OREANDA-NEWS. January 23, 2018. Republic First Bancorp, Inc. (NASDAQ:FRBK), the holding company for Republic Bank, today announced its financial results for the period ended December 31, 2017.

    Twelve Months Ended
($ in millions, except per share data)   12/31/17 12/31/16 % Change
         
Assets   $ 2,322.3 $   1,923.9   21 %
Loans        1,162.3      965.0           20 %
Deposits        2,063.3      1,677.7   23 %
Total Revenue   $   90.9 $    69.5             31 %
Net Income       8.9      4.9    80 %
Net Income per Diluted Share   $   0.15 $    0.12    25 %

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

“2017 was another tremendous year for ‘The Power of Red is Back’ growth campaign. Deposits and loans continued to grow at exceptional rates. Our store network expanded to twenty-three convenient locations and we solidified our position as one of the top residential mortgage lenders in our market through the successful integration of the Oak Mortgage team. I am excited over the opportunities we see in 2018 and beyond to build on the success achieved to this point. We are clearly giving customers a reason to Love Their Bank Again.”

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

“The momentum of our expansion strategy continues to build as we attract new FANS throughout our footprint. We believe we’ve put ourselves in perfect position to capitalize on opportunities that arise as our competition continues to alienate customers with declining levels of service, higher fees and fewer locations. In addition, the reduction in the corporate tax rate included in Tax Cuts and Jobs Act of 2017 will result in a significant benefit for us in the years to come. We intend on utilizing the savings generated by this Act to invest in our growth and expansion which will result in the creation of new jobs, improvements in technology and the ability to further contribute to the communities which we serve.”

Highlights for the Period Ended December 31, 2017

  • Net income increased by 80% to $8.9 million, or $0.15 per share, for the twelve months ended December 31, 2017 compared to $4.9 million, or $0.12 per share, for the twelve months ended December 31, 2016. The Company continues to open new stores and increase net income despite the additional costs associated with the expansion strategy.
     
  • Net Income was $2.7 million, or $0.05 per share, in the fourth quarter of 2017 compared to $2.3 million, or $0.04 per share, in the third quarter of 2017 and $1.5 million, or $0.03 per share, in the fourth quarter of 2016. Earnings in the fourth quarter of 2017 were impacted by two significant and infrequent events, as described below.
     
  • The Company reversed its deferred tax asset valuation allowance during the fourth quarter of 2017 resulting in an increase in net income of $2.9 million, or $0.05 per share, during the period. This entry factors in the impact of the new corporate tax rate under the Tax Cuts and Jobs Act signed into law on December 22, 2017.
     
  • Earnings in the fourth quarter of 2017 were also impacted by a $2.2 million write-down related to the Company’s largest non-performing asset included in OREO. Management’s decision to aggressively pursue a resolution for this asset resulted in the execution of an agreement of sale a required reduction in the carrying value.
     
  • Total deposits increased by $386 million, or 23%, to $2.1 billion as of December 31, 2017 compared to $1.7 billion as of December 31, 2016.
     
  • The fastest growing segment of the Company’s deposit base is non-interest bearing demand deposits. These balances grew by 35% to $439 million during 2017.
     
  • New stores opened since the beginning of the “Power of Red is Back” expansion campaign are currently growing deposits at an average rate of $27 million per year. The average deposit growth for all stores over the last twelve months was approximately $20 million per store.
     
  • A new store was recently opened in Fairless Hills, PA launching our expansion into Bucks County. Four new stores have been opened over the last twelve months, increasing the total store count to twenty-three locations. Six additional store openings are planned for 2018.
     
  • Total assets increased by $398 million, or 21%, to $2.3 billion as of December 31, 2017 compared to $1.9 billion as of December 31, 2016.
     
  • Total loans grew $197 million, or 20%, to $1.2 billion as of December 31, 2017 compared to $965 million at December 31, 2016.
     
  • Asset quality continues to improve. The ratio of non-performing assets to total assets declined to 0.94% as of December 31, 2017 compared to 1.51% as of December 31, 2016.
     
  • The Company’s residential mortgage division, Oak Mortgage, is serving the home financing needs of customers throughout its footprint. Oak originated over $378 million in loans during 2017.
  • Meeting the needs of small business customers continued to be an important part of the Company’s lending strategy. More than $51 million in new SBA loans were originated during 2017.
     
