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 second quarter net income of $8.3 million and Diluted Earnings per Class A Common Share of $0.40, both on par with the second quarter of 2015 despite additional noninterest expenses during the quarter resulting from transaction costs associated with the Company’s completion of its Cornerstone Bancorp, Inc. (“Cornerstone”) acquisition on May 17, 2016. Year-to-date net income was $26.1 million, a $4.0 million, or 18%, increase from the same period in 2015, resulting in return on average assets (“ROA”) and return on average equity (“ROE”) of 1.19% and 8.81% for the first six months of 2016.

Steve Trager, Republic’s Chairman and Chief Executive Officer, commented: “While the successful completion of our Cornerstone acquisition highlighted our second quarter, we continued to receive solid contributions from all of our other operating segments. Warehouse Lending, in particular, experienced solid growth with an increase in its quarterly average loans of $121 million from the first quarter of 2016. In addition, our Republic Processing Group (“RPG”) segment experienced positive net income growth in two of its small-dollar loan programs during the quarter. The solid performance of our Company across all of our operating segments continues to give me great optimism for the remainder of 2016 and beyond.”

The following tables highlight Republic’s financial performance for the second quarter and first six months of 2016 compared to the same periods in 2015:

 
dollars in thousands, except per-share data
      Highlights of Financial Performance
Three Months Ended             Six Months Ended        
Jun. 30, 2016     Jun. 30, 2015

$ Change

% ChangeJun. 30, 2016     Jun. 30, 2015

$ Change

% Change
 
Income before income taxes $ 12,699 $ 12,474 $ 225 2 % $ 39,327 $ 33,223 $ 6,104 18 %
Net Income* 8,340 8,320 20 0 % 26,075 22,108 3,967 18 %
Diluted Earnings per Class A Share 0.40 0.40 - 0 % 1.26 1.07 0.19 18 %
ROA 0.77 % 0.85 % NA -9 % 1.19 % 1.12 % NA 6 %
ROE 5.59 % 5.78 % NA -3 % 8.81 % 7.74 % NA 14 %
 
dollars in thousands
Core Banking Net Income by Origination Channel
Three Months Ended Six Months Ended
Segment/Origination ChannelJun. 30, 2016 Jun. 30, 2015

$ Change

% ChangeJun. 30, 2016 Jun. 30, 2015

$ Change

% Change
 
Traditional Banking segment*:
Traditional Network $ 4,986 $ 4,173 $ 813 19 % $ 10,958 $ 9,533 $ 1,425 15 %
Correspondent Lending 200 384 (184 ) -48 % 388 381 7 2 %
2016-Cornerstone Acquisition (330 ) - (330 ) NM (488 ) - (488 ) NM
2012-FDIC-Acquired Loans 353 1,268 (915 ) -72 % 1,265 1,257 8 1 %
Digital Bank Initiative   (249)   -     (249 ) NM   (413)   -     (413 ) NM
Total Traditional Banking segment 4,960 5,825 (865 ) -15 % 11,710 11,171 539 5 %
 
Warehouse Lending segment* 1,622 1,779 (157 ) -9 % 2,846 2,893 (47 ) -2 %
 
Mortgage Banking segment*   332     51     281   551 %   426     186     240   129 %
Total Core Banking* $6,914   $ 7,655   $ (741 ) -10 % $14,982   $ 14,250   $ 732   5 %
 

*See Segment Data in the back of this Earnings Release
NA – Not applicable
NM – Not meaningful

 

Second Quarter Impact of the Company’s Cornerstone Acquisition

As previously noted, the Company completed its acquisition of Cornerstone on May 17, 2016. As a result of the completion of the merger, the Company incurred pre-tax charges during the quarter totaling $704,000 for conversion-related expenses, professional fees and compensation-related expenses for Cornerstone employees acquired as part of the acquisition. As expected, the Cornerstone acquisition contributed a net after-tax loss of $330,000 to the Company’s operating results for the second quarter of 2016 as a consequence of these day-one expenses. Net income from the Cornerstone acquisition is expected to be accretive to the Company’s overall operating results on a quarterly basis going forward, as well as cumulatively for its first twelve months of operations post-acquisition.

Results of Operations for the Second Quarter of 2016 Compared to the Second Quarter of 2015

Core Bank(1) – Net income from Core Banking was $6.9 million for the second quarter of 2016, a decrease of $741,000, or 10%, from the second quarter of 2015. Comparability between the two quarters was impacted by the previously mentioned acquisition of Cornerstone and a $1.1 million reduction in loan accretion income from the second quarter of 2015, which resulted from continued paydowns and payoffs in the Company’s loan portfolios obtained through its 2012-FDIC assisted transactions.

Net interest income at the Core Bank increased to $33.4 million during the second quarter of 2016, a $2.8 million, or 9%, increase over the second quarter of 2015. The overall change in the Core Bank's net interest income for the second quarter of 2016 is further segmented by its origination channels in the table below:

 
      Net Interest     Net Interest        
Income Income
(in thousands)

2nd Quarter

 2nd Quarter $ %
Origination Channel       2016     2015     Change     Change
 
Traditional Network $ 27,715 $ 25,265 $ 2,450 10 %
Warehouse Lending 3,790 3,505 285 8 %
Correspondent Lending 426 171 255 149 %
2016-Cornerstone Acquisition 931 - 931 NM
2012-FDIC Acquired Loans   505   1,620   (1,115 ) -69 %
Total Core Bank Net Interest Income $33,367 $ 30,561 $ 2,806   9 %
 

NM – Not meaningful

 

The increase in net interest income was primarily the result of a $290 million, or 9%, year-over-year increase in the Core Bank’s quarterly average loans from the second quarter of 2015 to the second quarter of 2016. The strong growth in average loans outstanding more than offset the negative impact to the Core Bank’s net interest income resulting from a decrease of three basis points to its net interest margin from the second quarter of 2015 to the second quarter of 2016.

