FRBK - Republic First Bancorp Inc. Reports Second Quarter Financial Results

PHILADELPHIA, July 29, 2019 (GLOBE NEWSWIRE) -- Republic First Bancorp, Inc. (NASDAQ: FRBK), the holding company for Republic Bank, today announced its financial results for the period ended June 30, 2019.

Q2-2019 Highlights

• Total deposits increased by $394 million, or 18%, to $2.5 billion as of June 30, 2019 compared to $2.1 billion as of June 30, 2018.
   
• New stores opened since the beginning of the “Power of Red is Back” expansion campaign are currently growing deposits at an average rate of $25 million per year, while the average deposit growth for all stores over the last twelve months was approximately $14 million per store.
   
• Expansion into New York City began with the opening of our first store located on the corner of 14^th Street and 5^th Avenue.
   
• Total loans grew $191 million, or 15%, to $1.5 billion as of June 30, 2019 compared to $1.3 billion at June 30, 2018.
   
• Net income declined to $0.8 million, or $0.01 per share, for the six month period ended June 30, 2019 compared to $4.1 million, or $0.07 per share for the six month period ended June 30, 2018.

“The Power of Red is Back” expansion strategy launched in New York City with the opening of our newest store on the corner of 14^th Street and 5^th Avenue. On July 12^th we celebrated the grand opening of our first store in New York by welcoming Customers – and their pets – with a fun-filled day that included live entertainment, music and gifts. We also continued our expansion in Bucks County with the opening of our store in Feasterville, PA during the second quarter.

Profitability in 2019 continues to be hampered by a number of factors. Similar to the first quarter, net income in the second quarter was impacted by the costs necessary to initiate our expansion into New York City which includes the hiring of a management and lending team for this new market, along with the training and development costs for the new store openings. We also continue to feel the effect of a flat or inverted yield curve which has resulted in compression of the net interest margin.

Vernon W. Hill, II, Chairman of Republic First Bancorp said:

“The Power of Red is Back in New York City. The recent opening of our first store at 14^th & 5^th was a tremendous success. We are thrilled to bring back the legendary banking experience that our FANS in New York have been missing for the last several years. At a time when most banks are shuttering branches and retreating from the communities they serve, Republic Bank continues in its relentless pursuit to deliver an unmatched banking experience across every delivery channel. This not only includes the in-store experience, but online and mobile options as well.”

Harry D. Madonna, President and Chief Executive Officer of Republic First Bancorp added:

“Our strong growth since the inception of our expansion campaign demonstrates the success of the Republic model. Assets, loans and deposits have consistently grown at levels significantly above industry standards. We see significant opportunities to expand our footprint and create new FANS as our competitors continue to alienate customers with declining levels of service and fewer branch locations.”

A summary of the financial results for the period ended June 30, 2019 can be found in the following table:

Financial Highlights for the Period Ended June 30, 2019

• Total assets increased by $388 million, or 15%, to $2.9 billion as of June 30, 2019 compared to $2.6 billion as of June 30, 2018.
   
• We have twenty-eight convenient store locations open today. During the second quarter of 2019 we continued our expansion into Buck County with the opening of our new store in Feasterville, PA.  There are also multiple sites in various stages of development for future store locations.
   
• Expansion into New York City began in July 2019 with the grand opening of our first store location at 14^th Street & 5^th Avenue in Manhattan. We’ve also started construction on our next site in New York located at 51^st Street & 3^rd Avenue which is expected to open during the fourth quarter.
  
  
• Net income remained at $0.4 million, or $0.01 per share, for the three months ended June 30, 2019 compared to $0.4 million, or $0.01 per share for the three months ended March 31, 2019 and declined from $2.4 million, or $0.04 per share, for the three months ended June 30, 2018.
   
• The net interest margin decreased by 25 basis points to 2.94% for the three months ended June 30, 2019 compared to 3.19% for the three months ended June 30, 2018. Margin compression was driven by the flat and inverted yield curve experienced during the second quarter of 2019.
   
• Asset quality continues to improve. The ratio of non-performing assets to total assets declined to 0.53% as of June 30, 2019 compared to 0.81% as of June 30, 2018.
   
• The Company’s residential mortgage division, Oak Mortgage, is serving the home financing needs of customers throughout its footprint. The Oak Mortgage team has originated more than $370 million in mortgage loans over the last twelve months.
   
• Meeting the needs of small business customers continued to be an important part of the Company’s lending strategy.  More than $27 million in new SBA loans were originated during the six month period ended June 30, 2019. Republic Bank continues to be a top SBA lender in our market area based on the dollar volume of loan originations.
   
• The Company’s Total Risk-Based Capital ratio was 14.02% and Tier I Leverage Ratio was 8.97% at June 30, 2019.
   
• Book value per common share increased to $4.27 as of June 30, 2019 compared to $4.01 as of June 30, 2018.

