RBCAA Republic Bancorp Inc

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”) is pleased to report first quarter net income of $29.5 million, a $2.0 million, or 7% increase over the first quarter of 2018, resulting in Diluted Earnings per Class A Common Share (“Diluted EPS”) of $1.41. Return on average assets (“ROA”) and return on average equity (“ROE”) were 2.16% and 16.70% for the first quarter of 2019.

Steve Trager, Chairman & CEO of Republic commented, “We are very excited to report another strong quarter-over-quarter growth in net income for the Company. As is the case each year during the first quarter, our seasonal tax business is a major component of our overall results. We are pleased with our performance at Tax Refund Solutions (“TRS”), as net income increased 6% over the first quarter of 2018, and we are also optimistic as to how that performance could look at the end of the year if the refund payments from the federal government pick up during the remainder of 2019.

“In addition to our success at TRS, first quarter 2019 net income from our Core Banking operations grew 12% over the first quarter of 2018. With 94% of our total assets and the vast majority of our associates dedicated solely to its operations each and every day, the performance of our Core Bank continues to be the foundation for everything we are able to do and achieve as a company. Despite an inverted yield curve providing strong headwinds to the profits for all in the banking industry, I couldn’t be more proud of the first quarter performance of our Core Bank, as our success continues to be built on a strong net interest margin and the solid credit quality of our loan portfolio. While the economic times ahead are filled with uncertainty, I am confident that our business model will continue to position us well for success no matter what challenges come our way,” concluded Steve Trager.

The following table highlights Republic’s financial performance for the first quarter of 2019 compared to the first quarter of 2018:

                                      Total Company Financial Performance Highlights Three Months Ended Mar. 31, (dollars in thousands, except per share data) 2019 2018 $ Change % Change   Income Before Income Taxes* $ 36,976 $ 34,910 $ 2,066 6 % Net Income* 29,516 27,469 2,047 7 Diluted Earnings per Class A Common Stock 1.41 1.32 0.09 7 Return on Average Assets 2.16 % 2.08 % NA 4 Return on Average Equity 16.70 17.12 NA (2)  

NA – Not applicable

*See Segment Data at the End of this Earnings Release

 

Results of Operations for the First Quarter of 2019 Compared to the First Quarter of 2018

Core Bank(1) – Net income from Core Banking was $12.5 million for the first quarter of 2019, an increase of $1.4 million, or 12%, over the first quarter of 2018. Year-over-year net interest margin (“NIM”) expansion, higher mortgage banking income, and a reduction in the provision for loan losses resulting from continued strong credit quality all contributed to the rise in Core Bank net income. These positive drivers were partially offset by a 7% increase in salaries and employee benefits expense from the first quarter of 2018 to the same period in 2019, as the Core Bank continues to invest in its most valuable assets, its human resources, in an effort to achieve its long-term, strategic growth aspirations.

Despite headwinds associated with an increased cost of interest-bearing deposits, the Core Bank’s net interest income increased $2.5 million, or 6%, over the first quarter of 2018. A 21-basis point expansion in the Core Bank’s NIM, accompanied by a $129 million, or 3%, increase in quarterly average Core Bank loans drove the overall increase in net interest income. The table below presents the overall change in the Core Bank’s net interest income, as well as average and period-end loan balances by origination channel:

                            Net Interest Income   for the (dollars in thousands) Three Months Ended Mar. 31, Origination Channel 2019     2018 $ Change     % Change   Traditional Network $ 41,093 $ 37,934 $ 3,159 8

%

 

Warehouse Lending 2,895 3,591 (696 ) (19 ) Correspondent Lending 294 260 34 13 2012-FDIC Acquired Loans   62   66   (4 ) (6 ) Total Core Bank $ 44,344 $ 41,851 $ 2,493   6                                                                                                     Average Loan Balances Period-End Loan Balances (dollars in thousands) Three Months Ended Mar. 31, Mar. 31, Origination Channel   2019   2018 $ Change   % Change   2019   2018 $ Change   % Change   Traditional Network $ 3,500,974 $ 3,307,756 $ 193,218 6

%

 

$ 3,528,727 $ 3,322,017 $ 206,710 6

%

 

Warehouse Lending 407,341 448,039 (40,698 ) (9 ) 559,787 534,959 24,828 5 Correspondent Lending 92,322 114,156 (21,834 ) (19 ) 88,776 111,263 (22,487 ) (20 ) 2012-FDIC Acquired Loans   5,185   6,443   (1,258 ) (20 )   5,154   6,065   (911 ) (15 ) Total Core Bank $ 4,005,822 $ 3,876,394 $ 129,428   3 $ 4,182,444 $ 3,974,304 $ 208,140   5                                                            

