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Republic First Bancorp: Strong Buy

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Upward estimate revisions on the back of strong second quarter results – including a 300% earnings surprise – have helped Republic First Bancorp Inc. achieve a Zacks #1 Rank (Strong Buy) on September 4. Moreover, this commercial and retail banking service provider has delivered positive earnings surprises in three of the last four quarters.

With a solid year-to-date return of 31.1%, this stock offers an attractive investment opportunity.

The Rank Driver

Better-than-expected second quarter earnings, solid loan growth and fundamental strength – including strong credit quality and capital ratios – are the primary rank drivers for this stock.

Republic First Bancorp reported its second quarter results on July 24 with earnings per share of 4 cents, beating the Zacks Consensus Estimate of a penny significantly by 300%. It also compared favorably with the year-ago loss of 2 cents. Robust results for the reported quarter were primarily aided by higher non-interest income, elevated net interest income and reduced provision for loan losses.

Net interest margin, which contracted 2 basis points on a year-over year basis to 3.59%, was the downside for the quarter.

Net interest income increased 6.7% to $8.0 million from $7.5 million in the year-ago quarter. The rise was primarily due to lower cost of funds. Non-interest income jumped 19.0% year over year to $2.5 million. Provision for loan losses skidded 66.7% from the year-ago quarter to $0.5 million. Non-interest expense remained almost in line with the prior-year quarter at $9.0 million.

Credit quality continued to exhibit improvement. Non-performing loans were $10.9 million, sliding down from $38.9 million as of June 30, 2011. Non-performing assets for the quarter were $17.0 million, plummeting significantly from $52.0 million in the year-ago quarter. Allowance for loan losses as a percentage of period-end loans declined to 1.55% from 2.36% in the prior-year quarter.    

As of June 30, 2012, Republic First Bancorp's total risk-based capital ratio was 12.87%, Tier 1 risk-based capital ratio was 11.62% and Tier 1 leverage ratio was 8.99%. Tangible book value per share came in at $2.59.

Earnings Estimate Revisions

One of two estimates has moved higher over the last 30 days for 2012 and 2013 each.

The Zacks Consensus Estimate for this year is up 50.0% to 12 cents per share, while the Zacks Consensus Estimate for the next year gained 25.0% to reach 10 cents. The Zacks Consensus Estimate for 2012 reflects a year-over-year improvement of about 112.6%.


Republic First Bancorp currently trades at a forward P/E of 17.6x, in line with the peer group average. On a price-to-book basis, the shares are trading at 0.8x, a 20.0% discount to the peer group average of 1.0x. Given the company's strong fundamentals, the valuation looks reasonable.

About the Company

Headquartered in Philadelphia, Pennsylvania, Republic First Bancorp is a bank holding company. It operates through 13 offices located in Abington, Ardmore, Bala Cynwyd, Plymouth Meeting, Media, and Philadelphia in Pennsylvania and Voorhees and Haddonfield in New Jersey through its subsidiary – Republic First Bank, which offers an array of credit and depository banking services. The company, which was founded in 1987, has a market capitalization of roughly $54.8 million.

Old Second Bancorp Inc. (OSBC - Free Report) is also a Zacks #1 Rank bank stock.

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