The overall change in the Core Bank’s average loan balances by origination channel is presented below:

 
      Average     Average        
Quarterly Quarterly
(in thousands) Loans Loans $ %
Origination Channel       Jun. 30, 2016     Jun. 30, 2015     Change     Change
 
Traditional Network $ 2,698,166 $ 2,510,706 $ 187,460 7 %
Warehouse Lending 413,135 396,934 16,201 4 %
Correspondent Lending 239,221 234,411 4,810 2 %
2016-Cornerstone Acquisition 93,914 - 93,914 NM
2012-FDIC Acquired Loans   20,879   33,247   (12,368 ) -37 %
Total Core Bank Loans $3,465,315 $ 3,175,298 $ 290,017   9 %
 

NM – Not meaningful

 

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 second quarter of 2016 as compared to the second quarter of 2015:

  • The Core Bank’s Traditional Network experienced solid overall loan growth, with particularly strong growth in the quarterly average balance from the second quarter of 2015 to the second quarter of 2016 for the following portfolios: $64 million in Commercial Real Estate (“CRE”); $56 million in Commercial & Industrial (“C&I”); $41 million in Home Equity Lines of Credit (“HELOCs”); and $18 million in Indirect Auto. Growth in the commercial-related categories was primarily driven by a strong 2015 production year from the Core Bank’s Commercial and Corporate Banking Department. Year-over-year growth in HELOCs was driven primarily by a successful first-year-introductory-rate promotion, while growth in Indirect Auto loans was driven by the Company’s Dealer Services Department.
  • Within the Warehouse Lending (“Warehouse”) segment, net interest income remained solid when compared to the second quarter of 2015, as usage of Warehouse lines of credit remained relatively high among the Core Bank’s clients during the quarter. Average Warehouse loan balances for the second quarter of 2016 were $413 million, a $16 million increase from a strong second quarter of 2015. The yield for Warehouse lines of credit during the second quarter of 2016 increased 28 basis points from the same period in 2015, as Warehouse yields were positively impacted by an increase in short-term interest rates.
  • While the Core Bank’s average balance of correspondent loans increased only $5 million from the second quarter of 2015, its period-end balances within this portfolio decreased $87 million. The decrease in the period-end balances for correspondent loans resulted primarily from a reclassification of $74 million of these loans into the held-for-sale category, as management decided in late June to sell a portion of this portfolio in order to further enhance its overall liquidity position. The Company expects the sale to close in late July 2016.
  • With the Company’s Cornerstone mid-quarter acquisition occurring as of the close of business on May 17, 2016, the Core Bank benefitted from 44 days of net interest income from the acquired Cornerstone assets and liabilities.
  • The Core Bank’s 2012 FDIC-assisted transactions, as expected, contributed $1.1 million less in net interest income during the second quarter of 2016 compared to the same period in 2015, partially offsetting the positive variances noted above. Overall, accretion income from the 2012 FDIC-assisted transactions contributed only two basis points to the Core Bank’s net interest margin during the second quarter of 2016 compared to 14 basis points for the same period in 2015.

The Core Bank’s provision for loan and lease losses remained favorably low for the second quarter of 2016. Provision expense for the second quarter of 2016 included one notable provision of $330,000 associated with one C&I relationship. The remaining provision expense for the second quarter of 2016 and 2015 primarily represented an increase in general loss reserves, driven by the growth in the Core Bank’s loan portfolio during the respective quarters.

The table below illustrates the Core Bank’s well-regarded credit quality ratios for the most recent quarter ends and the previous three calendar year ends:

 
      As of and for the:
Quarter Ending:     Year Ending:
           
Core Banking Credit Quality RatiosJun. 30, 2016Mar. 31, 2016 Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2013
 
Nonperforming loans to total loans 0.54 % 0.60 % 0.66 % 0.78 % 0.81 %
 
Nonperforming assets to total loans (including OREO) 0.58 % 0.63 % 0.70 % 1.15 % 1.47 %
 
Delinquent loans to total loans 0.28 % 0.25 % 0.35 % 0.52 % 0.63 %
 
Net charge-offs to average loans 0.05 % 0.04 % 0.05 % 0.08 % 0.18 %
(Annualized as of 6/30/16 and 3/31/16)
 
OREO = Other Real Estate Owned
 

Noninterest income for the Core Bank was $8.0 million during the second quarter of 2016 compared to $7.2 million for the second quarter of 2015. Impacting the Core Bank’s noninterest income comparisons between the second quarters of 2016 and 2015 were the following:

  • Mortgage banking income increased $336,000 due to an increase in home-purchase loans combined with a rise in refinance activity. Such refinance activity resulted from a downturn in long-term interest rates and the subsequent increase in customer demand for long-term fixed rate loan products. As a result, secondary-market loan originations increased from $50 million during the second quarter of 2015 to $59 million for the second quarter of 2016.
  • Interchange fees increased $351,000, primarily due to an increase in debit-card interchange revenue. The higher revenue for debit card related transactions was primarily the result of growth in retail checking accounts and an increase in customer use of signature-based transactions, which grew 23% on a quarter-over-quarter basis.
  • Net gains (losses) on other real estate owned (“OREO”) improved $235,000, as the Bank’s OREO required no mark-to-market charges during the second quarter of 2016 compared to $220,000 in such charges during the same period in 2015.

