Deposits Grow 25% and Net Income Increases 578% Year Over Year

PHILADELPHIA, July 23, 2021 (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, 2021.

Q2-2021 Financial Highlights

• Net income for the six month period ended June 30, 2021 increased by 578% to $13.0 million, or $0.17 per diluted share, compared to net income of $1.9 million, or $0.03 per diluted share, for the six month period ended June 30, 2020.
  
  

• Net income for the quarter ended June 30, 2021 increased by 136% to $5.9 million, or $0.08 per diluted share, compared to net income of $2.5 million, or $0.04 per diluted share, for the quarter ended June 30, 2020.
  
  

• The improvement in earnings was driven by the strong growth in revenue while our focus on cost control initiatives continues to limit expense growth. During the first six months of 2021 total revenue increased 38% and non-interest expense increased by 11% compared to the first six months of 2020.
  
  

• Total deposits increased by $916 million, or 25%, to $4.6 billion as of June 30, 2021 compared to $3.6 billion as of June 30, 2020. New stores opened since the beginning of the “Power of Red is Back” expansion campaign are currently growing deposits at an average rate of $34 million per year, while the average deposit growth for all stores over the last twelve months was approximately $29 million per store.
  
  

• Excluding the impact of PPP loans, total loans grew $252 million, or 13%, to $2.1 billion as of June 30, 2021 compared to $1.9 billion at June 30, 2020.
  
  

• Asset quality remains strong as the ratio of non-performing assets to total assets declined to 0.26% as of June 30, 2021. Only one loan customer was still deferring loan payments at the end of the second quarter. This deferral relates to approximately $2.1 million of outstanding loan balances which is less than 0.1% of total loans.
  

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

“I am extremely pleased to report our financial results for the second quarter of 2021. Earnings have dramatically improved year over year as we continue to maintain our focus on cost control initiatives while increasing revenue. In addition, we continue to produce exceptional results from a balance sheet perspective. The Power of Red is Back expansion strategy has again resulted in strong organic growth in assets, loans and deposits far above industry standards during the second quarter of 2021.”

“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. In today’s world we clearly recognize the need to meet customer expectations through any delivery method that they prefer. To complement our in-store experience we are continuously investing in our technology platforms to provide our FANS with a total banking experience unmatched by any of our competitors.”

Financial Summary for the Period Ended June 30, 2021

The changes in the balance sheet as of June 30, 2021 were 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. A summary of the balance sheet presented with and without the impact of the PPP loan program for the period ended June 30, 2021 can be found in the following table:

*Note: See disclosure related to non-GAAP financial measures at the end of this release.

A summary of the income statement for the period ended June 30, 2021 can be found in the following table:

PPP Loan Program

The Paycheck Protection Program (“PPP”) included in the CARES Act approved during the first quarter of 2020 authorized financial institutions to make loans to companies that were impacted by the devastating economic effects of the 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. The Economic Aid Act approved by Congress during the fourth quarter of 2020 provided additional funding for a second round of PPP loans.

• We originated approximately $1 billion in PPP loans making us one of the top PPP lenders in the country when comparing PPP loans to total loans outstanding.
  
  

• We are now assisting borrowers that obtained PPP loans with applications to the SBA to forgive the balances that were used toward expenditures authorized under the program. As of the date of this release approximately $600 million in PPP loans that we originated have been forgiven by the SBA.
  
  

• Origination fees paid by the SBA to Republic are being recognized as income over the life of the loans or until the balances have been repaid or forgiven. Approximately $13 million in fees have been deferred and will recognized in future periods.
  
  

• More than 50% of the applications received during the first round of PPP were from businesses that were not existing customers of Republic Bank, many of which have switched their primary banking relationship to Republic.
  

Additional Financial Highlights

• Total assets increased by $943 million, or 21%, to $5.4 billion as of June 30, 2021 compared to $4.4 billion as of June 30, 2020. Excluding the short-term impact of the PPP loan program total assets increased by $1.2 billion, or 32%, year over year.
  
  

• The net interest margin increased by 16 basis points to 2.80% for the six months ended June 30, 2021 compared to 2.64% for the six months ended June 30, 2020. This increase was primarily driven by a decline in the cost of funds during the first half of 2021.
  
  

• We have thirty-two convenient store locations open today. During the second quarter we opened our newest store in Deptford, NJ and we have broken ground on a future store location in Ocean City, NJ which we also expect to open during 2021.
  
  

• Our residential mortgage division, Oak Mortgage, is serving the home financing needs of customers throughout its footprint. Loan production remains strong despite the impact of the COVID-19 pandemic. The Oak Mortgage team originated more than $800 million in mortgage loans over the last twelve months which is a record high for the Oak Mortgage Team.
  
  

• Total Risk-Based Capital ratio was 13.31% and Tier I Leverage Ratio was 7.28% at June 30, 2021.
  
  

• Book value per common share increased to $4.62 as of June 30, 2021 compared to $4.34 as of June 30, 2020.
  

Income Statement

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

Net income increased to $5.9 million, or $0.08 per share, for the three month period ended June 30, 2021, compared to net income of $2.5 million, or $0.04 per share, for the three month period ended June 30, 2020.

