Republic Bancorp, Inc. (NASDAQ: RBCAA), headquartered
in Louisville, Kentucky, is the holding company of Republic Bank
& Trust Company (the “Bank”).
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Republic Bancorp, Inc. (“Republic” or the “Company”) reported
solid second quarter net income of $15.8 million resulting in
Diluted Earnings per Class A Common Share (“Diluted EPS”) of $0.76.
Year-to-date (“YTD”) net income for the first six months of 2020
was $42.5 million resulting in return on average assets (“ROA”) and
return on average equity (“ROE”) of 1.45% and 10.79%. Net income
for the second quarter and first six months of 2020 was negatively
impacted by estimated Provisions for Expected Credit Loss Expense
(“Provision”) directly related to the on-going COVID-19
pandemic.
Steve Trager, Chairman & CEO of Republic commented, “With
2020 halfway over, I think we can all say that it will go down as
one of the most unforgettable years in our lifetimes. As the CEO of
a publicly traded company, I am proud of our operating performance
during these challenging times, and I believe our financial results
speak for themselves. In addition, I am also extremely proud of our
organizational response to the COVID-19 pandemic. We were able to
support our client base at an elite level while also protecting our
associates and the communities we serve during a very scary time. I
cannot stress enough how incredible the efforts were, and continue
to be, from all of our associates in this endeavor, with nearly 80%
of our workforce working from home through much of the pandemic.
With the world slowly returning to normal business operations, we
reopened our banking centers to foot traffic on June 4th, and on
June 15th began bringing back up to 25% of our back-office support
staff. Our “return-to-work” team continues to refine its plan to
bring all of our associates back to the office over an extended
period of time, provided we can do so in a safe-and-sound
manner.”
Trager continued, “Just as important at this time, all of us at
Republic are heartbroken by recent events that led to the current
protests and demands for change. Our Executive Team has spent many
hours listening – first to our Black and African-American
associates, and then to the leaders and change-makers from the
community. This reinforced our belief that corporate America, first
and foremost, must step up to ensure economic equality for all.
Initially, we have plans to develop a community loan fund, which
will be designed to help small businesses in need within
economically challenged areas of the communities we serve. We
recognize these are small first steps on a very long journey to
racial equity and justice, but we are committed to long-standing
efforts that will positively impact the Black and African-American
community.”
The following table highlights Republic’s financial performance
for the three and six months ended June 30, 2020 and 2019:
Total Company Financial
Performance Highlights
Three Months Ended Jun.
30,
Six Months Ended Jun.
30,
(dollars in thousands, except per share
data)
2020
2019
$ Change
% Change
2020
2019
$ Change
% Change
Income Before Income Tax Expense*
$
19,597
$
21,183
$
(1,586)
(7)
%
$
53,175
$
58,159
$
(4,984)
(9)
%
Net Income *
15,804
18,007
(2,203)
(12)
42,501
47,523
(5,022)
(11)
Diluted Earnings per Class A Common
Share
0.76
0.86
(0.10)
(12)
2.04
2.28
(0.24)
(11)
Return on Average Assets
1.04
%
1.31
%
NA
(21)
1.45
%
1.73
%
NA
(16)
Return on Average Equity
7.93
9.88
NA
(20)
10.79
13.24
NA
(19)
* Results by reportable segment provided near the end of this
earnings release. NA – Not applicable
Results of Operations for the Second
Quarter of 2020 Compared to the Second Quarter of
2019
Core Bank(1)
Net income from Core Banking was $13.2 million for the second
quarter of 2020, a 2% increase from the second quarter of 2019,
while pretax net income from Core Banking for the second quarter of
2020 was even more favorable with a 12% increase over the second
quarter of 2019. The comparability of second quarter net income for
the Core Bank was negatively impacted by the benefit of certain
infrequent income tax items recorded during the second quarter of
2019. Particularly strong revenues from the Core Bank’s Mortgage
Banking and Warehouse Lending (“Warehouse”) segments, along with
income from the origination of $526 million in Paycheck Protection
Program (“PPP”) loans, drove the Core Bank’s second quarter
earnings in 2020. Partially offsetting these increases was
additional Provision, as management continues to update the
estimated impact of the COVID-19 pandemic to the Core Bank’s loan
portfolio.
Net Interest Income – Core Bank net interest income was $45.5
million for the second quarter of 2020, a 1% decrease from the same
period in 2019. Industry-wide net interest margin compression was
the primary driver of the slight decrease and was partially offset
by the benefit to net interest income of robust loan growth in the
Warehouse segment and solid loan growth within the Traditional
Banking segment, particularly within the PPP portfolio. Overall,
average Core Bank loans grew $434 million, or 10%, from the second
quarter of 2019. Usage rates on the Core Bank’s Warehouse lines
rose from 57% during the second quarter of 2019 to 68% during the
second quarter of 2020, driving average Warehouse balances from
$635 million to a robust $807 million during these same time
periods. The Core Bank’s Traditional Banking segment loan averages
grew $232 million over the second quarter of 2019, driven by $526
million in PPP loans originated during the second quarter of 2020.
The Bank earns an annual coupon of 1% plus lender fees for each PPP
origination.
Consistent with a 225 basis point drop in the Federal Funds
Target Rate over the past 12 months, the Core Bank’s net interest
spread and net interest margin compressed 26 basis points and 39
basis points, respectively, from the second quarter of 2019 to the
same period in 2020. The Core Bank’s net interest spread, the
weighted average rate earned on its interest-earning assets less
the weighted average cost paid on its interest-bearing liabilities,
contracted primarily because the Core Bank’s liabilities had less
room to reprice downward than its asset counterparts. The Core
Bank’s net interest margin contracted 13 basis points more than the
contraction in its net interest spread due to the reduction in
benefit it realizes from its noninterest-bearing funding
sources.
The following tables present by reportable segment the overall
changes in the Core Bank’s net interest income, net interest
margin, as well as average and period-end loan balances:
Net Interest Income
Net Interest Margin
(dollars in thousands)
Three Months Ended Jun.
30,
Three Months Ended Jun.
30,
Reportable Segment
2020
2019
Change
2020
2019
Change
Traditional Banking*
$
39,035
$
41,877
$
(2,842)
3.26
%
3.75
%
(0.49)
%
Warehouse Lending
6,063
3,957
2,106
3.01
2.49
0.52
Mortgage Banking*
419
170
249
NM
NM
NM
Core Bank
$
45,517
$
46,004
$
(487)
3.23
3.62
(0.39)
Average Loan Balances
Period-End Loan
Balances
(dollars in thousands)
Three Months Ended Jun.
