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REPUBLIC FIRST BANCORP INC
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Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.
Provision to roll forward the allowance for credit losses excludes a provision of $99,000 for off-balance sheet commitments. The ACL on off-balance sheet commitments as of September 30, 2022 was $604,000.
Provision to roll forward the allowance for credit losses excludes a provision of $7,000 for off-balance sheet commitments. The ACL on off-balance sheet commitments as of September 30, 2022 was $604,000.
The valuation technique is determined based on estimated insurance proceeds and litigation.
Dividends per share of $0.44 and $0.44 were declared and paid on preferred stock for the three months ended June 30, 2022 and June 30, 2021
All amounts are net of tax. Amounts in parentheses indicate reductions to other comprehensive income.
Fair value is generally determined through independent appraisals of the underlying collateral, which include Level 3 inputs that are not identifiable.
The range and weighted average of qualitative factors such as economic conditions and estimated liquidation expenses are presented as a percent of the appraised value.
Dividends per share of $0.88 and $0.88 were declared and paid on preferred stock for the six months ended June 30, 2022 and June 30, 2021
Equity securities consist of investments in non-cumulative preferred stock.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
| For the quarterly period ended September 30, 2022. |
or
☐ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
| For the transition period from ____ to ____. |
Commission File Number: 000-17007
Republic First Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Pennsylvania | 23-2486815 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| |
50 South 16th Street, Philadelphia, Pennsylvania | 19102 |
(Address of principal executive offices) | (Zip code) |
215-735-4422
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common Stock | | FRBK | | Nasdaq Global Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☒ |
Non-Accelerated filer ☐ | Smaller reporting company ☒ |
Emerging growth company ☐ | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date.
Common Stock, $0.01 per share | 63,863,592 |
Title of Class | Number of Shares Outstanding as of March 13, 2023 |
REPUBLIC FIRST BANCORP, INC. AND SUBSIDIARIES |
TABLE OF CONTENTS |
|
|
|
Part I: Financial Information |
Page |
|
|
|
Item 1. |
Financial Statements |
|
|
Consolidated balance sheets as of September 30, 2022 (unaudited) and December 31, 2021 |
3 |
|
Consolidated statements of income for the three and nine months ended September 30, 2022 and 2021 (unaudited) |
4 |
|
Consolidated statements of comprehensive (loss) income for the three and nine months ended September 30, 2022 and 2021 (unaudited) |
5 |
|
Consolidated statements of cash flows for the nine months ended September 30, 2022 and 2021 (unaudited) |
6 |
|
Consolidated statements of changes in shareholders’ equity for the three and nine months ended September 30, 2022 and 2021 (unaudited) |
7 |
|
Notes to consolidated financial statements (unaudited) |
8 |
|
|
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
54 |
|
|
|
Item 3. |
Quantitative and Qualitative Disclosures about Market Risk |
74 |
|
|
|
Item 4. |
Controls and Procedures |
74 |
|
|
|
Part II: Other Information |
|
|
|
|
Item 1. |
Legal Proceedings |
75 |
|
|
|
Item 1A. |
Risk Factors |
76 |
|
|
|
