Republic Bancorp, Inc. Reports a 22% Year-Over-Year Increase in Fourth Quarter Pre-Tax Net Income

Jan 25, 2019 08:05 am
LOUISVILLE, Ky. -- 

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”) is pleased to report fourth quarter net income of $17.3 million, a 258% increase over the fourth quarter of 2017, resulting in Diluted Earnings per Class A Common Share (“Diluted EPS”) of $0.83. Year-to-date net income was $77.9 million, a $32.2 million, or 71%, increase from the same period in 2017, resulting in a return on average assets (“ROA”) and a return on average equity (“ROE”) of 1.52% and 11.67% for 2018.

Steve Trager, Chairman & CEO of Republic commented, “With the change in the tax law during 2018 playing such a large role in the comparability of our quarterly and year-over-year net income metrics, we have focused the benchmarks for our 2018 results using pre-tax net income, as we believe this is more reflective of the true operating performance of the Company on a comparable basis. I am excited about these results, as we were able to grow our pre-tax net income to $20.3 million for the fourth quarter of 2018, an increase of 22% over the fourth quarter of 2017. In addition, pre-tax net income for the year ended December 31, 2018 increased $15.9 million, or 20%, over the year ended December 31, 2017. A healthy expansion in our net interest margin was the primary driver for the increase in our net interest income and our solid year-over-year performance, despite less growth in our Core Bank loan portfolio than the recent past. We were able to achieve these results in our net interest margin thanks to our strong balance sheet management strategies and continued success in maintaining our noninterest-bearing deposit base.

“Looking ahead to 2019, an increase in short-term interest rates, a continued flattening of the yield curve, and stiff competition for lower-cost core deposits are all expected in the market for the coming year. We believe these projected headwinds will be a stern challenge for all in the banking industry. We further believe, however, that we are well positioned to face these challenges thanks to a strong management team and our 1,000+ dedicated associates that are willing to go the extra mile each and every day, in our efforts to make Republic one of the best performing banks in the industry,” concluded Steve Trager.

The following table highlights Republic’s financial performance for the fourth quarters and years ended December 31, 2018 and 2017:

 
   
Total Company Financial Performance Highlights
Three Months Ended Dec. 31,       Year Ended Dec. 31,  
(dollars in thousands, except per share data) 2018   2017

$ Change

  % Change 2018   2017

$ Change

  % Change
   
Income Before Income Taxes* $ 20,328 $ 16,612 $ 3,716 22 % $ 94,263 $ 78,386 $ 15,877 20 %
Net Income* 17,306 4,838 12,468 258 77,852 45,632 32,220 71
Diluted Earnings per Class A Common Stock 0.83 0.23 0.60 261 3.74 2.20 1.54 70
Return on Average Assets 1.37 % 0.39 % NA 251 1.52 % 0.95 % NA 60
Return on Average Equity 10.07 3.02 NA 233 11.67 7.26 NA 61
 

NA – Not applicable

*See Segment Data at the End of this Earnings Release

 

Results of Operations for the Fourth Quarter of 2018 Compared to the Fourth Quarter of 2017

Core Bank(1) – Net income from Core Banking was $16.2 million for the fourth quarter of 2018, an increase of $9.2 million, or 134%, over the fourth quarter of 2017. The Core Bank’s pre-tax net income for the fourth quarter of 2018 increased $1.7 million, or 10%, over the same period in 2017, benefitting from growth in net interest income and noninterest income, as well as continued strong credit quality.

Core Bank net interest income increased $2.0 million, or 4%, over the fourth quarter of 2017 driven by a 13 basis-point expansion in the Core Bank’s net interest margin and further complemented by an increase of $92 million, or 2%, in quarterly average Core Bank loans. The table below presents the overall change in the Core Bank’s net interest income, as well as average and period-end loan balances by origination channel:

 
  Net Interest Income  
for the
(dollars in thousands) Three Months Ended Dec. 31,
Origination Channel 2018     2017

$ Change

  % Change
 
Traditional Network $ 41,964 $ 37,529 $ 4,435 12 %
Warehouse Lending 3,557 4,460 (903 ) (20 )
Correspondent Lending 248 247 1 0
2012-FDIC Acquired Loans   89   1,648   (1,559 ) (95 )
Total Core Bank $ 45,858 $ 43,884 $ 1,974   4
 
 
                 
Average Loan Balances Period-End Loan Balances
(dollars in thousands) Three Months Ended Dec. 31, Dec. 31,
Origination Channel   2018   2017

$ Change

  % Change   2018   2017

$ Change

  % Change
 
Traditional Network $ 3,434,020 $ 3,247,472 $ 186,548 6 % $ 3,475,999 $ 3,286,582 $ 189,417 6 %
Warehouse Lending 453,794 523,725 (69,931 ) (13 ) 469,695 525,573 (55,878 ) (11 )
Correspondent Lending 97,252 120,734 (23,482 ) (19 ) 94,827 116,792 (21,965 ) (19 )
2012-FDIC Acquired Loans   5,448   6,836   (1,388 ) (20 )   5,218   6,551   (1,333 ) (20 )
Total Core Bank $ 3,990,514 $ 3,898,767 $ 91,747   2 $ 4,045,739 $ 3,935,498 $ 110,241   3
 

The primary drivers of the changes in the Core Bank’s average loan balances and net interest income for the fourth quarter of 2018, as compared to the fourth quarter of 2017, follow:

