focus on risk management practices, and access to government programs such as the PPP Loan Program should help mitigate potential future period losses.
The following table summarizes the number of loan customers that have been granted payment deferrals along with the related loan outstanding balances through the period ended December 31, 2020:
12/31/20 05/31/20 ($ in millions) Deferred Balances % of Total Loans* Deferred Balances % of Total Loans* Deferral of Principal Only $ 4 - % $ 176 9 % Deferral of Principal and Interest 12 - % 268 14 % Total Deferral Balances $ 16 <1% $ 444 24 % # of Loan Accounts on Deferral 21 <1% 491 9 %
*Note: PPP loans excluded from total loans when calculating % of total loan balances.
Loan balances with deferred payments have declined to $16 million , which is less than 1% of total loans, as of December 31, 2020. Loan deferrals peaked at $444 million , or 24% of total loans as of May 31, 2020. Only twenty-one loan customers were deferring loan payments as of December 31, 2020.
Total Banking Experience
The goal of the Republic Bank model is to deliver a unified customer experience not only through our physical store locations, but to include convenient on-line and mobile options as well. As a result of our commitment to FAN atical service across all delivery channels Republic Bank was named as America’s # 1 Bank for Service in a national Forbes survey during 2020. This survey measured overall customer satisfaction with their financial institution in the following categories: branch services, digital services, financial advice, trust and terms/conditions. We have thirty-one convenient store locations open today. In 2020 we opened new stores in Northfield, NJ and Bensalem, PA. We have also broken ground on future store locations in Deptford and Ocean City, NJ which we expect to open during 2021. As we proceed forward we will continue to enhance and upgrade our technology platforms to ensure that we deliver the best-in-class resources to our FANS for a safe, secure and convenient banking experience. Additional Financial Highlights
Total assets increased by $1.7 billion , or 52% , to $5.1 billion as of December 31, 2020 compared to $3.3 billion as of December 31, 2019. Excluding the impact of the PPP loan program total assets increased by $1.1 billion , or 33% , year over year. New stores opened since the beginning of the “Power of Red is Back” expansion campaign are currently growing deposits at an average rate of $38 million per year, while the average deposit growth for all stores over the last twelve months was approximately $33 million per store. The net interest margin increased by 8 basis points to 2.43% for the three months ended December 31, 2020 compared to 2.35% for the three months ended September 30, 2020. This increase was primarily driven by a decline in the cost funds to 0.54% during the fourth quarter of 2020 compared to 0.59% during the third quarter of 2020. Our residential mortgage division, Oak Mortgage, is serving the home financing needs of customers throughout its footprint. Loan production during 2020 was strong despite the impact of the COVID-19 pandemic. The Oak Mortgage team originated more than $700 million in mortgage loans over the last twelve months which was a record high for this division. A $50 million capital raise was completed during the third quarter of 2020 through a registered direct offering of convertible preferred stock providing the capital resources necessary to continue with our growth and expansion strategy. Total Risk-Based Capital ratio was 13.50% and Tier I Leverage Ratio was 8.17% at December 31, 2020. Book value per common share increased to $4.41 as of December 31, 2020 compared to $4.23 as of December 31, 2019. Income Statement
The major components of the income statement are as follows (dollars in thousands, except per share data):
Three Months Ended 12/31/20 09/30/20 % Change 12/31/19 % Change Net Interest Income $ 25,722 $ 22,930 12 % $ 19,914 29 % Non-interest Income 11,568 10,031 15 % 5,213 122 % Total Revenue 37,290 32,961 13 % 25,127 48 % Provision for Loan Losses 1,400 850 65 % 1,155 21 % Non-interest Expense 30,239 28,569 6 % 27,488 10 % Goodwill Impairment Charge - 5,011 (100 %) - - % Income (Loss) Before Taxes 5,651 (1,469 ) 485 % (3,516 ) 261 % Provision (Benefit) for Taxes 1,548 (503 ) 408 % (1,031 ) 250 % Net Income (Loss) 4,103 (966 ) 525 % (2,485 ) 265 % Preferred Dividends 924 - 100 % - 100 % Net Income (Loss) Attributable to Common Shareholders 3,179 (966 ) 429 % (2,485 ) 228 % Earnings per share (diluted) $ 0.05 $ (0.02 ) 439 % $ (0.04 ) 229 %
Net income was $4.1 million , or $0.05 per diluted share, for the three month period ended December 31, 2020, compared to a net loss of $1.0 million , or $(0.02) per share, for the three month period ended September 30, 2020 and a net loss of $2.5 million , or $(0.04) per share, for the three month period ended December 31, 2019.
