Republic Bancorp, Inc. (“Republic” or the “Company”) reported
third quarter 2024 net income and Diluted Earnings per Class A
Common Share (“Diluted EPS”) of $26.5 million and $1.37 per share,
representing increases of 23% and 25% over the third quarter of
2023. Year-to-date net income was $82.4 million, an $11.6 million,
or 16%, increase from the same period in 2023, resulting in return
on average assets (“ROA”) and return on average equity (“ROE”) of
1.60% and 11.53% for the first nine months of 2024.
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Logan Pichel, President & CEO of the Republic Bank &
Trust Company commented, “We are proud to report another strong
performance for the third quarter. Our third quarter results
reflect our on-going strategic initiatives to enhance revenue,
while maintaining our expense discipline. Our success is
particularly evident within our Core Bank, as our net interest
margin (“NIM”) showed a marked expansion over the third quarter of
2023, while our total noninterest expenses were flat from the same
period. Additionally, the diversification of our business segments
remained a key component to our long-term strategy and our current
success. Overall, four of our five reportable business segments
produced solid increases in net income for the third quarter of
2024 versus the third quarter of 2023.
The Company’s balance sheet during the quarter continued to
trend in a positive direction. Deposits grew by $33 million from
June 30, 2024 to the September 30, 2024, while we prudently grew
the loan portfolio during the quarter by $46 million in Warehouse
lending and $9 million in Republic Credit Solutions. Within our
Traditional Bank, total loans declined $22 million from June 30,
2024 to $4.6 billion as of September 30, 2024 as our focus remained
on pricing discipline. This on-going focus of growing deposits,
combined with selective loan portfolio growth, reduced our
period-end Total Company loan-to-deposit ratio to 104% as of
September 30, 2024 compared to 106% as of September 30, 2023.
Steadily reducing our loan-to-deposit ratio, over time, will remain
a key focus as we increase our flexibility for key strategic
decisions.
We believe we are well-positioned to finish the year on a high
note, as our capital levels remain strong, and our credit quality
remains favorable. While we are proud of our past results, we
remain optimistic about our future, given the strength of our
balance sheet. We are focused on our mission of creating lasting
value for our clients, our shareholders, our associates, and the
communities we serve.” Pichel concluded.
The following table highlights Republic’s key metrics for the
three months ended September 30, 2024 and 2023. 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 October 18,
2024.
Total Company Financial
Performance Highlights
Three Months
Ended Sep. 30,
Nine Months
Ended Sep. 30,
(dollars in thousands, except per share
data)
2024
2023
$ Change
% Change
2024
2023
$ Change
% Change
Income Before Income Tax Expense
$
33,849
$
27,072
$
6,777
25
%
$
104,653
$
89,694
$
14,959
17
%
Net Income
26,543
21,571
4,972
23
82,355
70,715
11,640
17
Diluted EPS
1.37
1.10
0.27
25
4.24
3.60
0.64
18
Return on Average Assets ("ROA")
1.58
%
1.36
%
NA
16
1.60
%
1.51
%
NA
6
Return on Average Equity ("ROE")
10.88
9.61
NA
13
11.53
10.58
NA
9
NA – Not applicable
Results of Operations for the Third Quarter of 2024 Compared
to the Third Quarter of 2023
Core Bank(1)
Net income for the Core Bank was $17.2 million for the third
quarter of 2024, a $4.0 million, or 30%, increase over the $13.2
million for the third quarter of 2023. Solid increases in net
interest income and noninterest income combined with flat
noninterest expenses and a minimal increase in the Provision were
all drivers for the growth in net income and GOP from the third
quarter of 2023 to the third quarter of 2024.
Net Interest Income – Core Bank net interest income was $54.6
million for the third quarter of 2024, a $4.6 million, or 9%,
increase from $50.0 million achieved during the third quarter of
2023. The rise in net interest income for the quarter was driven,
in general, by period-over-period growth in average
interest-earning assets and a higher net interest margin. The
increase in the Core Bank’s total dollars of net interest income
represented the second consecutive
quarter-over-same-quarter-last-year increase following two
consecutive quarterly declines in net interest income for the
fourth quarter of 2023 and the first quarter of 2024.
The Core Bank’s NIM increased from 3.43% during the third
quarter of 2023 to 3.53% during the third quarter of 2024. This
increase represented the first rise in the Core Bank’s
quarter-over-same-quarter-last-year NIM since the second quarter of
2023. The increase in the Core Bank’s NIM occurred as the rise in
its interest-earning asset yields outpaced the rise in its funding
costs. While the Core Bank’s cost of interest bearing liabilities
did demonstrate a notable increase of 46 basis points from the
third quarter of 2023 to the third quarter of 2024, the pace of the
increase on a linked-quarter basis began to slow meaningfully
during the second quarter of 2024, growing 13 basis points from the
first quarter of 2024 to the second quarter of 2024 and only 3
basis points from the second quarter of 2024 to the third quarter
of 2024.