  • The difference between the Core Bank’s net interest margin and net interest spread was 32 basis points during the fourth quarter of 2018 compared to 22 basis points during the fourth quarter of 2017. The differential between the net interest margin and net interest spread represents the value of the Core Bank’s noninterest-bearing deposits and stockholders’ equity to its net interest margin. Because of rising short-term interest rates from December 31, 2017 to December 31, 2018, as measured by the increase of 100 basis points in the Federal Funds Target Rate during this period, the contribution of the Core Bank’s noninterest-bearing deposits and stockholders’ equity to the net interest margin increased significantly.
  • The Traditional Network experienced solid growth in average loan balances of $187 million, or 6%, from the fourth quarter of 2017 to the fourth quarter of 2018. This growth was largely concentrated in the commercial loan sector, with average commercial real estate balances growing $43 million, or 4%, and average commercial and industrial balances growing $63 million, or 21%.
  • During the fourth quarter of 2017, the Core Bank’s Traditional Network received a favorable payoff of a purchased credit-impaired loan acquired in the Company’s 2016 acquisition of Cornerstone Bancorp, Inc. This favorable payoff contributed approximately $670,000 of non-recurring interest income and approximately six basis points of net interest margin to the Core Bank for the fourth quarter of 2017.
  • The Core Bank’s 2012 FDIC-Acquired loans contributed $1.6 million less in net interest income during the fourth quarter of 2018 compared to the same period in 2017. During the fourth quarter of 2017, a purchased credit-impaired loan paid off contributing approximately $1.6 million of non-recurring interest income and approximately 13 basis points of net interest margin to the Core Bank for the fourth quarter of 2017. Substantially all discount on the Core Bank’s 2012 FDIC-Acquired loans had been accreted by December 31, 2017.
  • Average Warehouse Lending (“Warehouse”) balances decreased $70 million from the fourth quarter of 2017 to the fourth quarter of 2018, as increasing home-mortgage interest rates during 2018 drove an overall decline in demand for residential mortgage loans. Additionally, an internal change in the way the Company assigns a cost of funds to Warehouse through its Funds Transfer Pricing (“FTP”) methodology resulted in a portion of the Warehouse segment’s fluctuation in net interest income. Effective January 1, 2018, the Company changed its Warehouse FTP methodology to be more consistent with the FTP methodology used for other Core Bank loan products with similar pricing and duration characteristics. This change in FTP methodology had a $287,000 negative comparable impact on the Warehouse net interest income for the fourth quarter of 2018 and a corresponding positive comparable impact of $287,000 to the Traditional Network’s net interest income.

The Core Bank’s provision for loan and lease losses (“Provision”) increased to $1.3 million for the fourth quarter of 2018 from $1.2 million for the same period in 2017. Overall, the Core Bank’s credit quality metrics remained strong from period to period, with the Core Bank’s ratios of nonperforming loans to total loans and delinquent loans to total loans remaining near historically low levels.

The table below presents the Core Bank’s credit quality metrics:

 
  As of and for the:
Quarters Ended:   Years Ended:
Dec. 31,   Sep. 30,   Jun. 30,   Mar. 31,   Dec. 31,   Dec. 31,   Dec. 31,
Core Banking Credit Quality Ratios   2018   2018   2018   2018   2018   2017   2016
 
Nonperforming loans to total loans 0.40 % 0.42 % 0.43 % 0.37 % 0.40 % 0.36 % 0.42 %
 
Nonperforming assets to total loans (including OREO) 0.40 0.42 0.43 0.38 0.40 0.36 0.46
 
Delinquent loans to total loans(2) 0.22 0.29 0.21 0.21 0.22 0.21 0.18
 
Net charge-offs to average loans 0.12 0.04 — 0.06 0.06 0.04 0.05
(Quarterly rates annualized)
 
OREO = Other Real Estate Owned
 

Noninterest income for the Core Bank was $8.9 million during the fourth quarter of 2018, a $986,000, or 13%, increase from the $7.9 million achieved during the fourth quarter of 2017. The following primarily drove this increase:

  • Service charges on deposits increased $240,000, or 7%, consistent with an 8% increase in transactional accounts from December 31, 2017 to December 31, 2018.
  • Mortgage banking income increased $194,000, with secondary market loan originations increasing slightly from $43 million during the fourth quarter of 2017 to $44 million during the fourth quarter of 2018.
  • Interchange fee income increased $327,000, or 13%, driven primarily by a 9% year-over-year increase in active debit cards.

Core Bank noninterest expenses increased $1.1 million, or 3%, during the fourth quarter of 2018 compared to the fourth quarter of 2017. The following primarily drove the increase:

  • Salaries and employee benefits expense increased $1.4 million, or 8%. This change was driven primarily by an increase of $1.3 in employee base-salary expense resulting from an increase of 53 Core Bank full-time-equivalent employees (“FTEs”) from December 31, 2017 to December 31, 2018.
  • Marketing expense declined $282,000 primarily due to a reduction in marketing spend for the Core Bank’s separately branded digital banking product offerings.
  • Data processing expense decreased $376,000, with a large portion of this decrease due to estimated conversion-related expenses recorded during the fourth quarter of 2017 for a change to the Company’s digital-banking platform for its commercial clients.
  • Interchange-related expenses increased $323,000, driven primarily by a 9% year-over-year increase in active debit cards.

Republic Processing Group(3)

Republic Processing Group (“RPG”) reported net income of $1.2 million for the fourth quarter of 2018 compared to a net loss of $2.0 million for the same period in 2017. RPG reported pre-tax net income of $1.5 million for the fourth quarter of 2018 compared to a pre-tax loss of $493,000 for the same period in 2017. Revenue growth within the Republic Credit Solutions (“RCS”) line-of-credit product drove the overall improvement in RPG profitability, increasing $1.5 million, or 22%, over the fourth quarter of 2017.

Total Company Income Taxes(4)

As with the previous quarters of 2018, the Company’s performance metrics and the comparability of those metrics for both the fourth quarter and the 12 months ending December 31, 2018 were positively impacted by the 2017 Tax Cuts and Jobs Act (“TCJA”). The TCJA, among other things, lowered the federal statutory corporate tax rate from 35% to 21%, effective for all of 2018. Along with the 14% lower 2018 statutory corporate tax rate, comparability between the fourth quarter of 2018 and the same period in 2017 was impacted by a $6.3 million charge during the fourth quarter of 2017 representing the decrease in the value of Republic’s net deferred tax assets (“DTAs”) as a result of the passage of the TCJA in December 2017.

