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:

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.

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 FANatical 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

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.

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%.

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.