Specific items of note impacting the Core Bank’s change in net
interest income and NIM between the third quarter of 2023 and the
third quarter of 2024 were as follows:
- Average outstanding Warehouse balances increased from $423
million during the third quarter of 2023 to $528 million for the
third quarter of 2024. Committed Warehouse lines declined from $1.0
billion to $902 million during these same periods, while an up-tick
in demand caused average usage rates for Warehouse lines to
increase from 42% during the third quarter of 2023 to 56% for the
third quarter of 2024.
- Traditional Bank average loans grew from $4.4 billion with a
weighted-average yield of 5.23% during the third quarter of 2023 to
$4.6 billion with a weighted average yield of 5.63% during the
third quarter of 2024. In general, the growth in average loan
balances was primarily attributable to loan growth achieved during
the last three months of 2023, as the spot balances for Traditional
Bank loans decreased $52 million, or 1%, from December 31, 2023 to
September 30, 2024.
- Average interest-earning cash, which is managed as a separate
but complementary component of the Company’s overall investment
portfolio, was $458 million with a weighted-average yield of 5.36%
during the third quarter of 2024 compared to $178 million with a
weighted-average yield of 5.38% for the third quarter of 2023. The
increase in average interest-earning cash was a strategic decision
primarily resulting from the inverted yield curve as the yield for
overnight cash remained a more appealing option throughout the
first nine months of 2024 than longer-term investment alternatives.
Additionally, management also chose to maintain supplemental
on-balance sheet liquidity during the first nine months of the
year, above required minimums, in response to the uncertainty of
the economic environment.
- Average investments were $593 million with a weighted-average
yield of 3.20% during the third quarter of 2024 compared to $771
million with a weighted-average yield of 2.75% for the third
quarter of 2023. As noted above, the more attractive yield for cash
generally led to a decrease in the Core Bank’s average investments
throughout 2024. Overall, the Core Bank continued to maintain an
investment portfolio with a short overall duration as part of its
total balance sheet interest rate risk management strategy.
- Further segmenting the Core Bank’s increased cost of
interest-bearing liabilities:
- The weighted-average cost of total interest-bearing deposits
increased from 2.08% during the third quarter of 2023 to 2.77% for
the third quarter of 2024, while average interest-bearing deposits
grew $510 million over the same periods. Included within this
growth in interest-bearing deposits was an $145 million increase in
the average balances for higher-costing, short-term brokered
deposits and third-party listing service deposits, which the
Company utilized for excess liquidity purposes.
- The average balance of FHLB borrowings decreased from $442
million for the third quarter of 2023 to $388 million for the third
quarter of 2024. In addition, the weighted-average cost of these
borrowings decreased from 4.85% to 4.41% for the same time periods.
The decrease in the average balance of borrowings was driven
primarily by the above noted growth in period-to-period average
interest-bearing deposits, while the decrease in the overall
weighted-average cost of FHLB borrowings resulted from
term-extension strategies to take advantage of the inverted yield
curve.
- Average noninterest-bearing deposits decreased $176 million
from the third quarter of 2023 to the third quarter of 2024. The
decline in noninterest-bearing deposits continued a trend dating
back to the fourth quarter of 2022, as the inverted yield curve and
competition for deposits continued to make interest-bearing
deposits a more attractive on-going alternative for consumer and
business deposit accounts.
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
2024
2023
Change
2024
2023
Change
Traditional Banking
$
51,023
$
47,493
$
3,530
3.61
%
3.52
%
0.09
%
Warehouse Lending
3,580
2,467
1,113
2.70
2.33
0.37
Total Core Bank
$
54,603
$
49,960
$
4,643
3.53
3.43
0.10
Average Loan Balances
Period-End Loan
Balances
(dollars in thousands)
Three Months Ended Sep.
30,
Sep. 30,
Sep. 30,
Reportable Segment
2024
2023
$ Change
% Change
2024
2023
$ Change
% Change
Traditional Banking
$
4,579,371
$
4,446,585
$
132,786
3
%
$
4,566,896
$
4,496,743
$
70,153
2
%
Warehouse Lending
528,363
423,141
105,222
25
595,163
457,033
138,130
30
Total Core Bank
$
5,107,734
$
4,869,726
$
238,008
5
$
5,162,059
$
4,953,776
$
208,283
4
Provision for Expected Credit Loss Expense – The Core Bank’s
Provision (2) was a net charge of $1.6 million for the third
quarter of 2024 compared to a net charge of $1.4 million for the
third quarter of 2023.