The Company estimates that the charge recorded during the fourth quarter of 2017 had a negative impact to the fourth quarter 2017 net income of $6.3 million, a negative impact to fourth quarter 2017 Diluted EPS of $0.30, and a reduction to fourth quarter 2017 ROA of 0.51% and ROE of 3.95%. Conversely, the on-going decrease in the federal statutory tax rate of 35% to 21% during 2018 benefitted the Company’s fourth quarter 2018 net income approximately $3.2 million, Diluted EPS by $0.14, ROA by 0.25%, and ROE by 1.85%.

In addition to the TCJA, the income tax expense line item for the fourth quarters and years ended December 31, 2018 and 2017 contained other items impacting the overall effective tax rate for the Company. See Footnote 4 of this earnings release for a high-level summary of those items and their overall impact to the effective income tax rates of the Company for the fourth quarters and years ended December 31, 2018 and 2017.

Republic Bancorp, Inc. (the “Company”) is the parent company of Republic Bank & Trust Company (the “Bank”). The Bank currently has 45 full-service banking centers and one loan production office throughout five states: 32 banking centers in 11 Kentucky communities - Covington, Crestview Hills, Elizabethtown, Florence, Frankfort, Georgetown, Lexington, Louisville, Owensboro, 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, Port Richey, St. Petersburg, Seminole, Tampa, and Temple Terrace; two banking centers in Tennessee (Nashville MSA) – Cool Springs (Franklin) and Green Hills (Nashville) and one loan production office in Brentwood; and one banking center in Norwood (Cincinnati), Ohio. 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 $5.2 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 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, 2017. The Company undertakes no obligation to update any forward-looking statements. These forward-looking statements are made only as of the date of this release, and the Company undertakes no obligation to release revisions to these forward-looking statements to reflect events or conditions after the date of this release.

   

Republic Bancorp, Inc. Financial Information

Fourth Quarter 2018 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
Dec. 31, 2018 Dec. 31, 2017
Assets:
Cash and cash equivalents $ 351,474 $ 299,351
Investment securities 543,771 591,458
Loans held for sale 21,809 16,989
Loans 4,148,227 4,014,034
Allowance for loan and lease losses   (44,675 )   (42,769 )
Loans, net 4,103,552 3,971,265
Federal Home Loan Bank stock, at cost 32,067 32,067
Premises and equipment, net 44,820 45,605
Goodwill 16,300 16,300
Other real estate owned ("OREO") 160 115
Bank owned life insurance ("BOLI") 64,883 63,356
Other assets and accrued interest receivable   61,568     48,856  
Total assets $ 5,240,404   $ 5,085,362  
 
Liabilities and Stockholders' Equity:
Deposits:
Noninterest-bearing $ 1,003,969 $ 1,022,042
Interest-bearing   2,452,176     2,411,116  
Total deposits 3,456,145 3,433,158
 
Securities sold under agreements to repurchase and other short-term borrowings 182,990 204,021
Federal Home Loan Bank advances 810,000 737,500
Subordinated note 41,240 41,240
Other liabilities and accrued interest payable   60,095     37,019  
Total liabilities 4,550,470 4,452,938
 
Stockholders' equity   689,934     632,424  
Total liabilities and stockholders' equity $ 5,240,404   $ 5,085,362  
 
       
Average Balance Sheet Data
Three Months Ended Dec. 31, Year Ended Dec. 31,
2018 2017 2018 2017
Assets:
Investment securities, including FHLB stock $ 579,429 $ 559,381 $ 542,258 $ 574,027
Federal funds sold and other interest-earning deposits 199,134 229,638 255,708 188,427
Loans, including loans held for sale 4,092,004 3,967,211 4,094,918 3,831,406
Total interest-earning assets 4,870,567 4,756,230 4,892,884 4,593,860
Total assets 5,070,845 4,953,134 5,130,628 4,826,208
 
Liabilities and Stockholders' Equity:
Noninterest-bearing deposits $ 1,050,236 $ 1,045,939 $ 1,147,432 $ 1,073,181
Interest-bearing deposits 2,477,962 2,383,196 2,445,385 2,267,663

Securities sold under agreements to repurchase and other short-term borrowings

252,073 271,434 225,145 219,515
Federal Home Loan Bank advances 515,413 537,326 557,090 563,552
Subordinated note 41,240 41,240 41,240 41,240
Total interest-bearing liabilities 3,286,688 3,233,196 3,268,860 3,091,970
Stockholders' equity 687,156 640,686 666,979 628,329
 

       

Republic Bancorp, Inc. Financial Information

Fourth Quarter 2018 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 Dec. 31, Year Ended Dec. 31,
2018 2017 2018 2017
 
Total interest income(5) $ 62,902 $ 56,349 $ 256,181 $ 218,778
Total interest expense   8,626   5,711     30,123   20,258  
Net interest income 54,276 50,638 226,058 198,520
 
Provision for loan and lease losses 5,104 6,071 31,368 27,704
 
Noninterest income:
Service charges on deposit accounts 3,565 3,325 14,273 13,357
Net refund transfer fees 55 171 20,029 18,500
Mortgage banking income 1,129 935 4,825 4,642
Interchange fee income 2,844 2,533 11,159 9,881
Program fees 1,520 1,851 6,225 5,824
Increase in cash surrender value of BOLI 392 384 1,527 1,562
Losses on available-for-sale debt securities — (136 ) — (136 )
Net gains on OREO 29 254 729 676
Other   585   873     4,658   4,108  
Total noninterest income   10,119   10,190     63,425   58,414  
 
Noninterest expense:
Salaries and employee benefits 21,743 20,502 91,189 82,233
Occupancy and equipment, net 6,474 6,518 25,365 25,194
Communication and transportation 1,115 1,261 4,785 4,711
Marketing and development 784 1,098 4,432 5,188
FDIC insurance expense 264 328 1,494 1,378
Bank franchise tax expense 863 652 4,951 4,626
Data processing 2,434 2,606 9,613 7,748
Interchange related expense 1,237 931 4,480 3,988
Supplies 446 565 1,444 1,594
OREO expense 31 104 94 388
Legal and professional fees 753 616 3,459 2,410
Other   2,819   2,964     12,546   11,386  
Total noninterest expense   38,963   38,145     163,852   150,844  
 
