Republic Bancorp, Inc. (NASDAQ: RBCAA), headquartered
in Louisville, Kentucky, is the holding company of Republic Bank
& Trust Company (the “Bank”).
Republic Bancorp, Inc. (“Republic” or the “Company”) is pleased
to report second quarter net income of $8.3 million and Diluted
Earnings per Class A Common Share of $0.40, both on par with the
second quarter of 2015 despite additional noninterest expenses
during the quarter resulting from transaction costs associated with
the Company’s completion of its Cornerstone Bancorp, Inc.
(“Cornerstone”) acquisition on May 17, 2016. Year-to-date net
income was $26.1 million, a $4.0 million, or 18%, increase from the
same period in 2015, resulting in return on average assets (“ROA”)
and return on average equity (“ROE”) of 1.19% and 8.81% for the
first six months of 2016.
Steve Trager, Republic’s Chairman and Chief Executive Officer,
commented: “While the successful completion of our Cornerstone
acquisition highlighted our second quarter, we continued to receive
solid contributions from all of our other operating segments.
Warehouse Lending, in particular, experienced solid growth with an
increase in its quarterly average loans of $121 million from the
first quarter of 2016. In addition, our Republic Processing Group
(“RPG”) segment experienced positive net income growth in two of
its small-dollar loan programs during the quarter. The solid
performance of our Company across all of our operating segments
continues to give me great optimism for the remainder of 2016 and
beyond.”
The following tables highlight Republic’s financial performance
for the second quarter and first six months of 2016 compared to the
same periods in 2015:
dollars in thousands, except per-share data
Highlights of Financial Performance
Three Months
Ended Six
Months Ended Jun. 30,
2016 Jun. 30, 2015
$ Change
% Change Jun. 30, 2016
Jun. 30, 2015
$ Change
% Change Income before income taxes
$
12,699 $ 12,474 $ 225 2 %
$ 39,327 $ 33,223 $
6,104 18 % Net Income*
8,340 8,320 20 0 %
26,075
22,108 3,967 18 % Diluted Earnings per Class A Share
0.40
0.40 - 0 %
1.26 1.07 0.19 18 % ROA
0.77 % 0.85
% NA -9 %
1.19 % 1.12 % NA 6 % ROE
5.59
% 5.78 % NA -3 %
8.81 % 7.74 % NA 14 %
dollars in thousands Core Banking Net Income by Origination Channel
Three Months Ended Six Months Ended
Segment/Origination Channel Jun. 30,
2016 Jun. 30, 2015
$ Change
% Change Jun. 30, 2016 Jun.
30, 2015
$ Change
% Change Traditional Banking segment*:
Traditional Network
$ 4,986 $ 4,173 $ 813 19 %
$ 10,958 $ 9,533 $ 1,425 15 % Correspondent Lending
200 384 (184 ) -48 %
388 381 7 2 % 2016-Cornerstone
Acquisition
(330 ) - (330 ) NM
(488 ) -
(488 ) NM 2012-FDIC-Acquired Loans
353 1,268 (915 ) -72 %
1,265 1,257 8 1 % Digital Bank Initiative
(249 )
- (249 ) NM
(413 )
- (413 ) NM
Total Traditional Banking segment
4,960 5,825 (865 ) -15 %
11,710 11,171 539 5 % Warehouse Lending segment*
1,622 1,779 (157 ) -9 %
2,846 2,893 (47 ) -2 %
Mortgage Banking segment*
332
51 281 551 %
426 186
240 129 % Total Core Banking*
$ 6,914
$ 7,655 $
(741 ) -10 %
$
14,982 $
14,250 $ 732 5
%
*See Segment Data in the back of this
Earnings ReleaseNA – Not applicableNM – Not meaningful
Second Quarter Impact of the Company’s
Cornerstone Acquisition
As previously noted, the Company completed its acquisition of
Cornerstone on May 17, 2016. As a result of the completion of the
merger, the Company incurred pre-tax charges during the quarter
totaling $704,000 for conversion-related expenses, professional
fees and compensation-related expenses for Cornerstone employees
acquired as part of the acquisition. As expected, the Cornerstone
acquisition contributed a net after-tax loss of $330,000 to the
Company’s operating results for the second quarter of 2016 as a
consequence of these day-one expenses. Net income from the
Cornerstone acquisition is expected to be accretive to the
Company’s overall operating results on a quarterly basis going
forward, as well as cumulatively for its first twelve months of
operations post-acquisition.
Results of Operations for the Second
Quarter of 2016 Compared to the Second Quarter of
2015
Core Bank(1) – Net income from Core Banking was
$6.9 million for the second quarter of 2016, a decrease of
$741,000, or 10%, from the second quarter of 2015. Comparability
between the two quarters was impacted by the previously mentioned
acquisition of Cornerstone and a $1.1 million reduction in loan
accretion income from the second quarter of 2015, which resulted
from continued paydowns and payoffs in the Company’s loan
portfolios obtained through its 2012-FDIC assisted
transactions.
Net interest income at the Core Bank increased to $33.4 million
during the second quarter of 2016, a $2.8 million, or 9%, increase
over the second quarter of 2015. The overall change in the Core
Bank's net interest income for the second quarter of 2016 is
further segmented by its origination channels in the table
below:
Net Interest Net
Interest
Income Income (in
thousands)
2nd Quarter
2nd Quarter $ % Origination Channel
2016 2015 Change
Change Traditional Network
$ 27,715 $ 25,265 $
2,450 10 % Warehouse Lending
3,790 3,505 285 8 %
Correspondent Lending
426 171 255 149 % 2016-Cornerstone
Acquisition
931 - 931 NM 2012-FDIC Acquired Loans
505 1,620
(1,115 ) -69 % Total Core Bank Net
Interest Income
$ 33,367
$ 30,561 $
2,806 9 %
NM – Not meaningful
The increase in net interest income was primarily the result of
a $290 million, or 9%, year-over-year increase in the Core Bank’s
quarterly average loans from the second quarter of 2015 to the
second quarter of 2016. The strong growth in average loans
outstanding more than offset the negative impact to the Core Bank’s
net interest income resulting from a decrease of three basis points
to its net interest margin from the second quarter of 2015 to the
second quarter of 2016.