We continue to demonstrate progress with operating leverage which drives improved earnings. Total revenue increased by 48% while non-interest expense increased by 10% , during the fourth quarter of 2020 compared to the fourth quarter of 2019.
Interest income increased by $4.4 million , or 16% , to $31.2 million for the quarter ended December 31, 2020 compared to $26.9 million for the quarter ended December 31, 2019. The increase in interest income is attributable to the growth in interest-earning assets over the last twelve months driven by the “Power of Red is Back” expansion strategy. We also continue to amortize the fees associated with the origination of PPP loans earlier this year which is reported as interest income. $3.0 million in PPP fees were recorded as income during the quarter ended December 31, 2020 with the remaining balance to be recognized over the life of the loans.
Interest expense decreased by $1.5 million , or 21% , to $5.5 million for the quarter ended December 31, 2020 compared to $7.0 million for the quarter ended December 31, 2019. The decrease in interest expense was primarily driven by a reduction in the cost of deposits as a result of the decrease in the Fed Funds rate during the first quarter of 2020.
The net interest margin for the three month period ended December 31, 2020 decreased by 24 basis points to 2.43% compared to 2.67% for the three month period ended December 31, 2019. The interest rate on the loans originated under the PPP loan program is 1.00% which caused a decline in the yield on interest earning assets in the fourth quarter of 2020. In addition, the rate cuts enacted by the Federal Reserve Bank during the first quarter of 2020 has created a lower interest rate environment.
Non-interest income increased by $6.4 million , or 122% , to $11.6 million for the three month period ended December 31, 2020, compared to $5.2 million for the three month period ended December 31, 2019. The increase is attributable to higher mortgage banking income driven by mortgage loan originations, and higher service fees on deposit accounts which is driven by growth in deposit balances and an increase in the number of deposit accounts in addition to the impact of the new branding and processing agreements with VISA.
Non-interest expense increased by 10% , to $30.2 million during the quarter ended December 31, 2020, compared to $27.5 million during the quarter ended December 31, 2019. The growth in expenses were mainly caused by an increase in salaries and benefit costs. This increase is mostly attributable to higher commissions paid as a result of an increase in residential mortgage loan originations. Occupancy and equipment expenses have also grown as a result of our growth strategy.
Twelve Months Ended 12/31/20 12/31/19 % Change Net Interest Income $ 91,832 $ 77,807 18 % Non-Interest Income 36,567 23,738 54 % Total Revenue 128,399 101,545 26 % Provision for Loan Losses 4,200 1,905 120 % Non-interest Expense 112,744 104,490 8 % Goodwill Impairment Charge 5,011 - 100 % Income (Loss) Before Taxes 6,444 (4,850 ) 233 % Provision (Benefit) for Taxes 1,390 (1,350 ) 203 % Net Income (Loss) 5,054 (3,500 ) 244 % Preferred Dividends 924 - 100 % Net Income (Loss) Attributable to Common Shareholders 4,130 (3,500 ) 218 % Earnings per Share (diluted) $ 0.07 $ (0.06 ) 218 %
We reported net income of $5.1 million , or $0.07 per share, for the twelve month period ended December 31, 2020, compared to a net loss of $3.5 million , or $(0.06) per share for the twelve month period ended December 31, 2019.
