Q4 2020 Republic First Bancorp Inc Earnings Call
Thank you for an all day and your conference will begin momentarily. Thank you for your patience. Once again. Thank you for holding the conference will begin momentarily. Thank you for your patience.
[music].
Welcome to the fourth quarter 2020 earnings Conference call. My name is Sunny I'll be your operator for today's call. At this time all participants are in a listen only mode.
Later, we will conduct the question and answer session. During the question and answer session or we have a question. Please press Star then one on your Touchtone phone. Please note that this conference is being recorded and I will now turn the call over to Vernon Hill. Mr. Hill, you may begin.
Thank you all and good morning, and thank you all for joining the call.
Income to the fourth quarter earnings or FRB Kerry. This is a great quarter for us and a great year, despite the PPP and despite the COVID-19 problem.
<unk> had a great year with growth in.
Income the.
Posits and loans and I'll turn it over to her.
CFO Frank.
Okay.
Caballero will now describe the actual results pardon my cold.
Go ahead, Frank so and the room here and addition to Vernon and I'm joined by Harry Madonna, Our CEO, and President and Andrew Logue, Chief operating officer.
As Burton said, we are very pleased of the quarter, we'd like to discard and start the discussion by talking about our earnings.
As a reminder, and the third quarter of this year, we booked a onetime goodwill impairment charge that was a nonrecurring charge. So when we talk about earnings comparisons quarter to quarter year to year.
Three of the discussion we will do the core earnings excluding net impairment charge.
For the fourth quarter, we recorded the earnings before tax of $5 7 million that compares to earnings before tax of $3 $5 million and the third quarter of 2020.
And of loss of $3 $5 million and the fourth quarter of 2019.
Year to day also showed tremendous improvement and the core earnings before tax for this year were $11 5 million compared to a loss of $4 $9 million and the 12 months ended 2019.
The significant improvement in earnings and the per shares whereby per share per share for the quarter fourth quarter was five per share.
For the third quarter of 2024, a share and a net loss of <unk> of share in the fourth quarter of 19 and for the year for the year. We earned 12 of share excluding the goodwill charge compared to a loss of <unk> of share for the 12 months of 2019.
Part of my call Frank wants to talk about why this happened and talk about the just the effectiveness of the jaws. So.
The improvement in earnings both quarter to quarter and year over year was driven by what we focus on as the jaws effect. This is the improvement in revenue.
The percentage revenue growth compared to the expense growth.
So for the fourth quarter of 2020, we saw revenue grow by 48% compared to the fourth quarter of 2019.
While expense growth expenses grew just 2% per.
For the 12 months, we saw a similar similar trends revenue grew 26%.
For the 12 months, while expenses grew just 8% and.
And the year and compared year over year. So we call. This the jaws effect and it's our it reflects our concentration and our focus on expense controls throughout the year at the end of last year, we announced several initiatives that we would focus on this year to control expenses to improve earnings and as of the end of the.
Year, we're pleased to report the significant improvements.
Okay back to May of <unk>. Thank you.
We had a great year and growth.
The deposits grew over year over year, 34%.
Billions of dollars, 34% demand deposits grew.
So that 30% per the year part of that was the PPP effects of <unk>.
Also had a good year Frank wanted to go ahead with the numbers going forward, yes. So total loans grew by $897 million or 51% to nearly $2 6 billion at the end of the year.
Some of that growth and a significant portion of that growth was driven by the PPP loans that we still carry on the books theres about $600 million and PPP loans, but excluding that we still grew loans $273 billion of 16% year over year, and a year, which we consider challenged by the government of.
Restrictions and the limited availability of customers. The result of the Covid pandemic and our focus on growing our 700 million and PPP loans.
In addition to the loan growth. We're pleased to report the asset quality remains strong our total nonperforming assets to total assets declined to just 22.
And two 8% and 28 point to a point or two weighted.
Two 8% as of December 31.
And as for deferrals, we were customers, we're deferring we only had.