Core Bank noninterest expenses increased $3.9 million, or 15%, from the second quarter of 2015 to the same period in 2016. The increase was primarily due to higher salary expense, as the Core Bank, excluding the acquired Cornerstone employees, added 76 additional full-time equivalent employees over the previous 12 months. Additionally, as previously discussed, the Core Bank incurred approximately $704,000 in pre-tax transaction-related expenses for its Cornerstone acquisition.

Republic Processing Group (“RPG”)

RPG recorded net income of $1.4 million for the second quarter of 2016 compared to net income of $665,000 during the second quarter of 2015. A notable part of this increase was from a rise in net income associated with RPG’s Republic Credit Solutions (“RCS”) small-dollar loan division, which contributed a net loss to RPG of $142,000 during the second quarter of 2015, as compared to net income of $962,000 during the second quarter of 2016. The increased profitability within the RCS division resulted primarily from a $59 million increase in small-dollar loan origination volume for the quarter, which generated a solid increase in fee income as the majority of these loans were sold subsequent to origination. In addition, the balances for the loans retained by RPG, generating an on-going spread, increased from $6 million at June 30, 2015 to $12 million at June 30, 2016. Loan balances are expected to increase modestly as RPG continues to prudently grow its overall small dollar program.

Conclusion

“As we enter the second half of 2016, we are excited about the many initiatives that we have on-going at the Company. Front and center of these initiatives is the rollout of our new, separately-branded, digital banking platform, which remains on schedule to launch in the fall. We plan to use this new platform to complement our existing brick-and-mortar locations, and if successful, expand our deposit reach over the long term. Other notable initiatives for the remainder of 2016 include:

  • The completion of our core systems’ merger with Cornerstone’s legacy systems on July 22nd, which should allow us to capitalize on the operational synergies of the transaction;
  • The relocation of our Cincinnati, Ohio, banking center to a larger, more prominent facility; and
  • The rollout of our new Dealer Floor Plan Lending platform, to further diversify our loan product mix and further complement our Indirect Auto Lending platform.

We continue to be excited about these and all opportunities available to us as a nimble and well-capitalized, $4.6 billion bank. We look forward to finishing the year strong, as we remain steadfast in our desire to provide great value to our customers and shareholders,” concluded Trager.

Republic Bancorp, Inc. (the “Company”) is the parent company of Republic Bank & Trust Company (the “Bank”). The Bank currently has 44 banking centers: 32 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 – Largo, Port Richey, St. Petersburg, Seminole, Temple Terrace; two banking centers in Tennessee – Cool Springs (Franklin) and Green Hills (Nashville); and one banking center in Blue Ash (Cincinnati), Ohio. The Bank offers internet banking at www.republicbank.com. The Company has $4.6 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 the following: our current expectations and assumptions regarding our business; changes in interest rates; the ability to develop products and strategies in order to meet the Company’s long-term strategic goals; the ability of the Company to integrate acquired operations, including obtaining synergies, integration objectives and anticipated timelines; the ability to close on future acquisitions; the overall 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 the 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. Important factors that could cause actual results to differ materially from those in the forward-looking statements include the actual timing, magnitude and frequency of interest rate changes, as well as the actual changes in market conditions and the application and timing of various management strategies as compared to those projected in our interest rate model. Additionally, actual results could differ materially from the interest rate model if interest rates do not move equally across all points on the yield curve and based upon other 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, 2015. 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 2016 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, 2016 Dec. 31, 2015 Jun. 30, 2015
Assets:
Cash and cash equivalents $ 142,979 $ 210,082 $ 92,766
Investment securities 551,027 555,785 499,682
Loans held for sale 94,658 4,597 11,819
Loans 3,691,323 3,326,610 3,323,977
Allowance for loan and lease losses   (29,308 )   (27,491 )   (25,248 )
Loans, net 3,662,015 3,299,119 3,298,729
Federal Home Loan Bank stock, at cost 28,208 28,208 28,208
Premises and equipment, net 42,956 31,106 33,560
Goodwill 16,313 10,168 10,168
Other real estate owned ("OREO") 1,503 1,220 2,920
Bank owned life insurance ("BOLI") 60,986 52,817 52,117
Other assets and accrued interest receivable   46,277     37,187     36,250  
Total assets $ 4,646,922   $ 4,230,289   $ 4,066,219  
 
Liabilities and Stockholders' Equity:
Deposits:
Noninterest-bearing $ 867,095 $ 634,863 $ 598,572
Interest-bearing   1,988,952     1,852,614     1,681,038  
Total deposits 2,856,047 2,487,477 2,279,610
 
Securities sold under agreements to repurchase and other short-term borrowings 126,124 395,433 229,825
Federal Home Loan Bank advances 987,500 699,500 916,500
Subordinated note 45,364 41,240 41,240
Other liabilities and accrued interest payable   36,864     30,092     26,072  
Total liabilities 4,051,899 3,653,742 3,493,247
 
Stockholders' equity   595,023     576,547     572,972  
Total liabilities and Stockholders' equity $ 4,646,922   $ 4,230,289   $ 4,066,219  
 