Core earnings improved significantly year over year. Pre-tax income excluding the goodwill impairment charge was $11.5 million during the twelve month period ended December 31, 2020 compared to a net loss of $4.9 million for the twelve month period ended December 31, 2019. The improvement in earnings comes as we continue to demonstrate progress with operating leverage. Total revenue increased by 26% while non-interest expense increased by 8% , excluding goodwill impairment, during the twelve month period ended December 31, 2020 compared to the twelve month period ended December 31, 2019.
The goodwill impairment charge of $5.0 million recorded in 2020 represents a one-time, non-cash accounting transaction which had no impact on liquidity and minimally increased regulatory capital ratios. A prolonged decline in the Company’s stock price, exacerbated by the COVID-19 pandemic and related economic impact led to recognition of the impairment pursuant to management’s completion of a goodwill impairment analysis as of September 30, 2020. This was a complete write-off of all goodwill on the balance sheet.
Net interest income increased by $14.0 million , or 18% , despite compression of our net interest margin during 2020. The net interest margin for the twelve month period ended December 31, 2020 decreased by 34 basis points to 2.51% compared to 2.85% for the twelve month period ended December 31, 2019. Strong growth in interest-earning assets drove the increase in net interest income. Revenue growth in 2020 was also a result of higher mortgage banking income which increased to $17.9 million in 2020 compared to $10.1 million in 2019. Oak Mortgage, the Bank’s residential mortgage lending division, originated more that $700 million in mortgage loans during 2020.
The first dividend on the outstanding shares of preferred stock was declared and paid during the fourth quarter of 2020. The preferred stock was issued in August 2020 and pays a dividend at an annual rate of 7.00% .
Deposits
Deposits by type of account are as follows (dollars in thousands):
Description 12/31/20 12/31/19 % Change 09/30/20 % Change Demand noninterest-bearing $ 1,006,876 $ 661,431 52 % $ 1,049,169 (4 %) Demand interest-bearing 1,776,995 1,352,360 31 % 1,618,342 10 % Money market and savings 1,043,519 761,793 37 % 1,034,799 1 % Certificates of deposit 186,361 223,579 (17 %) 203,296 (8 %) Total deposits $ 4,013,751 $ 2,999,163 34 % $ 3,905,606 3 %
Deposits increased to $4.0 billion at December 31, 2020 compared to $3.0 billion at December 30, 2019. This increase can be attributed to our strategy to expand the reach of our banking model which focuses on enhancing the total customer experience including in-store, on-line and mobile banking options. High levels of customer service and convenience across all delivery channels drives the gathering of low-cost, core deposits. We recognized strong growth in demand deposit balances, including an increase in non-interest bearing demand deposits of 52% , year over year as a result of the successful execution of our strategy. The increase in demand deposits during 2020 is also a result of our participation in the PPP loan program. Many of the PPP loans originated were for small businesses that were previously not customers of Republic Bank. Many of these small businesses have chosen to move their primary banking relationship to Republic as a result of the outstanding level of service and cooperation they experienced during the PPP loan process. Commercial deposits were 45% of total deposits as of December 31, 2020.
Lending
Loans by type are as follows (dollars in thousands):
Description 12/31/20 % of Total 12/31/19 % of Total 09/30/20 % of Total Commercial and industrial $ 200,188 8 % $ 223,906 13 % $ 228,145 9 % Owner occupied real estate 478,190 18 % 424,400 24 % 427,026 16 % Commercial real estate 702,765 27 % 613,631 35 % 676,460 26 % Construction and land development 142,821 5 % 121,395 7 % 164,671 6 % Residential mortgage 395,174 15 % 263,444 15 % 365,279 14 % Paycheck protection program (net) 624,120 24 % - - % 667,842 25 % Consumer and other 102,085 4 % 101,419 6 % 99,975 4 % Gross loans $ 2,645,342 100 % $ 1,748,195 100 % $ 2,629,398 100 %
Gross loans increased by $897 million , or 51% , to $2.6 billion at December 31, 2020 compared to $1.7 billion at December 31, 2019. A significant portion of the increase was driven by the loans originated through the PPP loan program during the second quarter of 2020. In addition, we continue to see results from the continued success with the relationship banking model which has driven a steady flow in quality loan demand. Excluding the addition of the PPP loans in 2020, loans still grew $273 million , or 16% , when compared to the balance as of December 31, 2019. We experienced strongest growth in the owner occupied real estate, commercial real estate and residential mortgage categories during 2020.
