Republic Bancorp, Inc. Reports an 11% Increase in Third Quarter Net Income
Republic Bancorp, Inc. (NASDAQ: RBCAA) reported a third-quarter net income of $20.4 million, marking an 11% increase from 2019. The year-to-date net income was $62.9 million, down 5% year-over-year. Diluted EPS rose to $0.98 for Q3, while YTD EPS declined to $3.02. The company faced credit loss allowances of $7 million for the quarter. Despite these challenges, Republic Bank achieved record mortgage banking income and assisted over 3,700 clients in obtaining $528 million in PPP loans during the pandemic. Their return on average assets stood at 1.41%.
- Third-quarter net income increased by 11% to $20.4 million.
- Record mortgage banking income reached $10.8 million, a 64% increase year-over-year.
- Assisted over 3,700 clients in obtaining $528 million in PPP loans.
- Average Core Bank loans grew by 7%, totaling $4.79 billion.
- Year-to-date net income decreased 5% compared to the same period in 2019.
- Core Bank's net income from Traditional Banking segment fell by $8.2 million.
- Net interest income decreased by 2% due to industry-wide margin compression.
- Provision for expected credit loss expense increased significantly to $5.9 million.
LOUISVILLE, Ky.--(BUSINESS WIRE)--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
Steve Trager, Chairman & CEO of Republic commented, “I couldn’t be prouder of our performance given the current environment. We were able to grow our third quarter net income by
Trager continued, “Reflecting further on our YTD results, we have had our best nine months ever in gathering deposits and generating mortgage banking income. In addition, I am extremely proud of our efforts to help our clients through the SBA’s PPP loan process. Through this process we helped over 3,700 clients attain
The following table highlights Republic’s financial performance for the three and nine months ended September 30, 2020 and 2019. Additional financial details, including segment-level data and key metrics, are provided in the accompanying financial supplement to this release. See Exhibit 99.2 of the Company’s Form 8-K filed with the SEC on October 16, 2020 for the financial supplement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Company Financial Performance Highlights |
|||||||||||||||||||||||||||||
|
|
|
Three Months Ended Sep. 30, |
|
|
|
|
Nine Months Ended Sep. 30, |
|
|
|
||||||||||||||||||||
(dollars in thousands, except per share data) |
|
|
2020 |
|
2019 |
|
$ Change |
|
% Change |
|
|
2020 |
|
2019 |
|
$ Change |
|
% Change |
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Tax Expense |
|
|
$ |
25,826 |
|
|
$ |
22,733 |
|
|
$ |
3,093 |
|
14 |
% |
|
|
$ |
79,001 |
|
|
$ |
80,892 |
|
|
$ |
(1,891) |
|
(2) |
% |
|
Net Income |
|
|
|
20,389 |
|
|
|
18,408 |
|
|
|
1,981 |
|
11 |
|
|
|
|
62,890 |
|
|
|
65,931 |
|
|
|
(3,041) |
|
(5) |
|
|
Diluted Earnings per Class A Common Share |
|
|
|
0.98 |
|
|
|
0.88 |
|
|
|
0.10 |
|
11 |
|
|
|
|
3.02 |
|
|
|
3.15 |
|
|
|
(0.13) |
|
(4) |
|
|
Return on Average Assets |
|
|
|
1.33 |
% |
|
|
1.29 |
% |
|
|
NA |
|
3 |
|
|
|
|
1.41 |
% |
|
|
1.58 |
% |
|
|
NA |
|
(11) |
|
|
Return on Average Equity |
|
|
|
10.05 |
|
|
|
9.92 |
|
|
|
NA |
|
1 |
|
|
|
|
10.54 |
|
|
|
12.11 |
|
|
|
NA |
|
(13) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NA – Not applicable |
|||||||||||||||||||||||||||||||
Results of Operations for the Third Quarter of 2020 Compared to the Third Quarter of 2019
Core Bank(3)
Net income from Core Banking was
Net Interest Income – Core Bank net interest income was
Average outstanding Warehouse balances grew from
Consistent with a 225 basis point decrease in the Federal Funds Target Rate from September 30, 2019 to September 30, 2020, the Core Bank’s net interest spread and net interest margin compressed 15 basis points and 31 basis points, respectively, from the third quarter of 2019 to the same period in 2020. The Core Bank’s net interest spread, the difference between the weighted average rate earned on its interest-earning assets less the weighted average cost paid on its interest-bearing liabilities, contracted primarily because the Core Bank’s liabilities had less room to reprice downward than its asset counterparts. The Core Bank’s net interest margin contracted 16 basis points further than its net interest spread due to the reduction in benefit the Bank sees from its noninterest-bearing funding sources, such as noninterest-bearing deposits and stockholders’ equity, in a falling rate environment.
