Republic Bancorp, Inc. Reports Second Quarter 2024 Net Income of $25.2 Million
This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20240719431470/en/
We also had another positive quarter in moderating our operating costs as our
Some of our additional highlights for the second quarter of 2024 include:
-
Core Bank asset quality remained excellent, with net charge-offs to average loans of only 0.02% for the quarter and nonperforming loans to total loans of 0.39% as ofJune 30, 2024 . -
We completed the sale of
$67 million of lower-yielding mortgage loans during the quarter. We executed this sale as we see opportunities to increase our future earnings through recycling the proceeds from this transaction into other higher yielding loan opportunities. -
Our
Traditional Bank loan portfolio grew by$16 million during the second quarter. As expected, our new loan production at theTraditional Bank has been slower during the first six months of 2024 compared to previous periods as we continued to exercise strong pricing discipline for new loan opportunities. While this pricing discipline contributed to the rising yields for the Traditional Bank’s overall loan portfolio, it also reduced the Traditional Bank’s new loan volume, and as a result, the overall opportunity for growth in the Traditional Bank’s loan portfolio since year-end. While this strategy will likely make growing the Traditional Bank’s overall loan portfolio more difficult in the near term, we will continue to make pricing decisions with the long-term future of the Company in mind. -
To take advantage of the currently inverted yield curve and lower our overall borrowing costs during the second quarter of 2024, we borrowed
$100 million from theFederal Home Loan Bank (“FHLB”) on a five-year basis. As a result of this strategy, the Company was able to lock in an annualized cost of 4.42% for these borrowings over the five-year term compared to an annualized cost of 5.55% for overnight borrowings.
As it relates to our diversification of revenue streams, our
As we look ahead to the second half of 2024, achieving moderately priced deposit growth will remain a major focus. With our superior customer service, competitive products, convenient locations, and solid digital capabilities, we believe we are well-armed to effectively and efficiently grow our loyal customer base. I am optimistic about our future and the potential for us to create long-term value for our shareholders, our clients, our associates, and the communities we serve,” Pichel concluded.
The following table highlights Republic’s key metrics for the three months ended
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Total Company Financial Performance Highlights |
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Three Months Ended
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Six Months Ended
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(dollars in thousands, except per share data) |
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2024 |
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2023 |
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$ Change |
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% Change |
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2024 |
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2023 |
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$ Change |
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% Change |
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Income Before Income Tax Expense |
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$ |
32,105 |
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$ |
26,508 |
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$ |
5,597 |
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21 |
% |
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$ |
70,804 |
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$ |
62,622 |
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$ |
8,182 |
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13 |
% |
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Net Income |
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25,206 |
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21,052 |
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4,154 |
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20 |
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55,812 |
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49,144 |
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6,668 |
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14 |
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Diluted EPS |
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1.30 |
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1.07 |
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0.23 |
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22 |
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2.87 |
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2.50 |
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0.37 |
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15 |
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Return on Average Assets ("ROA") |
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1.50 |
% |
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1.37 |
% |
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NA |
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10 |
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1.61 |
% |
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1.60 |
% |
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NA |
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1 |
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Return on Average Equity ("ROE") |
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10.57 |
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9.41 |
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NA |
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12 |
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11.90 |
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11.14 |
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NA |
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7 |
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NA – Not applicable |
Results of Operations for the Second Quarter of 2024 Compared to the Second Quarter of 2023
Net income for the
Net Interest Income
–
While net interest income did increase in terms of overall dollars, the Core Bank’s net interest margin (“NIM”) decreased from 3.65% during the second quarter of 2023 to 3.46% during the second quarter of 2024. As with the previous quarters over the past year, the primary driver of the decrease in the net interest margin at the
Additional items of note impacting the Core Bank’s change in net interest income and NIM between the second quarter of 2023 and the second quarter of 2024 were as follows:
-
Average outstanding Warehouse balances decreased from
$462 million during the second quarter of 2023 to$457 million for the second quarter of 2024.Committed Warehouse lines declined from$980 million to$957 million during these same periods, while an up-tick in demand caused average usage rates for Warehouse lines to increase from 47% during the second quarter of 2023 to 49% for the second quarter of 2024. -
Traditional Bank average loans grew from$4.3 billion with a weighted-average yield of 4.98% during the second quarter of 2023 to$4.6 billion with a weighted average yield of 5.57% during the second quarter of 2024. In general, the growth in average loan balances was primarily attributable to loan growth achieved during the last six months of 2023, as the spot balances forTraditional Bank loans decreased$29 million , or 1%, fromDecember 31, 2023 toJune 30, 2024 . -
Average interest-earning cash, which is managed as a separate but complementary component of the Company’s overall investment portfolio, was
