Republic Bancorp, Inc. (NASDAQ: RBCAA), headquartered
in Louisville, Kentucky, is the holding company of Republic Bank
& Trust Company (the “Bank”).
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Republic Bancorp, Inc. (“Republic” or the “Company”) reports net
income of $26.7 million for the first quarter of 2020, resulting in
Diluted Earnings per Class A Common Share (“Diluted EPS”) of $1.28,
return on average assets (“ROA”) of 1.90%, and return on average
equity (“ROE”) of 13.71%. Net income was down 10% from the first
quarter of 2019 primarily as a result of an increase in the
Company’s estimated Allowance for Credit Losses in response to the
potential impact of the COVID-19 pandemic.
Steve Trager, Chairman & CEO of Republic commented, “While
we are proud of many of our operating metrics for the quarter,
certainly the last month of the quarter was primarily focused on
the impact of the COVID-19 pandemic and our corporate response to
it. In that regard, our primary focus in response to the pandemic
has been:
(1) safeguarding the health of our associates
and our clients;
(2) cushioning our clients from the
pandemic’s negative economic impact;
(3) mitigating our risk of loss; and
(4) measuring, forecasting and planning for
the negative financial impact of the pandemic on a go-forward
basis.
“With respect to safeguarding of our associates and our clients,
we quickly and successfully enacted a social distancing protocol,
which allowed the substantial majority of our back-office
operations to work from home. For those personnel not able to work
from home, we have physically distanced these associates from each
other within our office space. Within our banking centers, we
changed our in-person client service hours to be by
appointment-only in order to limit the number of people within the
banking centers at any point in time. In addition, we diverted much
of our client service interaction to our drive-thru operations,
with many of our drive-thru transactions facilitated through
interactive teller machines (“ITMs”).
“To help cushion the impact of the pandemic on our deposit
clients, we suspended certain deposit fees for transaction accounts
for a yet-to-be-determined period of time. In addition, we also
began waiving early withdrawal penalties for our term certificates
of deposits (“CDs”) during the crisis so our clients can access
this source of funds at no additional cost. For our consumer and
commercial loan clients, we began offering various payment relief
options depending on the loan program. Perhaps most importantly, we
quickly refocused our salesforce and many of our back-office
operations to facilitate the U.S. Small Business Administration’s
(“SBA”) Paycheck Protection Program (“PPP”). We are extremely proud
of our Company-wide PPP effort, as we were up and running the first
day of the program and accepted over $200 million in applications
for our small business clients during the program’s first
weekend.
“In order to mitigate future risks and uncertainties, we have
increased our communications across the organization. We started
with our Business Continuity Planning team, enacting a
seven-day-a-week daily call with our sales and operational areas to
ensure that everyone is aware of the major issues at hand and that
we are protecting the Company’s assets while providing proper
service and attention to our clients.
“In addition to our daily operational calls, we have added a
second Asset-Liability Committee (“ALCO”) meeting each week to
ensure our liquidity monitoring remains diligent and our loan and
deposit pricing remains appropriate for the current risk
environment. We also took steps during the quarter to fortify our
liquidity position over the near term for any possible
unanticipated cash-flow needs.
“While our regulatory capital currently remains well above “well
capitalized” levels and our asset mix is well diversified and sound
as of March 31, 2020, we are certainly not immune from the inherent
risk in our loan portfolio. As a result, we have made changes to
our overall underwriting matrices, including revisions to many of
our minimum credit score requirements as well as our loan-to-value
maximums for newly underwritten commercial and residential clients.
With the on-going fluidity in the pandemic situation, we will
continue to closely monitor our underwriting standards and make
appropriate revisions as facts and circumstances warrant.
“Finally, we are very early in the process with respect to
measuring, forecasting and planning for the negative financial
impact of the pandemic. As we have previously disclosed, we adopted
the Current Expected Credit Loss (“CECL”) accounting method on
January 1st of this year. Upon adoption, we increased our Allowance
for Credit Losses (“Allowance”) by approximately $6.7 million in
order to account for the expected life-of-loan credit losses within
our portfolio. This increase was offset with a tax-effected
decrease to retained earnings. With the onset of the COVID-19
pandemic, Congress provided companies with an option to delay
adoption of CECL within the recently enacted Coronavirus Aid,
Relief, and Economic Security Act (“CARES” Act). We understand that
the financial impact to the banking industry may not be truly known
for months; however, we chose to move forward with CECL as
previously planned due to the uncertainty around future adoption
later this year. As a result, the Company recorded an additional
$7.2 million charge to its credit loss expense during the first
quarter of 2020 to account for potential losses within the
portfolio brought about by the impact of the pandemic. Our credit
loss expense could be subject to future fluctuations, up and down,
as additional information becomes available about this very
uncertain pandemic situation.
“As it relates to the diversification of our overall loan
portfolio, the following table exhibits our top 20 loan
concentrations by industry as of March 31, 2020,” concluded Steve
Trager.
(dollars in thousands)
Mar. 31, 2020
Industry
Outstanding
Available to Draw
Total Committed
Real Estate Credit (primarily Warehouse
Lines of Credit)
$
854,191
$
319,334
$
1,173,525
Lessors of Nonresidential Buildings
(except Miniwarehouses)
588,503
28,404
616,907
Lessors of Residential Buildings and
Dwellings
440,979
40,953
481,932
Commercial Banking
52,997
34,753
87,750
Hotels (except Casino Hotels) and
Motels
76,665
3,443
80,108
Offices of Physicians (except Mental
Health Specialists)
62,823
16,075
78,898
Limited-Service Restaurants
63,004
596
63,600
Full-Service Restaurants
49,384
4,307
53,691
Used Car Dealers
20,731
19,867
40,598
Religious Organizations
30,125
3,789
33,914
Fitness and Recreational Sports
Centers
30,954
1,455
32,409
Offices of Lawyers
22,558
6,910
29,468
New Housing For-Sale Builders
17,537
7,403
24,940
Lessors of Other Real Estate Property
22,104
1,219
23,323
Offices of Dentists
21,656
1,411
23,067
Line-Haul Railroads
10,816
10,000
20,816
Commercial and Institutional Building
Construction
13,221
7,285
20,506
Elementary and Secondary Schools
16,564
3,454
20,018
Fresh Fruit and Vegetable Merchant
Wholesalers
10,372
9,249
19,621
Legislative Bodies
18,704
—
18,704
Total Top 20 Industry Concentrations
$
2,423,888
$
519,907
$
2,943,795
The following table highlights Republic’s financial performance
for the first quarter of 2020 compared to the first quarter of
2019:
Total Company Financial
Performance Highlights
Three Months Ended Mar.
