Q1 2021 Republic First Bancorp Inc Earnings Call
Okay.
Welcome to the first quarter 2021 earnings Conference call. My name is Adrian and I'll be your operator for today's call.
At this time all participants are in a listen only mode. Later, we'll conduct a question and answer session.
During the question and answer session. If you have a question. Please press Star then one on your Touchtone phone. Please note. This conference is being recorded and now turn the call or the Frank Caballero CFO, Frank you may begin.
Good morning, and thanks for joining us today welcome to the first quarter earnings call for Republic First Bancorp, Inc.
Here in the room with me I have Vernon Hill, Chairman and CEO as well as Andrew Logue, our President and Chief operating Officer.
At this time I'll turn it over to Mr Hill.
Good morning. Thank you all for joining the call. We're pleased to report on your report on the financial profit by Sogou Republic Bank.
As we've said on prior calls of the momentum is building here as the power of Red model.
<unk> continues to show strength and every market net income for the quarter. After tax was $7 1 million of <unk> of share up over.
Compared to $4 1 million and the first quarter of last year and substantially up over the fourth quarter of 2020 the.
Profit includes the expense of the $3 million addition to our loan loss reserve as we've told you and the past we'd like to get the loan loss reserve to about 1% of loans the.
The gross we had the growth in the top line.
And we continue to enforce our jaws effect.
The 53% growth and the top line and noninterest expense for the quarter only grew 8% again deposits grew very strongly year over year deposits grew 48% the $4 billion $4 4 billion.
Again this quarter demand deposits are growing tremendously fast and now.
Go ahead, Frank just on on that.
Year over year, our noninterest bearing demand deposits grew over $500 million or 84% on a percentage basis, that's our fastest growing segment.
And those of you know me now we'd love to talk about store growth.
Uh huh.
Our new stores, the gl<expletive> cube, and the last 12 months of around $47 million of store and when you factor on some of the older stores Republic. The average is $45 million of store I can never accomplish that and the old days of commerce and that's an unbelievable number.
Loans grew.
44% year over year.
And that includes $600 million of PPP.
Asset quality is very important to us and remains very strong nonperforming <expletive>ets declined slightly to $2 seven.
Our total loan deferrals, Frank total of three loans three three customer relationships for a total of $3 million to $7 million and loans are far less of them. It's about 1% of the total portfolio and we don't see any trend.
Weakening and <expletive>et quality and I'll take a few minutes and go through some of the pages on the press release, where it's easier to read on page. Two just shows you the growth and <expletive>ets loans and deposits.
Quarter to year.
Year over year year over year of I'm reading this right without PPP deposits grew 48% of loans grew 44%.
On page three we've shown you the quarterly net income back to the first quarter of 2020 through the first quarter and you can see the the.
Regression of the bottom line, we've had five straight quarters of up.
PPP was a very important part of whats happened and this bank not only and what we've learned but the transformation.
Of the brand.
Why don't you.
Highlights of the yet and as we reported previously and the first round of PPP last year, we originated about $680 million and loans.
Through March 31st of this year in the second round of PPP, we've done on another $240 million and PPP loans that number continues to grow by the end of this we expect to have originated nearly $1 billion and PPP loans for our small business customers and as you said and we said and the last call and.
It's still true 50% of more of the PPP loans round, one and two are new customers to the bank because we filled the void that the very large banks.
Have created.
We have $16 million and.
The deferred fees from PPP won and we're getting additional fees and PPP to the right.
The combined deferral as of March 31, 16 million, which will carry forward over the life of these loans until the payroll.
On page four if you have the press release, we laugh about the loan deferrals and there was such a big deal last quarter.
Frank said, we have three of those relationships totaling 400.
And that was the peak, we had and we've reached the peak of nearly $444 million and Thats come all the way down the $3 million at the end of this quarter on three of the light levels.
Relationships.
Let me just hide the highlights of the margin the margin increased this quarter and some of that was the PPP fees.
The.
And I think those are the highlights of I forgot on anything right now.
I wanted to talk about C. So we continue to defer the adoption of seasonal as we're allowed to do under the economic.
And that was approved in December we will most likely wait until January one of 2022 to adopt the seasonal guidance for the allowance calculation.
Okay, we'll open it up wire way.
And by there.
Oh.
The answer the queue. Please press Star then one on your Touchtone phone line.