  • The Company’s Total Risk-Based Capital ratio was 16.70% and Tier I Leverage Ratio was 10.64% at December 31, 2017.
     
  • Book value per common share increased to $3.97 as of December 31, 2017 compared to $3.79 as of December 31, 2016.

Income Statement

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

  Three Months Ended   Twelve Months Ended
  12/31/17 12/31/16 %
Change		   12/31/17 12/31/16 %
Change
               
Total Revenue $   24,421     $   19,363        26 %   $   90,946     $   69,539       31 %
Provision for Loan Losses     400          -        100 %       900         1,557        (42 %)
Non-interest Expense     21,622         15,970        35 %       75,276         56,293       34 %
Income (Loss) Before Taxes      (143 )        1,447        (110 %)       5,986          4,826       24 %
Provision (Benefit) for Taxes     (2,881 )        (50 )   n/m         (2,919 )        (119 )    n/m  
Net Income     2,738         1,497       83 %        8,905         4,945       80 %
Net Income per Diluted Share $   0.05     $   0.03       67 %   $   0.15     $   0.12       25 %

The Company reported net income of $2.7 million, or $0.05 per diluted share, for the three month period ended December 31, 2017, compared to net income of $1.5 million, or $0.03 per diluted share, for the three month period ended December 31, 2016. Net income for the twelve month period ended December 31, 2017 was $8.9 million, or $0.15 per diluted share, compared to net income of $4.9 million, or $0.12 per diluted share, for the twelve months ended December 31, 2016. Net income in the fourth quarter of 2017 was impacted by two significant and infrequent events described in the following paragraphs.

On December 22, 2017, the Tax Cuts and Jobs Act was signed into law which included a reduction in the corporate tax rate from 35% to 21%. As a result of the change in the tax rate, the value of the Company’s existing deferred tax assets will permanently decrease by $7.7 million. A charge for this impairment was recorded during the fourth quarter. However, the Company has carried a valuation allowance against its deferred tax assets for the last several years. During the fourth quarter, management determined that the valuation allowance was no longer required and recorded an entry to reverse the $10.6 million valuation allowance. The combination of these two entries resulted in the recognition of a net tax benefit and increase in earnings in the amount of $2.9 million during the fourth quarter.

Earnings in the fourth quarter were also impacted by a writedown of $2.2 million against the Company’s largest non-performing asset. Management’s decision to aggressively pursue a resolution for a property held in the other real estate owned portfolio resulted in the execution of an agreement of sale and a required reduction in the carrying value. Closing on the sale is expected to occur during the first quarter of 2018.

Total revenue increased by $5.1 million, or 26%, to $24.4 million for the three month period ended December 31, 2017, compared to $19.4 million for the three month period ended December 31, 2016. This increase is primarily attributable to higher interest income as a result of the strong growth in interest-earning assets over the last twelve months driven by the Company’s “Power of Red is Back” expansion program.

Non-interest income increased to $5.0 million for the three month period ended December 31, 2017 compared to $4.7 million for the three month period ended December 31, 2016.

Non-interest expenses increased by $5.7 million, or 35%, to $21.6 million during the three month period ended December 31, 2017 compared to $16.0 million during the three months ended December 31, 2016. This increase was primarily driven by the addition of expenses related to the “Power of Red is Back” growth and expansion strategy. Salary and employee benefit costs were higher at the Bank as a result of annual merit increases along with increased staffing levels related to our growth strategy. Three new stores were opened during 2017. The Company now has twenty-three store locations. Occupancy and equipment expenses associated with the growth strategy also contributed to the increase in non-interest expenses. In addition, the writedown of $2.2 million related to an OREO property described earlier also contributed to the increase in non-interest expenses.

Balance Sheet

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

 

Description

  

12/31/17

  

12/31/16

 %
Change		  

09/30/17

 %
Change
           
Total assets $ 2,322,347 $ 1,923,931 21 % $ 2,141,563 8 %
Total loans (net)   1,153,679   955,817 21 %   1,087,147 6 %
Total deposits   2,063,295   1,677,670 23 %   1,885,405 9 %
Total core deposits   2,043,816   1,677,403 22 %   1,876,840 9 %

Total assets increased by $398 million, or 21%, as of December 31, 2017 when compared to December 31, 2016.  Deposits grew by $386 million to $2.1 billion as of December 31, 2017 compared to $1.7 billion as of December 31, 2016. Non-interest bearing demand deposit balances increased by 35% during 2017. The number of deposit accounts has also grown by 35% 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.”