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
77 |
|
|
|
Item 3. |
Defaults Upon Senior Securities |
78 |
|
|
|
Item 4. |
Mine Safety Disclosures |
78 |
|
|
|
Item 5. |
Other Information |
78 |
|
|
|
Item 6. |
Exhibits |
79 |
|
|
|
Signatures |
81 |
Republic First Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets
September 30, 2022 and December 31, 2021
(Dollars in thousands, except per share data)
| | September 30, 2022 (unaudited) | | | December 31, 2021 | |
ASSETS | | | | | | | | |
Cash and due from banks | | $ | 15,670 | | | $ | 14,072 | |
Interest bearing deposits with banks | | | 36,782 | | | | 104,812 | |
Cash and cash equivalents | | | 52,452 | | | | 118,884 | |
Investment securities available for sale, at fair value | | | 999,521 | | | | 1,075,366 | |
Investment securities held to maturity, at amortized cost (fair value of $1,267,546 and $1,647,360, respectively) | | | 1,562,376 | | | | 1,660,292 | |
Equity securities | | | 6,627 | | | | 9,173 | |
Restricted stock, at cost | | | 21,907 | | | | 3,510 | |
Mortgage loans held for sale, at fair value | | | 6,038 | | | | 8,538 | |
Other loans held for sale | | | 4,785 | | | | 5,224 | |
Loans receivable (net of allowance for credit losses of $25,255 and $18,964, respectively) | | | 3,035,597 | | | | 2,488,401 | |
Premises and equipment, net | | | 130,902 | | | | 127,440 | |
Other real estate owned, net | | | 876 | | | | 360 | |
Accrued interest receivable | | | 18,783 | | | | 15,073 | |
Operating lease right-of-use asset | | | 73,135 | | | | 75,627 | |
Other assets | | | 86,255 | | | | 38,768 | |
Total Assets | | $ | 5,999,254 | | | $ | 5,626,656 | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | |
Liabilities | | | | | | | | |
Deposits | | | | | | | | |
Demand – non-interest bearing | | $ | 1,418,060 | | | $ | 1,404,360 | |
Demand – interest bearing | | | 2,497,761 | | | | 2,283,779 | |
Money market and savings | | | 1,217,580 | | | | 1,305,096 | |
Time deposits | | | 118,183 | | | | 197,945 | |
Total Deposits | | | 5,251,584 | | | | 5,191,180 | |
Other borrowings | | | 442,500 | | | | - | |
Accrued interest payable | | | 401 | | | | 550 | |
Other liabilities | | | 24,409 | | | | 17,636 | |
Operating lease liability | | | 79,620 | | | | 81,770 | |
Subordinated debt | | | 11,282 | | | | 11,278 | |
Total Liabilities | | | 5,809,796 | | | | 5,302,414 | |
| | | | | | | | |
Commitments and contingencies (see note 4) | | | - | | | | - | |
| | | | | | | | |
Shareholders’ Equity | | | | | | | | |
Preferred stock, par value $0.01 per share; liquidation preference $25.00 per share; 10,000,000 shares authorized; shares issued 1,471,000 as of September 30, 2022 and 2,000,000 as of December 31, 2021; shares outstanding 1,471,000 as of September 30, 2022 and 2,000,000 as of December 31, 2021 | | | 15 | | | | 20 | |
Common stock, par value $0.01 per share: 100,000,000 shares authorized; shares issued 64,315,909 as of September 30, 2022 and 59,471,998 as of December 31, 2021; shares outstanding 63,787,064 as of September 30, 2022 and 58,943,153 as of December 31, 2021 | | | 643 | | | | 595 | |
Additional paid in capital | | | 326,549 | | | | 324,618 | |
Retained earnings | | | 19,601 | | | | 13,591 | |
Treasury stock at cost (503,408 shares as of September 30, 2022 and December 31, 2021) | | | (3,725 | ) | | | (3,725 | ) |
Stock held by deferred compensation plan (25,437 shares as of September 30, 2022 and December 31, 2021) | | | (183 | ) | | | (183 | ) |
Accumulated other comprehensive loss | | | (153,442 | ) | | | (10,674 | ) |