The overall change in the Core Bank’s average loan balances by
origination channel is presented below:
Average Average
Quarterly Quarterly (in
thousands)
Loans Loans $ % Origination Channel
Jun. 30, 2016 Jun. 30, 2015
Change Change Traditional Network
$ 2,698,166 $ 2,510,706 $ 187,460 7 % Warehouse
Lending
413,135 396,934 16,201 4 % Correspondent Lending
239,221 234,411 4,810 2 % 2016-Cornerstone Acquisition
93,914 - 93,914 NM 2012-FDIC Acquired Loans
20,879 33,247
(12,368 ) -37 % Total Core Bank Loans
$ 3,465,315 $
3,175,298 $ 290,017 9
%
NM – Not meaningful
The following factors were the primary drivers of the changes in
the Core Bank’s average loan balances and net interest income by
origination channel for the second quarter of 2016 as compared to
the second quarter of 2015:
- The Core Bank’s Traditional Network
experienced solid overall loan growth, with particularly strong
growth in the quarterly average balance from the second quarter of
2015 to the second quarter of 2016 for the following portfolios:
$64 million in Commercial Real Estate (“CRE”); $56 million in
Commercial & Industrial (“C&I”); $41 million in Home Equity
Lines of Credit (“HELOCs”); and $18 million in Indirect Auto.
Growth in the commercial-related categories was primarily driven by
a strong 2015 production year from the Core Bank’s Commercial and
Corporate Banking Department. Year-over-year growth in HELOCs was
driven primarily by a successful first-year-introductory-rate
promotion, while growth in Indirect Auto loans was driven by the
Company’s Dealer Services Department.
- Within the Warehouse Lending
(“Warehouse”) segment, net interest income remained solid when
compared to the second quarter of 2015, as usage of Warehouse lines
of credit remained relatively high among the Core Bank’s clients
during the quarter. Average Warehouse loan balances for the second
quarter of 2016 were $413 million, a $16 million increase from a
strong second quarter of 2015. The yield for Warehouse lines of
credit during the second quarter of 2016 increased 28 basis points
from the same period in 2015, as Warehouse yields were positively
impacted by an increase in short-term interest rates.
- While the Core Bank’s average balance
of correspondent loans increased only $5 million from the second
quarter of 2015, its period-end balances within this portfolio
decreased $87 million. The decrease in the period-end balances for
correspondent loans resulted primarily from a reclassification of
$74 million of these loans into the held-for-sale category, as
management decided in late June to sell a portion of this portfolio
in order to further enhance its overall liquidity position. The
Company expects the sale to close in late July 2016.
- With the Company’s Cornerstone
mid-quarter acquisition occurring as of the close of business on
May 17, 2016, the Core Bank benefitted from 44 days of net interest
income from the acquired Cornerstone assets and liabilities.
- The Core Bank’s 2012 FDIC-assisted
transactions, as expected, contributed $1.1 million less in net
interest income during the second quarter of 2016 compared to the
same period in 2015, partially offsetting the positive variances
noted above. Overall, accretion income from the 2012 FDIC-assisted
transactions contributed only two basis points to the Core Bank’s
net interest margin during the second quarter of 2016 compared to
14 basis points for the same period in 2015.
The Core Bank’s provision for loan and lease losses remained
favorably low for the second quarter of 2016. Provision expense for
the second quarter of 2016 included one notable provision of
$330,000 associated with one C&I relationship. The remaining
provision expense for the second quarter of 2016 and 2015 primarily
represented an increase in general loss reserves, driven by the
growth in the Core Bank’s loan portfolio during the respective
quarters.
The table below illustrates the Core Bank’s well-regarded credit
quality ratios for the most recent quarter ends and the previous
three calendar year ends:
As of and for the: Quarter Ending:
Year Ending:
Core Banking Credit Quality Ratios
Jun. 30, 2016 Mar. 31, 2016
Dec. 31, 2015 Dec. 31, 2014 Dec.
31, 2013 Nonperforming loans to total loans
0.54 % 0.60 % 0.66 % 0.78 % 0.81 %
Nonperforming assets to total loans (including OREO)
0.58 % 0.63 % 0.70 % 1.15 % 1.47 %
Delinquent loans to total loans
0.28 %
0.25 % 0.35 % 0.52 % 0.63 % Net charge-offs to
average loans
0.05 % 0.04 % 0.05 % 0.08
% 0.18 % (Annualized as of 6/30/16 and 3/31/16) OREO = Other
Real Estate Owned
Noninterest income for the Core Bank was $8.0 million during the
second quarter of 2016 compared to $7.2 million for the second
quarter of 2015. Impacting the Core Bank’s noninterest income
comparisons between the second quarters of 2016 and 2015 were the
following:
- Mortgage banking income increased
$336,000 due to an increase in home-purchase loans combined with a
rise in refinance activity. Such refinance activity resulted from a
downturn in long-term interest rates and the subsequent increase in
customer demand for long-term fixed rate loan products. As a
result, secondary-market loan originations increased from $50
million during the second quarter of 2015 to $59 million for the
second quarter of 2016.
- Interchange fees increased $351,000,
primarily due to an increase in debit-card interchange revenue. The
higher revenue for debit card related transactions was primarily
the result of growth in retail checking accounts and an increase in
customer use of signature-based transactions, which grew 23% on a
quarter-over-quarter basis.
- Net gains (losses) on other real estate
owned (“OREO”) improved $235,000, as the Bank’s OREO required no
mark-to-market charges during the second quarter of 2016 compared
to $220,000 in such charges during the same period in 2015.
Core Bank noninterest expenses increased $3.9 million, or 15%,
from the second quarter of 2015 to the same period in 2016. The
increase was primarily due to higher salary expense, as the Core
Bank, excluding the acquired Cornerstone employees, added 76
additional full-time equivalent employees over the previous 12
months. Additionally, as previously discussed, the Core Bank
incurred approximately $704,000 in pre-tax transaction-related
expenses for its Cornerstone acquisition.