Core Deposits

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

 

 

Description

  

 

12/31/17

  

 

12/31/16

  

%
Change

  

 

09/30/17

  

%
Change

 4th Qtr
2017
Cost of
Funds
             
Demand noninterest-bearing $ 438,500  $ 324,912    35 % $ 398,794   10 % 0.00 %
Demand interest-bearing   807,736   605,950  33 %   745,878    8 % 0.48 %
Money market and savings   700,321   635,644   10 %   619,265  13 % 0.54 %
Certificates of deposit   97,259   110,897   (12 %)   112,903  (14 %) 1.04 %
Total core deposits $ 2,043,816 $ 1,677,403   22 % $ 1,876,840    9 % 0.43 %
             

Core deposits increased by 22% to $2.0 billion at December 31, 2017 compared to $1.7 billion at December 31, 2016 as the Company moves forward with its growth strategy to increase the number of stores and expand its banking model which focuses on high levels of customer service and convenience and drives the gathering of low-cost, core deposits. On a percentage basis, the Company recognized strongest growth in non-interest bearing demand deposit balances year over year as a result of the successful execution of its strategy.

Lending

Loan balances by type are as follows (dollars in thousands):

 

Description

  

12/31/17

 % of
Total		  

12/31/16

 % of
Total		  

09/30/17

 % of
Total
             
Commercial real estate $ 433,304 37 % $ 378,519 40 % $ 415,532  38 %
Construction and land development   104,617 9 %   61,453 5 %   93,657 8 %
Commercial and industrial   173,343 15 %   174,744 20 %   163,085 15 %
Owner occupied real estate   309,838 27 %   276,986 28 %   297,880 27 %
Consumer and other   76,412 7 %   63,588 6 %   71,867 7 %
Residential mortgage   64,764 5 %   9,682 1 %   53,384 5 %
Gross loans $ 1,162,278 100 % $ 964,972 100 % $ 1,095,405 100 %
             

Gross loans increased by $197 million, or 20%, to $1.2 billion at December 31, 2017 compared to $965 million at December 31, 2016 as a result of the steady growth 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, residential mortgages and the owner occupied categories.

Asset Quality

The Company’s non-performing asset balances and asset quality ratios are highlighted below:

  Three Months Ended
  12/31/17 09/30/17 12/31/16
       
Non-performing assets / capital and reserves 9 % 10 % 13 %
Non-performing assets / total assets 0.94 % 1.07 % 1.51 %
Quarterly net loan charge-offs / average loans 0.02 % 0.43 % 0.12 %
Allowance for loan losses / gross loans 0.74 % 0.75 % 0.95 %
Allowance for loan losses / non-performing loans 58 % 60 % 48 %

The percentage of non-performing assets to total assets decreased to 0.94% at December 31, 2017, compared to 1.51% at December 31, 2016. One of the Company’s largest non-performing loan relationships has been restructured and returned to performing status during 2017. In addition, the Company’s largest asset held in other real estate owned was written down during the fourth quarter of 2017 as a result of the Company’s decision to aggressively pursue the sale of this asset.  The ratio of non-performing assets to capital and reserves decreased to 9% at December 31, 2017 compared to 13% at December 31, 2016.

Capital

The Company’s capital ratios at December 31, 2017 were as follows:

  Actual
12/31/17		 Regulatory Guidelines
“Well Capitalized”
     
Leverage Ratio   10.64% 5.00%
Common Equity Ratio   14.75% 6.50%
Tier 1 Risk Based Capital   16.13% 8.00%
Total Risk Based Capital   16.70% 10.00%
Tangible Common Equity    9.56% n/a

Total shareholders’ equity increased to $226 million at December 31, 2017 compared to $215 million at December 31, 2016. Book value per common share increased to $3.97 at December 31, 2017 compared to $3.79 per share at December 31, 2016.  The Company completed a common stock offering in the amount of $100 million during the fourth quarter of 2016.

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-three store locations in the Greater Philadelphia and Southern New Jersey market place.  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 wholly owned subsidiary, Oak Mortgage Company. For more information about Republic Bank, visit www.myrepublicbank.com.