The net charge of $1.6 million for the third quarter of 2024 was
driven, primarily, by the following:
- The Core Bank recorded a net credit to the Provision of
$442,000 during the third quarter of 2024 primarily related to a
decline in Traditional Bank loan balances, which decreased by $22
million for the quarter.
- The Core Bank recorded a loan loss Provision of $1.9 million
for the charge-off of three linked, marine-related consumer
loans.
- The Core Bank recorded a net charge to the Provision of
$116,000 resulting from general formula reserves applied to an $46
million increase in outstanding Warehouse balances during the
quarter.
The net charge during the third quarter of 2023 was primarily
driven by the following:
- The Core Bank recorded a net charge to the Provision of $1.6
million during the third quarter of 2023 related to general formula
reserves applied to $101 million of Traditional Bank loan growth
for the quarter.
- The Core Bank recorded a net credit to the Provision of
$203,000 resulting from general formula reserves applied to an $82
million decline in outstanding Warehouse balances for the
quarter.
As a percentage of total loans, the Core Bank’s Allowance(2)
increased 1 basis point from September 30, 2023 to September 30,
2024. The table below provides a view of the Company’s percentage
of Allowance-to-total-loans by reportable segment.
As of Sep. 30, 2024
As of Sep. 30, 2023
Year-over-Year Change
(dollars in thousands)
Allowance
Allowance
Allowance
Reportable Segment
Gross Loans
Allowance
to Loans
Gross Loans
Allowance
to Loans
to Loans
% Change
Traditional Bank
$
4,566,896
$
59,549
1.30
%
$
4,496,743
$
56,931
1.27
%
0.03
%
2
%
Warehouse Lending
595,163
1,486
0.25
457,033
1,143
0.25
—
—
Total Core Bank
5,162,059
61,035
1.18
4,953,776
58,074
1.17
0.01
1
Tax Refund Solutions
302
1
0.33
354
1
0.28
0.05
18
Republic Credit Solutions
134,556
21,122
15.70
126,969
16,501
13.00
2.70
21
Total Republic Processing Group
134,858
21,123
15.66
127,323
16,502
12.96
2.70
21
Total Company
$
5,296,917
$
82,158
1.55
%
$
5,081,099
$
74,576
1.47
%
0.08
%
5
%
ACLL Roll-Forward
Three Months Ended September
30,
2024
2023
(dollars in thousands)
Beginning
Charge-
Ending
Beginning
Charge-
Ending
Reportable Segment
Balance
Provision
offs
Recoveries
Balance
Balance
Provision
offs
Recoveries
Balance
Traditional Bank
$
59,865
$
1,488
$
(2,308
)
$
504
$
59,549
$
55,567
$
1,567
$
(332
)
$
129
$
56,931
Warehouse Lending
1,370
116
—
—
1,486
1,346
(203
)
—
—
1,143
Total Core Bank
61,235
1,604
(2,308
)
504
61,035
56,913
1,364
(332
)
129
58,074
Tax Refund Solutions
—
(2,310
)
—
2,311
1
—
(1,967
)
—
1,968
1
Republic Credit Solutions
19,452
6,365
(5,022
)
327
21,122
15,289
4,333
(3,340
)
219
16,501
Total Republic Processing Group
19,452
4,055
(5,022
)
2,638
21,123
15,289
2,366
(3,340
)
2,187
16,502
Total Company
$
80,687
$
5,659
$
(7,330
)
$
3,142
$
82,158
$
72,202
$
3,730
$
(3,672
)
$
2,316
$
74,576
The table below presents the Core Bank’s credit quality
metrics:
Quarters Ended:
Years Ended:
Sep. 30,
Sep. 30,
Dec. 31,
Dec. 31,
Dec. 31,
Core Banking Credit Quality
Ratios
2024
2023
2023
2022
2021
Nonperforming loans to total loans
0.38
%
0.37
%
0.39
%
0.37
%
0.47
%
Nonperforming assets to total loans
(including OREO)
0.40
0.39
0.41
0.40
0.51
Delinquent loans* to total loans
0.19
0.14
0.16
0.14
0.17
Net charge-offs to average loans
0.14
0.02
0.01
0.00
0.01
(Quarterly rates annualized)
OREO = Other Real Estate Owned
*Loans 30-days-or-more past due at the
time the second contractual payment is past due.
