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”) reported
first quarter 2023 net income and Diluted Earnings per Class A
Common Share (“Diluted EPS”) of $28.1 million and $1.42 per
share.
As presented in the table below, Republic’s Total Company
Operating net income was $31.8 million for the first quarter of
2023, an increase of $7.2 million, or 29%, over its Total Company
Operating net income, a non-GAAP metric, for the first quarter of
2022. Republic’s Operating net income for the first quarter of 2023
was adjusted for the impact to net income of the Day-1 Provision
and estimated merger expenses of the CBank acquisition, while its
first quarter 2022 Operating net income was adjusted for the impact
to net income of the termination penalty the Company received for
the cancelled sale of its tax business.
Diluted Earnings Per Class A
Common Share
Year to date
Year to date
(dollars in thousands, except per share
data)
Mar. 31, 2023
Mar. 31, 2022
$ Change
% Change
Mar. 31, 2023
Mar. 31, 2022
$ Change
% Change
Total Company Net Income, As
Reported
$
28,092
$
28,350
$
(258
)
(1
)%
$
1.42
$
1.42
$
-
—
%
Adjustments:
Add Back the Impact of CBank Day 1
Provisions, Net of Taxes
2,092
—
2,092
—
0.11
—
0.11
—
Add Back the Impact of CBank Merger
Expenses, Net of Taxes
1,613
—
1,613
—
0.08
—
0.08
—
Reduce for the Impact of the Termination
Penalty Received for Cancelled TRS Transaction, Net of Taxes
—
(3,772
)
3,772
—
—
(0.19
)
0.19
—
Total Company Operating Net Income -
non-GAAP
$
31,797
$
24,578
$
7,219
29
$
1.61
$
1.23
$
0.38
31
Logan Pichel, President and CEO of the Bank commented, “When
adjusting for the items noted above that are outside of our normal
recurring operations, our Operating net income for both the Total
Company and the Core Bank during the first quarter of 2023 were
strong and significantly better than the comparable Operating net
income for the first quarter of 2022. Our quarter-over-quarter
growth in first quarter Operating net income reflected the
continued benefits of the Bank’s sound interest rate risk
management function and solid core deposit base, prudent loan
growth within the Traditional Bank, disciplined expense management,
and continued historically low credit losses within the Core
Bank.”
Core Bank’s net income was $10.3 million for the first quarter
of 2023, an increase of $2.7 million, or 35%, over its net income
for the first quarter of 2022. As reflected in the table below, the
Core Bank’s adjusted Operating net income was $14.0 million for the
first quarter of 2023, an increase of $6.4 million, or 84%, over
its adjusted Operating net income for the first quarter of 2022.
Republic’s Core Bank Operating net income for the first quarter of
2023 was adjusted for the impact to net income of the Day-1
Provision and estimated merger expenses of the CBank acquisition.
There were no adjustments to net income related to the Core Bank
for the first quarter of 2022.
Year to date
(dollars in thousands)
Mar. 31, 2023
Mar. 31, 2022
$ Change
% Change
Core Bank Net Income, As
Reported
$
10,308
$
7,608
$
2,700
35
%
Adjustments:
Add Back the Impact of CBank Day 1
Provisions, Net of Taxes
2,092
—
2,092
—
Add Back the Impact of CBank Merger
Expenses, Net of Taxes
1,613
-
1,613
—
Core Bank Operating Net Income -
non-GAAP
$
14,013
$
7,608
$
6,405
84
Pichel further commented, “Within our Traditional Bank,
excluding the loans we acquired as part of the CBank merger, we had
another strong quarter of loan growth of $92 million to further
build upon the $353 million of loan growth during 2022. The largest
driver of Traditional Bank growth during the first quarter of 2023
from a market perspective was from our Louisville-based Private
Banking and Commercial-related divisions along with steady
contributions from Northern Kentucky/Cincinnati, Florida and
Nashville. As we previously noted, we also completed our merger
with CBank on March 15th adding another $218 million of loans and
leases to our Traditional Bank outstanding loan balances. We are
extremely excited to pair the Republic and CBank cultures together
and look forward to further increasing our market share in the
Greater Cincinnati area with the help of CBank’s fantastic sales
team.
