RBCAA Republic Bancorp Inc

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 $10.1 million, a 21% increase over the second quarter of 2016, resulting in Diluted Earnings per Class A Common Share of $0.48. Year-to-date net income was $30.1 million, a $4.0 million, or 15%, increase from the same period in 2016, resulting in return on average assets (“ROA”) and return on average equity (“ROE”) of 1.26% and 9.72% for the first six months of 2017.

Steve Trager, “I am very excited to see continued quarter-over-same-quarter-last-year growth in our net income. We have been able to achieve this growth in net income despite an increase in run costs of overhead expenses associated with additional staffing and infrastructure investments made during the previous 12 months, as we continue with the implementation of several strategic initiatives. Offsetting our higher overhead expenses and contributing to our strong net income for the quarter was solid growth in net interest income from both our Core Bank(1) and our Republic Processing Group (“RPG”) operations.

“Along with our positive earnings growth, we continue to execute on portions of our strategic plan to enhance our overall balance sheet structure. Our core deposits(9) grew nicely during the first six months of 2017, with core noninterest-bearing deposits growing $62 million, or 7%, and core interest-bearing deposits growing $72 million, or 4%. Contributing to the increase in core interest-bearing deposits during the first six months of 2017 was $54 million in growth from MemoryBank, our separately-branded online digital banking platform. The strength in our core deposit growth further allowed us to reduce our wholesale brokered-deposit balances, which have a propensity to be a more expensive long-term funding source. On the asset side of the ledger, we continue to reduce our reliance on residential real estate loans for balance sheet growth. Our Traditional Bank loan portfolio increased $87 million during the first six months of 2017 thanks to strong growth in commercial real estate, as well as, construction and development loans.”

The following table highlights Republic’s financial performance for the second quarters and six months ended June 30, 2017 and 2016:

        (dollars in thousands, except per share data)                                                                 Financial Performance Highlights     Three Months Ended Jun. 30,     Six Months Ended Jun. 30,     2017     2016    

$ Change

    % Change     2017     2016    

$ Change

    % Change     Income Before Income Taxes $ 15,269 $ 12,699 $ 2,570 20 % $ 45,340 $ 39,327 $ 6,013 15 % Net Income* 10,071 8,340 1,731 21 30,088 26,075 4,013 15 Diluted Earnings per Class A Common Stock 0.48 0.40 0.08 20 1.45 1.26 0.19 15 Return on Average Assets 0.86 % 0.77 % NA 12 1.26 % 1.19 % NA 6 Return on Average Equity 6.42 5.59 NA 15 9.72 8.81 NA 10                                                                                    

NA – Not applicable*See Segment Data at the End of this Earnings Release

 

Results of Operations for the Second Quarter of 2017 Compared to the Second Quarter of 2016

Core Bank(1) – Net income from Core Banking was $7.8 million for the second quarter of 2017, an increase of $933,000, or 13%, over the second quarter of 2016.

The increase in net income at the Core Bank was primarily driven by strong growth in net interest income during the quarter, as net interest income at the Core Bank increased $4.6 million, or 14%, over the second quarter of 2016. The increase in net interest income was enhanced by an 18-basis-point rise in the Core Bank’s net interest margin for the second quarter of 2017 to 3.46%. The increase in the Core Bank’s net interest margin was further complemented by a $225 million, or 6%, increase in the Core Bank’s quarterly average loans from the second quarter of 2016 to the second quarter of 2017.

In addition to the benefits to interest income resulting from strong growth within the loan portfolio, the Core Bank was also able to hold its level of interest expense relatively flat with its second quarter 2016 interest expense, despite three increases of the Federal Funds Target Rate by the Federal Reserve since December 2016. The Core Bank was able to maintain its level of interest expense primarily by decreasing its reliance on term FHLB advances by $115 million over the previous 12 months, replacing such funds with either overnight advances or lower costing core deposits.

The overall change in the Core Bank’s net interest income, as well as average and period-end loan balances by origination channel, are presented below:

                Net Interest Income         for the (dollars in thousands)   Three Months Ended Jun. 30,     Origination Channel     2017         2016    

$ Change

        % Change           Traditional Network $ 33,039 $ 28,647 $ 4,392 15 % MemoryBank 8 — 8 NM Warehouse Lending 4,435 3,790 645 17 Correspondent Lending 229 425 (196 ) (46 ) 2012-FDIC Acquired Loans     244       505       (261 )   (52 ) Total Core Bank   $ 37,955     $ 33,367     $ 4,588     14                                                        

NM – Not meaningful

                  Average Loan Balances                         Period-End Loan Balances                 (dollars in thousands)   Three Months Ended Jun. 30,     Jun. 30,     Origination Channel     2017         2016    

$ Change

    % Change     2017         2016    

$ Change

    % Change           Traditional Network $ 3,050,247 $ 2,792,080 $ 258,167 9 % $ 3,131,535 $ 2,910,689 $ 220,846 8 % Warehouse Lending 489,384 413,135 76,249 18 600,630 586,077 14,553 2 Correspondent Lending 137,270 239,221 (101,951 ) (43 ) 129,792 162,269 (32,477 ) (20 ) 2012-FDIC Acquired Loans     13,659       20,879       (7,220 )   (35 )     12,253       20,090       (7,837 )   (39 ) Total Core Bank   $ 3,690,560     $ 3,465,315     $ 225,245     7   $ 3,874,210     $ 3,679,125     $ 195,085     5        

