Republic Bancorp, Inc. (NASDAQ: RBCAA), headquartered
in Louisville, Kentucky, is the holding company of Republic Bank
& Trust Company (the “Bank”).
Republic Bancorp, Inc. (“Republic” or the “Company”) is pleased
to report third quarter net income of $10.7 million, a 9% increase
over the third quarter of 2016, resulting in Diluted Earnings per
Class A Common Share of $0.51. Year-to-date net income was $40.8
million, a $4.9 million, or 14%, increase from the same period in
2016, resulting in return on average assets (“ROA”) and return on
average equity (“ROE”) of 1.14% and 8.71% for the first nine months
of 2017.
Steve Trager, Chairman & CEO of Republic commented, “As we
enter the homestretch of 2017, we remain pleased with our strong
operating results this year. As with the previous quarters of 2017,
the third quarter saw the Company achieve strong net interest
margin expansion, continued strong credit quality metrics within
our Core Banking(1) operations, and solid growth in both loans and
deposits.
“In addition to the strong performance for the Company overall,
we are also pleased with the results of our various operating
segments. In particular, our Traditional Banking segment within our
Core Banking operations experienced a 25% increase in net income
for the quarter, while our Republic Credit Solutions (“RCS”)
segment within our Republic Processing Group(2) (“RPG”) increased
its quarterly net income by 54% over the third quarter of 2016. We
also continued to see success in our separately branded on-line
digital banking platform, which finished the quarter with over
1,000 clients totaling $58 million in deposits from 49 states.
“Looking ahead to the fourth quarter, we expect to go live with
several major technological platform enhancements that we have been
implementing and testing during the first nine months of 2017.
These initiatives include, among others, new loan origination
systems for mortgage and consumer loans, and a new
client-relationship-management platform for managing our sales
teams and strategic marketing opportunities as well as our client
communications. On a long-term basis, we expect these systems to
help us expand sales and provide better client service in a more
efficient and cost effective manner. We look forward to getting a
strong start in 2018 with this new technology in place,” concluded
Steve Trager.
The following table highlights Republic’s
financial performance for the third quarters and nine months ended
September 30, 2017 and 2016:
(dollars in thousands, except per share
data)
Financial Performance
Highlights Three Months Ended Sep. 30,
Nine
Months Ended Sep. 30,
2017 2016
$ Change
% Change
2017 2016
$ Change
% Change
Income Before Income Taxes* $ 16,434 $ 14,676 $ 1,758 12 % $ 61,774
$ 54,003 $ 7,771 14 % Net Income* 10,706 9,828 878 9 40,794 35,903
4,891 14 Diluted Earnings per Class A Common Stock 0.51 0.47 0.04 9
1.96 1.73 0.23 13 Return on Average Assets 0.89 % 0.87 % NA 2 1.14
% 1.08 % NA 6 Return on Average Equity 6.76 6.54 NA 3 8.71 8.04 NA
8
NA – Not applicable
*See Segment Data at the End of this
Earnings Release
Results of Operations for the Third
Quarter of 2017 Compared to the Third Quarter of
2016
Core Bank(1) – Net income from Core Banking was
$10.2 million for the third quarter of 2017, an increase of
$273,000, or 3%, over the third quarter of 2016. The increase in
net income at the Core Bank was primarily driven by strong growth
in net interest income, which increased $6.1 million, or 17%, over
the third quarter of 2016. The growth in net interest income was
propelled by a 30-basis-point rise in the Core Bank’s net interest
margin for the third quarter of 2017 to 3.68% and further
complemented by a $144 million increase in the Core Bank’s
quarterly average loans.
The overall change in the Core Bank’s net
interest income, as well as average and period-end loan balances by
origination channel, is presented below:
Net
Interest Income for the
(dollars in thousands)
Three Months Ended Sep. 30,
Origination Channel 2017
2016
$ Change
% Change
Traditional Network $ 35,382 $ 30,459 $ 4,923 16 %
Warehouse Lending 4,737 4,924 (187 ) (4 ) Correspondent Lending 307
485 (178 ) (37 ) 2012-FDIC Acquired Loans 1,809
266 1,543
580 Total Core Bank $ 42,235 $ 36,134
$ 6,101 17
Average Loan Balances
Period-End Loan Balances (dollars in thousands)
Three Months Ended Sep. 30, Sep. 30,
Origination Channel 2017
2016
$ Change
% Change 2017
2016
$ Change
% Change Traditional Network $
3,152,032 $ 2,943,310 $ 208,722 7 % $ 3,203,673 $ 2,971,343 $
232,330 8 % Warehouse Lending 535,703 542,894 (7,191 ) (1 ) 571,160
661,186 (90,026 ) (14 ) Correspondent Lending 127,905 178,385
(50,480 ) (28 ) 125,643 156,955 (31,312 ) (20 ) 2012-FDIC Acquired
Loans 11,409 18,649
(7,240 ) (39 ) 9,906
17,094 (7,188 ) (42 )
Total Core Bank $ 3,827,049 $ 3,683,238
$ 143,811 4 $ 3,910,382 $
3,806,578 $ 103,804 3
The following factors were the primary drivers of the changes in
the Core Bank’s average loan balances and net interest income by
origination channel for the third quarter of 2017, as compared to
the third quarter of 2016:
- The Core Bank’s Traditional Network
experienced solid average loan growth of $209 million from the
third quarter of 2016 to the third quarter of 2017. The overall mix
of this growth was well diversified, with average balance increases
of $108 million in commercial real estate; $55 million in
construction and development; and $53 million in commercial and
industrial loans.
- The Core Bank’s 2012 FDIC-Acquired
loans contributed $1.5 million more in net interest income during
the third quarter of 2017 compared to the same period in 2016,
resulting from the early payoff of one large commercial loan and a
credit to income of $1.6 million of discount associated with this
loan. Overall, accretion income from the 2012 FDIC-Acquired loans
contributed 15 basis points to the Core Bank’s net interest margin
during the third quarter of 2017 with only a nominal contribution
for the same period in 2016.
The Core Bank’s provision expense for the third
quarters of 2017 and 2016 primarily represented general loss
reserves driven by growth in the loan portfolio during the two
periods. The Core Bank’s credit quality metrics remained favorable,
as indicated by the table below:
As of and for the:
Quarter Ending:
Year Ending: Sept. 30,
Jun. 30, Mar. 31, Dec.
31, Dec. 31,
Dec. 31, Core Banking Credit Quality
Ratios 2017 2017
2017 2016
2015 2014 Nonperforming
loans to total loans 0.40 % 0.40 % 0.46 % 0.42 % 0.66 % 0.78 %
Nonperforming assets to total loans (including OREO) 0.40
0.41 0.50 0.46 0.70 1.15 Delinquent loans to total loans(8)
0.20 0.18 0.16 0.18 0.35 0.52 Net charge-offs to average
loans 0.03 0.05 0.02 0.05 0.05 0.08 (Annualized as of 9/30/17,
6/30/17 and 3/31/17)
OREO = Other Real Estate
Owned
Noninterest income for the Core Bank was $8.3 million during the
third quarter of 2017, a $1.7 million, or 17%, decrease from the
$10.0 million achieved during the third quarter of 2016. The
primary driver of the drop in noninterest income was a $2.0 million
decrease in mortgage banking income attributable to the
following:
- Approximately $1.1 million of the
decrease was attributable to a gain from a nonrecurring bulk sale
of $71 million in correspondent mortgage loans during the third
quarter of 2016.
- The remainder of the decrease was the
result of a decline in consumer refinance activity of
first-mortgage home loans.
Core Bank noninterest expenses increased $3.4 million, or 11%,
during the third quarter of 2017 compared to the third quarter of
2016. The increase was primarily driven by the following:
- Salaries and employee benefits expense
increased $2.0 million, or 12%, as the Core Bank’s
full-time-equivalent employees increased by 66 employees over the
previous 12 months to support the Core Bank’s strategic
initiatives.
- Occupancy expense increased $1.2
million, primarily due to a $907,000 impairment charge resulting
from a mark-to-market adjustment of a bank property that the
Company intends to market for sale. The remaining increase in
occupancy expense was primarily driven by increases in rent expense
and depreciation expense resulting from new locations, existing
banking center renovations and the cost of technology to support
the previously mentioned Core Bank’s strategic initiatives.
- Marketing and development expense
increased $531,000, with a substantial portion of this increase
focused on driving loan and deposit growth in markets outside of
the Company’s Louisville, Kentucky footprint. In addition, the
Company also instituted a marketing awareness campaign in its
Louisville, Kentucky market as part of a mortgage lending
initiative.
- Partially offsetting the increases
above, the Core Bank’s noninterest expenses during the third
quarter of 2016 included a nonrecurring prepayment penalty of
$846,000 related to the payoff of $50 million in long-term Federal
Home Loan Bank advances. No similar expense was incurred during the
third quarter of 2017.
Republic Processing Group(2)
RPG reported net income of $495,000 for the third quarter of
2017 compared to a nominal loss of $110,000 for the same period in
2016.
Within the RCS segment of RPG, net income increased to $1.6
million for the third quarter of 2017 compared to $1.0 million for
the same period in 2016, with increases in net interest income and
noninterest income of $2.8 million and $724,000, respectively,
offsetting an increase of $2.4 million in provisions for loan
losses. Growth in RCS loans held for investment and RCS loans sold
was the primary driver of revenue growth. Average RCS loans held
for investment increased to $47 million during the third quarter of
2017 from $16 million during the third quarter of 2016, while loans
sold through RCS increased to $178 million during the third quarter
of 2017 from $125 million during the third quarter of 2016.
RCS loans typically earn a higher yield but also carry higher
credit risk compared to Core Bank loans. Provision expense was $2.4
million higher at RCS during the third quarter of 2017 compared to
the same period in 2016 due to an increase in general loss reserves
for growth in RCS loans and an increase in the historical loss
factors within the loan loss reserve calculation resulting from a
rise in charge-offs from the prior year.
Partially offsetting the net income attributable to the RCS
segment, the Tax Refund Solutions (“TRS”) segment of RPG reported
an expected net loss of $1.1 million for the third quarter of 2017,
approximately even with the net loss reported during the third
quarter of 2016. The TRS segment of RPG accounts for the majority
of RPG’s annualized revenues, but derives substantially all of its
revenues during the first and second quarters of the year and
historically operates at a net loss during the second half of the
year, as the Company prepares for the next tax season.
Republic Bancorp, Inc. (the “Company”) is the parent company of
Republic Bank & Trust Company (the “Bank”). The Bank currently
has 45 full-service banking centers and one loan production office
throughout five states: 33 banking centers in 12 Kentucky
communities - Covington, Crestwood, Elizabethtown, Florence,
Frankfort, Georgetown, Independence, Lexington, Louisville,
Owensboro, Shelbyville and Shepherdsville; three banking centers in
southern Indiana – Floyds Knobs, Jeffersonville and New Albany; six
banking centers in five Florida communities (Tampa MSA) – Largo,
Port Richey, St. Petersburg, Seminole, and Temple Terrace; two
banking centers in Tennessee – Cool Springs (Franklin) and Green
Hills (Nashville) and one loan production office in Brentwood
(Nashville); and one banking center in Norwood (Cincinnati), Ohio.
The Bank offers internet banking at www.republicbank.com. The Bank
also offers separately-branded, nation-wide digital banking at
www.mymemorybank.com. The Company has $5.0 billion in assets and is
headquartered in Louisville, Kentucky. The Company’s Class A Common
Stock is listed under the symbol “RBCAA” on the NASDAQ Global
Select Market.