30,
Jun. 30,
Reportable Segment
2020
2019
$ Change
% Change
2020
2019
$ Change
% Change
Traditional Banking*
$
3,883,753
$
3,651,630
$
232,123
6
%
$
3,935,823
$
3,699,576
$
236,247
6
%
Warehouse Lending
806,771
634,688
172,083
27
1,029,779
737,794
291,985
40
Mortgage Banking*
42,290
12,153
30,137
248
40,028
13,883
26,145
188
Core Bank
$
4,732,814
$
4,298,471
$
434,343
10
$
5,005,630
$
4,451,253
$
554,377
12
*Includes loans held for sale NM – Not meaningful
Provision for Expected Credit Loss Expense – The Core Bank’s
Provision increased to $3.5 million for the second quarter of 2020
from $1.8 million for the same period in 2019. The Provision for
the second quarter of 2020 primarily reflected $4.6 million of
Provision related to the potential impact of the COVID-19 pandemic
to the Core Bank’s loan portfolio partially offset by a reduction
of $1.5 million in reserves due to a $112 million decrease in
non-PPP Traditional Bank loans during the second quarter of 2020.
The Provision for the second quarter of 2019 included a $1.2
million estimated specific loan loss reserve for one
commercial-related client that defaulted during the period.
As of June 30, 2020, the Traditional Banking segment maintained
$793 million in loans under deferral and forbearance agreements due
to COVID-19 hardship. These deferral and forbearance agreements
were generally under three-month terms but could be further
extended based on underlying borrower circumstances. The following
table presents the balances of loans in COVID-19 related deferral
or forbearance, the balance of PPP loans, and the remainder of the
Traditional Bank’s loan portfolio by loan class as of June 30,
2020:
Total
June 30, 2020 (dollars in
thousands)
COVID-19 Hardship (1)
PPP Loans
Other Loans
Traditional Banking
Traditional Banking:
Residential real estate:
Owner occupied
$
51,570
$
—
$
833,755
$
885,325
Nonowner occupied
58,754
—
195,946
254,700
Commercial real estate
491,314
—
830,976
1,322,290
Commercial & industrial
141,720
511,065
251,942
904,727
Construction & land development
28,927
—
128,327
157,254
Lease financing receivables
2,443
—
9,421
11,864
Home equity
13,776
—
251,490
265,266
Consumer
4,678
—
129,719
134,397
Total Traditional Banking
$
793,182
$
511,065
$
2,631,576
$
3,935,823
Percent of Total Traditional
Banking
20
%
13
%
67
%
100
%
(1) Loans under deferral or forbearance agreements due to
COVID-19 hardship. Agreements are generally under three-month
terms.
Noninterest Income – Core Bank noninterest income was $14.5
million during the second quarter of 2020, a $4.2 million, or 41%,
increase from the solid $10.3 million achieved during the second
quarter of 2019. Items significantly impacting noninterest income
for the quarter included the following:
- Mortgage Banking income increased $6.0 million, resulting from
a $137 million increase in secondary market loans originated from
period to period combined with a $59 million increase in the Bank’s
pipeline of secondary market loans from June 30, 2019 to June 30,
2020. The increase in volume is a proud accomplishment, as our
Mortgage Banking associates accommodated this high demand in a
predominantly digital and virtual environment, while maintaining
industry-strong closing times.
- Offsetting the increase in Mortgage Banking income were
decreases in Service Charges on Deposits of $1.1 million and
Interchange Income of $444,000. These decreases largely reflect a
change in consumer savings and spending patterns during the
pandemic-driven economic restrictions. At this time, the Company is
uncertain if and for how long these current patterns will
continue.
Noninterest Expense – Core Bank noninterest expense increased 1%
when comparing the second quarter of 2020 to the same period in
2019. Items significantly impacting noninterest expense for the
quarter included the following:
- Salaries and benefits expense increased $894,000, or 4%,
substantially driven by higher Mortgage Banking commissions.
- Data Processing expense increased $483,000, or 22%, driven by
the Company’s increased investment in Software-as-a-Service
applications since June 30, 2019.
- Offsetting the above were decreases in Marketing and
Development, Interchange, and Travel and Entertainment expenses,
with each of these expenses driven downward as a direct result of
pandemic-related influences.
Republic Processing
Group(2)
Republic Processing Group (“RPG”) reported net income of $2.6
million for the second quarter of 2020 compared to $5.1 million for
the same period in 2019, with a $3.5 million decrease in net income
at RPG’s Tax Refund Solutions (“TRS”) segment partially offset by a
$1.0 million increase in net income at its Republic Credit
Solutions (“RCS”) segment.
Tax Refund Solutions
Related to TRS, an increase in estimated Provision for its Easy
Advance (“EA”) loans drove the negative swing in net income for the
quarter. Overall, the TRS Provision increased from a net charge of
$392,000 during the second quarter of 2019 to a net charge of $4.4
million during the second quarter of 2020. With the second quarter
EA paydowns, the percent of unpaid EA’s to total EA’s originated
dropped to 5.05% at June 30, 2020. This compares to 3.45% at June
30, 2019, a difference of 160 basis points. By comparison, the
unpaid EA percentage was 6.77% at March 31, 2020, compared to 5.84%
at March 31, 2019, representing a difference of 93 basis
points.
The higher net charges to the Provision during the second
quarter of 2020 and the higher unpaid EA balances as a percentage
of EA originations as of June 30, 2020, resulted from repayment
rates from the U.S. Treasury that significantly lagged those during
the second quarter of 2019. Management believes the significant
decline in repayment rates from the U.S. Treasury during the second
quarter of 2020 was directly related to the impact of the current
COVID-19 pandemic and the ability of the IRS to facilitate payment
processing for certain types of tax returns that require further
taxpayer communication and verification. While management is
optimistic that EA loss rates could still finish more in-line with
those from the prior years, management is uncertain if or when this
turnaround could occur. As a result, the Company completely
charged-off all remaining unpaid EA’s as of June 30, 2020, in-line
with its customary June 30th charge-off policy for EA loans. Any EA
payments received after June 30, 2020 will be credited as a direct
recovery to the Provision in the period it is received.
In addition to an increase in EA related Provision, a $716,000,
or 20%, decrease in net Refund Transfer (“RT”) revenues during the
second quarter of 2020 compared to the second quarter of 2019 also
negatively impacted TRS’s quarter-to-quarter comparison. RT’s
processed decreased 8% and revenue per RT decreased 1% from 2019 to
2020. As with the lag in payments from the U.S. Treasury related to
EA’s, management believes the COVID-19 pandemic also negatively
impacted 2020 RT volume, particularly within the second quarter of
2020.