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 2017, as compared to the second quarter of 2016:

• The Core Bank’s Traditional Network experienced average loan growth over the previous 12 months of $258 million. The overall mix of this growth was well diversified, with average balance increases of $124 million in commercial real estate; $72 million in construction and development; $29 million in home equity lines of credit (“HELOCs”); and $38 million in commercial and industrial. Approximately $92 million of the increase in Traditional Network average loans resulted from the loans acquired in the Company’s May 2016 acquisition of Cornerstone Bancorp, Inc. The Cornerstone acquisition contributed an average balance of $95 million to the second quarter of 2016 because of its mid-quarter acquisition, while contributing $187 million to the average loans for the second quarter of 2017.
• Within the Warehouse segment, net interest income grew 17% from the second quarter of 2016. Driving the growth in net interest income was a $76 million, or 18%, increase in average outstanding Warehouse balances for the second quarter of 2017. The Core Bank increased its committed Warehouse lines of credit from $800 million at June 30, 2016 to $1.1 billion at June 30, 2017, with usage rates of those lines at 57% and 48%, respectively, during the periods. In addition to the strong balance sheet growth for the portfolio, the yield for Warehouse lines of credit was 4.49% during the second quarter of 2017, an increase of 44 basis points from the same period in 2016.

The Core Bank’s provision expense for the second quarters of 2017 and 2016 primarily represented general loss reserves driven by growth in the loan portfolio during the two periods. The Core Bank’s credit quality metrics remained favorable, as indicated by the table below:

                As of and for the:     Quarter Ending:         Year Ending:     Jun. 30,         Mar. 31,     Dec. 31,         Dec. 31,         Dec. 31,   Core Banking Credit Quality Ratios     2017     2017     2016     2015     2014     Nonperforming loans to total loans 0.40 % 0.46 % 0.42 % 0.66 % 0.78 %   Nonperforming assets to total loans (including OREO) 0.41 0.50 0.46 0.70 1.15   Delinquent loans to total loans 0.18 0.16 0.18 0.35 0.52   Net charge-offs to average loans 0.05 0.02 0.05 0.05 0.08 (Annualized as of 6/30/17 and 3/31/17)         OREO = Other Real Estate Owned    

Noninterest income for the Core Bank was $8.5 million during the second quarter of 2017, a 7% increase over the $8.0 million achieved during the second quarter of 2016. Notable category changes impacting the Core Bank’s noninterest income comparisons between the second quarters of 2017 and 2016 were as follows:

• Interchange income increased $249,000, or 11%, due to a 12% increase in the number of active debit cards and an 8% increase in the number of transactions experienced by the Company for those cards.
• Net gains/(losses) on sales of other real estate owned (“OREO”) improved $169,000. As of June 30, 2017, the Core Bank maintained just two pieces of OREO with a total book value of $300,000.
• Service charges on deposits increased $108,000, or 3%, driven by a 7% increase in the Core Bank’s transaction account base from period to period.

• Mortgage banking income decreased $115,000 from the second quarter of 2016, as secondary market originations decreased consistent with a decrease in consumer refinance activity.

Core Bank noninterest expenses increased $3.4 million, or 11%, during the second quarter of 2017 compared to the second quarter of 2016. The increase was primarily driven by the following:

• Salaries and employee benefits expense increased $1.9 million, or 12%, as the Core Bank’s full-time-equivalent employees increased by 86 employees over the previous 12 months to support the previously mentioned Core Bank’s strategic initiatives.
• Occupancy expense increased $775,000, or 16%, primarily driven by increases in rent expense and depreciation expense resulting from new locations, existing banking center renovations and the cost of technology to support the Core Bank’s strategic initiatives.

Republic Processing Group (“RPG”)

The RPG segment reported net income of $2.2 million for the second quarter of 2017 compared to $1.4 million for the same period in 2016.

The higher second quarter 2017 net income was primarily driven by an $861,000 increase in net refund transfer (“RT”) revenues at the Tax Refund Solutions (“TRS”) division of RPG, as the second quarter of 2017 generated a higher percentage of the Company’s year-to-date RT production as compared to the same period in 2016. The small shift in RT production between the first and second quarters of 2017 was primarily due to delays in certain taxpayer refunds from the U.S. Treasury due to additional fraud prevention measures taken by the Federal government.

Within the Republic Credit Solutions (“RCS”) division of RPG, net income increased to $1.1 million for the second quarter of 2017 compared to $899,000 for the same period in 2016, with increases in net interest income and noninterest income of $3.0 million and $764,000, respectively, primarily offsetting an increase of $3.2 million increase in provisions for loan losses, as RCS continues to provide prudently for its steadily-growing consumer credit portfolios.

Conclusion

“I am very proud of our solid first half of 2017. In addition to our notable top-line revenue growth for the first half of the year, we have made healthy progress with many of our near-term and long-term initiatives. As we turn our focus to the second half of 2017, we look forward to the completion of several of our near-term strategic projects.