31,
(dollars in thousands, except per share
data)
2020
2019
$ Change
% Change
Income Before Income Tax Expense*
$
33,578
$
36,976
$
(3,398)
(9)
%
Net Income *
26,697
29,516
(2,819)
(10)
Diluted Earnings per Class A Common
Share
1.28
1.41
(0.13)
(9)
Return on Average Assets
1.90
%
2.16
%
NA
(12)
Return on Average Equity
13.71
16.70
NA
(18)
* Results by reportable segment provided
near the end of this earnings release. NA – Not applicable
Notable first quarter 2020 financial information for the Company
by operating segment follows:
Core Bank(1)
- Traditional Bank net income declined $5.6 million, primarily
due to a $5.4 million increase in credit loss expense driven
largely by economic concerns of the COVID-19 pandemic. The increase
in credit loss expense during the quarter related to the COVID-19
pandemic was partially offset by a large $470,000 loan recovery
during the period, as well as the formula impact of a $60 million
decrease in Traditional Bank spot balances from December 31, 2019
to March 31, 2020.
- Warehouse Lending net income was strong during the first
quarter of 2020, increasing 66% over the first quarter of 2019. As
mortgage rates fell during the first quarter of 2020, a surge in
consumer refinance volume for Warehouse clients drove a 58%
increase in average Warehouse loans for the quarter, which more
than offset a 16-basis point decline in the Warehouse net interest
margin.
- Mortgage banking revenue was $4.8 million for the first quarter
of 2020 compared to $1.5 million for the first quarter of 2019. As
mortgage rates fell during the first quarter of 2020, the Company
experienced strong growth in consumer refinance activity,
particularly within the Company’s relatively new Consumer Direct
channel. Overall, the Company originated $125 million of secondary
market mortgage loans during the first quarter of 2020 compared to
$41 million for the first quarter of 2019.
The following table presents the overall changes in the Core
Bank’s net interest income and net interest margin by reportable
segment:
Net Interest Income
Net Interest Margin
(dollars in thousands)
Three Months Ended Mar.
31,
Three Months Ended Mar.
31,
Reportable Segment
2020
2019
Change
2020
2019
Change
Traditional Banking
$
40,620
$
41,347
$
(727)
3.80
%
3.84
%
(0.04)
%
Warehouse Lending
4,307
2,895
1,412
2.68
2.84
(0.16)
Mortgage Banking*
214
102
112
NM
NM
NM
Core Bank
$
45,141
$
44,344
$
797
3.65
3.76
(0.11)
*Includes loans held for sale NM – Not
meaningful
Republic Processing
Group(2)
- Our seasonal tax business continued to provide its traditional
first quarter lift, with net income from our Tax Refund Solutions
(“TRS”) segment remaining strong at $11.5 million despite a $1.7
million increase in credit loss expense.
- TRS’s credit loss expense for Easy Advance (“EA”) loans was
$15.2 million, or 3.93% of its $387 million in EAs originated
during the first quarter of 2020 compared to credit loss expense of
$13.4 million, or 3.44% of its $389 million of EAs originated
during the first quarter of 2019. The increased credit loss expense
for the first quarter of 2020 was due to slower refund payments
received from the U.S. Treasury for 2020 as compared to 2019. While
the Company is uncertain how much the COVID-19 pandemic contributed
to the slower refund payments for 2020, management believes it has
adequately adjusted its expected loss rate to absorb EA losses
based on information known through the date of this release. EAs
are only originated during the first two months of each year, with
all uncollected EAs charged off by June 30th of each year. EAs
collected during the second half of each year are recorded as
recoveries of previously charged-off loans. TRS’s loss rate as of
June 30, 2019 was 3.45% of total originations and it finished 2019
with an EA loss rate of 2.74% of total EAs originated.
- Net income for our Republic Credit Solutions (“RCS”) grew 38%
over the first quarter of 2019. The increase in net income
primarily reflects a decrease in credit loss expense on RCS’s
line-of-credit product. Credit loss expense for RCS decreased
despite $665,000 of additional reserves during the first quarter of
2020 related to the COVID-19 pandemic, as a decrease in net
charge-offs and a decrease in outstanding balances for its
line-of-credit product drove down credit loss expense.
Republic Bancorp, Inc. (the “Company”) is the parent company of
Republic Bank & Trust Company (the “Bank”). The Bank currently
has 42 full-service banking centers and two loan production offices
throughout five states: 28 banking centers in 8 Kentucky
communities – Covington, Crestview Hills, Florence, Georgetown,
Lexington, Louisville, Shelbyville, and Shepherdsville; three
banking centers in southern Indiana – Floyds Knobs, Jeffersonville,
and New Albany; seven banking centers in six Florida communities
(Tampa MSA) – Largo, New Port Richey, St. Petersburg, Seminole,
Tampa, and Temple Terrace, and one loan production office in
Oldsmar; two banking centers in two Tennessee communities
(Nashville MSA) – Cool Springs and Green Hills, and one loan
production office in Brentwood; and two banking centers in two Ohio
communities (Cincinnati MSA) – Norwood and West Chester. The Bank
offers internet banking at www.republicbank.com. The Bank also
offers separately branded, nation-wide digital banking at
www.mymemorybank.com. The Company has $5.7 billion in assets and is
headquartered in Louisville, Kentucky. The Company’s Class A Common
Stock is listed under the symbol “RBCAA” on the NASDAQ Global
Select Market.