The primary drivers of the changes in the Core Bank’s average loan balances and net interest income for the first quarter of 2019, as compared to the first quarter of 2018 follow:

• The difference between the Core Bank’s net interest margin and net interest spread was 36 basis points during the first quarter of 2019 compared to 22 basis points during the first quarter of 2018, with the differential representing the value to the net interest margin of noninterest-bearing deposits and stockholders’ equity. The increase in this value resulted from a 49-basis point rise in the yield of the Bank’s interest-earning assets from period to period.
• Over the previous 12 months, the Core Bank’s interest-earning assets repriced at a faster pace than its interest-bearing liabilities, leading to a higher spread. Altogether, the Core Bank’s net interest spread increased seven basis points from the first quarter 2018 to the same period in 2019. Contributing significantly to this overall expansion in net interest spread was the ability of the Core Bank to manage its overall funding costs related to its non-maturity deposits. Overall, the Core Bank’s interest-bearing deposit funding costs rose 38 basis points from the first quarter of 2018 to the same period in 2019, despite a 91-basis-point increase in the average Federal Funds Target Rate over the same period.
• The Traditional Network experienced growth in average loan balances of $193 million, or 6%, from the first quarter of 2018 to the first quarter of 2019. The primary contributors for the increase in the quarter-over-quarter average balances were commercial and industrial loans, which grew $82 million, and commercial real estate loans, which increased $39 million. March 2019 was an exceptional growth month for the Traditional Network, as period-end loan balances grew $51 million during the month, alone, driven by strong commercial-related loan activity.
• Partially offsetting the positive drivers above, net interest income from Warehouse Lending (“Warehouse”) declined $696,000, as average Warehouse loan balances decreased $41 million from the first quarter of 2018 to the first quarter of 2019. While this segment did experience a larger than usual seasonal decline during January 2019, it rebounded significantly during March 2019, as the average usage rate among its clients increased notably during the month to bring its average loans for the quarter closer in-line with the first quarter of 2018.

The Core Bank’s provision for loan and lease losses (“Provision”) decreased to $414,000 for the first quarter of 2019 from $960,000 for the same period in 2018. The Core Bank’s overall credit quality metrics remained strong from period to period, with its ratios of nonperforming loans to total loans and delinquent loans to total loans remaining near historically low levels. Additionally, the Core Bank had no notable individual charge-offs during the first quarter of 2019.

The table below presents the Core Bank’s credit quality metrics:

                                  As of and for the: Quarters Ended:   Years Ended: Mar. 31,   Mar. 31,   Dec. 31,   Dec. 31,   Dec. 31, Core Banking Credit Quality Ratios   2019     2018     2018   2017   2016   Nonperforming loans to total loans 0.37 % 0.37 % 0.40 % 0.36 % 0.42 %   Nonperforming assets to total loans (including OREO) 0.37 0.38 0.40 0.36 0.46   Delinquent loans to total loans(2) 0.18 0.21 0.22 0.21 0.18   Net charge-offs to average loans 0.04 0.06 0.06 0.04 0.05 (Quarterly rates annualized)                                 OREO = Other Real Estate Owned                                

Noninterest income for the Core Bank was $8.5 million during the first quarter of 2019, a $417,000, or 5%, increase from the $8.1 million achieved during the first quarter of 2018. Driving the change in noninterest income was a $519,000 rise in mortgage banking income, which resulted from a $12 million increase in secondary market loans originated for the period combined with a $15 million increase in the Bank’s pipeline of secondary market loans-in-process from March 31, 2018 to March 31, 2019. Over the previous 12 months, the Bank has continued to increase its staffing and resources to the mortgage origination function. The Bank’s continued investments in these resources, combined with a meaningful period-to-period decline in home-mortgage interest rates, contributed to the increased quarter-over-quarter mortgage activity.

Core Bank noninterest expense increased $2.2 million, or 6%, during the first quarter of 2019 compared to the first quarter of 2018. The following primarily drove the increase:

• Salaries and employee benefits expense increased $1.5 million, or 7%. Annual merit increases and the addition of 75 Core Bank full-time-equivalent employees (“FTEs”) from March 31, 2018 to March 31, 2019 primarily drove the increase.
• Occupancy expense increased $377,000, or 6%, primarily driven by increases in rent expense and support costs for the Core Bank’s technology and infrastructure.

Republic Processing Group(3)

Republic Processing Group (“RPG”) reported net income of $17.0 million for the first quarter of 2019 compared to $16.3 million for the same period in 2018. Net income at RPG’s TRS segment grew $798,000, or 6%, to $13.2 million during the first quarter of 2019 compared to $12.4 million for the same period in 2018. Solid revenue growth of $1.8 million from TRS’s Easy Advance (“EA”) and Refund Transfer (“RT”) products was partially offset by a $1.0 million decline in revenue related to a one-time fee recorded by TRS during the first quarter of 2018 for a non-tax-related product.