“In regards to the mergers and acquisitions (“M&A”) market, we continue to be alert for opportunities that fit within our strategic plan and are also priced appropriately to maximize shareholder value. As the M&A market continues to heat up, however, we believe that finding an accretive opportunity is becoming less and less likely in the near term. While we will remain steadfast in our search for a strategic acquisition candidate, our primary focus for the second half of 2017 will be organic growth through our existing sales infrastructure. In addition, we have made meaningful investments in our outer markets over the past 18 months, and we look forward to those investments bearing fruit in the months and the years ahead,” concluded Steve Trager.

Republic Bancorp, Inc. (the “Company”) is the parent company of Republic Bank & Trust Company (the “Bank”). The Bank currently has 45 full-service banking centers and one loan production office throughout five states: 33 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 (Tampa MSA) – Largo, Port Richey, St. Petersburg, Seminole, and Temple Terrace; two banking centers in Tennessee – Cool Springs (Franklin) and Green Hills (Nashville) and one loan production office in Brentwood (Nashville); and one banking center in Norwood (Cincinnati), Ohio. The Bank offers internet banking at www.republicbank.com. The Bank also offers separately-branded, nation-wide digital banking at www.mymemorybank.com. The Company has $5.0 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 StatementsThis 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 our current expectations and assumptions regarding our business, the future impact to our balance sheet and income statement resulting from changes in interest rates, the ability to develop products and strategies in order to meet the Company’s long-term strategic goals, the 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 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. Actual results could differ materially based upon 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, 2016. The Company undertakes no obligation to update any forward-looking statements. 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 Information

Second Quarter 2017 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, 2017 Dec. 31, 2016 Jun. 30, 2016 Assets: Cash and cash equivalents $ 332,695 $ 289,309 $ 142,979 Investment securities 525,684 534,139 551,027 Loans held for sale 11,756 15,170 94,658 Loans 3,916,320 3,810,778 3,691,323 Allowance for loan and lease losses   (37,898 )   (32,920 )   (29,308 ) Loans, net 3,878,422 3,777,858 3,662,015 Federal Home Loan Bank stock, at cost 32,067 28,208 28,208 Premises and equipment, net 44,255 42,869 42,956 Goodwill 16,300 16,300 16,313

Other real estate owned (“OREO”)

300 1,391 1,503

Bank owned life insurance (“BOLI”)

62,578 61,794 60,986 Other assets and accrued interest receivable   51,604     49,271     46,277   Total assets $ 4,955,661   $ 4,816,309   $ 4,646,922    

Liabilities and Stockholders’ Equity:

Deposits: Noninterest-bearing $ 1,061,637 $ 971,952 $ 867,095 Interest-bearing   2,072,301     2,188,740     1,988,952   Total deposits 3,133,938 3,160,692 2,856,047   Securities sold under agreements to repurchase and other short-term borrowings 113,334 173,473 126,124 Federal Home Loan Bank advances 1,002,500 802,500 987,500 Subordinated note 41,240 41,240 45,364 Other liabilities and accrued interest payable   37,758     33,998     36,864   Total liabilities 4,328,770 4,211,903 4,051,899  

Stockholders’ equity

  626,891     604,406     595,023  

Total liabilities and Stockholders’ equity

$ 4,955,661   $ 4,816,309   $ 4,646,922         Average Balance Sheet Data Three Months Ended Jun. 30, Six Months Ended Jun. 30, 2017 2016 2017 2016 Assets: Investment securities, including FHLB stock $ 597,818 $ 579,027 $ 592,250 $ 580,448 Federal funds sold and other interest-earning deposits 130,650 95,204 157,181 197,664 Loans and fees, including loans held for sale 3,730,379 3,479,397 3,740,004 3,386,255 Total interest-earning assets 4,458,847 4,153,628 4,489,435 4,164,367 Total assets 4,668,048 4,351,843 4,757,395 4,394,343  

Liabilities and Stockholders’ Equity:

Noninterest-bearing deposits $ 1,063,215 $ 805,718 $ 1,097,711 $ 861,204 Interest-bearing deposits 2,224,127 1,980,310 2,218,205 1,942,014

Securities sold under agreements to repurchase and other short-term borrowings

179,594 267,574 198,896 337,636 Federal Home Loan Bank advances 500,027 627,335 548,826 589,709 Subordinated note 41,240 43,234 41,240 42,237 Total interest-bearing liabilities 2,944,988 2,918,453 3,007,167 2,911,596