16 customers deferring loan payments at the end of the year, which represents $60 million where the.
Less than 1% this is well down from the peak of $444 million that we saw earlier and the year. So we're very pleased with the trend of asset quality.
Got it.
In addition to the the earnings wed.
I'd like to mention that the improvement in earnings and each quarter throughout the year. Our release, we put a chart in there that shows the trend and the first quarter all the way through the fourth quarter. So it was consistent improving and Chris and.
Consistent improvement and core earnings demonstrating the momentum that.
And that we feel as we head into 2021, that's on page three of the printing press release for those of you have it.
Go ahead, Bryan yet the.
We have of section and here as well regarding the PPP loan program and reiterate the statistics that we did earlier and the year nearly $680 million and total PPP loans that was from nearly 5000 and business customers and the important thing that we'd like to stress here is more than 50% of the applications that we have.
Received approval on where from businesses that were not previously customers of Republic Bank.
Many of these customers have since which their business over two to Republic and opened deposit accounts as well as bringing regular commercial loans.
We are in the process of rolling out.
Good day and this on and the peaked on on the round, one and we've begun making loans on the pp P round, two which the portal open the last week.
We've also previously reported debt.
Received gross fees of 20, nearly $22 million is the result of this program and as we've stated before these fees are recognized over the life of the loans. So we have nearly $13 million that we carry into next year as deferred revenue that will continue to be recognized as these loans are paid off or paid down.
Thank you.
And want to keep growing and Frank I'm going force, Yes, we put a section here the talks about the total banking experience.
Our goal is to deliver a unified customer experience not only through our store locations that we talk about so much but we have tremendous online and mobile options as well and as a result of this.
Named as America's number one bank for service during 2020 by Forbes by Forbes and the survey conducted.
According to their customers.
We opened our 31 store.
Third quarter of this year of bed sales of opened and the third quarter. We're pleased to announce that we've broken ground on stores and Deptford as well as the Ocean city that we expect to open and during 2021.
The additional highlights include.
Growth per store of the average growth rate per store, the new stores that we opened the glass billings I'm, sorry, and deposits was $38 million.
And if you look at all of the stores combined we're still growing stores and an average of $33 million of store, which is tremendous growth.
We also saw and our cost of money went down.
And we did see a decline and the cost of funds, which led to the point, where we talk about the improvement and our margin during the fourth quarter. If you compare Q4 to Q3, we saw the margin improved to four 3% compared to $2 35.
The improvement and the decrease and the cost of funds drove that as well as the fact that the compressed margin partially was driven by the PPP loans that we carry on the books.
For those that aren't familiar of those loans carry a rate of 1%.
We also had a tremendous year and our residential mortgage division and our mortgage team originated more than $700 million and loans. During 2020 and this is a record high for this group the had a tremendous year the.
The low rate environment as has assisted and that we've seen some refinancings, but we're also seeing really strong growth and our new home purchase originations.
Pleased with the performance of both mortgage.
We also originated we also raised capital during 2020 during the third quarter, we announced the $50 million capital range, we issued <unk>.
<unk> preferred stock this gives us the capital that we need to continue with the growth.
Net and trajectory of that world.
Deposit type Frank lights on page 10 for those and have our copy.
I talked the magic and the growth.
Total deposits, but demand is by far the.
Fastest growth.
Scene, and that assist and our and our decrease and the cost of funds and other things that we'd like to highlight the is the commercial deposits make up 45% of our total deposits and.
And I think this is indicative of our strong performance of the PPP program as well as our ongoing efforts to continue to build relationships throughout our footprint.
And this reflects my long time experience and the business that commercial lending over funds itself. If you look over time the C commercial deposits growth exceed commercial loan growth have always found it that way.
Alright go ahead, and when we look at the lending categories. We had a chart and our release on page 11 that shows our lending by the site.
And we saw strong growth and in our commercial.