Republic Bank. It’s just easier here. ®
Forward-Looking StatementsThis press release contains
certain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. The
forward-looking statements in the preceding paragraphs are based on
our current expectations and assumptions regarding our business,
the future impact to our balance sheet and income statement
resulting from changes in interest rates, the ability to develop
products and strategies in order to meet the Company’s long-term
strategic goals, the economy and other future conditions. Because
forward-looking statements relate to the future, they are subject
to inherent uncertainties, risks and changes in circumstances that
are difficult to predict. Our actual results may differ materially
from those contemplated by forward-looking statements. We caution
you therefore against relying on any of these forward-looking
statements. They are neither statements of historical fact nor
guarantees or assurances of future performance. Actual results
could differ materially based upon factors disclosed from time to
time in the Company’s filings with the U.S. Securities and Exchange
Commission, including those factors set forth as “Risk Factors” in
the Company’s Annual Report on Form 10-K for the period ended
December 31, 2016. The Company undertakes no obligation to update
any forward-looking statements. These forward-looking statements
are made only as of the date of this release, and the Company
undertakes no obligation to release revisions to these
forward-looking statements to reflect events or conditions after
the date of this release.
Republic Bancorp, Inc. Financial
Information
Third Quarter 2017 Earnings
Release
(all amounts other than per share amounts,
number of employees and number of banking centers are expressed in
thousands unless otherwise noted)
Balance Sheet Data
Sep. 30, 2017 Dec. 31, 2016 Sep. 30,
2016 Assets: Cash and cash equivalents $ 329,862 $
289,309 $ 302,167 Investment securities 523,896 534,139 524,444
Loans held for sale 13,135 15,170 11,226 Loans 3,957,512 3,810,778
3,823,031 Allowance for loan and lease losses (40,191 )
(32,920 ) (30,436 ) Loans, net 3,917,321 3,777,858
3,792,595 Federal Home Loan Bank stock, at cost 32,067 28,208
28,208 Premises and equipment, net 44,845 42,869 43,385 Goodwill
16,300 16,300 16,300
Other real estate owned (“OREO”)
167 1,391 2,435
Bank owned life insurance (“BOLI”)
62,972 61,794 61,392 Other assets and accrued interest receivable
52,609 49,271 45,125
Total assets $ 4,993,174 $ 4,816,309 $ 4,827,277
Liabilities and Stockholders’
Equity:
Deposits: Noninterest-bearing $ 1,040,414 $ 971,952 $ 947,602
Interest-bearing 2,309,315 2,188,740
2,188,291 Total deposits 3,349,729 3,160,692
3,135,893 Securities sold under agreements to repurchase and
other short-term borrowings 173,311 173,473 152,458 Federal Home
Loan Bank advances 757,500 802,500 862,500 Subordinated note 41,240
41,240 41,240 Other liabilities and accrued interest payable
38,107 33,998 34,626 Total
liabilities 4,359,887 4,211,903 4,226,717
Stockholders’ equity
633,287 604,406 600,560
Total liabilities and Stockholders’
equity
$ 4,993,174 $ 4,816,309 $ 4,827,277
Average Balance Sheet Data Three Months Ended Sep.
30, Nine Months Ended Sep. 30, 2017 2016
2017 2016 Assets: Investment securities,
including FHLB stock $ 552,821 $ 554,508 $ 578,963 $ 571,740
Federal funds sold and other interest-earning deposits 208,688
58,910 174,538 147,180 Loans and fees, including loans held for
sale 3,875,420 3,702,093 3,785,639 3,492,997 Total interest-earning
assets 4,636,929 4,315,511 4,539,140 4,211,917 Total assets
4,834,653 4,531,958 4,783,434 4,440,881
Liabilities and Stockholders’
Equity:
Noninterest-bearing deposits $ 1,052,162 $ 900,432 $ 1,082,361 $
874,060 Interest-bearing deposits 2,249,436 2,155,289 2,228,731
2,014,197
Securities sold under agreements to
repurchase and other short-term borrowings
208,160 215,343 202,018 296,574 Federal Home Loan Bank advances
618,750 584,946 572,390 588,109 Subordinated note 41,240 44,288
41,240 42,926 Total interest-bearing liabilities 3,117,586
2,999,866 3,044,379 2,941,806
Stockholders’ equity
633,874 601,043 624,164 595,236
Republic Bancorp, Inc. Financial
Information
Third Quarter 2017 Earnings Release
(continued)
(all amounts other than per share amounts,
number of employees and number of banking centers are expressed in
thousands unless otherwise noted)
Income Statement Data
Three Months Ended Sep. 30,
Nine Months Ended Sep. 30, 2017 2016
2017 2016 Total interest income(3) $ 53,725 $
43,934 $ 162,429 $ 128,089 Total interest expense 5,418
4,536 14,547 13,680 Net interest income
48,307 39,398 147,882 114,409 Provision for loan and lease
losses 4,221 2,489 21,633 9,489 Noninterest income: Service
charges on deposit accounts 3,395 3,416 10,032 9,838 Net refund
transfer fees 177 132 18,329 19,119 Mortgage banking income 1,102
3,081 3,707 5,902 Interchange fee income 2,475 2,415 7,348 6,755
Program fees 1,597 979 3,972 1,942 Increase in cash surrender value
of BOLI 394 406 1,178 1,114 Net gains (losses) on OREO 31 (137 )
422 191 Other 1,203 1,009 3,236
2,163 Total noninterest income 10,374 11,301
48,224 47,024 Noninterest expenses: Salaries
and employee benefits 20,505 18,068 61,731 52,965 Occupancy and
equipment, net 6,806 5,631 18,676 16,159 Communication and
transportation 1,239 1,029 3,450 2,974 Marketing and development
1,677 1,076 4,090 2,773 FDIC insurance expense 300 345 1,050 1,483
Bank franchise tax expense 749 846 3,974 3,944 Data processing
1,795 1,659 5,142 4,535 Interchange related expense 928 1,118 3,057
3,069 Supplies 241 280 1,029 969 OREO expense 55 159 284 355 Legal
and professional fees 446 539 1,794 1,965 FHLB advance prepayment
penalty — 846 — 846 Other 3,285 1,938
8,422 5,904 Total noninterest expenses 38,026
33,534 112,699 97,941 Income before
income tax expense 16,434 14,676 61,774 54,003 Income tax expense
5,728 4,848 20,980 18,100
Net income $ 10,706 $ 9,828 $ 40,794 $ 35,903
Republic Bancorp, Inc. Financial
Information
Third Quarter 2017 Earnings Release
(continued)
(all amounts other than per share amounts,
number of employees and number of banking centers are expressed in
thousands unless otherwise noted)
Selected Data and Ratios
Three Months Ended Sep.
30, Nine Months Ended Sep. 30, 2017 2016
2017 2016 Per Share Data: Basic
weighted average shares outstanding 21,153 20,925 20,921 20,946
Diluted weighted average shares outstanding 21,236 20,938 21,000
20,957 End of period shares outstanding: Class A Common
Stock 18,618 18,617 18,618 18,617 Class B Common Stock 2,243 2,245
2,243 2,245 Book value per share(4) $ 30.36 $ 28.79 $ 30.36
$ 28.79 Tangible book value per share(4) 29.29 27.70 29.29 27.70
Earnings per share: Basic earnings per Class A Common Stock
$ 0.51 $ 0.47 $ 1.97 $ 1.73 Basic earnings per Class B Common Stock
0.47 0.43 1.79 1.58 Diluted earnings per Class A Common Stock 0.51
0.47 1.96 1.73 Diluted earnings per Class B Common Stock 0.47 0.43
1.78 1.57 Cash dividends declared per Common share: Class A
Common Stock $ 0.220 $ 0.209 $ 0.649 $ 0.616 Class B Common Stock
0.200 0.190 0.590 0.560
Performance Ratios:
Return on average assets 0.89 % 0.87 % 1.14 % 1.08 % Return on
average equity 6.76 6.54 8.71 8.04 Efficiency ratio(5) 65 66 57 61
Yield on average interest-earning assets(3) 4.63 4.07 4.77 4.05
Cost of average interest-bearing liabilities 0.70 0.60 0.64 0.62
Cost of average deposits(6) 0.31 0.21 0.27 0.20 Net interest
spread(3) 3.93 3.47 4.13 3.43 Net interest margin - Total
Company(3) 4.17 3.65 4.34 3.62 Net interest margin - Core Bank(1)
3.68 3.38 3.49 3.26
Other Information: End of
period FTEs(7) - Total Company 970 899 970 899 End of period
FTEs(7) - Core Bank(1) 896 830 896 830 Number of full-service
banking centers 45 44 45 44
Republic Bancorp, Inc. Financial
Information
Third Quarter 2017 Earnings Release
(continued)
(all amounts other than per share amounts,
number of employees and number of banking centers are expressed in
thousands unless otherwise noted)
Credit Quality Data and Ratios As of
and for the As of and for the Three
Months Ended Sep. 30, Nine Months Ended Sep. 30,
2017 2016 2017
2016 Credit Quality Asset Balances:
Nonperforming Assets - Total Company: Loans on nonaccrual
status $ 15,475 $ 17,769 $ 15,475 $ 17,769 Loans past due
90-days-or-more and still on accrual 906 223
906 223 Total nonperforming
loans 16,381 17,992 16,381 17,992 OREO 167
2,435 167 2,435 Total
nonperforming assets - Total Company $ 16,548 $ 20,427
$ 16,548 $ 20,427
Nonperforming
Assets - Core Bank(1): Loans on nonaccrual status $ 15,475 $
17,769 $ 15,475 $ 17,769 Loans past due 90-days-or-more and still
on accrual 55 141 55
141 Total nonperforming loans 15,530 17,910 15,530
17,910 OREO 167 2,435 167
2,435 Total nonperforming assets - Core Bank(1) $
15,697 $ 20,345 $ 15,697 $ 20,345
Delinquent loans: Delinquent loans - Core Bank(1) $
7,756 $ 8,050 $ 7,756 $ 8,050 Delinquent loans - RPG(2)
4,270 664 4,270 664
Total delinquent loans - Total Company $ 12,026 $
8,714 $ 12,026 $ 8,714
Credit
Quality Ratios - Total Company: Nonperforming loans to
total loans 0.41 % 0.47 % 0.41 % 0.47 % Nonperforming assets to
total loans (including OREO) 0.42 0.53 0.42 0.53 Nonperforming
assets to total assets 0.33 0.42 0.33 0.42 Allowance for loan and
lease losses to total loans 1.02 0.80 1.02 0.80 Allowance for loan
and lease losses to nonperforming loans 245 169 245 169 Delinquent
loans to total loans(8)(9) 0.30 0.23 0.30 0.23 Net charge-offs to
average loans (annualized) 0.20 0.15 0.51 0.25
Credit
Quality Ratios - Core Bank(1): Nonperforming loans to
total loans 0.40 % 0.47 % 0.40 % 0.47 % Nonperforming assets to
total loans (including OREO) 0.40 0.53 0.40 0.53 Nonperforming
assets to total assets 0.32 0.43 0.32 0.43 Allowance for loan and
lease losses to total loans 0.76 0.71 0.76 0.71 Allowance for loan
and lease losses to nonperforming loans 190 152 190 152 Delinquent
loans to total loans(8) 0.20 0.21 0.20 0.21 Net charge-offs to
average loans (annualized) 0.03 0.03 0.03 0.04
Republic Bancorp, Inc. Financial
Information
Third Quarter 2017 Earnings Release
(continued)
(all amounts other than per share amounts,
number of employees and number of banking centers are expressed in
thousands unless otherwise noted)
Balance Sheet Data
Quarterly Comparison
Sep. 30, 2017 Jun. 30, 2017 Mar. 31, 2017
Dec. 31, 2016 Sept. 30, 2016 Assets: Cash and
cash equivalents $ 329,862 $ 332,695 $ 206,187 $ 289,309 $ 302,167
Investment securities 523,896 525,684 578,130 534,139 524,444 Loans
held for sale 13,135 11,756 10,292 15,170 11,226 Loans 3,957,512
3,916,320 3,710,376 3,810,778 3,823,031 Allowance for loan and
lease losses (40,191 ) (37,898 ) (42,362 )
(32,920 ) (30,436 ) Loans, net 3,917,321 3,878,422
3,668,014 3,777,858 3,792,595 Federal Home Loan Bank stock, at cost