$393 million with a weighted-average yield of 5.46% during the second quarter of 2024 compared to$115 million with a weighted-average yield of 5.43% for the second quarter of 2023. The increase in average interest-earning cash balances was the continuance of a strategic decision over the past year for additional on-balance sheet liquidity above required minimums in response to the uncertainty of the economic environment. -
Average investments were
$670 million with a weighted-average yield of 3.09% during the second quarter of 2024 compared to$775 million with a weighted-average yield of 2.73% for the second quarter of 2023. TheCore Bank continued to maintain an investment portfolio during the second quarter of 2024 with a short overall duration as part of its interest rate risk management strategy. As a result of this short duration, theCore Bank has approximately$111 million of investment securities as ofJune 30, 2024 that are scheduled to mature over the remaining six months of 2024 with a weighted-average yield of 3.69%. -
Further segmenting the Core Bank’s increased cost of interest-bearing liabilities:
-
The weighted-average cost of total interest-bearing deposits increased from 1.59% during the second quarter of 2023 to 2.79% for the second quarter of 2024, while average interest-bearing deposits grew
$668 million over the same periods. Included within this$668 million of growth in interest-bearing deposits was a$251 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 increased from
$256 million for the second quarter of 2023 to$306 million for the second quarter of 2024. Conversely, the weighted-average cost of these borrowings decreased from 4.90% to 4.29% for the same time periods. The increase in the average balance of borrowings was driven, in general, by the above noted growth in period-to-period average loans, while the decrease in the overall weighted-average cost of FHLB borrowings resulted from term-extension strategies to take advantage of the currently inverted yield curve.
-
The weighted-average cost of total interest-bearing deposits increased from 1.59% during the second quarter of 2023 to 2.79% for the second quarter of 2024, while average interest-bearing deposits grew
The following tables present by reportable segment the overall changes in the Core Bank’s net interest income, net interest margin, as well as average and period-end loan balances:
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Net Interest Income |
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Net Interest Margin |
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(dollars in thousands) |
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Three Months Ended |
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Three Months Ended |
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Reportable Segment |
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2024 |
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2023 |
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Change |
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2024 |
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2023 |
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Change |
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Traditional Banking |
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$ |
49,915 |
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$ |
48,743 |
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$ |
1,172 |
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3.53 |
% |
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3.77 |
% |
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(0.24) |
% |
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Warehouse Lending |
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2,914 |
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2,642 |
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272 |
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2.57 |
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2.28 |
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0.29 |
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$ |
52,829 |
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$ |
51,385 |
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$ |
1,444 |
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3.46 |
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3.65 |
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(0.19) |
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Average Loan Balances |
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Period-End Loan Balances |
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(dollars in thousands) |
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Three Months Ended |
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Reportable Segment |
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2024 |
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2023 |
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$ Change |
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% Change |
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2024 |
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2023 |
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$ Change |
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% Change |
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Traditional Banking |
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$ |
4,622,655 |
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$ |
4,279,373 |
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$ |
343,282 |
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8 |
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% |
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$ |
4,589,167 |
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$ |
4,394,668 |
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$ |
194,499 |
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4 |
% |
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Warehouse Lending |
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456,908 |
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462,755 |
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(5,847 |
) |
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(1 |
) |
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549,011 |
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539,560 |
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9,451 |
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2 |
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$ |
5,079,563 |
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$ |
4,742,128 |
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$ |
337,435 |
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7 |
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$ |
5,138,178 |
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$ |
4,934,228 |
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$ |
203,950 |
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4 |
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*Includes loans held for sale |
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NM – Not meaningful |
Provision for Expected Credit Loss Expense – The Core Bank’s Provision (2) was a net charge of
The net charge of
-
The
Core Bank recorded a net charge to the Provision of$681,000 during the second quarter of 2024 substantially related to general formula reserves applied toTraditional Bank loans. While loan balances at theTraditional Bank only slightly increased by$16 million during the second quarter, the segment continued to experience a change in loan mix, growing in categories such as construction and land development, with higher loan loss reserve requirements thus driving its higher Provision for the quarter.