Commercial and our owner occupied real estate commercial real estate as well as our residential mortgage loan book.
In addition, the PPP loans, we've got about $624 million still on the books, we continue to see forgiveness of on those loans come through as we get into the first quarter, we're starting to see the SBA accelerate on the forgiveness of those applications, though we expect those to wind down from a very low number as of the year goes on.
And that will help our NIM. It does help the NIM because of the 1% loans come off the books.
And we're hoping by the end of the second quarter. We've got most of those applications to the SBA and forget and we can take all of our fees, we received and the at that time, yet of the acceleration on the fees happens.
And when the when the loan is paid off of for debt.
Lastly, there is a chart in here on asset quality.
Yes.
Of course.
We had I'm sorry, as we reiterate and I'm, sorry page 11, non performing assets to total assets two 8% our charge offs 0.0 of 5%.
Our allowance for loan losses compared to gross loans continues to grow excluding the PPP impact the.
And that amount of debt level is range of 64 basis points and our allowance for loan losses to nonperforming loans is now over 100%.
At this point I'll turn it back the Vernon.
Capital of the numbers speak for themselves.
That's all we have and the press release, we'd be happy to open the floor now and a questions you'd like to ask please please do so.
Thank you and we have a question. Please press Star then one on your Touchtone phone if you wish to be removed from the queue. Please press the pound or the hash key there will be of delay before the first question is announced and review.
The new Speaker phone you may need to pick up the handset first before pressing the numbers. Once again if you have the question. Please press Star then one on your Touchtone phone.
And we have a question from Frank Schiraldi from Piper Sandler. Please go ahead.
Good morning.
Hey, guys. Let me ask you about Triple P. I mean, you guys did such an exceptional job and the first round just wondering how significant do you think the the <unk>.
Second round here could be for FRB cash.
I don't think we know the answer Frank So it's sort of the guests theres not the while demand for round two that we saw in round one but there is definitely demand for round two round two has.
Targeted provisions per hotel businesses, and food businesses, so you're going to see more demand there.
We don't know how to guess what the amount is going to be but we are seeing demands now we are seeing at but I would be surprised if we saw the flood that we saw in the spring of 'twenty one 'twenty.
Okay.
And then mortgage banking, obviously has been quite strong and even the fourth quarter, which seasonally usually the little bit weaker and the industry.
And was much stronger than the third quarter. So just wondering if you can talk about the pipeline and your thoughts for.
At the beginning of 2021 at least from that and the revenue quality low growth of up Andy Logue runs at growth Andy watch bring us up to date and pipelines are still very strong right now.
Suburban business primarily rates of growth.
And again, we haven't seen a slowdown other than two weeks around Christmas.
Volumes of strong I think what free cash.
A little different and what we've seen it's partially range driven of course, but it may be more driven and AD market the.
People moving to the.
Barb and markets, they are buying new homes or refinance the and youre seeing that in the New York market.
We haven't seen that slowdown and the fourth quarter right now.
Yes.
Non has not slowed.
Okay.
And then just finally on deferrals.
Down.
Quite.
Significantly obviously down under 1% of loans just wondering in your experience.
Have all of the loans that have come off deferral of have day, just basically gone back to paying under the original terms are there any modifications.
And that have been made to get those off the barrel.
I think the answer to that question is yes, and yes, and there's probably some more twists and turns still it none of them have glass for all of them.
The trouble debt restructure I don't think and Andy right now.
But they all take slightly.
And then from.
Some of the loans have been repaid some of them been repaid by the U S.
EBITDA some of our deferred loans of our SBA seven loans and so they have a different twist to but there is no real common trend out.
Okay. I mean is there any common threaten the on the stuff that has been modified is there any.
And a trend there in terms of what the modification has looked like because of just basically and expansion of <unk>.
Of the original terms.
Just broadly speaking.
Broadly speaking of the majority of the would be and extension of the terms.
And they are paying but the facilities of death rates.
Got you okay.
Thank you.