The following tables present by reportable segment the overall changes in the Core Bank’s net interest income, net interest margin, as well as average and period-end loan balances:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Income |
|
|
Net Interest Margin |
|
|||||||||||||||||
(dollars in thousands) |
|
|
Three Months Ended Sep. 30, |
|
|
|
|
|
Three Months Ended Sep. 30, |
|
|
|
|
|||||||||||
Reportable Segment |
|
|
2020 |
|
|
2019 |
|
Change |
|
2020 |
|
2019 |
|
Change |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional Banking* |
|
|
$ |
38,753 |
|
|
$ |
42,879 |
|
$ |
(4,126 |
) |
|
3.22 |
% |
|
3.76 |
% |
|
|
(0.54 |
)% |
|
|
Warehouse Lending |
|
|
|
7,345 |
|
|
|
4,329 |
|
|
3,016 |
|
|
3.41 |
|
|
2.30 |
|
|
|
1.11 |
|
|
|
Mortgage Banking* |
|
|
|
300 |
|
|
|
212 |
|
|
88 |
|
|
NM |
|
|
NM |
|
|
|
NM |
|
|
|
Core Bank |
|
|
$ |
46,398 |
|
|
$ |
47,420 |
|
$ |
(1,022 |
) |
|
3.25 |
|
|
3.56 |
|
|
|
(0.31 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Loan Balances |
|
|
Period-End Loan Balances |
|
||||||||||||||||||||
(dollars in thousands) |
|
Three Months Ended Sep. 30, |
|
|
|
|
Sep. 30, |
|
|
|
||||||||||||||||
Reportable Segment |
|
2020 |
|
2019 |
|
$ Change |
|
% Change |
|
|
2020 |
|
2019 |
|
$ Change |
|
% Change |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional Banking* |
|
$ |
3,906,335 |
|
$ |
3,709,931 |
|
$ |
196,404 |
|
5 |
% |
|
|
$ |
3,856,504 |
|
$ |
3,721,239 |
|
$ |
135,265 |
|
4 |
% |
|
Warehouse Lending |
|
|
860,420 |
|
|
752,089 |
|
|
108,331 |
|
14 |
|
|
|
|
1,028,675 |
|
|
973,588 |
|
|
55,087 |
|
6 |
|
|
Mortgage Banking* |
|
|
26,127 |
|
|
17,500 |
|
|
8,627 |
|
49 |
|
|
|
|
44,860 |
|
|
32,739 |
|
|
12,121 |
|
37 |
|
|
Core Bank |
|
$ |
4,792,882 |
|
$ |
4,479,520 |
|
$ |
313,362 |
|
7 |
|
|
|
$ |
4,930,039 |
|
$ |
4,727,566 |
|
$ |
202,473 |
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Includes loans held for sale NM – Not meaningful |
||||||||||||||||||||||||||
Provision for Expected Credit Loss Expense – The Core Bank’s Provision increased to
Along with the PPP, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act provided several forms of economic relief designed to defray the impact of COVID-19. In April 2020, through its own independent relief efforts and CARES Act provisions, the Company began offering loan accommodations through deferrals and forbearances. These accommodations were generally under three-month terms for commercial clients, with residential and consumer accommodations in line with prevailing regulatory and legal parameters. Loans modified as a result of pandemic-related requests are generally not considered troubled debt restructurings by the Company if, prior to the pandemic, the borrower was performing in accordance with loan terms.