Republic Credit Solutions
Net income at RCS increased from $4.1 million during the second
quarter of 2019 to $5.1 million for the second quarter of 2020. The
increase in RCS’s net income primarily reflected a release of $3.2
million in RCS’s reserves as a result of a $7 million decrease in
outstanding balances for its line-of-credit product during the
second quarter of 2020. Provision expense for RCS’s line-of-credit
product swung from a net charge of $2.2 million during the second
quarter of 2019 to a net credit of $1.5 million for second quarter
of 2020. RCS provides for losses on this line-of-credit product at
approximately 49% of outstanding balances, while earning
approximately 90% of its total revenue (interest income and
noninterest income) from this product. The $3.7 million reduction
in RCS’s Provision for the quarter was partially offset by a $2.0
million reduction in RCS’s revenues resulting from the decrease in
outstanding loan balances.
Republic Bancorp, Inc. (the “Company”) is the parent company of
Republic Bank & Trust Company (the “Bank”). The Bank currently
has 42 full-service banking centers and two loan production offices
throughout five states: 28 banking centers in 8 Kentucky
communities – Covington, Crestview Hills, Florence, Georgetown,
Lexington, Louisville, Shelbyville, and Shepherdsville; three
banking centers in southern Indiana – Floyds Knobs, Jeffersonville,
and New Albany; seven banking centers in six Florida communities
(Tampa MSA) – Largo, New Port Richey, St. Petersburg, Seminole,
Tampa, and Temple Terrace, and one loan production office in
Oldsmar; two banking centers in two Tennessee communities
(Nashville MSA) – Cool Springs and Green Hills, and one loan
production office in Brentwood; and two banking centers in two Ohio
communities (Cincinnati MSA) – Norwood and West Chester. 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 $6.5 billion in assets and is
headquartered in Louisville, Kentucky. The Company’s Class A Common
Stock is listed under the symbol “RBCAA” on the NASDAQ Global
Select Market.
Republic Bank. It’s just easier here. ®
Forward-Looking Statements This press release contains
certain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. The
forward-looking statements in the preceding paragraphs are based on
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 yield curve, the
ability to develop products and strategies in order to meet the
Company’s long-term strategic goals, the economy, and other future
conditions, including, but not limited to, the impact of the
COVID-19 pandemic. 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, 2019 and quarterly
report on Form 10-Q for the period ended March 31, 2020. The
Company undertakes no obligation to update any forward-looking
statements, except as required by applicable law.
Republic Bancorp, Inc.
Financial Information
Second Quarter 2020 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, 2020
Dec. 31, 2019
Jun. 30, 2019
Assets:
Cash and cash equivalents
$
560,195
$
385,303
$
473,779
Investment securities, net of allowance
for credit losses (3)
545,607
537,074
447,512
Loans held for sale
52,992
31,468
63,949
Loans held for sale upon branch
divestiture
—
—
131,881
Loans
5,065,092
4,433,151
4,390,533
Allowance for credit losses (3)
(55,097)
(43,351)
(45,983)
Loans, net
5,009,995
4,389,800
4,344,550
Federal Home Loan Bank stock, at cost
25,629
30,831
32,242
Premises and equipment, net
42,753
46,196
44,199
Right-of-use assets
34,450
35,206
37,450
Goodwill
16,300
16,300
16,300
Other real estate owned ("OREO")
2,194
113
1,095
Bank owned life insurance ("BOLI")
67,217
66,433
65,642
Other assets and accrued interest
receivable
103,243
81,595
64,535
Total assets
$
6,460,575
$
5,620,319
$
5,723,134
Liabilities and Stockholders'
Equity:
Deposits:
Noninterest-bearing
$
1,821,400
$
1,033,379
$
1,003,793
Interest-bearing
3,196,685
2,752,629
2,557,127
Deposits held for assumption upon branch
divestiture
—
—
152,954
Total deposits
5,018,085
3,786,008
3,713,874
Securities sold under agreements to
repurchase and other short-term borrowings
177,397
167,617
226,002
Operating lease liabilities
35,571
36,530
38,852
Federal Reserve Paycheck Protection
Program Liquidity Facility
169,209
—
—
Federal Home Loan Bank advances
137,500
750,000
915,000
Subordinated note
41,240
41,240
41,240
Other liabilities and accrued interest
payable
85,954
74,680
56,738
Total liabilities
5,664,956
4,856,075
4,991,706
Stockholders' equity
795,619
764,244
731,428
Total liabilities and stockholders'
equity
$
6,460,575
$
5,620,319
$
5,723,134
Average Balance Sheet Data
Three Months Ended Jun.
30,
Six Months Ended Jun.
30,
2020
2019
2020
2019
Assets:
Federal funds sold and other
interest-earning deposits
$
299,760
$
297,205
$
253,548
$
293,587
Investment securities, including FHLB
stock
605,776
514,366
562,751
538,923
Loans, including loans held for sale
4,867,622
4,424,905
4,680,380
4,341,254
Total interest-earning assets
5,773,158
5,236,476
5,496,679
5,173,764
Total assets
6,094,421
5,480,525
5,860,683
5,478,609
Liabilities and Stockholders'
Equity:
Noninterest-bearing deposits, including
those held for assumption
$
1,697,603
$
1,098,817
$
1,473,314
$
1,178,198
Interest-bearing deposits, including those
held for assumption
2,880,988
2,588,836
2,868,160
2,609,188
Securities sold under agreements to
repurchase and other short-term
borrowings
176,541
220,189
192,755
225,864
Federal Reserve Paycheck Protection
Program Liquidity Facility
122,769
—
61,384
—
Federal Home Loan Bank advances
263,296
710,879
317,307
611,695
Subordinated note
41,240
41,240