Income Statement

The major components of the income statement are as follows (dollars in thousands, except per share data):

The Company reported net income of $381 thousand, or $0.01 per share, for the three month period ended June 30, 2019, compared to $426 thousand, or $0.01 per share for the three month period ended March 31, 2019 and $2.4 million, or $0.04 per share, for the three month period ended June 30, 2018.  Net income for the six month period ended June 30, 2019 was $807 thousand, or $0.01 per share, compared to net income of $4.1 million, or $0.07 per share, for the six months ended June 30, 2018.

On a linked quarter basis net income was consistent at $0.4 million for the first and second quarter of 2019. Year over year net income declined to $0.4 million in the second quarter of 2019 from $2.4 in the second quarter of 2018. Current year profitability has been impacted by the expenses incurred to expand into the New York market and continued compression of the net interest margin.

Interest income increased by $3.9 million, or 18%, to $26.2 million for the quarter ended June 30, 2019 compared to $22.3 million for the quarter ended June 30, 2018. The increase in interest income is attributable to the growth in interest-earning assets over the last twelve months driven by the Company’s “Power of Red is Back” expansion strategy. However, interest expense increased by $3.2 million, or 88%, to $6.9 million for the quarter ended June 30, 2019 compared to $3.7 million for the quarter ended June 30, 2018. The increase in interest expense was driven by multiple increases in the fed funds rate during 2018 which resulted in a higher cost of funds on deposit balances and led to compression in the net interest margin. The net interest margin for the three month period ended June 30, 2019 decreased by 25 basis points to 2.94% compared to 3.19% for the three month period ended June 30, 2018.

Non-interest income increased by $1.3 million, or 22%, to $7.0 million for the three month period ended June 30, 2019, compared to $5.8 million for the three month period ended June 30, 2018. The increase is primarily attributable to higher service fees on deposit accounts which is driven by growth in deposit balances and an increase in the number of deposit accounts. An increase in gains on sales of SBA loans and investment securities also contributed to the increase in non-interest income during the second quarter of 2019.

Non-interest expenses increased by 25%, to $25.9 million during the quarter ended June 30, 2019 compared to $20.7 million during the quarter ended June 30, 2018. The growth in expenses was mainly caused by an increase in salaries and employee benefits driven by annual merit increases along with increased staffing levels related to our growth and expansion strategy. Occupancy and equipment expenses associated with the growth strategy also contributed to the increase in non-interest expenses. We’ve also begun to incur costs related to the expansion into the New York market as we hire a management and lending team and commence rent payments for the build out of our store locations.

The provision for income taxes was $105 thousand for the three month period ended June 30, 2019 compared to a provision for income taxes in the amount of $530 thousand for the three month period ended June 30, 2018.

Balance Sheet

The major components of the balance sheet are as follows (dollars in thousands):

Total assets increased by $388.1 million, or 15%, as of June 30, 2019 when compared to June 30, 2018.  Deposits grew by $393.8 million to $2.5 billion as of June 30, 2019 compared to $2.1 billion as of June 30, 2018. The number of deposit accounts has grown by 27% during the past twelve months. The strong growth in assets, loans and deposits has been driven by the addition of new stores and the successful execution of the Company’s aggressive growth strategy referred to as “The Power of Red is Back.”

Deposits

Deposits by type of account are as follows (dollars in thousands):

Deposits increased to $2.5 billion at June 30, 2019 compared to $2.1 billion at June 30, 2018 as the Company moves forward with its growth strategy to increase the number of stores and expand the reach of its banking model which focuses on high levels of customer service and convenience and drives the gathering of low-cost, core deposits. The Company recognized strong growth in demand deposit balances and certificates of deposit, year over year as a result of the successful execution of its strategy.

Lending

Loans by type are as follows (dollars in thousands):

Gross loans increased by $191 million, or 15%, to $1.5 billion at June 30, 2019 compared to $1.3 billion at June 30, 2018 as a result of the steady flow in quality loan demand over the last twelve months and continued success with the relationship banking model. The Company experienced strongest growth in commercial real estate, owner occupied real estate and residential mortgage loans year over year.

Asset Quality

The Company’s asset quality ratios are highlighted below:

The percentage of non-performing assets to total assets decreased to 0.53% at June 30, 2019, compared to 0.81% at June 30, 2018.  The ratio of non-performing assets to capital and reserves decreased to 6% at June 30, 2019 compared to 9% at June 30, 2018 primarily as a result of decreases in non-performing assets over the last 12 months.

Capital

The Company’s capital ratios at June 30, 2019 were as follows:

Total shareholders’ equity increased to $251 million at June 30, 2019 compared to $235 million at June 30, 2018. Book value per common share increased to $4.27 at June 30, 2019 compared to $4.01 per share at June 30, 2018.

Analyst and Investor Call

An analyst and investor call will be held on the following date and time:

About Republic Bank

Republic Bank, a subsidiary of Republic First Bancorp, Inc., 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 twenty-eight stores located in the Greater Philadelphia, Southern New Jersey and New York City markets.  Republic Bank stores are open 7 days a week, 361 days a year, with extended lobby and drive-thru hours providing customers with 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; 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, 2018 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.

Source: Republic First Bancorp, Inc.

Contact: 
Frank A. Cavallaro, CFO
(215) 735-4422