Average Balance Sheet Data
      Three Months Ended Jun. 30,     Six Months Ended Jun. 30,
2016     2015 2016     2015
Assets:
Investment securities, including FHLB stock $ 579,027 $ 531,402 $ 580,448 $ 528,161
Federal funds sold and other interest-earning deposits 95,204 32,300 197,664 86,933
Loans and fees, including loans held for sale 3,479,397 3,180,127 3,386,255 3,105,014
Total interest-earning assets 4,153,628 3,743,829 4,164,367 3,720,108
Total assets 4,351,843 3,925,312 4,394,343 3,934,868
 
Liabilities and Stockholders' Equity:
Noninterest-bearing deposits $ 805,718 $ 601,371 $ 861,204 $ 660,150
Interest-bearing deposits 1,980,310 1,703,982 1,942,014 1,670,168

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

267,574 335,530 337,636 363,321
Federal Home Loan Bank advances 627,335 646,737 589,709 607,554
Subordinated note 43,234 41,240 42,237 41,240
Total interest-bearing liabilities 2,918,453 2,727,489 2,911,596 2,682,283
Stockholders' equity 596,795 575,653 592,194 571,600

 
 
 

Republic Bancorp, Inc. Financial Information
Second Quarter 2016 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,
2016     2015 2016     2015
 
Total interest income(2) $ 40,140 $ 35,722 $ 84,155 $ 69,483
Total interest expense   4,563   4,664     9,144   9,403  
 
Net interest income 35,577 31,058 75,011 60,080
 
Provision for loan and lease losses 1,814 904 7,000 1,089
 
Noninterest income:
Service charges on deposit accounts 3,282 3,247 6,422 6,286
Net refund transfer fees 1,909 1,907 18,987 17,242
Mortgage banking income 1,560 1,224 2,821 2,577
Interchange fee income 2,217 2,044 4,340 4,238
Republic Processing Group program fees 664 169 963 397
Gain on call of security available for sale - 88 - 88
Net gains (losses) on OREO 80 (155 ) 328 (274 )
Increase in cash surrender value of BOLI 369 353 708 702
Other   721   608     1,154   1,215  
Total noninterest income   10,802   9,485     35,723   32,471  
 
Noninterest expenses:
Salaries and employee benefits 17,814 14,323 34,897 29,600
Occupancy and equipment, net 5,109 5,142 10,528 10,343
Communication and transportation 872 771 1,945 1,817
Marketing and development 1,190 977 1,697 1,562
FDIC insurance expense 480 474 1,138 1,148
Bank franchise tax expense 647 847 3,098 3,248
Data processing 1,543 1,092 2,876 2,058
Interchange related expense 1,047 931 1,951 1,938
Supplies 240 219 689 580
OREO expense 116 120 196 339
Legal and professional fees 604 528 1,427 2,143
Other   2,204   1,741     3,965   3,463  
Total noninterest expenses   31,866   27,165     64,407   58,239  
 
Income before income tax expense 12,699 12,474 39,327 33,223
Income tax expense   4,359   4,154     13,252   11,115  
 
Net income $ 8,340 $ 8,320   $ 26,075 $ 22,108  

 
 
 

Republic Bancorp, Inc. Financial Information
Second Quarter 2016 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 Statistics
      As of and for the     As of and for the
Three Months Ended Jun. 30, Six Months Ended Jun. 30,
2016     2015 2016     2015
Per Share Data:
 
Basic average shares outstanding 20,947 20,860 20,956 20,859
Diluted average shares outstanding 20,958 20,941 20,966 20,939
 
End of period shares outstanding:
Class A Common Stock 18,617 18,602 18,617 18,602
Class B Common Stock 2,245 2,245 2,245 2,245
 
Book value per share(3) $ 28.52 $ 27.48 $ 28.52 $ 27.48
Tangible book value per share(3) 27.44 26.76 27.44 26.76
 
Earnings per share:
Basic earnings per Class A Common Stock $ 0.40 $ 0.40 $ 1.26 $ 1.07
Basic earnings per Class B Common Stock 0.37 0.37 1.14 0.97
Diluted earnings per Class A Common Stock 0.40 0.40 1.26 1.07
Diluted earnings per Class B Common Stock 0.37 0.36 1.14 0.97
 
Cash dividends declared per share:
Class A Common Stock $ 0.209 $ 0.198 $ 0.407 $ 0.385
Class B Common Stock 0.190 0.180 0.370 0.350
 
Performance Ratios:
 
Return on average assets 0.77 % 0.85 % 1.19 % 1.12 %
Return on average equity 5.59 5.78 8.81 7.74
Efficiency ratio(4) 69 67 58 63
Yield on average interest-earning assets 3.87 3.82 4.04 3.74
Cost of interest-bearing liabilities 0.63 0.68 0.63 0.70
Cost of deposits(5) 0.19 0.18 0.20 0.19
Net interest spread 3.24 3.14 3.41 3.04
Net interest margin - Total Company 3.43 3.32 3.60 3.23
Net interest margin - Core Bank(1) 3.28 3.31 3.19 3.25
 
Other Information:
 
End of period FTEs(6) - Total Company 883 751 883 751
End of period FTEs(6) - Core Bank 818 699 818 699
Number of banking centers 44 40 44 40

 
 
 

Republic Bancorp, Inc. Financial Information
Second Quarter 2016 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 Statistics       As of and for the     As of and for the
Three Months Ended Jun. 30, Six Months Ended Jun. 30,
2016     2015 2016     2015
Credit Quality Asset Balances:
 
Loans on nonaccrual status $ 18,778 $ 24,624 $ 18,778 $ 24,624
Loans past due 90-days-or-more and still on accrual   1,178     -     1,178     -  
Total nonperforming loans 19,956 24,624 19,956 24,624
OREO   1,503     2,920     1,503     2,920  
Total nonperforming assets $ 21,459   $ 27,544   $ 21,459   $ 27,544  
Total delinquent loans $ 10,607 $ 11,355 $ 10,607 $ 11,355
 