EA revenue, net of Provision expense, increased to $5.5 million for the first quarter of 2019, a $960,000, or 21%, increase over the same period in 2018. For the first quarter 2019 tax season, TRS modified its EA product offering with the following changes:

• TRS allowed the taxpayer to choose from multiple loan-amount tiers, subject to underwriting, up to a maximum advance amount of $6,250, a substantial increase over the maximum of $3,500 the previous year;
• TRS lowered the fee charged to the tax providers for the EA; and
• TRS implemented a direct fee to the taxpayer for the EA, with the annual percentage rate to the taxpayer for his or her portion of the total fee being less than 36% for all offering tiers.

Despite the increase in the available EA maximum amount, the average loan amount for the first quarter of 2019 decreased by 10% compared to the first quarter 2018 tax season, as the taxpayer base generally opted for lower loan amounts during 2019. While the average amount borrowed per loan decreased during 2019, the average fee per loan increased 6% for the same period, as the combined tax provider and taxpayer fee for 2019 resulted in a higher total average fee per loan than the lone tax provider fee in 2018.

TRS’s Provision for EA loan losses was $13.4 million, or 3.44% of its $389 million in EAs originated during the first quarter of 2019, compared to a Provision of $13.3 million, or 3.09% of its $430 million of EAs originated during the first quarter of 2018. The increased loan loss for the first quarter of 2019 was due to slower refund payments received from the U.S. Treasury for 2019 as compared to 2018. The Company believes these slower payments were primarily due to the partial government shutdown during the first quarter of 2019. While the Company is optimistic its ultimate EA losses will finish the year more in line with its prior season, it is unable to predict that outcome at this time given the current level of payments received. EAs are only originated during the first two months of each year, with all uncollected EAs charged off by June 30th of each year. EAs collected during the second half of each year are recorded as recoveries of previously charged-off loans. TRS’s loss rate as of June 30, 2018 was 2.88% of total originations and it finished the year with an EA loss rate of 2.50% of total EAs originated during 2018.

TRS’s net RT revenues reached $17.1 million during the first quarter of 2019, an increase of $748,000, or 5%, over the same period in 2018. A nominal increase in RT pricing and a shift in the RT mix among the various tax providers primarily drove the rise in net RT revenues.

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 two loan production offices throughout five states: 32 banking centers in 11 Kentucky communities - Covington, Crestview Hills, Elizabethtown, Florence, Frankfort, Georgetown, Lexington, Louisville, Owensboro, 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, Port Richey, St. Petersburg, Seminole, Tampa, and Temple Terrace, and one loan production office in Oldsmar; two banking centers in Tennessee (Nashville MSA) – Cool Springs (Franklin) and Green Hills (Nashville), and one loan production office in Brentwood; 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 $5.4 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, changes in Easy Advance loss estimates, 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, 2018. 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

First Quarter 2019 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 Mar. 31, 2019 Dec. 31, 2018 Mar. 31, 2018 Assets: Cash and cash equivalents $ 345,512 $ 351,474 $ 362,122 Investment securities 498,318 543,771 483,573 Loans held for sale 24,177 21,809 14,295 Loans 4,298,710 4,148,227 4,052,500 Allowance for loan and lease losses   (57,961)   (44,675)   (52,341) Loans, net 4,240,749 4,103,552 4,000,159 Federal Home Loan Bank stock, at cost 29,965 32,067 32,067 Premises and equipment, net 43,527 44,820 46,792 Right-of-use assets(4) 38,738 — — Goodwill 16,300 16,300 16,300 Other real estate owned ("OREO") 216 160 160 Bank owned life insurance ("BOLI") 65,265 64,883 63,727 Other assets and accrued interest receivable   63,001   61,568   59,139 Total assets $ 5,365,768 $ 5,240,404 $ 5,078,334   Liabilities and Stockholders' Equity: Deposits: Noninterest-bearing $ 1,184,480 $ 1,003,969 $ 1,241,127 Interest-bearing   2,589,836   2,452,176   2,476,496 Total deposits 3,774,316 3,456,145 3,717,623   Securities sold under agreements to repurchase and other short-term borrowings 173,168 182,990 175,682 Operating lease liabilities(4) 40,203 — — Federal Home Loan Bank advances 560,000 810,000 440,000 Subordinated note 41,240 41,240 41,240 Other liabilities and accrued interest payable   59,750   60,095   50,535 Total liabilities 4,648,677 4,550,470 4,425,080   Stockholders' equity   717,091   689,934   653,254 Total liabilities and stockholders' equity $ 5,365,768 $ 5,240,404 $ 5,078,334   Average Balance Sheet Data Three Months Ended Mar. 31, 2019 2018 Assets: Federal funds sold and other interest-earning deposits $ 289,928 $ 283,161 Investment securities, including FHLB stock 563,752 552,760 Loans, including loans held for sale 4,256,673 4,082,050 Total interest-earning assets 5,110,353 4,917,971 Total assets 5,476,671 5,278,204   Liabilities and Stockholders' Equity: Noninterest-bearing deposits $ 1,258,461 $ 1,319,860 Interest-bearing deposits 2,629,765 2,416,142