41,240
41,240
Total interest-bearing liabilities
3,484,834
3,561,144
3,480,846
3,487,987
Stockholders' equity
797,227
728,723
788,064
717,838
Republic Bancorp, Inc. Financial
Information
Second Quarter 2020 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,
2020
2019
2020
2019
Total interest income (4)
$
57,091
$
65,664
$
138,250
$
148,297
Total interest expense
4,886
11,718
13,307
22,052
Net interest income
52,205
53,946
124,943
126,245
Provision for expected credit loss expense
(3)
6,534
4,460
29,294
21,691
Noninterest income:
Service charges on deposit accounts
2,451
3,598
5,587
6,901
Net refund transfer fees
2,913
3,629
18,736
20,729
Mortgage banking income
8,398
2,416
13,193
3,955
Interchange fee income
2,808
3,257
5,360
6,014
Program fees
1,138
1,037
3,762
2,111
Increase in cash surrender value of
BOLI
395
377
784
759
Net gains on OREO
1
90
4
220
Other
647
721
1,894
1,853
Total noninterest income
18,751
15,125
49,320
42,542
Noninterest expense:
Salaries and employee benefits
26,324
25,286
52,946
50,362
Occupancy and equipment, net
6,715
6,472
13,561
13,056
Communication and transportation
1,353
1,071
2,642
2,232
Marketing and development
1,018
1,278
1,851
2,380
FDIC insurance expense
299
295
299
743
Bank franchise tax expense
914
935
3,420
3,431
Data processing
2,753
2,217
5,292
4,313
Interchange related expense
1,173
1,302
2,249
2,617
Supplies
539
582
991
1,066
Other real estate owned and other
repossession expense
21
148
39
194
Legal and professional fees
1,025
844
2,262
1,730
Other
2,691
2,998
6,242
6,813
Total noninterest expense
44,825
43,428
91,794
88,937
Income before income tax expense
19,597
21,183
53,175
58,159
Income tax expense
3,793
3,176
10,674
10,636
Net income
$
15,804
$
18,007
$
42,501
$
47,523
Republic Bancorp, Inc. Financial InformationSecond
Quarter 2020 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,
2020
2019
2020
2019
Per Share Data:
Basic weighted average shares
outstanding
21,016
21,016
21,035
20,997
Diluted weighted average shares
outstanding
21,041
21,138
21,077
21,125
Period-end shares outstanding:
Class A Common Stock
18,708
18,740
18,708
18,740
Class B Common Stock
2,200
2,208
2,200
2,208
Book value per share (5)
$
38.05
$
34.92
$
38.05
$
34.92
Tangible book value per share (5)
36.93
33.87
36.93
33.87
Earnings per share ("EPS"):
Basic EPS - Class A Common Stock
$
0.76
$
0.86
$
2.04
$
2.29
Basic EPS - Class B Common Stock
0.69
0.79
1.86
2.08
Diluted EPS - Class A Common Stock
0.76
0.86
2.04
2.28
Diluted EPS - Class B Common Stock
0.69
0.78
1.85
2.07
Cash dividends declared per Common
share:
Class A Common Stock
$
0.286
$
0.264
$
0.572
$
0.528
Class B Common Stock
0.260
0.240
0.520
0.480
Performance Ratios:
Return on average assets
1.04
%
1.31
%
1.45
%
1.73
%
Return on average equity
7.93
9.88
10.79
13.24
Efficiency ratio (6)
63
63
53
53
Yield on average interest-earning assets
(4)
3.96
5.02
5.03
5.73
Cost of average interest-bearing
liabilities
0.56
1.32
0.76
1.26
Cost of average deposits (7)
0.32
0.75
0.46
0.72
Net interest spread (4)
3.40
3.70
4.27
4.47
Net interest margin - Total Company
(4)
3.62
4.12
4.55
4.88
Net interest margin - Core Bank (1)
3.23
3.62
3.43
3.69
Other Information:
End of period FTEs (8) - Total Company
1,094
1,089
1,094
1,089
End of period FTEs - Core Bank
1,001
1,012
1,001
1,012
Number of full-service banking centers
42
45
42
45
Republic Bancorp, Inc. Financial
Information
Second Quarter 2020 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,
2020
2019
2020
2019
Credit Quality Asset Balances:
Nonperforming Assets - Total
Company:
Loans on nonaccrual status
$
19,884
$
19,238
$
19,884
$
19,238
Loans past due 90-days-or-more and still
on accrual
535
166
535
166
Total nonperforming loans
20,419
19,404
20,419
19,404
OREO
2,194
1,095
2,194
1,095
Total nonperforming assets
$
22,613
$
20,499
$
22,613
$
20,499
Nonperforming Assets - Core Bank
(1):
Loans on nonaccrual status
$
19,884
$
19,238
$
19,884
$
19,238
Loans past due 90-days-or-more and still
on accrual
—
—
—
—
Total nonperforming loans
19,884
19,238
19,884
19,238
OREO
2,194
1,095
2,194
1,095
Total nonperforming assets
$
22,078
$
20,333
$
22,078
$
20,333
Delinquent loans:
Delinquent loans - Core Bank
$
7,862
$
12,524
$
7,862
$
12,524
Delinquent loans - RPG (2)
6,184
6,802
6,184
6,802
Total delinquent loans - Total Company
$
14,046
$
19,326
$
14,046
$
19,326
Credit Quality Ratios - Total
Company:
Nonperforming loans to total loans
0.40
%
0.44
%
0.40
%
0.44
%
Nonperforming assets to total loans
(including OREO)
0.45
0.47
0.45
0.47
Nonperforming assets to total assets
0.35
0.36
0.35
0.36
Allowance for credit losses to total
loans
1.09
1.05
1.09
1.05
Allowance for credit losses to
nonperforming loans
270
237
270
237
Delinquent loans to total loans (9)
0.28
0.44
0.28
0.44
Net charge-offs to average loans
(annualized)
1.80
1.49
1.03
0.94
Credit Quality Ratios - Core
Bank:
Nonperforming loans to total loans
0.40
%
0.45
%
0.40
%
0.45
%
Nonperforming assets to total loans
(including OREO)
0.44
0.47
0.44
0.47
Nonperforming assets to total assets
0.36
0.37
0.36
0.37
Allowance for credit losses to total
loans
0.92
0.77
0.92
0.77
Allowance for credit losses to
nonperforming loans
230
171
230
171
Delinquent loans to total loans
0.16
0.29
0.16
0.29
Net charge-offs to average loans
(annualized)
0.04
0.04
0.01
0.04
Republic Bancorp, Inc. Financial Information
Second Quarter 2020 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, 2020
Mar. 31, 2020
Dec. 31, 2019
Sep. 30, 2019
Jun. 30, 2019
Assets:
Cash and cash equivalents
$
560,195
$
316,263
$
385,303
$
397,072
$
473,779
Investment securities, net of allowance
