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RF

REPUBLIC FIRST BANCORP INC (FRBK)·Q1 2023 Earnings Summary

Executive Summary

  • Q1 2023 delivered a net loss to common of $9.7M (−$0.15 EPS) driven by sharp funding cost increases, a $3.1M Signature Bank preferred write-down, and elevated legal/professional fees; net interest margin fell to 1.62% from 2.69% YoY .
  • Deposits fell 2.7% QoQ, but deposit relationships rose 5.2% and balances increased in April; 76% of deposits were FDIC‑insured or fully collateralized, with total available liquidity of ~$1.4B and cash/equivalents up 212% QoQ to $153.2M .
  • Management suspended preferred dividends and deferred interest on junior subordinated debt to preserve capital/liquidity; capital ratios remained above regulatory minimums and “well capitalized” at the bank level .
  • Strategic realignment accelerated: exit of legacy mortgage origination, streamlined NYC commercial lending, and reciprocal deposit programs to refocus on core markets and improve profitability .
  • Street consensus (S&P Global) was unavailable for FRBK; thus beat/miss vs estimates cannot be assessed. Expect near‑term stock narrative to hinge on deposit stability, funding costs, capital actions, and execution on expense reductions (consensus unavailable via S&P Global).

What Went Well and What Went Wrong

What Went Well

  • Liquidity and deposit quality: cash and equivalents rose 211.7% QoQ to $153.2M; total available liquidity reached ~$1.4B; 76% of deposits insured/collateralized .
  • Relationship momentum: despite sector turmoil, deposit relationships increased 5.2% in Q1 and balances grew between March 31 and April 30 .
  • Portfolio mark recovery: fair value of AFS/HTM improved $43.9M (+9.7%) vs Dec 31, 2022; management emphasized progress on restoring profitability and capital .

Quoted management: “We are highly focused on executing our strategy to restore profitability, improve capital levels and enhance shareholder value…seeing signs of progress as we move through the Company’s legacy headwinds.” – CEO Thomas X. Geisel .

What Went Wrong

  • Funding costs surged: total interest expense rose to $28.2M (+$24.9M YoY); average rate on interest‑bearing liabilities jumped to 2.52% (from 0.34% YoY), compressing NIM to 1.62% .
  • Earnings pressure: net interest income fell to $24.0M (−$12.1M YoY); non‑interest income fell by $3.1M YoY, including a $3.1M Signature Bank preferred write‑down .
  • Elevated OpEx and capital preservation: non‑interest expense was $37.2M (+$5.0M YoY), including $5.5M legal/audit/professional; board suspended preferred dividends and deferred interest payments to preserve capital .

Financial Results

Income and Profitability (Oldest → Newest)

MetricQ1 2022Q4 2022Q1 2023
Total Net Revenue ($USD Millions)$40.5 (NII $36.1 + Non‑interest $4.3) $37.8 (NII $32.9 + Non‑interest $4.9) $25.3 (NII $24.0 + Non‑interest $1.3)
Net Interest Margin (%)2.69% 2.25% 1.62%
Non‑Interest Expense ($USD Millions)$32.2 $36.4 $37.2
Provision for Credit Losses ($USD Millions)$(0.07) (credit) $0.76 $0.44
Net Income to Common ($USD Millions)$5.4 $(0.4) $(9.7)
Diluted EPS ($USD)$0.08 $(0.01) $(0.15)
Efficiency Ratio (%)79.52% 96.31% 147.32%

Funding Costs and Interest Expense

MetricQ1 2022Q4 2022Q1 2023
Total Interest Expense ($USD Millions)$3.3 $17.0 $28.2
Avg Rate on Interest‑Bearing Liabilities (%)0.34% 1.57% 2.52%
Deposit Interest Expense ($USD Millions)$3.0 $12.2 $18.6
Borrowings Interest Expense ($USD Millions)$0.06 $4.8 $9.6

Balance Sheet and Deposits

MetricQ1 2022Q4 2022Q1 2023
Total Assets ($USD Billions)$5.70 $6.05 $6.16
Loans Receivable ($USD Billions)$2.56 $3.13 $3.14
Cash & Equivalents ($USD Millions)$101.5 $49.2 $153.2
Total Deposits ($USD Billions)$5.31 $5.01 $4.88
Interest‑Bearing Deposits ($USD Billions)$3.91 $3.72 $3.67
Non‑Interest‑Bearing Deposits ($USD Billions)$1.40 $1.29 $1.21
Other Borrowings ($USD Billions)$0.00 $0.73 $0.97
Shareholders’ Equity ($USD Millions)$275.7 $192.7 $196.8
Loan/Deposit Ratio (%)——64.4%
FDIC‑Insured or Fully Collateralized Deposits (%)——>76%

Asset Quality and Capital

MetricQ1 2022Q4 2022Q1 2023
Nonperforming Loans ($USD Millions)$12.4 $15.5 $18.6
NPLs / Total Loans (%)0.49% 0.50% 0.59%
NPAs / Total Assets (%)0.22% 0.27% 0.31%
ACL / Total Loans (%)0.91% 0.83% 0.84%
Criticized Loans ($USD Millions)$18.5 $20.2 $22.1
Company Total Risk‑Based Capital (%)——10.42%
Company CET1 (%)——8.36%
Bank Total Risk‑Based Capital (%)——10.19%
Bank CET1 (%)——9.43%

Segment breakdown: Single reportable segment (Community Banking) .