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

231,602 257,439 Federal Home Loan Bank advances 511,408 545,778 Subordinated note 41,240 41,240 Total interest-bearing liabilities 3,414,015 3,260,599 Stockholders' equity 706,833 641,624     Republic Bancorp, Inc. Financial Information First Quarter 2019 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 Mar. 31, 2019 2018   Total interest income(5) $ 82,633 $ 73,833 Total interest expense   10,334   6,168 Net interest income 72,299 67,665   Provision for loan and lease losses 17,231 17,255   Noninterest income: Service charges on deposit accounts 3,303 3,555 Net refund transfer fees 17,100 16,352 Mortgage banking income 1,539 1,020 Interchange fee income 2,757 2,667 Program fees 1,074 1,696 Increase in cash surrender value of BOLI 382 371 Net gains on OREO 130 132 Other   1,132   1,752 Total noninterest income   27,417   27,545   Noninterest expense: Salaries and employee benefits 25,076 23,834 Occupancy and equipment, net 6,584 6,221 Communication and transportation 1,161 1,382 Marketing and development 1,102 916 FDIC insurance expense 448 525 Bank franchise tax expense 2,496 2,518 Data processing 2,096 2,386 Interchange related expense 1,315 1,007 Supplies 484 381 OREO expense 46 45 Legal and professional fees 886 1,043 Other   3,815   2,787 Total noninterest expense   45,509   43,045   Income before income tax expense 36,976 34,910 Income tax expense   7,460   7,441   Net income $ 29,516 $ 27,469     Republic Bancorp, Inc. Financial Information First Quarter 2019 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 Mar. 31, 2019 2018 Per Share Data:   Basic weighted average shares outstanding 20,973 20,920 Diluted weighted average shares outstanding 21,106 21,018   Period-end shares outstanding: Class A Common Stock 18,698 18,645 Class B Common Stock 2,213 2,243   Book value per share(6) $ 34.29 $ 31.27 Tangible book value per share(6) 33.25 30.22   Earnings per share ("EPS"): Basic EPS - Class A Common Stock $ 1.42 $ 1.32 Basic EPS - Class B Common Stock 1.29 1.21 Diluted EPS - Class A Common Stock 1.41 1.32 Diluted EPS - Class B Common Stock 1.28 1.20   Cash dividends declared per Common share: Class A Common Stock $ 0.264 $ 0.242 Class B Common Stock 0.240 0.220   Performance Ratios:   Return on average assets 2.16 % 2.08 % Return on average equity 16.70 17.12 Efficiency ratio(7) 46 45 Yield on average interest-earning assets(5) 6.47 6.01 Cost of average interest-bearing liabilities 1.21 0.76 Cost of average deposits(8) 0.69 0.36 Net interest spread(5) 5.26 5.25 Net interest margin - Total Company(5) 5.66 5.50 Net interest margin - Core Bank(1) 3.76 3.55   Other Information:   End of period FTEs(9) - Total Company 1,073 1,003 End of period FTEs - Core Bank 997 922 Number of full-service banking centers 45 45     Republic Bancorp, Inc. Financial Information First Quarter 2019 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 Mar. 31, 2019 2018 Credit Quality Asset Balances:   Nonperforming Assets - Total Company: Loans on nonaccrual status $ 15,361 $ 14,849 Loans past due 90-days-or-more and still on accrual   199   1,279 Total nonperforming loans 15,560 16,128 OREO   216   160 Total nonperforming assets $ 15,776 $ 16,288   Nonperforming Assets - Core Bank(1): Loans on nonaccrual status $ 15,361 $ 14,849 Loans past due 90-days-or-more and still on accrual   4   27 Total nonperforming loans 15,365 14,876 OREO   216   160 Total nonperforming assets $ 15,581 $ 15,036   Delinquent loans: Delinquent loans - Core Bank $ 7,727 $ 8,303 Delinquent loans - RPG(3)(10)   26,460   17,530 Total delinquent loans - Total Company $ 34,187 $ 25,833     Credit Quality Ratios - Total Company:   Nonperforming loans to total loans 0.36 % 0.40 % Nonperforming assets to total loans (including OREO) 0.37 0.40 Nonperforming assets to total assets 0.29 0.32 Allowance for loan and lease losses to total loans 1.35 1.29 Allowance for loan and lease losses to nonperforming loans 373 325 Delinquent loans to total loans(2)(10) 0.80 0.64 Net charge-offs to average loans (annualized) 0.37 0.75   Credit Quality Ratios - Core Bank:   Nonperforming loans to total loans 0.37 % 0.37 % Nonperforming assets to total loans (including OREO) 0.37 0.38 Nonperforming assets to total assets 0.31 0.31 Allowance for loan and lease losses to total loans 0.75 0.77 Allowance for loan and lease losses to nonperforming loans 205 205 Delinquent loans to total loans 0.18 0.21 Net charge-offs to average loans (annualized) 0.04 0.06           Republic Bancorp, Inc. Financial Information First Quarter 2019 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 Mar. 31, 2019 Dec. 31, 2018 Sep. 30, 2018 Jun. 30, 2018 Mar. 31, 2018 Assets: Cash and cash equivalents $ 345,512 $ 351,474 $ 365,512 $ 386,956 $ 362,122 Investment securities 498,318 543,771 513,766 485,622 483,573 Loans held for sale 24,177 21,809 28,899 26,337 14,295 Loans 4,298,710 4,148,227 4,136,195 4,195,984 4,052,500 Allowance for loan and lease losses   (57,961)   (44,675)   (43,824)   (45,047)   (52,341) Loans, net 4,240,749 4,103,552 4,092,371 4,150,937 4,000,159 Federal Home Loan Bank stock, at cost 29,965 32,067 32,067 32,067 32,067 Premises and equipment, net 43,527 44,820 45,945 46,485 46,792 Right-of-use assets(4) 38,738 — — — — Goodwill 16,300 16,300 16,300 16,300 16,300 Other real estate owned 216 160 70 — 160 Bank owned life insurance 65,265 64,883 64,491 64,106 63,727 Other assets and accrued interest receivable   63,001   61,568   62,933   57,135   59,139 Total assets $ 5,365,768 $ 5,240,404 $ 5,222,354 $ 5,265,945 $ 5,078,334   Liabilities and Stockholders' Equity: Deposits: Noninterest-bearing $ 1,184,480 $ 1,003,969 $ 1,103,461 $ 1,061,182 $ 1,241,127 Interest-bearing   2,589,836   2,452,176   2,463,224   2,412,187   2,476,496 Total deposits 3,774,316 3,456,145 3,566,685 3,473,369 3,717,623  