Stockholders’ equity

627,940 596,795 619,229 592,194    

Republic Bancorp, Inc. Financial Information

Second Quarter 2017 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, 2017 2016 2017 2016   Total interest income(2) $ 47,821 $ 40,140 $ 108,704 $ 84,155 Total interest expense   4,684   4,563   9,129   9,144 Net interest income 43,137 35,577 99,575 75,011   Provision for loan and lease losses 5,061 1,814 17,412 7,000   Noninterest income: Service charges on deposit accounts 3,390 3,282 6,637 6,422 Net refund transfer fees 2,770 1,909 18,152 18,987 Mortgage banking income 1,445 1,560 2,605 2,821 Interchange fee income 2,547 2,217 4,873 4,340 Program fees 1,284 664 2,375 963 Increase in cash surrender value of BOLI 393 369 784 708 Net gains on OREO 249 80 391 328 Other   849   721   2,033   1,154 Total noninterest income   12,927   10,802   37,850   35,723   Noninterest expenses: Salaries and employee benefits 20,015 17,814 41,226 34,897 Occupancy and equipment, net 5,903 5,109 11,870 10,528 Communication and transportation 939 872 2,211 1,945 Marketing and development 1,409 1,190 2,413 1,697 FDIC insurance expense 300 480 750 1,138 Bank franchise tax expense 790 647 3,225 3,098 Data processing 1,695 1,543 3,347 2,876 Interchange related expense 1,071 1,047 2,129 1,951 Supplies 261 240 788 689 OREO expense 132 116 229 196 Legal and professional fees 596 604 1,348 1,427 Other   2,623   2,204   5,137   3,965 Total noninterest expenses   35,734   31,866   74,673   64,407   Income before income tax expense 15,269 12,699 45,340 39,327 Income tax expense   5,198   4,359   15,252   13,252   Net income $ 10,071 $ 8,340 $ 30,088 $ 26,075    

Republic Bancorp, Inc. Financial Information

Second Quarter 2017 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 Ratios                   Three Months Ended Jun. 30, Six Months Ended Jun. 30, 2017 2016 2017 2016 Per Share Data:   Basic weighted average shares outstanding 21,151 20,947 20,918 20,956 Diluted weighted average shares outstanding 21,230 20,958 20,996 20,966   End of period shares outstanding: Class A Common Stock 18,615 18,617 18,615 18,617 Class B Common Stock 2,243 2,245 2,243 2,245   Book value per share(3) $ 30.06 $ 28.52 $ 30.06 $ 28.52 Tangible book value per share(3) 28.98 27.44 28.98 27.44   Earnings per share: Basic earnings per Class A Common Stock $ 0.48 $ 0.40 $ 1.45 $ 1.26 Basic earnings per Class B Common Stock 0.44 0.37 1.32 1.14 Diluted earnings per Class A Common Stock 0.48 0.40 1.45 1.26 Diluted earnings per Class B Common Stock 0.44 0.37 1.32 1.14   Cash dividends declared per Common share: Class A Common Stock $ 0.220 $ 0.209 $ 0.429 $ 0.407 Class B Common Stock 0.200 0.190 0.390 0.370   Performance Ratios:   Return on average assets 0.86 % 0.77 % 1.26 % 1.19 % Return on average equity 6.42 5.59 9.72 8.81 Efficiency ratio(4) 64 69 54 58 Yield on average interest-earning assets(2) 4.29 3.87 4.84 4.04 Cost of average interest-bearing liabilities 0.64 0.63 0.61 0.63 Cost of average deposits(5) 0.28 0.19 0.25 0.20 Net interest spread(2) 3.65 3.24 4.23 3.41 Net interest margin - Total Company(2) 3.87 3.43 4.44 3.60 Net interest margin - Core Bank(1) 3.46 3.28 3.39 3.19   Other Information:   End of period FTEs(6) - Total Company 976 883 976 883 End of period FTEs(6) - Core Bank(1) 904 818 904 818 Number of full-service banking centers 45 44 45 44    

Republic Bancorp, Inc. Financial Information

Second Quarter 2017 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 Ratios     As of and for the     As of and for the Three Months Ended Jun. 30, Six Months Ended Jun. 30, 2017     2016 2017     2016 Credit Quality Asset Balances:   Nonperforming Assets - Total Company: Loans on nonaccrual status $ 15,467 $ 18,778 $ 15,467 $ 18,778 Loans past due 90-days-or-more and still on accrual   335     1,212     335     1,212   Total nonperforming loans 15,802 19,990 15,802 19,990 OREO   300     1,503     300     1,503   Total nonperforming assets - Total Company $ 16,102   $ 21,493   $ 16,102   $ 21,493     Nonperforming Assets - Core Bank(1): Loans on nonaccrual status $ 15,467 $ 18,778 $ 15,467 $ 18,778 Loans past due 90-days-or-more and still on accrual   33     1,198     33     1,198   Total nonperforming loans 15,500 19,976 15,500 19,976 OREO   300     1,503     300     1,503   Total nonperforming assets - Core Bank(1) $ 15,800   $ 21,479   $ 15,800   $ 21,479     Delinquent loans: Delinquent loans - Core Bank(1) $ 6,844 $ 10,188 $ 6,844 $ 10,188 Delinquent loans - RPG   2,169     419     2,169     419   Total delinquent loans - Total Company $ 9,013   $ 10,607   $ 9,013   $ 10,607       Credit Quality Ratios - Total Company:   Nonperforming loans to total loans 0.40 % 0.54 % 0.40 % 0.54 % Nonperforming assets to total loans (including OREO) 0.41 0.58 0.41 0.58 Nonperforming assets to total assets 0.32 0.46 0.32 0.46 Allowance for loan and lease losses to total loans 0.97 0.79 0.97 0.79 Allowance for loan and lease losses to nonperforming loans 240 147 240 147 Delinquent loans to total loans(7)(8) 0.23 0.29 0.23 0.29 Net charge-offs to average loans (annualized) 1.02 0.46 0.67 0.31   Credit Quality Ratios - Core Bank(1):   Nonperforming loans to total loans 0.40 % 0.54 % 0.40 % 0.54 % Nonperforming assets to total loans (including OREO) 0.41 0.58 0.41 0.58 Nonperforming assets to total assets 0.32 0.47 0.32 0.47 Allowance for loan and lease losses to total loans 0.76 0.73 0.76 0.73 Allowance for loan and lease losses to nonperforming loans 189 135 189 135 Delinquent loans to total loans(7) 0.18 0.28 0.18 0.28 Net charge-offs to average loans (annualized) 0.05 0.05 0.04 0.04    