Republic Processing Group (“RPG”)
RPG recorded net income of $1.4 million for the second quarter
of 2016 compared to net income of $665,000 during the second
quarter of 2015. A notable part of this increase was from a rise in
net income associated with RPG’s Republic Credit Solutions (“RCS”)
small-dollar loan division, which contributed a net loss to RPG of
$142,000 during the second quarter of 2015, as compared to net
income of $962,000 during the second quarter of 2016. The increased
profitability within the RCS division resulted primarily from a $59
million increase in small-dollar loan origination volume for the
quarter, which generated a solid increase in fee income as the
majority of these loans were sold subsequent to origination. In
addition, the balances for the loans retained by RPG, generating an
on-going spread, increased from $6 million at June 30, 2015 to $12
million at June 30, 2016. Loan balances are expected to increase
modestly as RPG continues to prudently grow its overall small
dollar program.
Conclusion
“As we enter the second half of 2016, we are excited about the
many initiatives that we have on-going at the Company. Front and
center of these initiatives is the rollout of our new,
separately-branded, digital banking platform, which remains on
schedule to launch in the fall. We plan to use this new platform to
complement our existing brick-and-mortar locations, and if
successful, expand our deposit reach over the long term. Other
notable initiatives for the remainder of 2016 include:
- The completion of our core systems’
merger with Cornerstone’s legacy systems on July 22nd, which should
allow us to capitalize on the operational synergies of the
transaction;
- The relocation of our Cincinnati, Ohio,
banking center to a larger, more prominent facility; and
- The rollout of our new Dealer Floor
Plan Lending platform, to further diversify our loan product mix
and further complement our Indirect Auto Lending platform.
We continue to be excited about these and all opportunities
available to us as a nimble and well-capitalized, $4.6 billion
bank. We look forward to finishing the year strong, as we remain
steadfast in our desire to provide great value to our customers and
shareholders,” concluded Trager.
Republic Bancorp, Inc. (the “Company”) is the parent company of
Republic Bank & Trust Company (the “Bank”). The Bank currently
has 44 banking centers: 32 banking centers in 12 Kentucky
communities - Covington, Crestwood, Elizabethtown, Florence,
Frankfort, Georgetown, Independence, Lexington, Louisville,
Owensboro, Shelbyville and Shepherdsville; three banking centers in
southern Indiana – Floyds Knobs, Jeffersonville and New Albany; six
banking centers in five Florida communities – Largo, Port Richey,
St. Petersburg, Seminole, Temple Terrace; two banking centers in
Tennessee – Cool Springs (Franklin) and Green Hills (Nashville);
and one banking center in Blue Ash (Cincinnati), Ohio. The Bank
offers internet banking at www.republicbank.com. The Company has
$4.6 billion in assets and is headquartered in Louisville,
Kentucky. The Company’s Class A Common Stock is listed under the
symbol “RBCAA” on the NASDAQ Global Select Market.
Republic Bank. It’s just easier here.®
Forward-Looking Statements
This press release contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995. The forward-looking statements in the preceding paragraphs
are based on the following: our current expectations and
assumptions regarding our business; changes in interest rates; the
ability to develop products and strategies in order to meet the
Company’s long-term strategic goals; the ability of the Company to
integrate acquired operations, including obtaining synergies,
integration objectives and anticipated timelines; the ability to
close on future acquisitions; the overall economy; and other future
conditions. Because forward-looking statements relate to the
future, they are subject to inherent uncertainties, risks and
changes in circumstances that are difficult to predict. Our actual
results may differ materially from those contemplated by the
forward-looking statements. We caution you therefore against
relying on any of these forward-looking statements. They are
neither statements of historical fact nor guarantees or assurances
of future performance. Important factors that could cause actual
results to differ materially from those in the forward-looking
statements include the actual timing, magnitude and frequency of
interest rate changes, as well as the actual changes in market
conditions and the application and timing of various management
strategies as compared to those projected in our interest rate
model. Additionally, actual results could differ materially from
the interest rate model if interest rates do not move equally
across all points on the yield curve and based upon other factors
disclosed from time to time in the Company’s filings with the U.S.
Securities and Exchange Commission, including those factors set
forth as “Risk Factors” in the Company’s Annual Report on Form 10-K
for the period ended December 31, 2015. These forward-looking
statements are made only as of the date of this release, and the
Company undertakes no obligation to release revisions to these
forward-looking statements to reflect events or conditions after
the date of this release.
Republic Bancorp, Inc. Financial
InformationSecond Quarter 2016 Earnings Release(all
amounts other than per share amounts, number of employees and
number of banking centers are expressed in thousands unless
otherwise noted)
Balance Sheet Data
Jun. 30, 2016 Dec. 31, 2015 Jun. 30,
2015 Assets: Cash and cash equivalents $ 142,979 $
210,082 $ 92,766 Investment securities 551,027 555,785 499,682
Loans held for sale 94,658 4,597 11,819 Loans 3,691,323 3,326,610
3,323,977 Allowance for loan and lease losses
(29,308 ) (27,491
) (25,248 ) Loans,
net 3,662,015 3,299,119 3,298,729 Federal Home Loan Bank stock, at
cost 28,208 28,208 28,208 Premises and equipment, net 42,956 31,106
33,560 Goodwill 16,313 10,168 10,168 Other real estate owned
("OREO") 1,503 1,220 2,920 Bank owned life insurance ("BOLI")
60,986 52,817 52,117 Other assets and accrued interest receivable
46,277 37,187
36,250 Total assets
$
4,646,922 $ 4,230,289
$ 4,066,219
Liabilities and Stockholders' Equity: Deposits:
Noninterest-bearing $ 867,095 $ 634,863 $ 598,572 Interest-bearing
1,988,952 1,852,614 1,681,038
Total deposits 2,856,047 2,487,477 2,279,610
Securities sold under agreements to repurchase and other short-term
borrowings 126,124 395,433 229,825 Federal Home Loan Bank advances
987,500 699,500 916,500 Subordinated note 45,364 41,240 41,240
Other liabilities and accrued interest payable 36,864
30,092 26,072 Total liabilities
4,051,899 3,653,742 3,493,247 Stockholders' equity
595,023 576,547
572,972 Total liabilities and
Stockholders' equity
$ 4,646,922
$ 4,230,289 $
4,066,219 Average Balance Sheet
Data Three Months Ended Jun. 30,
Six Months Ended Jun. 30, 2016
2015 2016 2015
Assets: Investment securities, including FHLB stock $
579,027 $ 531,402 $ 580,448 $ 528,161 Federal funds sold and other
interest-earning deposits 95,204 32,300 197,664 86,933 Loans and
fees, including loans held for sale 3,479,397 3,180,127 3,386,255
3,105,014 Total interest-earning assets 4,153,628 3,743,829
4,164,367 3,720,108 Total assets 4,351,843 3,925,312 4,394,343
3,934,868
Liabilities and Stockholders' Equity:
Noninterest-bearing deposits $ 805,718 $ 601,371 $ 861,204 $
660,150 Interest-bearing deposits 1,980,310 1,703,982 1,942,014
1,670,168
Securities sold under agreements to
repurchase and other short-term borrowings
267,574 335,530 337,636 363,321 Federal Home Loan Bank advances
627,335 646,737 589,709 607,554 Subordinated note 43,234 41,240
42,237 41,240 Total interest-bearing liabilities 2,918,453
2,727,489 2,911,596 2,682,283 Stockholders' equity 596,795 575,653
592,194 571,600
Republic Bancorp, Inc. Financial
InformationSecond Quarter 2016 Earnings Release
(continued)(all amounts other than per share amounts, number of
employees and number of banking centers are expressed in thousands
unless otherwise noted)
Income Statement Data Three
Months Ended Jun. 30, Six Months Ended Jun.
