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 second quarter net income of $18.0 million, a 15% increase over the second quarter of 2018, resulting in Diluted Earnings per Class A Common Share (“Diluted EPS”) of $0.86. Year-to-date net income was $47.5 million, a $4.4 million, or 10%, increase from the same period in 2018, resulting in return on average assets (“ROA”) and return on average equity (“ROE”) of 1.73% and 13.24% for the first six months of 2019.
Steve Trager, Chairman & CEO of Republic commented, “We are pleased to report another solid quarter of net income for the Company, as continued strong net interest income along with notable growth in Mortgage Banking income drove our quarterly results. Within the Republic Processing Group (“RPG”), Republic Credit Solutions (“RCS”) continued to have strong operating results with a 97% increase in net income for the second quarter of 2019 compared to the same period in 2018, thanks in large part to a reduction in provision expense resulting from the discontinuance of the Company’s subprime credit card portfolio in January of this year.”
The following table highlights Republic’s financial performance for the second quarters and six months ended June 30, 2019 and 2018:
Total Company Financial Performance Highlights | ||||||||||||||||||||||||||||
Three Months Ended Jun. 30, | Six Months Ended Jun. 30, | |||||||||||||||||||||||||||
(dollars in thousands, except per share data) | 2019 | 2018 | $ Change | % Change | 2019 | 2018 | $ Change | % Change | ||||||||||||||||||||
Income Before Income Taxes* | $ | 21,183 | $ | 19,816 | $ | 1,367 | 7 | % | $ | 58,159 | $ | 54,726 | $ | 3,433 | 6 | % | ||||||||||||
Net Income* | 18,007 | 15,666 | 2,341 | 15 | 47,523 | 43,135 | 4,388 | 10 | ||||||||||||||||||||
Diluted Earnings per Class A Common Stock | 0.86 | 0.74 | 0.12 | 16 | 2.28 | 2.06 | 0.22 | 11 | ||||||||||||||||||||
Return on Average Assets | 1.31 | % | 1.23 | % | NA | 7 | 1.73 | % | 1.67 | % | NA | 4 | ||||||||||||||||
Return on Average Equity | 9.88 | 9.45 | NA | 5 | 13.24 | 13.22 | NA | 0 | ||||||||||||||||||||
NA – Not applicable
*See segment data at the end of this earnings release
Results of Operations for the Second Quarter of 2019 Compared to the Second Quarter of 2018
Core Bank(1)
Net income from Core Banking was $13.0 million for the second quarter of 2019, a $1.4 million, or 12%, increase from the second quarter of 2018. Core Bank pre-tax net income increased 1% over a strong second quarter in 2018, with benefits from continued growth in net interest income and mortgage banking income offset by a higher provision for loan losses (“Provision”) and higher overhead costs. As discussed in the section titled “Total Company Income Tax Expense” later in this release, the Core Bank received the benefit of certain infrequent income tax items during the second quarter of 2019, positively impacting the net income comparability to the second quarter of 2018.
Net Interest Income – Core Bank net interest income and net interest margin were generally impacted in opposite fashion by the performance of its two major net-interest-income producing segments during the second quarter of 2019. Within the Traditional Banking segment, strong year-over-year loan growth primarily drove an overall increase in net interest income and was complemented by further margin expansion. Within the Warehouse Lending (“Warehouse”) segment, however, the benefit of robust average-balance growth was more than offset by net interest margin compression during the quarter.
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:
(dollars in thousands) | Three Months Ended Jun. 30, | ||||||||||||||||||||||
2019 | 2018 | Change | |||||||||||||||||||||
Reportable Segment | Net Interest
| Net Interest
| Net Interest
| Net Interest
| Net Interest
| Net Interest
| |||||||||||||||||
Traditional Banking | $ | 41,877 | 3.75 | % | $ | 39,348 | 3.71 | % | $ | 2,529 | 0.04 | % | |||||||||||
Warehouse Lending | 3,957 | 2.49 | 4,164 | 3.08 | (207 | ) | (0.59 | ) | |||||||||||||||
Mortgage Banking | 170 | NM | 103 | NM | 67 | NM | |||||||||||||||||
Total Core Bank | $ | 46,004 | 3.62 | $ | 43,615 | 3.64 | $ | 2,389 | (0.02 | ) | |||||||||||||
Average Loan Balances | Period-End Loan Balances | ||||||||||||||||||||||
(dollars in thousands) | Three Months Ended Jun. 30, | Jun. 30, | |||||||||||||||||||||
Reportable Segment | 2019 | 2018 | $ Change | % Change | 2019 | 2018 | $ Change | % Change | |||||||||||||||
Traditional Banking | $ | 3,651,630 | $ | 3,455,432 | $ | 196,198 | 6 | % | $ | 3,699,576 | $ | 3,476,426 | $ | 223,150 | 6 | % | |||||||
Warehouse Lending* | 634,688 | 541,537 | 93,151 | 17 | 737,794 | 634,841 | 102,953 | 16 | |||||||||||||||
Mortgage Banking* | 12,153 | 6,752 | 5,401 | 80 | 13,883 | 12,653 | 1,230 | 10 | |||||||||||||||
Total Core Bank* | $ | 4,298,471 | $ | 4,003,721 | $ | 294,750 | 7 | $ | 4,451,253 | $ | 4,123,920 | $ | 327,333 | 8 | |||||||||
*Includes loans held for sale
NM – Not meaningful
The primary drivers of the changes in the Core Bank’s net interest income for the second quarter of 2019, as compared to the second quarter of 2018, follow:
Traditional Banking
The Traditional Banking segment’s net interest income increased $2.5 million, or 6%, over the second quarter of 2018. The rise in net interest income was generally driven by the following items:
- Average loans during the second quarter of 2019 were $196 million, or 6%, higher than the comparable period in 2018. The primary contributors for the increase in the quarter-over-quarter average balances were commercial and industrial loans, which grew $80 million, and commercial real estate loans, which grew $56 million.
- Despite a 31-basis-point increase in the Traditional Banking segment’s cost of interest-bearing liabilities, its net interest margin continued to expand due to the increased value from its noninterest-bearing funding. The difference between the Traditional Banking segment’s net interest margin and net interest spread was 18 basis points during the second quarter of 2019 compared to 14 basis points during the second quarter of 2018, with the differential representing the increased value to the net interest margin of noninterest-bearing deposits and stockholders’ equity. The increase in this value resulted from a 30-basis-point rise in the yield on the Traditional Banking segment’s interest-earning assets from period to period.
