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Republic First Bancorp, Inc. Reports Fourth Quarter Financial Results Deposits Grow 34% and Earnings Continue to Improve as Momentum Builds

Published: 2021-01-25 13:30:00 ET
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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 FANatical 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