Income before income tax expense 20,328 16,612 94,263 78,386
Income tax expense(4)   3,022   11,774     16,411   32,754  
 
Net income $ 17,306 $ 4,838   $ 77,852 $ 45,632  
 

       

Republic Bancorp, Inc. Financial Information

Fourth Quarter 2018 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 Dec. 31, Year Ended Dec. 31,
2018 2017 2018 2017
Per Share Data:
 
Basic weighted average shares outstanding 20,975 21,149 20,960 20,921
Diluted weighted average shares outstanding 21,113 21,258 21,065 21,007
 
Period-end shares outstanding:
Class A Common Stock 18,675 18,607 18,675 18,607
Class B Common Stock 2,213 2,243 2,213 2,243
 
Book value per share(6) $ 33.03 $ 30.33 $ 33.03 $ 30.33
Tangible book value per share(6) 31.98 29.27 31.98 29.27
 
Earnings per share ("EPS"):
Basic EPS - Class A Common Stock $ 0.83 $ 0.23 $ 3.76 $ 2.21
Basic EPS - Class B Common Stock 0.76 0.21 3.41 2.01
Diluted EPS - Class A Common Stock 0.83 0.23 3.74 2.20
Diluted EPS - Class B Common Stock 0.75 0.21 3.40 2.00
 
Cash dividends declared per Common share:
Class A Common Stock $ 0.242 $ 0.220 $ 0.968 $ 0.869
Class B Common Stock 0.220 0.200 0.880 0.790
 
Performance Ratios:
 
Return on average assets 1.37 % 0.39 % 1.52 % 0.95 %
Return on average equity 10.07 3.02 11.67 7.26
Efficiency ratio(7) 61 63 57 59
Yield on average interest-earning assets(5) 5.17 4.74 5.24 4.76
Cost of average interest-bearing liabilities 1.05 0.71 0.92 0.66
Cost of average deposits(8) 0.59 0.35 0.47 0.29
Net interest spread(5) 4.12 4.03 4.32 4.10
Net interest margin - Total Company(5) 4.46 4.26 4.62 4.32
Net interest margin - Core Bank(1) 3.85 3.72 3.70 3.55
 
Other Information:
 
End of period FTEs(9) - Total Company 1,051 997 1,051 997
End of period FTEs - Core Bank 968 915 968 915
Number of full-service banking centers 45 45 45 45
 

       

Republic Bancorp, Inc. Financial Information

Fourth Quarter 2018 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 As of and for the
Three Months Ended Dec. 31, Year Ended Dec. 31,
2018 2017 2018 2017
Credit Quality Asset Balances:
 
Nonperforming Assets - Total Company:
Loans on nonaccrual status $ 15,993 $ 14,118 $ 15,993 $ 14,118
Loans past due 90-days-or-more and still on accrual   145   956   145   956
Total nonperforming loans 16,138 15,074 16,138 15,074
OREO   160   115   160   115
Total nonperforming assets $ 16,298 $ 15,189 $ 16,298 $ 15,189
 
Nonperforming Assets - Core Bank(1):
Loans on nonaccrual status $ 15,993 $ 14,118 $ 15,993 $ 14,118
Loans past due 90-days-or-more and still on accrual   13   19   13   19
Total nonperforming loans 16,006 14,137 16,006 14,137
OREO   160   115   160   115
Total nonperforming assets $ 16,166 $ 14,252 $ 16,166 $ 14,252
 
Delinquent loans:
Delinquent loans - Core Bank $ 8,875 $ 8,460 $ 8,875 $ 8,460
Delinquent loans - RPG(3)   7,087   5,641   7,087   5,641
Total delinquent loans - Total Company $ 15,962 $ 14,101 $ 15,962 $ 14,101
 
 
Credit Quality Ratios - Total Company:
 
Nonperforming loans to total loans 0.39 % 0.38 % 0.39 % 0.38 %
Nonperforming assets to total loans (including OREO) 0.39 0.38 0.39 0.38
Nonperforming assets to total assets 0.31 0.30 0.31 0.30
Allowance for loan and lease losses to total loans 1.08 1.07 1.08 1.07
Allowance for loan and lease losses to nonperforming loans 277 284 277 284
Delinquent loans to total loans(2) 0.38 0.35 0.38 0.35
Net charge-offs to average loans (annualized) 0.42 0.35 0.72 0.47
 
Credit Quality Ratios - Core Bank:
 
Nonperforming loans to total loans 0.40 % 0.36 % 0.40 % 0.36 %
Nonperforming assets to total loans (including OREO) 0.40 0.36 0.40 0.36
Nonperforming assets to total assets 0.31 0.28 0.31 0.28
Allowance for loan and lease losses to total loans 0.78 0.77 0.78 0.77
Allowance for loan and lease losses to nonperforming loans 197 213 197 213
Delinquent loans to total loans 0.22 0.21 0.22 0.21
Net charge-offs to average loans (annualized) 0.12 0.06 0.06 0.04
 

         

Republic Bancorp, Inc. Financial Information

Fourth Quarter 2018 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
Dec. 31, 2018 Sep. 30, 2018 Jun. 30, 2018 Mar. 31, 2018 Dec. 31, 2017
Assets:
Cash and cash equivalents $ 351,474 $ 365,512 $ 386,956 $ 362,122 $ 299,351
Investment securities 543,771 513,766 485,622 483,573 591,458
Loans held for sale 21,809 28,899 26,337 14,295 16,989
Loans 4,148,227 4,136,195 4,195,984 4,052,500 4,014,034
Allowance for loan and lease losses   (44,675 )   (43,824 )   (45,047 )   (52,341 )   (42,769 )
Loans, net 4,103,552 4,092,371 4,150,937 4,000,159 3,971,265
Federal Home Loan Bank stock, at cost 32,067 32,067 32,067 32,067 32,067
Premises and equipment, net 44,820 45,945 46,485 46,792 45,605
Goodwill 16,300 16,300 16,300 16,300 16,300
Other real estate owned 160 70 — 160 115
Bank owned life insurance 64,883 64,491 64,106 63,727 63,356
Other assets and accrued interest receivable   61,568     62,933     57,135     59,139     48,856  
Total assets $ 5,240,404   $ 5,222,354   $ 5,265,945   $ 5,078,334   $ 5,085,362  
 
