Q2 2020 Republic First Bancorp Inc Earnings Call

Thank you for holding your conference was again momentarily in the one minute. Thank you for your patience.

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Good morning, and welcome to the second quarter 2020, <unk> earnings Conference call. My name is scenario and I'll be the operator for today's call. At this time all participants are not listen only mode. Later, we'll conduct a question answer session. During the question answer session. If you have a question. Please press Star then one.

Chunk phone. Please note. This conference is being recorded I'll now turn the call over to Mr. Vernon Hills. That's true how are you may begin.

Good morning, and welcome to the call I'm pleased to report on a.

Strong second quarter once mariner.

Eric Madonna she'll quite capillary CFO and Andy Love.

President.

I'll go through the high point to that that we'll be happy to open up more calls.

We were coming out of a second quarter was very strong momentum.

The things that happened in the second quarter I Hope you all saw this.

National.

Survey by four kids aimed to bear the name Republican America's number one bank for survivors that is what our model, which meant that they we believe it reflects what we've been doing just by chance of you May remember L. Sullivan of Congress North America's most convenient by.

Also a corridor, we were very active in the TPP problem.

Oh.

KBW matching of all the banks.

We produced the highest onboard PPP loans as a percentage of our car.

Oh, it's not only been very strong in the raising season, we have about 18 or 19 million.

PPP visa all moving to the income statement in third fourth and first quarter, but he's brought tremendous number of new accounts, Thomas and clients more than I've ever seen in my wife.

50% of the paint be premium or customers that did not bad business and we shared good percentage of a moving over.

Well I'm on the peeping pay which is in the bottom of page terribly away generated 682 million and loans 4800 miles.

Perfect World customers that momentum was made a nice in this market did not exact new clients and we were very happy too.

Well, just BPP babies R 22 million of which approximately 19 million or where the new rules are that we recognize those fees as a ones are we paid or forgiven. So we expect that they'll hit the income statement imports, we more and why.

KBW using the P.G.P.P.P. numbers right make sure I get it right pretax profit.

Pretax pre provision.

Number for US was 4.2 million right when I use that number in the last quarter.

He has small loss that right like breakeven in the last quarter and losses or that you prior.

We've been talking about creating jobs, where the topline grows at a higher percentage and had the expense line.

That's the way, we see to increase our earnings in the second quarter quarter to quarter topline rose, 13% expenses went down 2% and that's the same numbers.

For the year to year topline went up 17% expenses only went up 3%.

And that's short is on page three.

Uh huh asset quality.

Hey used to be very strong force.

Our nonperforming loans went down 1.31%.

Oh bond to page three shows our deferred garments.

Would you like life was 22% of outstanding one of its now reduced to 2% of hormone accounts and 7% of our loan balances.

Then went down 21, yes like explain why that was a one time and in the second quarter, we had a high level of PPP loans on our balance sheet and we only have just be gone to recognize the fees associated with that so at a 1% yield on those loans plus of limited.

Right mission on the on the origination fees it dropped the margin back at the corner.

And that's because they are counting won't change much in the metal.

Everything else. We we currently are are amortizing the revenue were recognizing the revenue on the origination fees income went up 24 month basis, which is the control more or like or as the loans are forgive them or we page evidence based on wall last that long on much levels.

I would have to worry spend a good bit and they had better benefit but it's much more as we had a good first data the momentum aired very strong and they tell me most of the residential mortgage that all four homes being bought a deep Dan but even in this market, we're saying a lot of house sales.

You can see Grosvenor, while growth in all one thing that's definitely a this quarterly is on page five we have shown you they.

Balance sheet.

And the growth with PPP and without the PPP.

Our weighted shares.

Growth in loans.

The last 12 months without the pp back was 25% and our deposits without the PPP effect was 28%.

Oh I believe was a points we wanted to make we'd be happy to.

Whatever questions. Please.

Absolutely. Thank you.