 
Credit Quality Ratios - Total Company:
 
Nonperforming loans to total loans 0.54 % 0.74 % 0.54 % 0.74 %
Nonperforming assets to total loans (including OREO) 0.58 0.83 0.58 0.83
Nonperforming assets to total assets 0.46 0.68 0.46 0.68
Allowance for loan and lease losses to total loans 0.79 0.76 0.79 0.76
Allowance for loan and lease losses to nonperforming loans 147 103 147 103
Delinquent loans to total loans(7) 0.29 0.34 0.29 0.34
Net charge-offs to average loans (annualized) 0.46 0.04 0.31 0.02
 
Credit Quality Ratios - Core Bank(1):
 
Nonperforming loans to total loans 0.54 % 0.74 % 0.54 % 0.74 %
Nonperforming assets to total loans (including OREO) 0.58 0.83 0.58 0.83
Nonperforming assets to total assets 0.47 0.68 0.47 0.68
Allowance for loan and lease losses to total loans 0.73 0.75 0.73 0.75
Allowance for loan and lease losses to nonperforming loans 135 102 135 102
Delinquent loans to total loans(7) 0.28 0.34 0.28 0.34
Net charge-offs to average loans (annualized) 0.05 0.04 0.04 0.03

 
 
 

Republic Bancorp, Inc. Financial Information
Second Quarter 2016 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, 2016 Mar. 31, 2016 Dec. 31, 2015 Sept. 30, 2015 Jun. 30, 2015
Assets:
Cash and cash equivalents $ 142,979 $ 198,172 $ 210,082 $ 90,731 $ 92,766
Investment securities 551,027 556,605 555,785 502,599 499,682
Loans held for sale 94,658 8,129 4,597 12,326 11,819
Loans 3,691,323 3,351,969 3,326,610 3,297,874 3,323,977
Allowance for loan and lease losses   (29,308 )   (31,475 )   (27,491 )   (26,959 )   (25,248 )
Loans, net 3,662,015 3,320,494 3,299,119 3,270,915 3,298,729
Federal Home Loan Bank stock, at cost 28,208 28,208 28,208 28,208 28,208
Premises and equipment, net 42,956 30,277 31,106 31,095 33,560
Goodwill 16,313 10,168 10,168 10,168 10,168
Other real estate owned 1,503 1,280 1,220 2,832 2,920
Bank owned life insurance 60,986 53,156 52,817 52,465 52,117
Other assets and accrued interest receivable   46,277     40,276     37,187     34,638     36,250  
Total assets $ 4,646,922   $ 4,246,765   $ 4,230,289   $ 4,035,977   $ 4,066,219  
 
Liabilities and Stockholders' Equity:
Deposits:
Noninterest-bearing $ 867,095 $ 800,946 $ 634,863 $ 637,875 $ 598,572
Interest-bearing   1,988,952     1,935,700     1,852,614     1,729,955     1,681,038  
Total deposits 2,856,047 2,736,646 2,487,477 2,367,830 2,279,610
 

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

126,124 319,893 395,433 309,624 229,825
Federal Home Loan Bank advances 987,500 517,500 699,500 711,500 916,500
Subordinated note 45,364 41,240 41,240 41,240 41,240
Other liabilities and accrued interest payable   36,864     39,929     30,092     31,071     26,072  
Total liabilities 4,051,899 3,655,208 3,653,742 3,461,265 3,493,247
 
Stockholders' equity   595,023     591,557     576,547     574,712     572,972  
Total liabilities and Stockholders' equity $ 4,646,922   $ 4,246,765   $ 4,230,289   $ 4,035,977   $ 4,066,219  
 
 
 
Average Balance Sheet Data
Quarterly Comparison
Jun. 30, 2016 Mar. 31, 2016 Dec. 31, 2015 Sept. 30, 2015 Jun. 30, 2015
Assets:
Investment securities, including FHLB stock $ 579,027 $ 581,869 $ 595,739 $ 533,956 $ 531,402
Federal funds sold and other interest-earning deposits 95,204 298,250 71,480 30,633 32,300
Loans and fees, including loans held for sale 3,479,397 3,292,689 3,249,595 3,235,057 3,180,127
Total interest-earning assets 4,153,628 4,172,808 3,916,814 3,799,646 3,743,829
Total assets 4,351,843 4,436,843 4,088,016 3,971,501 3,925,312
 
Liabilities and Stockholders' Equity:
Noninterest-bearing deposits $ 805,718 $ 916,691 $ 675,500 $ 609,641 $ 601,371
Interest-bearing deposits 1,980,310 1,903,721 1,774,526 1,740,553 1,703,982

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

267,574 407,698 426,833 363,905 335,530
Federal Home Loan Bank advances 627,335 552,082 567,163 616,509 646,737
Subordinated note 43,234 41,240 41,240 41,240 41,240
Total interest-bearing liabilities 2,918,453 2,904,741 2,809,762 2,762,207 2,727,489
Stockholders' equity 596,795 587,593 578,573 577,185 575,653

 
 
 

Republic Bancorp, Inc. Financial Information
Second Quarter 2016 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, 2016     Mar. 31, 2016     Dec. 31, 2015     Sept. 30, 2015     Jun. 30, 2015
 