for credit losses (3)
545,607
608,330
537,074
638,697
447,512
Loans held for sale
52,992
54,904
31,468
51,243
63,949
Loans held for sale upon branch
divestiture
—
—
—
130,770
131,881
Loans
5,065,092
4,515,599
4,433,151
4,664,054
4,390,533
Allowance for credit losses (3)
(55,097)
(70,431)
(43,351)
(46,932)
(45,983)
Loans, net
5,009,995
4,445,168
4,389,800
4,617,122
4,344,550
Federal Home Loan Bank stock, at cost
25,629
38,900
30,831
32,242
32,242
Premises and equipment, net
42,753
44,215
46,196
46,735
44,199
Right-of-use assets
34,450
34,349
35,206
36,051
37,450
Goodwill
16,300
16,300
16,300
16,300
16,300
Other real estate owned
2,194
85
113
119
1,095
Bank owned life insurance
67,217
66,822
66,433
66,037
65,642
Other assets and accrued interest
receivable
103,243
96,697
81,595
71,259
64,535
Total assets
$
6,460,575
$
5,722,033
$
5,620,319
$
6,103,647
$
5,723,134
Liabilities and Stockholders'
Equity:
Deposits:
Noninterest-bearing
$
1,821,400
$
1,300,891
$
1,033,379
$
1,031,553
$
1,003,793
Interest-bearing
3,196,685
2,770,566
2,752,629
2,703,199
2,557,127
Deposits held for assumption upon branch
divestiture
—
—
—
142,384
152,954
Total deposits
5,018,085
4,071,457
3,786,008
3,877,136
3,713,874
Securities sold under agreements to
repurchase and other short-term borrowings
177,397
126,080
167,617
167,949
226,002
Operating lease liabilities
35,571
35,537
36,530
37,391
38,852
Federal Reserve Paycheck Protection
Program Liquidity Facility
169,209
—
—
—
—
Federal Home Loan Bank advances
137,500
572,500
750,000
1,170,000
915,000
Subordinated note
41,240
41,240
41,240
41,240
41,240
Other liabilities and accrued interest
payable
85,954
91,173
74,680
65,484
56,738
Total liabilities
5,664,956
4,937,987
4,856,075
5,359,200
4,991,706
Stockholders' equity
795,619
784,046
764,244
744,447
731,428
Total liabilities and stockholders'
equity
$
6,460,575
$
5,722,033
$
5,620,319
$
6,103,647
$
5,723,134
Average Balance Sheet Data
Quarterly Comparison
Jun. 30, 2020
Mar. 31, 2020
Dec. 31, 2019
Sep. 30, 2019
Jun. 30, 2019
Assets:
Federal funds sold and other
interest-earning deposits
$
299,760
$
207,335
$
152,286
$
302,156
$
297,205
Investment securities, including FHLB
stock
605,776
519,726
632,559
547,281
514,366
Loans, including loans held for sale
4,867,622
4,493,137
4,588,538
4,606,139
4,424,905
Total interest-earning assets
5,773,158
5,220,198
5,373,383
5,455,576
5,236,476
Total assets
6,094,421
5,626,946
5,638,498
5,711,636
5,480,525
Liabilities and Stockholders'
Equity:
Noninterest-bearing deposits, including
those held for assumption
$
1,697,603
$
1,249,025
$
1,062,010
$
1,065,904
$
1,098,817
Interest-bearing deposits, including those
held for assumption
2,880,988
2,855,332
2,966,993
2,833,632
2,588,836
Securities sold under agreements to
repurchase and other short-term
borrowings
176,541
208,969
248,558
246,889
220,189
Federal Reserve Paycheck Protection
Program Liquidity Facility
122,769
—
—
—
—
Federal Home Loan Bank advances
263,296
371,319
469,130
690,457
710,879
Subordinated note
41,240
41,240
41,240
41,240
41,240
Total interest-bearing liabilities
3,484,834
3,476,860
3,725,921
3,812,218
3,561,144
Stockholders' equity
797,227
778,900
758,740
742,176
728,723
Republic Bancorp, Inc. Financial InformationSecond Quarter 2020
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, 2020
Mar. 31, 2020
Dec. 31, 2019
Sep. 30, 2019
Jun. 30, 2019
Total interest income (4)
$
57,091
$
81,159
$
64,527
$
68,059
$
65,664
Total interest expense
4,886
8,421
10,132
12,573
11,718
Net interest income
52,205
72,738
54,395
55,486
53,946
Provision for expected credit loss expense
(3)
6,534
22,760
914
3,153
4,460
Noninterest income:
Service charges on deposit accounts
2,451
3,136
3,547
3,749
3,598
Net refund transfer fees
2,913
15,823
112
317
3,629
Mortgage banking income
8,398
4,795
2,480
3,064
2,416
Interchange fee income
2,808
2,552
2,814
3,031
3,257
Program fees
1,138
2,624
1,284
1,317
1,037
Increase in cash surrender value of
BOLI
395
389
397
394
377
Net gains on OREO
1
3
53
267
90
Net gain (loss) on branch divestiture
—
—
7,948
(119)
—
Other
647
1,247
1,020
791
721
Total noninterest income
18,751
30,569
19,655
12,811
15,125
Noninterest expense:
Salaries and employee benefits
26,324
26,622
23,997
24,822
25,286
Occupancy and equipment, net
6,715
6,846
6,497
6,571
6,472
Communication and transportation
1,353
1,289
1,198
1,017
1,071
Marketing and development
1,018
833
1,223
1,420
1,278
FDIC insurance expense
299
—
—
—
295
Bank franchise tax expense
914
2,506
927
935
935
Data processing
2,753
2,539
2,532
2,344
2,217
Interchange related expense
1,173
1,076
1,115
1,138
1,302
Supplies
539
452
335
292
582
OREO expense
21
18
2
130
148
Legal and professional fees
1,025
1,237
601
1,026
844
Other
2,691
3,551
2,408
2,716
2,998
Total noninterest expense
44,825
46,969
40,835
42,411
43,428
Income before income tax expense
19,597
33,578
32,301
22,733
21,183
Income tax expense
3,793
6,881
6,533
4,325
3,176
Net income
$
15,804
$
26,697
$
25,768
$
18,408
$
18,007
Republic Bancorp, Inc. Financial InformationSecond Quarter 2020
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, 2020
Mar. 31, 2020
Dec. 31, 2019
Sep. 30, 2019
Jun. 30, 2019
Per Share Data:
Basic weighted average shares
outstanding
21,016
21,035
21,036
21,036
21,016
Diluted weighted average shares
outstanding
21,041
21,094
21,133
21,137
21,138
Period-end shares outstanding:
Class A Common Stock
18,708
18,687
18,737
18,744
18,740
Class B Common Stock
2,200
2,200
2,206
2,208
2,208
Book value per share (5)
$
38.05
$
37.54
$
36.49
$
35.54
$
34.92
Tangible book value per share (5)
36.93