We'll now begin the question answer session. If you have a question. Please press Star then one on your Touchtone phone, if you're using a speaker phone you managed to pick up the handset first before passing the numbers. Once again if you have a question. Please press Star then one on your Touchtone phone.

Leaning on standby for any question.

And the first question comes from Michael She alone. Please go ahead. Your line is open.

Hi, good morning, Thanks for taking my questions.

Michael your from.

Oh I'm sorry.

Level question here, but Michael your from one fraud, Michael your from what bar.

Oh, I'm, sorry, I'm from key brand with KBW.

Right Great. Please go ahead.

Okay, and so yeah, I don't know quite here right.

You had a lot of good fundamental momentum for your business. So can you just discuss what leverage you have to keep it going moving forward.

Yes. Thank you Michael what we see great things in the future that look very clear Jos a we expect the on deposit ratio to go from current number is 65% and we see a reasonable path to get the right 85% over the next couple of years, yes, so and that way.

It is our margin by how many best Frank already better right at looking at it right now with increasing to 30 30 basis points, which today actually the DPP would get it up 3%. So that's one lab whenever there's been about Josh wherever growing our top line at a higher percentage and after that expenses, it's something we've been trying to get done for.

A long time that should have a tremendously positive.

Impact on our bottom line is that as I said earlier topline Rouge set on a year over year.

Blind.

17% expenses from 3% for the quarter grew 13% expecting a down 2% and our third lever is loans, excluding BPP are growing at 25% and deposits are growing at 28%. My also say that vision.

Paid PDP is at a tremendous impact not only on the growth of this company bought our brand the big banks in this market have done a really important job with wells, leading the pack and then a tremendous opportunity to watch handle our current clients, but attract new clients we.

Very strong momentum from this.

Thank you Mike anything else.

Yeah, and then you got bad pretty positive deferral trends compared to peers. How comfortable are comfortable are you with the current reserve and how much do you expect to build it in this environment going forward.

Yeah, we're comfortable with the reserve.

Do you see our nonperforming number is very low we have 19 million left the PPP loans.

Available in the next up these in available in the next.

Three quarters, so what we might use as an opportunity where we can to boost the loan loss reserve.

Okay. Thanks, and just one last quick one are you expecting any kind of bounced back in the gain on sale that now that the PDP program has slowed down.

Am I right are we expect the white.

A bounce back in a and B a gain on sale.

It's a BBB program is kind of slowed down now.

Yeah, I'm not sure idea I understand your question the production and ask the a large is kind of slowed during the PPP thing.

Okay.

I'd say that estimate.

Our Daimler from way.

Well I get you mentioned in the release that you're asked the gain on sale. It down so I wonder if that would pick back up in.

Oh I see US you mean, yeah. It is down from the historic number we've we've been doing yes, we would expect that that moved back to what we've seen more and more normally.

Okay.

Hi, Def less affected by the PPP that just a whole Coleman 19 thing.

Okay. That's helpful. Alright, Thank you for calling out thanks for taking my question. Thank.

Thank you.

Thank you. Our next question comes from Frank Schiraldi from Piper Sandler. Please go ahead. Your line is open.

Hi, good morning.

Burning in terms of there can you guys a share with us the PPP program can you share with us what what that provided for an income in the quarter and then bigger picture just.

Deposit growth was tremendous even excluding.

Pp, but I assume some of that reflects good growth in and operating accounts at some of these you know guys who were not customers become customers back. So can you talk little bit about what sort of Bob you know deposit growth that generated as well as income provided in the quarter. Thank you had before I turn.

Over to Frank and he'll give you some numbers, but it's a little bit of a guess here because you're not sure what's what but what's happened in the market. The big banks that have awful job serving their PPP blinds and wells was the worst so we and a lot of banks would only do PPP for their current clients that what's been a tremendous plus for us.

And lots of ways, and the and I would say and the lower middle market and even up to the middle market and they couldn't get their PPP loans done with their current bank and again Bucks a chance to ask them to switch and 50% on we think have.