The following table presents loan balances under COVID-19 accommodations as of June 30, 2020 and a rollforward of accommodated balances through September 30, 2020. The table reflects that approximately
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
Jun. 30, 2020 |
|
|
Three Months Ended Sep. 30, 2020 |
|
|
Sep. 30, 2020 COVID-19 Accommodations |
|
||||||||||||||||||||
|
|
|
|
COVID-19 |
|
Additional |
|
(Payments) Draws Made |
|
|
Out of Accommodation |
|
Still under Accommodation |
|
|||||||||||||||||
(in thousands) |
|
|
|
Accm.* |
|
|
Accm. |
|
Net (Pay)/Draw |
|
(Payoffs) |
|
|
Current |
|
Past Due** |
|
1st Accm. |
|
> 1st Accm. |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Traditional Banking: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Owner occupied |
|
|
|
$ |
51,570 |
|
|
$ |
6,780 |
|
$ |
(525 |
) |
|
$ |
(3,751 |
) |
|
|
$ |
45,761 |
|
$ |
51 |
|
$ |
1,804 |
|
$ |
6,458 |
|
Nonowner occupied |
|
|
|
|
58,754 |
|
|
|
— |
|
|
(667 |
) |
|
|
(536 |
) |
|
|
|
57,551 |
|
|
— |
|
|
— |
|
|
— |
|
Commercial real estate |
|
|
|
|
491,314 |
|
|
|
3,567 |
|
|
(5,840 |
) |
|
|
(15,939 |
) |
|
|
|
467,447 |
|
|
2,739 |
|
|
457 |
|
|
2,459 |
|
Commercial & industrial |
|
|
|
|
141,720 |
|
|
|
— |
|
|
(7,438 |
) |
|
|
(3,842 |
) |
|
|
|
118,784 |
|
|
12 |
|
|
— |
|
|
11,644 |
|
Construction & land development |
|
|
|
|
28,927 |
|
|
|
— |
|
|
486 |
|
|
|
(9,214 |
) |
|
|
|
20,199 |
|
|
— |
|
|
— |
|
|
— |
|
Lease financing receivables |
|
|
|
|
2,443 |
|
|
|
— |
|
|
409 |
|
|
|
— |
|
|
|
|
2,852 |
|
|
— |
|
|
— |
|
|
— |
|
Home equity |
|
|
|
|
13,776 |
|
|
|
627 |
|
|
(173 |
) |
|
|
(2,835 |
) |
|
|
|
11,173 |
|
|
— |
|
|
187 |
|
|
35 |
|
Consumer |
|
|
|
|
4,678 |
|
|
|
58 |
|
|
(134 |
) |
|
|
(229 |
) |
|
|
|
4,283 |
|
|
— |
|
|
41 |
|
|
49 |
|
Total Traditional Banking |
|
|
|
$ |
793,182 |
|
|
$ |
11,032 |
|
$ |
(13,882 |
) |
|
$ |
(36,346 |
) |
|
|
$ |
728,050 |
|
$ |
2,802 |
|
$ |
2,489 |
|
$ |
20,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
*Accm.= Accommodation(s) **Loans 30-days-or-more past due on their contractual payments following exit from their accommodation period. |
|||||||||||||||||||||||||||||||
The table below presents the Core Bank’s credit quality metrics:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters Ended: |
Years Ended: |
||||||||||
|
Sep. 30, |
|
Jun. 30, |
|
Mar. 31, |
|
Dec. 31, |
Dec. 31, |
Dec. 31, |
|||
Core Banking Credit Quality Ratios |
2020 |
|
2020 |
|
2020 |
|
2019 |
2018 |
2017 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming loans to total loans |
0.43 |
% |
0.40 |
% |
0.46 |
% |
0.54 |
% |
0.40 |
% |
0.36 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming assets to total loans (including OREO) |
0.47 |
|
0.44 |
|
0.47 |
|
0.54 |
|
0.40 |
|
0.36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Delinquent loans* to total loans |
0.23 |
|
0.16 |
|
0.27 |
|
0.30 |
|
0.22 |
|
0.21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs (recoveries) to average loans |
0.03 |
|
0.04 |
|
(0.03) |
|
0.11 |
|
0.06 |
|
0.04 |
|
(Quarterly rates annualized) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OREO = Other Real Estate Owned |
|
|
|
|
|
|
|
|
|
|
|
|
*Loans 30-days-or-more past due |
||||||||||||
Noninterest Income – Core Bank noninterest income was
-
Mortgage Banking income increased