Liabilities and Stockholders' Equity:
Deposits:
Noninterest-bearing $ 1,003,969 $ 1,103,461 $ 1,061,182 $ 1,241,127 $ 1,022,042
Interest-bearing   2,452,176     2,463,224     2,412,187     2,476,496     2,411,116  
Total deposits 3,456,145 3,566,685 3,473,369 3,717,623 3,433,158
 

Securities sold under agreements to repurchase and other short-term borrowings

182,990 163,768 175,291 175,682 204,021
Federal Home Loan Bank advances 810,000 715,000 860,000 440,000 737,500
Subordinated note 41,240 41,240 41,240 41,240 41,240
Other liabilities and accrued interest payable   60,095     58,851     52,037     50,535     37,019  
Total liabilities 4,550,470 4,545,544 4,601,937 4,425,080 4,452,938
 
Stockholders' equity   689,934     676,810     664,008     653,254     632,424  
Total liabilities and stockholders' equity $ 5,240,404   $ 5,222,354   $ 5,265,945   $ 5,078,334   $ 5,085,362  
 
Average Balance Sheet Data
  Quarterly Comparison
Dec. 31, 2018 Sep. 30, 2018 Jun. 30, 2018 Mar. 31, 2018 Dec. 31, 2017
Assets:
Investment securities, including FHLB stock $ 579,429 $ 530,468 $ 506,209 $ 552,760 $ 559,381
Federal funds sold and other interest-earning deposits 199,134 265,111 276,246 283,161 229,638
Loans, including loans held for sale 4,092,004 4,112,926 4,092,388 4,082,050 3,967,211
Total interest-earning assets 4,870,567 4,908,505 4,874,843 4,917,971 4,756,230
Total assets 5,070,845 5,101,286 5,074,781 5,278,204 4,953,134
 
Liabilities and Stockholders' Equity:
Noninterest-bearing deposits $ 1,050,236 $ 1,076,967 $ 1,146,403 $ 1,319,860 $ 1,045,939
Interest-bearing deposits 2,477,962 2,476,088 2,410,330 2,416,142 2,383,196

Securities sold under agreements to repurchase and other short-term borrowings

252,073 213,195 178,063 257,439 271,434
Federal Home Loan Bank advances 515,413 574,130 593,187 545,778 537,326
Subordinated note 41,240 41,240 41,240 41,240 41,240
Total interest-bearing liabilities 3,286,688 3,304,653 3,222,820 3,260,599 3,233,196
Stockholders' equity 687,156 675,470 663,077 641,624 640,686
 

         

Republic Bancorp, Inc. Financial Information

Fourth Quarter 2018 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
Dec. 31, 2018   Sep. 30, 2018   Jun. 30, 2018 Mar. 31, 2018 Dec. 31, 2017
 
Total interest income(5) $ 62,902 $ 61,090 $ 58,356 $ 73,833 $ 56,349
Total interest expense   8,626   8,057   7,272   6,168   5,711  
Net interest income 54,276 53,033 51,084 67,665 50,638
 
Provision for loan and lease losses 5,104 4,077 4,932 17,255 6,071
 
Noninterest income:
Service charges on deposit accounts 3,565 3,579 3,574 3,555 3,325
Net refund transfer fees 55 149 3,473 16,352 171
Mortgage banking income 1,129 1,360 1,316 1,020 935
Interchange fee income 2,844 2,757 2,891 2,667 2,533
Program fees 1,520 1,686 1,323 1,696 1,851
Increase in cash surrender value of BOLI 392 385 379 371 384
Losses on available-for-sale debt securities — — — — (136 )
Net gains on OREO 29 248 320 132 254
Other   585   1,301   1,020   1,752   873  
Total noninterest income   10,119   11,465   14,296   27,545   10,190  
 
Noninterest expense:
Salaries and employee benefits 21,743 22,846 22,766 23,834 20,502
Occupancy and equipment, net 6,474 6,279 6,391 6,221 6,518
Communication and transportation 1,115 1,047 1,241 1,382 1,261
Marketing and development 784 1,449 1,283 916 1,098
FDIC insurance expense 264 360 345 525 328
Bank franchise tax expense 863 710 860 2,518 652
Data processing 2,434 2,350 2,443 2,386 2,606
Interchange related expense 1,237 1,138 1,098 1,007 931
Supplies 446 314 303 381 565
OREO expense 31 2 16 45 104
Legal and professional fees 753 935 728 1,043 616
Other   2,819   3,782   3,158   2,787   2,964  
Total noninterest expense   38,963   41,212   40,632   43,045   38,145  
 
Income before income tax expense 20,328 19,209 19,816 34,910 16,612
Income tax expense(4)   3,022   1,798   4,150   7,441   11,774  
 
Net income $ 17,306 $ 17,411 $ 15,666 $ 27,469 $ 4,838  
 

         

Republic Bancorp, Inc. Financial Information

Fourth Quarter 2018 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
Dec. 31, 2018 Sep. 30, 2018 Jun. 30, 2018 Mar. 31, 2018 Dec. 31, 2017
Per Share Data:
 
Basic weighted average shares outstanding 20,975 20,962 21,187 20,920 21,149
Diluted weighted average shares outstanding 21,113 21,120 21,331 21,018 21,258
 
Period-end shares outstanding:
Class A Common Stock 18,675 18,682 18,677 18,645 18,607
Class B Common Stock 2,213 2,213 2,215 2,243 2,243
 
Book value per share(6) $ 33.03 $ 32.39 $ 31.78 $ 31.27 $ 30.33
Tangible book value per share(6) 31.98 31.34 30.73 30.22 29.27
 