Republic Bank. It’s just easier here. ®
Forward-Looking Statements This press release contains
certain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. The
forward-looking statements in the preceding paragraphs are based on
our current expectations and assumptions regarding our business,
the future impact to our balance sheet and income statement
resulting from changes in interest rates, the yield curve, the
ability to develop products and strategies in order to meet the
Company’s long-term strategic goals, the economy, and other future
conditions, including, but not limited to, the impact of the
COVID-19 pandemic. 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, 2019. The Company
undertakes no obligation to update any forward-looking statements,
except as required by applicable law.
Republic Bancorp, Inc. Financial
Information
First Quarter 2020 Earnings
Release
(all amounts other than per share amounts,
number of employees, and number of banking centers are expressed in
thousands unless otherwise noted)
Balance Sheet Data
Mar. 31, 2020
Dec. 31, 2019
Mar. 31, 2019
Assets:
Cash and cash equivalents
$
316,263
$
385,303
$
345,512
Investment securities, net of allowance
for credit losses (3)
608,330
537,074
498,318
Loans held for sale
54,904
31,468
24,177
Loans
4,515,599
4,433,151
4,298,710
Allowance for credit losses (3)
(70,431)
(43,351)
(57,961)
Loans, net
4,445,168
4,389,800
4,240,749
Federal Home Loan Bank stock, at cost
38,900
30,831
29,965
Premises and equipment, net
44,215
46,196
43,527
Right-of-use assets
34,349
35,206
38,738
Goodwill
16,300
16,300
16,300
Other real estate owned ("OREO")
85
113
216
Bank owned life insurance ("BOLI")
66,822
66,433
65,265
Other assets and accrued interest
receivable
96,697
81,595
63,001
Total assets
$
5,722,033
$
5,620,319
$
5,365,768
Liabilities and Stockholders'
Equity:
Deposits:
Noninterest-bearing
$
1,300,891
$
1,033,379
$
1,184,480
Interest-bearing
2,770,566
2,752,629
2,589,836
Total deposits
4,071,457
3,786,008
3,774,316
Securities sold under agreements to
repurchase and other short-term borrowings
126,080
167,617
173,168
Operating lease liabilities
35,537
36,530
40,203
Federal Home Loan Bank advances
572,500
750,000
560,000
Subordinated note
41,240
41,240
41,240
Other liabilities and accrued interest
payable
91,173
74,680
59,750
Total liabilities
4,937,987
4,856,075
4,648,677
Stockholders' equity
784,046
764,244
717,091
Total liabilities and stockholders'
equity
$
5,722,033
$
5,620,319
$
5,365,768
Average Balance Sheet Data
Three Months Ended Mar.
31,
2020
2019
Assets:
Federal funds sold and other
interest-earning deposits
$
207,335
$
289,928
Investment securities, including FHLB
stock
519,726
563,752
Loans, including loans held for sale
4,493,137
4,256,673
Total interest-earning assets
5,220,198
5,110,353
Total assets
5,626,946
5,476,671
Liabilities and Stockholders'
Equity:
Noninterest-bearing deposits, including
those held for assumption
$
1,249,025
$
1,258,461
Interest-bearing deposits, including those
held for assumption
2,855,332
2,629,765
Securities sold under agreements to
repurchase and other short-term borrowings
208,969
231,602
Federal Home Loan Bank advances
371,319
511,408
Subordinated note
41,240
41,240
Total interest-bearing liabilities
3,476,860
3,414,015
Stockholders' equity
778,900
706,833
Republic Bancorp, Inc. Financial Information
First Quarter 2020 Earnings Release
(continued)
(all amounts other than per share amounts,
number of employees, and number of banking centers are expressed in
thousands unless otherwise noted)
Income Statement Data
Three Months Ended Mar.
31,
2020
2019
Total interest income (4)
$
81,159
$
82,633
Total interest expense
8,421
10,334
Net interest income
72,738
72,299
Credit loss expense (3)
22,760
17,231
Noninterest income:
Service charges on deposit accounts
3,136
3,303
Net refund transfer fees
15,823
17,100
Mortgage banking income
4,795
1,539
Interchange fee income
2,552
2,757
Program fees
2,624
1,074
Increase in cash surrender value of
BOLI
389
382
Net gains on OREO
3
130
Other
1,247
1,132
Total noninterest income
30,569
27,417
Noninterest expense:
Salaries and employee benefits
26,622
25,076
Occupancy and equipment, net
6,846
6,584
Communication and transportation
1,289
1,161
Marketing and development
833
1,102
FDIC insurance expense
—
448
Bank franchise tax expense
2,506
2,496
Data processing
2,539
2,096
Interchange related expense
1,076
1,315
Supplies
452
484
Other real estate owned and other
repossession expense
18
46
Legal and professional fees
1,237
886
Other
3,551
3,815
Total noninterest expense
46,969
45,509
Income before income tax expense
33,578
36,976
Income tax expense
6,881
7,460
Net income
$
26,697
$
29,516
Republic Bancorp, Inc. Financial Information
First Quarter 2020 Earnings Release
(continued)
(all amounts other than per share amounts,
number of employees, and number of banking centers are expressed in
thousands unless otherwise noted)
Selected Data and Ratios
Three Months Ended Mar.