30, 2016 2015 2016
2015 Total interest income(2) $ 40,140 $
35,722 $ 84,155 $ 69,483 Total interest expense
4,563 4,664
9,144 9,403 Net
interest income 35,577 31,058 75,011 60,080 Provision for
loan and lease losses 1,814 904 7,000 1,089 Noninterest
income: Service charges on deposit accounts 3,282 3,247 6,422 6,286
Net refund transfer fees 1,909 1,907 18,987 17,242 Mortgage banking
income 1,560 1,224 2,821 2,577 Interchange fee income 2,217 2,044
4,340 4,238 Republic Processing Group program fees 664 169 963 397
Gain on call of security available for sale - 88 - 88 Net gains
(losses) on OREO 80 (155 ) 328 (274 ) Increase in cash surrender
value of BOLI 369 353 708 702 Other
721
608 1,154
1,215 Total noninterest income
10,802 9,485
35,723 32,471
Noninterest expenses: Salaries and employee benefits 17,814 14,323
34,897 29,600 Occupancy and equipment, net 5,109 5,142 10,528
10,343 Communication and transportation 872 771 1,945 1,817
Marketing and development 1,190 977 1,697 1,562 FDIC insurance
expense 480 474 1,138 1,148 Bank franchise tax expense 647 847
3,098 3,248 Data processing 1,543 1,092 2,876 2,058 Interchange
related expense 1,047 931 1,951 1,938 Supplies 240 219 689 580 OREO
expense 116 120 196 339 Legal and professional fees 604 528 1,427
2,143 Other
2,204 1,741
3,965 3,463
Total noninterest expenses
31,866
27,165 64,407
58,239 Income before income tax expense
12,699 12,474 39,327 33,223 Income tax expense
4,359 4,154
13,252 11,115 Net
income
$ 8,340 $
8,320 $ 26,075
$ 22,108
Republic Bancorp, Inc. Financial
InformationSecond Quarter 2016 Earnings Release
(continued)(all amounts other than per share amounts, number of
employees and number of banking centers are expressed in thousands
unless otherwise noted)
Selected Data and Statistics
As of and for the As of and for the
Three Months Ended Jun. 30, Six Months Ended Jun. 30,
2016 2015 2016
2015 Per Share Data: Basic average shares
outstanding 20,947 20,860 20,956 20,859 Diluted average shares
outstanding 20,958 20,941 20,966 20,939 End of period shares
outstanding: Class A Common Stock 18,617 18,602 18,617 18,602 Class
B Common Stock 2,245 2,245 2,245 2,245 Book value per
share(3) $ 28.52 $ 27.48 $ 28.52 $ 27.48 Tangible book value per
share(3) 27.44 26.76 27.44 26.76 Earnings per share: Basic
earnings per Class A Common Stock $ 0.40 $ 0.40 $ 1.26 $ 1.07 Basic
earnings per Class B Common Stock 0.37 0.37 1.14 0.97 Diluted
earnings per Class A Common Stock 0.40 0.40 1.26 1.07 Diluted
earnings per Class B Common Stock 0.37 0.36 1.14 0.97 Cash
dividends declared per share: Class A Common Stock $ 0.209 $ 0.198
$ 0.407 $ 0.385 Class B Common Stock 0.190 0.180 0.370 0.350
Performance Ratios: Return on average assets 0.77 %
0.85 % 1.19 % 1.12 % Return on average equity 5.59 5.78 8.81 7.74
Efficiency ratio(4) 69 67 58 63 Yield on average interest-earning
assets 3.87 3.82 4.04 3.74 Cost of interest-bearing liabilities
0.63 0.68 0.63 0.70 Cost of deposits(5) 0.19 0.18 0.20 0.19 Net
interest spread 3.24 3.14 3.41 3.04 Net interest margin - Total
Company 3.43 3.32 3.60 3.23 Net interest margin - Core Bank(1) 3.28
3.31 3.19 3.25
Other Information: End of
period FTEs(6) - Total Company 883 751 883 751 End of period
FTEs(6) - Core Bank 818 699 818 699 Number of banking centers 44 40
44 40
Republic Bancorp, Inc. Financial
InformationSecond Quarter 2016 Earnings Release
(continued)(all amounts other than per share amounts, number of
employees and number of banking centers are expressed in thousands
unless otherwise noted)
Credit Quality Data and Statistics
As of and for the As of and for
the Three Months Ended Jun. 30, Six Months Ended Jun.