Total Shareholders’ Equity | | | 189,458 | | | | 324,242 | |
Total Liabilities and Shareholders’ Equity | | $ | 5,999,254 | | | $ | 5,626,656 | |
(See notes to consolidated financial statements)
Republic First Bancorp, Inc. and Subsidiaries
Consolidated Statements of Income
For the Three and Nine Months Ended September 30, 2022 and 2021
(Dollars in thousands, except per share data)
(unaudited)
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and fees on taxable loans |
|
$ |
30,653 |
|
|
$ |
26,954 |
|
|
$ |
83,304 |
|
|
$ |
84,453 |
|
Interest and fees on tax-exempt loans |
|
|
605 |
|
|
|
426 |
|
|
|
1,573 |
|
|
|
1,290 |
|
Interest and dividends on taxable investment securities |
|
|
14,304 |
|
|
|
8,128 |
|
|
|
41,749 |
|
|
|
21,273 |
|
Interest and dividends on tax-exempt investment securities |
|
|
392 |
|
|
|
89 |
|
|
|
875 |
|
|
|
242 |
|
Interest on federal funds sold and other interest-earning assets |
|
|
54 |
|
|
|
181 |
|
|
|
179 |
|
|
|
294 |
|
Total interest income |
|
|
46,008 |
|
|
|
35,778 |
|
|
|
127,680 |
|
|
|
107,552 |
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand- interest bearing |
|
|
4,798 |
|
|
|
3,165 |
|
|
|
9,536 |
|
|
|
9,706 |
|
Money market and savings |
|
|
845 |
|
|
|
837 |
|
|
|
2,419 |
|
|
|
2,888 |
|
Time deposits |
|
|
139 |
|
|
|
281 |
|
|
|
607 |
|
|
|
1,245 |
|
Other borrowings |
|
|
2,227 |
|
|
|
53 |
|
|
|
2,579 |
|
|
|
200 |
|
Total interest expense |
|
|
8,009 |
|
|
|
4,336 |
|
|
|
15,141 |
|
|
|
14,039 |
|
Net interest income |
|
|
37,999 |
|
|
|
31,442 |
|
|
|
112,539 |
|
|
|
93,513 |
|
Provision for credit losses |
|
|
3,998 |
|
|
|
900 |
|
|
|
4,756 |
|
|
|
3,900 |
|
Net interest income after provision for credit losses |
|
|
34,001 |
|
|
|
30,542 |
|
|
|
107,783 |
|
|
|
89,613 |
|
Non-interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan and servicing fees |
|
|
311 |
|
|
|
946 |
|
|
|
1,500 |
|
|
|
2,239 |
|
Mortgage banking income |
|
|
844 |
|
|
|
2,397 |
|
|
|
2,847 |
|
|
|
9,869 |
|
Gain on sales of SBA loans |
|
|
502 |
|
|
|
641 |
|
|
|
1,713 |
|
|
|
2,035 |
|
Service fees on deposit accounts |
|
|
3,668 |
|
|
|
3,283 |
|
|
|
10,243 |
|
|
|
10,503 |
|
Net (loss) gain on sale or call of investment securities |
|
|
(46 |
) |
|
|
- |
|
|
|
(46 |
) |
|
|
2 |
|
Other non-interest income |
|
|
463 |
|
|
|
50 |
|
|
|
(1,295 |
) |
|
|
624 |
|
Total non-interest income |
|
|
5,742 |
|
|
|
7,317 |
|
|
|
14,962 |
|
|
|
25,272 |
|
Non-interest expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
|
16,276 |
|
|
|
14,640 |
|
|
|
47,157 |
|
|
|
44,216 |
|
Occupancy |
|
|
3,982 |
|
|
|
3,630 |
|
|
|
11,382 |
|
|
|
11,238 |
|
Depreciation and amortization |
|
|
2,193 |
|
|
|
2,059 |
|
|
|
6,455 |
|
|
|
6,368 |
|
Legal |
|
|
3,617 |
|
|
|
265 |
|
|
|
10,943 |
|
|
|
776 |
|
Other real estate owned |
|
|
317 |
|
|
|
119 |
|
|
|
409 |
|
|
|
710 |
|
Appraisal and other loan expenses |
|
|
428 |
|
|
|
410 |
|
|
|
815 |
|
|
|
1,669 |
|
Advertising |
|
|
231 |
|
|
|
192 |
|
|
|
675 |
|
|
|
482 |
|
Data processing |
|
|
1,574 |
|
|
|
2,472 |
|
|
|
5,609 |
|
|
|
5,991 |
|
Insurance |
|
|
179 |
|
|
|
304 |
|
|
|
660 |
|
|
|
938 |
|
Professional fees |
|
|
1,875 |
|
|
|
800 |
|
|
|
3,895 |
|
|
|
2,371 |
|
Debit card processing |
|
|
991 |
|
|
|
743 |
|
|
|
2,723 |
|
|
|
2,527 |
|
Regulatory assessments and costs |
|
|
1,101 |
|
|
|
904 |
|
|
|
3,290 |
|
|
|
2,511 |
|
Taxes, other |
|
|
757 |
|
|
|
978 |
|
|
|
2,071 |
|
|
|
2,083 |
|
Other operating expenses |
|
|
4,193 |
|
|
|
2,259 |
|
|
|
11,075 |
|
|
|
7,760 |
|