Michael It's our best speeds on the fee side, we recognized about $1.5 million of the origination fees of 22 million of 22 million growth.

In addition, there was another oh.

Okay.

500000, 2 billion on earned on the 1%.

Rate or yield on those loans.

These things should yield about 3%.

Over the lifetime, but it's hard to predict because you don't know how fast they want to be repaid or for given by the SBK for instance.

Yes today is not yet accepting.

Forgiveness after is that right Andy right. So.

It's all it's a little aren't again, but we think the fee should primarily headquarters three four and warm.

Okay.

And then on the.

On the momentum the operating leverage the jobs as you know.

Obviously, it's going to be tough to say on a quarter to quarter basis revenues up 13% this quarter versus expenses actually fell, but if we think about it longer term any any sort of guide you can give on modeling your expectations for how.

Faster revenue should grow here versus expenses on sort of longer timetable is it.

Two to one.

Any help there would be great.

Uh huh.

We're not really confident to give you a numerical projection in the middle ball winch PPP stuff, but Frank.

On slide who will make that clear at least with the third quarter.

But you can look on a year to year basis, which had very little PPP baby back and you can see the number 17 and three.

Right.

Okay.

Okay and and.

If you could just start.

Maybe talk about growth from here a number of stores you expect to open I'm, assuming that's slowed a bit just given.

The environment, but if you could just remind us of those expectations.

Right.

I thought about stores, because I love stores, but this company has become much more of a quick and brick business, where we deliver and store online mobile and why the things that we wound is important about this Forbes America's number one for service we were number one of the Fintech stuff in the digital the customer wants a unit.

Fine experienced delivered through every channel. So we're continuing to deliver an every channel we have one more opening this year.

Our third business this year.

New York, we've stopped for the time being on the branch side, but we're growing on the cash management alone side.

No bodies to show what mine has got all look like six months from now but.

You will see a building stores, but you'll see us focusing on every builder every channel mobile online stores and our deposit growth per stores, even when you take which includes all been textile takes on the pp bad the number for the corn will help us.

Number per store, we still would actually excluding TPP is approximately $25 million per store.

Okay.

Okay and then just finally I just wanted to ask about as you go to you obviously have delayed c. So as you go to that model are you still comfortable that you're looking for profitability in the back half of the year or do you think there will be some reserve builds.

Could or could fully offset that.

Well, let's put it this way.

We are free it take either one of those routes or some combined route.

Okay, I'm not sure understood. So you're saying you might not have to.

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Switched to see so this year.

Oh, you asked about say Cecil right. So the requirement to adopt seasonal will will occur when the national state of emergency is lifted.

So it could be Q3 Q4, it could go into next year, but thats when the acquired it will come into play.

Okay.

Okay, and you'll be able to capture some of that through outside of the piano right through the day one.

Mark.

As of December 31st of the prior years last 12, 31 19 any adjustment there goes through just through equity not the PNM anything that would result in.

An increased this year in the current year will run through the PML. So we're running a parallel model. So that we can track at quarter to quarter I understand where the changes line and the parallel model was roughly in line with that car.

The Parallon model as a b ended the year was in line.

The new diesel model with the significant effect to future economic forecasts right now would have a higher margin.

But we won't we will continue to evaluate that as the economy statewide.

Okay.

Right. So you don't have a number you can share in terms of your expectation above reserve to loan post c. So it's just a with all the uncertainty or you're still working through that I guess.

Yes, that's that's accurate.

Alright, great. Thank you bye bye bye bye bye, Brad we meant member looking at non numbers are nonperformance keep going down.

Word acorda going down.

No that's fair Yep, I mean, you know the deferral rates at some point.

And deferrals are really strong, but at some point I would imagine some of those deferrals will migrate to the lower risk weightings and I know, it's probably not because we just couple of quarters seats.

Yeah, Okay. Okay. Thank you.

Correct.

Thank you.

We have no further questions at this time.

Thank you all thank you for your support shares.

Thank you and thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.

Yes.

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