Total interest income(2) $ 40,140 $ 44,015 $ 36,842 $ 36,107 $ 35,722
Total interest expense   4,563   4,581   4,376     4,683     4,664  
Net interest income 35,577 39,434 32,466 31,424 31,058
 
Provision for loan and lease losses 1,814 5,186 2,074 2,233 904
 
Noninterest income:
Service charges on deposit accounts 3,282 3,140 3,330 3,399 3,247
Net refund transfer fees 1,909 17,078 49 97 1,907
Mortgage banking income 1,560 1,261 862 972 1,224
Interchange fee income 2,217 2,123 2,148 1,967 2,044
Republic Processing Group program fees 664 319 329 474 169
Gain on call of security available for sale - - - - 88
Net gains (losses) on OREO 80 248 (19 ) (8 ) (155 )
Increase in cash surrender value of BOLI 369 339 353 348 353
Other   721   413   665     557     608  
Total noninterest income   10,802   24,921   7,717     7,806     9,485  
 
Noninterest expenses:
Salaries and employee benefits 17,814 17,083 13,194 15,297 14,323
Occupancy and equipment, net 5,109 5,419 5,129 5,217 5,142
Communication and transportation 872 1,073 984 951 771
Marketing and development 1,190 507 843 756 977
FDIC insurance expense 480 658 462 474 474
Bank franchise tax expense 647 2,451 640 846 847
Data processing 1,543 1,333 1,323 959 1,092
Interchange related expense 1,047 904 1,026 909 931
Supplies 240 449 292 229 219
OREO expense 116 80 250 146 120
Legal and professional fees 604 823 510 653 528
Other   2,204   1,761   2,194     1,801     1,741  
Total noninterest expenses   31,866   32,541   26,847     28,238     27,165  
 
Income before income tax expense 12,699 26,628 11,262 8,759 12,474
Income tax expense   4,359   8,893   3,844     3,119     4,154  
 
Net income $ 8,340 $ 17,735 $ 7,418   $ 5,640   $ 8,320  

 
 
 

Republic Bancorp, Inc. Financial Information
Second Quarter 2016 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 Statistics
      As of and for the Three Months Ended
Jun. 30, 2016     Mar. 31, 2016     Dec. 31, 2015     Sept. 30, 2015     Jun. 30, 2015
Per Share Data:
 
Basic average shares outstanding 20,947 20,904 20,876 20,848 20,860
Diluted average shares outstanding 20,958 21,009 20,953 20,934 20,941
 
End of period shares outstanding:
Class A Common Stock 18,617 18,659 18,652 18,603 18,602
Class B Common Stock 2,245 2,245 2,245 2,245 2,245
 
Book value per share(3) $ 28.52 $ 28.30 $ 27.59 $ 27.57 $ 27.48
Tangible book value per share(3) 27.44 27.58 26.87 26.84 26.76
 
Earnings per share:
Basic earnings per Class A Common Stock $ 0.40 $ 0.86 $ 0.36 $ 0.27 $ 0.40
Basic earnings per Class B Common Stock 0.37 0.78 0.33 0.25 0.37
Diluted earnings per Class A Common Stock 0.40 0.85 0.36 0.27 0.40
Diluted earnings per Class B Common Stock 0.37 0.77 0.33 0.25 0.36
 
Cash dividends declared per share:
Class A Common Stock $ 0.209 $ 0.198 $ 0.198 $ 0.198 $ 0.198
Class B Common Stock 0.190 0.180 0.180 0.180 0.180
 
Performance Ratios:
 
Return on average assets 0.77 % 1.60 % 0.73 % 0.57 % 0.85 %
Return on average equity 5.59 12.07 5.13 3.91 5.78
Efficiency ratio(4) 69 51 67 72 67
Yield on average interest-earning assets 3.87 4.22 3.76 3.80 3.82
Cost of interest-bearing liabilities 0.63 0.63 0.62 0.68 0.68
Cost of deposits(5) 0.19 0.20 0.19 0.18 0.18
Net interest spread 3.24 3.59 3.14 3.12 3.14
Net interest margin - Total Company 3.43 3.78 3.32 3.31 3.32
Net interest margin - Core Bank(1) 3.28 3.12 3.17 3.29 3.31
 
Other Information:
 
End of period FTEs(6) - Total Company 883 817 785 769 751
End of period FTEs(6) - Core Bank 818 756 726 712 699
Number of banking centers 44 40 40 40 40

 
 
 

Republic Bancorp, Inc. Financial Information
Second Quarter 2016 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 Statistics
      As of and for the Three Months Ended
Jun. 30, 2016     Mar. 31, 2016     Dec. 31, 2015     Sept. 30, 2015     Jun. 30, 2015
Credit Quality Asset Balances:
 
Loans on nonaccrual status $ 18,778 $ 19,907 $ 21,712 $ 23,143 $ 24,624
Loans past due 90-days-or-more and still on accrual   1,178     -     224     43     -  
Total nonperforming loans 19,956 19,907 21,936 23,186 24,624
OREO   1,503     1,280     1,220     2,832     2,920  
Total nonperforming assets $ 21,459   $ 21,187   $ 23,156   $ 26,018   $ 27,544  
Total delinquent loans $ 10,607 $ 8,657 $ 11,731 $ 11,996 $ 11,355
 
 
Credit Quality Ratios - Total Company:
 