Republic Bancorp, Inc. Financial Information

Second Quarter 2017 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, 2017 Mar. 31, 2017 Dec. 31, 2016 Sept. 30, 2016 Jun. 30, 2016 Assets: Cash and cash equivalents $ 332,695 $ 206,187 $ 289,309 $ 302,167 $ 142,979 Investment securities 525,684 578,130 534,139 524,444 551,027 Loans held for sale 11,756 10,292 15,170 11,226 94,658 Loans 3,916,320 3,710,376 3,810,778 3,823,031 3,691,323 Allowance for loan and lease losses   (37,898 )   (42,362 )   (32,920 )   (30,436 )   (29,308 ) Loans, net 3,878,422 3,668,014 3,777,858 3,792,595 3,662,015 Federal Home Loan Bank stock, at cost 32,067 28,208 28,208 28,208 28,208 Premises and equipment, net 44,255 43,962 42,869 43,385 42,956 Goodwill 16,300 16,300 16,300 16,300 16,313 Other real estate owned 300 1,362 1,391 2,435 1,503 Bank owned life insurance 62,578 62,185 61,794 61,392 60,986 Other assets and accrued interest receivable   51,604     50,152     49,271     45,125     46,277   Total assets $ 4,955,661   $ 4,664,792   $ 4,816,309   $ 4,827,277   $ 4,646,922    

Liabilities and Stockholders’ Equity:

Deposits: Noninterest-bearing $ 1,061,637 $ 1,070,237 $ 971,952 $ 947,602 $ 867,095 Interest-bearing   2,072,301     2,278,547     2,188,740     2,188,291     1,988,952   Total deposits 3,133,938 3,348,784 3,160,692 3,135,893 2,856,047  

Securities sold under agreements to repurchase and other short-term borrowings

113,334 144,375 173,473 152,458 126,124 Federal Home Loan Bank advances 1,002,500 467,500 802,500 862,500 987,500 Subordinated note 41,240 41,240 41,240 41,240 45,364 Other liabilities and accrued interest payable   37,758     42,229     33,998     34,626     36,864   Total liabilities 4,328,770 4,044,128 4,211,903 4,226,717 4,051,899  

Stockholders’ equity

  626,891     620,664     604,406     600,560     595,023  

Total liabilities and Stockholders’ equity

$ 4,955,661   $ 4,664,792   $ 4,816,309   $ 4,827,277   $ 4,646,922       Average Balance Sheet Data Quarterly Comparison Jun. 30, 2017 Mar. 31, 2017 Dec. 31, 2016 Sept. 30, 2016 Jun. 30, 2016 Assets: Investment securities, including FHLB stock $ 597,818 $ 586,621 $ 571,158 $ 554,508 $ 579,027 Federal funds sold and other interest-earning deposits 130,650 184,007 57,950 58,910 95,204 Loans and fees, including loans held for sale 3,730,379 3,749,738 3,792,902 3,702,093 3,479,397 Total interest-earning assets 4,458,847 4,520,366 4,422,010 4,315,511 4,153,628 Total assets 4,668,048 4,847,700 4,622,760 4,531,958 4,351,843  

Liabilities and Stockholders’ Equity:

Noninterest-bearing deposits $ 1,063,215 $ 1,132,591 $ 950,020 $ 900,432 $ 805,718 Interest-bearing deposits 2,224,127 2,212,219 2,197,411 2,155,289 1,980,310

Securities sold under agreements to repurchase and other short-term borrowings

179,594 218,412 231,817 215,343 267,574 Federal Home Loan Bank advances 500,027 598,167 570,135 584,946 627,335 Subordinated note 41,240 41,240 41,240 44,288 43,234 Total interest-bearing liabilities 2,944,988 3,070,038 3,040,603 2,999,866 2,918,453