36.45
35.41
34.47
33.87
Earnings per share ("EPS"):
Basic EPS - Class A Common Stock
$
0.76
$
1.29
$
1.23
$
0.88
$
0.86
Basic EPS - Class B Common Stock
0.69
1.17
1.13
0.80
0.79
Diluted EPS - Class A Common Stock
0.76
1.28
1.23
0.88
0.86
Diluted EPS - Class B Common Stock
0.69
1.16
1.12
0.80
0.78
Cash dividends declared per Common
share:
Class A Common Stock
$
0.286
$
0.286
$
0.264
$
0.264
$
0.264
Class B Common Stock
0.260
0.260
0.240
0.240
0.240
Performance Ratios:
Return on average assets
1.04
%
1.90
%
1.83
%
1.29
%
1.31
%
Return on average equity
7.93
13.71
13.58
9.92
9.88
Efficiency ratio (6)
63
45
62
62
63
Yield on average interest-earning assets
(4)
3.96
6.22
4.80
4.99
5.02
Cost of average interest-bearing
liabilities
0.56
0.97
1.09
1.32
1.32
Cost of average deposits (7)
0.32
0.61
0.74
0.82
0.75
Net interest spread (4)
3.40
5.25
3.71
3.67
3.70
Net interest margin - Total Company
(4)
3.62
5.57
4.05
4.07
4.12
Net interest margin - Core Bank (1)
3.23
3.65
3.56
3.56
3.62
Other Information:
End of period FTEs (8) - Total Company
1,094
1,077
1,080
1,093
1,089
End of period FTEs - Core Bank
1,001
994
997
1,013
1,012
Number of full-service banking centers
42
42
41
45
45
Republic Bancorp, Inc. Financial
Information
Second Quarter 2020 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, 2020
Mar. 31, 2020
Dec. 31, 2019
Sep. 30, 2019
Jun. 30, 2019
Credit Quality Asset Balances:
Nonperforming Assets - Total
Company:
Loans on nonaccrual status
$
19,884
$
20,358
$
23,332
$
20,574
$
19,238
Loans past due 90-days-or-more and still
on accrual
535
495
157
175
166
Total nonperforming loans
20,419
20,853
23,489
20,749
19,404
OREO
2,194
85
113
119
1,095
Total nonperforming assets
$
22,613
$
20,938
$
23,602
$
20,868
$
20,499
Nonperforming Assets - Core Bank
(1):
Loans on nonaccrual status
$
19,884
$
20,358
$
23,332
$
20,574
$
19,238
Loans past due 90-days-or-more and still
on accrual
—
—
—
-
-
Total nonperforming loans
19,884
20,358
23,332
20,574
19,238
OREO
2,194
85
113
119
1,095
Total nonperforming assets
$
22,078
$
20,443
$
23,445
$
20,693
$
20,333
Delinquent Loans:
Delinquent loans - Core Bank
$
7,862
$
11,863
$
13,042
$
13,496
$
12,524
Delinquent loans - RPG (2) (10)
6,184
30,764
7,762
6,876
6,802
Total delinquent loans - Total Company
$
14,046
$
42,627
$
20,804
$
20,372
$
19,326
Credit Quality Ratios - Total
Company:
Nonperforming loans to total loans
0.40
%
0.46
%
0.53
%
0.44
%
0.44
%
Nonperforming assets to total loans
(including OREO)
0.45
0.46
0.53
0.45
0.47
Nonperforming assets to total assets
0.35
0.37
0.42
0.34
0.36
Allowance for credit losses to total
loans
1.09
1.56
0.98
1.01
1.05
Allowance for credit losses to
nonperforming loans
270
338
185
226
237
Delinquent loans to total loans (9)
(10)
0.28
0.94
0.47
0.44
0.44
Net charge-offs to average loans
(annualized)
1.80
0.19
0.39
0.68
1.49
Credit Quality Ratios - Core
Bank:
Nonperforming loans to total loans
0.40
%
0.46
%
0.54
%
0.45
%
0.45
%
Nonperforming assets to total loans
(including OREO)
0.44
0.47
0.54
0.45
0.47
Nonperforming assets to total assets
0.36
0.38
0.43
0.35
0.37
Allowance for credit losses to total
loans
0.92
0.97
0.70
0.73
0.77
Allowance for credit losses to
nonperforming loans
230
210
129
163
171
Delinquent loans to total loans
0.16
0.27
0.30
0.30
0.29
Net (recoveries) charge-offs to average
loans (annualized)
0.04
(0.03)
0.19
0.15
0.04
Republic Bancorp, Inc. Financial Information Second Quarter
2020 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, 2020, the Company was divided into five
reportable segments: Traditional Banking, Warehouse Lending
(“Warehouse”), Mortgage Banking, Tax Refund Solutions (“TRS”), and
Republic Credit Solutions (“RCS”). Management considers the first
three segments to collectively constitute “Core Bank” or “Core
Bankingoperations, while the last two segments collectively
constitute Republic Processing Group (“RPG”) operations.
MemoryBank®, the Company’s national branchless banking platform is
part of the Traditional Banking segment.
The nature of segment operations and the primary drivers of net
revenues by reportable segment are provided below:
Reportable Segment:
Nature of Operations:
Primary Drivers of Net
Revenue:
Core Banking:
Traditional Banking
Provides traditional banking products to
clients in its market footprint primarily via its network of
banking centers and to clients outside of its market footprint
primarily via its digital 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 the Bank's market footprint.
Loan sales and servicing.
Republic Processing Group:
Tax Refund Solutions
TRS offers tax-related credit products and
facilitates the receipt and payment of federal and state tax
refunds through Refund Transfer products. The RPS division of TRS
offers general-purpose reloadable cards. TRS and RPS products are
primarily provided to clients outside of the Bank’s market
footprint.
Loans, refund transfers, and prepaid
cards.
Republic Credit Solutions
Offers consumer credit products. RCS
products are primarily provided to clients outside of the Bank’s
market footprint, with a substantial portion of RCS clients
considered subprime or near-prime borrowers.
Unsecured, 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 2019 Annual Report on Form
10-K. Republic evaluates segment performance using operating
income. The Company allocates goodwill to the Traditional Banking
segment. Republic generally allocates income taxes based on income
before income tax expense unless reasonable and specific segment
allocations can be made. The Company makes transactions among
reportable segments at carrying value.