Nonperforming loans to total loans 0.54 % 0.59 % 0.66 % 0.70 % 0.74 %
Nonperforming assets to total loans (including OREO) 0.58 0.63 0.70 0.79 0.83
Nonperforming assets to total assets 0.46 0.50 0.55 0.64 0.68
Allowance for loan and lease losses to total loans 0.79 0.94 0.83 0.82 0.76
Allowance for loan and lease losses to nonperforming loans 147 158 125 116 103
Delinquent loans to total loans(7) 0.29 0.26 0.35 0.36 0.34
Net charge-offs to average loans (annualized) 0.46 0.15 0.19 0.06 0.04
 
Credit Quality Ratios - Core Bank(1):
 
Nonperforming loans to total loans 0.54 % 0.60 % 0.66 % 0.70 % 0.74 %
Nonperforming assets to total loans (including OREO) 0.58 0.63 0.70 0.79 0.83
Nonperforming assets to total assets 0.47 0.51 0.55 0.65 0.68
Allowance for loan and lease losses to total loans 0.73 0.78 0.78 0.78 0.75
Allowance for loan and lease losses to nonperforming loans 135 131 117 111 102
Delinquent loans to total loans(7) 0.28 0.25 0.35 0.36 0.34
Net charge-offs to average loans (annualized) 0.05 0.04 0.10 0.05 0.04
 
 
 

Republic Bancorp, Inc. Financial Information
Second Quarter 2016 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 customers are similar.

As of June 30, 2016, the Company was divided into four distinct operating segments: Traditional Banking, Warehouse Lending (“Warehouse”), Mortgage Banking and Republic Processing Group (“RPG”). Management considers the first three segments to collectively constitute “Core Bank” or “Core Banking” activities. Correspondent Lending operations are considered part of the Traditional Banking segment. The RPG segment includes the following divisions: Tax Refund Solutions (“TRS”), Republic Payment Solutions (“RPS”) and Republic Credit Solutions (“RCS”). TRS generates the majority of RPG’s income, with the relatively smaller divisions of RPG, RPS and RCS, considered immaterial for separate and independent segment reporting. All divisions of the RPG segment operate through the Bank.

The nature of segment operations and the primary drivers of net revenues by reportable segment are provided below:

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

primarily to clients outside of its market

footprint via its Internet and Correspondent

Lending delivery channels.

Loans, investments and deposits
Warehouse Lending

Provides short-term, revolving credit

facilities to mortgage bankers across the

Nation.

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 its market footprint.

                    Loan sales and servicing
Republic Processing Group

The TRS division facilitates the receipt and

payment of federal and state tax refund

products. The RPS division offers general

purpose reloadable cards. The RCS

division offers short-term credit products.

RPG products are primarily provided to

clients outside of the Bank’s market

footprint.

Refund transfers and 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 2015 Annual Report on Form 10-K. Segment performance is evaluated using operating income. Goodwill is not allocated. 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
Second Quarter 2016 Earnings Release (continued)

 

Segment information for the three and six months ended June 30, 2016 and 2015 follows:

 
      Three Months Ended June 30, 2016
Core Banking        
(dollars in thousands)      

Traditional

Banking

   

Warehouse

Lending

   

Mortgage

Banking

   

Total Core

Banking

    

Republic

Processing

Group

   

Total

Company

           
Net interest income $ 29,537 $ 3,790 $ 40 $ 33,367 $ 2,210 $ 35,577
 
Provision for loan and lease losses 798 480 - 1,278 536 1,814
 
Net refund transfer fees - - - - 1,909 1,909
Mortgage banking income - - 1,560 1,560 - 1,560
Republic Processing Group program fees - - - - 644 644
Other noninterest income   6,371     5     63   6,439     250   6,689  
Total noninterest income 6,371 5 1,623 7,999 2,803 10,802
 
Total noninterest expenses   27,737     735     1,152   29,624     2,242   31,866  
 
Income before income tax expense 7,373 2,580 511 10,464 2,235 12,699
Income tax expense   2,413     958     179   3,550     809   4,359  
Net income $ 4,960   $ 1,622   $ 332$6,914   $ 1,426$8,340  
 
Segment end-of-period assets $ 3,989,769 $ 585,441 $ 18,133 $ 4,593,343 $ 53,579 $ 4,646,922
 
Net interest margin 3.23 % 3.67 % NM 3.28 % NM 3.43 %
 
 
 
Three Months Ended June 30, 2015
Core Banking
(dollars in thousands)      

Traditional

Banking

   

Warehouse

Lending

   

Mortgage

Banking

   

Total Core

Banking

    

Republic

Processing

Group

   

Total

Company

 
Net interest income $ 26,999 $ 3,505 $ 57 $ 30,561 $ 497 $ 31,058
 
Provision for loan and lease losses 553 164 - 717 187 904
 
Net refund transfer fees - - - - 1,907 1,907
Mortgage banking income - - 1,224 1,224 - 1,224
Republic Processing Group program fees - - - - 169 169
Gain on call of security available for sale 88 - - 88 - 88
Other noninterest income   5,774     6     71   5,851     246   6,097  
Total noninterest income 5,862 6 1,295 7,163 2,322 9,485
 
Total noninterest expenses   23,835     610     1,274   25,719     1,446   27,165  
 
Income before income tax expense 8,473 2,737 78 11,288 1,186 12,474
Income tax expense   2,648     958     27   3,633     521   4,154  
Net income $ 5,825   $ 1,779   $ 51$7,655   $ 665$8,320  
 
Segment end-of-period assets $ 3,520,996 $ 488,356 $ 15,635 $ 4,024,987 $ 41,232 $ 4,066,219
 
Net interest margin 3.28 % 3.53 % NM 3.31 % NM 3.32 %

 
 
 
 
 
 
 

