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Republic First Bancorp Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 10, 2011 05:22PM
Republic First Bancorp Inc. (FRBK) filed Quarterly Report for the period ended 2011-03-31.
Highlight of Business Operations:
Loans held for sale are comprised of loans guaranteed by the U.S. Small Business Administration (“SBA”) which the Company usually originates with the intention of selling in the future. During the first quarter 2011, the Company originated SBA loans totaling $13.7 million and transferred the guaranteed portion of those loans totaling $7.5 million to the loans held for sale category. The Company recognized total gains of $697,000 in the first quarter 2011 on the sales of SBA loans. Total SBA loans held for sale were $6.2 million at March 31, 2011. Loans held for sale, as a percentage of total Company assets, were less than 1% at March 31, 2011.
The loan portfolio represents the Company s largest asset category and is its most significant source of interest income. The Company s lending strategy is focused on small and medium size businesses and professionals that seek highly personalized banking services. The loan portfolio consists of secured and unsecured commercial loans including commercial real estate, construction loans, residential mortgages, automobile loans, home improvement loans, home equity loans and lines of credit, overdraft lines of credit and others. Commercial loans typically range between $250,000 and $5,000,000 but customers may borrow significantly larger amounts up to Republic s legal lending limit to a customer, which was approximately $16.4 million at March 31, 2011. Loans made to one individual customer even if secured by different collateral, are aggregated for purposes of the lending limit. Gross loans increased $10.5 million, to $630.9 million at March 31, 2011, compared to $620.4 million at December 31, 2010 mainly as a result of new originations in the commercial and industrial category.
Investment securities available-for-sale are investments which may be sold in response to changing market and interest rate conditions, and for liquidity and other purposes. The Company s investment securities available-for-sale consist primarily of U.S. Government agency mortgage-backed securities (MBS), agency collateralized mortgage obligations (CMO), municipal securities, corporate bonds and pooled trust preferred securities. Available-for-sale securities totaled $139.6 million at March 31, 2011, compared to $143.4 million at December 31, 2010. The decrease of $3.8 million was mainly attributable to principal and interest pay downs on MBS and CMO securities held in the investment portfolio. At March 31, 2011, the portfolio had a net unrealized loss of $679,000 compared to a net unrealized loss of $1.7 million at December 31, 2010.
The Company reported a net loss of $2.5 million, or $0.10 per share, for the three months ended March 31, 2011, as compared to a net loss of $3.9 million, or $0.37 per share, for the three months ended March 31, 2010.
Net interest income for both of the three month periods ended March 31, 2011 and 2010 was $7.4 million. Interest income decreased $1.1 million, or 10.6%, from $10.4 million for the three months ended March 31, 2010 to $9.3 million for the three months ended March 31, 2011, primarily due to a $103.4 million decrease in average interest earning assets. The reduction in interest earning assets was driven by a reduction in outstanding loans as a result of the intentional effort to reduce asset quality concerns in the commercial real estate loan portfolio. Investment securities also decreased as a result of early calls on agency bonds held in the investment portfolio. Interest expense decreased $1.1 million, or 36.7%, from $3.0 million for the three months ended March 31, 2010 to $1.9 million for the three months ended March 31, 2011, due to a 36 basis point decrease in the rate on average interest-bearing deposits outstanding and a $119.9 million decrease in average interest bearing liabilities. This decrease is the result of the Company s decision to reduce its dependence on the more volatile sources of funding found in the brokered and public fund certificate of deposit market.
Non-interest income increased $652,000 to $1.1 million during the three months ended March 31, 2011 compared to $475,000 during the three months ended March 31, 2010 primarily due to gains recognized on the sale of SBA loans during the first quarter of 2011. Non-interest expenses increased $587,000 to $9.0 million during the three months ended March 31, 2011 as compared to $8.4 million during the three months ended March 31, 2010 primarily due to an increase in carrying costs and write-downs associated with other real estate owned. Return on average assets and average equity from continuing operations were (1.17)% and (11.59)%, respectively, during the three months ended March 31, 2011 compared to (1.61)% and (22.68)%, respectively, for the three months ended March 31, 2010.
Stocks Discussed: FRBK,