Stockholders’ equity

627,940 610,429 604,095 601,043 596,795    

Republic Bancorp, Inc. Financial Information

Second Quarter 2017 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, 2017 Mar. 31, 2017 Dec. 31, 2016 Sept. 30, 2016 Jun. 30, 2016   Total interest income(2) $ 47,821 $ 60,883 $ 45,903 $ 43,934 $ 40,140 Total interest expense   4,684   4,445   4,258   4,536     4,563 Net interest income 43,137 56,438 41,645 39,398 35,577   Provision for loan and lease losses 5,061 12,351 5,004 2,489 1,814   Noninterest income: Service charges on deposit accounts 3,390 3,247 3,338 3,416 3,282 Net refund transfer fees 2,770 15,382 121 132 1,909 Mortgage banking income 1,445 1,160 980 3,081 1,560 Interchange fee income 2,547 2,326 2,254 2,415 2,217 Program fees 1,284 1,091 1,102 979 664 Increase in cash surrender value of BOLI 393 391 402 406 369 Net gains (losses) on OREO 249 142 53 (137 ) 80 Other   849   1,184   2,235   1,009     721 Total noninterest income   12,927   24,923   10,485   11,301     10,802   Noninterest expenses: Salaries and employee benefits 20,015 21,211 16,917 18,068 17,814 Occupancy and equipment, net 5,903 5,967 5,618 5,631 5,109 Communication and transportation 939 1,272 1,282 1,029 872 Marketing and development 1,409 1,004 1,005 1,076 1,190 FDIC insurance expense 300 450 297 345 480 Bank franchise tax expense 790 2,435 813 846 647 Data processing 1,695 1,652 1,586 1,659 1,543 Interchange related expense 1,071 1,058 1,071 1,118 1,047 Supplies 261 527 437 280 240 OREO expense 132 97 148 159 116 Legal and professional fees 596 752 591 539 604 FHLB advance prepayment penalty — — — 846 — Other   2,623   2,514   2,401   1,938     2,204 Total noninterest expenses   35,734   38,939   32,166   33,534     31,866   Income before income tax expense 15,269 30,071 14,960 14,676 12,699 Income tax expense   5,198   10,054   4,960   4,848     4,359   Net income $ 10,071 $ 20,017 $ 10,000 $ 9,828   $ 8,340    

Republic Bancorp, Inc. Financial Information

Second Quarter 2017 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 Ratios                     As of and for the Three Months Ended Jun. 30, 2017 Mar. 31, 2017 Dec. 31, 2016 Sep. 30, 2016 Jun. 30, 2016 Per Share Data:   Basic weighted average shares outstanding 21,151 20,915 20,926 20,925 20,947 Diluted weighted average shares outstanding 21,230 20,996 20,941 20,938 20,958   End of period shares outstanding: Class A Common Stock 18,615 18,615 18,615 18,617 18,617 Class B Common Stock 2,243 2,243 2,245 2,245 2,245   Book value per share(3) $ 30.06 $ 29.76 $ 28.97 $ 28.79 $ 28.52 Tangible book value per share(3) 28.98 28.68 27.89 27.70 27.44   Earnings per share: Basic earnings per Class A Common Stock $ 0.48 $ 0.97 $ 0.48 $ 0.47 $ 0.40 Basic earnings per Class B Common Stock 0.44 0.88 0.44 0.43 0.37 Diluted earnings per Class A Common Stock 0.48 0.96 0.48 0.47 0.40 Diluted earnings per Class B Common Stock 0.44 0.88 0.44 0.43 0.37   Cash dividends declared per Common share: Class A Common Stock $ 0.220 $ 0.209 $ 0.209 $ 0.209 $ 0.209 Class B Common Stock 0.200 0.190 0.190 0.190 0.190   Performance Ratios:   Return on average assets 0.86 % 1.65 % 0.87 % 0.87 % 0.77 % Return on average equity 6.42 13.12 6.62 6.54 5.59 Efficiency ratio(4) 64 48 62 66 69 Yield on average interest-earning assets(2) 4.29 5.39 4.15 4.07 3.87 Cost of average interest-bearing liabilities 0.64 0.58 0.56 0.60 0.63 Cost of average deposits(5) 0.28 0.22 0.22 0.21 0.19 Net interest spread(2) 3.65 4.81 3.59 3.47 3.24 Net interest margin - Total Company(2) 3.87 4.99 3.77 3.65 3.43 Net interest margin - Core Bank(1) 3.46 3.33 3.42 3.38 3.28   Other Information:   End of period FTEs(6) - Total Company 976 973 938 899 883 End of period FTEs(6) - Core Bank(1) 904 901 869 830 818 Number of full-service banking centers 45 45 44 44 44    

Republic Bancorp, Inc. Financial Information

Second Quarter 2017 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 Ratios                     As of and for the Three Months Ended Jun. 30, 2017 Mar. 31, 2017 Dec. 31, 2016 Sept. 30, 2016 Jun. 30, 2016 Credit Quality Asset Balances:   Nonperforming Assets - Total Company: Loans on nonaccrual status $ 15,467 $ 16,793 $ 15,892 $ 17,769 $ 18,778 Loans past due 90-days-or-more and still on accrual   335   203   167   223   1,212 Total nonperforming loans 15,802 16,996 16,059 17,992 19,990 OREO   300   1,362   1,391   2,435   1,503 Total nonperforming assets - Total Company $ 16,102 $ 18,358 $ 17,450 $ 20,427 $ 21,493   Nonperforming Assets - Core Bank(1): Loans on nonaccrual status $ 15,467 $ 16,793 $ 15,892 $ 17,769 $ 18,778 Loans past due 90-days-or-more and still on accrual   33   81   85   141   1,198 Total nonperforming loans 15,500 16,874 15,977 17,910 19,976 OREO   300   1,362   1,391   2,435   1,503 Total nonperforming assets - Core Bank(1) $ 15,800 $ 18,236 $ 17,368 $ 20,345 $ 21,479   Delinquent Loans: Delinquent loans - Core Bank(1) $ 6,844 $ 5,952 $ 6,821 $ 8,050 $ 10,188 Delinquent loans - RPG   2,169   10,211   2,137   664   419 Total delinquent loans - Total Company $ 9,013 $ 16,163 $ 8,958 $ 8,714 $ 10,607     Credit Quality Ratios - Total Company:   Nonperforming loans to total loans 0.40 % 0.46 % 0.42 % 0.47 % 0.54 % Nonperforming assets to total loans (including OREO) 0.41 0.49 0.46 0.53 0.58 Nonperforming assets to total assets 0.32 0.39 0.36 0.42 0.46 Allowance for loan and lease losses to total loans 0.97 1.14 0.86 0.80 0.79 Allowance for loan and lease losses to nonperforming loans 240 249 205 169 147 Delinquent loans to total loans(7)(8) 0.23 0.44 0.24 0.23 0.29 Net charge-offs to average loans (annualized) 1.02 0.31 0.27 0.15 0.46   Credit Quality Ratios - Core Bank(1):   Nonperforming loans to total loans 0.40 % 0.46 % 0.42 % 0.47 % 0.54 % Nonperforming assets to total loans (including OREO) 0.41 0.50 0.46 0.53 0.58 Nonperforming assets to total assets 0.32 0.40 0.36 0.43 0.47 Allowance for loan and lease losses to total loans 0.76 0.76 0.74 0.72 0.73 Allowance for loan and lease losses to nonperforming loans 189 166 175 152 135 Delinquent loans to total loans(7) 0.18 0.16 0.18 0.21 0.28 Net charge-offs to average loans (annualized) 0.05 0.02 0.09 0.03 0.05  