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

173,168 182,990 163,768 175,291 175,682 Operating lease liabilities(4) 40,203 — — — — Federal Home Loan Bank advances 560,000 810,000 715,000 860,000 440,000 Subordinated note 41,240 41,240 41,240 41,240 41,240 Other liabilities and accrued interest payable   59,750   60,095   58,851   52,037   50,535 Total liabilities 4,648,677 4,550,470 4,545,544 4,601,937 4,425,080   Stockholders' equity   717,091   689,934   676,810   664,008   653,254 Total liabilities and stockholders' equity $ 5,365,768 $ 5,240,404 $ 5,222,354 $ 5,265,945 $ 5,078,334   Average Balance Sheet Data   Quarterly Comparison Mar. 31, 2019 Dec. 31, 2018 Sep. 30, 2018 Jun. 30, 2018 Mar. 31, 2018 Assets: Federal funds sold and other interest-earning deposits $ 289,928 $ 199,134 $ 265,111 $ 276,246 $ 283,161 Investment securities, including FHLB stock 563,752 579,429 530,468 506,209 552,760 Loans, including loans held for sale 4,256,673 4,092,004 4,112,926 4,092,388 4,082,050 Total interest-earning assets 5,110,353 4,870,567 4,908,505 4,874,843 4,917,971 Total assets 5,476,671 5,070,845 5,101,286 5,074,781 5,278,204   Liabilities and Stockholders' Equity: Noninterest-bearing deposits $ 1,258,461 $ 1,050,236 $ 1,076,967 $ 1,146,403 $ 1,319,860 Interest-bearing deposits 2,629,765 2,477,962 2,476,088 2,410,330 2,416,142

 