Republic Bancorp, Inc. Financial
Information
Second Quarter 2020 Earnings Release
(continued)
Segment information for the three and six
months ended June 30, 2020 and 2019 follows:
Three Months Ended June 30,
2020
Core Banking
Republic Processing Group
("RPG")
Total
Tax
Republic
Traditional
Warehouse
Mortgage
Core
Refund
Credit
Total
Total
(dollars in thousands)
Banking
Lending
Banking
Banking
Solutions
Solutions
RPG
Company
Net interest income
$
39,035
$
6,063
$
419
$
45,517
$
1,081
$
5,607
$
6,688
$
52,205
Provision for expected credit loss
expense
3,080
449
—
3,529
4,448
(1,443)
3,005
6,534
Net refund transfer fees
—
—
—
—
2,913
—
2,913
2,913
Mortgage banking income
—
—
8,398
8,398
—
—
—
8,398
Program fees
—
—
—
—
618
520
1,138
1,138
Other noninterest income
6,126
17
8
6,151
151
—
151
6,302
Total noninterest income
6,126
17
8,406
14,549
3,682
520
4,202
18,751
Total noninterest expense
36,688
811
2,689
40,188
3,734
903
4,637
44,825
Income before income tax expense
5,393
4,820
6,136
16,349
(3,419)
6,667
3,248
19,597
Income tax expense
729
1,085
1,288
3,102
(853)
1,544
691
3,793
Net income
$
4,664
$
3,735
$
4,848
$
13,247
$
(2,566)
$
5,123
$
2,557
$
15,804
Period-end assets
$
4,967,759
$
1,028,400
$
54,518
$
6,050,677
$
306,583
$
103,315
$
409,898
$
6,460,575
Net interest margin
3.26
%
3.01
%
NM
3.23
%
NM
NM
NM
3.62
%
Net-revenue concentration*
63
%
9
%
12
%
84
%
7
%
9
%
16
%
100
%
Three Months Ended June 30,
2019
Core Banking
Republic Processing Group
("RPG")
Total
Tax
Republic
Traditional
Warehouse
Mortgage
Core
Refund
Credit
Total
Total
(dollars in thousands)
Banking
Lending
Banking
Banking
Solutions
Solutions
RPG
Company
Net interest income
$
41,877
$
3,957
$
170
$
46,004
$
710
$
7,232
$
7,942
$
53,946
Provision for expected credit loss
expense
1,427
417
—
1,844
392
2,224
2,616
4,460
Net refund transfer fees
—
—
—
—
3,629
—
3,629
3,629
Mortgage banking income
—
—
2,416
2,416
—
—
—
2,416
Program fees
—
—
—
—
50
987
1,037
1,037
Other noninterest income
7,853
13
56
7,922
89
32
121
8,043
Total noninterest income
7,853
13
2,472
10,338
3,768
1,019
4,787
15,125
Total noninterest expense
37,764
792
1,354
39,910
2,849
669
3,518
43,428
Income before income tax expense
10,539
2,761
1,288
14,588
1,237
5,358
6,595
21,183
Income tax expense
744
621
270
1,635
288
1,253
1,541
3,176
Net income
$
9,795
$
2,140
$
1,018
$
12,953
$
949
$
4,105
$
5,054
$
18,007
Period-end assets
$
4,805,449
$
738,300
$
20,568
$
5,564,317
$
36,834
$
121,983
$
158,817
$
5,723,134
Net interest margin
3.75
%
2.49
%
NM
3.62
%
NM
NM
NM
4.12
%
Net-revenue concentration*
72
%
6
%
4
%
82
%
6
%
12
%
18
%
100
%
*Net revenues represent total net interest income plus
noninterest income. Net-revenue concentration equals segment-level
net revenue divided by total Company net revenue.
Six Months Ended June 30,
2020
Core Banking
Republic Processing Group
("RPG")
Total
Tax
Republic
Traditional
Warehouse
Mortgage
Core
Refund
Credit
Total
Total
(dollars in thousands)
Banking
Lending
Banking
Banking
Solutions
Solutions
RPG
Company
Net interest income
$
79,656
$
10,370
$
632
$
90,658
$
21,606
$
12,679
$
34,285
$
124,943
Provision for expected credit loss
expense
8,669
781
—
9,450
19,581
263
19,844
29,294
Net refund transfer fees
—
—
—
—
18,736
—
18,736
18,736
Mortgage banking income
—
—
13,193
13,193
—
—
—
13,193
Program fees
—
—
—
—
930
2,832
3,762
3,762
Other noninterest income
13,361
28
32
13,421
208
—
208
13,629
Total noninterest income
13,361
28
13,225
26,614
19,874
2,832
22,706
49,320
Total noninterest expense
73,335
1,614
4,685
79,634
10,363
1,797
12,160
91,794
Income before income tax expense
11,013
8,003
9,172
28,188
11,536
13,451
24,987
53,175
Income tax expense
1,189
1,801
1,926
4,916
2,644
3,114
5,758
10,674
Net income
$
9,824
$
6,202
$
7,246
$
23,272
$
8,892
$
10,337
$
19,229
$
42,501
Period-end assets
$
4,967,759
$
1,028,400
$
54,518
$
6,050,677
$
306,583
$
103,315
$
409,898
$
6,460,575
Net interest margin
3.52
%
2.86
%
NM
3.43
%
NM
NM
NM
4.55
%
Net-revenue concentration*
53
%
6
%
8
%
67
%
24
%
9
%
33
%
100
%
Six Months Ended June 30,
2019
Core Banking
Republic Processing Group
("RPG")
Total
Tax
Republic
Traditional
Warehouse
Mortgage
Core
Refund
Credit
Total
Total
(dollars in thousands)
Banking
Lending
Banking
Banking
Solutions
Solutions
RPG
Company
Net interest income
$
83,224
$
6,852
$
272
$
90,348
$
21,148
$
14,749
$
35,897
$
126,245
Provision for expected credit loss
expense
1,616
642
—
2,258
13,826
5,607
19,433
21,691
Net refund transfer fees
—
—
—
—
20,729
—
20,729
20,729
Mortgage banking income
—
—
3,955
3,955
—
—
—
3,955
Program fees
—
—
—
—
196
1,915
2,111
2,111
Other noninterest income
14,749
23
96
14,868
220
659
879
15,747
Total noninterest income
14,749
23
4,051
18,823
21,145
2,574
23,719
42,542
Total noninterest expense
73,314
1,550
2,674
77,538
9,963
1,436
11,399
88,937
Income before income tax expense
23,043
4,683
1,649
29,375
18,504
10,280
28,784
58,159
Income tax expense
2,509
1,054
346
3,909
4,318
2,409
6,727
10,636
Net income
$
20,534
$
3,629
$
1,303
$
25,466
$
14,186
$
7,871
$
22,057
$
47,523
Period-end assets
$
4,805,449
$
738,300
$
20,568
$
5,564,317
$
36,834
$
121,983
$
158,817
$
5,723,134
Net interest margin
3.81
%
2.63
%
NM
3.69
%
NM
NM
NM
4.88
%
Net-revenue concentration*
58
%
4
%
3
%
65
%
25
%
10
%
35
%
100
%
*Net revenues represent total net interest income plus
noninterest income. Net-revenue concentration equals segment-level
net revenue divided by total Company net revenue.
Republic Bancorp, Inc. Financial
Information
Second Quarter 2020 Earnings Release
(continued)
(1)
“Core Bank” or “Core Banking” operations
consist of the Traditional Banking, Warehouse Lending, and Mortgage
Banking segments.
(2)
Republic Processing Group operations
consist of the Tax Refund Solutions and Republic Credit Solutions
segments.