31,
2020
2019
Per Share Data:
Basic weighted average shares
outstanding
21,035
20,973
Diluted weighted average shares
outstanding
21,094
21,106
Period-end shares outstanding:
Class A Common Stock
18,687
18,698
Class B Common Stock
2,200
2,213
Book value per share (5)
$
37.54
$
34.29
Tangible book value per share (5)
36.45
33.25
Earnings per share ("EPS"):
Basic EPS - Class A Common Stock
$
1.29
$
1.42
Basic EPS - Class B Common Stock
1.17
1.29
Diluted EPS - Class A Common Stock
1.28
1.41
Diluted EPS - Class B Common Stock
1.16
1.28
Cash dividends declared per Common
share:
Class A Common Stock
$
0.286
$
0.264
Class B Common Stock
0.260
0.240
Performance Ratios:
Return on average assets
1.90
%
2.16
%
Return on average equity
13.71
16.70
Efficiency ratio (6)
45
46
Yield on average interest-earning assets
(4)
6.22
6.47
Cost of average interest-bearing
liabilities
0.97
1.21
Cost of average deposits (7)
0.61
0.69
Net interest spread (4)
5.25
5.26
Net interest margin - Total Company
(4)
5.57
5.66
Net interest margin - Core Bank (1)
3.65
3.76
Other Information:
End of period FTEs (8) - Total Company
1,077
1,073
End of period FTEs - Core Bank
994
997
Number of full-service banking centers
42
45
Republic Bancorp, Inc. Financial Information
First Quarter 2020 Earnings Release
(continued)
(all amounts other than per share amounts,
number of employees, and number of banking centers are expressed in
thousands unless otherwise noted)
Credit Quality Data and Ratios
As of and for the
Three Months Ended Mar.
31,
2020
2019
Credit Quality Asset Balances:
Nonperforming Assets - Total
Company:
Loans on nonaccrual status
$
20,358
$
15,361
Loans past due 90-days-or-more and still
on accrual
495
199
Total nonperforming loans
20,853
15,560
OREO
85
216
Total nonperforming assets
$
20,938
$
15,776
Nonperforming Assets - Core Bank
(1):
Loans on nonaccrual status
$
20,358
$
15,361
Loans past due 90-days-or-more and still
on accrual
—
4
Total nonperforming loans
20,358
15,365
OREO
85
216
Total nonperforming assets
$
20,443
$
15,581
Delinquent loans:
Delinquent loans - Core Bank
$
11,863
$
7,727
Delinquent loans - RPG (2) (9)
30,764
26,460
Total delinquent loans - Total Company
$
42,627
$
34,187
Credit Quality Ratios - Total
Company:
Nonperforming loans to total loans
0.46
%
0.36
%
Nonperforming assets to total loans
(including OREO)
0.46
0.37
Nonperforming assets to total assets
0.37
0.29
Allowance for credit losses to total
loans
1.56
1.35
Allowance for credit losses to
nonperforming loans
338
373
Delinquent loans to total loans (9)
(10)
0.94
0.80
Net charge-offs to average loans
(annualized)
0.19
0.37
Credit Quality Ratios - Core
Bank:
Nonperforming loans to total loans
0.46
%
0.37
%
Nonperforming assets to total loans
(including OREO)
0.47
0.37
Nonperforming assets to total assets
0.38
0.31
Allowance for credit losses to total
loans
0.97
0.75
Allowance for credit losses to
nonperforming loans
210
205
Delinquent loans to total loans
0.27
0.18
Net (recoveries) charge-offs to average
loans (annualized)
(0.03)
0.04
Republic Bancorp, Inc. Financial Information
First Quarter 2020 Earnings Release
(continued)
(all amounts other than per share amounts,
number of employees, and number of banking centers are expressed in
thousands unless otherwise noted)
Balance Sheet Data
Quarterly Comparison
Mar. 31, 2020
Dec. 31, 2019
Sep. 30, 2019
Jun. 30, 2019
Mar. 31, 2019
Assets:
Cash and cash equivalents
$
316,263
$
385,303
$
397,072
$
473,779
$
345,512
Investment securities, net of allowance
for credit losses (3)
608,330
537,074
638,697
447,512
498,318
Loans held for sale
54,904
31,468
51,243
63,949
24,177
Loans held for sale upon branch
divestiture
—
—
130,770
131,881
—
Loans
4,515,599
4,433,151
4,664,054
4,390,533
4,298,710
Allowance for credit losses (3)
(70,431)
(43,351)
(46,932)
(45,983)
(57,961)
Loans, net
4,445,168
4,389,800
4,617,122
4,344,550
4,240,749
Federal Home Loan Bank stock, at cost
38,900
30,831
32,242
32,242
29,965
Premises and equipment, net
44,215
46,196
46,735
44,199
43,527
Right-of-use assets
34,349
35,206
36,051
37,450
38,738
Goodwill
16,300
16,300
16,300
16,300
16,300
Other real estate owned
85
113
119
1,095
216
Bank owned life insurance
66,822
66,433
66,037
65,642
65,265
Other assets and accrued interest
receivable
96,697
81,595
71,259
64,535
63,001
Total assets
$
5,722,033
$
5,620,319
$
6,103,647
$
5,723,134
$
5,365,768
Liabilities and Stockholders'
Equity:
Deposits:
Noninterest-bearing
$
1,300,891
$
1,033,379
$
1,031,553
$
1,003,793
$
1,184,480
Interest-bearing
2,770,566
2,752,629
2,703,199
2,557,127
2,589,836
Deposits held for assumption upon branch
divestiture
—
—
142,384
152,954
—
Total deposits
4,071,457
3,786,008
3,877,136
3,713,874
3,774,316
Securities sold under agreements to
repurchase and other short-term borrowings
126,080
167,617
167,949
226,002
173,168
Operating lease liabilities
35,537
36,530
37,391
38,852
40,203