Total non-interest expense |
|
|
37,714 |
|
|
|
29,775 |
|
|
|
107,159 |
|
|
|
89,640 |
|
Income before provision for income taxes |
|
|
2,029 |
|
|
|
8,084 |
|
|
|
15,586 |
|
|
|
25,245 25,245 |
|
Provision for income taxes |
|
|
476 |
|
|
|
1,988 |
|
|
|
3,805 |
|
|
|
6,147 |
|
Net income |
|
$ |
1,553 |
|
|
$ |
6,096 |
|
|
$ |
11,781 |
|
|
$ |
19,098 |
|
Preferred stock dividends |
|
|
644 |
|
|
|
875 |
|
|
|
2,154 |
|
|
|
2,625 |
|
Net income available to common shareholders |
|
$ |
909 |
|
|
$ |
5,221 |
|
|
$ |
9,627 |
|
|
$ |
16,473 |
|
Net income per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share |
|
$ |
0.01 |
|
|
$ |
0.09 |
|
|
$ |
0.15 |
|
|
$ |
0.28 |
|
Diluted earnings per common share |
|
$ |
0.01 |
|
|
$ |
0.08 |
|
|
$ |
0.14 |
|
|
$ |
0.25 |
|
(See notes to consolidated financial statements)
Republic First Bancorp, Inc. and Subsidiaries
Consolidated Statements of Comprehensive (Loss) Income
For the Three and Nine Months Ended September 30, 2022 and 2021
(Dollars in thousands)
(unaudited)
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
| | 2022 | | | 2021 | | | 2022 | | | 2021 | |
| | | | | | | | | | | | | | | | |
Net income (loss) | | $ | 1,553 | | | $ | 6,096 | | | $ | 11,781 | | | $ | 19,098 | |
| | | | | | | | | | | | | | | | |
Other comprehensive income (loss), net of tax | | | | | | | | | | | | | | | | |
Unrealized (losses) on securities (pre-tax ($60,669), ($4,158), ($191,991), and ($5,717), respectively) | | | (45,277 | ) | | | (3,102 | ) | | | (143,283 | ) | | | (4,265 | ) |
Reclassification adjustment for securities losses (gains) (pre-tax $46, ($2), $46, and ($2), respectively) | | | 34 | | | | (1 | ) | | | 34 | | | | (1 | ) |
Net unrealized gains (losses) on securities | | | (45,243 | ) | | | (3,103 | ) | | | (143,249 | ) | | | (4,266 | ) |
Amortization of net unrealized holding losses to income during the period (pre-tax $178, $499, $644, and $1,998 respectively) | | | 133 | | | | 373 | | | | 481 | | | | 1,491 | |
| | | | | | | | | | | | | | | | |
Total other comprehensive (loss) income | | | (45,110 | ) | | | (2,730 | ) | | | (142,768 | ) | | | (2,775 | ) |
| | | | | | | | | | | | | | | | |
Total comprehensive (loss) income | | $ | (43,557 | ) | | $ | 3,366 | | | $ | (130,987 | ) | | $ | 16,323 | |
(See notes to consolidated financial statements)
Republic First Bancorp, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2022 and 2021
(Dollars in thousands)
(unaudited)
|
|
Nine Months Ended September 30, |
|
|
|
2022 |
|
|
2021 |
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
Net income |
|
$ |
11,781 |
|
|
$ |
19,098 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Provision for credit losses |
|
|
4,756 |
|
|
|
3,900 |
|
Write down of other real estate owned |
|
|
328 |
|
|
|
670 |
|
Depreciation and amortization |
|
|
6,455 |
|
|
|
6,368 |
|
Stock based compensation |
|
|
1,255 |
|
|
|
1,562 |
|
Loss (gain) on sale or call of investment securities |
|
|
46 |
|
|
|
(2 |
) |
Fair value adjustments on equity securities |
|
|
2,546 |
|
|
|
(192 |
) |
Amortization of premiums on investment securities |
|
|
3,973 |
|
|
|
6,394 |
|
Accretion of discounts on retained SBA loans |
|
|
(971 |
) |
|
|
(709 |
) |
Fair value adjustments on SBA servicing assets |
|
|
1,004 |
|
|
|
545 |
|
Proceeds from sales of SBA loans originated for sale |
|
|
21,535 |
|
|
|
22,489 |
|
SBA loans originated for sale |
|
|
(19,383 |
) |
|
|
(22,380 |
) |
Gains on sales of SBA loans originated for sale |
|
|
(1,713 |
) |
|
|
(2,035 |
) |