32,067 32,067 28,208 28,208 28,208 Premises and equipment, net
44,845 44,255 43,962 42,869 43,385 Goodwill 16,300 16,300 16,300
16,300 16,300 Other real estate owned 167 300 1,362 1,391 2,435
Bank owned life insurance 62,972 62,578 62,185 61,794 61,392 Other
assets and accrued interest receivable 52,609
51,604 50,152 49,271
45,125 Total assets $ 4,993,174 $ 4,955,661 $
4,664,792 $ 4,816,309 $ 4,827,277
Liabilities and Stockholders’
Equity:
Deposits: Noninterest-bearing $ 1,040,414 $ 1,061,637 $ 1,070,237 $
971,952 $ 947,602 Interest-bearing 2,309,315
2,072,301 2,278,547 2,188,740
2,188,291 Total deposits 3,349,729 3,133,938
3,348,784 3,160,692 3,135,893
Securities sold under agreements to
repurchase and other short-term borrowings
173,311 113,334 144,375 173,473 152,458 Federal Home Loan Bank
advances 757,500 1,002,500 467,500 802,500 862,500 Subordinated
note 41,240 41,240 41,240 41,240 41,240 Other liabilities and
accrued interest payable 38,107 37,758
42,229 33,998 34,626
Total liabilities 4,359,887 4,328,770 4,044,128 4,211,903 4,226,717
Stockholders’ equity
633,287 626,891 620,664
604,406 600,560
Total liabilities and Stockholders’
equity
$ 4,993,174 $ 4,955,661 $ 4,664,792 $
4,816,309 $ 4,827,277
Average
Balance Sheet Data Quarterly Comparison Sep. 30,
2017 Jun. 30, 2017 Mar. 31, 2017 Dec. 31,
2016 Sept. 30, 2016 Assets: Investment
securities, including FHLB stock $ 552,821 $ 597,818 $ 586,621 $
571,158 $ 554,508 Federal funds sold and other interest-earning
deposits 208,688 130,650 184,007 57,950 58,910 Loans and fees,
including loans held for sale 3,875,420 3,730,379 3,749,738
3,792,902 3,702,093 Total interest-earning assets 4,636,929
4,458,847 4,520,366 4,422,010 4,315,511 Total assets 4,834,653
4,668,048 4,847,700 4,622,760 4,531,958
Liabilities and Stockholders’
Equity:
Noninterest-bearing deposits $ 1,052,162 $ 1,063,215 $ 1,132,591 $
950,020 $ 900,432 Interest-bearing deposits 2,249,436 2,224,127
2,212,219 2,197,411 2,155,289
Securities sold under agreements to
repurchase and other short-term borrowings
208,160 179,594 218,412 231,817 215,343 Federal Home Loan Bank
advances 618,750 500,027 598,167 570,135 584,946 Subordinated note
41,240 41,240 41,240 41,240 44,288 Total interest-bearing
liabilities 3,117,586 2,944,988 3,070,038 3,040,603 2,999,866
Stockholders’ equity
633,874 627,940 610,429 604,095 601,043
Republic Bancorp, Inc. Financial
Information
Third Quarter 2017 Earnings Release
(continued)
(all amounts other than per share amounts,
number of employees and number of banking centers are expressed in
thousands unless otherwise noted)
Income Statement Data
Three Months Ended
Sep. 30, 2017 Jun. 30, 2017 Mar. 31, 2017
Dec. 31, 2016 Sept. 30, 2016 Total interest
income(3) $ 53,725 $ $ 47,821 $ 60,883 $ 45,903 $ 43,934 Total
interest expense 5,418 4,684 4,445
4,258 4,536 Net interest income 48,307 43,137 56,438
41,645 39,398 Provision for loan and lease losses 4,221
5,061 12,351 5,004 2,489 Noninterest income: Service charges
on deposit accounts 3,395 3,390 3,247 3,338 3,416 Net refund
transfer fees 177 2,770 15,382 121 132 Mortgage banking income
1,102 1,445 1,160 980 3,081 Interchange fee income 2,475 2,547
2,326 2,254 2,415 Program fees 1,597 1,284 1,091 1,102 979 Increase
in cash surrender value of BOLI 394 393 391 402 406 Net gains
(losses) on OREO 31 249 142 53 (137 ) Other 1,203 849
1,184 2,235 1,009 Total noninterest
income 10,374 12,927 24,923 10,485
11,301 Noninterest expenses: Salaries and
employee benefits 20,505 20,015 21,211 16,917 18,068 Occupancy and
equipment, net 6,806 5,903 5,967 5,618 5,631 Communication and
transportation 1,239 939 1,272 1,282 1,029 Marketing and
development 1,677 1,409 1,004 1,005 1,076 FDIC insurance expense
300 300 450 297 345 Bank franchise tax expense 749 790 2,435 813
846 Data processing 1,795 1,695 1,652 1,586 1,659 Interchange
related expense 928 1,071 1,058 1,071 1,118 Supplies 241 261 527
437 280 OREO expense 55 132 97 148 159 Legal and professional fees
446 596 752 591 539 FHLB advance prepayment penalty — — — — 846
Other 3,285 2,623 2,514 2,401
1,938 Total noninterest expenses 38,026 35,734
38,939 32,166 33,534 Income
before income tax expense 16,434 15,269 30,071 14,960 14,676 Income
tax expense 5,728 5,198 10,054 4,960
4,848 Net income $ 10,706 $ $ 10,071 $ 20,017
$ 10,000 $ 9,828
Republic Bancorp, Inc. Financial
Information
Third Quarter 2017 Earnings Release
(continued)
(all amounts other than per share amounts,
number of employees and number of banking centers are expressed in
thousands unless otherwise noted)
Selected Data and Ratios
As of and for the
Three Months Ended Sep. 30, 2017 Jun. 30, 2017
Mar. 31, 2017 Dec. 31, 2016 Sep. 30, 2016
Per Share Data: Basic weighted average shares
outstanding 21,153 21,151 20,915 20,926 20,925 Diluted weighted
average shares outstanding 21,236 21,230 20,996 20,941 20,938
End of period shares outstanding: Class A Common Stock
18,618 18,618 18,615 18,615 18,617 Class B Common Stock 2,243 2,243
2,243 2,245 2,245 Book value per share(4) $ 30.36 $ 30.05 $
29.76 $ 28.97 $ 28.79 Tangible book value per share(4) 29.29 28.98
28.68 27.89 27.70 Earnings per share: Basic earnings per
Class A Common Stock $ 0.51 $ 0.48 $ 0.97 $ 0.48 $ 0.47 Basic
earnings per Class B Common Stock 0.47 0.44 0.88 0.44 0.43 Diluted
earnings per Class A Common Stock 0.51 0.48 0.96 0.48 0.47 Diluted
earnings per Class B Common Stock 0.47 0.44 0.88 0.44 0.43
Cash dividends declared per Common share: Class A Common Stock $
0.220 $ 0.220 $ 0.209 $ 0.209 $ 0.209 Class B Common Stock 0.200
0.200 0.190 0.190 0.190
Performance Ratios:
Return on average assets 0.89 % 0.86 % 1.65 % 0.87 % 0.87 % Return
on average equity 6.76 6.42 13.12 6.62 6.54 Efficiency ratio(5) 65
64 48 62 66 Yield on average interest-earning assets(3) 4.63 4.29
5.39 4.15 4.07 Cost of average interest-bearing liabilities 0.70
0.64 0.58 0.56 0.60 Cost of average deposits(6) 0.31 0.28 0.22 0.22
0.21 Net interest spread(3) 3.93 3.65 4.81 3.59 3.47 Net interest
margin - Total Company(3) 4.17 3.87 4.99 3.77 3.65 Net interest
margin - Core Bank(1) 3.68 3.46 3.33 3.42 3.38
Other
Information: End of period FTEs(6) - Total Company 970
976 973 938 899 End of period FTEs(6) - Core Bank(1) 896 904 901
869 830 Number of full-service banking centers 45 45 45 44 44
Republic Bancorp, Inc. Financial
Information
Third Quarter 2017 Earnings Release
(continued)
(all amounts other than per share amounts,
number of employees and number of banking centers are expressed in
thousands unless otherwise noted)
Credit Quality Data and Ratios
As of and for
the Three Months Ended Sep. 30, 2017 Jun. 30,
2017 Mar. 31, 2017 Dec. 31, 2016 Sept. 30,
2016 Credit Quality Asset Balances:
Nonperforming Assets - Total Company: Loans on nonaccrual
status $ 15,475 $ 15,467 $ 16,793 $ 15,892 $ 17,769 Loans past due
90-days-or-more and still on accrual 906 335
203 167 223 Total
nonperforming loans 16,381 15,802 16,996 16,059 17,992 OREO
167 300 1,362 1,391
2,435 Total nonperforming assets - Total
Company $ 16,548 $ 16,102 $ 18,358 $ 17,450
$ 20,427
Nonperforming Assets - Core
Bank(1): Loans on nonaccrual status $ 15,475 $ 15,467 $ 16,793
$ 15,892 $ 17,769 Loans past due 90-days-or-more and still on
accrual 55 33 81
85 141 Total nonperforming loans 15,530 15,500
16,874 15,977 17,910 OREO 167 300
1,362 1,391 2,435 Total
nonperforming assets - Core Bank(1) $ 15,697 $ 15,800
$ 18,236 $ 17,368 $ 20,345
Delinquent Loans: Delinquent loans - Core Bank(1) $ 7,756 $
6,844 $ 5,952 $ 6,821 $ 8,050 Delinquent loans - RPG(2)
4,270 2,169 10,211 2,137
664 Total delinquent loans - Total Company $
12,026 $ 9,013 $ 16,163 $ 8,958 $ 8,714
Credit Quality Ratios - Total Company:
Nonperforming loans to total loans 0.41 % 0.40 % 0.46 % 0.42
% 0.47 % Nonperforming assets to total loans (including OREO) 0.42
0.41 0.49 0.46 0.53 Nonperforming assets to total assets 0.33 0.32
0.39 0.36 0.42 Allowance for loan and lease losses to total loans
1.02 0.97 1.14 0.86 0.80 Allowance for loan and lease losses to
nonperforming loans 245 240 249 205 169 Delinquent loans to total
loans(8)(9) 0.30 0.23 0.44 0.24 0.23 Net charge-offs to average
loans (annualized) 0.20 1.02 0.31 0.27 0.15
Credit
Quality Ratios - Core Bank(1): Nonperforming loans to
total loans 0.40 % 0.40 % 0.46 % 0.42 % 0.47 % Nonperforming assets
to total loans (including OREO) 0.40 0.41 0.50 0.46 0.53
Nonperforming assets to total assets 0.32 0.32 0.40 0.36 0.43
Allowance for loan and lease losses to total loans 0.76 0.76 0.76
0.74 0.72 Allowance for loan and lease losses to nonperforming
loans 190 189 166 175 152 Delinquent loans to total loans(8) 0.20
0.18 0.16 0.18 0.21 Net charge-offs to average loans (annualized)
0.03 0.05 0.02 0.09 0.03
Republic Bancorp, Inc. Financial InformationThird
Quarter 2017 Earnings Release (continued)
Segment Data:
Reportable segments are determined by the type of products and
services offered and the level of information provided to the chief
operating decision maker, who uses such information to review
performance of various components of the business (such as banking
centers and business units), which are then aggregated if operating
performance, products/services, and clients are similar.