In addition to the strong loan growth during the first quarter
within our Core Bank, we were also able to maintain another strong
quarter of net interest margin of 3.98%. Our low-cost deposit base
continued to be a key contributor to the year-long expansion we
have experienced in our net interest margin within our Core Bank.
Noninterest-bearing deposits, in particular, within our Core Bank
averaged $1.49 billion for the first quarter of 2023, and
represented 36% of our average total deposits of the Core Bank for
the quarter. The true value of a bank’s franchise is its core
deposit base, and we are extremely proud of the deposit base and
corresponding franchise value we have built at Republic since our
inception.
As it relates to expense control, we have implemented a lot of
disciplines over the past few years to moderate our expenses and
become a more efficient organization. As a result, our total
Company non-interest expenses for the quarter, excluding the Day-1
CBank expenses, increased $1.8 million(4), or 4%(4), from the first
quarter of last year. This has been a huge focus for everyone
across our organization and we are extremely proud of our on-going
results.
“Of course, the big story across the banking industry during the
first quarter was the two bank failures. It is circumstances like
this that illustrate the true value of an investment in, and a
banking relationship with, a community bank such as Republic Bank.
With a significant ownership stake in our Company, our management
team manages the various risks of being a bank with the long-term
horizon in mind. This approach to risk management is something that
differentiates us from many others. Our long-term horizon for risk
management is the primary reason that Republic Bank traditionally
places among the best capitalized banks in the country, and our
Core Bank consistently places among the best, as well, for its low
credit losses. Rest assured that we will continue to operate the
Company to be here for its communities, its clients, its
associates, and its shareholders for many years to come,” concluded
Pichel.
The following table highlights Republic’s key metrics for the
three months ended March 31, 2023 and 2022. Additional financial
details, including segment-level data, are provided in the
financial supplement to this release. The attached digital version
of this release includes the financial supplement as an appendix.
The financial supplement may also be found as Exhibit 99.2 of the
Company’s Form 8-K filed with the SEC on April 20, 2023.
Total Company Financial
Performance Highlights
Three Months Ended Mar.
31,
(dollars in thousands, except per share
data)
2023
2022
$ Change
% Change
Income Before Income Tax Expense
$
36,114
$
36,369
$
(255
)
(1
)%
Net Income
28,092
28,350
(258
)
(1
)
Diluted EPS
1.42
1.42
-
—
Return on Average Assets ("ROA")
1.81
%
1.77
%
NA
2
Return on Average Equity ("ROE")
12.78
13.37
NA
(4
)
NA – Not applicable
Results of Operations for the First
quarter of 2023 Compared to the First quarter of
2022
Core Bank(1)
As previously noted, Operating net income for the Core Bank was
$14.0 million for the first quarter of 2023 compared to $7.6
million for the first quarter of 2022. Continuing the trend from
the second half of 2022, an increase in Traditional Bank net
interest income was the primary driver to the Core Bank’s earnings
growth for the quarter and helped to offset declines in Mortgage
Banking income and net interest income within the Warehouse Lending
(“Warehouse”) segment.
Net Interest Income – Core Bank net interest income was $52.3
million for the first quarter of 2023, an $11.4 million, or 28%,
increase over the first quarter of 2022. In addition, the Core
Bank’s net interest margin (“NIM”) increased from 2.92% during the
first quarter of 2022 to 3.98% during the first quarter of 2023.