KPIs: Closing share price: $5.16 (Q1 22), $2.15 (Q4 22), $1.36 (Q1 23) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Preferred Stock DividendsOngoingPaid as declaredSuspended (Series A Non‑Cumulative)Lowered (capital preservation)
Junior Subordinated Debt Interest (Due 2037)OngoingPaidDeferredLowered (liquidity/capital preservation)
Business Mix – Mortgage OriginationOngoingOperated jumbo legacy platformExit mortgage origination businessStrategic realignment
Business Mix – NYC Commercial LendingOngoingOperated NYC lending teamStreamlined; reduction in forceStrategic refocus on core markets
Deposit StrategyNear termStandard programsAdded reciprocal deposit programsExpanded deposit channels
Capital Raise ($125M announced 3/10/23)Near termProceeding to identify additional investorsPaused pending market stabilizationTiming adjusted

No formal numerical revenue/EPS/OpEx guidance disclosed.

Earnings Call Themes & Trends

Note: No Q1 2023 earnings call transcript was found; themes below reflect disclosures across filings/press releases.

TopicPrevious Mentions (Q3 2022)Previous Mentions (Q4 2022)Current Period (Q1 2023)Trend
Funding costs and NIMRates up 425 bps in 2022; risk to margins NIM down to 2.25% NIM 1.62%; avg liability rate 2.52% Deteriorating margin due to deposit/borrowing costs
Deposits and liquidityAssets +7% YoY; deposit base large; PPP wind‑down Deposits $5.01B Deposits $4.88B; 76% insured/collateralized; liquidity ~$1.4B Stabilizing via insurance collateralization and liquidity
Capital actions—Announced $125M raise (3/10) Paused raise; suspended preferred dividends; deferred interest Defensive capital preservation
Strategic focusCommunity banking segment —Exit mortgage origination; streamline NYC lending; focus core markets Refocusing to improve profitability
Legal/shareholder mattersLitigation updates and internal control corrections Elevated legal/pro fees $5.5M legal/audit/pro fees Elevated near term, expected to normalize post‑realignment
Securities valuationLarge unrealized losses with rising rates —Fair value improvement $43.9M since 12/31 Modest recovery with rate dynamics

Management Commentary

  • “Our strong community banking brand…allowed us to largely maintain steady deposit levels amid…uncertainty… We are highly focused on…restore profitability, improve capital levels…seeing signs of progress…lay the foundation for a successful future.” – Thomas X. Geisel, President & CEO .
  • “Today’s announcement is a critical milestone in our ongoing efforts to bring Republic current on its quarterly and annual filings… working diligently to… improve profitability and enhance… liquidity and capital position.” – Michael W. Harrington, CFO .
  • “Focus on our core business lines in our core markets… executing meaningful business realignment and efficiency initiatives to grow profitability… difficult decisions… best interests of the Company.” – CEO on exiting mortgage origination and streamlining NYC lending .
  • “Actions…laying the foundation for a more efficient, profitable business… protect shareholders from excessive and unnecessary dilution.” – CEO on pausing capital raise pending market stabilization .

Q&A Highlights

No Q1 2023 earnings call transcript was available; therefore, there were no analyst Q&A themes to report for the period (no earnings-call-transcript found for FRBK in 2023).

Estimates Context

  • Wall Street consensus (S&P Global) for FRBK Q1 2023 EPS and revenue was unavailable due to missing mapping, so we cannot assess beats/misses (consensus unavailable via S&P Global).
MetricQ1 2023 ConsensusActual Q1 2023
EPS ($)N/A (S&P Global consensus unavailable)$(0.15)
Revenue ($USD Millions)N/A (S&P Global consensus unavailable)$25.3 (NII + Non‑interest)

Key Takeaways for Investors

  • Funding cost shock is the core earnings headwind: liability rates jumped to 2.52%, compressing NIM to 1.62% and elevating efficiency ratio to 147%—watch deposit repricing pace and borrowing mix .
  • Deposit stability and quality improved: >76% insured/collateralized and liquidity ~$1.4B; April deposit growth suggests stabilization—key for risk perception amid sector volatility .
  • Capital preservation moves (suspending preferred dividends, deferring interest) reduce near‑term cash outflows; bank remains “well capitalized,” but equity optics are sensitive—monitor future capital raise timing/terms .
  • Strategic exits (mortgage origination) and focus on core markets should lower cost base over time; look for sequential declines in legal/pro fees and clearer expense trajectory post‑realignment .
  • Securities portfolio marks modestly improved; rate path remains a swing factor for AOCI and capital resilience—track duration/HTM composition and unrealized losses .
  • Asset quality steady but creeping: NPLs up to 0.59% of loans; ACL/loans ~0.84%—credit remains manageable; monitor CRE and construction exposures .
  • Near‑term trading: stock likely reacts to deposit updates, capital actions, and opex control; medium‑term thesis hinges on stabilizing NIM and executing cost realignment to restore profitability (consensus unavailable via S&P Global).

Citations: Q1 2023 earnings press release and 8‑K ; strategic/business updates ; capital update press release ; prior quarter context via 10‑Q (Q3 2022) .