UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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☒Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended June 30, 20182019
or
☐Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Commission File Number: 0-24649
REPUBLIC BANCORP, INC.
(Exact name of registrant as specified in its charter)
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Kentucky |
| 61-0862051 |
(State of other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
601 West Market Street, Louisville, Kentucky |
| 40202 |
(Address of principal executive offices) |
| (Zip Code) |
Registrant’s telephone number, including area code: (502) 584-3600
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol | Name of each exchange on which registered |
Class A Common | RBCAA | The Nasdaq Stock Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer ☐ |
| Accelerated filer ☒ |
| Non-accelerated filer ☐ |
| Smaller reporting company ☐ |
Emerging growth company ☐ |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
The number of shares outstanding of the registrant’s Class A Common Stock and Class B Common Stock, as of July 31, 2018,2019, was 18,676,95718,739,086 and 2,214,427.2,207,626.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations. | 68 | |
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110 | ||
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Unregistered Sales of Equity Securities and Use of Proceeds. | ||
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2
PART I — FINANCIAL INFORMATIONGLOSSARY OF ABBREVIATIONS AND ACRONYMS
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(The acronyms and terms identified in thousands)alphabetical order below are used throughout this Form 10-Q. You may find it helpful to refer to this page as you read this report.
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| June 30, |
| December 31, |
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| 2018 |
| 2017 |
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ASSETS |
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Cash and cash equivalents | $ | 386,956 |
| $ | 299,351 |
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Available-for-sale debt securities |
| 416,053 |
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| 524,303 |
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Held-to-maturity debt securities (fair value of $67,513 in 2018 and $65,133 in 2017) |
| 66,776 |
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| 64,227 |
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Equity securities with readily determinable fair value |
| 2,793 |
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| 2,928 |
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Mortgage loans held for sale, at fair value |
| 12,653 |
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| 5,761 |
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Consumer loans held for sale, at fair value |
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| 2,677 |
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Consumer loans held for sale, at the lower of cost or fair value |
| 13,684 |
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| 8,551 |
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Loans (includes $2,237 of loans carried at fair value at June 30, 2018) |
| 4,195,984 |
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| 4,014,034 |
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Allowance for loan and lease losses |
| (45,047) |
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| (42,769) |
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Loans, net |
| 4,150,937 |
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| 3,971,265 |
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Federal Home Loan Bank stock, at cost |
| 32,067 |
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| 32,067 |
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Premises and equipment, net |
| 43,734 |
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| 42,588 |
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Premises, held for sale |
| 2,751 |
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| 3,017 |
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Goodwill |
| 16,300 |
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| 16,300 |
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Other real estate owned |
| — |
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| 115 |
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Bank owned life insurance |
| 64,106 |
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| 63,356 |
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Other assets and accrued interest receivable |
| 57,135 |
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| 48,856 |
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TOTAL ASSETS | $ | 5,265,945 |
| $ | 5,085,362 |
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LIABILITIES |
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Deposits: |
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Noninterest-bearing | $ | 1,061,182 |
| $ | 1,022,042 |
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Interest-bearing |
| 2,412,187 |
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| 2,411,116 |
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Total deposits |
| 3,473,369 |
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| 3,433,158 |
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Securities sold under agreements to repurchase and other short-term borrowings |
| 175,291 |
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| 204,021 |
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Federal Home Loan Bank advances |
| 860,000 |
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| 737,500 |
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Subordinated note |
| 41,240 |
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| 41,240 |
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Other liabilities and accrued interest payable |
| 52,037 |
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| 37,019 |
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Total liabilities |
| 4,601,937 |
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| 4,452,938 |
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Commitments and contingent liabilities (Footnote 8) |
| — |
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| — |
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STOCKHOLDERS’ EQUITY |
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Preferred stock, no par value |
| — |
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Class A Common Stock and Class B Common Stock, no par value |
| 4,903 |
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| 4,902 |
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Additional paid in capital |
| 140,114 |
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| 139,406 |
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Retained earnings |
| 520,784 |
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| 487,700 |
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Accumulated other comprehensive (loss) income |
| (1,793) |
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| 416 |
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Total stockholders’ equity |
| 664,008 |
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| 632,424 |
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 5,265,945 |
| $ | 5,085,362 |
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12
The following ASUs were adopted by the Company during the six months ended June 30, 2019:
ASU. No. | Topic | Nature of Update | Date Adopted | Method of Adoption | Financial Statement Impact | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016-02 | Leases (Topic 842) | Most leases are considered operating leases, which are not accounted for on the lessees’ balance sheets. The significant change under this ASU is that those operating leases will be recorded on the balance sheet. | January 1, 2019 | Modified-retrospective approach, which includes a number of optional practical expedients. | The Company adopted this ASU on January 1, 2019 and upon adoption recorded $40 million of right-of-use lease assets and $42 million of operating lease liabilities on its balance sheet. The adoption of this ASU did not have a meaningful impact on the Company's performance metrics, including regulatory capital ratios and return on average assets. Additionally, the Company does not believe that the adoption of this ASU by its clients will have a significant impact on the Company's ability to underwrite credit when client financial statements are presented inclusive of the requirements of this ASU. See Note 7 in this section of the filing regarding disclosures by the Company | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2018-10 | Codification Improvements to Topic 842, Leases | This ASU affects narrow aspects of the |
| January 1, 2019 |
14 2. INVESTMENT SECURITIES
Available-for-Sale Debt Securities
The
Held-to-Maturity Debt Securities
The
Sales of Available-for-Sale Debt Securities
During the three and six months ended June 30,
Debt Securities by Contractual Maturity
The amortized cost and fair value of debt securities by contractual maturity at June 30,
Unrealized-Loss Analysis on Debt Securities Debt securities with unrealized losses at June 30, 2019 and December 31, 2018, aggregated by investment category and length of time that individual debt securities have been in a continuous unrealized loss position, were as follows:
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At June 30, 2019, the Bank’s security portfolio consisted of 168 securities, 37 of which were in an unrealized loss position. At December 31, 2018, the Bank’s security portfolio consisted of 182 securities, 65 of which were in an unrealized loss position. At June 30, 2019 and December 31, 2018, there were no holdings of debt securities of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of stockholders’ equity.
Corporate Bonds
Mortgage Backed Securities and Collateralized Mortgage Obligations
At June 30,
Trust Preferred Security
During 2015, the Parent Company purchased a $3 million floating rate
Other-than-temporary impairment
Unrealized losses for all debt securities are reviewed to determine whether the losses are “other-than-temporary.” Debt securities are evaluated for OTTI on at least a quarterly basis and more frequently when economic or market conditions warrant such an evaluation to determine whether a decline in value below amortized cost is other-than-temporary. In conducting this assessment, the Bank evaluates a number of factors including, but not limited to the following:
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The term “other-than-temporary” is not intended to indicate that the decline is permanent, but indicates that the prospects for a near-term recovery of value are not necessarily favorable, or that there is a general lack of evidence to support a realizable value equal to or greater than the carrying value of the investment. Once a decline in value is determined to be other-than-temporary, the value of the security is reduced and a corresponding charge to earnings is recognized for the anticipated credit losses.
The Bank owns one private label mortgage backed security with a total carrying value of
See additional discussion regarding the Bank’s private label mortgage backed security under Footnote
Pledged Debt Securities
Equity Securities
The
18 For equity securities with readily determinable fair values, the gross realized and unrealized gains and losses recognized in the Company’s consolidated statements of income were as follows:
3. LOANS HELD FOR SALE
In the ordinary course of business, the Bank originates for sale mortgage loans and consumer loans. Mortgage loans originated for sale are primarily originated and sold into the secondary market through the Bank’s Mortgage Banking segment, while consumer loans originated for sale are originated and sold through the RCS segment. Additionally, as described below, the Company took possession of a portfolio of reverse mortgages during the second quarter of 2019 and sold this portfolio in July 2019.
Mortgage Loans Held for Sale, at Fair Value
See additional detail regarding mortgage loans originated for sale, at fair value under Footnote
During the second quarter of
Consumer Loans Held for Sale, at the Lower of Cost or Fair Value
RCS originates for sale 90% of its line-of-credit product and a portion of its
Loans Held for Sale in Connection with Sale of Banking Centers, at the Lower of Cost or Fair Value See additional detail regarding loans held for sale in connection with Sale of Banking Centers under Footnote 18 “Subsequent Event” in this section of the filing.
4. LOANS AND ALLOWANCE FOR LOAN AND LEASE LOSSES
The
*Identifies loans to borrowers located primarily outside of the Bank’s market footprint. **Total loans are presented inclusive of premiums, discounts and net loan origination fees and costs. See table directly below for expanded detail.
The following table reconciles the contractually receivable and carrying amounts of
The following table reconciles the contractually required and carrying amounts of all PCI
The following table presents a rollforward of the accretable amount on all PCI
*Transfers are primarily attributable to changes in estimated cash flows of the underlying loans.