(3)
Effective January 1, 2020, the Company
adopted Accounting Standards Codification (“ASC”) 326 Financial
Instruments – Credit Losses, which replaces the pre-January 1, 2020
“probable-incurred” method for calculating the Company’s Allowance
for Credit Losses (“ACL”) with the current expected credit loss
(“CECL”) method. CECL is applicable to financial assets measured at
amortized cost, including loan and lease receivables and
held-to-maturity debt securities. CECL also applies to certain
off-balance sheet credit exposures. In addition to CECL, ASC 326
made changes to the accounting for Available-for-Sale (“AFS”) debt
securities. One such change is to require credit losses to be
presented as an allowance rather than as a write-down on AFS debt
securities that the Company does not intend or will likely not be
compelled to sell.
When measuring an ACL, CECL primarily
differs from the probable-incurred method by: a) incorporating a
lower “expected” threshold for loss recognition versus a higher
“probable” threshold; b) requiring life-of-loan considerations; and
c) requiring reasonable and supportable forecasts. The Company’s
CECL method is a “static-pool” method that analyzes historical
closed pools of loans over their expected lives to attain a loss
rate, which is then adjusted for current conditions and reasonable
and supportable forecasts prior to being applied to the current
balance of the analyzed pools. Due to its reasonably strong
correlation to the Company's historical net loan losses, the
Company has chosen to use the national unemployment rate as its
primary forecasting tool.
In accord with the adoption of ASC 326 and
CECL, the Company recorded on January 1, 2020 a $6.7 million, or
16%, increase in the ACL for its loans and leases, a $51,000 ACL
for its investment debt securities, and an approximate $456,000 ACL
for its off-balance sheet exposures. This adoption also reduced the
Company’s retained earnings on a tax-effected basis, with no impact
on 2020 earnings. The adoption date increase in ACL for the
Company’s loans and leases primarily reflects additional ACL for
longer duration loan portfolios, such as the Company's residential
real estate and consumer loan portfolios. No additional
segmentation of the Bank's loan portfolios was deemed necessary
upon adoption.
(4)
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 $7.8 million and $8.4
million for the quarters ended June 30, 2020 and 2019. The amount
of loan fee income included in total interest income was $36.2
million and $37.0 million for the six months ended June 30, 2020
and 2019.
The amount of loan fee income included in
total interest income per quarter was as follows: $7.8 million
(quarter ended June 30, 2020); $28.5 million (quarter ended March
31, 2020); $8.5 million (quarter ended December 31, 2019); $9.1
million (quarter ended September 30, 2019); and $8.4 million
(quarter ended June 30, 2019).
Interest income for Easy Advances (“EA’s”)
is composed entirely of loan fees. The loan fees disclosed above
included EA fees of $19.5 million and $19.1 million for the six
months ended June 30, 2020 and 2019. EA’s are only offered during
the first two months of each year.
(5)
The following table provides a
reconciliation of total stockholders’ equity in accordance with
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, 2020
Mar. 31, 2020
Dec. 31, 2019
Sep. 30, 2019
Jun. 30, 2019
Total stockholders' equity - GAAP (a)
$
795,619
$
784,046
$
764,244
$
744,447
$
731,428
Less: Goodwill
16,300
16,300
16,300
16,300
16,300
Less: Mortgage servicing rights
6,711
5,994
5,888
5,483
5,158
Less: Core deposit intangible
377
423
469
516
562
Tangible stockholders' equity - Non-GAAP
(c)
$
772,231
$
761,329
$
741,587
$
722,148
$
709,408
Total assets - GAAP (b)
$
6,460,575
$
5,722,033
$
5,620,319
$
6,103,647
$
5,723,134
Less: Goodwill
16,300
16,300
16,300
16,300
16,300
Less: Mortgage servicing rights
6,711
5,994
5,888
5,483
5,158
Less: Core deposit intangible
377
423
469
516
562
Tangible assets - Non-GAAP (d)
$
6,437,187
$
5,699,316
$
5,597,662
$
6,081,348
$
5,701,114
Total stockholders' equity to total assets
- GAAP (a/b)
12.31
%
13.70
%
13.60
%
12.20
%
12.78
%
Tangible stockholders' equity to tangible
assets - Non-GAAP (c/d)
12.00
%
13.36
%
13.25
%
11.87
%
12.44
%
Number of shares outstanding (e)
20,908
20,887
20,943
20,948
20,948
Book value per share - GAAP (a/e)
$
38.05
$
37.54
$
36.49
$
35.54
$
34.92
Tangible book value per share - Non-GAAP
(c/e)
36.93
36.45
35.41
34.47
33.87
(6)
The efficiency ratio, a non-GAAP measure
with no GAAP comparable, 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 and the Company’s net gain from its November
2019 branch divestiture.
Three Months Ended Jun.
30,
Six Months Ended Jun.
30,
(dollars in thousands)
2020
2019
2020
2019
Net interest income
$
52,205
$
53,946
$
124,943
$
126,245
Noninterest income
18,751
15,125
49,320
42,542
Less: Net gain (loss) on sales, calls, and
impairment of debt and equity securities
16
33
16
33
Total adjusted revenue - Non-GAAP (a)
$
70,956
$
69,071
$
174,247
$
168,754
Noninterest expense (b)
$
44,825
$
43,428
$
91,794
$
88,937
Efficiency Ratio - Non-GAAP (b/a)
63
%
63
%
53
%
53
%
Three Months Ended
(dollars in thousands)
Jun. 30, 2020
Mar. 31, 2020*
Dec. 31, 2019
Sep. 30, 2019
Jun. 30, 2019
Net interest income
$
52,205
$
72,738
$
54,395
$
55,486
$
53,946
Noninterest income
18,751
30,569
19,655
12,811
15,125
Less: Net gain on branch divestiture
—
—
7,948
(119)
—
Less: Net gain (loss) on sales, calls, and
impairment of debt and equity securities
16
40
(12)
19
33
Total adjusted revenue - Non-GAAP (a)
$
70,940
$
103,267
$
66,114
$
68,397
$
69,038
Noninterest expense (b)
$
44,825
$
46,969
$
40,835
$
42,411
$
43,428
Efficiency Ratio - Non-GAAP (b/a)
63
%
45
%
62
%
62
%
63
%
*The Company’s efficiency ratio for the first quarter of each
year traditionally benefits from seasonal revenues from its TRS
segment.
(7)
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.
(8)
FTEs – Full-time-equivalent
employees.
(9)
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.
(10)
Delinquent loans for the RPG
segment included $23 million of EA’s at March 31, 2020. EA’s are
only offered during the first two months of each year. EA’s 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 EA’s are
charged-off by the end of the second quarter of each year.
NM – Not meaningful
NA – Not applicable
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200717005041/en/
Kevin Sipes Executive
Vice President & Chief Financial Officer (502)
560-8628
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