30, 2016 2015 2016
2015 Credit Quality Asset Balances:
Loans on nonaccrual status $ 18,778 $ 24,624 $ 18,778 $ 24,624
Loans past due 90-days-or-more and still on accrual 1,178
- 1,178 - Total
nonperforming loans 19,956 24,624 19,956 24,624 OREO 1,503
2,920 1,503 2,920
Total nonperforming assets $ 21,459 $ 27,544 $ 21,459
$ 27,544 Total delinquent loans $ 10,607 $ 11,355 $
10,607 $ 11,355
Credit Quality Ratios - Total
Company: Nonperforming loans to total loans 0.54 % 0.74
% 0.54 % 0.74 % Nonperforming assets to total loans (including
OREO) 0.58 0.83 0.58 0.83 Nonperforming assets to total assets 0.46
0.68 0.46 0.68 Allowance for loan and lease losses to total loans
0.79 0.76 0.79 0.76 Allowance for loan and lease losses to
nonperforming loans 147 103 147 103 Delinquent loans to total
loans(7) 0.29 0.34 0.29 0.34 Net charge-offs to average loans
(annualized) 0.46 0.04 0.31 0.02
Credit Quality Ratios -
Core Bank(1): Nonperforming loans to total loans 0.54 %
0.74 % 0.54 % 0.74 % Nonperforming assets to total loans (including
OREO) 0.58 0.83 0.58 0.83 Nonperforming assets to total assets 0.47
0.68 0.47 0.68 Allowance for loan and lease losses to total loans
0.73 0.75 0.73 0.75 Allowance for loan and lease losses to
nonperforming loans 135 102 135 102 Delinquent loans to total
loans(7) 0.28 0.34 0.28 0.34 Net charge-offs to average loans
(annualized) 0.05 0.04 0.04 0.03
Republic Bancorp, Inc. Financial
InformationSecond Quarter 2016 Earnings Release
(continued)(all amounts other than per share amounts, number of
employees and number of banking centers are expressed in thousands
unless otherwise noted)
Balance Sheet Data
Quarterly
Comparison Jun. 30, 2016 Mar. 31, 2016 Dec.
31, 2015 Sept. 30, 2015 Jun. 30, 2015
Assets: Cash and cash equivalents $ 142,979 $ 198,172 $
210,082 $ 90,731 $ 92,766 Investment securities 551,027 556,605
555,785 502,599 499,682 Loans held for sale 94,658 8,129 4,597
12,326 11,819 Loans 3,691,323 3,351,969 3,326,610 3,297,874
3,323,977 Allowance for loan and lease losses
(29,308 ) (31,475
) (27,491 )
(26,959 ) (25,248
) Loans, net 3,662,015 3,320,494 3,299,119 3,270,915
3,298,729 Federal Home Loan Bank stock, at cost 28,208 28,208
28,208 28,208 28,208 Premises and equipment, net 42,956 30,277
31,106 31,095 33,560 Goodwill 16,313 10,168 10,168 10,168 10,168
Other real estate owned 1,503 1,280 1,220 2,832 2,920 Bank owned
life insurance 60,986 53,156 52,817 52,465 52,117 Other assets and
accrued interest receivable
46,277
40,276 37,187
34,638 36,250
Total assets
$ 4,646,922
$ 4,246,765 $
4,230,289 $ 4,035,977
$ 4,066,219
Liabilities and Stockholders' Equity: Deposits:
Noninterest-bearing $ 867,095 $ 800,946 $ 634,863 $ 637,875 $
598,572 Interest-bearing 1,988,952 1,935,700
1,852,614 1,729,955
1,681,038 Total deposits 2,856,047 2,736,646 2,487,477
2,367,830 2,279,610
Securities sold under agreements to
repurchase and other short-term borrowings
126,124 319,893 395,433 309,624 229,825 Federal Home Loan Bank
advances 987,500 517,500 699,500 711,500 916,500 Subordinated note
45,364 41,240 41,240 41,240 41,240 Other liabilities and accrued
interest payable 36,864 39,929
30,092 31,071 26,072 Total
liabilities 4,051,899 3,655,208 3,653,742 3,461,265 3,493,247
Stockholders' equity
595,023
591,557 576,547
574,712
572,972 Total liabilities and Stockholders'
equity
$ 4,646,922 $
4,246,765 $ 4,230,289
$ 4,035,977 $
4,066,219 Average
Balance Sheet Data Quarterly Comparison Jun. 30,
2016 Mar. 31, 2016 Dec. 31, 2015 Sept. 30,
2015 Jun. 30, 2015 Assets: Investment securities,
including FHLB stock $ 579,027 $ 581,869 $ 595,739 $ 533,956 $
531,402 Federal funds sold and other interest-earning deposits
95,204 298,250 71,480 30,633 32,300 Loans and fees, including loans
held for sale 3,479,397 3,292,689 3,249,595 3,235,057 3,180,127
Total interest-earning assets 4,153,628 4,172,808 3,916,814
3,799,646 3,743,829 Total assets 4,351,843 4,436,843 4,088,016
3,971,501 3,925,312
Liabilities and Stockholders'
Equity: Noninterest-bearing deposits $ 805,718 $ 916,691 $
675,500 $ 609,641 $ 601,371 Interest-bearing deposits 1,980,310
1,903,721 1,774,526 1,740,553 1,703,982
Securities sold under agreements to
repurchase and other short-term borrowings
267,574 407,698 426,833 363,905 335,530 Federal Home Loan Bank
advances 627,335 552,082 567,163 616,509 646,737 Subordinated note
43,234 41,240 41,240 41,240 41,240 Total interest-bearing
liabilities 2,918,453 2,904,741 2,809,762 2,762,207 2,727,489
Stockholders' equity 596,795 587,593 578,573 577,185 575,653
Republic Bancorp, Inc. Financial
InformationSecond Quarter 2016 Earnings Release
(continued)(all amounts other than per share amounts, number of
employees and number of banking centers are expressed in thousands
unless otherwise noted)