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| FDIC | Federal Deposit Insurance Corporation | Prime | The | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
AOCI | Accumulated Other Comprehensive Income | FFTR | Federal Funds Target Rate | Provision | Provision for Loan and Lease Losses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
APR | Annual Percentage Rate | FHLB | Federal Home Loan Bank | PSU | Performance Stock Unit | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ASC | Accounting Standards Codification | FHLMC | Federal Home Loan Mortgage Corporation | R&D | Research and Development | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ASU | Accounting Standards Update | FICO | Fair Isaac Corporation | RB&T / the | Republic Bank & Trust Company | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basic EPS | Basic earnings per Class A Common Share | FNMA | Federal National Mortgage Association | RBCT | Republic Bancorp Capital Trust | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BOLI | Bank Owned Life Insurance | FRB | Federal Reserve Bank | RCS | Republic Credit Solutions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BPO | Brokered Price Opinion | FTE | Full Time Equivalent | Republic / the Company | Republic Bancorp, Inc. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
C&D | Construction and | GAAP | Generally Accepted Accounting Principles in the | ROA | Return on | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
C&I |
| Commercial and Industrial |
| HELOC |
| Home Equity Line of Credit |
|
|
| Return on Average Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CECL | Current Expected Credit Loss | HTM | Held to Maturity | RPG | Republic Processing Group | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CMO | Collateralized Mortgage Obligation | IRS | Internal Revenue Service | RPS | Republic Payment Solutions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Core Bank | The Traditional Banking, Warehouse Lending, and Mortgage Banking reportable segments | LIBOR | London Interbank Offered Rate | RT | Refund Transfer | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CRA | Community Reinvestment Act | LPO | Loan Production Office | SEC | Securities and Exchange Commission | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CRE | Commercial Real Estate | LTV | Loan to Value | SSUAR | Securities Sold Under Agreements to Repurchase | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Diluted EPS | Diluted earnings per Class A Common Share | MBS | Mortgage Backed Securities | SVP | Senior Vice President | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DTA | Deferred Tax Assets | MSRs | Mortgage Servicing Rights | TCJA | 2017 Tax Cuts and Jobs Act | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DTL | Deferred Tax Liabilities | NA | Not Applicable | TDR | Troubled Debt Restructuring | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EA | Easy Advance | NM | Not Meaningful | The Captive | Republic Insurance Services, Inc. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EBITDA | Earnings Before Interest, Taxes, Depreciation and Amortization | OCI | Other Comprehensive Income | TPS | Trust Preferred Securities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EFTA | Electronic Fund Transfers Act | OREO | Other Real Estate Owned | TRS | Tax Refund Solutions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ESPP | Employee Stock Purchase Plan | OTTI | Other than Temporary Impairment | TRUP | TPS Investment | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EVP | Executive Vice President | PCI | Purchased Credit Impaired | Warehouse | Warehouse Lending | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3
PART I — FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands)
|
|
|
|
|
|
|
| June 30, |
| December 31, |
| ||
| 2019 |
| 2018 |
| ||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents | $ | 473,779 |
| $ | 351,474 |
|
Available-for-sale debt securities |
| 380,356 |
|
| 475,738 |
|
Held-to-maturity debt securities (fair value of $64,433 in 2019 and $64,858 in 2018) |
| 63,902 |
|
| 65,227 |
|
Equity securities with readily determinable fair value |
| 3,254 |
|
| 2,806 |
|
Mortgage loans held for sale, at fair value |
| 13,883 |
|
| 8,971 |
|
Reverse mortgage loans held for sale, at the lower of cost or fair value |
| 12,457 |
|
| — |
|
Consumer loans held for sale, at the lower of cost or fair value |
| 37,609 |
|
| 12,838 |
|
Loans held for sale in connection with sale of banking centers, at the lower of cost or fair value |
| 111,745 |
|
| — |
|
Loans (loans carried at fair value of $1,369 in 2019 and $1,922 in 2018) |
| 4,410,669 |
|
| 4,148,227 |
|
Allowance for loan and lease losses |
| (45,983) |
|
| (44,675) |
|
Loans, net |
| 4,364,686 |
|
| 4,103,552 |
|
Federal Home Loan Bank stock, at cost |
| 32,242 |
|
| 32,067 |
|
Premises and equipment, net |
| 42,647 |
|
| 43,126 |
|
Premises, held for sale |
| 1,552 |
|
| 1,694 |
|
Right-of-use assets |
| 37,450 |
|
| — |
|
Goodwill |
| 16,300 |
|
| 16,300 |
|
Other real estate owned |
| 1,095 |
|
| 160 |
|
Bank owned life insurance |
| 65,642 |
|
| 64,883 |
|
Other assets and accrued interest receivable |
| 64,535 |
|
| 61,568 |
|
|
|
|
|
|
|
|
TOTAL ASSETS | $ | 5,723,134 |
| $ | 5,240,404 |
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
Noninterest-bearing | $ | 1,003,793 |
| $ | 1,003,969 |
|
Interest-bearing |
| 2,557,127 |
|
| 2,452,176 |
|
Deposits held for assumption in connection with sale of banking centers |
| 152,954 |
|
| — |
|
Total deposits |
| 3,713,874 |
|
| 3,456,145 |
|
|
|
|
|
|
|
|
Securities sold under agreements to repurchase and other short-term borrowings |
| 226,002 |
|
| 182,990 |
|
Operating lease liabilities |
| 38,852 |
|
| — |
|
Federal Home Loan Bank advances |
| 915,000 |
|
| 810,000 |
|
Subordinated note |
| 41,240 |
|
| 41,240 |
|
Other liabilities and accrued interest payable |
| 56,738 |
|
| 60,095 |
|
|
|
|
|
|
|
|
Total liabilities |
| 4,991,706 |
|
| 4,550,470 |
|
|
|
|
|
|
|
|
Commitments and contingent liabilities (Footnote 9) |
| — |
|
| — |
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, no par value |
| — |
|
| — |
|
Class A Common Stock and Class B Common Stock, no par value |
| 4,907 |
|
| 4,900 |
|
Additional paid in capital |
| 141,525 |
|
| 141,018 |
|
Retained earnings |
| 581,734 |
|
| 545,013 |
|
Accumulated other comprehensive income (loss) |
| 3,262 |
|
| (997) |
|
|
|
|
|
|
|
|
Total stockholders’ equity |
| 731,428 |
|
| 689,934 |
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 5,723,134 |
| $ | 5,240,404 |
|
See accompanying footnotes to consolidated financial statements.
4
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Six Months Ended |
| ||||||||
| June 30, |
| June 30, |
| ||||||||
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
INTEREST INCOME: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, including fees | $ | 60,211 |
| $ | 53,944 |
| $ | 137,039 |
| $ | 123,571 |
|
Taxable investment securities |
| 3,284 |
|
| 2,708 |
|
| 6,875 |
|
| 5,342 |
|
Federal Home Loan Bank stock and other |
| 2,169 |
|
| 1,704 |
|
| 4,383 |
|
| 3,276 |
|
Total interest income |
| 65,664 |
|
| 58,356 |
|
| 148,297 |
|
| 132,189 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST EXPENSE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
| 6,903 |
|
| 3,934 |
|
| 13,651 |
|
| 7,294 |
|
Securities sold under agreements to repurchase and other short-term borrowings |
| 330 |
|
| 222 |
|
| 751 |
|
| 435 |
|
Federal Home Loan Bank advances |
| 4,062 |
|
| 2,723 |
|
| 6,792 |
|
| 4,997 |
|
Subordinated note |
| 423 |
|
| 393 |
|
| 858 |
|
| 714 |
|
Total interest expense |
| 11,718 |
|
| 7,272 |
|
| 22,052 |
|
| 13,440 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INTEREST INCOME |
| 53,946 |
|
| 51,084 |
|
| 126,245 |
|
| 118,749 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan and lease losses |
| 4,460 |
|
| 4,932 |
|
| 21,691 |
|
| 22,187 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES |
| 49,486 |
|
| 46,152 |
|
| 104,554 |
|
| 96,562 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONINTEREST INCOME: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges on deposit accounts |
| 3,598 |
|
| 3,574 |
|
| 6,901 |
|
| 7,129 |
|
Net refund transfer fees |
| 3,629 |
|
| 3,473 |
|
| 20,729 |
|
| 19,825 |
|
Mortgage banking income |
| 2,416 |
|
| 1,316 |
|
| 3,955 |
|
| 2,336 |
|
Interchange fee income |
| 3,257 |
|
| 2,891 |
|
| 6,014 |
|
| 5,558 |
|
Program fees |
| 1,037 |
|
| 1,323 |
|
| 2,111 |
|
| 3,019 |
|
Increase in cash surrender value of bank owned life insurance |
| 377 |
|
| 379 |
|
| 759 |
|
| 750 |
|
Net gains on other real estate owned |
| 90 |
|
| 320 |
|
| 220 |
|
| 452 |
|
Other |
| 721 |
|
| 1,020 |
|
| 1,853 |
|
| 2,772 |
|
Total noninterest income |
| 15,125 |
|
| 14,296 |
|
| 42,542 |
|
| 41,841 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONINTEREST EXPENSE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
| 25,286 |
|
| 22,766 |
|
| 50,362 |
|
| 46,600 |
|
Occupancy and equipment, net |
| 6,472 |
|
| 6,391 |
|
| 13,056 |
|
| 12,612 |
|
Communication and transportation |
| 1,071 |
|
| 1,241 |
|
| 2,232 |
|
| 2,623 |
|
Marketing and development |
| 1,278 |
|
| 1,283 |
|
| 2,380 |
|
| 2,199 |
|
FDIC insurance expense |
| 295 |
|
| 345 |
|
| 743 |
|
| 870 |
|
Bank franchise tax expense |
| 935 |
|
| 860 |
|
| 3,431 |
|
| 3,378 |
|
Data processing |
| 2,217 |
|
| 2,443 |
|
| 4,313 |
|
| 4,829 |
|
Interchange related expense |
| 1,302 |
|
| 1,098 |
|
| 2,617 |
|
| 2,105 |
|
Supplies |
| 582 |
|
| 303 |
|
| 1,066 |
|
| 684 |
|
Other real estate owned and other repossession expense |
| 148 |
|
| 16 |
|
| 194 |
|
| 61 |
|
Legal and professional fees |
| 844 |
|
| 728 |
|
| 1,730 |
|
| 1,771 |
|
Other |
| 2,998 |
|
| 3,158 |
|
| 6,813 |
|
| 5,945 |
|
Total noninterest expense |
| 43,428 |
|
| 40,632 |
|
| 88,937 |
|
| 83,677 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAX EXPENSE |
| 21,183 |
|
| 19,816 |
|
| 58,159 |
|
| 54,726 |
|
INCOME TAX EXPENSE |
| 3,176 |
|
| 4,150 |
|
| 10,636 |
|
| 11,591 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME | $ | 18,007 |
| $ | 15,666 |
| $ | 47,523 |
| $ | 43,135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC EARNINGS PER SHARE: |
|
|
|
|
|
|
|
|
|
|
|
|
Class A Common Stock | $ | 0.86 |
| $ | 0.75 |
| $ | 2.29 |
| $ | 2.08 |
|
Class B Common Stock |
| 0.79 |
|
| 0.68 |
|
| 2.08 |
|
| 1.89 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED EARNINGS PER SHARE: |
|
|
|
|
|
|
|
|
|
|
|
|
Class A Common Stock | $ | 0.86 |
| $ | 0.74 |
| $ | 2.28 |
| $ | 2.06 |
|
Class B Common Stock |
| 0.78 |
|
| 0.68 |
|
| 2.07 |
|
| 1.88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying footnotes to consolidated financial statements.