Federal Home Loan Bank advances
572,500
750,000
1,170,000
915,000
560,000
Subordinated note
41,240
41,240
41,240
41,240
41,240
Other liabilities and accrued interest
payable
91,173
74,680
65,484
56,738
59,750
Total liabilities
4,937,987
4,856,075
5,359,200
4,991,706
4,648,677
Stockholders' equity
784,046
764,244
744,447
731,428
717,091
Total liabilities and stockholders'
equity
$
5,722,033
$
5,620,319
$
6,103,647
$
5,723,134
$
5,365,768
Average Balance Sheet Data
Quarterly Comparison
Mar. 31, 2020
Dec. 31, 2019
Sep. 30, 2019
Jun. 30, 2019
Mar. 31, 2019
Assets:
Federal funds sold and other
interest-earning deposits
$
207,335
$
152,286
$
302,156
$
297,205
$
289,928
Investment securities, including FHLB
stock
519,726
632,559
547,281
514,366
563,752
Loans, including loans held for sale
4,493,137
4,588,538
4,606,139
4,424,905
4,256,673
Total interest-earning assets
5,220,198
5,373,383
5,455,576
5,236,476
5,110,353
Total assets
5,626,946
5,638,498
5,711,636
5,480,525
5,476,671
Liabilities and Stockholders'
Equity:
Noninterest-bearing deposits, including
those held for assumption
$
1,249,025
$
1,062,010
$
1,065,904
$
1,098,817
$
1,258,461
Interest-bearing deposits, including those
held for assumption
2,855,332
2,966,993
2,833,632
2,588,836
2,629,765
Securities sold under agreements to
repurchase and other short-term borrowings
208,969
248,558
246,889
220,189
231,602
Federal Home Loan Bank advances
371,319
469,130
690,457
710,879
511,408
Subordinated note
41,240
41,240
41,240
41,240
41,240
Total interest-bearing liabilities
3,476,860
3,725,921
3,812,218
3,561,144
3,414,015
Stockholders' equity
778,900
758,740
742,176
728,723
706,833
Republic Bancorp, Inc. Financial Information
First Quarter 2020 Earnings Release
(continued)
(all amounts other than per share amounts,
number of employees, and number of banking centers are expressed in
thousands unless otherwise noted)
Income Statement Data
Three Months Ended
Mar. 31, 2020
Dec. 31, 2019
Sep. 30, 2019
Jun. 30, 2019
Mar. 31, 2019
Total interest income (4)
$
81,159
$
64,527
$
68,059
$
65,664
$
82,633
Total interest expense
8,421
10,132
12,573
11,718
10,334
Net interest income
72,738
54,395
55,486
53,946
72,299
Credit loss expense (3)
22,760
914
3,153
4,460
17,231
Noninterest income:
Service charges on deposit accounts
3,136
3,547
3,749
3,598
3,303
Net refund transfer fees
15,823
112
317
3,629
17,100
Mortgage banking income
4,795
2,480
3,064
2,416
1,539
Interchange fee income
2,552
2,814
3,031
3,257
2,757
Program fees
2,624
1,284
1,317
1,037
1,074
Increase in cash surrender value of
BOLI
389
397
394
377
382
Net gains on OREO
3
53
267
90
130
Net gain (loss) on branch divestiture
—
7,948
(119)
—
—
Other
1,247
1,020
791
721
1,132
Total noninterest income
30,569
19,655
12,811
15,125
27,417
Noninterest expense:
Salaries and employee benefits
26,622
23,997
24,822
25,286
25,076
Occupancy and equipment, net
6,846
6,497
6,571
6,472
6,584
Communication and transportation
1,289
1,198
1,017
1,071
1,161
Marketing and development
833
1,223
1,420
1,278
1,102
FDIC insurance expense
—
—
—
295
448
Bank franchise tax expense
2,506
927
935
935
2,496
Data processing
2,539
2,532
2,344
2,217
2,096
Interchange related expense
1,076
1,115
1,138
1,302
1,315
Supplies
452
335
292
582
484
OREO expense
18
2
130
148
46
Legal and professional fees
1,237
601
1,026
844
886
Other
3,551
2,408
2,716
2,998
3,815
Total noninterest expense
46,969
40,835
42,411
43,428
45,509
Income before income tax expense
33,578
32,301
22,733
21,183
36,976
Income tax expense
6,881
6,533
4,325
3,176
7,460
Net income
$
26,697
$
25,768
$
18,408
$
18,007
$
29,516
Republic Bancorp, Inc. Financial Information
First Quarter 2020 Earnings Release
(continued)
(all amounts other than per share amounts,
number of employees, and number of banking centers are expressed in
thousands unless otherwise noted)
Selected Data and Ratios
As of and for the Three Months
Ended
Mar. 31, 2020
Dec. 31, 2019
Sep. 30, 2019
Jun. 30, 2019
Mar. 31, 2019
Per Share Data:
Basic weighted average shares
outstanding
21,035
21,036
21,036
21,016
20,973
Diluted weighted average shares
outstanding
21,094
21,133
21,137
21,138
21,106
Period-end shares outstanding:
Class A Common Stock
18,687
18,737
18,744
18,740
18,675
Class B Common Stock
2,200
2,206
2,208
2,208
2,213
Book value per share (5)
$
37.54
$
36.49
$
35.54
$
34.92
$
34.29
Tangible book value per share (5)
36.45
35.41
34.47
33.87
33.25
Earnings per share ("EPS"):
Basic EPS - Class A Common Stock
$
1.29
$
1.23
$
0.88
$
0.86
$
1.42
Basic EPS - Class B Common Stock
1.17
1.13
0.80
0.79
1.29
Diluted EPS - Class A Common Stock
1.28
1.23
0.88
0.86
1.41
Diluted EPS - Class B Common Stock
1.16
1.12
0.80
0.78
1.28
Cash dividends declared per Common
share:
Class A Common Stock
$
0.286
$
0.264
$
0.264
$
0.264
$
0.264
Class B Common Stock
0.260
0.240
0.240
0.240
0.240
Performance Ratios:
Return on average assets
1.90
%
1.83