-
The
Core Bank recorded a net charge to the Provision of$214,000 resulting from general formula reserves applied to an$86 million increase in outstanding Warehouse balances during the quarter.
The net charge of
-
The
Core Bank recorded a net charge to the Provision of$3.9 million during the second quarter of 2023 substantially related to general formula reserves applied to$229 million ofTraditional Bank loan growth for the quarter.
-
Offsetting the above, the
Core Bank recognized a$2.0 million credit to the Provision during the second quarter of 2023 driven primarily by the release of$1.5 million in COVID-related reserves as the federal government declared an official end to the COVID pandemic effectiveMay 2023 .
-
The
Core Bank recorded a net charge to the Provision of$202,000 resulting from general formula reserves applied to an$81 million increase in outstanding Warehouse balances during the quarter.
As a percentage of total loans, the Core Bank’s Allowance(2) increased 4 basis points from
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As of |
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As of |
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Year-over-Year Change |
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(dollars in thousands) |
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Allowance |
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Allowance |
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Allowance |
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Reportable Segment |
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Gross Loans |
|
Allowance |
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to Loans |
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Gross Loans |
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Allowance |
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to Loans |
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to Loans |
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% Change |
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$ |
4,589,167 |
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$ |
59,865 |
1.30 |
% |
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$ |
4,394,668 |
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$ |
55,567 |
1.26 |
% |
|
0.04 |
% |
3 |
% |
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Warehouse Lending |
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549,011 |
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|
1,370 |
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0.25 |
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|
539,560 |
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|
1,346 |
|
0.25 |
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— |
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— |
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5,138,178 |
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|
61,235 |
|
1.19 |
|
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|
4,934,228 |
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|
56,913 |
|
1.15 |
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|
0.04 |
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3 |
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Tax Refund Solutions |
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92 |
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— |
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— |
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|
193 |
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— |
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— |
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— |
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— |
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Republic |
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126,000 |
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|
19,452 |
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15.44 |
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118,721 |
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|
15,289 |
|
12.88 |
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|
2.56 |
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20 |
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126,092 |
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19,452 |
|
15.43 |
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|
118,914 |
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|
15,289 |
|
12.86 |
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|
2.57 |
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20 |
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$ |
5,264,270 |
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$ |
80,687 |
1.53 |
% |
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$ |
5,053,142 |
|
$ |
72,202 |
1.43 |
% |
|
0.10 |
% |
7 |
% |
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ACLL Roll-Forward |
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Three Months Ended |