Noninterest Income – Core Bank noninterest income increased $1.1
million from $10.0 million in the third quarter of 2023 to $11.1
million for the third quarter of 2024. The increase in noninterest
income was primarily driven by a $1.2 million increase in mortgage
banking income, which resulted from a reduction in long-term
interest rates during the third quarter of 2024 leading to an
up-tick in consumer loan demand for 15-and 30-year fixed rate
mortgage loans. Altogether, the Core Bank experienced a $47.5
million, or 99%, increase in fixed-rate, secondary market loan
rate-lock applications from the third quarter of 2023 to the third
quarter of 2024.
Noninterest Expense – The Core Bank’s noninterest expenses were
essentially flat at $42.2 million for the third quarter of 2024, an
increase of only $15,000 over the third quarter of 2023. Notable
line-item variances within the noninterest expense category
included:
- Salaries and benefits were flat as a 41-count reduction in Core
Bank FTEs from September 30, 2023 to September 30, 2024 was able to
substantially offset the increase in salaries over the same periods
resulting from annual merit increases.
- Technology expenses declined $358,000 from period-to-period,
primarily the result of a $450,000 credit the Core Bank received
during the third quarter of 2024 for a contract billing dispute
with one of its technology providers.
Republic Processing Group(3)
RPG reported net income of $9.4 million for the third quarter of
2024, a $1.0 million, or 12% increase over the $8.4 million for the
third quarter of 2023. RPG’s performance for the third quarter of
2024 compared to the third quarter of 2023, by operating segment,
was as follows:
Tax Refund Solutions
TRS recorded net income of $919,000 during the third quarter of
2024 compared to net income of $418,000 for the third quarter of
2023. The overall increase in TRS net income for the quarter was
driven primarily by a $387,000 increase in recoveries of prior
period charge-offs for Refund Advances (“RAs”) and a $340,000
increase in net refund transfer fees. Both of these increases were
the positive result of a pick-up in the pace of tax refund payments
received from the federal government as compared to third quarter
of 2023.
Republic Payment
Solutions
Net income at RPS was $2.2 million for the third quarter of
2024, a $917,000 decrease from the third quarter of 2023. During
the quarter, RPS earned a slightly lower yield of 4.91% applied to
the $351 million average of prepaid program balances for the third
quarter of 2024 compared to a yield of 4.97% for the $343 million
in average prepaid card balances for the third quarter of 2023. In
addition, net interest income at RPS was also negatively impacted
by a $1.3 million charge to interest expense for a revenue sharing
arrangement that began in January 2024.
Republic Credit
Solutions
Net income at RCS increased $1.4 million, or 29% from $4.9
million for the third quarter of 2023 to $6.3 million for the third
quarter of 2024. The increase in RCS net income was primarily due
to growth in profitability of one of its Line-of-Credit (“LOC”)
products, which had an increase in net income of $959,000 from the
third quarter of 2023 to the third quarter of 2024. The rise in net
income for this LOC product was driven primarily by a
period-to-period increase in average outstanding loan balances of
approximately $8 million.
Republic Bancorp, Inc. (the “Company”) is the parent company of
Republic Bank & Trust Company (the “Bank”). The Bank currently
has 47 banking centers in communities within five metropolitan
statistical areas (“MSAs”) across five states: 22 banking centers
located within the Louisville MSA in Louisville, Prospect,
Shelbyville, and Shepherdsville in Kentucky, and Floyds Knobs,
Jeffersonville, and New Albany in Indiana; six banking centers
within the Lexington MSA in Georgetown and Lexington in Kentucky;
eight banking centers within the Cincinnati MSA in Cincinnati and
West Chester in Ohio, and Bellevue, Covington, Crestview Hills, and
Florence in Kentucky; seven banking centers within the Tampa MSA in
Largo, New Port Richey, St. Petersburg, Seminole, and Tampa in
Florida; and four banking centers within the Nashville MSA in
Franklin, Murfreesboro, Nashville and Spring Hill, Tennessee. In
addition, Republic Bank Finance has one loan production office in
St. Louis, Missouri. The Bank offers internet banking at
www.republicbank.com. The Company is headquartered in Louisville,
Kentucky, and as of September 30, 2024, had approximately $6.7
billion in total assets. 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, 2023. 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 and Warehouse Lending
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, RPS, and RCS segments.
NM – Not meaningful
NA – Not applicable
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Republic Bancorp, Inc. Kevin Sipes Executive Vice President
& Chief Financial Officer (502) 560-8628
Republic Bancorp (NASDAQ:RBCAA)
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