5
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Six Months Ended |
| ||||||||
| June 30, |
| June 30, |
| ||||||||
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income | $ | 18,007 |
| $ | 15,666 |
| $ | 47,523 |
| $ | 43,135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE INCOME |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of derivatives used for cash flow hedges |
| (146) |
|
| 77 |
|
| (215) |
|
| 276 |
|
Reclassification amount for net derivative losses realized in income |
| (13) |
|
| 9 |
|
| (32) |
|
| 35 |
|
Change in unrealized (loss) gain on AFS debt securities |
| 2,014 |
|
| (546) |
|
| 5,673 |
|
| (2,663) |
|
Adjustment for adoption of ASU 2016-01 |
| — |
|
| — |
|
| — |
|
| (428) |
|
Change in unrealized gain on AFS debt security for which a portion of OTTI has been recognized in earnings |
| (1) |
|
| (15) |
|
| (34) |
|
| (17) |
|
Total other comprehensive income (loss) before income tax |
| 1,854 |
|
| (475) |
|
| 5,392 |
|
| (2,797) |
|
Tax effect |
| (389) |
|
| 99 |
|
| (1,133) |
|
| 588 |
|
Total other comprehensive income (loss), net of tax |
| 1,465 |
|
| (376) |
|
| 4,259 |
|
| (2,209) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME | $ | 19,472 |
| $ | 15,290 |
| $ | 51,782 |
| $ | 40,926 |
|
See accompanying footnotes to consolidated financial statements.
6
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended June 30, 2019 |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common Stock |
|
|
|
|
|
|
| Accumulated |
|
|
|
| ||||||
|
| Class A |
| Class B |
|
|
|
| Additional |
|
|
|
| Other |
| Total |
| |||
|
| Shares |
| Shares |
|
|
|
| Paid In |
| Retained |
| Comprehensive |
| Stockholders’ |
| ||||
(in thousands) |
| Outstanding |
| Outstanding |
| Amount |
| Capital |
| Earnings |
| Income (Loss) |
| Equity |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 1, 2019 |
| 18,698 |
| 2,213 |
| $ | 4,899 |
| $ | 141,206 |
| $ | 569,189 |
| $ | 1,797 |
| $ | 717,091 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| — |
| — |
|
| — |
|
| — |
|
| 18,007 |
|
| — |
|
| 18,007 |
|
Net change in accumulated other comprehensive income |
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| 1,465 |
|
| 1,465 |
|
Dividends declared on Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A Shares ($0.264 per share) |
| — |
| — |
|
| — |
|
| — |
|
| (4,932) |
|
| — |
|
| (4,932) |
|
Class B Shares ($0.240 per share) |
| — |
| — |
|
| — |
|
| — |
|
| (530) |
|
| — |
|
| (530) |
|
Stock options exercised, net of shares redeemed |
| 34 |
| — |
|
| 8 |
|
| (110) |
|
| — |
|
| — |
|
| (102) |
|
Conversion of Class B to Class A Common Shares |
| 5 |
| (5) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Net change in notes receivable on Class A Common Stock |
| — |
| — |
|
| — |
|
| (158) |
|
| — |
|
| — |
|
| (158) |
|
Deferred compensation - Class A Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors |
| — |
| — |
|
| — |
|
| 41 |
|
| — |
|
| — |
|
| 41 |
|
Designated key employees |
| — |
| — |
|
| — |
|
| 58 |
|
| — |
|
| — |
|
| 58 |
|
Employee stock purchase plan - Class A Common Stock |
| 2 |
| — |
|
| — |
|
| 114 |
|
| — |
|
| — |
|
| 114 |
|
Stock-based awards - Class A Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance stock units |
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Restricted stock |
| 1 |
| — |
|
| — |
|
| 295 |
|
| — |
|
| — |
|
| 295 |
|
Stock options |
| — |
| — |
|
| — |
|
| 79 |
|
| — |
|
| — |
|
| 79 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2019 |
| 18,740 |
| 2,208 |
| $ | 4,907 |
| $ | 141,525 |
| $ | 581,734 |
| $ | 3,262 |
| $ | 731,428 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended June 30, 2018 |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common Stock |
|
|
|
|
|
|
| Accumulated |
|
|
|
| ||||||
|
| Class A |
| Class B |
|
|
|
| Additional |
|
|
|
| Other |
| Total |
| |||
|
| Shares |
| Shares |
|
|
|
| Paid In |
| Retained |
| Comprehensive |
| Stockholders’ |
| ||||
(in thousands) |
| Outstanding |
| Outstanding |
| Amount |
| Capital |
| Earnings |
| Income |
| Equity |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 1, 2018 |
| 18,645 |
| 2,243 |
| $ | 4,902 |
| $ | 139,646 |
| $ | 510,123 |
| $ | (1,417) |
| $ | 653,254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| — |
| — |
|
| — |
|
| — |
|
| 15,666 |
|
| — |
|
| 15,666 |
|
Net change in accumulated other comprehensive income |
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| (376) |
|
| (376) |
|
Dividends declared Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A Shares ($0.242 per share) |
| — |
| — |
|
| — |
|
| — |
|
| (4,518) |
|
| — |
|
| (4,518) |
|
Class B Shares ($0.220 per share) |
| — |
| — |
|
| — |
|
| — |
|
| (487) |
|
| — |
|
| (487) |
|
Stock options exercised, net of shares redeemed |
| 2 |
| — |
|
| — |
|
| 48 |
|
| — |
|
| — |
|
| 48 |
|
Conversion of Class B to Class A Common Shares |
| 28 |
| (28) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Net change in notes receivable on Class A Common Stock |
| — |
| — |
|
| — |
|
| 36 |
|
| — |
|
| — |
|
| 36 |
|
Deferred director compensation expense - Class A Common Stock |
| 2 |
| — |
|
| 1 |
|
| 47 |
|
| — |
|
| — |
|
| 48 |
|
Stock-based awards - Class A Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance stock units |
| — |
| — |
|
| — |
|
| 27 |
|
| — |
|
| — |
|
| 27 |
|
Restricted stock |
| — |
| — |
|
| — |
|
| 254 |
|
| — |
|
| — |
|
| 254 |
|
Stock options |
| — |
| — |
|
| — |
|
| 56 |
|
| — |
|
| — |
|
| 56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2018 |
| 18,677 |
| 2,215 |
| $ | 4,903 |
| $ | 140,114 |
| $ | 520,784 |
| $ | (1,793) |
| $ | 664,008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying footnotes to consolidated financial statements.
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended June 30, 2019 |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common Stock |
|
|
|
|
|
|
| Accumulated |
|
|
|
| ||||||
|
| Class A |
| Class B |
|
|
|
| Additional |
|
|
|
| Other |
| Total |
| |||
|
| Shares |
| Shares |
|
|
|
| Paid In |
| Retained |
| Comprehensive |
| Stockholders’ |
| ||||
(in thousands) |
| Outstanding |
| Outstanding |
| Amount |
| Capital |
| Earnings |
| Income (Loss) |
| Equity |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2019 |
| 18,675 |
| 2,213 |
| $ | 4,900 |
| $ | 141,018 |
| $ | 545,013 |
| $ | (997) |
| $ | 689,934 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment for adoption of ASU 2016-02 |
| — |
| — |
|
| — |
|
| — |
|
| 126 |
|
| — |
|
| 126 |
|
Net income |
| — |
| — |
|
| — |
|
| — |
|
| 47,523 |
|
| — |
|
| 47,523 |
|
Net change in accumulated other comprehensive income |
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| 4,259 |
|
| 4,259 |
|
Dividends declared on Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A Shares ($0.528 per share) |
| — |
| — |
|
| — |
|
| — |
|
| (9,865) |
|
| — |
|
| (9,865) |
|
Class B Shares ($0.480 per share) |
| — |
| — |
|
| — |
|
| — |
|
| (1,061) |
|
| — |
|
| (1,061) |
|
Stock options exercised, net of shares redeemed |
| 34 |
| — |
|
| 8 |
|
| (110) |
|
| — |
|
| — |
|
| (102) |
|
Conversion of Class B to Class A Common Shares |
| 5 |
| (5) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Repurchase of Class A Common Stock |
| (8) |
| — |
|
| (1) |
|
| (376) |
|
| (2) |
|
| — |
|
| (379) |
|
Net change in notes receivable on Class A Common Stock |
| — |
| — |
|
| — |
|
| (192) |
|
| — |
|
| — |
|
| (192) |
|
Deferred compensation - Class A Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors |
| 5 |
| — |
|
| — |
|
| 106 |
|
| — |
|
| — |
|
| 106 |
|
Designated key employees |
| — |
| — |
|
| — |
|
| 226 |
|
| — |
|
| — |
|
| 226 |
|
Employee stock purchase plan - Class A Common Stock |
| 5 |
| — |
|
| — |
|
| 235 |
|
| — |
|
| — |
|
| 235 |
|
Stock-based awards - Class A Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance stock units |
| 23 |
| — |
|
| — |
|
| (57) |
|
| — |
|
| — |
|
| (57) |
|
Restricted stock |
| 1 |
| — |
|
| — |
|
| 475 |
|
| — |
|
| ��— |
|
| 475 |
|
Stock options |
| — |
| — |
|
| — |
|
| 200 |
|
| — |
|
| — |
|
| 200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2019 |
| 18,740 |
| 2,208 |
| $ | 4,907 |
| $ | 141,525 |
| $ | 581,734 |
| $ | 3,262 |
| $ | 731,428 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended June 30, 2018 |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common Stock |
|
|
|
|
|
|
| Accumulated |
|
|
|
| ||||||
|
| Class A |
| Class B |
|
|
|
| Additional |
|
|
|
| Other |
| Total |
| |||
|
| Shares |
| Shares |
|
|
|
| Paid In |
| Retained |
| Comprehensive |
| Stockholders’ |
| ||||
(in thousands) |
| Outstanding |
| Outstanding |
| Amount |
| Capital |
| Earnings |
| Income |
| Equity |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2018 |
| 18,607 |
| 2,243 |
| $ | 4,902 |
| $ | 139,406 |
| $ | 487,700 |
| $ | 416 |
| $ | 632,424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment for adoption of ASU 2016-01 |
| — |
| — |
|
| — |
|
| — |
|
| (35) |
|
| (338) |
|
| (373) |
|
Net income |
| — |
| — |
|
| — |
|
| — |
|
| 43,135 |
|
| — |
|
| 43,135 |
|
Net change in accumulated other comprehensive income |
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| (1,871) |
|
| (1,871) |
|
Dividends declared Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A Shares ($0.484 per share) |
| — |
| — |
|
| — |
|
| — |
|
| (9,035) |
|
| — |
|
| (9,035) |
|
Class B Shares ($0.440 per share) |
| — |
| — |
|
| — |
|
| — |
|
| (981) |
|
| — |
|
| (981) |
|
Stock options exercised, net of shares redeemed |
| 2 |
| — |
|
| — |
|
| 48 |
|
| — |
|
| — |
|
| 48 |
|
Conversion of Class B to Class A Common Shares |
| 28 |
| (28) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Net change in notes receivable on Class A Common Stock |
| — |
| — |
|
| — |
|
| 69 |
|
| — |
|
| — |
|
| 69 |
|
Deferred director compensation expense - Class A Common Stock |
| 5 |
| — |
|
| 1 |
|
| 102 |
|
| — |
|
| — |
|
| 103 |
|
Stock-based awards - Class A Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance stock units |
| — |
| — |
|
| — |
|
| 53 |
|
| — |
|
| — |
|
| 53 |
|
Restricted stock |
| 35 |
| — |
|
| — |
|
| 318 |
|
| — |
|
| — |
|
| 318 |
|
Stock options |
| — |
| — |
|
| — |
|
| 118 |
|
| — |
|
| — |
|
| 118 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2018 |
| 18,677 |
| 2,215 |
| $ | 4,903 |
| $ | 140,114 |
| $ | 520,784 |
| $ | (1,793) |
| $ | 664,008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying footnotes to consolidated financial statements.
8
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
|
|
|
|
|
|
|
| Six Months Ended |
| ||||
| June 30, |
| ||||
| 2019 |
| 2018 |
| ||
OPERATING ACTIVITIES: |
|
|
|
|
|
|
Net income | $ | 47,523 |
| $ | 43,135 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
Net amortization on investment securities |
| (21) |
|
| (231) |
|
Net accretion on loans and amortization of core deposit intangible and operating lease components |
| (1,833) |
|
| (1,863) |
|
Unrealized (gains) losses on equity securities with readily determinable fair value |
| (448) |
|
| 135 |
|
Depreciation of premises and equipment |
| 4,572 |
|
| 4,998 |
|
Amortization of mortgage servicing rights |
| 733 |
|
| 731 |
|
Provision for loan and lease losses |
| 21,691 |
|
| 22,187 |
|
Net gain on sale of mortgage loans held for sale |
| (3,478) |
|
| (1,862) |
|
Origination of mortgage loans held for sale |
| (122,696) |
|
| (84,124) |
|
Proceeds from sale of mortgage loans held for sale |
| 121,262 |
|
| 79,094 |
|
Net gain on sale of consumer loans held for sale |
| (2,618) |
|
| (2,836) |
|
Origination of consumer loans held for sale |
| (346,413) |
|
| (373,409) |
|
Proceeds from sale of consumer loans held for sale |
| 324,260 |
|
| 371,552 |
|
Net gain realized on sale of other real estate owned |
| (220) |
|
| (452) |
|
Impairment of premises held for sale |
| 132 |
|
| 230 |
|
Deferred compensation expense - Class A Common Stock |
| 332 |
|
| 103 |
|
Stock-based awards expense - Class A Common Stock |
| 618 |
|
| 489 |
|
Increase in cash surrender value of bank owned life insurance |
| (759) |
|
| (750) |
|
Net change in other assets and liabilities: |
|
|
|
|
|
|
Accrued interest receivable |
| (774) |
|
| (476) |
|
Accrued interest payable |
| 491 |
|
| (30) |
|
Other assets |
| 581 |
|
| 2,778 |
|
Other liabilities |
| (7,775) |
|
| 3,574 |
|
Net cash provided by operating activities |
| 35,160 |
|
| 62,973 |
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES: |
|
|
|
|
|
|
Purchases of available-for-sale debt securities |
| — |
|
| (99,026) |
|
Purchases of held-to-maturity debt securities |
| — |
|
| (4,934) |
|
Proceeds from calls, maturities and paydowns of available-for-sale debt securities |
| 101,051 |
|
| 204,811 |
|
Proceeds from calls, maturities and paydowns of held-to-maturity debt securities |
| 1,315 |
|
| 2,400 |
|
Net change in outstanding warehouse lines of credit |
| (269,099) |
|
| (108,269) |
|
Net change in other loans |
| (137,490) |
|
| (89,503) |
|
Proceeds from redemption of Federal Home Loan Bank stock |
| 2,102 |
|
| — |
|
Purchase of Federal Home Loan Bank stock |
| (2,277) |
|
| — |
|
Proceeds from sales of other real estate owned |
| 580 |
|
| 751 |
|
Net purchases of premises and equipment |
| (4,083) |
|
| (6,108) |
|
Net cash used in investing activities |
| (307,901) |
|
| (99,878) |
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES: |
|
|
|
|
|
|
Net change in deposits |
| 257,729 |
|
| 40,211 |
|
Net change in securities sold under agreements to repurchase and other short-term borrowings |
| 43,012 |
|
| (28,730) |
|
Payments of Federal Home Loan Bank advances |
| (565,000) |
|
| (377,500) |
|
Proceeds from Federal Home Loan Bank advances |
| 670,000 |
|
| 500,000 |
|
Repurchase of Class A Common Stock |
| (379) |
|
| — |
|
Net proceeds from Class A Common Stock purchased through employee stock purchase plan |
| 235 |
|
| 48 |
|
Net proceeds from Class A Common Stock options exercised |
| (102) |
|
| — |
|
Cash dividends paid |
| (10,449) |
|
| (9,519) |
|
Net cash provided by (used in) financing activities |
| 395,046 |
|
| 124,510 |
|
|
|
|
|
|
|
|
NET CHANGE IN CASH AND CASH EQUIVALENTS |
| 122,305 |
|
| 87,605 |
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
| 351,474 |
|
| 299,351 |
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 473,779 |
| $ | 386,956 |
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASHFLOW INFORMATION: |
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
Interest | $ | 21,561 |
| $ | 13,470 |
|
Income taxes |
| 6,726 |
|
| 8,177 |
|
|
|
|
|
|
|
|
SUPPLEMENTAL NONCASH DISCLOSURES: |
|
|
|
|
|
|
Transfers from loans to real estate acquired in settlement of loans | $ | 1,295 |
| $ | 184 |
|
Transfers from loans held for sale to held for investment |
| — |
|
| 2,237 |
|
Transfers from loans held for investment to held for sale |
| 124,202 |
|
| — |
|
Unfunded commitments in low-income-housing investments |
| — |
|
| 9,033 |
|
Right-of-use assets recorded upon adoption of ASU 2016-02 |
| 40,202 |
|
| — |
|
See accompanying footnotes to consolidated financial statements.
9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – JUNE 30, 2019 and 2018 AND DECEMBER 31, 2018 (UNAUDITED)
1.BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation — The consolidated financial statements include the accounts of Republic Bancorp, Inc. (the “Parent Company”) and its wholly-owned subsidiaries, Republic Bank & Trust Company and Republic Insurance Services, Inc. As used in this filing, the terms “Republic,” the “Company,” “we,” “our,” and “us” refer to Republic Bancorp, Inc., and, where the context requires, Republic Bancorp, Inc. and its subsidiaries. The term the “Bank” refers to the Company’s subsidiary bank: Republic Bank & Trust Company. The term the “Captive” refers to the Company’s insurance subsidiary: Republic Insurance Services, Inc. All significant intercompany balances and transactions are eliminated in consolidation.
Republic is a financial holding company headquartered in Louisville, Kentucky. The Bank is a Kentucky-based, state-chartered non-member financial institution that provides both traditional and non-traditional banking products through five reportable segments using a multitude of delivery channels. While the Bank operates primarily in its market footprint, its non-brick-and-mortar delivery channels allow it to reach clients across the United States. The Captive is a Nevada-based, wholly-owned insurance subsidiary of the Company. The Captive provides property and casualty insurance coverage to the Company and the Bank as well as a group of third-party insurance captives for which insurance may not be available or economically feasible.
Republic Bancorp Capital Trust is a Delaware statutory business trust that is a wholly-owned unconsolidated finance subsidiary of Republic Bancorp, Inc.
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. For further information, refer to the consolidated financial statements and footnotes thereto included in Republic’s Form 10-K for the year ended December 31, 2018.
As of June 30, 2019, the Company was divided into five reportable segments: Traditional Banking, Warehouse, Mortgage Banking, TRS, and RCS. Management considers the first three segments to collectively constitute “Core Bank” or “Core Banking” operations, while the last two segments collectively constitute 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.
10
Core Bank
Traditional Banking segment — The Traditional Banking segment provides traditional banking products primarily to customers in the Company’s market footprint. As of June 30, 2019, Republic had 45 full-service banking centers and two LPOs with locations as follows:
Kentucky — 32
Metropolitan Louisville — 18
Central Kentucky — 9
Elizabethtown — 1*
Frankfort — 1*
Georgetown — 1
Lexington — 5
Shelbyville — 1
Western Kentucky — 2
Owensboro — 2*
Northern Kentucky — 3
Covington — 1
Crestview Hills — 1
Florence — 1
Southern Indiana — 3
Floyds Knobs — 1
Jeffersonville — 1
New Albany — 1
Metropolitan Tampa, Florida — 8**
Metropolitan Cincinnati, Ohio — 1
Metropolitan Nashville, Tennessee — 3**
* The Company agreed to sell banking center(s) in July 2019. See Note 18 in this section of the filing for additional information.
** Includes an LPO
Republic’s headquarters are in Louisville, which is the largest city in Kentucky based on population.
Traditional Banking results of operations are primarily dependent upon net interest income, which represents the difference between the interest income and fees on interest-earning assets and the interest expense on interest-bearing liabilities. Principal interest-earning Traditional Banking assets represent investment securities and commercial and consumer loans primarily secured by real estate and/or personal property. Interest-bearing liabilities primarily consist of interest-bearing deposit accounts, securities sold under agreements to repurchase, as well as short-term and long-term borrowing sources. FHLB advances have traditionally been a significant borrowing source for the Bank.
Other sources of Traditional Banking income include service charges on deposit accounts, debit and credit card interchange fee income, title insurance commissions, fees charged to clients for trust services, and increases in the cash surrender value of BOLI.
Traditional Banking operating expenses consist primarily of salaries and employee benefits, occupancy and equipment expenses, communication and transportation costs, data processing, interchange related expenses, marketing and development expenses, FDIC insurance expense, franchise tax expense and various other general and administrative costs. Traditional Banking results of operations are significantly impacted by general economic and competitive conditions, particularly changes in market interest rates, government laws and policies and actions of regulatory agencies.
The Traditional Bank has acquired for investment single family, first lien mortgage loans that meet the Traditional Bank’s specifications through its Correspondent Lending channel. Substantially all loans purchased through the Correspondent Lending channel are purchased at a premium.
11
Warehouse Lending segment — Through its Warehouse Lending segment, the Core Bank provides short-term, revolving credit facilities to mortgage bankers across the United States through mortgage warehouse lines of credit. These credit facilities are primarily secured by single family, first lien residential real estate loans. The credit facility enables the mortgage banking clients to close single family, first lien residential real estate loans in their own name and temporarily fund their inventory of these closed loans until the loans are sold to investors approved by the Bank. Individual loans are expected to remain on the warehouse line for an average of 15 to 30 days. Reverse mortgage loans typically remain on the line longer than conventional mortgage loans. Interest income and loan fees are accrued for each individual loan during the time the loan remains on the warehouse line and collected when the loan is sold. The Core Bank receives the sale proceeds of each loan directly from the investor and applies the funds to pay off the warehouse advance and related accrued interest and fees. The remaining proceeds are credited to the mortgage-banking client.
Mortgage Banking segment — Mortgage Banking activities primarily include 15-, 20- and 30-year fixed-term single family, first lien residential real estate loans that are originated and sold into the secondary market, primarily to the FHLMC and the FNMA. The Bank typically retains servicing on loans sold into the secondary market. Administration of loans with servicing retained by the Bank includes collecting principal and interest payments, escrowing funds for property taxes and property insurance, and remitting payments to secondary market investors. The Bank receives fees for performing these standard servicing functions.
Republic Processing Group
Tax Refund Solutions segment — Through the TRS segment, the Bank is one of a limited number of financial institutions that facilitates the receipt and payment of federal and state tax refund products and offers a credit product through third-party tax preparers located throughout the United States, as well as tax-preparation software providers (collectively, the “Tax Providers”). Substantially all of the business generated by the TRS segment occurs in the first half of the year. The TRS segment traditionally operates at a loss during the second half of the year, during which time the segment incurs costs preparing for the upcoming year’s tax season.
RTs are fee-based products whereby a tax refund is issued to the taxpayer after the Bank has received the refund from the federal or state government. There is no credit risk or borrowing cost associated with these products because they are only delivered to the taxpayer upon receipt of the tax refund directly from the governmental paying authority. Fees earned by the Company on RTs, net of revenue share, are reported as noninterest income under the line item “Net refund transfer fees.”
The EA tax credit product is a loan that allows a taxpayer to borrow funds as an advance of a portion of their tax refund. In response to changes in the legal, regulatory and competitive environment, management annually reviews and revises the EA’s product parameters. Further changes in EA product parameters do not ensure positive results and could have an overall material negative impact on the performance of the EA and therefore on the Company’s financial condition and results of operations. For the 2018 and 2019 fiscal years, the EA product had the following features:
EA features consistent during 2018 and 2019:
· | Offered only during the first two months of each year; |
· | No requirement that the taxpayer pays for another bank product, such as an RT; |
· | Multiple funds disbursement methods, including direct deposit, prepaid card, check, or Walmart Direct2Cash®, based on the taxpayer-customer’s election; |
· | Repayment of the EA to the Bank is deducted from the taxpayer’s tax refund proceeds; and |
· | If an insufficient refund to repay the EA occurs: |
o | there is no recourse to the taxpayer, |
o | no negative credit reporting on the taxpayer, and |
o | no collection efforts against the taxpayer. |
EA features modified from 2018 to 2019:
· | During 2019, the taxpayer was given the option to choose from multiple loan-amount tiers, subject to underwriting, up to a maximum advance amount of $6,250. This compares to a maximum loan amount of $3,500 during 2018; and |
· | During 2018, EA fees were charged only to the Tax Providers. In 2019, the fee charged to the Tax Providers was lowered; and a direct fee to the taxpayer was charged. The APR to the taxpayer for his or her portion of the total fee equated to less than 36% for all offering tiers. |
12
The Company reports fees paid for the EA product as interest income on loans. EAs are generally repaid within three weeks after the taxpayer’s tax return is submitted to the applicable taxing authority. EAs do not have a contractual due date but the Company considers an EA delinquent if it remains unpaid three weeks after the taxpayer’s tax return is submitted to the applicable taxing authority. Provisions for loan losses on EAs are estimated when advances are made, with provisions for all probable EA losses made in the first quarter of each year. Unpaid EAs are charged off by June 30th of each year, with EAs collected during the second half of each year recorded as recoveries of previously charged off loans.
Related to the overall credit losses on EAs, the Bank’s ability to control losses is highly dependent upon its ability to predict the taxpayer’s likelihood to receive the tax refund as claimed on the taxpayer’s tax return. Each year, the Bank’s EA approval model is based primarily on the prior-year’s tax refund payment patterns. Because the substantial majority of the EA volume occurs each year before that year’s tax refund payment patterns can be analyzed and subsequent underwriting changes made, credit losses during a current year could be higher than management’s predictions if tax refund payment patterns change materially between years.
Republic Payment Solutions — RPS is managed and operated within the TRS segment. The RPS division is an issuing bank offering general-purpose reloadable prepaid cards through third-party service providers. For the projected near-term, as the prepaid card program matures, the operating results of the RPS division are expected to be immaterial to the Company’s overall results of operations and will be reported as part of the TRS segment. The RPS division will not be considered a separate reportable segment until such time, if any, that it meets quantitative reporting thresholds.
The Company reports fees related to RPS programs under Program fees. Additionally, the Company’s portion of interchange revenue generated by prepaid card transactions is reported as noninterest income under “Interchange fee income.”