Earnings per share ("EPS"):
Basic EPS - Class A Common Stock $ 0.83 $ 0.84 $ 0.75 $ 1.32 $ 0.23
Basic EPS - Class B Common Stock 0.76 0.76 0.68 1.21 0.21
Diluted EPS - Class A Common Stock 0.83 0.83 0.74 1.32 0.23
Diluted EPS - Class B Common Stock 0.75 0.76 0.68 1.20 0.21
 
Cash dividends declared per Common share:
Class A Common Stock $ 0.242 $ 0.242 $ 0.242 $ 0.242 $ 0.220
Class B Common Stock 0.220 0.220 0.220 0.220 0.200
 
Performance Ratios:
 
Return on average assets 1.37 % 1.37 % 1.23 % 2.08 % 0.39 %
Return on average equity 10.07 10.31 9.45 17.12 3.02
Efficiency ratio(7) 61 64 62 45 63
Yield on average interest-earning assets(5) 5.17 4.98 4.79 6.01 4.74
Cost of average interest-bearing liabilities 1.05 0.98 0.90 0.76 0.71
Cost of average deposits(8) 0.59 0.51 0.44 0.36 0.35
Net interest spread(5) 4.12 4.00 3.89 5.25 4.03
Net interest margin - Total Company(5) 4.46 4.32 4.19 5.50 4.26
Net interest margin - Core Bank(1) 3.85 3.76 3.64 3.55 3.72
 
Other Information:
 
End of period FTEs(9) - Total Company 1,051 1,034 1,013 1,003 997
End of period FTEs - Core Bank 968 953 933 922 915
Number of full-service banking centers 45 45 45 45 45
 

         

Republic Bancorp, Inc. Financial Information

Fourth Quarter 2018 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
Dec. 31, 2018 Sep. 30, 2018 Jun. 30, 2018 Mar. 31, 2018 Dec. 31, 2017
Credit Quality Asset Balances:
 
Nonperforming Assets - Total Company:
Loans on nonaccrual status $ 15,993 $ 17,015 $ 17,502 $ 14,849 $ 14,118
Loans past due 90-days-or-more and still on accrual   145   254   858   1,279   956
Total nonperforming loans 16,138 17,269 18,360 16,128 15,074
OREO   160   70   —   160   115
Total nonperforming assets $ 16,298 $ 17,339 $ 18,360 $ 16,288 $ 15,189
 
Nonperforming Assets - Core Bank(1):
Loans on nonaccrual status $ 15,993 $ 17,015 $ 17,502 $ 14,849 $ 14,118
Loans past due 90-days-or-more and still on accrual   13   5   22   27   19
Total nonperforming loans 16,006 17,020 17,524 14,876 14,137
OREO   160   70   —   160   115
Total nonperforming assets $ 16,166 $ 17,090 $ 17,524 $ 15,036 $ 14,252
 
Delinquent Loans:
Delinquent loans - Core Bank $ 8,875 $ 11,840 $ 8,703 $ 8,303 $ 8,460
Delinquent loans - RPG(3)(10)   7,087   5,986   4,429   17,530   5,641
Total delinquent loans - Total Company $ 15,962 $ 17,826 $ 13,132 $ 25,833 $ 14,101
 
 
Credit Quality Ratios - Total Company:
 
Nonperforming loans to total loans 0.39 % 0.42 % 0.44 % 0.40 % 0.38 %
Nonperforming assets to total loans (including OREO) 0.39 0.42 0.44 0.40 0.38
Nonperforming assets to total assets 0.31 0.33 0.35 0.32 0.30
Allowance for loan and lease losses to total loans 1.08 1.06 1.07 1.29 1.07
Allowance for loan and lease losses to nonperforming loans 277 254 245 325 284
Delinquent loans to total loans(2)(10) 0.38 0.43 0.31 0.64 0.35
Net charge-offs to average loans (annualized) 0.42 0.52 1.19 0.75 0.35
 
Credit Quality Ratios - Core Bank:
 
Nonperforming loans to total loans 0.40 % 0.42 % 0.43 % 0.37 % 0.36 %
Nonperforming assets to total loans (including OREO) 0.40 0.42 0.43 0.38 0.36
Nonperforming assets to total assets 0.31 0.33 0.34 0.31 0.28
Allowance for loan and lease losses to total loans 0.78 0.78 0.76 0.77 0.77
Allowance for loan and lease losses to nonperforming loans 197 184 179 205 213
Delinquent loans to total loans 0.22 0.29 0.21 0.21 0.21
Net charge-offs to average loans (annualized) 0.12 0.04 — 0.06 0.06
 

Republic Bancorp, Inc. Financial Information
Fourth Quarter 2018 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 December 31, 2018, 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. The Bank’s Correspondent Lending channel and the Company’s national branchless banking platform, MemoryBank®, are considered 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 and Correspondent Lending 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 refund 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 the same as those described in the summary of significant accounting policies in the Company’s 2017 Annual Report on Form 10-K. 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 Republic can reasonably make specific segment allocations. The Company makes transactions among reportable segments at carrying value.

         

Republic Bancorp, Inc. Financial Information

Fourth Quarter 2018 Earnings Release (continued)

 

Segment information for the quarters and years ended December 31, 2018 and 2017 follows:

 
Three Months Ended December 31, 2018
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 $ 42,207 $ 3,557 $ 94 $ 45,858 $ 76 $ 8,342 $ 8,418 $ 54,276
 
Provision for loan and lease losses 1,552 (230 ) — 1,322 (554 ) 4,336 3,782 5,104
 
Net refund transfer fees — — — — 55 — 55 55
Mortgage banking income — — 1,129 1,129 — — — 1,129
Program fees — — — — 19 1,501 1,520 1,520
Other noninterest income   7,374   10     339     7,723   17     (325 )   (308 )   7,415
Total noninterest income 7,374 10 1,468 8,852 91 1,176 1,267 10,119
 
Total noninterest expense   32,785   844     905     34,534   3,232     1,197     4,429     38,963
 
Income (loss) before income tax expense 15,244 2,953 657 18,854 (2,511 ) 3,985 1,474 20,328
Income tax expense (benefit)   1,913   676     138     2,727   (631 )   926     295     3,022
Net income (loss) $ 13,331 $ 2,277   $ 519   $ 16,127 $ (1,880 ) $ 3,059   $ 1,179   $ 17,306
 