%
1.29
%
1.31
%
2.16
%
Return on average equity
13.71
13.58
9.92
9.88
16.70
Efficiency ratio (6)
45
62
62
63
46
Yield on average interest-earning assets
(4)
6.22
4.80
4.99
5.02
6.47
Cost of average interest-bearing
liabilities
0.97
1.09
1.32
1.32
1.21
Cost of average deposits (7)
0.61
0.74
0.82
0.75
0.69
Net interest spread (4)
5.25
3.71
3.67
3.70
5.26
Net interest margin - Total Company
(4)
5.57
4.05
4.07
4.12
5.66
Net interest margin - Core Bank (1)
3.65
3.56
3.56
3.62
3.76
Other Information:
End of period FTEs (8) - Total Company
1,077
1,080
1,093
1,089
1,073
End of period FTEs - Core Bank
994
997
1,013
1,012
997
Number of full-service banking centers
42
41
45
45
45
Republic Bancorp, Inc. Financial Information
First Quarter 2020 Earnings Release
(continued)
(all amounts other than per share amounts,
number of employees, and number of banking centers are expressed in
thousands unless otherwise noted)
Credit Quality Data and Ratios
As of and for the Three Months
Ended
Mar. 31, 2020
Dec. 31, 2019
Sep. 30, 2019
Jun. 30, 2019
Mar. 31, 2019
Credit Quality Asset Balances:
Nonperforming Assets - Total
Company:
Loans on nonaccrual status
$
20,358
$
23,332
$
20,574
$
19,238
$
15,361
Loans past due 90-days-or-more and still
on accrual
495
157
175
166
199
Total nonperforming loans
20,853
23,489
20,749
19,404
15,560
OREO
85
113
119
1,095
216
Total nonperforming assets
$
20,938
$
23,602
$
20,868
$
20,499
$
15,776
Nonperforming Assets - Core Bank
(1):
Loans on nonaccrual status
$
20,358
$
23,332
$
20,574
$
19,238
$
15,361
Loans past due 90-days-or-more and still
on accrual
—
—
—
—
4
Total nonperforming loans
20,358
23,332
20,574
19,238
15,365
OREO
85
113
119
1,095
216
Total nonperforming assets
$
20,443
$
23,445
$
20,693
$
20,333
$
15,581
Delinquent Loans:
Delinquent loans - Core Bank
$
11,863
$
13,042
$
13,496
$
12,524
$
7,727
Delinquent loans - RPG (2) (9)
30,764
7,762
6,876
6,802
26,460
Total delinquent loans - Total Company
$
42,627
$
20,804
$
20,372
$
19,326
$
34,187
Credit Quality Ratios - Total
Company:
Nonperforming loans to total loans
0.46
%
0.53
%
0.44
%
0.44
%
0.36
%
Nonperforming assets to total loans
(including OREO)
0.46
0.53
0.45
0.47
0.37
Nonperforming assets to total assets
0.37
0.42
0.34
0.36
0.29
Allowance for credit losses to total
loans
1.56
0.98
1.01
1.05
1.35
Allowance for credit losses to
nonperforming loans
338
185
226
237
373
Delinquent loans to total loans (9)
(10)
0.94
0.47
0.44
0.44
0.80
Net charge-offs to average loans
(annualized)
0.19
0.39
0.68
1.49
0.37
Credit Quality Ratios - Core
Bank:
Nonperforming loans to total loans
0.46
%
0.54
%
0.45
%
0.45
%
0.37
%
Nonperforming assets to total loans
(including OREO)
0.47
0.54
0.45
0.47
0.37
Nonperforming assets to total assets
0.38
0.43
0.35
0.37
0.31
Allowance for credit losses to total
loans
0.97
0.70
0.73
0.77
0.75
Allowance for credit losses to
nonperforming loans
210
129
163
171
205
Delinquent loans to total loans
0.27
0.30
0.30
0.29
0.18
Net (recoveries) charge-offs to average
loans (annualized)
(0.03)
0.19
0.15
0.04
0.04
Republic Bancorp, Inc. Financial Information First Quarter
2020 Earnings Release (continued)
Segment Data:
Reportable segments are determined by the type of products and
services offered and the level of information provided to the chief
operating decision maker, who uses such information to review
performance of various components of the business (such as banking
centers and business units), which are then aggregated if operating
performance, products/services, and clients are similar.
As of March 31, 2020, the Company was divided into five
reportable segments: Traditional Banking, Warehouse Lending
(“Warehouse”), Mortgage Banking, Tax Refund Solutions (“TRS”), and
Republic Credit Solutions (“RCS”). Management considers the first
three segments to collectively constitute “Core Bank” or “Core
Banking” operations, while the last two segments collectively
constitute Republic Processing Group (“RPG”) operations.
MemoryBank®, the Company’s national branchless banking platform is
part of the Traditional Banking segment.
The nature of segment operations and the primary drivers of net
revenues by reportable segment are provided below:
Reportable Segment:
Nature of Operations:
Primary Drivers of Net
Revenue:
Core Banking:
Traditional Banking
Provides traditional banking products to
clients in its market footprint primarily via its network of
banking centers and to clients outside of its market footprint
primarily via its digital delivery channels.
Loans, investments, and deposits.
Warehouse Lending
Provides short-term, revolving credit
facilities to mortgage bankers across the United States.
Mortgage warehouse lines of credit.
Mortgage Banking
Primarily originates, sells and services
long-term, single-family, first-lien residential real estate loans
primarily to clients in the Bank's market footprint.
Loan sales and servicing.