Republic Credit Solutions segment — Through the RCS segment, the Bank offers consumer credit products. In general, the credit products are unsecured, small dollar consumer loans and are dependent on various factors including the consumer’s ability to repay. RCS loans typically earn a higher yield but also have higher credit risk compared to loans originated through the Traditional Banking segment, with a significant portion of RCS clients considered subprime or near-prime borrowers. Additional information regarding consumer loan products offered through RCS follows:
· | RCS line-of-credit product – The Bank originates a line-of-credit product to generally subprime borrowers across the United States with certain services provided by Elevate Credit, Inc., its third-party servicer provider. RCS sells participation interests equal to 90% of the balances generated within three business days to a third-party special purpose entity and retains the remaining 10% interest. The line-of-credit product represents the substantial majority of RCS activity. Loan balances held for sale are carried at the lower of cost or fair value. |
· | RCS healthcare receivables product – The Bank originates healthcare-receivables products across the United States through two different third-party service providers. In one program, the Bank retains 100% of the receivables originated. In the other program, the Bank retains 100% of the receivables originated in some instances, and in other instances, sells 100% of the receivables within one month of origination. Loan balances held for sale are carried at the lower of cost or fair value. |
From the fourth quarter of 2015 through the first quarter of 2018, the Bank piloted through RCS a credit-card product to generally subprime borrowers across the United States through one third-party marketer/servicer. For outstanding cards, RCS sold 90% of the balances generated within two business days of each transaction occurrence to a special purpose entity related to its third-party marketer/servicer and retained the remaining 10% interest. During the fourth quarter of 2018, the Bank and its third-party marketer/servicer finalized an agreement to sell 100% of the existing portfolio to an unrelated third party. The sale of the RCS credit-card portfolio receivables was settled in January 2019 and all accounts and related assets were transferred in March 2019.
The Company reports interest income and loan origination fees earned on RCS loans under “Loans, including fees,” while any gains or losses on sale of RCS loans are reported as noninterest income under “Program fees.”
13
Accounting Standards Updates Issued
The following ASUs were issued prior to June 30, 2019 and are considered relevant to the Company’s financial statements. Generally, if an issued-but-not-yet-effective ASU with an expected immaterial impact to the Company has been disclosed in prior Company financial statements, it will not be re-disclosed below.
ASU. No. | Topic | Nature of Update | Date Adoption Required | Permitted Adoption Methods | Expected Financial Statement Impact | |||||
2016-13 | Financial Instruments – Credit Losses (Topic 326) | This ASU amends guidance on reporting credit losses for assets held at amortized-cost basis and available-for-sale debt securities. | January 1, 2020 | Modified-retrospective approach. | As a result of this ASU, the Company expects an as yet undetermined increase in its allowance for credit losses. A committee formed by the Company to oversee its transition to a current expected credit losses (“CECL”) methodology has analyzed the Company’s loan-level data and preliminarily concluded that no additional loan level segmentation beyond its current methodology segmentation would be warranted under CECL. The Company is also currently performing iterations of its allowance calculation under a “beta” CECL model provided by the same third-party software solution currently-employed to calculate the Company's allowance for loan and lease losses. | |||||
2019-04 | Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments | This ASU clarifies and improves areas of guidance related to the recently issued standards on credit losses, hedging, and recognition and measurement. | Based on areas amended. | Based on areas amended. | Immaterial | |||||
2019-05 | Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief | This ASU provides the fair value option for certain instruments within the scope of Subtopic 326-20, Financial Instruments—Credit Losses. | January 1, 2020 | Modified-retrospective approach. | The Company has this ASU under consideration. | |||||
Accounting Standards Updates Adopted
The following ASUs were adopted by the Company during the six months ended June 30, 2019:
ASU. No. | Topic | Nature of Update | Date Adopted | Method of Adoption | Financial Statement Impact | |||||
2016-02 | Leases (Topic 842) | Most leases are considered operating leases, which are not accounted for on the lessees’ balance sheets. The significant change under this ASU is that those operating leases will be recorded on the balance sheet. | January 1, 2019 | Modified-retrospective approach, which includes a number of optional practical expedients. | The Company adopted this ASU on January 1, 2019 and upon adoption recorded $40 million of right-of-use lease assets and $42 million of operating lease liabilities on its balance sheet. The adoption of this ASU did not have a meaningful impact on the Company's performance metrics, including regulatory capital ratios and return on average assets. Additionally, the Company does not believe that the adoption of this ASU by its clients will have a significant impact on the Company's ability to underwrite credit when client financial statements are presented inclusive of the requirements of this ASU. See Note 7 in this section of the filing regarding disclosures by the Company to comply with this ASU. | |||||
2018-10 | Codification Improvements to Topic 842, Leases | This ASU affects narrow aspects of the guidance issued in the amendments in ASU 2016-02. | January 1, 2019 | Adoption should conform to the adoption of ASU 2016-02 above. | See Note 7 in this section of the filing regarding disclosures by the Company to comply with this ASU. | |||||
2018-11 | Leases (Topic 842): Targeted Improvements | This ASU provides the Company with an additional (and optional) transition method to adopt ASU 2016-02. This ASU also provides the Company with a practical expedient to not separate non-lease components from the associated lease component under certain circumstances. | January 1, 2019 | Adoption should conform to the adoption of ASU 2016-02 above. | The Company elected the optional transition method permitted by this ASU, allowing the Company to adopt ASU 2016-02, effective January 1, 2019 with a cumulative-effect adjustment to the opening balance of retained earnings on January 1, 2019. | |||||
2017-12 | Derivatives and Hedging (Topic 815) | The amendments in this ASU make certain targeted improvements to simplify the application of hedge accounting. | January 1, 2019 | Prospectively. | Immaterial |
14
2.INVESTMENT SECURITIES
Available-for-Sale Debt Securities
The gross amortized cost and fair value of AFS debt securities and the related gross unrealized gains and losses recognized in AOCI were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross |
| Gross |
|
|
|
| |||
|
| Amortized |
| Unrealized |
| Unrealized |
| Fair |
| ||||
June 30, 2019 (in thousands) |
| Cost |
| Gains |
| Losses |
| Value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities and U.S. Government agencies |
| $ | 139,608 |
| $ | 20 |
| $ | (293) |
| $ | 139,335 |
|
Private label mortgage backed security |
|
| 2,285 |
|
| 1,330 |
|
| — |
|
| 3,615 |
|
Mortgage backed securities - residential |
|
| 151,504 |
|
| 2,911 |
|
| (223) |
|
| 154,192 |
|
Collateralized mortgage obligations |
|
| 69,143 |
|
| 375 |
|
| (139) |
|
| 69,379 |
|
Corporate bonds |
|
| 10,000 |
|
| — |
|
| (165) |
|
| 9,835 |
|
Trust preferred security |
|
| 3,554 |
|
| 446 |
|
| — |
|
| 4,000 |
|
Total available-for-sale debt securities |
| $ | 376,094 |
| $ | 5,082 |
| $ | (820) |
| $ | 380,356 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross |
| Gross |
|
|
|
| |||
|
| Amortized |
| Unrealized |
| Unrealized |
| Fair |
| ||||
December 31, 2018 (in thousands) |
| Cost |
| Gains |
| Losses |
| Value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities and U.S. Government agencies |
| $ | 218,502 |
| $ | 25 |
| $ | (1,654) |
| $ | 216,873 |
|
Private label mortgage backed security |
|
| 2,348 |
|
| 1,364 |
|
| — |
|
| 3,712 |
|
Mortgage backed securities - residential |
|
| 168,992 |
|
| 1,470 |
|
| (1,253) |
|
| 169,209 |
|
Collateralized mortgage obligations |
|
| 73,740 |
|
| 222 |
|
| (1,151) |
|
| 72,811 |
|
Corporate bonds |
|
| 10,000 |
|
| — |
|
| (942) |
|
| 9,058 |
|
Trust preferred security |
|
| 3,533 |
|
| 542 |
|
| — |
|
| 4,075 |
|
Total available-for-sale debt securities |
| $ | 477,115 |
| $ | 3,623 |
| $ | (5,000) |
| $ | 475,738 |
|
Held-to-Maturity Debt Securities
The carrying value, gross unrecognized gains and losses, and fair value of HTM debt securities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross |
| Gross |
|
|
|
| ||
|
| Carrying |
| Unrecognized |
| Unrecognized |
| Fair |
| ||||
June 30, 2019 (in thousands) |
| Value |
| Gains |
| Losses |
| Value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage backed securities - residential |
| $ | 129 |
| $ | 8 |
| $ | — |
| $ | 137 |
|
Collateralized mortgage obligations |
|
| 18,232 |
|
| 116 |
|
| (17) |
|
| 18,331 |
|
Corporate bonds |
|
| 45,079 |
|
| 441 |
|
| (17) |
|
| 45,503 |
|
Obligations of state and political subdivisions |
|
| 462 |
|
| — |
|
| — |
|
| 462 |
|
Total held-to-maturity debt securities |
| $ | 63,902 |
| $ | 565 |
| $ | (34) |
| $ | 64,433 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross |
| Gross |
|
|
|
| ||
|
| Carrying |
| Unrecognized |
| Unrecognized |
| Fair |
| ||||
December 31, 2018 (in thousands) |
| Value |
| Gains |
| Losses |
| Value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage backed securities - residential |
| $ | 132 |
| $ | 8 |
| $ | — |
| $ | 140 |
|
Collateralized mortgage obligations |
|
| 19,544 |
|
| 178 |
|
| (46) |
|
| 19,676 |
|
Corporate bonds |
|
| 45,088 |
|
| 16 |
|
| (514) |
|
| 44,590 |
|
Obligations of state and political subdivisions |
|
| 463 |
|
| — |
|
| (11) |
|
| 452 |
|
Total held-to-maturity debt securities |
| $ | 65,227 |
| $ | 202 |
| $ | (571) |
| $ | 64,858 |
|
Sales of Available-for-Sale Debt Securities
During the three and six months ended June 30, 2019 and 2018, there were no gains or losses on sales or calls of AFS debt securities.
15
Debt Securities by Contractual Maturity
The amortized cost and fair value of debt securities by contractual maturity at June 30, 2019 follow. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are detailed separately.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Available-for-Sale |
| Held-to-Maturity |
| ||||||||
|
| Debt Securities |
| Debt Securities |
| ||||||||
|
| Amortized |
| Fair |
| Carrying |
| Fair |
| ||||
June 30, 2019 (in thousands) |
| Cost |
| Value |
| Value |
| Value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due in one year or less |
| $ | 77,383 |
| $ | 77,167 |
| $ | 5,075 |
| $ | 5,103 |
|
Due from one year to five years |
|
| 72,225 |
|
| 72,003 |
|
| 35,522 |
|
| 35,935 |
|
Due from five years to ten years |
|
| — |
|
| — |
|
| 4,944 |
|
| 4,927 |
|
Due beyond ten years |
|
| 3,554 |
|
| 4,000 |
|
| — |
|
| — |
|
Private label mortgage backed security |
|
| 2,285 |
|
| 3,615 |
|
| — |
|
| — |
|
Mortgage backed securities - residential |
|
| 151,504 |
|
| 154,192 |
|
| 129 |
|
| 137 |
|
Collateralized mortgage obligations |
|
| 69,143 |
|
| 69,379 |
|
| 18,232 |
|
| 18,331 |
|
Total debt securities |
| $ | 376,094 |
| $ | 380,356 |
| $ | 63,902 |
| $ | 64,433 |
|
Unrealized-Loss Analysis on Debt Securities
Debt securities with unrealized losses at June 30, 2019 and December 31, 2018, aggregated by investment category and length of time that individual debt securities have been in a continuous unrealized loss position, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Less than 12 months |
| 12 months or more |
| Total |
| ||||||||||||
|
|
|
|
| Unrealized |
|
|
|
| Unrealized |
|
|
|
| Unrealized |
| |||
June 30, 2019 (in thousands) |
| Fair Value |
| Losses |
| Fair Value |
| Losses |
| Fair Value |
| Losses |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities and U.S. Government agencies |
| $ | — |
| $ | — |
| $ | 107,091 |
| $ | (293) |
| $ | 107,091 |
| $ | (293) |
|
Mortgage backed securities - residential |
|
| — |
|
| — |
|
| 39,033 |
|
| (223) |
|
| 39,033 |
|
| (223) |
|
Collateralized mortgage obligations |
|
| 4,189 |
|
| (5) |
|
| 20,687 |
|
| (134) |
|
| 24,876 |
|
| (139) |
|
Corporate bonds |
|
| — |
|
| — |
|
| 9,835 |
|
| (165) |
|
| 9,835 |
|
| (165) |
|
Total available-for-sale debt securities |
| $ | 4,189 |
| $ | (5) |
| $ | 176,646 |
| $ | (815) |
| $ | 180,835 |
| $ | (820) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Less than 12 months |
| 12 months or more |
| Total |
| ||||||||||||
|
|
|
|
| Unrealized |
|
|
|
| Unrealized |
|
|
|
| Unrealized |
| |||
December 31, 2018 (in thousands) |
| Fair Value |
| Losses |
| Fair Value |
| Losses |
| Fair Value |
| Losses |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities and U.S. Government agencies |
| $ | 71,627 |
| $ | (598) |
| $ | 106,136 |
| $ | (1,056) |
| $ | 177,763 |
| $ | (1,654) |
|
Mortgage backed securities - residential |
|
| 43,691 |
|
| (484) |
|
| 32,003 |
|
| (769) |
|
| 75,694 |
|
| (1,253) |
|
Collateralized mortgage obligations |
|
| 16,487 |
|
| (473) |
|
| 31,071 |
|
| (678) |
|
| 47,558 |
|
| (1,151) |
|
Corporate bonds |
|
| 9,058 |
|
| (942) |
|
| — |
|
| — |
|
| 9,058 |
|
| (942) |
|
Total available-for-sale debt securities |
| $ | 140,863 |
| $ | (2,497) |
| $ | 169,210 |
| $ | (2,503) |
| $ | 310,073 |
| $ | (5,000) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Less than 12 months |
| 12 months or more |
| Total |
| ||||||||||||
|
|
|
|
| Unrealized |
|
|
|
| Unrealized |
|
|
|
| Unrealized |
| |||
June 30, 2019 (in thousands) |
| Fair Value |
| Losses |
| Fair Value |
| Losses |
| Fair Value |
| Losses |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized mortgage obligations |
| $ | — |
| $ | — |
| $ | 5,213 |
| $ | (17) |
| $ | 5,213 |
| $ | (17) |
|
Corporate bonds |
|
| 4,927 |
|
| (17) |
|
| — |
|
| — |
|
| 4,927 |
|
| (17) |
|
Total held-to-maturity debt securities: |
| $ | 4,927 |
| $ | (17) |
| $ | 5,213 |
| $ | (17) |
| $ | 10,140 |
| $ | (34) |
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Less than 12 months |
| 12 months or more |
| Total |
| ||||||||||||
|
|
|
|
| Unrealized |
|
|
|
| Unrealized |
|
|
|
| Unrealized |
| |||
December 31, 2018 (in thousands) |
| Fair Value |
| Losses |
| Fair Value |
| Losses |
| Fair Value |
| Losses |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized mortgage obligations |
| $ | — |
| $ | — |
| $ | 5,539 |
| $ | (46) |
| $ | 5,539 |
| $ | (46) |
|
Corporate bonds |
|
| 39,499 |
|
| (514) |
|
| — |
|
| — |
|
| 39,499 |
|
| (514) |
|
Obligations of state and political subdivisions |
|
| 105 |
|
| (1) |
|
| 347 |
|
| (10) |
|
| 452 |
|
| (11) |
|
Total held-to-maturity debt securities: |
| $ | 39,604 |
| $ | (515) |
| $ | 5,886 |
| $ | (56) |
| $ | 45,490 |
| $ | (571) |
|
At June 30, 2019, the Bank’s security portfolio consisted of 168 securities, 37 of which were in an unrealized loss position.
At December 31, 2018, the Bank’s security portfolio consisted of 182 securities, 65 of which were in an unrealized loss position.
At June 30, 2019 and December 31, 2018, there were no holdings of debt securities of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of stockholders’ equity.
Corporate Bonds
From 2013 to 2018, the Bank purchased various floating-rate corporate bonds. These bonds were rated “investment grade” by accredited rating agencies as of their respective purchase dates. The total fair value of the Bank’s corporate bonds represented 10% and 10% of the Bank’s investment portfolio as of June 30, 2019 and December 31, 2018. During 2018, one of these bonds was downgraded to BBB+ (S&P/Fitch), driving a significant decrease in the bond’s market value. As of June 30, 2019, this bond reflected an unrealized loss of $165,000. The Bank does not intend to sell this bond, and it is likely that it will not be required to sell this bond before the bond’s anticipated recovery, therefore, management does not consider this bond to have OTTI.
Mortgage Backed Securities and Collateralized Mortgage Obligations
At June 30, 2019, with the exception of the $3.6 million private label mortgage backed security, all other mortgage backed securities and CMOs held by the Bank were issued by U.S. government-sponsored entities and agencies, primarily the FHLMC and FNMA. At June 30, 2019 and December 31, 2018, there were gross unrealized losses of $362,000 and $2.4 million related to AFS mortgage backed securities and CMOs. Because these unrealized losses are attributable to changes in interest rates and illiquidity, and not credit quality, and because the Bank does not have the intent to sell these securities, and it is likely that it will not be required to sell the securities before their anticipated recovery, management does not consider these securities to have OTTI.
Trust Preferred Security
During 2015, the Parent Company purchased a $3 million floating rate TRUP at a price of 68% of par. The coupon on this security is based on the 3-month LIBOR rate plus 159 basis points. The Company performed an initial analysis prior to acquisition and performs ongoing analysis of the credit risk of the underlying borrower in relation to its TRUP.
Other-than-temporary impairment
Unrealized losses for all debt securities are reviewed to determine whether the losses are “other-than-temporary.” Debt securities are evaluated for OTTI on at least a quarterly basis and more frequently when economic or market conditions warrant such an evaluation to determine whether a decline in value below amortized cost is other-than-temporary. In conducting this assessment, the Bank evaluates a number of factors including, but not limited to the following:
· | The length of time and the extent to which fair value has been less than the amortized cost basis; |
· | The Bank’s intent to hold until maturity or sell the debt security prior to maturity; |
· | An analysis of whether it is more-likely-than-not that the Bank will be required to sell the debt security before its anticipated recovery; |
· | Adverse conditions specifically related to the security, an industry, or a geographic area; |
· | The historical and implied volatility of the fair value of the security; |
· | The payment structure of the security and the likelihood of the issuer being able to make payments; |
· | Failure of the issuer to make scheduled interest or principal payments; |
· | Any rating changes by a rating agency; and |
· | Recoveries or additional decline in fair value subsequent to the balance sheet date. |
17
The term “other-than-temporary” is not intended to indicate that the decline is permanent, but indicates that the prospects for a near-term recovery of value are not necessarily favorable, or that there is a general lack of evidence to support a realizable value equal to or greater than the carrying value of the investment. Once a decline in value is determined to be other-than-temporary, the value of the security is reduced and a corresponding charge to earnings is recognized for the anticipated credit losses.