Period-end assets $ 4,647,037 $ 470,126 $ 14,246 $ 5,131,409 $ 20,288 $ 88,707 $ 108,995 $ 5,240,404
 
Net interest margin 3.92 % 3.14 % NM 3.85 % NM NM NM 4.46 %
 
Net-revenue concentration* 77 % 6 % 2 % 85 % — % 15 % 15 % 100 %
 
Three Months Ended December 31, 2017
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 $ 39,333 $ 4,460 $ 91 $ 43,884 $ 18 $ 6,736 $ 6,754 $ 50,638
 
Provision for loan and lease losses 1,312 (114 ) — 1,198 (228 ) 5,101 4,873 6,071
 
Net refund transfer fees — — — — 171 — 171 171
Mortgage banking income — — 935 935 — — — 935
Program fees — — — — 73 1,778 1,851 1,851
Other noninterest income   6,834   10     87     6,931   12     290     302     7,233
Total noninterest income 6,834 10 1,022 7,866 256 2,068 2,324 10,190
 
Total noninterest expense   31,085   944     1,418     33,447   3,600     1,098     4,698     38,145
 
Income (loss) before income tax expense 13,770 3,640 (305 ) 17,105 (3,098 ) 2,605 (493 ) 16,612
Income tax expense (benefit)   9,518   1,512     (808 )   10,222   (1,125 )   2,677     1,552     11,774
Net income (loss) $ 4,252 $ 2,128   $ 503   $ 6,883 $ (1,973 ) $ (72 ) $ (2,045 ) $ 4,838
 
Period-end assets $ 4,470,932 $ 525,246 $ 11,115 $ 5,007,293 $ 12,450 $ 65,619 $ 78,069 $ 5,085,362
 
Net interest margin 3.76 % 3.41 % NM 3.72 % NM NM NM 4.26 %
 
Net-revenue concentration* 77 % 7 % 2 % 86 % — % 14 % 14 % 100 %

_______________

*Net revenue represents net interest income plus total noninterest income. Net-revenue concentration equals segment-level net revenue divided by total Company net revenue.

         

Republic Bancorp, Inc. Financial Information

Fourth Quarter 2018 Earnings Release (continued)

 
Year Ended December 31, 2018
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 $ 160,398 $ 15,726 $ 402 $ 176,526 $ 19,203 $ 30,329 $ 49,532 $ 226,058
 
Provision for loan and lease losses 3,710 (142 ) — 3,568 10,919 16,881 27,800 31,368
 
Net refund transfer fees — — — — 20,029 — 20,029 20,029
Mortgage banking income — — 4,825 4,825 — — — 4,825
Program fees — — — — 295 5,930 6,225 6,225
Other noninterest income   29,965   40     550     30,555   1,229   562   1,791   32,346
Total noninterest income 29,965 40 5,375 35,380 21,553 6,492 28,045 63,425
 
Total noninterest expense   136,439   3,367     4,356     144,162   14,686   5,004   19,690   163,852
 
Income before income tax expense 50,214 12,541 1,421 64,176 15,151 14,936 30,087 94,263
Income tax expense   6,819   2,869     298     9,986   3,033   3,392   6,425   16,411
Net income $ 43,395 $ 9,672   $ 1,123   $ 54,190 $ 12,118 $ 11,544 $ 23,662 $ 77,852
 
Period-end assets $ 4,647,037 $ 470,126 $ 14,246 $ 5,131,409 $ 20,288 $ 88,707 $ 108,995 $ 5,240,404
 
Net interest margin 3.76 % 3.17 % NM 3.70 % NM NM NM 4.62 %
 
Net-revenue concentration* 66 % 5 % 2 % 73 % 14 % 13 % 27 % 100 %
 
Year Ended December 31, 2017
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 $ 142,823 $ 17,533 $ 346 $ 160,702 $ 15,197 $ 22,621 $ 37,818 $ 198,520
 
Provision for loan and lease losses 3,923 (150 ) — 3,773 6,535 17,396 23,931 27,704
 
Net refund transfer fees — — — — 18,500 — 18,500 18,500
Mortgage banking income — — 4,642 4,642 — — — 4,642
Program fees — — — — 176 5,648 5,824 5,824
Other noninterest income   27,452   37     279     27,768   164   1,516   1,680   29,448
Total noninterest income 27,452 37 4,921 32,410 18,840 7,164 26,004 58,414
 
Total noninterest expense   124,637   3,392     4,765     132,794   14,491   3,559   18,050   150,844
 
Income before income tax expense 41,715 14,328 502 56,545 13,011 8,830 21,841 78,386
Income tax expense   18,202   5,421     (526 )   23,097   4,721   4,936   9,657   32,754
Net income $ 23,513 $ 8,907   $ 1,028   $ 33,448 $ 8,290 $ 3,894 $ 12,184 $ 45,632
 
Period-end assets $ 4,470,932 $ 525,246 $ 11,115 $ 5,007,293 $ 12,450 $ 65,619 $ 78,069 $ 5,085,362
 
Net interest margin 3.55 % 3.53 % NM 3.55 % NM NM NM 4.32 %
 
Net-revenue concentration* 66 % 7 % 2 % 75 % 13 % 12 % 25 % 100 %

_______________

*Net revenue represents net interest income plus total noninterest income. Net-revenue concentration equals segment-level net revenue divided by total Company net revenue.

 

 

Republic Bancorp, Inc. Financial Information

Fourth Quarter 2018 Earnings Release (continued)

 
(1) “Core Bank” or “Core Banking” operations consist of the Traditional Banking, Warehouse Lending, and Mortgage Banking segments.
 
(2) 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.
 
(3) Republic Processing Group operations consist of the Tax Refund Solutions and Republic Credit Solutions segments.
 