This increase was driven primarily by the following in each Core
Bank segment:
Traditional Bank
The Traditional Bank’s net interest income increased $14.0
million, or 39%, and its NIM expanded 117 basis points to 4.07%
from the first quarter of 2022 to the first quarter of 2023. This
increase in net interest income and the related expansion in NIM
resulted primarily from the benefits of the Company’s low-cost core
deposit base and strong year-over-year growth in average loan
balances. These benefits were partially offset by a decline in the
Company’s average interest-earning cash balances, with these
balances near more normal, historical levels during the first
quarter of 2023 as the excess liquidity from the various government
stimulus programs related to COVID continued to wane throughout the
industry. The following highlights some of the more impactful items
affecting net interest income during the quarter for the
Traditional Bank.
- Average Traditional Bank loans grew from $3.5 billion with a
weighted-average yield of 3.95% during the first quarter of 2022 to
$3.9 billion with a weighted average yield of 4.59% during the
first quarter of 2023.
- Average investments grew to $773 million with a
weighted-average yield of 2.61% during the first quarter of 2023
from $606 million with a weighted-average yield of 1.39% for the
first quarter of 2022.
- The Traditional Bank’s cost of average total deposits,
including the positive benefit of its average noninterest-bearing
deposits, increased from 0.08% during the first quarter of 2022 to
0.47% for the first quarter of 2023.
- Average interest-earning cash was $238 million with a
weighted-average yield of 4.55% during the first quarter of 2023
compared to $858 million with a weighted-average yield of 0.20% for
the first quarter of 2022. The decline in average cash balances was
driven generally by the cash change in cash used to fund the
increases in average investments and loans along with the decreases
in average deposit balances from quarter to quarter.
Warehouse Lending
Net interest income within the Warehouse segment decreased $2.4
million, or 54%, from the first quarter of 2022 to the first
quarter of 2023, driven by decreases in both average outstanding
balances and net interest margin. Overall, average outstanding
Warehouse balances declined from $585 million during the first
quarter of 2022 to $330 million for the first quarter of 2023.
In addition, the Warehouse net interest margin decreased 56
basis points from 3.09% during the first quarter of 2022 to 2.53%
during the first quarter of 2023. The decline in the Warehouse net
interest margin generally occurred as the rise in its funding
costs, as charged through the Company’s internal
funds-transfer-pricing (“FTP”) methodology, outpaced the increase
in the Warehouse loan yield since rates began rising in March of
2022.
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 Mar.
31,
Three Months Ended Mar.
31,
Reportable Segment
2023
2022
Change
2023
2022
Change
Traditional Banking - Legacy
$
49,717
$
36,148
$
13,569
4.05
%
2.90
%
1.15
%
Traditional Banking - CBank**
390
-
390
NM
NM
NM
Total Traditional Banking
50,107
36,148
13,959
4.07
2.90
1.17
Warehouse Lending
2,087
4,515
(2,428
)
2.53
3.09
(0.56
)
Mortgage Banking*
61
204
(143
)
NM
NM
NM
Total Core Bank
$
52,255
$
40,867
$
11,388
3.98
2.92
1.06
Average Loan Balances
Period-End Loan
Balances
(dollars in thousands)
Three Months Ended Mar.
31,
Mar. 31,
Dec. 31,
Reportable Segment
2023
2022
$ Change
% Change
2023
2022
$ Change
% Change
Traditional Banking - Legacy
$
3,869,734
$
3,520,173
$
349,561
10
%
$
3,947,137
$
3,855,142
$
91,995
2
%
Traditional Banking - CBank
41,109
-
41,109
NM
218,040
-
218,040
NM
Total Traditional Banking
3,910,843
3,520,173
390,670
11
$
4,165,177
3,855,142
310,035
8
Warehouse Lending
329,716
584,519
(254,803
)
(44
)
457,365
403,560
53,805
13
Mortgage Banking*
2,545
18,810
(16,265
)
(86
)
1,034
1,302
(268
)
(21
)
Total Core Bank
$
4,243,104
$
4,123,502
$
119,602
3
$
4,623,576
$
4,260,004
$
363,572
9
*Includes loans held for sale
** CBank was acquired on 3/15/2023. The
figures presented above include the related activity for the period
3/16/2023 to 3/31/2023.