Republic Bancorp, Inc. Financial InformationSecond Quarter 2017 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 clients are similar.

As of June 30, 2017, the Company was divided into four distinct business 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 and the Company’s national branchless banking platform, MemoryBank, are considered part of Traditional Banking. The RPG segment includes the following divisions: Tax Refund Solutions (“TRS”), Republic Credit Solutions (“RCS”) and Republic Payment Solutions (“RPS”). TRS generates the majority of RPG’s income, with the relatively smaller divisions of RPG, RCS and RPS, 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 to clients outside of its market footprint primarily via its Digital and Correspondent Lending delivery channels. Loans, investments and deposits Warehouse Lending Provides short-term, revolving credit facilities to mortgage bankers across the United States. 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 RCS division offers short-term credit products. The RPS division offers general-purpose reloadable cards. RPG products are primarily provided to clients outside of the Bank’s market footprint. Refund transfers and unsecured small-dollar, consumer 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 2016 Annual Report on Form 10-K. Segment performance is evaluated using operating income. Goodwill is allocated to the Traditional Banking segment. 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 2017 Earnings Release (continued)

Segment information for the three and six months ended June 30, 2017 and 2016 follows:

                        Three Months Ended June 30, 2017 Core Banking Total Republic Traditional Warehouse Mortgage Core Processing Total (dollars in thousands)     Banking     Lending     Banking     Banking     Group     Company   Net interest income $ 33,434 $ 4,435 $ 86 $ 37,955 $ 5,182 $ 43,137   Provision for loan and lease losses 1,461 264 — 1,725 3,336 5,061   Net refund transfer fees — — — — 2,770 2,770 Mortgage banking income — — 1,445 1,445 — 1,445 Program fees — — — — 1,284 1,284 Other noninterest income   6,969     10     115   7,094     334   7,428   Total noninterest income 6,969 10 1,560 8,539 4,388 12,927   Total noninterest expenses   31,185     822     984   32,991     2,743   35,734     Income before income tax expense 7,757 3,359 662 11,778 3,491 15,269 Income tax expense   2,471     1,228     232   3,931     1,267   5,198   Net income $ 5,286   $ 2,131   $ 430 $ 7,847   $ 2,224 $ 10,071     Segment end-of-period assets $ 4,283,741 $ 600,060 $ 13,920 $ 4,897,721 $ 57,940 $ 4,955,661   Net interest margin 3.44 % 3.62 % NM 3.46 % NM 3.87 %     Three Months Ended June 30, 2016 Core Banking Total Republic Traditional Warehouse Mortgage Core Processing Total (dollars in thousands)     Banking     Lending     Banking     Banking     Group     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 Program fees — — — — 664 664 Other noninterest income   6,371     5     63   6,439     230   6,669   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 %    

Republic Bancorp, Inc. Financial Information

Second Quarter 2017 Earnings Release (continued)

      Six Months Ended June 30, 2017 Core Banking                     Total Republic Traditional Warehouse Mortgage Core Processing Total (dollars in thousands)     Banking     Lending     Banking     Banking     Group     Company   Net interest income $ 66,094 $ 8,336 $ 153 $ 74,583 $ 24,992 $ 99,575   Provision for loan and lease losses 1,928 38 — 1,966 15,446 17,412   Net refund transfer fees — — — — 18,152 18,152 Mortgage banking income — — 2,605 2,605 — 2,605 Program fees — — — — 2,375 2,375 Other noninterest income   13,491     16     127   13,634     1,084   14,718   Total noninterest income 13,491 16 2,732 16,239 21,611 37,850   Total noninterest expenses   61,275     1,600     2,198   65,073     9,600   74,673     Income before income tax expense 16,382 6,714 687 23,783 21,557 45,340 Income tax expense   4,733     2,455     241   7,429     7,823   15,252   Net income $ 11,649   $ 4,259   $ 446 $ 16,354   $ 13,734 $ 30,088     Segment end-of-period assets $ 4,283,741 $ 600,060 $ 13,920 $ 4,897,721 $ 57,940 $ 4,955,661   Net interest margin 3.37 % 3.60 % NM 3.39 % NM 4.44 %     Six Months Ended June 30, 2016 Core Banking Total Republic Traditional Warehouse Mortgage Core Processing Total (dollars in thousands)     Banking     Lending     Banking     Banking     Group     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 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 %        

Republic Bancorp, Inc. Financial Information

Second Quarter 2017 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 can meaningfully impact total interest income, loan yields, net interest margin and net interest spread. The amount of loan fee income included in total interest income was $6.4 million and $3.7 million for the quarters ended June 30, 2017 and 2016. The amount of loan fee income included in total interest income was $27.7 million and $13.5 million for the six months ended June 30, 2017 and 2016.