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

231,602 252,073 213,195 178,063 257,439 Federal Home Loan Bank advances 511,408 515,413 574,130 593,187 545,778 Subordinated note 41,240 41,240 41,240 41,240 41,240 Total interest-bearing liabilities 3,414,015 3,286,688 3,304,653 3,222,820 3,260,599 Stockholders' equity 706,833 687,156 675,470 663,077 641,624           Republic Bancorp, Inc. Financial Information First Quarter 2019 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 Mar. 31, 2019   Dec. 31, 2018   Sep. 30, 2018 Jun. 30, 2018 Mar. 31, 2018   Total interest income(5) $ 82,633 $ 62,902 $ 61,090 $ 58,356 $ 73,833 Total interest expense   10,334   8,626   8,057   7,272   6,168 Net interest income 72,299 54,276 53,033 51,084 67,665   Provision for loan and lease losses 17,231 5,104 4,077 4,932 17,255   Noninterest income: Service charges on deposit accounts 3,303 3,565 3,579 3,574 3,555 Net refund transfer fees 17,100 55 149 3,473 16,352 Mortgage banking income 1,539 1,129 1,360 1,316 1,020 Interchange fee income 2,757 2,844 2,757 2,891 2,667 Program fees 1,074 1,520 1,686 1,323 1,696 Increase in cash surrender value of BOLI 382 392 385 379 371 Net gains on OREO 130 29 248 320 132 Other   1,132   585   1,301   1,020   1,752 Total noninterest income   27,417   10,119   11,465   14,296   27,545   Noninterest expense: Salaries and employee benefits 25,076 21,743 22,846 22,766 23,834 Occupancy and equipment, net 6,584 6,474 6,279 6,391 6,221 Communication and transportation 1,161 1,115 1,047 1,241 1,382 Marketing and development 1,102 784 1,449 1,283 916 FDIC insurance expense 448 264 360 345 525 Bank franchise tax expense 2,496 863 710 860 2,518 Data processing 2,096 2,434 2,350 2,443 2,386 Interchange related expense 1,315 1,237 1,138 1,098 1,007 Supplies 484 446 314 303 381 OREO expense 46 31 2 16 45 Legal and professional fees 886 753 935 728 1,043 Other   3,815   2,819   3,782   3,158   2,787 Total noninterest expense   45,509   38,963   41,212   40,632   43,045   Income before income tax expense 36,976 20,328 19,209 19,816 34,910 Income tax expense   7,460   3,022   1,798   4,150   7,441   Net income $ 29,516 $ 17,306 $ 17,411 $ 15,666 $ 27,469           Republic Bancorp, Inc. Financial Information First Quarter 2019 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 Mar. 31, 2019 Dec. 31, 2018 Sep. 30, 2018 Jun. 30, 2018 Mar. 31, 2018 Per Share Data:   Basic weighted average shares outstanding 20,973 20,975 20,962 21,187 20,920 Diluted weighted average shares outstanding 21,106 21,113 21,120 21,331 21,018   Period-end shares outstanding: Class A Common Stock 18,698 18,675 18,682 18,677 18,645 Class B Common Stock 2,213 2,213 2,213 2,215 2,243   Book value per share(6) $ 34.29 $ 33.03 $ 32.39 $ 31.78 $ 31.27 Tangible book value per share(6) 33.25 31.98 31.34 30.73 30.22   Earnings per share ("EPS"): Basic EPS - Class A Common Stock $ 1.42 $ 0.83 $ 0.84 $ 0.75 $ 1.32 Basic EPS - Class B Common Stock 1.29 0.76 0.76 0.68 1.21 Diluted EPS - Class A Common Stock 1.41 0.83 0.83 0.74 1.32 Diluted EPS - Class B Common Stock 1.28 0.75 0.76 0.68 1.20   Cash dividends declared per Common share: Class A Common Stock $ 0.264 $ 0.242 $ 0.242 $ 0.242 $ 0.242 Class B Common Stock 0.240 0.220 0.220 0.220 0.220   Performance Ratios:   Return on average assets 2.16 % 1.37 % 1.37 % 1.23 % 2.08 % Return on average equity 16.70 10.07 10.31 9.45 17.12 Efficiency ratio(7) 46 61 64 62 45 Yield on average interest-earning assets(5) 6.47 5.17 4.98 4.79 6.01 Cost of average interest-bearing liabilities 1.21 1.05 0.98 0.90 0.76 Cost of average deposits(8) 0.69 0.59 0.51 0.44 0.36 Net interest spread(5) 5.26 4.12 4.00 3.89 5.25 Net interest margin - Total Company(5) 5.66 4.46 4.32 4.19 5.50 Net interest margin - Core Bank(1) 3.76 3.85 3.76 3.64 3.55   Other Information:   End of period FTEs(9) - Total Company 1,073 1,051 1,034 1,013 1,003 End of period FTEs - Core Bank 997 968 953 933 922 Number of full-service banking centers 45 45 45 45 45           Republic Bancorp, Inc. Financial Information First Quarter 2019 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 Mar. 31, 2019 Dec. 31, 2018 Sep. 30, 2018 Jun. 30, 2018 Mar. 31, 2018 Credit Quality Asset Balances:   Nonperforming Assets - Total Company: Loans on nonaccrual status $ 15,361 $ 15,993 $ 17,015 $ 17,502 $ 14,849 Loans past due 90-days-or-more and still on accrual   199   145   254   858   1,279 Total nonperforming loans 15,560 16,138 17,269 18,360 16,128 OREO   216   160   70   —   160 Total nonperforming assets $ 15,776 $ 16,298 $ 17,339 $ 18,360 $ 16,288   Nonperforming Assets - Core Bank(1): Loans on nonaccrual status $ 15,361 $ 15,993 $ 17,015 $ 17,502 $ 14,849 Loans past due 90-days-or-more and still on accrual   4   13   5   22   27 Total nonperforming loans 15,365 16,006 17,020 17,524 14,876 OREO   216   160   70   —   160 Total nonperforming assets $ 15,581 $ 16,166 $ 17,090 $ 17,524 $ 15,036   Delinquent Loans: Delinquent loans - Core Bank $ 7,727 $ 8,875 $ 11,840 $ 8,703 $ 8,303 Delinquent loans - RPG(3)(10)   26,460   7,087   5,986   4,429   17,530 Total delinquent loans - Total Company $ 34,187 $ 15,962 $ 17,826 $ 13,132 $ 25,833     Credit Quality Ratios - Total Company:   Nonperforming loans to total loans 0.36 % 0.39 % 0.42 % 0.44 % 0.40 % Nonperforming assets to total loans (including OREO) 0.37 0.39 0.42 0.44 0.40 Nonperforming assets to total assets 0.29 0.31 0.33 0.35 0.32 Allowance for loan and lease losses to total loans 1.35 1.08 1.06 1.07 1.29 Allowance for loan and lease losses to nonperforming loans 373 277 254 245 325 Delinquent loans to total loans(2)(10) 0.80 0.38 0.43 0.31 0.64 Net charge-offs to average loans (annualized) 0.37 0.42 0.52 1.19 0.75   Credit Quality Ratios - Core Bank:   Nonperforming loans to total loans 0.37 % 0.40 % 0.42 % 0.43 % 0.37 % Nonperforming assets to total loans (including OREO) 0.37 0.40 0.42 0.43 0.38 Nonperforming assets to total assets 0.31 0.31 0.33 0.34 0.31 Allowance for loan and lease losses to total loans 0.75 0.78 0.78 0.76 0.77 Allowance for loan and lease losses to nonperforming loans 205 197 184 179 205 Delinquent loans to total loans 0.18 0.22 0.29 0.21 0.21 Net charge-offs to average loans (annualized) 0.04 0.12 0.04 — 0.06  