NM – Not meaningful
Provision for Expected Credit Loss Expense – The Core Bank’s
Provision(2) was a net charge of $3.1 million during the first
quarter of 2023 compared to a net credit of $81,000 for the first
quarter of 2022.
The net charge during the first quarter of 2023 was primarily
driven by the Day-1 Provision for CBank of $2.7 million. The
remaining net charge of $430,000 to the Core Bank Provision was
primarily from general formula reserves applied to $92 million of
Traditional Bank loan growth from December 31, 2022, to March 31,
2023, as well as $54 million of spot balance warehouse loan growth
during the same period. The net credit during the first quarter of
2022 was primarily driven by a decline in formula reserves
resulting from lower period-end Warehouse balances, partially
offset by increased formula reserves tied to strong Traditional
Bank loan growth during the quarter.
As of March 31, 2023, while its credit metrics remained solid,
the Core Bank’s Allowance remained generally elevated compared to
historical levels due to continued uncertainty regarding inflation
and the potential impacts to the economy from Federal Reserve
actions to bring inflation under control. As a percentage of total
loans, the Core Bank’s Allowance(2) increased from 1.21% as of
March 31, 2022, to 1.22% as of March 31, 2023. The table below
provides a view of the Company’s percentage of
Allowance-to-total-loans by reportable segment.
As of Mar. 31, 2023
As of Dec. 31, 2022
Quarterly Change
(dollars in thousands)
Allowance
Allowance
Allowance
Reportable Segment
Gross Loans
Allowance
to Loans
Gross Loans
Allowance
to Loans
to Loans
% Change
Traditional Bank - Legacy
$
3,947,137
$
50,932
1.29
%
$
3,855,142
$
49,616
1.29
%
—
%
—
%
Traditional Banking - CBank
218,040
4,284
1.96
—
—
—
1.96
—
Total Traditional Bank
4,165,177
55,216
1.33
3,855,142
49,616
1.29
0.04
3
Warehouse Lending
457,365
1,144
0.25
403,560
1,725
0.43
(0.18
)
(41.86
)
Total Core Bank
4,622,542
56,360
1.22
4,258,702
51,341
1.21
0.01
1
Tax Refund Solutions
39,992
25,981
64.97
149,272
8,370
5.61
59.36
1,058
Republic Credit Solutions
111,700
13,780
12.34
107,828
11,945
11.08
1.26
11
Total Republic Processing Group
151,692
39,761
26.21
257,100
20,315
7.90
18.31
232
Total Company
$
4,774,234
$
96,121
2.01
%
$
4,515,802
$
71,656
1.59
%
0.42
%
26
%
ACLL Roll-Forward
Three Months Ended March
31,
2023
2022
(dollars in thousands)
Beginning
CBank
Charge-
Ending
Beginning
Charge-
Ending
Reportable Segment
Balance
Adjustment*
Provision
offs
Recoveries
Balance
Balance
Provision
offs
Recoveries
Balance
Traditional Bank - Legacy
$
50,709
$
—
$
300
$
(331
)
$
254
$
50,932
$
49,407
$
327
$
(263
)
$
145
$
49,616
Traditional Banking - CBank
—
1,600
2,684
—
—
4,284
—
—
—
—
—
Total Traditional Bank
50,709
1,600
2,984
(331
)
254
55,216
49,407
327
(263
)
145
49,616
Warehouse Lending
1,009
—
135
—
—
1,144
2,126
(401
)
—
—
1,725
Total Core Bank
51,718
1,600
3,119
(331
)
254
56,360
51,533
(74
)
(263
)
145
51,341
Tax Refund Solutions
3,888
—
21,808
—
285
25,981
96
7,912
—
362
8,370
Republic Credit Solutions
14,807
—
1,839
(3,099
)
233
13,780
12,948
1,395
(2,673
)
275
11,945
Total Republic Processing Group
18,695
—
23,647
(3,099
)
518
39,761
13,044
9,307
(2,673
)
637
20,315
Total Company
$
70,413
$
1,600
$
26,766
$
(3,430
)
$
772
$
96,121
$
64,577
$
9,233
$
(2,936
)
$
782
$
71,656
* The net fair value adjustment to ACLL
includes an estimate of lifetime credit losses for Purchased Credit
Deteriorated loans.