Republic Processing Group:
Tax Refund Solutions
TRS offers tax-related credit products and
facilitates the receipt and payment of federal and state tax
refunds through Refund Transfer products. The RPS division of TRS
offers general-purpose reloadable cards. TRS and RPS products are
primarily provided to clients outside of the Bank’s market
footprint.
Loans, refund transfers, and prepaid
cards.
Republic Credit Solutions
Offers consumer credit products. RCS
products are primarily provided to clients outside of the Bank’s
market footprint, with a substantial portion of RCS clients
considered subprime or near-prime borrowers.
Unsecured, consumer loans.
The accounting policies used for Republic’s reportable segments
are generally the same as those described in the summary of
significant accounting policies in the Company’s 2019 Annual Report
on Form 10-K. The Company did update its accounting policies during
the first quarter of 2020 upon adoption of the CECL standard.
Republic evaluates segment performance using operating income. The
Company allocates goodwill to the Traditional Banking segment.
Republic generally allocates income taxes based on income before
income tax expense unless reasonable and specific segment
allocations can be made. The Company makes transactions among
reportable segments at carrying value.
Republic Bancorp, Inc. Financial Information First Quarter
2020 Earnings Release (continued)
Segment information for the quarters ended March 31, 2020 and
2019 follows:
Three Months Ended March 31,
2020
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
$
40,620
$
4,307
$
214
$
45,141
$
20,525
$
7,072
$
27,597
$
72,738
Credit loss expense
5,589
332
—
5,921
15,133
1,706
16,839
22,760
Net refund transfer fees
—
—
—
—
15,823
—
15,823
15,823
Mortgage banking income
—
—
4,795
4,795
—
—
—
4,795
Program fees
—
—
—
—
312
2,312
2,624
2,624
Other noninterest income
7,235
11
24
7,270
57
—
57
7,327
Total noninterest income
7,235
11
4,819
12,065
16,192
2,312
18,504
30,569
Total noninterest expense
36,647
803
1,996
39,446
6,629
894
7,523
46,969
Income before income tax expense
5,619
3,183
3,037
11,839
14,955
6,784
21,739
33,578
Income tax expense
460
716
638
1,814
3,497
1,570
5,067
6,881
Net income
$
5,159
$
2,467
$
2,399
$
10,025
$
11,458
$
5,214
$
16,672
$
26,697
Period-end assets
$
4,471,235
$
851,405
$
53,298
$
5,375,938
$
240,898
$
105,197
$
346,095
$
5,722,033
Net interest margin
3.80
%
2.68
%
NM
3.65
%
NM
NM
NM
5.57
%
Net-revenue concentration*
46
%
4
%
5
%
55
%
36
%
9
%
45
%
100
%
Three Months Ended March 31,
2019
Core Banking
Republic Processing Group
("RPG")
Total
Tax
Republic
Traditional
Warehouse
Mortgage
Core
Refund
Credit
Total
Total
(dollars in thousands)
Banking
Lending
Banking
Banking
Solutions
Solutions
RPG
Company
Net interest income
$
41,347
$
2,895
$
102
$
44,344
$
20,438
$
7,517
$
27,955
$
72,299
Credit loss expense
189
225
—
414
13,434
3,383
16,817
17,231
Net refund transfer fees
—
—
—
—
17,100
—
17,100
17,100
Mortgage banking income
—
—
1,539
1,539
—
—
—
1,539
Program fees
—
—
—
—
146
928
1,074
1,074
Other noninterest income
6,896
10
40
6,946
131
627
758
7,704
Total noninterest income
6,896
10
1,579
8,485
17,377
1,555
18,932
27,417
Total noninterest expense
35,550
758
1,320
37,628
7,114
767
7,881
45,509
Income before income tax expense
12,504
1,922
361
14,787
17,267
4,922
22,189
36,976
Income tax expense
1,765
433
76
2,274
4,030
1,156
5,186
7,460
Net income
$
10,739
$
1,489
$
285
$
12,513
$
13,237
$
3,766
$
17,003
$
29,516
Period-end assets
$
4,471,419
$
559,545
$
17,087
$
5,048,051
$
224,485
$
93,232
$
317,717
$
5,365,768
Net interest margin
3.84
%
2.84
%
NM
3.76
%
NM
NM
NM
5.66
%
Net-revenue concentration*
48
%
3
%
2
%
53
%
38
%
9
%
47
%
100
%
_________________________
*Net revenues represent total net interest
income plus noninterest income. Net-revenue concentration equals
segment-level net revenue divided by total Company net revenue.
Republic Bancorp, Inc. Financial Information First Quarter
2020 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)
Effective January 1, 2020, the Company
adopted Accounting Standards Codification (“ASC”) 326 Financial
Instruments – Credit Losses, which replaces the pre-January 1, 2020
“probable-incurred” method for calculating the Company’s Allowance
for Credit Losses (“ACL”) with the current expected credit loss
(“CECL”) method. CECL is applicable to financial assets measured at
amortized cost, including loan and lease receivables and
held-to-maturity debt securities. CECL also applies to certain
off-balance sheet credit exposures. In addition to CECL, ASC 326
made changes to the accounting for Available-for-Sale (“AFS”) debt
securities. One such change is to require credit losses to be
presented as an allowance rather than as a write-down on AFS debt
securities that the Company does not intend or will likely not be
compelled to sell.
When measuring an ACL, CECL primarily
differs from the probable-incurred method by: a) incorporating a
lower “expected” threshold for loss recognition versus a higher
“probable” threshold; b) requiring life-of-loan considerations; and
c) requiring reasonable and supportable forecasts. The Company’s
CECL method is a “static-pool” method that analyzes historical
closed pools of loans over their expected lives to attain a loss
rate, which is then adjusted for current conditions and reasonable
and supportable forecasts prior to being applied to the current
balance of the analyzed pools. Due to its reasonably strong
correlation to the Company's historical net loan losses, the
Company has chosen to use the U.S. unemployment rate as its primary
forecasting tool.