Asset Quality
The Company’s asset quality ratios are highlighted below:
Three Months Ended 12/31/20 09/30/20 12/31/19 Non-performing assets / capital and reserves 4 % 4 % 5 % Non-performing assets / total assets 0.28 % 0.27 % 0.42 % Quarterly net loan charge-offs / average loans* 0.05 % 0.01 % 0.09 % Allowance for loan losses / gross loans* 0.64 % 0.60 % 0.53 % Allowance for loan losses / non-performing loans 101 % 95 % 75 %
*Note: PPP loans excluded when calculating % of total loan balances.
The percentage of non-performing assets to total assets decreased to 0.28% at December 31, 2020, compared to 0.42% at December 31, 2019. Tha allowance for loan losses as a percentage of total loans excluding PPP loans increased to 0.64% as of December 31, 2020 compared to 0.53% as of December 31, 2019. The ratio of non-performing assets to capital and reserves decreased to 4% at December 31, 2020 compared to 5% at December 31, 2019 primarily as a result of decreases in non-performing assets and increases in capital and reserves over the last 12 months.
Capital
The Company’s capital ratios at December 31, 2020 were as follows:
Actual 12/31/20 Bancorp Actual 12/31/20 Bank Regulatory Guidelines “Well Capitalized” Leverage Ratio 8.17 % 7.44 % 5.00 % Common Equity Ratio 10.51 % 11.82 % 6.50 % Tier 1 Risk Based Capital 12.96 % 11.82 % 8.00 % Total Risk Based Capital 13.50 % 12.36 % 10.00 % Tangible Common Equity 5.13 % 5.68 % n/a
Total shareholders’ equity increased to $308 million at December 31, 2020 compared to $249 million at December 31, 2019. The increase was primarily driven by a capital raise during the third quarter of 2020. We issued $50 million of noncumulative perpetual preferred stock in August 2020. The preferred stock has an annual dividend of 7.00% payable on a quarterly basis and is convertible into shares of common stock at a price of $3.00 per share. Book value per common share increased to $4.41 at December 31, 2020 compared to $4.23 per share at December 31, 2019.
Non-GAAP Financial Measures
In addition to evaluating the Company’s financial results of operations in accordance with accounting principles generally accepted in the U.S. (“GAAP”), management periodically supplements its evaluation with an analysis of certain non-GAAP financial measures that are intended to provide the reader with additional perspectives on operating results, financial conditions, and performance trends, while facilitating comparisons with the performance of other financial institutions. Non-GAAP financial measures are not a substitute for GAAP measures, rather, they should be read and used in conjunction with the Company’s GAAP financial information.
The Company believes that disclosing non-GAAP financial measures is both useful internally and is expected by our investors and analysts in order to better understand the overall performance of the Company. Other companies may calculate and define their non-GAAP financial measures and supplemental data differently. A reconciliation of GAAP financial measures to non-GAAP measures and other performance ratios, as adjusted, are included in a table following the financial schedules included with this press release.
Analyst and Investor Call
An analyst and investor call will be held on the following date and time:
Date: January 25, 2021 Time: 11:00am (EST) From the U.S. dial: (888) 517-2513 [US Toll Free] or (847) 619-6533 [US Toll] Participant Pin: 8721 352#
An operator will assist you in joining the call.
About Republic First Bancorp, Inc.