The table below presents the Core Bank’s credit quality
metrics:
Quarters Ended:
Years Ended:
Mar. 31,
Mar. 31,
Dec. 31,
Dec. 31,
Dec. 31,
Core Banking Credit Quality
Ratios
2023
2022
2022
2021
2020
Nonperforming loans to total loans
0.34
%
0.40
%
0.37
%
0.47
%
0.50
%
Nonperforming assets to total loans
(including OREO)
0.38
0.44
0.40
0.51
0.56
Delinquent loans* to total loans
0.12
0.14
0.14
0.17
0.21
Net charge-offs to average loans
0.01
0.01
0.00
0.01
0.03
(Quarterly rates annualized)
OREO = Other Real Estate Owned
*Loans 30-days-or-more past due
Noninterest Income – Core Bank noninterest income was $8.5
million during the first quarter of 2023, a decrease of $1.5
million, or 15%, from the first quarter of 2022. The decrease in
non-interest income was driven primarily by a reduction in Mortgage
Banking income, which declined $1.9 million for the quarter. The
decrease in Mortgage banking income was caused by the rise in
long-term interest rates, which led to a significant slowdown in
the origination of mortgage loans to be sold into the secondary
market. As a result, the Core Bank sold only $17 million of loans
into the secondary market during the first quarter of 2023 compared
to sales of $119 million during the first quarter of 2022.
Noninterest Expense – Core Bank noninterest expense was $44.4
million for the first quarter of 2023 compared to $41.9 million for
the first quarter of 2022, an increase of $2.5 million, or 6% for
the quarter. Included within this increase were $2.1 million of
Day-1 expenses related to the CBank merger. Excluding these merger
related expenses, Core Bank non-interest expense was up a nominal
$431,000(5), or 1%(5), over the first quarter of 2022.
Republic Processing
Group(3)
The Republic Processing Group (“RPG”) reported net income of
$17.8 million for the first quarter of 2023, a decrease of $3.0
million from the first quarter of 2022. The TRS segment was the
primary driver for quarter-to-quarter change in net income at RPG.
TRS derives substantially all its revenues during the first half of
the year. TRS recorded net income of $12.4 million for the first
quarter of 2023 compared to net income of $15.4 million for the
same period in 2022. The following primarily drove the decrease in
TRS’s net income for the quarter:
- As previously disclosed, the Bank received a contract
termination fee of $5.0 million during the first quarter of 2022
related to its cancelled sale of TRS. The after-tax benefit to the
TRS net income during the first quarter of 2022 was $3.8
million.
- Net interest income within the TRS segment was up $16.4 million
from the first quarter of 2022 to the first quarter of 2023. Net
interest income at TRS includes income from its prepaid card
products as well as the income associated with its tax-related
credit products. A further breakdown of net interest income by each
of these categories are as follows:
- The prepaid card product component of TRS drove a $3.1 million
increase to net interest income for the segment. This increase was
generally driven by a higher crediting rate applied through the
Company’s internal FTP. The prepaid card FTP credit yield was 3.82%
for average prepaid card-related balances of $377 million during
the first quarter of 2023 compared to 0.37% for average prepaid
card-related balances of $397 million during the first quarter of
2022.
- Related to the segment’s tax-related products, net interest
income increased $13.3 million for the quarter. Loan-related
interest and fees increased $18.0 million for the quarter and was
driven primarily by increase in Refund Advance (“RA”) volume driven
by a new contract with a large national tax preparation provider.
This increase in loan revenue was partially offset by a $4.4
million increase to the segment’s net cost of funds as applied
through its internal FTP.