$7.7 million over the third quarter of 2019 to a record high$10.8 million for the third quarter of 2020, as both origination volume and pricing improved from the prior period. The Core Bank originated$204 million in secondary market loans during the third quarter of 2020, a64% increase over the same period in 2019, while the Bank’s cash gain as a percentage of those originations increased approximately 250 basis points over the third quarter of 2019.
-
Offsetting the increase in Mortgage Banking income was a
$731,000 decrease in Service Charges on Deposits resulting largely from a change in consumer savings and spending patterns during the pandemic-driven economic restrictions.
Noninterest Expense – Core Bank noninterest expense increased
-
Salaries and benefits expense increased
$1.5 million , or7% . The overall increase was substantially driven by higher Mortgage Banking commissions, which rose$1.2 million over the same period in 2019.
-
Data Processing expense increased
$1.0 million , or45% , driven by the Company’s increased investment in technology since September 30, 2019. Approximately60% of the increase was driven by loan application system costs related to the PPP loan program and the substantial rise in mortgage refinance volume during the year.
Republic Processing Group(4)
Republic Processing Group (“RPG”) reported net income of
Tax Refund Solutions
Within TRS, a positive change in Provision from a net credit of
With the third quarter EA paydowns, the percent of unpaid EAs to total EAs originated was
Republic Credit Solutions
Net income at RCS decreased slightly from
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
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 timing of PPP loan forgiveness and 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 and quarterly report on Form 10-Q for the period ended June 30, 2020. The Company undertakes no obligation to update any forward-looking statements, except as required by applicable law.
Footnotes:
(1) |
The following table provides a reconciliation of the Company’s ratio of Allowance to Traditional Bank loans in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) to its Allowance to non-PPP Traditional Bank loans, a non-GAAP measure. The Company believes this non-GAAP measure better reflects the level of Traditional Bank Allowance available to cover expected Traditional Bank loan losses. The Company has made no Allowance for PPP loans because these loans are guaranteed by the U.S. Small Business Administration. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of Sep. 30, 2020 |
|
|||||||
|
|
|
|
|
|
|
|
Allowance |
|
|
(dollars in thousands) |
|
Gross Loans |
|
Allowance |
|
to Loans |
|
|||
|
|
|
|
|
|
|
|
|
|
|
Traditional Bank (GAAP) |
|
$ |
3,856,504 |
|
$ |
48,657 |
|
1.26 |
% |
|
Less: Paycheck Protection Program |
|
|
514,550 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional Bank, Less PPP (non-GAAP) |
|
$ |
3,341,954 |
|
$ |
48,657 |
|
1.46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
PPP – The U.S. Small Business Administration’s Paycheck Protection Program. |
|
|
(2) |
“Core Bank” or “Core Banking” operations consist of the Traditional Banking, Warehouse Lending, and Mortgage Banking segments. |
|
|
(3) |
Republic Processing Group operations consist of the Tax Refund Solutions and Republic Credit Solutions segments. |
|
|
NM – Not meaningful |
|
|
|
NA – Not applicable |
|