Republic Bancorp, Inc. Financial Information
Second Quarter 2016 Earnings Release (continued)

 
      Six Months Ended June 30, 2016
Core Banking        
(dollars in thousands)      

Traditional

Banking

   

Warehouse

Lending

   

Mortgage

Banking

   

Total Core

Banking

    

Republic

Processing

Group

   

Total

Company

           
Net interest income $ 58,145 $ 6,445 $ 72 $ 64,662 $ 10,349 $ 75,011
 
Provision for loan and lease losses 1,278 498 - 1,776 5,224 7,000
 
Net refund transfer fees - - - - 18,987 18,987
Mortgage banking income - - 2,821 2,821 - 2,821
Republic Processing Group program fees - - - - 963 963
Other noninterest income   12,481     10     155   12,646     306     12,952  
Total noninterest income 12,481 10 2,976 15,467 20,256 35,723
 
Total noninterest expenses   52,612     1,430     2,392   56,434     7,973     64,407  
 
Income before income tax expense 16,736 4,527 656 21,919 17,408 39,327
Income tax expense   5,026     1,681     230   6,937     6,315     13,252  
Net income $ 11,710   $ 2,846   $ 426$14,982   $ 11,093   $26,075  
 
Segment end-of-period assets $ 3,989,769 $ 585,441 $ 18,133 $ 4,593,343 $ 53,579 $ 4,646,922
 
Net interest margin 3.15 % 3.65 % NM 3.19 % NM 3.60 %
 
 
 
Six Months Ended June 30, 2015
Core Banking
(dollars in thousands)      

Traditional

Banking

   

Warehouse

Lending

   

Mortgage

Banking

   

Total Core

Banking

    

Republic

Processing

Group

   

Total

Company

 
Net interest income $ 52,757 $ 6,046 $ 113 $ 58,916 $ 1,164 $ 60,080
 
Provision for loan and lease losses 669 423 - 1,092 (3 ) 1,089
 
Net refund transfer fees - - - - 17,242 17,242
Mortgage banking income - - 2,577 2,577 - 2,577
Republic Processing Group program fees - - - - 397 397
Gain on call of security available for sale 88 - - 88 - 88
Other noninterest income   11,171     11     155   11,337     830     12,167  
Total noninterest income 11,259 11 2,732 14,002 18,469 32,471
 
Total noninterest expenses   47,242     1,183     2,559   50,984     7,255     58,239  
 
Income before income tax expense 16,105 4,451 286 20,842 12,381 33,223
Income tax expense   4,934     1,558     100   6,592     4,523     11,115  
Net income $ 11,171   $ 2,893   $ 186$14,250   $ 7,858   $22,108  
 
Segment end-of-period assets $ 3,520,996 $ 488,356 $ 15,635 $ 4,024,987 $ 41,232 $ 4,066,219
 
Net interest margin 3.22 % 3.56 % NM 3.25 % NM 3.23 %
 
 
 
 
 
 

Republic Bancorp, Inc. Financial Information
Second Quarter 2016 Earnings Release (continued)

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

(2) The amount of loan fee income included in total interest income was $3.7 million and $2.9 million for the quarters ended June 30, 2016 and 2015. The amount of loan fee income included in total interest income was $13.5 million and $4.7 million for the six months ended June 30, 2016 and 2015.

The amount of loan fee income included in total interest income per quarter was as follows: $3.7 million (quarter ended June 30, 2016); $9.8 million (quarter ended March 31, 2016); $3.1 million (quarter ended December 31, 2015); $2.5 million (quarter ended September 30, 2015); and $2.9 million (quarter ended June 30, 2015).

(3) 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, 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, 2016     Mar. 31, 2016     Dec. 31, 2015     Sept. 30, 2015     Jun. 30, 2015
Total stockholders' equity (a) $ 595,023 $ 591,557 $ 576,547 $ 574,712 $ 572,972
Less: Goodwill 16,313 10,168 10,168 10,168 10,168
Less: Mortgage servicing rights 4,998 4,891 4,912 4,968 4,971
Less: Core deposit intangible   1,171     -     -     -     -  
Tangible stockholders' equity (c) $ 572,541   $ 576,498   $ 561,467   $ 559,576   $ 557,833  
 
Total assets (b) $ 4,646,922 $ 4,246,765 $ 4,230,289 $ 4,035,977 $ 4,066,219
Less: Goodwill 16,313 10,168 10,168 10,168 10,168
Less: Mortgage servicing rights 4,998 4,891 4,912 4,968 4,971
Less: Core deposit intangible   1,171     -     -     -     -  
Tangible assets (d) $ 4,624,440   $ 4,231,706   $ 4,215,209   $ 4,020,841   $ 4,051,080  
 
Total stockholders' equity to total assets (a/b) 12.80 % 13.93 % 13.63 % 14.24 % 14.09 %
Tangible stockholders' equity to tangible assets (c/d) 12.38 % 13.62 % 13.32 % 13.92 % 13.77 %
 
Number of shares outstanding (e)   20,862     20,904     20,897     20,848     20,847  
 
Book value per share (a/e) $ 28.52 $ 28.30 $ 27.59 $ 27.57 $ 27.48
Tangible book value per share (c/e) 27.44 27.58 26.87 26.84 26.76
 

(4) The efficiency ratio 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.

(5) The cost of deposits ratio equals annualized total interest expense on deposits divided by total average interest-bearing deposits plus total average noninterest-bearing deposits.

(6) FTEs – Full time equivalent employees.

(7) 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.

NM – Not meaningful