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2024 |
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2023 |
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(dollars in thousands) |
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Beginning |
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Charge- |
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Ending |
|
Beginning |
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Charge- |
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Ending |
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Reportable Segment |
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Balance |
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Provision |
|
offs |
|
Recoveries |
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Balance |
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Balance |
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Adjustment* |
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Provision |
|
offs |
|
Recoveries |
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Balance |
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$ |
59,176 |
|
$ |
921 |
|
|
$ |
(332 |
) |
|
$ |
100 |
|
$ |
59,865 |
|
$ |
55,216 |
|
$ |
(1,384 |
) |
|
$ |
1,860 |
|
|
$ |
(239 |
) |
|
$ |
114 |
|
$ |
55,567 |
Warehouse Lending |
|
|
1,156 |
|
|
214 |
|
|
|
— |
|
|
|
— |
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|
1,370 |
|
|
1,144 |
|
|
— |
|
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|
202 |
|
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|
— |
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|
— |
|
|
1,346 |
|
|
|
60,332 |
|
|
1,135 |
|
|
|
(332 |
) |
|
|
100 |
|
|
61,235 |
|
|
56,360 |
|
|
(1,384 |
) |
|
|
2,062 |
|
|
|
(239 |
) |
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|
114 |
|
|
56,913 |
|
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|||||
Tax Refund Solutions |
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|
30,069 |
|
|
(1,182 |
) |
|
|
(32,693 |
) |
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|
3,806 |
|
|
— |
|
|
25,981 |
|
|
— |
|
|
|
(219 |
) |
|
|
(25,950 |
) |
|
|
188 |
|
|
— |
Republic |
|
|
18,301 |
|
|
5,196 |
|
|
|
(4,315 |
) |
|
|
270 |
|
|
19,452 |
|
|
13,780 |
|
|
— |
|
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|
4,296 |
|
|
|
(3,018 |
) |
|
|
231 |
|
|
15,289 |
|
|
|
48,370 |
|
|
4,014 |
|
|
|
(37,008 |
) |
|
|
4,076 |
|
|
19,452 |
|
|
39,761 |
|
|
— |
|
|
|
4,077 |
|
|
|
(28,968 |
) |
|
|
419 |
|
|
15,289 |
|
|
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|||||
|
|
$ |
108,702 |
|
$ |
5,149 |
|
|
$ |
(37,340 |
) |
|
$ |
4,176 |
|
$ |
80,687 |
|
$ |
96,121 |
|
$ |
(1,384 |
) |
|
$ |
6,139 |
|
|
$ |
(29,207 |
) |
|
$ |
533 |
|
$ |
72,202 |
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* 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:
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Quarters Ended: |
Years Ended: |
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Core Banking Credit Quality Ratios |
2024 |
2023 |
2023 |
2022 |
2021 |
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Nonperforming loans to total loans |
0.39 |
% |
0.34 |
% |
0.39 |
% |
0.37 |
% |
0.47 |
% |
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Nonperforming assets to total loans (including OREO) |
0.41 |
|
0.37 |
|
0.41 |
|
0.40 |
|
0.51 |
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Delinquent loans* to total loans |
0.18 |
|
0.12 |
|
0.16 |
|
0.14 |
|
0.17 |
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Net charge-offs to average loans |
0.02 |
|
0.01 |
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0.01 |
|
0.00 |
|
0.01 |
|
(Quarterly rates annualized) |
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OREO = Other Real Estate Owned |
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*Loans 30-days-or-more past due at the time the second contractual payment is past due. |
Noninterest Income –
Noninterest Expense – The Core Bank’s noninterest expenses were
RPG reported net income of
Tax Refund Solutions
TRS recorded net income of
Republic Payment Solutions
Net income at RPS was
Republic
Net income at RCS increased
Republic Bancorp, Inc. (the “Company”) is the parent company of
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
Footnotes: |
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(1) “Core Bank” or “Core Banking” operations consist of the Traditional Banking and Warehouse Lending segments. |
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(2) Provision – Provision for Expected Credit Loss Expense |
Allowance – Allowance for Credit Losses on Loans |
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(3) |
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NM – Not meaningful |
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NA – Not applicable |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240719431470/en/
Republic Bancorp, Inc.
Executive Vice President & Chief Financial Officer
(502) 560-8628
Source: