FRBK - Republic First Bancorp Inc. Reports Third Quarter Financial Results Deposits Increase by 14% and Loans Grow 14%

PHILADELPHIA, Oct. 28, 2019 (GLOBE NEWSWIRE) -- Republic First Bancorp, Inc. (NASDAQ: FRBK), the holding company for Republic Bank, today announced its financial results for the period ended September 30, 2019.

Q3-2019 Highlights

• Total deposits increased by $340 million, or 14%, to $2.7 billion as of September 30, 2019 compared to $2.4 billion as of September 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 $24 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 during the third quarter.
   
• Total loans grew $191 million, or 14%, to $1.6 billion as of September 30, 2019 compared to $1.4 billion at September 30, 2018.
   
• Profitability declined as the Company reported a net loss of $1.8 million, or ($0.03) per share, during the third quarter of 2019 compared to net income of $2.3 million, or $0.04 per share during the third quarter of 2018.

“The Power of Red is Back” in New York City. During the third quarter we launched our expansion into New York City with the opening of our newest store on the corner of 14^th Street and 5^th Avenue. We immediately began converting customers into FANS by treating them with the legendary customer service and convenience that Republic Bank is known for.  We anxiously await the opening of our second New York store at 51^st Street and 3^rd Avenue, which we expect to complete in early November, to share our FANatical approach to banking with an ever growing FAN base.

Third quarter results were negatively impacted by continued compression of our net interest margin caused by a flat and, at times, an inverted yield curve. The shape of the yield curve is driving lower yields on interest earning assets and higher rates on interest bearing liabilities. In the midst of this challenging interest rate environment we have also incurred costs required to expand into New York City. In addition to new hires, training, advertising, and occupancy expenses for the opening of our first two stores in New York this year, we have also established a management and lending team for this new market.

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

“We are thrilled to bring The Power of Red Back to New York City. At a time when most banks are closing 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. We are extremely excited to have the opportunity to create new FANS in the City of New York. Today we face a difficult challenge as the shape of the yield curve limits our ability to increase net interest income proportionate to the growth in our balance sheet. We are evaluating all opportunities to improve profitability in this challenging rate environment.”

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

“Since the inception of The Power of Red is Back growth campaign we have demonstrated consistent growth in the balance sheet through organic growth in loans and deposits. The results have been a testament to the strength of our model and the unmatched commitment to customer service by every member of the Republic Bank Team. The current interest rate environment has put a significant strain on profitability in recent quarters. We will assess every opportunity within our control to enhance earnings.”

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

Financial Highlights for the Period Ended September 30, 2019

• Total assets increased by $429 million, or 16%, to $3.1 billion as of September 30, 2019 compared to $2.7 billion as of September 30, 2018.
   
• We have twenty-eight convenient store locations open today. During the third quarter of 2019 we celebrated the grand opening of our first store in New York City located at 14^th Street and 5^th Avenue.
   
• Construction on our next site in New York located at 51^st Street & 3^rd Avenue is ongoing and expected to be complete during the fourth quarter. We’ve also broken ground on sites in Northfield, NJ and Bensalem, PA. There are multiple sites in various stages of development for future store locations.
   
• Profitability declined during the third quarter. The Company recorded a net loss of $1.8 million, or ($0.03) per share, for the three months ended September 30, 2019 compared to net income of $0.4 million, or $0.01 per share for the three months ended June 30, 2019 and net income of $2.3 million, or $0.04 per share, for the three months ended September 30, 2018.
   
• The net interest margin decreased by 32 basis points to 2.82% for the three months ended September 30, 2019 compared to 3.14% for the three months ended September 30, 2018. Margin compression was driven by the flat and inverted yield curve experienced during the third quarter of 2019.
   
• The ratio of non-performing assets to total assets declined to 0.61% as of September 30, 2019 compared to 0.76% as of September 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 $390 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 $43 million in new SBA loans were originated during the nine month period ended September 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 13.53% and Tier I Leverage Ratio was 8.60% at September 30, 2019.
   
• Book value per common share increased to $4.26 as of September 30, 2019 compared to $4.01 as of September 30, 2018.

Income Statement

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

The Company reported a net loss of $1.8 million, or ($0.03) per share, for the three month period ended September 30, 2019, compared to net income of $381 thousand, or $0.01 per share for the three month period ended June 30, 2019 and net income of $2.3 million, or $0.04 per share, for the three month period ended September 30, 2018.  The net loss for the nine month period ended September 30, 2019 was $1.0 million, or ($0.02) per share, compared to net income of $6.5 million, or $0.11 per share, for the nine months ended September 30, 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 $2.7 million, or 11%, to $26.2 million for the quarter ended September 30, 2019 compared to $23.6 million for the quarter ended September 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 $2.4 million, or 55%, to $6.8 million for the quarter ended September 30, 2019 compared to $4.4 million for the quarter ended September 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. On a linked quarter basis, the deposit cost of funds has begun to decline as a result of two reductions in the fed funds rate during the third quarter of 2019. The net interest margin for the three month period ended September 30, 2019 decreased by 32 basis points to 2.82% compared to 3.14% for the three month period ended September 30, 2018.

Non-interest income increased by $1.4 million, or 28%, to $6.6 million for the three month period ended September 30, 2019, compared to $5.1 million for the three month period ended September 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 investment securities also contributed to the increase in non-interest income during the third quarter of 2019.

Non-interest expenses increased by 34%, to $27.8 million during the quarter ended September 30, 2019 compared to $20.8 million during the quarter ended September 30, 2018. The growth in expenses was driven by an increase in salaries and employee benefits as a result of 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. Throughout 2019, we’ve incurred costs related to our expansion into the New York market. Our first store in New York opened during the third quarter of 2019 and our second location is now under construction. In addition, we’ve hired a management and lending team to operate in this new market. Rent payments have commenced for our store locations and we’ve initiated a marketing and advertising campaign to announce our expansion.

The benefit for income taxes was $516 thousand for the three month period ended September 30, 2019 compared to a provision for income taxes in the amount of $622 thousand for the three month period ended September 30, 2018.

Balance Sheet

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

Total assets increased by $428.7 million, or 16%, as of September 30, 2019 when compared to September 30, 2018.  Deposits grew by $339.7 million to $2.7 billion as of September 30, 2019 compared to $2.4 billion as of September 30, 2018. The number of deposit accounts has grown by 28% 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 $2.7 billion at September 30, 2019 compared to $2.4 billion at September 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 14%, to $1.6 billion at September 30, 2019 compared to $1.4 billion at September 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 0.61% at September 30, 2019, compared to 0.76% at September 30, 2018.  The ratio of non-performing assets to capital and reserves decreased to 7% at September 30, 2019 compared to 8% at September 30, 2018 primarily as a result of decreases in non-performing assets over the last 12 months.

Capital

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

Total shareholders’ equity increased to $251 million at September 30, 2019 compared to $236 million at September 30, 2018. Book value per common share increased to $4.26 at September 30, 2019 compared to $4.01 per share at September 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.