Republic Bancorp, Inc. Financial InformationFirst Quarter 2019 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 March 31, 2019, 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 Banking” operations, while the last two segments collectively constitute Republic Processing Group (“RPG”) operations. The Bank’s Correspondent Lending channel and the Company’s national branchless banking platform, MemoryBank®, are considered 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 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 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 refund 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 2018 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 Republic can reasonably make specific segment allocations. The Company makes transactions among reportable segments at carrying value.

          Republic Bancorp, Inc. Financial Information First Quarter 2019 Earnings Release (continued)  

Segment information for the quarters ended March 31, 2019 and 2018 follows:

  Three Months Ended March 31, 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 $ 41,347 $ 2,895 $ 102 $ 44,344 $ 20,438 $ 7,517 $ 27,955 $ 72,299   Provision for loan and lease losses 189 225 — 414 13,434 3,383 16,817 17,231   Net refund transfer fees — — — — 17,100 — 17,100 17,100 Mortgage banking income — — 1,539 1,539 — — — 1,539 Program fees — — — — 146 928 1,074 1,074 Other noninterest income   6,896   10   40   6,946   131   627   758   7,704 Total noninterest income 6,896 10 1,579 8,485 17,377 1,555 18,932 27,417   Total noninterest expense   35,550   758   1,320   37,628   7,114   767   7,881   45,509   Income before income tax expense 12,504 1,922 361 14,787 17,267 4,922 22,189 36,976 Income tax expense   1,765   433   76   2,274   4,030   1,156   5,186   7,460 Net income $ 10,739 $ 1,489 $ 285 $ 12,513 $ 13,237 $ 3,766 $ 17,003 $ 29,516   Period-end assets $ 4,471,419 $ 559,545 $ 17,087 $ 5,048,051 $ 224,485 $ 93,232 $ 317,717 $ 5,365,768   Net interest margin 3.84 % 2.84 % NM 3.76 % NM NM NM 5.66 %   Net-revenue concentration* 48 % 3 % 2 % 53 % 38 % 9 % 47 % 100 %   Three Months Ended March 31, 2018 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 $ 38,188 $ 3,591 $ 72 $ 41,851 $ 18,686 $ 7,128 $ 25,814 $ 67,665   Provision for loan and lease losses 939 21 — 960 13,389 2,906 16,295 17,255   Net refund transfer fees — — — — 16,352 — 16,352 16,352 Mortgage banking income — — 1,020 1,020 — — — 1,020 Program fees — — — — 59 1,637 1,696 1,696 Other noninterest income   7,002   8   38   7,048   1,110   319   1,429   8,477 Total noninterest income 7,002 8 1,058 8,068 17,521 1,956 19,477 27,545   Total noninterest expense   33,392   839   1,204   35,435   6,525   1,085   7,610   43,045   Income (loss) before income tax expense 10,859 2,739 (74) 13,524 16,293 5,093 21,386 34,910 Income tax expense (benefit)   1,772   627   (16)   2,383   3,854   1,204   5,058   7,441 Net income (loss) $ 9,087 $ 2,112 $ (58) $ 11,141 $ 12,439 $ 3,889 $ 16,328 $ 27,469   Period-end assets $ 4,344,341 $ 534,545 $ 9,864 $ 4,888,750 $ 129,395 $ 60,189 $ 189,584 $ 5,078,334   Net interest margin 3.59 % 3.21 % NM 3.55 % NM NM NM 5.50 %   Net-revenue concentration* 47 % 4 % 1 % 52 % 38 % 10 % 48 % 100 %            