- Offsetting the rise in net interest income, TRS recorded a net
charge to the Provision for RAs of $21.7 million on the $737
million in RAs originated during the first quarter of 2023. This
compares to a net charge to the Provision of $8.3 million, on the
$311 million of RAs originated during the first quarter of 2022.
The $13.4 million increase in Provision for the first quarter of
2023 was primarily due to the increased volume from the new
contract noted in the paragraph above.
Including early season RAs originated during
the fourth quarter of 2022, TRS had a total Allowance for RAs of
$25.8 million as of March 31, 2023, representing 3.09% of all RAs
originated related to the first quarter 2023 tax season. TRS’s loss
rate as of June 30, 2022, was 2.85% of total originations and TRS
finished 2022 with a final RA loss rate of 2.20% of total RAs
originated.
- Net Refund Transfer (“RT”) revenue declined $1.2 million for
the quarter. The decrease in net RT revenue was consistent with a
general decline in overall RT volume across the industry.
Republic Bancorp, Inc. (the “Company”) is the parent company of
Republic Bank & Trust Company (the “Bank”). The Bank currently
has 45 banking centers in communities in four metropolitan
statistical areas (“MSAs”) across five states: 22 banking centers
located in the Louisville MSA in Louisville, Prospect, Shelbyville,
and Shepherdsville in Kentucky, and Floyds Knobs, Jeffersonville,
and New Albany in Indiana; six centers in the Lexington MSA in
Georgetown and Lexington in Kentucky; eight banking centers in the
Cincinnati MSA in Kenwood, Norwood and West Chester in Ohio, and
Bellevue, Covington, Crestview Hills, and Florence in Kentucky;
seven centers in the Tampa MSA in Largo, New Port Richey, St.
Petersburg, Seminole, Tampa, and Temple Terrace in Florida; and two
banking centers in the Nashville MSA in Cool Springs and Green
Hills, Tennessee. The Bank offers internet banking at
www.republicbank.com. As of March 31, 2023, the Company has
approximately $6.1 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. 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, 2022. The Company
undertakes no obligation to update any forward-looking statements,
except as required by applicable law.
Footnotes:
(1)
“Core Bank” or “Core Banking” operations
consist of the Traditional Banking, Warehouse Lending, and Mortgage
Banking segments.
(2)
Provision – Provision for Expected Credit
Loss Expense
Allowance – Allowance for Credit Losses on
Loans
(3)
Republic Processing Group operations
consist of the TRS and Republic Credit Solutions (“RCS”)
segments.
(4)
The following table reconciles Total
Company Noninterest Expenses excluding Day-1 CBank expenses, a
non-GAAP measure.
Noninterest Expenses
Three Months Ended Mar.
31,
(dollars in thousands)
2023
2022
$ Change
% Change
Total Company - GAAP
$
52,443
$
48,581
$
3,862
8
%
Less: Impact of CBank Day-1 Expenses
2,073
—
2,073
NM
Traditional Banking ex CBank Day-1
Expenses - non-GAAP
$
50,370
$
48,581
$
1,789
4
(5)
The following table reconciles Core Bank
Noninterest Expenses excluding Day-1 CBank expenses, a non-GAAP
measure.
Noninterest Expenses
Three Months Ended Mar.
31,
(dollars in thousands)
2023
2022
$ Change
% Change
Core Bank - GAAP
$
44,374
$
41,869
$
2,505
6
%
Less: Impact of CBank Day-1 Expenses
2,073
—
2,073
NM
Core Bank ex CBank Day-1 Expenses -
non-GAAP
$
42,301
$
41,869
$
432
1
NM – Not meaningful
NA – Not applicable
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230420005145/en/
Republic Bancorp, Inc. Kevin Sipes Executive Vice President
& Chief Financial Officer (502) 560-8628
Grafico Azioni Republic Bancorp (NASDAQ:RBCAA)
Storico
Da Ago 2024 a Set 2024
Grafico Azioni Republic Bancorp (NASDAQ:RBCAA)
Storico
Da Set 2023 a Set 2024