Warehouse Lending
Despite a 17% increase in average outstanding Warehouse balances during the second quarter of 2019 compared to the second quarter of 2018, a 59-basis-point compression in its net interest margin during the same period drove a $207,000 decrease in its net interest income. The following factors led to the overall changes in the Warehouse segment’s net interest income and net interest margin:
- Pricing pressure to the Bank on Warehouse lines of credit resulting from the negative impact of an inverted yield curve on Warehouse clients primarily drove the 59-basis-point compression in the Warehouse segment’s net interest margin.
- A sharp decline in long-term fixed mortgage rates drove increased client usage of the Bank’s Warehouse lines of credit, driving average outstanding Warehouse balances from $542 million during the second quarter of 2018 to $635 million during the second quarter of 2019.
Provision Expense – The Core Bank’s Provision increased to $1.8 million for the second quarter of 2019 from $773,000 for the same period in 2018. The difference in the Provision between the two periods was primarily related to a $1.2 million estimated specific loan loss reserve for one commercial-related client that defaulted during the second quarter of 2019. Despite personal guarantees associated with this relationship, the Bank recorded a large estimated Provision due to the potential for a prolonged workout horizon and the general uncertainty associated with these types of circumstances.
The table below presents the Core Bank’s credit quality metrics:
As of and for the: | ||||||||||
Quarters Ended: | Years Ended: | |||||||||
Jun. 30, | Mar. 31, | Dec. 31, | Dec. 31, | Dec. 31, | ||||||
Core Banking Credit Quality Ratios | 2019 | 2019 | 2018 | 2017 | 2016 | |||||
Nonperforming loans to total loans | 0.43 | % | 0.37 | % | 0.40 | % | 0.36 | % | 0.42 | % |
Nonperforming assets to total loans (including OREO) | 0.46 | 0.37 | 0.40 | 0.36 | 0.46 | |||||
Delinquent loans to total loans(2) | 0.28 | 0.18 | 0.22 | 0.21 | 0.18 | |||||
Net charge-offs to average loans | 0.04 | 0.04 | 0.06 | 0.04 | 0.05 | |||||
(Quarterly rates annualized) | ||||||||||
OREO = Other Real Estate Owned | ||||||||||
Noninterest Income – Core Bank noninterest income was $10.3 million during the second quarter of 2019, a $1.2 million, or 14%, increase from the $9.1 million achieved during the second quarter of 2018. Driving the increase in noninterest income was a $1.1 million rise in mortgage banking income, which resulted from a $27 million increase in secondary market loans originated from period to period combined with a $33 million increase in the Bank’s pipeline of secondary market loans in process from June 30, 2018 to June 30, 2019. Over the previous 12 months, the Bank has continued to invest in staffing and other resources for the mortgage banking function. A sharp decline in long-term mortgage rates during the quarter, combined with the Bank’s continued investments in mortgage resources, contributed to the increased quarter-over-quarter mortgage activity.
Noninterest Expense – Core Bank noninterest expense increased $2.5 million, or 7%, during the second quarter of 2019 compared to the second quarter of 2018 resulting primarily from a $2.1 million, or 10%, increase in salaries and benefits expense. Annual merit increases and the addition of 79 Core Bank full-time-equivalent employees (“FTEs”) from June 30, 2018 to June 30, 2019 primarily drove the increase.
Republic Processing Group(3)
Republic Processing Group (“RPG”) reported net income of $5.1 million for the second quarter of 2019 compared to $4.1 million for the same period in 2018, with a $2.0 million increase in net income at RPG’s Republic Credit Solutions (“RCS”) segment partially offset by a $1.0 million reduction in net income at its Tax Refund Solutions (“TRS”) segment.
Republic Credit Solutions
RCS’s increase in net income primarily reflects a $2.8 million reduction in Provision expense resulting from lower Provisions of $1.2 million and $1.6 million, respectively, for RCS’s line-of-credit product and its discontinued credit card product. The overall improvement in the Provision for the line-of-credit product was driven by a decline in its annualized historical loss rate combined with a year-to-year decrease in average outstanding balances. The decrease in losses within the RCS credit-card portfolio was due to the discontinuance of the program, effective January of this year.
Tax Refund Solutions
Related to the profitability of TRS, a negative change in Provision expense from a net credit of $888,000 during the second quarter of 2018 to a net charge of $392,000 during the second quarter of 2019 drove the segment’s overall change in net income. The net credit during the second quarter of 2018 resulted from better than expected paydowns from the US Treasury on unpaid Easy Advance (“EA”) loans, allowing the Company to reverse a portion of the loan loss provisions it recorded during the first quarter of 2018. Conversely, loan paydowns from the US Treasury during the second quarter of 2019 approximated the Company’s estimate from the first quarter of 2019, causing the Company’s loan loss reserve for EA loans to remain materially the same from the first quarter.
With the second quarter EA paydowns, the percent of unpaid EAs to total EAs originated dropped to 3.45% at June 30, 2019. This compares to 2.88% at June 30, 2018, a gap of 57 basis points. By comparison, the unpaid EA percentage was 5.84% at March 31, 2019, compared to 4.49% at March 31, 2018, representing a gap of 135 basis points. Management remains optimistic that this gap can continue to shrink through the remainder of 2019. With all unpaid EAs having been charged off as of June 30, 2019, any EA payments received throughout the remainder of 2019 will represent recovery credits directly to income.
Total Company - Income Tax Expense
In April 2019, Kentucky enacted HB458, which allows for combined filing for Republic Bancorp and the Bank. Republic Bancorp had previously filed a separate company income tax return for Kentucky and generated net operating losses, for which it had maintained a valuation allowance against the related deferred tax asset. HB458 also allows for certain net operating losses to be utilized on a combined return. Republic Bancorp expects to file a combined return beginning in 2021 and to utilize these previously generated net operating losses. The tax benefit to reverse the valuation allowance on the deferred tax asset for these losses is expected to be approximately $815,000. This benefit was recorded in the second quarter of 2019, with 100% of this benefit attributed to the Core Bank.
In addition to the tax benefit recognized during the quarter associated with passage of HB458, the Company also received $388,000 in income tax benefit during the second quarter of 2019 associated with equity compensation. Substantially all of this benefit was attributed to the Core Bank.