As of September 30, 2017, 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 the “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.
Prior to the third quarter of 2017, RPG was considered a
reportable segment, with its largest division, TRS, and relatively
smaller divisions, Republic Payment Solutions (“RPS”) and RCS,
reported within RPG. During the third quarter of 2017, due to RCS’s
growth in revenues relative to the total Company’s revenues,
management restructured RPG by upgrading TRS and RCS as separate
reportable segments under the newly-classified RPG operations.
Also, as part of the restructuring, the RPS division, which
remained too immaterial to be classified a separate reportable
segment, was reclassified within the newly-classified TRS segment.
All segments within RPG operations and divisions within those
segments operate through the Bank. All prior periods have been
reclassified to conform to the current presentation.
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 Revenues:
Core Banking:
Traditional Banking Provides traditional banking products to
clients primarily in its market footprint via its network of
banking centers and to clients outside of its market footprint
primarily via its Digital and Correspondent Lending delivery
channels. Loans, investments, and deposits. Warehouse
Lending Provides short-term, revolving credit facilities to
mortgage bankers across the United States. Mortgage warehouse lines
of credit. Mortgage Banking
Primarily originates, sells and services
long-term, single family, first lien residential real estate loans
primarily to clients in 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 short-term credit products.
RCS products are primarily provided to clients outside of the
Bank’s market footprint. Unsecured small-dollar, consumer loans.
The accounting policies used for Republic’s reportable segments
are the same as those described in the summary of significant
accounting policies in the Company’s 2016 Annual Report on Form
10-K. Segment performance is evaluated using operating income.
Goodwill is allocated to the Traditional Banking segment. Income
taxes are generally allocated based on income before income tax
expense unless specific segment allocations can be reasonably made.
Transactions among reportable segments are made at carrying
value.
Republic Bancorp, Inc. Financial
Information
Third Quarter 2017 Earnings Release
(continued)
Segment information for the three and nine
months ended September 30, 2017 and 2016 follows:
Three Months Ended September 30, 2017
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
$ 37,396 $ 4,737 $ 102
$ 42,235 $ 60 $ 6,012
$
6,072 $ 48,307 Provision for loan and
lease losses 683 (74 ) —
609 (840 ) 4,452
3,612
4,221 Net refund transfer fees — — —
— 177 —
177 177 Mortgage banking income — — 1,102
1,102 — —
— 1,102 Program fees — — —
—
63 1,534
1,597 1,597 Other noninterest income
7,130 11 65
7,206
16 276
292
7,498 Total noninterest income 7,130 11 1,167
8,308 256 1,810
2,066 10,374 Total
noninterest expenses 32,280 848
1,149
34,277 2,851 898
3,749 38,026
Income (loss) before income tax expense 11,563 3,974 120
15,657 (1,695 ) 2,472
777 16,434 Income tax
expense (benefit) 3,951 1,454 41
5,446 (615 ) 897
282 5,728 Net income (loss) $
7,612 $ 2,520 $ 79
$ 10,211 $
(1,080 ) $ 1,575
$
495 $ 10,706 Segment
end-of-period assets $ 4,361,591 $ 570,676 $ 9,395
$
4,941,662 $ 13,090 $ 38,422
$
51,512 $ 4,993,174 Net interest margin
3.70 % 3.54 % NM
3.68 % NM NM
NM 4.17
% Three Months Ended September 30,
2016 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 $ 31,134 $ 4,924 $ 76 $
36,134 $ 38 $ 3,226
$
3,264
$
39,398 Provision for loan and lease losses 289 188
—
477 (89 ) 2,101
2,012 2,489 Net
refund transfer fees — — —
— 132 —
132 132
Mortgage banking income — — 3,081
3,081 — —
—
3,081 Program fees — — —
— 29 950
979
979 Other noninterest income 6,899 4
57
6,960 13
136
149 7,109 Total
noninterest income 6,899 4 3,138
10,041 174 1,086
1,260 11,301 Total noninterest expenses
28,939 727 1,184
30,850
2,075 609
2,684
33,534 Income (loss) before income tax
expense 8,805 4,013 2,030
14,848 (1,774 ) 1,602
(172
) 14,676 Income tax expense (benefit) 2,707
1,493 710
4,910
(642 ) 580
(62 )
4,848 Net income (loss) $ 6,098 $ 2,520
$ 1,320
$ 9,938 $ (1,132 ) $ 1,022
$
(110 ) $ 9,828 Segment
end-of-period assets $ 4,109,464 $ 660,410 $ 15,003
$
4,784,877 $ 26,608 $ 15,792
$
42,400 $ 4,827,277 Net interest margin
3.35 % 3.63 % NM
3.38 % NM NM
NM 3.65
%
Republic Bancorp, Inc. Financial
Information
Third Quarter 2017 Earnings Release
(continued)
Nine Months Ended September 30, 2017
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 $ 103,490 $ 13,073 $ 255
$
116,818 $ 15,179 $ 15,885
$
31,064
$ 147,882 Provision for loan and lease losses
2,611 (36 ) —
2,575 6,763 12,295
19,058 21,633
Net refund transfer fees — — —