Income Statement Data Three
Months Ended Jun. 30, 2016 Mar. 31,
2016 Dec. 31, 2015 Sept.
30, 2015 Jun. 30, 2015 Total
interest income(2) $ 40,140 $ 44,015 $ 36,842 $ 36,107 $ 35,722
Total interest expense
4,563
4,581 4,376
4,683 4,664 Net
interest income 35,577 39,434 32,466 31,424 31,058 Provision
for loan and lease losses 1,814 5,186 2,074 2,233 904
Noninterest income: Service charges on deposit accounts 3,282 3,140
3,330 3,399 3,247 Net refund transfer fees 1,909 17,078 49 97 1,907
Mortgage banking income 1,560 1,261 862 972 1,224 Interchange fee
income 2,217 2,123 2,148 1,967 2,044 Republic Processing Group
program fees 664 319 329 474 169 Gain on call of security available
for sale - - - - 88 Net gains (losses) on OREO 80 248 (19 ) (8 )
(155 ) Increase in cash surrender value of BOLI 369 339 353 348 353
Other
721 413
665 557
608 Total noninterest income
10,802 24,921
7,717 7,806
9,485 Noninterest expenses: Salaries and
employee benefits 17,814 17,083 13,194 15,297 14,323 Occupancy and
equipment, net 5,109 5,419 5,129 5,217 5,142 Communication and
transportation 872 1,073 984 951 771 Marketing and development
1,190 507 843 756 977 FDIC insurance expense 480 658 462 474 474
Bank franchise tax expense 647 2,451 640 846 847 Data processing
1,543 1,333 1,323 959 1,092 Interchange related expense 1,047 904
1,026 909 931 Supplies 240 449 292 229 219 OREO expense 116 80 250
146 120 Legal and professional fees 604 823 510 653 528 Other
2,204 1,761
2,194 1,801
1,741 Total noninterest expenses
31,866 32,541
26,847 28,238
27,165 Income before income tax expense
12,699 26,628 11,262 8,759 12,474 Income tax expense
4,359 8,893
3,844 3,119
4,154 Net income
$
8,340 $ 17,735
$ 7,418 $
5,640 $ 8,320
Republic Bancorp, Inc. Financial
InformationSecond Quarter 2016 Earnings Release
(continued)(all amounts other than per share amounts, number of
employees and number of banking centers are expressed in thousands
unless otherwise noted)
Selected Data and Statistics
As of and for the Three Months Ended Jun. 30, 2016
Mar. 31, 2016 Dec. 31,
2015 Sept. 30, 2015 Jun.
30, 2015 Per Share Data: Basic average shares
outstanding 20,947 20,904 20,876 20,848 20,860 Diluted average
shares outstanding 20,958 21,009 20,953 20,934 20,941 End of
period shares outstanding: Class A Common Stock 18,617 18,659
18,652 18,603 18,602 Class B Common Stock 2,245 2,245 2,245 2,245
2,245 Book value per share(3) $ 28.52 $ 28.30 $ 27.59 $
27.57 $ 27.48 Tangible book value per share(3) 27.44 27.58 26.87
26.84 26.76 Earnings per share: Basic earnings per Class A
Common Stock $ 0.40 $ 0.86 $ 0.36 $ 0.27 $ 0.40 Basic earnings per
Class B Common Stock 0.37 0.78 0.33 0.25 0.37 Diluted earnings per
Class A Common Stock 0.40 0.85 0.36 0.27 0.40 Diluted earnings per
Class B Common Stock 0.37 0.77 0.33 0.25 0.36 Cash dividends
declared per share: Class A Common Stock $ 0.209 $ 0.198 $ 0.198 $
0.198 $ 0.198 Class B Common Stock 0.190 0.180 0.180 0.180 0.180
Performance Ratios: Return on average assets
0.77 % 1.60 % 0.73 % 0.57 % 0.85 % Return on average equity 5.59
12.07 5.13 3.91 5.78 Efficiency ratio(4) 69 51 67 72 67 Yield on
average interest-earning assets 3.87 4.22 3.76 3.80 3.82 Cost of
interest-bearing liabilities 0.63 0.63 0.62 0.68 0.68 Cost of
deposits(5) 0.19 0.20 0.19 0.18 0.18 Net interest spread 3.24 3.59
3.14 3.12 3.14 Net interest margin - Total Company 3.43 3.78 3.32
3.31 3.32 Net interest margin - Core Bank(1) 3.28 3.12 3.17 3.29
3.31
Other Information: End of period FTEs(6)
- Total Company 883 817 785 769 751 End of period FTEs(6) - Core
Bank 818 756 726 712 699 Number of banking centers 44 40 40 40 40
Republic Bancorp, Inc. Financial
InformationSecond Quarter 2016 Earnings Release
(continued)(all amounts other than per share amounts, number of
employees and number of banking centers are expressed in thousands
unless otherwise noted)
Credit Quality Data and Statistics
As of and for the Three Months Ended Jun. 30,
2016 Mar. 31, 2016 Dec.
31, 2015 Sept. 30, 2015
Jun. 30, 2015 Credit Quality Asset Balances:
Loans on nonaccrual status $ 18,778 $ 19,907 $ 21,712 $ 23,143 $
24,624 Loans past due 90-days-or-more and still on accrual
1,178 - 224 43
- Total nonperforming loans 19,956 19,907 21,936
23,186 24,624 OREO 1,503 1,280
1,220 2,832 2,920 Total
nonperforming assets $ 21,459 $ 21,187 $ 23,156
$ 26,018 $ 27,544 Total delinquent loans $
10,607 $ 8,657 $ 11,731 $ 11,996 $ 11,355
Credit
Quality Ratios - Total Company: Nonperforming loans to
total loans 0.54 % 0.59 % 0.66 % 0.70 % 0.74 % Nonperforming assets
to total loans (including OREO) 0.58 0.63 0.70 0.79 0.83
Nonperforming assets to total assets 0.46 0.50 0.55 0.64 0.68
Allowance for loan and lease losses to total loans 0.79 0.94 0.83
0.82 0.76 Allowance for loan and lease losses to nonperforming
loans 147 158 125 116 103 Delinquent loans to total loans(7) 0.29
0.26 0.35 0.36 0.34 Net charge-offs to average loans (annualized)
0.46 0.15 0.19 0.06 0.04
Credit Quality Ratios - Core
Bank(1): Nonperforming loans to total loans 0.54 % 0.60
% 0.66 % 0.70 % 0.74 % Nonperforming assets to total loans
(including OREO) 0.58 0.63 0.70 0.79 0.83 Nonperforming assets to
total assets 0.47 0.51 0.55 0.65 0.68 Allowance for loan and lease
losses to total loans 0.73 0.78 0.78 0.78 0.75 Allowance for loan
and lease losses to nonperforming loans 135 131 117 111 102
Delinquent loans to total loans(7) 0.28 0.25 0.35 0.36 0.34 Net
charge-offs to average loans (annualized) 0.05 0.04 0.10 0.05 0.04
Republic Bancorp, Inc. Financial InformationSecond
Quarter 2016 Earnings Release (continued)
Segment Data:
Reportable segments are determined by the type of products and
services offered and the level of information provided to the chief
operating decision maker, who uses such information to review
performance of various components of the business (such as banking
centers and business units), which are then aggregated if operating
performance, products/services, and customers are similar.