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 $5.7 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 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
Second 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 | ||||||||||||
Jun. 30, 2019 | Dec. 31, 2018 | Jun. 30, 2018 | ||||||||||
Assets: | ||||||||||||
Cash and cash equivalents | $ | 473,779 | $ | 351,474 | $ | 386,956 | ||||||
Investment securities | 447,512 | 543,771 | 485,622 | |||||||||
Loans held for sale | 63,949 | 21,809 | 26,337 | |||||||||
Loans | 4,522,414 | 4,148,227 | 4,195,984 | |||||||||
Allowance for loan and lease losses | (45,983 | ) | (44,675 | ) | (45,047 | ) | ||||||
Loans, net | 4,476,431 | 4,103,552 | 4,150,937 | |||||||||
Federal Home Loan Bank stock, at cost | 32,242 | 32,067 | 32,067 | |||||||||
Premises and equipment, net | 44,199 | 44,820 | 46,485 | |||||||||
Right-of-use assets(4) | 37,450 | — | — | |||||||||
Goodwill | 16,300 | 16,300 | 16,300 | |||||||||
Other real estate owned ("OREO") | 1,095 | 160 | — | |||||||||
Bank owned life insurance ("BOLI") | 65,642 | 64,883 | 64,106 | |||||||||
Other assets and accrued interest receivable | 64,535 | 61,568 | 57,135 | |||||||||
Total assets | $ | 5,723,134 | $ | 5,240,404 | $ | 5,265,945 | ||||||
Liabilities and Stockholders' Equity: | ||||||||||||
Deposits: | ||||||||||||
Noninterest-bearing | $ | 1,052,177 | $ | 1,003,969 | $ | 1,061,182 | ||||||
Interest-bearing | 2,661,697 | 2,452,176 | 2,412,187 | |||||||||
Total deposits | 3,713,874 | 3,456,145 | 3,473,369 | |||||||||
Securities sold under agreements to repurchase and other short-term borrowings | 226,002 | 182,990 | 175,291 | |||||||||
Operating lease liabilities(4) | 38,852 | — | — | |||||||||
Federal Home Loan Bank advances | 915,000 | 810,000 | 860,000 | |||||||||
Subordinated note | 41,240 | 41,240 | 41,240 | |||||||||
Other liabilities and accrued interest payable | 56,738 | 60,095 | 52,037 | |||||||||
Total liabilities | 4,991,706 | 4,550,470 | 4,601,937 | |||||||||
Stockholders' equity | 731,428 | 689,934 | 664,008 | |||||||||
Total liabilities and stockholders' equity | $ | 5,723,134 | $ | 5,240,404 | $ | 5,265,945 | ||||||
Average Balance Sheet Data | |||||||||||||
Three Months Ended Jun. 30, | Six Months Ended Jun. 30, | ||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||
Assets: | |||||||||||||
Federal funds sold and other interest-earning deposits | $ | 297,205 | $ | 276,246 | $ | 293,587 | $ | 279,684 | |||||
Investment securities, including FHLB stock | 514,366 | 506,209 | 538,923 | 529,356 | |||||||||
Loans, including loans held for sale | 4,424,905 | 4,092,388 | 4,341,254 | 4,087,247 | |||||||||
Total interest-earning assets | 5,236,476 | 4,874,843 | 5,173,764 | 4,896,287 | |||||||||
Total assets | 5,480,525 | 5,074,781 | 5,478,609 | 5,175,927 | |||||||||
Liabilities and Stockholders' Equity: | |||||||||||||
Noninterest-bearing deposits | $ | 1,098,817 | $ | 1,146,403 | $ | 1,178,198 | $ | 1,232,652 | |||||
Interest-bearing deposits | 2,588,836 | 2,410,330 | 2,609,188 | 2,413,220 | |||||||||
Securities sold under agreements to repurchase and other short-term borrowings | 220,189 | 178,063 | 225,864 | 217,532 | |||||||||
Federal Home Loan Bank advances | 710,879 | 593,187 | 611,695 | 569,613 | |||||||||
Subordinated note | 41,240 | 41,240 | 41,240 | 41,240 | |||||||||
Total interest-bearing liabilities | 3,561,144 | 3,222,820 | 3,487,987 | 3,241,605 | |||||||||
Stockholders' equity | 728,723 | 663,077 | 717,838 | 652,407 | |||||||||
Republic Bancorp, Inc. Financial Information
Second 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 Jun. 30, | Six Months Ended Jun. 30, | ||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||
Total interest income(5) | $ | 65,664 | $ | 58,356 | $ | 148,297 | $ | 132,189 | |||||
Total interest expense | 11,718 | 7,272 | 22,052 | 13,440 | |||||||||
Net interest income | 53,946 | 51,084 | 126,245 | 118,749 | |||||||||
Provision for loan and lease losses | 4,460 | 4,932 | 21,691 | 22,187 | |||||||||
Noninterest income: | |||||||||||||
Service charges on deposit accounts | 3,598 | 3,574 | 6,901 | 7,129 | |||||||||
Net refund transfer fees | 3,629 | 3,473 | 20,729 | 19,825 | |||||||||
Mortgage banking income | 2,416 | 1,316 | 3,955 | 2,336 | |||||||||
Interchange fee income | 3,257 | 2,891 | 6,014 | 5,558 | |||||||||
Program fees | 1,037 | 1,323 | 2,111 | 3,019 | |||||||||
Increase in cash surrender value of BOLI | 377 | 379 | 759 | 750 | |||||||||
Net gains on OREO | 90 | 320 | 220 | 452 | |||||||||
Other | 721 | 1,020 | 1,853 | 2,772 | |||||||||
Total noninterest income | 15,125 | 14,296 | 42,542 | 41,841 | |||||||||
Noninterest expense: | |||||||||||||
Salaries and employee benefits | 25,286 | 22,766 | 50,362 | 46,600 | |||||||||
Occupancy and equipment, net | 6,472 | 6,391 | 13,056 | 12,612 | |||||||||
Communication and transportation | 1,071 | 1,241 | 2,232 | 2,623 | |||||||||
Marketing and development | 1,278 | 1,283 | 2,380 | 2,199 | |||||||||
FDIC insurance expense | 295 | 345 | 743 | 870 | |||||||||
Bank franchise tax expense | 935 | 860 | 3,431 | 3,378 | |||||||||
