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 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, 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 Information
Third 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