 

The amount of loan fee income included in total interest income per quarter was as follows: $6.4 million (quarter ended June 30, 2017); $21.3 million (quarter ended March 31, 2017); $5.9 million (quarter ended December 31, 2016); $4.8 million (quarter ended September 30, 2016); and $3.7 million (quarter ended June 30, 2016.)

 

Interest income for Easy Advances (“EAs”) is composed entirely of loan fees. The loan fees disclosed above included EA fees of $14.2 million and $5.2 million for the six months ended June 30, 2017 and 2016. EAs are only offered during the first two months of each year.

 

(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, a non-GAAP measure, 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, 2017     Mar. 31, 2017     Dec. 31, 2016     Sept. 30, 2016     Jun. 30, 2016  

Total stockholders’ equity (a)

$ 626,891 $ 620,664 $ 604,406 $ 600,560 $ 595,023 Less: Goodwill 16,300 16,300 16,300 16,300 16,313 Less: Mortgage servicing rights 5,159 5,158 5,180 5,338 4,998 Less: Core deposit intangible   964     1,017     1,070     1,121     1,171  

Tangible stockholders’ equity (c)

$ 604,468   $ 598,189   $ 581,856   $ 577,801   $ 572,541     Total assets (b) $ 4,955,661 $ 4,664,792 $ 4,816,309 $ 4,827,277 $ 4,646,922 Less: Goodwill 16,300 16,300 16,300 16,300 16,313 Less: Mortgage servicing rights 5,159 5,158 5,180 5,338 4,998 Less: Core deposit intangible   964     1,017     1,070     1,121     1,171   Tangible assets (d) $ 4,933,238   $ 4,642,317   $ 4,793,759   $ 4,804,518   $ 4,624,440    

Total stockholders’ equity to total assets (a/b)

12.65 % 13.31 % 12.55 % 12.44 % 12.80 %

Tangible stockholders’ equity to tangible assets (c/d)

12.25 % 12.89 % 12.14 % 12.03 % 12.38 %   Number of shares outstanding (e)   20,858     20,858     20,860     20,862     20,862     Book value per share (a/e) $ 30.06 $ 29.76 $ 28.97 $ 28.79 $ 28.52 Tangible book value per share (c/e) 28.98 28.68 27.89 27.70 27.44        

(4)

   

The efficiency ratio, a non-GAAP measure, 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 average 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.

 

(8)

Delinquent loans for the RPG segment included $8.4 million of EAs at March 31, 2017. EAs were only offered during the first two months of 2017 and 2016. EAs do not have a contractual due date but are eligible for delinquency consideration three weeks after the taxpayer-customer’s tax return is submitted to the applicable tax authority. All unpaid EAs are charged-off by the end of the second quarter of each year.

 

(9)

Core deposits, a non-GAAP measure, are total deposits excluding time deposits greater than or equal to $250,000 and all brokered deposits. Core deposits are intended to include those deposits that are more stable and lower cost and that reprice more slowly than other deposits when interest rates rise. The following table reconciles noninterest-bearing and interest-bearing deposits in accordance with GAAP to core deposits from the Company’s Core Banking operations:

  (dollars in thousands)     Jun. 30, 2017     Dec. 31, 2016    

$ Change

    % Change   Noninterest-bearing deposits - GAAP $ 1,061,637 $ 971,952 $ 89,685 9 % Less: Noninterest-bearing deposits - RPG segment   55,969   28,493   27,476   96 Core noninterest-bearing deposits - Core Banking (a) $ 1,005,668 $ 943,459 $ 62,209   7 %   Interest-bearing deposits - GAAP $ 2,072,301 $ 2,188,740 $ (116,439 ) (5 )% Less: Time deposits, $250,000 and over 61,662 37,200 24,462 66 Less: Brokered money market accounts 136,616 360,597 (223,981 ) (62 ) Less: Brokered certificates of deposit   38,186   28,666   9,520   33 Core interest-bearing deposits - Total Company 1,835,837 1,762,277 73,560 4 Less: Interest-bearing deposits - RPG segment   1,404   —   1,404   — Core interest-bearing deposits - Core Banking (b) $ 1,834,433 $ 1,762,277 $ 72,156 4 %   Total core deposits - Core Banking (a+b) $ 2,840,101 $ 2,705,736 $ 134,365   5 %  

NM – Not meaningful

View source version on businesswire.com: http://www.businesswire.com/news/home/20170721005006/en/

Republic Bancorp, Inc.Kevin Sipes, 502-560-8628Executive Vice President & Chief Financial Officer