Data processing | 2,217 | 2,443 | 4,313 | 4,829 | |||||||||
Interchange related expense | 1,302 | 1,098 | 2,617 | 2,105 | |||||||||
Supplies | 582 | 303 | 1,066 | 684 | |||||||||
OREO expense | 148 | 16 | 194 | 61 | |||||||||
Legal and professional fees | 844 | 728 | 1,730 | 1,771 | |||||||||
Other | 2,998 | 3,158 | 6,813 | 5,945 | |||||||||
Total noninterest expense | 43,428 | 40,632 | 88,937 | 83,677 | |||||||||
Income before income tax expense | 21,183 | 19,816 | 58,159 | 54,726 | |||||||||
Income tax expense | 3,176 | 4,150 | 10,636 | 11,591 | |||||||||
Net income | $ | 18,007 | $ | 15,666 | $ | 47,523 | $ | 43,135 | |||||
Republic Bancorp, Inc. Financial Information
Second 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 Jun. 30, | Six Months Ended Jun. 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Per Share Data: | ||||||||||||||||
Basic weighted average shares outstanding | 21,016 | 21,187 | 20,997 | 20,939 | ||||||||||||
Diluted weighted average shares outstanding | 21,138 | 21,331 | 21,125 | 21,072 | ||||||||||||
Period-end shares outstanding: | ||||||||||||||||
Class A Common Stock | 18,740 | 18,677 | 18,740 | 18,677 | ||||||||||||
Class B Common Stock | 2,208 | 2,215 | 2,208 | 2,215 | ||||||||||||
Book value per share(6) | $ | 34.92 | $ | 31.78 | $ | 34.92 | $ | 31.78 | ||||||||
Tangible book value per share(6) | 33.87 | 30.73 | 33.87 | 30.73 | ||||||||||||
Earnings per share ("EPS"): | ||||||||||||||||
Basic EPS - Class A Common Stock | $ | 0.86 | $ | 0.75 | $ | 2.29 | $ | 2.08 | ||||||||
Basic EPS - Class B Common Stock | 0.79 | 0.68 | 2.08 | 1.89 | ||||||||||||
Diluted EPS - Class A Common Stock | 0.86 | 0.74 | 2.28 | 2.06 | ||||||||||||
Diluted EPS - Class B Common Stock | 0.78 | 0.68 | 2.07 | 1.88 | ||||||||||||
Cash dividends declared per Common share: | ||||||||||||||||
Class A Common Stock | $ | 0.264 | $ | 0.242 | $ | 0.528 | $ | 0.484 | ||||||||
Class B Common Stock | 0.240 | 0.220 | 0.480 | 0.440 | ||||||||||||
Performance Ratios: | ||||||||||||||||
Return on average assets | 1.31 | % | 1.23 | % | 1.73 | % | 1.67 | % | ||||||||
Return on average equity | 9.88 | 9.45 | 13.24 | 13.22 | ||||||||||||
Efficiency ratio(7) | 63 | 62 | 53 | 52 | ||||||||||||
Yield on average interest-earning assets(5) | 5.02 | 4.79 | 5.73 | 5.40 | ||||||||||||
Cost of average interest-bearing liabilities | 1.32 | 0.90 | 1.26 | 0.83 | ||||||||||||
Cost of average deposits(8) | 0.75 | 0.44 | 0.72 | 0.40 | ||||||||||||
Net interest spread(5) | 3.70 | 3.89 | 4.47 | 4.57 | ||||||||||||
Net interest margin - Total Company(5) | 4.12 | 4.19 | 4.88 | 4.85 | ||||||||||||
Net interest margin - Core Bank(1) | 3.62 | 3.64 | 3.69 | 3.60 | ||||||||||||
Other Information: | ||||||||||||||||
End of period FTEs(9) - Total Company | 1,089 | 1,013 | 1,089 | 1,013 | ||||||||||||
End of period FTEs - Core Bank | 1,012 | 933 | 1,012 | 933 | ||||||||||||
Number of full-service banking centers | 45 | 45 | 45 | 45 | ||||||||||||
Republic Bancorp, Inc. Financial Information
Second 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 | As of and for the | ||||||||||||||
Three Months Ended Jun. 30, | Six Months Ended Jun. 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Credit Quality Asset Balances: | ||||||||||||||||
Nonperforming Assets - Total Company: | ||||||||||||||||
Loans on nonaccrual status | $ | 19,238 | $ | 17,502 | $ | 19,238 | $ | 17,502 | ||||||||
Loans past due 90-days-or-more and still on accrual | 166 | 858 | 166 | 858 | ||||||||||||
Total nonperforming loans | 19,404 | 18,360 | 19,404 | 18,360 | ||||||||||||
OREO | 1,095 | — | 1,095 | — | ||||||||||||
Total nonperforming assets | $ | 20,499 | $ | 18,360 | $ | 20,499 | $ | 18,360 | ||||||||
Nonperforming Assets - Core Bank(1): | ||||||||||||||||
Loans on nonaccrual status | $ | 19,238 | $ | 17,502 | $ | 19,238 | $ | 17,502 | ||||||||
Loans past due 90-days-or-more and still on accrual | — | 22 | — | 22 | ||||||||||||
Total nonperforming loans | 19,238 | 17,524 | 19,238 | 17,524 | ||||||||||||
OREO | 1,095 | — | 1,095 | — | ||||||||||||
Total nonperforming assets | $ | 20,333 | $ | 17,524 | $ | 20,333 | $ | 17,524 | ||||||||
Delinquent loans: | ||||||||||||||||
Delinquent loans - Core Bank | $ | 12,524 | $ | 8,703 | $ | 12,524 | $ | 8,703 | ||||||||
Delinquent loans - RPG(3) | 6,802 | 4,429 | 6,802 | 4,429 | ||||||||||||
Total delinquent loans - Total Company | $ | 19,326 | $ | 13,132 | $ | 19,326 | $ | 13,132 | ||||||||
Credit Quality Ratios - Total Company: | ||||||||||||||||
Nonperforming loans to total loans | 0.43 | % | 0.44 | % | 0.43 | % | 0.44 | % | ||||||||
Nonperforming assets to total loans (including OREO) | 0.45 | 0.44 | 0.45 | 0.44 | ||||||||||||
Nonperforming assets to total assets | 0.36 | 0.35 | 0.36 | 0.35 | ||||||||||||
Allowance for loan and lease losses to total loans | 1.02 | 1.07 | 1.02 | 1.07 | ||||||||||||
Allowance for loan and lease losses to nonperforming loans | 237 | 245 | 237 | 245 | ||||||||||||
Delinquent loans to total loans(2) | 0.43 | 0.31 | 0.43 | 0.31 | ||||||||||||
Net charge-offs to average loans (annualized) | 1.49 | 1.19 | 0.94 | 0.97 | ||||||||||||