Republic First Bancorp, Inc. is the holding company for Republic First Bank which does business under the name Republic Bank. Republic Bank is a full-service, state-chartered commercial bank, whose deposits are insured up to the applicable limits by the Federal Deposit Insurance Corporation (FDIC). The Bank provides diversified financial products through its thirty-one stores located in Greater Philadelphia, Southern New Jersey and New York City. Republic Bank stores are open 7 days a week, 361 days a year, with extended lobby and drive-thru hours providing customers with some of the most convenient hours compared to any bank in its market. The Bank offers free checking, free coin counting, ATM/Debit cards issued on the spot and access to more than 55,000 surcharge free ATMs worldwide via the Allpoint Network. The Bank also offers a wide range of residential mortgage products through its mortgage division which does business under the name of Oak Mortgage Company. For more information about Republic Bank, visit www.myrepublicbank.com .
Forward Looking Statements
The Company may from time to time make written or oral “forward-looking statements”, including statements contained in this release and in the Company's filings with the Securities and Exchange Commission. The forward-looking statements contained herein, are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. For example, risks and uncertainties can arise with changes in: general economic conditions, including turmoil in the financial markets and related efforts of government agencies to stabilize the financial system; the adequacy of our allowance for loan losses and our methodology for determining such allowance; adverse changes in our loan portfolio and credit risk-related losses and expenses; concentrations within our loan portfolio, including our exposure to commercial real estate loans, and to our primary service area; changes in interest rates; business conditions in the financial services industry, including competitive pressure among financial services companies, new service and product offerings by competitors, price pressures and similar items; deposit flows; loan demand; the regulatory environment, including evolving banking industry standards, changes in legislation or regulation; impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act; our securities portfolio and the valuation of our securities; accounting principles, policies and guidelines as well as estimates and assumptions used in the preparation of our financial statements; rapidly changing technology; litigation liabilities, including costs, expenses, settlements and judgments; the effects of health emergencies, including the spread of infectious diseases and pandemics; and other economic, competitive, governmental, regulatory and technological factors affecting our operations, pricing, products and services. You should carefully review the risk factors described in the Form 10-K for the year ended December 31, 2019, the Form 10-Q for the quarter ended June 30, 2020 and other documents the Company files from time to time with the Securities and Exchange Commission. The words “would be,” “could be,” “should be,” “probability,” “risk,” “target,” “objective,” “may,” “will,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect” and similar expressions or variations on such expressions are intended to identify forward-looking statements. All such statements are made in good faith by the Company pursuant to the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. The Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company, except as may be required by applicable law or regulations.