Proceeds from sales of mortgage loans originated for sale |
|
|
84,904 |
|
|
|
344,087 |
|
Mortgage loans originated for sale |
|
|
(81,056 |
) |
|
|
(298,521 |
) |
Fair value adjustment for mortgage loans originated for sale |
|
|
311 |
|
|
|
1,920 |
|
Gains on sales of mortgage loans originated for sale |
|
|
(2,062 |
) |
|
|
(9,572 |
) |
Amortization of debt issuance costs |
|
|
5 |
|
|
|
5 |
|
Non-cash expense related to leases |
|
|
344 |
|
|
|
249 |
|
Repayment of operating lease liabilities |
|
|
(4,216 |
) |
|
|
(4,179 |
) |
Net (increase) decrease in accrued interest receivable and other assets |
|
|
(3,821 |
) |
|
|
1,392 |
|
Net increase (decrease) in accrued interest payable and other liabilities |
|
|
10,909 |
|
|
|
(384 |
) |
Net cash provided by operating activities |
|
|
36,930 |
|
|
|
70,705 |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
Purchase of investment securities available for sale |
|
|
(251,859 |
) |
|
|
(464,868 |
) |
Purchase of investment securities held to maturity |
|
|
(51,145 |
) |
|
|
(764,947 |
) |
Proceeds from the sale of securities available for sale |
|
|
34,073 |
|
|
|
- |
|
Proceeds from the paydown, maturity, or call of securities available for sale |
|
|
99,986 |
|
|
|
104,147 |
|
Proceeds from the paydown, maturity, or call of securities held to maturity |
|
|
147,394 |
|
|
|
201,255 |
|
Net purchase of restricted stock |
|
|
(18,397 |
) |
|
|
(471 |
) |
Net (increase) decrease in loans |
|
|
(555,295 |
) |
|
|
149,212 |
|
Net proceeds from sale of other real estate owned |
|
|
329 |
|
|
|
155 |
|
Premises and equipment expenditures |
|
|
(9,917 |
) |
|
|
(8,499 |
) |
Net cash used in investing activities |
|
|
(604,831 |
) |
|
|
(784,016 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
Net proceeds from exercise of stock options |
|
|
719 |
|
|
|
140 |
|
Net increase in demand, money market and savings deposits |
|
|
140,166 |
|
|
|
947,213 |
|
Net (decrease) increase in time deposits |
|
|
(79,762 |
) |
|
|
11,117 |
|
Net increase (repayment) in other borrowings |
|
|
442,500 |
|
|
|
(633,866 |
) |
Preferred stock dividends paid |
|
|
(2,154 |
) |
|
|
(2,625 |
) |
Net cash provided by financing activities |
|
|
501,469 |
|
|
|
321,979 |
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
|
(66,432 |
) |
|
|
(391,332 |
) |
Cash and cash equivalents, beginning of year |
|
|
118,884 |
|
|
|
775,300 |
|
Cash and cash equivalents, end of period |
|
$ |
52,452 |
|
|
$ |
383,968 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures |
|
|
|
|
|
|
|
|
Interest paid |
|
$ |
15,290 |
|
|
$ |
13,595 |
|
Income taxes paid |
|
$ |
3,486 |
|
|
$ |
8,540 |
|
Non-cash transfers from loans receivable to other real estate owned |
|
$ |
1,173 |
|
|
$ |
168 |
|
Non-cash transfers from loans held for sale to loans receivable |
|
$ |
476 |
|
|
$ |
- |
|
Lease liabilities arising from obtaining right-of-use assets |
|
$ |
3,272 |
|
|
$ |
8,175 |
|
(See notes to consolidated financial statements)
Republic First Bancorp, Inc. and Subsidiaries
Consolidated Statements of Changes in Shareholders’ Equity
For the Three and Nine Months Ended September 30, 2022 and 2021
(Dollars in thousands)
(unaudited)
| | Preferred Stock | | | Common Stock | | | Additional Paid in Capital | | | Retained Earnings / Accumulated Deficit | | | Treasury Stock | | | Stock Held by Deferred Compensation Plan | | | Accumulated Other Comprehensive Loss | | | Total Shareholders’ Equity | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance July 1, 2022 | | $ | 15 | | | $ | 643 | | |