Credit Quality Ratios - Core Bank: | ||||||||||||||||
Nonperforming loans to total loans | 0.43 | % | 0.43 | % | 0.43 | % | 0.43 | % | ||||||||
Nonperforming assets to total loans (including OREO) | 0.46 | 0.43 | 0.46 | 0.43 | ||||||||||||
Nonperforming assets to total assets | 0.37 | 0.34 | 0.37 | 0.34 | ||||||||||||
Allowance for loan and lease losses to total loans | 0.75 | 0.76 | 0.75 | 0.76 | ||||||||||||
Allowance for loan and lease losses to nonperforming loans | 171 | 179 | 171 | 179 | ||||||||||||
Delinquent loans to total loans | 0.28 | 0.21 | 0.28 | 0.21 | ||||||||||||
Net charge-offs to average loans (annualized) | 0.04 | — | 0.04 | 0.03 | ||||||||||||
Republic Bancorp, Inc. Financial Information
Second 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 | |||||||||||||||||
Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | |||||||||||||
Assets: | |||||||||||||||||
Cash and cash equivalents | $ | 473,779 | $ | 345,512 | $ | 351,474 | $ | 365,512 | $ | 386,956 | |||||||
Investment securities | 447,512 | 498,318 | 543,771 | 513,766 | 485,622 | ||||||||||||
Loans held for sale | 63,949 | 24,177 | 21,809 | 28,899 | 26,337 | ||||||||||||
Loans | 4,522,414 | 4,298,710 | 4,148,227 | 4,136,195 | 4,195,984 | ||||||||||||
Allowance for loan and lease losses | (45,983) | (57,961) | (44,675) | (43,824) | (45,047) | ||||||||||||
Loans, net | 4,476,431 | 4,240,749 | 4,103,552 | 4,092,371 | 4,150,937 | ||||||||||||
Federal Home Loan Bank stock, at cost | 32,242 | 29,965 | 32,067 | 32,067 | 32,067 | ||||||||||||
Premises and equipment, net | 44,199 | 43,527 | 44,820 | 45,945 | 46,485 | ||||||||||||
Right-of-use assets(4) | 37,450 | 38,738 | — | — | — | ||||||||||||
Goodwill | 16,300 | 16,300 | 16,300 | 16,300 | 16,300 | ||||||||||||
Other real estate owned | 1,095 | 216 | 160 | 70 | — | ||||||||||||
Bank owned life insurance | 65,642 | 65,265 | 64,883 | 64,491 | 64,106 | ||||||||||||
Other assets and accrued interest receivable | 64,535 | 63,001 | 61,568 | 62,933 | 57,135 | ||||||||||||
Total assets | $ | 5,723,134 | $ | 5,365,768 | $ | 5,240,404 | $ | 5,222,354 | $ | 5,265,945 | |||||||
Liabilities and Stockholders' Equity: | |||||||||||||||||
Deposits: | |||||||||||||||||
Noninterest-bearing | $ | 1,052,177 | $ | 1,184,480 | $ | 1,003,969 | $ | 1,103,461 | $ | 1,061,182 | |||||||
Interest-bearing | 2,661,697 | 2,589,836 | 2,452,176 | 2,463,224 | 2,412,187 | ||||||||||||
Total deposits | 3,713,874 | 3,774,316 | 3,456,145 | 3,566,685 | 3,473,369 | ||||||||||||
Securities sold under agreements to repurchase and other short-term borrowings | 226,002 | 173,168 | 182,990 | 163,768 | 175,291 | ||||||||||||
Operating lease liabilities(4) | 38,852 | 40,203 | — | — | — | ||||||||||||
Federal Home Loan Bank advances | 915,000 | 560,000 | 810,000 | 715,000 | 860,000 | ||||||||||||
Subordinated note | 41,240 | 41,240 | 41,240 | 41,240 | 41,240 | ||||||||||||
Other liabilities and accrued interest payable | 56,738 | 59,750 | 60,095 | 58,851 | 52,037 | ||||||||||||
Total liabilities | 4,991,706 | 4,648,677 | 4,550,470 | 4,545,544 | 4,601,937 | ||||||||||||
Stockholders' equity | 731,428 | 717,091 | 689,934 | 676,810 | 664,008 | ||||||||||||
Total liabilities and stockholders' equity | $ | 5,723,134 | $ | 5,365,768 | $ | 5,240,404 | $ | 5,222,354 | $ | 5,265,945 | |||||||
Average Balance Sheet Data | |||||||||||||||||
Quarterly Comparison | |||||||||||||||||
Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | |||||||||||||
Assets: | |||||||||||||||||
Federal funds sold and other interest-earning deposits | $ | 297,205 | $ | 289,928 | $ | 199,134 | $ | 265,111 | $ | 276,246 | |||||||
Investment securities, including FHLB stock | 514,366 | 563,752 | 579,429 | 530,468 | 506,209 | ||||||||||||
Loans, including loans held for sale | 4,424,905 | 4,256,673 | 4,092,004 | 4,112,926 | 4,092,388 | ||||||||||||
Total interest-earning assets | 5,236,476 | 5,110,353 | 4,870,567 | 4,908,505 | 4,874,843 | ||||||||||||
Total assets | 5,480,525 | 5,476,671 | 5,070,845 | 5,101,286 | 5,074,781 | ||||||||||||
Liabilities and Stockholders' Equity: | |||||||||||||||||
Noninterest-bearing deposits | $ | 1,098,817 | $ | 1,258,461 | $ | 1,050,236 | $ | 1,076,967 | $ | 1,146,403 | |||||||
Interest-bearing deposits | 2,588,836 | 2,629,765 | 2,477,962 | 2,476,088 | 2,410,330 | ||||||||||||
Securities sold under agreements to repurchase and other short-term borrowings | 220,189 | 231,602 | 252,073 | 213,195 | 178,063 | ||||||||||||
Federal Home Loan Bank advances | 710,879 | 511,408 | 515,413 | 574,130 | 593,187 | ||||||||||||
Subordinated note | 41,240 | 41,240 | 41,240 | 41,240 | 41,240 | ||||||||||||
Total interest-bearing liabilities | 3,561,144 | 3,414,015 | 3,286,688 | 3,304,653 | 3,222,820 | ||||||||||||
Stockholders' equity | 728,723 | 706,833 | 687,156 | 675,470 | 663,077 | ||||||||||||
Republic Bancorp, Inc. Financial Information
Second 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 | |||||||||||||||||
Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | |||||||||||||
Total interest income(5) | $ | 65,664 | $ | 82,633 | $ | 62,902 | $ | 61,090 | $ | 58,356 | |||||||