As of June 30, 2016, the Company was divided into four
distinct operating segments: Traditional Banking, Warehouse Lending
(“Warehouse”), Mortgage Banking and Republic Processing Group
(“RPG”). Management considers the first three segments to
collectively constitute “Core Bank” or “Core Banking” activities.
Correspondent Lending operations are considered part of the
Traditional Banking segment. The RPG segment includes the following
divisions: Tax Refund Solutions (“TRS”), Republic Payment Solutions
(“RPS”) and Republic Credit Solutions (“RCS”). TRS generates the
majority of RPG’s income, with the relatively smaller divisions of
RPG, RPS and RCS, considered immaterial for separate and
independent segment reporting. All divisions of the RPG segment
operate through the Bank.
The nature of segment operations and the primary drivers of net
revenues by reportable segment are provided below:
Segment:
Nature of
Operations:
Primary Drivers
of Net Revenues:
Core Banking:
Traditional Banking
Provides traditional banking products
to
clients primarily in its market footprint
via
its network of banking centers and
primarily to clients outside of its
market
footprint via its Internet and
Correspondent
Lending delivery channels.
Loans, investments and deposits Warehouse Lending
Provides short-term, revolving credit
facilities to mortgage bankers across
the
Nation.
Mortgage warehouse lines of credit Mortgage Banking
Primarily originates, sells and
services
long-term, single family, first lien
residential real estate loans primarily
to
clients in its market footprint.
Loan sales and servicing Republic Processing Group
The TRS division facilitates the receipt
and
payment of federal and state tax
refund
products. The RPS division offers
general
purpose reloadable cards. The RCS
division offers short-term credit
products.
RPG products are primarily provided to
clients outside of the Bank’s market
footprint.
Refund transfers and loans
The accounting policies used for Republic’s reportable segments
are the same as those described in the summary of significant
accounting policies in the Company’s 2015 Annual Report on Form
10-K. Segment performance is evaluated using operating income.
Goodwill is not allocated. Income taxes are generally allocated
based on income before income tax expense unless specific segment
allocations can be reasonably made. Transactions among reportable
segments are made at carrying value.
Republic Bancorp, Inc. Financial
InformationSecond Quarter 2016 Earnings Release
(continued)
Segment information for the three and six
months ended June 30, 2016 and 2015 follows:
Three Months Ended
June 30, 2016
Core Banking (dollars in
thousands)
Traditional
Banking
Warehouse
Lending
Mortgage
Banking
Total Core
Banking
Republic
Processing
Group
Total
Company
Net interest income $
29,537 $ 3,790 $ 40
$ 33,367 $ 2,210
$
35,577 Provision for loan and lease losses 798 480 -
1,278 536
1,814 Net refund transfer fees - - -
- 1,909
1,909 Mortgage banking income - - 1,560
1,560 -
1,560 Republic Processing Group program fees
- - -
- 644
644 Other noninterest income
6,371 5
63 6,439
250 6,689 Total
noninterest income 6,371 5 1,623
7,999 2,803
10,802
Total noninterest expenses
27,737
735 1,152
29,624 2,242
31,866 Income before income tax
expense 7,373 2,580 511
10,464 2,235
12,699 Income
tax expense
2,413
958 179
3,550 809
4,359 Net income
$
4,960 $ 1,622
$ 332 $
6,914 $ 1,426
$ 8,340
Segment end-of-period assets $ 3,989,769 $ 585,441 $ 18,133
$ 4,593,343 $ 53,579
$ 4,646,922
Net interest margin 3.23 % 3.67 % NM
3.28 % NM
3.43 % Three Months Ended
June 30, 2015 Core Banking (dollars in thousands)
Traditional
Banking
Warehouse
Lending
Mortgage
Banking
Total Core
Banking
Republic
Processing
Group
Total
Company
Net interest income $ 26,999 $ 3,505 $ 57
$
30,561 $ 497
$ 31,058 Provision for
loan and lease losses 553 164 -
717 187
904
Net refund transfer fees - - -
- 1,907
1,907 Mortgage
banking income - - 1,224
1,224 -
1,224 Republic
Processing Group program fees - - -
- 169
169 Gain on
call of security available for sale 88 - -
88 -
88
Other noninterest income
5,774
6 71
5,851 246
6,097 Total noninterest income 5,862 6
1,295
7,163 2,322
9,485 Total noninterest
expenses
23,835 610
1,274 25,719
1,446 27,165
Income before income tax expense 8,473 2,737 78
11,288 1,186
12,474 Income tax expense
2,648 958
27 3,633
521 4,154 Net income
$ 5,825 $
1,779 $ 51
$ 7,655
$ 665 $
8,320 Segment end-of-period
assets $ 3,520,996 $ 488,356 $ 15,635
$ 4,024,987 $
41,232
$ 4,066,219 Net interest margin 3.28 %
3.53 % NM
3.31 % NM
3.32 %
Republic Bancorp, Inc. Financial
InformationSecond Quarter 2016 Earnings Release
(continued)
Six Months Ended
June 30, 2016
Core Banking (dollars in
thousands)
Traditional
Banking
Warehouse
Lending
Mortgage
Banking
Total Core
Banking
Republic
Processing
Group
Total
Company
Net interest income $
58,145 $ 6,445 $ 72
$ 64,662 $ 10,349
$
75,011 Provision for loan and lease losses 1,278 498
-
1,776 5,224
7,000 Net refund transfer fees -
- -
- 18,987
18,987 Mortgage banking income - - 2,821