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Republic First Bancorp, Inc. Consolidated Balance Sheets (Unaudited) December 31, September 30, December 31, (dollars in thousands, except per share amounts) 2020 2020 2019 ASSETS Cash and due from banks $ 29,746 $ 43,689 $ 41,928 Interest-bearing deposits and federal funds sold 745,554 874,472 126,391 Total cash and cash equivalents 775,300 918,161 168,319 Securities - Available for sale 537,547 440,655 539,042 Securities - Held to maturity 814,936 688,939 644,842 Restricted stock 3,039 3,789 2,746 Total investment securities 1,355,522 1,133,383 1,186,630 Loans held for sale 53,370 42,549 13,349 Loans receivable 2,645,342 2,629,398 1,748,195 Allowance for loan losses (12,975 ) (11,851 ) (9,266 ) Net loans 2,632,367 2,617,547 1,738,929 Premises and equipment 123,170 124,034 116,956 Other real estate owned 1,188 1,113 1,730 Other assets 124,818 121,969 115,377 Total Assets $ 5,065,735 $ 4,958,756 $ 3,341,290 LIABILITIES Non-interest bearing deposits $ 1,006,876 $ 1,049,169 $ 661,431 Interest bearing deposits 3,006,875 2,856,437 2,337,732 Total deposits 4,013,751 3,905,606 2,999,163 Short-term borrowings 633,866 646,267 - Subordinated debt 11,271 11,270 11,265 Other liabilities 98,734 92,675 81,694 Total Liabilities 4,757,622 4,655,818 3,092,122 SHAREHOLDERS' EQUITY Preferred stock 20 20 - Common stock 594 594 594 Additional paid-in capital 322,321 321,915 272,039 Accumulated deficit (8,084 ) (11,263 ) (12,216 ) Treasury stock at cost (3,726 ) (3,725 ) (3,725 ) Stock held by deferred compensation plan (183 ) (183 ) (183 ) Accumulated other comprehensive loss (2,829 ) (4,420 ) (7,341 ) Total Shareholders' Equity 308,113 302,938 249,168 Total Liabilities and Shareholders' Equity $ 5,065,735 $ 4,958,756 $ 3,341,290
Republic First Bancorp, Inc. Consolidated Statements of Income (Unaudited) Three Months Ended Twelve Months Ended December 31, September 30, December 31, December 31, December 31, (in thousands, except per share amounts) 2020 2020 2019 2020 2019 INTEREST INCOME Interest and fees on loans $ 25,698 $ 24,683 $ 19,421 $ 93,292 $ 74,497 Interest and dividends on investment securities 5,473 3,778 6,531 21,144 27,796 Interest on other interest earning assets 76 99 940 514 2,571 Total interest income 31,247 28,560 26,892 114,950 104,864 INTEREST EXPENSE Interest on deposits 5,453 5,553 6,869 22,751 26,267 Interest on borrowed funds 74 77 109 367 790 Total interest expense 5,527 5,630 6,978 23,118 27,057 Net interest income 25,720 22,930 19,914 91,832 77,807 Provision for loan losses 1,400 850 1,155 4,200 1,905 Net interest income after provision for loan losses 24,320 22,080 18,759 87,632 75,902 NON-INTEREST INCOME Service fees on deposit accounts 2,336 2,134 2,091 8,118 7,541 Mortgage banking income 7,113 4,962 2,077 17,923 10,125 Gain on sale of SBA loans 174 649 594 1,741 3,187 Gain on sale of investment securities - 279 - 2,760 1,103 Other non-interest income 1,945 2,007 451 6,025 1,782 Total non-interest income 11,568 10,031 5,213 36,567 23,738 NON-INTEREST EXPENSE Salaries and employee benefits 15,123 14,596 13,510 56,276 53,888 Occupancy and equipment 5,834 5,524 5,077 22,210 18,047 Legal and professional fees 1,344 940 1,036 4,222 3,924 Foreclosed real estate 21 80 456 459 2,109 Regulatory assessments and related fees 618 625 324 2,546 1,228 Goodwill impairment - 5,011 - 5,011 - Other operating expenses 7,299 6,804 7,085 27,031 25,294 Total non-interest expense 30,239 33,580 27,488 117,755 104,490 Income (loss) before provision (benefit) for income taxes 5,649 (1,469 ) (3,516 ) 6,444 (4,850 ) Provision (benefit) for income taxes 1,548 (503 ) (1,031 ) 1,390 (1,350 ) Net income (loss) 4,101 (966 ) (2,485 ) 5,054 (3,500 ) Preferred stock dividends 924 - - 924 - Net income (loss) attributable to common shareholders $ 3,177 $ (966 ) $ (2,485 ) $ 4,130 $ (3,500 ) Net Income (Loss) per Common Share Basic $ 0.05 $ (0.02 ) $ (0.04 ) $ 0.07 $ (0.06 ) Diluted $ 0.05 $ (0.02 ) $ (0.04 ) $ 0.07 $ (0.06 ) Average Common Shares Outstanding Basic 58,859 58,853 58,843 58,853 58,833 Diluted 58,917 64,432 58,843 58,904 58,833