Total interest expense | 11,718 | 10,334 | 8,626 | 8,057 | 7,272 | ||||||||||||
Net interest income | 53,946 | 72,299 | 54,276 | 53,033 | 51,084 | ||||||||||||
Provision for loan and lease losses | 4,460 | 17,231 | 5,104 | 4,077 | 4,932 | ||||||||||||
Noninterest income: | |||||||||||||||||
Service charges on deposit accounts | 3,598 | 3,303 | 3,565 | 3,579 | 3,574 | ||||||||||||
Net refund transfer fees | 3,629 | 17,100 | 55 | 149 | 3,473 | ||||||||||||
Mortgage banking income | 2,416 | 1,539 | 1,129 | 1,360 | 1,316 | ||||||||||||
Interchange fee income | 3,257 | 2,757 | 2,844 | 2,757 | 2,891 | ||||||||||||
Program fees | 1,037 | 1,074 | 1,520 | 1,686 | 1,323 | ||||||||||||
Increase in cash surrender value of BOLI | 377 | 382 | 392 | 385 | 379 | ||||||||||||
Net gains on OREO | 90 | 130 | 29 | 248 | 320 | ||||||||||||
Other | 721 | 1,132 | 585 | 1,301 | 1,020 | ||||||||||||
Total noninterest income | 15,125 | 27,417 | 10,119 | 11,465 | 14,296 | ||||||||||||
Noninterest expense: | |||||||||||||||||
Salaries and employee benefits | 25,286 | 25,076 | 21,743 | 22,846 | 22,766 | ||||||||||||
Occupancy and equipment, net | 6,472 | 6,584 | 6,474 | 6,279 | 6,391 | ||||||||||||
Communication and transportation | 1,071 | 1,161 | 1,115 | 1,047 | 1,241 | ||||||||||||
Marketing and development | 1,278 | 1,102 | 784 | 1,449 | 1,283 | ||||||||||||
FDIC insurance expense | 295 | 448 | 264 | 360 | 345 | ||||||||||||
Bank franchise tax expense | 935 | 2,496 | 863 | 710 | 860 | ||||||||||||
Data processing | 2,217 | 2,096 | 2,434 | 2,350 | 2,443 | ||||||||||||
Interchange related expense | 1,302 | 1,315 | 1,237 | 1,138 | 1,098 | ||||||||||||
Supplies | 582 | 484 | 446 | 314 | 303 | ||||||||||||
OREO expense | 148 | 46 | 31 | 2 | 16 | ||||||||||||
Legal and professional fees | 844 | 886 | 753 | 935 | 728 | ||||||||||||
Other | 2,998 | 3,815 | 2,819 | 3,782 | 3,158 | ||||||||||||
Total noninterest expense | 43,428 | 45,509 | 38,963 | 41,212 | 40,632 | ||||||||||||
Income before income tax expense | 21,183 | 36,976 | 20,328 | 19,209 | 19,816 | ||||||||||||
Income tax expense | 3,176 | 7,460 | 3,022 | 1,798 | 4,150 | ||||||||||||
Net income | $ | 18,007 | $ | 29,516 | $ | 17,306 | $ | 17,411 | $ | 15,666 | |||||||
Republic Bancorp, Inc. Financial Information
Second 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 | |||||||||||||||||||||
Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | |||||||||||||||||
Per Share Data: | |||||||||||||||||||||
Basic weighted average shares outstanding | 21,016 | 20,973 | 20,975 | 20,962 | 21,187 | ||||||||||||||||
Diluted weighted average shares outstanding | 21,138 | 21,106 | 21,113 | 21,120 | 21,331 | ||||||||||||||||
Period-end shares outstanding: | |||||||||||||||||||||
Class A Common Stock | 18,740 | 18,698 | 18,675 | 18,682 | 18,677 | ||||||||||||||||
Class B Common Stock | 2,208 | 2,213 | 2,213 | 2,213 | 2,215 | ||||||||||||||||
Book value per share(6) | $ | 34.92 | $ | 34.29 | $ | 33.03 | $ | 32.39 | $ | 31.78 | |||||||||||
Tangible book value per share(6) | 33.87 | 33.25 | 31.98 | 31.34 | 30.73 | ||||||||||||||||
Earnings per share ("EPS"): | |||||||||||||||||||||
Basic EPS - Class A Common Stock | $ | 0.86 | $ | 1.42 | $ | 0.83 | $ | 0.84 | $ | 0.75 | |||||||||||
Basic EPS - Class B Common Stock | 0.79 | 1.29 | 0.76 | 0.76 | 0.68 | ||||||||||||||||
Diluted EPS - Class A Common Stock | 0.86 | 1.41 | 0.83 | 0.83 | 0.74 | ||||||||||||||||
Diluted EPS - Class B Common Stock | 0.78 | 1.28 | 0.75 | 0.76 | 0.68 | ||||||||||||||||
Cash dividends declared per Common share: | |||||||||||||||||||||
Class A Common Stock | $ | 0.264 | $ | 0.264 | $ | 0.242 | $ | 0.242 | $ | 0.242 | |||||||||||
Class B Common Stock | 0.240 | 0.240 | 0.220 | 0.220 | 0.220 | ||||||||||||||||
Performance Ratios: | |||||||||||||||||||||
Return on average assets | 1.31 | % | 2.16 | % | 1.37 | % | 1.37 | % | 1.23 | % | |||||||||||
Return on average equity | 9.88 | 16.70 | 10.07 | 10.31 | 9.45 | ||||||||||||||||
Efficiency ratio(7) | 63 | 46 | 61 | 64 | 62 | ||||||||||||||||
Yield on average interest-earning assets(5) | 5.02 | 6.47 | 5.17 | 4.98 | 4.79 | ||||||||||||||||
Cost of average interest-bearing liabilities | 1.32 | 1.21 | 1.05 | 0.98 | 0.90 | ||||||||||||||||
Cost of average deposits(8) | 0.75 | 0.69 | 0.59 | 0.51 | 0.44 | ||||||||||||||||
Net interest spread(5) | 3.70 | 5.26 | 4.12 | 4.00 | 3.89 | ||||||||||||||||
Net interest margin - Total Company(5) | 4.12 | 5.66 | 4.46 | 4.32 | 4.19 | ||||||||||||||||
Net interest margin - Core Bank(1) | 3.62 | 3.76 | 3.85 | 3.76 | 3.64 | ||||||||||||||||
Other Information: | |||||||||||||||||||||
End of period FTEs(9) - Total Company | 1,089 | 1,073 | 1,051 | 1,034 | 1,013 | ||||||||||||||||
End of period FTEs - Core Bank | 1,012 | 997 | 968 | 953 | 933 | ||||||||||||||||
Number of full-service banking centers | 45 | 45 | 45 | 45 | 45 | ||||||||||||||||
Republic Bancorp, Inc. Financial Information
Second 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 | ||||||||||||||||||||
Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | ||||||||||||||||
Credit Quality Asset Balances: | ||||||||||||||||||||