We continue to demonstrate progress with operating leverage which drives improved earnings. Total revenue increased by 24% while non-interest expense increased by 14%, during the second quarter of 2021 compared to the second quarter of 2020.

Net interest income increased to $30.6 million during the second quarter of 2021 compared to $22.4 million during the second quarter of 2020. 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 which is reported as interest income and is recognized over the life of the loans. Approximately $13 million in origination fees related to the PPP loan program have been deferred as of June 30, 2021 and will be recognized over the life of the loans in future periods.

The net interest margin for the three month period ended June 30, 2021 increased by 9 basis points to 2.64% compared to 2.55% for the three month period ended June 30, 2020. The net interest margin declined by 33 basis points on a linked quarter basis as a result of a decrease in the recognition of PPP origination fees compared to the first quarter of 2021.

Non-interest income declined to $7.7 million during the quarter ended June 30, 2021, compared to $8.4 million during the quarter ended June 30, 2020. The decrease is primarily attributable to the gain on the sale of investment securities recognized during the second quarter of 2020 which did not recur in the second quarter of 2021.

Non-interest expense increased by 14%, to $30.5 million during the quarter ended June 30, 2021, compared to $26.7 million during the quarter ended June 30, 2020. The growth in expenses year over year was mainly driven by an increase in salaries and benefit costs. Salary expense increased primarily as a result of merit increases and the cost for medical and dental benefits have returned to normal levels after a significant decline during the early stages of the pandemic in 2020. Other operating expenses have grown as a result of our growth strategy.

A dividend on the outstanding shares of preferred stock in the amount of $0.9 million was declared and paid during the second quarter of 2021. The preferred stock was initially issued in August 2020 and pays a dividend at an annual rate of 7.00%.

Net income increased to $13.0 million, or $0.17 per share, for the six month period ended June 30, 2021, compared to net income of $1.9 million, or $0.03 per share, for the six month period ended June 30, 2020. Similar to the results for the three month period ended June 30, 2021, improved operating leverage also drove better earnings during the six month period ended June 30, 2021. Total revenue increased by 38% while non-interest expense increased by 11%, during the first six months of 2021 compared to the first six months of 2020.

Net interest income increased to $62.1 million during the six month period ended June 30, 2021 compared to $43.2 million during the six month period ended June 30, 2020. 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 which is reported as interest income and is recognized over the life of the loans. The net interest margin for the six month period ended June 30, 2021 increased by 16 basis points to 2.80% compared to 2.64% for the six month period ended June 30, 2020.

Non-interest income increased by $3.0 million, or 20%, to $18.0 million for the six month period ended June 30, 2021, compared to $15.0 million for the six month period ended June 30, 2020. The increase is attributable to higher mortgage banking income driven by residential mortgage loan originations. The increase was also a result of 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 11%, to $59.9 million during the six months ended June 30, 2021, compared to $53.9 million during the six months ended June 30, 2020. The growth in expenses year over year was mainly caused by an increase in salaries and benefit costs. Occupancy and equipment expenses have also grown as a result of our growth strategy.

Deposits

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

Deposits increased by $916 million, or 25%, to $4.6 billion at June 30, 2021 compared to $3.6 billion at June 30, 2020. 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 15%, year over year as a result of the successful execution of our strategy. The increase in demand deposits over the last twelve months 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 June 30, 2021.

Lending

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

Gross loans decreased by $21 million, or 1%, at June 30, 2021 compared to June 30, 2020. Loans originated through the PPP loan program continue to be repaid or forgiven by the SBA which offsets the growth experienced in other categories in the portfolio. Excluding the impact of the PPP loans, gross loans increased by $252 million, or 13%, to $2.1 billion at June 30, 2021 compared to $1.9 billion at June 30, 2020. We continue to see results from the continued success with our relationship banking model which has driven a steady flow in quality loan demand. We experienced strongest growth in the owner-occupied real estate, commercial real estate and residential mortgage categories over the last twelve months.

Asset Quality

The Company’s asset quality ratios are highlighted below:

*Note: PPP loans excluded when calculating % of total loan balances. See disclosure related to non-GAAP financial measures at the end of this release.

The percentage of non-performing assets to total assets decreased to 0.26% at June 30, 2021, compared to 0.31% at June 30, 2020. The allowance for loan losses as a percentage of total loans excluding PPP loans increased to 0.75% as of June 30, 2021 compared to 0.58% as of June 30, 2020. The allowance for loan losses as a percentage of non-performing loans increased to 134% at June 30, 2021 compared to 87% at June 30, 2020 as a result of the increase the allowance for loan losses over the last 12 months.

Capital

The Company’s capital ratios at June 30, 2021 were as follows:

Total shareholders’ equity increased to $320 million at June 30, 2021 compared to $255 million at June 30, 2020. The increase was primarily driven by a capital raise completed during the third quarter of 2020. The Company 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 $4.62 at June 30, 2021 compared to $4.34 per share at June 30, 2020.

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.

Analyst and Investor Call

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

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-two 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, 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.