Republic First Bancorp, Inc. Average Balances and Net Interest Income (unaudited) For the three months ended For the three months ended For the three months ended (dollars in thousands) December 31, 2020 September 30, 2020 December 31, 2019 Interest Interest Interest Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/ Balance Expense Rate Balance Expense Rate Balance Expense Rate Interest-earning assets: Federal funds sold and other $ 302,990 $ 76 0.10 % $ 383,632 $ 99 0.10 % $ 228,292 $ 940 1.63 % interest-earning assets Investment securities 1,247,502 5,481 1.76 % 908,166 3,784 1.67 % 1,090,736 6,539 2.40 % Loans receivable 2,668,570 25,821 3.84 % 2,617,981 24,829 3.77 % 1,658,917 19,538 4.67 % Total interest-earning assets 4,219,062 31,378 2.95 % 3,909,779 28,712 2.92 % 2,977,945 27,017 3.60 % Other assets 267,110 269,071 261,875 Total assets $ 4,486,172 $ 4,178,850 $ 3,239,820 Interest-bearing liabilities: Demand non interest-bearing $ 1,031,846 $ 1,043,116 $ 619,075 Demand interest-bearing 1,758,942 3,312 0.75 % 1,541,837 3,056 0.79 % 1,309,205 3,725 1.13 % Money market & savings 1,071,747 1,420 0.53 % 980,979 1,613 0.65 % 745,707 1,902 1.01 % Time deposits 194,096 721 1.47 % 217,554 884 1.62 % 222,116 1,242 2.22 % Total deposits 4,056,631 5,453 0.53 % 3,783,486 5,553 0.58 % 2,896,103 6,869 0.94 % Total interest-bearing deposits 3,024,785 5,453 0.72 % 2,740,370 5,553 0.81 % 2,277,028 6,869 1.20 % Other borrowings 31,847 74 0.92 % 32,343 77 0.95 % 11,264 109 3.84 % Total interest-bearing liabilities 3,056,632 5,527 0.72 % 2,772,713 5,630 0.81 % 2,288,292 6,978 1.21 % Total deposits and other borrowings 4,088,478 5,527 0.54 % 3,815,829 5,630 0.59 % 2,907,367 6,978 0.95 % Non interest-bearing liabilities 91,873 88,773 82,515 Shareholders' equity 305,821 274,248 249,938 Total liabilities and shareholders' equity $ 4,486,172 $ 4,178,850 $ 3,239,820 Net interest income $ 25,851 $ 23,082 $ 20,039 Net interest spread 2.23 % 2.11 % 2.39 % Net interest margin 2.43 % 2.35 % 2.67 % Note: The above tables are presented on a tax equivalent basis.
Republic First Bancorp, Inc. Average Balances and Net Interest Income (unaudited) For the twelve months ended For the twelve months ended (dollars in thousands) December 31, 2020 December 31, 2019 Interest Interest Average Income/ Yield/ Average Income/ Yield/ Balance Expense Rate Balance Expense Rate Interest-earning assets: Federal funds sold and other $ 242,132 $ 513 0.21 % $ 129,528 $ 2,571 1.98 % interest-earning assets Investment securities 1,086,386 21,167 1.95 % 1,074,706 27,886 2.59 % Loans receivable 2,359,169 93,854 3.98 % 1,544,904 74,946 4.85 % Total interest-earning assets 3,687,687 115,534 3.13 % 2,749,138 105,403 3.83 % Other assets 265,893 229,767 Total assets $ 3,953,580 $ 2,978,905 Interest-bearing liabilities: Demand non interest-bearing $ 926,692 $ 555,385 Demand interest-bearing 1,509,826 12,645 0.84 % 1,184,530 15,621 1.32 % Money market & savings 916,607 6,247 0.68 % 705,445 6,796 0.96 % Time deposits 211,636 3,859 1.82 % 190,567 3,850 2.02 % Total deposits 3,564,761 22,751 0.64 % 2,635,927 26,267 1.00 % Total interest-bearing deposits 2,638,069 22,751 0.86 % 2,080,542 26,267 1.26 % Other borrowings 30,413 367 1.21 % 22,911 790 3.45 % Total interest-bearing liabilities 2,668,482 23,118 0.87 % 2,103,453 27,057 1.29 % Total deposits and other borrowings 3,595,174 23,118 0.64 % 2,658,838 27,057 1.02 % Non interest-bearing liabilities 87,200 71,131 Shareholders' equity 271,206 248,936 Total liabilities and shareholders' equity $ 3,953,580 $ 2,978,905 Net interest income $ 92,416 $ 78,346 Net interest spread 2.26 % 2.54 % Net interest margin 2.51 % 2.85 % Note: The above tables are presented on a tax equivalent basis.