Nonperforming Assets - Total Company: | ||||||||||||||||||||
Loans on nonaccrual status | $ | 19,238 | $ | 15,361 | $ | 15,993 | $ | 17,015 | $ | 17,502 | ||||||||||
Loans past due 90-days-or-more and still on accrual | 166 | 199 | 145 | 254 | 858 | |||||||||||||||
Total nonperforming loans | 19,404 | 15,560 | 16,138 | 17,269 | 18,360 | |||||||||||||||
OREO | 1,095 | 216 | 160 | 70 | — | |||||||||||||||
Total nonperforming assets | $ | 20,499 | $ | 15,776 | $ | 16,298 | $ | 17,339 | $ | 18,360 | ||||||||||
Nonperforming Assets - Core Bank(1): | ||||||||||||||||||||
Loans on nonaccrual status | $ | 19,238 | $ | 15,361 | $ | 15,993 | $ | 17,015 | $ | 17,502 | ||||||||||
Loans past due 90-days-or-more and still on accrual | — | 4 | 13 | 5 | 22 | |||||||||||||||
Total nonperforming loans | 19,238 | 15,365 | 16,006 | 17,020 | 17,524 | |||||||||||||||
OREO | 1,095 | 216 | 160 | 70 | — | |||||||||||||||
Total nonperforming assets | $ | 20,333 | $ | 15,581 | $ | 16,166 | $ | 17,090 | $ | 17,524 | ||||||||||
Delinquent Loans: | ||||||||||||||||||||
Delinquent loans - Core Bank | $ | 12,524 | $ | 7,727 | $ | 8,875 | $ | 11,840 | $ | 8,703 | ||||||||||
Delinquent loans - RPG(3)(10) | 6,802 | 26,460 | 7,087 | 5,986 | 4,429 | |||||||||||||||
Total delinquent loans - Total Company | $ | 19,326 | $ | 34,187 | $ | 15,962 | $ | 17,826 | $ | 13,132 | ||||||||||
Credit Quality Ratios - Total Company: | ||||||||||||||||||||
Nonperforming loans to total loans | 0.43 | % | 0.36 | % | 0.39 | % | 0.42 | % | 0.44 | % | ||||||||||
Nonperforming assets to total loans (including OREO) | 0.45 | 0.37 | 0.39 | 0.42 | 0.44 | |||||||||||||||
Nonperforming assets to total assets | 0.36 | 0.29 | 0.31 | 0.33 | 0.35 | |||||||||||||||
Allowance for loan and lease losses to total loans | 1.02 | 1.35 | 1.08 | 1.06 | 1.07 | |||||||||||||||
Allowance for loan and lease losses to nonperforming loans | 237 | 373 | 277 | 254 | 245 | |||||||||||||||
Delinquent loans to total loans(2)(10) | 0.43 | 0.80 | 0.38 | 0.43 | 0.31 | |||||||||||||||
Net charge-offs to average loans (annualized) | 1.49 | 0.37 | 0.42 | 0.52 | 1.19 | |||||||||||||||
Credit Quality Ratios - Core Bank: | ||||||||||||||||||||
Nonperforming loans to total loans | 0.43 | % | 0.37 | % | 0.40 | % | 0.42 | % | 0.43 | % | ||||||||||
Nonperforming assets to total loans (including OREO) | 0.46 | 0.37 | 0.40 | 0.42 | 0.43 | |||||||||||||||
Nonperforming assets to total assets | 0.37 | 0.31 | 0.31 | 0.33 | 0.34 | |||||||||||||||
Allowance for loan and lease losses to total loans | 0.75 | 0.75 | 0.78 | 0.78 | 0.76 | |||||||||||||||
Allowance for loan and lease losses to nonperforming loans | 171 | 205 | 197 | 184 | 179 | |||||||||||||||
Delinquent loans to total loans | 0.28 | 0.18 | 0.22 | 0.29 | 0.21 | |||||||||||||||
Net charge-offs to average loans (annualized) | 0.04 | 0.04 | 0.12 | 0.04 | — | |||||||||||||||
Republic Bancorp, Inc. Financial Information
Second 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 June 30, 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 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 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 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 2019 Earnings Release (continued)
Segment information for the quarters and six months ended June 30, 2019 and 2018 follows:
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 loan and lease losses | 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 | % | |||||||||||||
Three Months Ended June 30, 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 | $ | 39,348 | $ | 4,164 | $ | 103 | $ | 43,615 | $ | 328 | $ | 7,141 | $ | 7,469 | $ | 51,084 | |||||||||||||
Provision for loan and lease losses | 523 | 250 | — | 773 | (888) | 5,047 | 4,159 | 4,932 | |||||||||||||||||||||
Net refund transfer fees | — | — | — | — | 3,473 | — | 3,473 | 3,473 | |||||||||||||||||||||
Mortgage banking income | — | — | 1,316 | 1,316 | — | — | — | 1,316 | |||||||||||||||||||||
Program fees | — | — | — | — | 124 | 1,199 | 1,323 | 1,323 | |||||||||||||||||||||
Other noninterest income | 7,725 | 11 | 49 | 7,785 | 80 | 319 | 399 | 8,184 | |||||||||||||||||||||
Total noninterest income | 7,725 | 11 | 1,365 | 9,101 | 3,677 | 1,518 | 5,195 | 14,296 | |||||||||||||||||||||
Total noninterest expense | 35,415 | 850 | 1,176 | 37,441 | 2,273 | 918 | 3,191 | 40,632 | |||||||||||||||||||||
Income before income tax expense | 11,135 | 3,075 | 292 | 14,502 | 2,620 | 2,694 | 5,314 | 19,816 | |||||||||||||||||||||
Income tax expense | 2,168 | 702 | 62 | 2,932 | 609 | 609 | 1,218 | 4,150 | |||||||||||||||||||||
Net income | $ | 8,967 | $ | 2,373 | $ | 230 | $ | 11,570 | $ | 2,011 | $ | 2,085 | $ | 4,096 | $ | 15,666 | |||||||||||||
Period-end assets | $ | 4,501,539 | $ | 634,452 | $ | 17,998 | $ | 5,153,989 | $ | 27,192 | $ | 84,764 | $ | 111,956 | $ | 5,265,945 | |||||||||||||
Net interest margin | 3.71 | % | 3.08 | % | NM | 3.64 | % | NM | NM | NM | 4.19 | % | |||||||||||||||||
Net-revenue concentration* | 73 | % | 6 | % | 2 | % | 81 | % | 6 | % | 13 | % | 19 | % | 100 | % | |||||||||||||
*Net revenues represent total net interest income plus noninterest income.