2,821 -
2,821 Republic Processing Group program fees
- - -
- 963
963 Other noninterest income
12,481 10
155 12,646
306 12,952
Total noninterest income 12,481 10 2,976
15,467 20,256
35,723 Total noninterest expenses
52,612 1,430
2,392 56,434
7,973 64,407
Income before income tax expense 16,736 4,527 656
21,919 17,408
39,327 Income tax expense
5,026 1,681
230 6,937
6,315 13,252
Net income
$ 11,710 $
2,846 $ 426
$ 14,982
$ 11,093 $
26,075 Segment end-of-period
assets $ 3,989,769 $ 585,441 $ 18,133
$ 4,593,343 $
53,579
$ 4,646,922 Net interest margin 3.15 %
3.65 % NM
3.19 % NM
3.60 %
Six Months Ended
June 30, 2015 Core
Banking (dollars in thousands)
Traditional
Banking
Warehouse
Lending
Mortgage
Banking
Total Core
Banking
Republic
Processing
Group
Total
Company
Net interest income $ 52,757 $ 6,046 $ 113
$
58,916 $ 1,164
$ 60,080 Provision for
loan and lease losses 669 423 -
1,092 (3 )
1,089
Net refund transfer fees - - -
- 17,242
17,242
Mortgage banking income - - 2,577
2,577 -
2,577
Republic Processing Group program fees - - -
- 397
397 Gain on call of security available for sale 88 - -
88 -
88 Other noninterest income
11,171 11
155 11,337
830 12,167
Total noninterest income 11,259 11 2,732
14,002 18,469
32,471 Total noninterest expenses
47,242 1,183
2,559 50,984
7,255 58,239
Income before income tax expense 16,105 4,451 286
20,842 12,381
33,223 Income tax expense
4,934 1,558
100 6,592
4,523 11,115
Net income
$ 11,171 $
2,893 $ 186
$ 14,250
$ 7,858 $
22,108 Segment end-of-period
assets $ 3,520,996 $ 488,356 $ 15,635
$ 4,024,987 $
41,232
$ 4,066,219 Net interest margin 3.22 %
3.56 % NM
3.25 % NM
3.23 %
Republic Bancorp, Inc. Financial InformationSecond
Quarter 2016 Earnings Release (continued)
(1) “Core Bank” or “Core Banking” operations consist of the
Traditional Banking, Warehouse Lending and Mortgage Banking
segments.
(2) The amount of loan fee income included in total interest
income was $3.7 million and $2.9 million for the quarters ended
June 30, 2016 and 2015. The amount of loan fee income included in
total interest income was $13.5 million and $4.7 million for the
six months ended June 30, 2016 and 2015.
The amount of loan fee income included in total interest income
per quarter was as follows: $3.7 million (quarter ended June 30,
2016); $9.8 million (quarter ended March 31, 2016); $3.1 million
(quarter ended December 31, 2015); $2.5 million (quarter ended
September 30, 2015); and $2.9 million (quarter ended June 30,
2015).
(3) The following table provides a reconciliation of total
stockholders’ equity in accordance with U.S. Generally Accepted
Accounting Principles (“GAAP”) to tangible stockholders’ equity in
accordance with applicable regulatory requirements, a non-GAAP
disclosure. The Company provides the tangible book value per share,
in addition to those defined by banking regulators, because of its
widespread use by investors as a means to evaluate capital
adequacy.
Quarterly Comparison (dollars in
thousands, except per share data) Jun. 30, 2016
Mar. 31, 2016 Dec. 31, 2015
Sept. 30, 2015 Jun. 30,
2015 Total stockholders' equity (a) $ 595,023 $ 591,557 $
576,547 $ 574,712 $ 572,972 Less: Goodwill 16,313 10,168 10,168
10,168 10,168 Less: Mortgage servicing rights 4,998 4,891 4,912
4,968 4,971 Less: Core deposit intangible 1,171
- - - -
Tangible stockholders' equity (c) $ 572,541 $ 576,498
$ 561,467 $ 559,576 $ 557,833 Total
assets (b) $ 4,646,922 $ 4,246,765 $ 4,230,289 $ 4,035,977 $
4,066,219 Less: Goodwill 16,313 10,168 10,168 10,168 10,168 Less:
Mortgage servicing rights 4,998 4,891 4,912 4,968 4,971 Less: Core
deposit intangible 1,171 - -
- - Tangible assets (d) $
4,624,440 $ 4,231,706 $ 4,215,209 $ 4,020,841
$ 4,051,080 Total stockholders' equity to
total assets (a/b) 12.80 % 13.93 % 13.63 % 14.24 % 14.09 % Tangible
stockholders' equity to tangible assets (c/d) 12.38 % 13.62 % 13.32
% 13.92 % 13.77 % Number of shares outstanding (e)
20,862 20,904 20,897
20,848 20,847 Book value per share
(a/e) $ 28.52 $ 28.30 $ 27.59 $ 27.57 $ 27.48 Tangible book value
per share (c/e) 27.44 27.58 26.87 26.84 26.76
(4) The efficiency ratio equals total noninterest expense
divided by the sum of net interest income and noninterest income.
The ratio excludes net gains (losses) on sales, calls and
impairment of investment securities, if applicable.
(5) The cost of deposits ratio equals annualized total interest
expense on deposits divided by total average interest-bearing
deposits plus total average noninterest-bearing deposits.
(6) FTEs – Full time equivalent employees.
(7) The delinquent loans to total loans ratio equals loans
30-days-or-more past due divided by total loans. Depending on loan
class, loan delinquency is determined by the number of days or the
number of payments past due.
NM – Not meaningful
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160722005029/en/
Republic Bancorp, Inc.Kevin Sipes, 502-560-8628Executive Vice
President & Chief Financial Officer
Republic Bancorp (NASDAQ:RBCAA)
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