*Net revenues represent total net interest income plus noninterest income.

   

Republic Bancorp, Inc. Financial Information

First Quarter 2019 Earnings Release (continued)

 

(1)

“Core Bank” or “Core Banking” operations consist of the Traditional Banking, Warehouse Lending, and Mortgage Banking segments.

 

(2)

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.

 

(3)

Republic Processing Group operations consist of the Tax Refund Solutions and Republic Credit Solutions segments.

 

(4)

The Company adopted Accounting Standard Update 2016-02, effective January 1, 2019. ASU 2016-02 requires the Company, as lessee, record the present value of its expected operating lease payments on its balance sheet as operating lease liabilities, with offsetting right-of-use assets for the respective leased property. Prior to January 1, 2019, operating leases were not recorded on a lessee’s balance sheet in this manner.

 

(5)

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 per quarter was as follows: $28.6 million (quarter ended March 31, 2019); $9.4 million (quarter ended December 31, 2018); $9.0 million (quarter ended September 30, 2018); $8.5 million (quarter ended June 30, 2018); and $26.9 million (quarter ended March 31, 2018).

 

Interest income for Easy Advances (“EAs”) is composed entirely of loan fees. The loan fees disclosed above included EA fees of $18.9 million and $17.8 million for the quarters ended March 31, 2019 and 2018. EAs are only offered during the first two months of each year.

 

(6)

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) Mar. 31, 2019 Dec. 31, 2018   Sep. 30, 2018   Jun. 30, 2018     Mar. 31, 2018     Total stockholders' equity - GAAP (a) $ 717,091 $ 689,934 $ 676,810 $ 664,008 $ 653,254 Less: Goodwill 16,300 16,300 16,300 16,300 16,300 Less: Mortgage servicing rights 4,935 4,919 4,925 4,914 4,925 Less: Core deposit intangible   608   654   705   756   807 Tangible stockholders' equity - Non-GAAP (c) $ 695,248 $ 668,061 $ 654,880 $ 642,038 $ 631,222   Total assets - GAAP (b) $ 5,365,768 $ 5,240,404 $ 5,222,354 $ 5,265,945 $ 5,078,334 Less: Goodwill 16,300 16,300 16,300 16,300 16,300 Less: Mortgage servicing rights 4,935 4,919 4,925 4,914 4,925 Less: Core deposit intangible   608   654   705   756   807 Tangible assets - Non-GAAP (d) $ 5,343,925 $ 5,218,531 $ 5,200,424 $ 5,243,975 $ 5,056,302   Total stockholders' equity to total assets - GAAP (a/b) 13.36 % 13.17 % 12.96 % 12.61 % 12.86 % Tangible stockholders' equity to tangible assets - Non-GAAP (c/d) 13.01 % 12.80 % 12.59 % 12.24 % 12.48 %   Number of shares outstanding (e)   20,911   20,888   20,895   20,892   20,888   Book value per share - GAAP (a/e) $ 34.29 $ 33.03 $ 32.39 $ 31.78 $ 31.27 Tangible book value per share - Non-GAAP (c/e) 33.25 31.98 31.34 30.73 30.22    

(7)

 

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.

 

(8)

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.

 

(9)

FTEs – Full-time-equivalent employees.

 

(10)

Delinquent loans for the RPG segment included $19 million and $13 million of EAs at March 31, 2019 and 2018. EAs are only offered during the first two months of each year. 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.

 

NM – Not meaningful

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Republic Bancorp, Inc.Kevin SipesExecutive Vice President & Chief Financial Officer(502) 560-8628