I was wondering I wanted to say to you Frank Hall on that.
But I forgot.
But the momentum is what we talked about and this bank and Q3 and the momentum is building and again in Q4, and we can see and and all of our lines of business and every market.
Thank you all.
Anybody else.
Next question comes from my question Bonnie from K VW. Please go ahead.
Hi, good morning, everyone.
Hi, Mike.
So the <unk> plenty of was the strong year for loan growth.
Can you just talk about your loan growth outlook and appetite for 'twenty, one and the key drivers there.
And that's true.
And Im not sure we know what the overall loan growth is going to be and the market because of the COVID-19, and is still up and the year, but as I said and quarter three.
And our tremendous participation in the PPP won.
One the loan program from.
The moved a tremendous number of new accounts that was deposits and loans, we see lots of new clients.
Particularly because of the work we did and the first round. So I'm optimistic about the growth, but it's hard to tell what America is going to look like and the next.
<unk>.
Okay understood.
And then.
Can you just talk about.
Your expectation for the NIM as well and.
Including in that conversation and the impacts from PPP This quarter and then how.
And how much opportunity might be from a cost of funds to drive that down.
Frank.
We read the minutes, what you do of the fed meetings and.
We are not projecting or expecting any change in rates. During 2021, So we would expect.
The NIM to remain consistent.
<unk> seen it over the last quarter or two however, you do bring up the PPP. So youll see PPP loans pay off and the first and second quarter, where we will shed 1% loans. However, youll see a pick up because we're going to accelerate the recognition of the revenue that we talked about which was deferred.
So that also runs through the margin so youll see youll see an increase from the PPP revenue.
But outside of that at the strip the PPP away we expect.
<unk>.
And the rate environment to remain at a cost of funds is going down or flat.
Dropped down into the fourth quarter, we think its leveled off and we've done a rate cut and we don't see much of our mix is improving all the time, we continue to see growth of demand deposits. As you pointed out on that chart that highlights the significant increase and noninterest bearing demand will always help us.
But there is not much room for error rate movements.
Okay. Thanks, and then can you just remind us of when you are adopting diesel and of the capital impact you expect on adoption.
So we had stated earlier that we intended on adopting the seasonal and the fourth quarter of 2012.
The economic aid.
Active was adopted or passed by Congress and the fourth quarter push the adoption for another year. So we're not required to adopt it until January of 'twenty and 'twenty two.
We have the ability to effectively adopted in January of 'twenty, one, but the requirement is January of 2022, and the fourth quarter.
We weren't allowed to adopt and in the fourth quarter. So so.
As of this time it is being deferred.
We can say that we're running a parallel comparison and we brought our seasonal calculation each quarter and compare it to the incurred loss method that we're currently.
Booking our muscle and our reserve of one.
And at this point, we are our reserve.
Under the CSO model would be lower than where it is at today. So we think we have a conservative number a good number of the loan loss allowance for loan losses.
So and make it clear if you adopted and and the fourth quarter. You wouldn't have had the makeup of divisional contribution to your loan loss reserve it would have been lower.
Okay.
Great. Thanks, Thanks for taking my questions. Thank.
Thank you.
And our next question comes from Doug Stevens from Morgan Stanley. Please go ahead.
I just tell all of them.
Hi.
And New York has changed since you opened a few branches up I wondered if you could talk about New York, we haven't heard about that lately and.
And New York is a different world right now we opened our two stores, we built the commercial loan team up there.
Our commercial launch of growing our deposits are growing mainly commercial so we expect strong growth and.
And this coming year in New York.
But we're probably not going to build and another store in New York City until we the <unk>.
Harman, what New York, particularly Manhattan, and it looks like but we're getting strong growth in deposits and loans from our lending teams.
Alright, thank you.
Yes.
As a reminder of you have the question. Please press Star then one on your Touchtone phone.
And we have no further questions at this time.
Thank you all.
Thank you all excellent. Thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.
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