It was true move yourself from the queue. Please press star pounds of pound sign again to ask the questions. Please press Star then one on your touch comes on.
And the first question is from Brian its clarity from Piper Sandler Your line is open.
Alright, Thats, the Frank Frank or all of the good morning, everyone.
Frank.
I know I know banks are seeing and you guys are all the scheme Super strong deposit growth I'm wondering if you could just give a little more color on the drivers I recognize it's likely a combination of stuff, but whats the primary story is it.
The triple P and borrowers, bringing all of the funds as the new retail relationships the higher balances given the stimulus stimulus and what's the primary driver of that.
Yes, yes, and yes, the triple T have important and effect on this bank we've gathered a lot of mid size.
Okay.
On the ICL accounts from the big banks that had an effect and we see it every day PPP loans, we made a year or so ago are resulting in new relationships now so we see and all the time. So that's that's driver number one driver.
Driver number two is we're continuing to expand on our retail network, we were in New York.
It's just the combination of things.
And I think the size of Republic has gotten so that it's reinforcing the growth of our brands is much more well known and you might remember of Forbes named US The Numb America's number one bank for service and Thats had a really important effects on our brand Frank.
Yes, even in the first quarter of this year, which is typically a slower quarter for us as far as deposit growth because of customer needs and we grew $350 million in.
Deposits and more than half of that was driven by new account relationships new deposits into the bank.
The App and New York overtime will become more important and all the time, we're not billing amount of branch right now and New York that we see what's happening, but the commercial side of the business is very strong.
Great. Thank you and.
And then Brian and you mentioned the.
The 1% level in terms of I guess, the reserve to loan ratio the describing towards.
Just wondering given the strong revenue trends and the Triple P income do you think you'll get there over the next couple of quarters or do you get there with seats of what's what's the general timeline on that and the.
The 1% is just the range I guess, the smile habits, where everybody had reserves of 1% of loans.
What's just get us to the way <unk> eight or something like if you take out the PPP impact of it which we think will run off over the remainder of this year. We're in the 80 80 80 to 85 basis points range.
It will be driven by growth and it'll be driven by what happens to the economy.
Even if C. So we continue to run and seasonal parallel to our current model and as of March 31st we say and the release here. The as of March and then we would not be required to increase our reserve due to seasonal so.
And so we'll just manage it and monitor and according to the and Frank were a little vague.
We have room to add more to reserve, but you had kind of predict the loan growth numbers. So it's hard to give you a number but.
Eight one point out is a good range for us.
You remember the old days of Commerce, and we were growing so fast and Youre always you always had this question, but the I think this is a good number from here. The one is probably the range of the business.
And.
Okay, and then Frank just for modeling purposes can you give the the triple P contribution to NII this quarter, maybe versus what it was last quarter.
Yes, and the <unk>.
First quarter, it was approximately $7 million and speeds that were amortized as a result of.
Forgiveness of pay offs and that's that's about that's almost double from what we recognized and the fourth so it was about $3 million more than the fourth quarter, but remember we put an extra million dollars 3 million and the reserve. So it's almost the lie.
Okay. Thank you.
Thank you Brian.
And our next question comes from Michael Perito from <unk>. Your line is open.
Hi, Michael.
Hi, Vernon Hi, Frank Andy how are you guys.
Good thank you.
Good. Thanks for taking my question is just kind of couple I wanted to add.
On the clearly.
Good production from the PPP here.
And I'm curious.
You guys have any additional stature of willing to share and kind of the conversion rate of.
The 50% of which are our potential new clients are already kind of deposits account opened or anything like that and Thats 50 person.
That is.
And the 50% is not a projection and thats whats happened right Ryan.
And the first wave of the first round last year would enhance of those applications that we got were from non customers at the time and what Youre seeing and as I said earlier, Mike Theres a tail here, even we even though we did at <unk>.
<unk> and somebody last fall of just getting around the moving so it seems kind of have a long lifecycle.
And what was the other thing you asked well yeah. I was just curious on that point and you guys had any kind of early indications of our early stats about what that kind of conversion rates banner right. So the half that were new customers have half open deposit accounts of 20, or just anything like that or or not yet no. No. These are 50.
Percentage of the PPP customers have moved their deposits and they are borrowing accounts, though is is that right Ryan.
No I think Mike's question is so half of the applications were from non customers the conversion rate.
We'd have to drill down on and we don't have that revenue available, but I could follow up on that for you and call you back and then all the time, we'll try and disclose it to everybody. It's hard to actually track and some type of May open accounts of different names and.
It's not that easy to track, but thats the sense, we're getting and when on Mt.
New business I hear about PPP every visit.
Yeah, no that that'd be great. If that's something you guys could drill down on on ensuring the future just because it feels like it should be a pretty powerful numbers. So would be great to have some more specifics around it.
Secondly, I was just curious.
Of your expenses continue you asked could you do a nice job there I think I saw on the release there are a couple of new stores coming down the pipe. Just wondering if you of any update on kind of how we should be thinking about expense growth.
On.
Over the near future here.
And non non interest expense is basically flat and even compared to March of last year, it's up.
88%, so how should we model of expense growth.
Obviously, the new stores will have some impact.
The first quarter, we typically see merit increases and salaries, but we continue to monitor all of the expenses. So.
Remember <unk> talked on about commission income.
The so as you've probably seen the trend and are in our open mortgage the revenue from the residential mortgage business has grown with that the commissions and the payouts grow there and thats kind of tails off slightly youll see declines there so the pluses and minuses and the expenses should.
Should should maintain and single digit growth year over year, even with the new stores.
Okay and is there anything that could ex U.
Celebrate that because I'm just from my perspective, it really feels like the M&A related disruption and your core markets is on a high.
The trajectory here.
I think we've already seen quite a few large.
Transactions and both the Philadelphia, and New Jersey, New York marketplaces, but it feels like there could be even more to come in and just how do you guys kind of manage that balance right of taking advantage of of the growth and there are there any thoughts around that that you guys are willing to expand upon or fair.
Yes, we want to take advantage of it every chance, we get and all of the markets every merger helps us and every market that we're in you don't see youll see new stores being built but not like the old days, but you see it and recruiting commercial loan teams. When these banks get merged so you'll definitely see some gross promise there.
Great.
Excellent. Thank you for taking my questions guys I appreciate it.
Thank you Mike.
And our next question comes from James Pan with CPA Partners. Your line is open.
Hi, Thanks for taking my questions gentlemen.
Just to clarify things.
Were there any PPP fees within the first quarter.
Yes, the answer that we provided earlier of the $7 million worth of PPP fees that were amortized interest income during the quarter.
Okay, great and.
Going over your net interest income I noticed there was like a 60 bps increase in loan receivables can you talk from December 31 to March 31st can you give more color on on <unk>.
Why you were able to get a better yield on your loan receivable portfolio.
Included in that are the <unk> the fees from the PPP loans. So interest PPP feeds are reported as interest income in loans and the growing line. So that's the big driver there.
So if you were looking at your non interest income, which I thought were the fees were you also had a very good increase.
What was that increase.
Primarily residential mortgages.
We're also seeing some additional revenues from the new.
Visa deal that we announced last year, we converted this quarter. So there's revenue enhancements there they're the.
The primary drivers and and in addition to service fees on.
On deposit accounts and deposits continued to grow there'll be fee based revenue that comes along with the and most of you know commercial deposit accounts produced the most of these with your cash management services and the demand deposit growth is probably and commercial accounts, primarily restaurant of lot of it is yes.
Yeah.
Okay, great. Thanks.
Yes.
And just as a reminder, if you'd like to enter the queue. Please press star.
And then one on your Touchtone phone and again Thats star one to enter the queue and our next question comes from Bill Collins private Investor.
Okay No bill.
Hey, How're you doing Vernon.
From the beginning my mother used to work for Ya Lilly and for <unk>.
Commerce Bank.
I've been in the back of a long time.
A lot of money and continue to I tried to accumulate is there anything we can do to make this more attractive and get any.
I hear the same thing every earnings call.
And we beat all of the estimates top bottom and the.
<unk> <unk> per day.
And now it's Eric.
And it's our job to perform at the bank level of its our job to tell the stock story.
And I agree the stock is selling under what we think it's real value is and it's my job to go out and and get it up so.
No one on going on.
And you more than me.
Alright sounds good. Thank you Sir thank you.
And we have no further questions I'll now turn the call back over for final remarks.
Alright, where all of that we are thank you all.
Good day. Thank you. Thank you.
Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.
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