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
Republic Bancorp (NASDAQ:RBCAA)
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