Republic Bancorp, Inc. Financial Information
Second Quarter 2019 Earnings Release (continued)
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 loan and lease losses | 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 | % | |||||||||||||
Six Months Ended June 30, 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 | $ | 77,536 | $ | 7,755 | $ | 175 | $ | 85,466 | $ | 19,014 | $ | 14,269 | $ | 33,283 | $ | 118,749 | |||||||||||||
Provision for loan and lease losses | 1,462 | 271 | — | 1,733 | 12,501 | 7,953 | 20,454 | 22,187 | |||||||||||||||||||||
Net refund transfer fees | — | — | — | — | 19,825 | — | 19,825 | 19,825 | |||||||||||||||||||||
Mortgage banking income | — | — | 2,336 | 2,336 | — | — | — | 2,336 | |||||||||||||||||||||
Program fees | — | — | — | — | 183 | 2,836 | 3,019 | 3,019 | |||||||||||||||||||||
Other noninterest income | 14,727 | 19 | 87 | 14,833 | 1,190 | 638 | 1,828 | 16,661 | |||||||||||||||||||||
Total noninterest income | 14,727 | 19 | 2,423 | 17,169 | 21,198 | 3,474 | 24,672 | 41,841 | |||||||||||||||||||||
Total noninterest expense | 68,807 | 1,689 | 2,380 | 72,876 | 8,798 | 2,003 | 10,801 | 83,677 | |||||||||||||||||||||
Income before income tax expense | 21,994 | 5,814 | 218 | 28,026 | 18,913 | 7,787 | 26,700 | 54,726 | |||||||||||||||||||||
Income tax expense | 3,940 | 1,329 | 46 | 5,315 | 4,463 | 1,813 | 6,276 | 11,591 | |||||||||||||||||||||
Net income | $ | 18,054 | $ | 4,485 | $ | 172 | $ | 22,711 | $ | 14,450 | $ | 5,974 | $ | 20,424 | $ | 43,135 | |||||||||||||
Period-end assets | $ | 4,501,539 | $ | 634,452 | $ | 17,998 | $ | 5,153,989 | $ | 27,192 | $ | 84,764 | $ | 111,956 | $ | 5,265,945 | |||||||||||||
Net interest margin | 3.65 | % | 3.13 | % | NM | 3.60 | % | NM | NM | NM | 4.85 | % | |||||||||||||||||
Net-revenue concentration* | 57 | % | 5 | % | 2 | % | 64 | % | 25 | % | 11 | % | 36 | % | 100 | % | |||||||||||||
*Net revenues represent total net interest income plus noninterest income.
Republic Bancorp, Inc. Financial Information
Second 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 sheets 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 was $8.4 million and $8.5 million for the quarters ended June 30, 2019 and 2018. The amount of loan fee income included in total interest income was $37.0 million and $35.4 million for the six months ended June 30, 2019 and 2018.
The amount of loan fee income included in total interest income per quarter was as follows: $8.4 million (quarter ended June 30, 2019); $28.6 million (quarter ended March 31, 2019); $9.4 million (quarter ended December 31, 2018); $9.0 million (quarter ended September 30, 2018); and $8.5 million (quarter ended June 30, 2018).
Interest income for Easy Advances (“EAs”) is composed entirely of loan fees. The loan fees disclosed above included EA fees of $19.1 million and $17.8 million for the first six months ended June 30, 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) | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | |||||||||||||||
Total stockholders' equity - GAAP (a) | $ | 731,428 | $ | 717,091 | $ | 689,934 | $ | 676,810 | $ | 664,008 | ||||||||||
Less: Goodwill | 16,300 | 16,300 | 16,300 | 16,300 | 16,300 | |||||||||||||||
Less: Mortgage servicing rights | 5,158 | 4,935 | 4,919 | 4,925 | 4,914 | |||||||||||||||
Less: Core deposit intangible | 562 | 608 | 654 | 705 | 756 | |||||||||||||||
Tangible stockholders' equity - Non-GAAP (c) | $ | 709,408 | $ | 695,248 | $ | 668,061 | $ | 654,880 | $ | 642,038 | ||||||||||
Total assets - GAAP (b) | $ | 5,723,134 | $ | 5,365,768 | $ | 5,240,404 | $ | 5,222,354 | $ | 5,265,945 | ||||||||||
Less: Goodwill | 16,300 | 16,300 | 16,300 | 16,300 | 16,300 | |||||||||||||||
Less: Mortgage servicing rights | 5,158 | 4,935 | 4,919 | 4,925 | 4,914 | |||||||||||||||
Less: Core deposit intangible | 562 | 608 | 654 | 705 | 756 | |||||||||||||||
Tangible assets - Non-GAAP (d) | $ | 5,701,114 | $ | 5,343,925 | $ | 5,218,531 | $ | 5,200,424 | $ | 5,243,975 | ||||||||||
Total stockholders' equity to total assets - GAAP (a/b) | 12.78 | % | 13.36 | % | 13.17 | % | 12.96 | % | 12.61 | % | ||||||||||
Tangible stockholders' equity to tangible assets - Non-GAAP (c/d) | 12.44 | % | 13.01 | % | 12.80 | % | 12.59 | % | 12.24 | % | ||||||||||
Number of shares outstanding (e) | 20,948 | 20,911 | 20,888 | 20,895 | 20,892 | |||||||||||||||
Book value per share - GAAP (a/e) | $ | 34.92 | $ | 34.29 | $ | 33.03 | $ | 32.39 | $ | 31.78 | ||||||||||
Tangible book value per share - Non-GAAP (c/e) | 33.87 | 33.25 | 31.98 | 31.34 | 30.73 | |||||||||||||||
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 of EAs at March 31, 2019. 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
View source version on businesswire.com: https://www.businesswire.com/news/home/20190719005009/en/
Contacts:
Kevin Sipes
Executive Vice President & Chief Financial Officer
(502) 560-8628