— 18,329 —
18,329 18,329 Mortgage banking income — — 3,707
3,707 — —
— 3,707 Program fees — — —
—
103 3,869
3,972 3,972 Other noninterest income
20,618 27 192
20,837
152 1,227
1,379
22,216 Total noninterest income 20,618 27 3,899
24,544 18,584 5,096
23,680 48,224 Total
noninterest expenses 93,552 2,448
3,347
99,347 10,891 2,461
13,352 112,699 Income
(loss) before income tax expense 27,945 10,688 807
39,440
16,109 6,225
22,334 61,774 Income tax expense
(benefit) 8,684 3,909 282
12,875 5,846 2,259
8,105
20,980 Net income (loss) $ 19,261 $
6,779 $ 525
$ 26,565 $ 10,263 $ 3,966
$
14,229 $ 40,794 Segment
end-of-period assets $ 4,361,591 $ 570,676 $ 9,395
$
4,941,662 $ 13,090 $ 38,422
$
51,512 $ 4,993,174 Net interest margin
3.48 % 3.58 % NM
3.49 % NM NM
NM 4.34
% Nine Months Ended September 30,
2016 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 $
89,279 $ 11,369 $ 148
$ 100,796 $ 6,589 $ 7,024
$
13,613 $ 114,409 Provision for loan and
lease losses 1,567 686 —
2,253 2,905 4,331
7,236
9,489 Net refund transfer fees — — —
— 19,119
—
19,119 19,119 Mortgage banking income — — 5,902
5,902 — —
— 5,902 Program fees — — —
—
174 1,768
1,942 1,942 Other noninterest income
19,380 14 212
19,606
176 279
455 20,061
Total noninterest income 19,380 14 6,114
25,508
19,469 2,047
21,516 47,024 Total noninterest
expenses 81,551 2,157 3,576
87,284 9,029 1,628
10,657 97,941 Income (loss)
before income tax expense 25,541 8,540 2,686
36,767 14,124
3,112
17,236 54,003 Income tax expense (benefit)
7,733 3,174 940
11,847 5,125 1,128
6,253
18,100 Net income (loss) $ 17,808 $
5,366 $ 1,746
$ 24,920 $ 8,999 $ 1,984
$
10,983 $ 35,903 Segment
end-of-period assets $ 4,109,464 $ 660,410 $ 15,003
$
4,784,877 $ 26,608 $ 15,792
$
42,400 $ 4,827,277 Net interest margin
3.22 % 3.64 % NM
3.26 % NM NM
NM 3.62
%
Republic Bancorp, Inc. Financial
Information
Third Quarter 2017 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)
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 $9.1 million and $4.8
million for the quarters ended September 30, 2017 and 2016. The
amount of loan fee income included in total interest income was
$36.8 million and $18.3 million for the nine months ended September
30, 2017 and 2016.
The amount of loan fee income included in
total interest income per quarter was as follows: $9.1 million
(quarter ended September 30, 2017); $6.4 million (quarter ended
June 30, 2017); $21.3 million (quarter ended March 31, 2017); $5.9
million (quarter ended December 31, 2016); and $4.8 million
(quarter ended September 30, 2016).
Interest income for Easy Advances (“EAs”)
is composed entirely of loan fees. The loan fees disclosed above
included EA fees of $14.2 million and $5.2 million for the nine
months ended September 30, 2017 and 2016. EAs are only offered
during the first two months of each year.
(4)
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)
Sep. 30, 2017
Jun. 30, 2017 Mar. 31, 2017
Dec. 31, 2016 Sept. 30,
2016
Total stockholders’ equity (a)
$ 633,287 $ 626,891 $ 620,664 $ 604,406 $ 600,560 Less: Goodwill
16,300 16,300 16,300 16,300 16,300 Less: Mortgage servicing rights
5,128 5,159 5,158 5,180 5,338 Less: Core deposit intangible
911 964 1,017 1,070
1,121
Tangible stockholders’ equity (c)
$ 610,948 $ 604,468 $ 598,189 $ 581,856
$ 577,801 Total assets (b) $ 4,993,174 $ 4,955,661 $
4,664,792 $ 4,816,309 $ 4,827,277 Less: Goodwill 16,300 16,300
16,300 16,300 16,300 Less: Mortgage servicing rights 5,128 5,159
5,158 5,180 5,338 Less: Core deposit intangible 911
964 1,017 1,070
1,121 Tangible assets (d) $ 4,970,835 $ 4,933,238
$ 4,642,317 $ 4,793,759 $ 4,804,518
Total stockholders’ equity to total assets
(a/b)
12.68 % 12.65 % 13.31 % 12.55 % 12.44 %
Tangible stockholders’ equity to tangible
assets (c/d)
12.29 % 12.25 % 12.89 % 12.14 % 12.03 % Number of shares
outstanding (e) 20,861 20,861
20,858 20,860 20,862 Book
value per share (a/e) $ 30.36 $ 30.05 $ 29.76 $ 28.97 $ 28.79
Tangible book value per share (c/e) 29.29 28.98 28.68 27.89 27.70
(5)
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.
(6)
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.
(7)
FTEs – Full-time-equivalent employees.
(8)
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.
(9)
Delinquent loans for the RPG segment
included $8.4 million of EAs at March 31, 2017. EAs were only
offered during the first two months of 2017 and 2016. EAs do not
have a contractual due date but are eligible for delinquency
consideration three weeks after the taxpayer-customer’s tax return
is submitted to the applicable tax authority. All unpaid EAs are
charged-off by the end of the second quarter of each year.
NM – Not meaningful
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171020005035/en/
Republic Bancorp, Inc.Kevin Sipes, 502-560-8628Executive Vice
President & Chief Financial Officer
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