(4) The 2017 Tax Cuts and Jobs Act (“TCJA”), enacted on December 22, 2017, lowered the federal corporate tax rate from 35% to 21%, effective January 1, 2018. With the TCJA’s meaningful impact during 2018 and the fourth quarter of 2017, the Company’s effective tax rate per quarter was as follows: 14.9% (quarter ended December 31, 2018); 9.4% (quarter ended September 30, 2018); 20.9% (quarter ended June 30, 2018); 21.3% (quarter ended March 31, 2018); and 70.9% (quarter ended December 31, 2017).
 
In addition to the TCJA lowering the Company’s 2018 federal income tax rate, Republic’s relatively low effective tax rate during the third quarter of 2018 was driven by approximately $2.8 million in income tax benefits recognized during the third quarter of 2018 as part of preparing the Company’s fiscal-year 2017 federal tax return due October 15, 2018. The Company considers approximately $2.6 million of the $2.8 million in federal income tax benefits to be nonrecurring in nature, with a portion of the remaining benefits to be realizable in the future.
 
A $6.3 million charge to income tax expense upon remeasurement of the Company’s deferred tax assets and liabilities at a 21% corporate tax rate drove the relatively high effective tax rate for the fourth quarter of 2017.
 
The following table reflects the impact of the TCJA on Republic’s income tax expense and effective tax rate for the fourth quarters and years ended December 31, 2018 and 2017.
 
               
Three Months Ended Dec. 31, Year Ended Dec. 31,
2018 2017 2018 2017
Effective Effective Effective Effective
(in thousands) Amount Tax Rate Amount Tax Rate Amount Tax Amount Tax Rate
 
Income before income tax expense $ 20,328 $ 16,612 $ 94,263 $ 78,386
 
Income tax expense, before adjusting items $ 4,269 21.00 % $ 5,814 35.00 % $ 19,795 21.00 % $ 27,435 35.00 %
Adjustments relating to:
Enactment of the TCJA (389 ) (1.91 ) 6,327 38.09 (2,762 ) (2.93 ) 6,327 8.07
Nontaxable Income (250 ) (1.23 ) (405 ) (2.44 ) (933 ) (0.99 ) (1,488 ) (1.90 )
State Taxes, net of federal benefit 422 2.08 174 1.05 1,569 1.66 700 0.89
General business tax credits (213 ) (1.05 ) — — (1,355 ) (1.44 ) — —
Tax Benefit of Vesting Employee Benefits (191 ) (0.94 ) (243 ) (1.46 ) (191 ) (0.20 ) (243 ) (0.31 )
Reduction of uncertain tax positions (210 ) (1.03 ) (433 ) (2.61 ) (210 ) (0.22 ) (433 ) (0.55 )
Other, net   (416 ) (2.05 )     540   3.25       498   0.53       456   0.58    
Total Adjustments   (1,247 ) (6.13 )     5,960   35.88       (3,384 ) (3.59 )     5,319   6.79    
 
Income tax expense, as reported $ 3,022   14.87   % $ 11,774   70.88   % $ 16,411   17.41   % $ 32,754   41.79   %
 
(5) 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 was $9.4 million and $9.4 million for the quarters ended December 31, 2018 and 2017. The amount of loan fee income included in total interest income was $53.8 million and $46.2 million for the years ended December 31, 2018 and 2017.
 
The amount of loan fee income included in total interest income per quarter was as follows: $9.4 million (quarter ended December 31, 2018); $9.0 million (quarter ended September 30, 2018); $8.5 million (quarter ended June 30, 2018); $26.9 million (quarter ended March 31, 2018); and $9.4 million (quarter ended December 31, 2017).
 
Interest income for Easy Advances (“EAs”) is composed entirely of loan fees. The loan fees disclosed above included EA fees of $17.8 million and $14.2 million for the years ended December 31, 2018 and 2017. EAs are only offered during the first two months of each year.
 
(6) The following table provides a reconciliation of total stockholders’ equity in accordance with U.S. Generally Accepted Accounting Principles (“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) Dec. 31, 2018 Sep. 30, 2018   Jun. 30, 2018     Mar. 31, 2018     Dec. 31, 2017  
 
Total stockholders' equity - GAAP (a) $ 689,934 $ 676,810 $ 664,008 $ 653,254 $ 632,424
Less: Goodwill 16,300 16,300 16,300 16,300 16,300
Less: Mortgage servicing rights 4,919 4,925 4,914 4,925 5,044
Less: Core deposit intangible   654   705   756   807   858
Tangible stockholders' equity - Non-GAAP (c) $ 668,061 $ 654,880 $ 642,038 $ 631,222 $ 610,222
 
Total assets - GAAP (b) $ 5,240,404 $ 5,222,354 $ 5,265,945 $ 5,078,334 $ 5,085,362
Less: Goodwill 16,300 16,300 16,300 16,300 16,300
Less: Mortgage servicing rights 4,919 4,925 4,914 4,925 5,044
Less: Core deposit intangible   654   705   756   807   858
Tangible assets - Non-GAAP (d) $ 5,218,531 $ 5,200,424 $ 5,243,975 $ 5,056,302 $ 5,063,160
 
Total stockholders' equity to total assets - GAAP (a/b) 13.17 % 12.96 % 12.61 % 12.86 % 12.44 %
Tangible stockholders' equity to tangible assets - Non-GAAP (c/d) 12.80 % 12.59 % 12.24 % 12.48 % 12.05 %
 
Number of shares outstanding (e)   20,888   20,895   20,892   20,888   20,850
 
Book value per share - GAAP (a/e) $ 33.03 $ 32.39 $ 31.78 $ 31.27 $ 30.33
Tangible book value per share - Non-GAAP (c/e) 31.98 31.34 30.73 30.22 29.27
 
(7) The efficiency ratio, a non-GAAP measure, 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, if applicable.
 
(8) 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.
 
(9) FTEs – Full-time-equivalent employees.
 
(10) Delinquent loans for the RPG segment included $13 million of EAs at March 31, 2018. EAs were only offered during the first two months of 2018. 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.
 
NM – Not meaningful

Republic Bancorp, Inc.
Kevin Sipes
Executive Vice President & Chief Financial Officer
(502) 560-8628