In accord with the adoption of ASC 326 and
CECL, the Company recorded on January 1, 2020 a $6.7 million, or
16%, increase in the ACL for its loans and leases, a $51,000 ACL
for its investment debt securities, and an approximate $456,000 ACL
for its off-balance sheet exposures. This adoption also reduced the
Company’s retained earnings on a tax-effected basis, with no impact
on earnings for the quarter ended March 31, 2020. The adoption date
increase in ACL for the Company’s loans and leases primarily
reflects additional ACL for longer duration loan portfolios, such
as the Company's residential real estate and consumer loan
portfolios. No additional segmentation of the Bank's loan
portfolios was deemed necessary upon adoption.
(4)
The amount of loan fee income can
meaningfully impact total interest income, loan yields, net
interest margin, and net interest spread. The amount of loan fee
income included in total interest income per quarter was as
follows: $28.5 million (quarter ended March 31, 2020); $8.5 million
(quarter ended December 31, 2019); $9.1 million (quarter ended
September 30, 2019); $8.4 million (quarter ended June 30, 2019);
and $28.6 million (quarter ended March 31, 2019).
Interest income for Easy Advances (“EAs”)
is composed entirely of loan fees. The loan fees disclosed above
included EA fees of $19.3 million and $18.9 million for the
quarters ended March 31, 2020 and 2019. EAs are only offered during
the first two months of each year.
(5)
The following table provides a
reconciliation of total stockholders’ equity in accordance with
GAAP to tangible stockholders’ equity in accordance with applicable
regulatory requirements, a non-GAAP disclosure. The Company
provides the tangible book value per share, a non-GAAP measure, in
addition to those defined by banking regulators, because of its
widespread use by investors as a means to evaluate capital
adequacy.
Quarterly Comparison
(dollars in thousands, except per share
data)
Mar. 31, 2020
Dec. 31, 2019
Sep. 30, 2019
Jun. 30, 2019
Mar. 31, 2019
Total stockholders' equity - GAAP (a)
$
784,046
$
764,244
$
744,447
$
731,428
$
717,091
Less: Goodwill
16,300
16,300
16,300
16,300
16,300
Less: Mortgage servicing rights
5,994
5,888
5,483
5,158
4,935
Less: Core deposit intangible
423
469
516
562
608
Tangible stockholders' equity - Non-GAAP
(c)
$
761,329
$
741,587
$
722,148
$
709,408
$
695,248
Total assets - GAAP (b)
$
5,722,033
$
5,620,319
$
6,103,647
$
5,723,134
$
5,365,768
Less: Goodwill
16,300
16,300
16,300
16,300
16,300
Less: Mortgage servicing rights
5,994
5,888
5,483
5,158
4,935
Less: Core deposit intangible
423
469
516
562
608
Tangible assets - Non-GAAP (d)
$
5,699,316
$
5,597,662
$
6,081,348
$
5,701,114
$
5,343,925
Total stockholders' equity to total assets
- GAAP (a/b)
13.70
%
13.60
%
12.20
%
12.78
%
13.36
%
Tangible stockholders' equity to tangible
assets - Non-GAAP (c/d)
13.36
%
13.25
%
11.87
%
12.44
%
13.01
%
Number of shares outstanding (e)
20,887
20,943
20,948
20,948
20,911
Book value per share - GAAP (a/e)
$
37.54
$
36.49
$
35.54
$
34.92
$
34.29
Tangible book value per share - Non-GAAP
(c/e)
36.45
35.41
34.47
33.87
33.25
(6)
The efficiency ratio, a non-GAAP measure
with no GAAP comparable, 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 and the Company’s net gain from its November
2019 branch divestiture.
Three Months Ended Mar.
31,
(dollars in thousands)
2020
2019
Net interest income
$
72,738
$
72,299
Noninterest income
30,569
27,417
Less: Net gain (loss) on sales, calls, and
impairment of debt and equity securities
40
37
Total adjusted revenue - Non-GAAP (a)
$
103,267
$
99,679
Noninterest expense (b)
$
46,969
$
45,509
Efficiency Ratio - Non-GAAP (b/a)
45
%
46
%
Three Months Ended
(dollars in thousands)
Mar. 31, 2020
Dec. 31, 2019
Sep. 30, 2019
Jun. 30, 2019
Mar. 31, 2019
Net interest income
$
72,738
$
54,395
$
55,486
$
53,946
$
72,299
Noninterest income
30,569
19,655
12,811
15,125
27,417
Less: Net gain on branch divestiture
—
7,948
(119)
—
—
Less: Net gain (loss) on sales, calls, and
impairment of debt and equity securities
40
(12)
19
33
37
Total adjusted revenue - Non-GAAP (a)
$
103,267
$
66,114
$
68,397
$
69,038
$
99,679
Noninterest expense (b)
$
46,969
$
40,835
$
42,411
$
43,428
$
45,509
Efficiency Ratio - Non-GAAP (b/a)
45
%
62
%
62
%
63
%
46
%
(7)
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.
(8)
FTEs – Full-time-equivalent employees.
(9)
Delinquent loans for the RPG segment
included $23 million and $19 million of EAs at March 31, 2020 and
2019. EAs are only offered during the first two months of each
year. EAs do not have a contractual due date but are eligible for
delinquency consideration three weeks after the taxpayer-customer’s
tax return is submitted to the applicable tax authority. All unpaid
EAs are charged-off by the end of the second quarter of each
year.
(10)
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
NA – Not applicable
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version on businesswire.com: https://www.businesswire.com/news/home/20200423005038/en/
Republic Bancorp, Inc. Kevin Sipes Executive Vice President
& Chief Financial Officer (502) 560-8628
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