Republic First Bancorp, Inc. Summary of Allowance for Loan Losses and Other Related Data (unaudited) Three months ended Twelve months ended December 31, September 30, December 31, December 31, December 31, (dollars in thousands) 2020 2020 2019 2020 2019 Balance at beginning of period $ 11,851 $ 11,040 $ 8,467 $ 9,266 $ 8,615 Provision charged to operating expense 1,400 850 1,155 4,200 1,905 13,251 11,890 9,622 13,466 10,520 Recoveries on loans charged-off: Commercial 10 10 5 51 219 Consumer 3 3 2 13 9 Total recoveries 13 13 7 64 228 Loans charged-off: Commercial (249 ) (50 ) (354 ) (448 ) (1,356 ) Consumer (40 ) (2 ) (9 ) (107 ) (126 ) Total charged-off (289 ) (52 ) (363 ) (555 ) (1,482 ) Net (charge-offs) recoveries (276 ) (39 ) (356 ) (491 ) (1,254 ) Balance at end of period $ 12,975 $ 11,851 $ 9,266 $ 12,975 $ 9,266 Net (charge-offs) recoveries as a percentage of average loans outstanding 0.04 % 0.01 % 0.09 % 0.02 % 0.08 % Allowance for loan losses as a percentage of period-end loans 0.49 % 0.45 % 0.53 % 0.49 % 0.53 %
Republic First Bancorp, Inc. Summary of Non-Performing Loans and Assets (unaudited) December 31, September 30, June 30, March 31, December 31, (dollars in thousands) 2020 2020 2020 2020 2019 Non-accrual loans: Commercial real estate $ 10,232 $ 10,641 $ 10,747 $ 12,060 $ 10,569 Consumer and other 2,014 1,808 1,970 2,125 1,844 Total non-accrual loans 12,246 12,449 12,717 14,185 12,413 Loans past due 90 days or more and still accruing 612 - - - - Total non-performing loans 12,858 12,449 12,717 14,185 12,413 Other real estate owned 1,188 1,113 1,144 1,144 1,730 Total non-performing assets $ 14,046 $ 13,562 $ 13,861 $ 15,329 $ 14,143 Non-performing loans to total loans 0.49 % 0.47 % 0.50 % 0.75 % 0.71 % Non-performing assets to total assets 0.28 % 0.27 % 0.31 % 0.46 % 0.42 % Non-performing loan coverage 100.91 % 95.20 % 86.81 % 72.03 % 74.65 % Allowance for loan losses as a percentage of total period-end loans 0.49 % 0.45 % 0.43 % 0.54 % 0.53 % Non-performing assets / capital plus allowance for loan losses 4.37 % 4.31 % 5.21 % 5.84 % 5.47 %
Republic First Bancorp, Inc. Non-GAAP to GAAP Reconciliation and Calculation of Non-GAAP Performance Measures Three Months Ended Twelve Months Ended December 31, September 30, December 31, December 31, December 31, (in thousands, except per share amounts) 2020 2020 2019 2020 2019 Non-interest Expense $ 30,239 $ 33,580 $ 27,824 $ 117,755 $ 104,490 Less: Goodwill Impairment - (5,011 ) - (5,011 ) - Adjusted Non-interest Expense 30,239 28,569 27,824 112,744 104,490 Income (Loss) Before Provision (Benefit) $ 5,651 $ (1,469 ) $ (3,516 ) $ 6,444 $ (4,850 ) for Income Taxes Plus: Goodwill Impairment - 5,011 - 5,011 - Core Earnings Before Tax 5,651 3,542 (3,516 ) 11,455 (4,850 ) Net Income 3,982 (966 ) (1,822 ) 5,054 (3,500 ) Plus: Goodwill Impairment - 5,011 - 5,011 - Less: Tax Effect of Goodwill Impairment - (1,271 ) - (1,271 ) - Adjusted Net Income 3,982 2,774 (1,822 ) 8,794 (3,500 )