The Bank owns one private label mortgage backed security with a total carrying value of $3.6 million at June 30, 2019. This security is mostly backed by “Alternative A” first lien mortgage loans, but also has an insurance “wrap” or guarantee as an added layer of protection to the security holder. This asset is illiquid, and as such, the Bank determined it to be a Level 3 security in accordance with ASC Topic 820, Fair Value Measurement. Based on this determination, the Bank utilized an income valuation model (“present value model”) approach, in determining the fair value of the security. This approach is beneficial for positions that are not traded in active markets or are subject to transfer restrictions, and/or where valuations are adjusted to reflect illiquidity and/or non-transferability. Such adjustments are generally based on available market evidence. In the absence of such evidence, management’s best estimate is used. Management’s best estimate consists of both internal and external support for this investment.
See additional discussion regarding the Bank’s private label mortgage backed security under Footnote 10 “Fair Value” in this section of the filing.
Pledged Debt Securities
Debt securities pledged to secure public deposits, securities sold under agreements to repurchase and debt securities held for other purposes, as required or permitted by law are as follows:
|
|
|
|
|
|
|
|
(in thousands) |
| June 30, 2019 |
| December 31, 2018 |
| ||
|
|
|
|
|
|
|
|
Carrying amount |
| $ | 274,545 |
| $ | 240,590 |
|
Fair value |
|
| 274,652 |
|
| 240,700 |
|
Equity Securities
The carrying value, gross unrealized gains and losses, and fair value of equity securities with readily determinable fair values were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross |
| Gross |
|
|
|
| |||
|
|
| Amortized |
| Unrealized |
| Unrealized |
| Fair |
| ||||
June 30, 2019 (in thousands) |
|
| Cost |
| Gains |
| Losses |
| Value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Freddie Mac preferred stock |
|
| $ | — |
| $ | 787 |
| $ | — |
| $ | 787 |
|
Community Reinvestment Act mutual fund |
|
|
| 2,500 |
|
| — |
|
| (33) |
|
| 2,467 |
|
Total equity securities with readily determinable fair values |
|
| $ | 2,500 |
| $ | 787 |
| $ | (33) |
| $ | 3,254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross |
| Gross |
|
|
|
| |||
|
|
| Amortized |
| Unrealized |
| Unrealized |
| Fair |
| ||||
December 31, 2018 (in thousands) |
|
| Cost |
| Gains |
| Losses |
| Value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Freddie Mac preferred stock |
|
| $ | — |
| $ | 410 |
| $ | — |
| $ | 410 |
|
Community Reinvestment Act mutual fund |
|
|
| 2,500 |
|
| — |
|
| (104) |
|
| 2,396 |
|
Total equity securities with readily determinable fair values |
|
| $ | 2,500 |
| $ | 410 |
| $ | (104) |
| $ | 2,806 |
|
18
For equity securities with readily determinable fair values, the gross realized and unrealized gains and losses recognized in the Company’s consolidated statements of income were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gains (Losses) Recognized on Equity Securities |
| ||||||||||||||||
|
|
| Three Months Ended June 30, 2019 |
| Three Months Ended June 30, 2018 |
| ||||||||||||||
(in thousands) |
|
| Realized |
| Unrealized |
| Total |
| Realized |
| Unrealized |
| Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Freddie Mac preferred stock |
|
| $ | — |
| $ | 126 |
| $ | 126 |
| $ | — |
| $ | 60 |
| $ | 60 |
|
Community Reinvestment Act mutual fund |
|
|
| — |
|
| 33 |
|
| 33 |
|
| — |
|
| (14) |
|
| (14) |
|
Total equity securities with readily determinable fair value |
|
| $ | — |
| $ | 159 |
| $ | 159 |
| $ | — |
| $ | 46 |
| $ | 46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gains (Losses) Recognized on Equity Securities |
| ||||||||||||||||
|
|
| Six Months Ended June 30, 2019 |
| Six Months Ended June 30, 2018 |
| ||||||||||||||
(in thousands) |
|
| Realized |
| Unrealized |
| Total |
| Realized |
| Unrealized |
| Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Freddie Mac preferred stock |
|
| $ | — |
| $ | 378 |
| $ | 378 |
| $ | — |
| $ | (84) |
| $ | (84) |
|
Community Reinvestment Act mutual fund |
|
|
| — |
|
| 70 |
|
| 70 |
|
| — |
|
| (51) |
|
| (51) |
|
Total equity securities with readily determinable fair value |
|
| $ | — |
| $ | 448 |
| $ | 448 |
| $ | — |
| $ | (135) |
| $ | (135) |
|
19
3. LOANS HELD FOR SALE
In the ordinary course of business, the Bank originates for sale mortgage loans and consumer loans. Mortgage loans originated for sale are primarily originated and sold into the secondary market through the Bank’s Mortgage Banking segment, while consumer loans originated for sale are originated and sold through the RCS segment. Additionally, as described below, the Company took possession of a portfolio of reverse mortgages during the second quarter of 2019 and sold this portfolio in July 2019.
Mortgage Loans Held for Sale, at Fair Value
See additional detail regarding mortgage loans originated for sale, at fair value under Footnote 11 “Mortgage Banking Activities” of this section of the filing.
Reverse Mortgage Loans Held for Sale, at the Lower of Cost or Fair Value
During the second quarter of 2019, the Company reached an agreement with one of its Warehouse clients to take possession of certain first lien, residential reverse mortgage loans as payment for the approximate $12 million outstanding on the client’s Warehouse facility with the Bank. The Bank took possession of these loans as payment on the Warehouse facility after the client informed the Bank of its intent to close its business operations. These loans were sold by the Company in July 2019 at a loss of approximately $200,000.
Consumer Loans Held for Sale, at the Lower of Cost or Fair Value
RCS originates for sale 90% of its line-of-credit product and a portion of its hospital receivables product. Prior to the third quarter of 2018, RCS also originated for sale 90% of its credit-card product. During the third quarter of 2018, the Bank and its third-party marketer/servicer agreed to sell 100% of the existing RCS credit-card portfolio to an unrelated third party. As a result, the Bank reclassified 100% of its RCS credit-card portfolio into a held-for-sale category and charged this portfolio down to its estimated net realizable value. The Bank and its third-party marketer/servicer settled the sale of the RCS credit-card portfolio in January 2019. Ordinary gains or losses on the sale of RCS products are reported as a component of “Program fees.”
Activity for consumer loans held for sale and carried at the lower of cost or market value was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Six Months Ended |
| ||||||||
|
| June 30, |
| June 30, |
| ||||||||
(in thousands) |
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period |
| $ | 12,864 |
| $ | 7,380 |
| $ | 12,838 |
| $ | 8,551 |
|
Origination of consumer loans held for sale |
|
| 200,327 |
|
| 198,903 |
|
| 346,413 |
|
| 356,424 |
|
Proceeds from the sale of consumer loans held for sale |
|
| (176,759) |
|
| (194,263) |
|
| (324,260) |
|
| (354,529) |
|
Net gain on sale of consumer loans held for sale |
|
| 1,177 |
|
| 1,664 |
|
| 2,618 |
|
| 3,238 |
|
Balance, end of period |
| $ | 37,609 |
| $ | 13,684 |
| $ | 37,609 |
| $ | 13,684 |
|
Loans Held for Sale in Connection with Sale of Banking Centers, at the Lower of Cost or Fair Value
See additional detail regarding loans held for sale in connection with Sale of Banking Centers under Footnote 18 “Subsequent Event” in this section of the filing.
20
4.LOANS AND ALLOWANCE FOR LOAN AND LEASE LOSSES
The composition of the loan portfolio follows:
|
|
|
|
|
|
|
(in thousands) | June 30, 2019 |
| December 31, 2018 |
| ||
|
|
|
|
|
|
|
Traditional Banking: |
|
|
|
|
|
|
Residential real estate: |
|
|
|
|
|
|
Owner occupied | $ | 907,826 |
| $ | 907,005 |
|
Owner occupied - correspondent* |
| 78,943 |
|
| 94,827 |
|
Nonowner occupied |
| 259,166 |
|
| 242,846 |
|
Commercial real estate |
| 1,253,868 |
|
| 1,248,940 |
|
Construction & land development |
| 190,984 |
|
| 175,178 |
|
Commercial & industrial |
| 447,295 |
|
| 430,355 |
|
Lease financing receivables |
| 17,271 |
|
| 15,031 |
|
Home equity |
| 296,834 |
|
| 332,548 |
|
Consumer: |
|
|
|
|
|
|
Credit cards |
| 17,429 |
|
| 19,095 |
|
Overdrafts |
| 894 |
|
| 1,102 |
|
Automobile loans |
| 63,553 |
|
| 63,475 |
|
Other consumer |
| 53,768 |
|
| 46,642 |
|
Total Traditional Banking |
| 3,587,831 |
|
| 3,577,044 |
|
Warehouse lines of credit* |
| 725,337 |
|
| 468,695 |
|
Total Core Banking |
| 4,313,168 |
|
| 4,045,739 |
|
|
|
|
|
|
|
|
Republic Processing Group*: |
|
|
|
|
|
|
Tax Refund Solutions: |
|
|
|
|
|
|
Easy Advances |
| — |
|
| — |
|
Other TRS loans |
| 711 |
|
| 13,744 |
|
Republic Credit Solutions |
| 96,790 |
|
| 88,744 |
|
Total Republic Processing Group |
| 97,501 |
|
| 102,488 |
|
|
|
|
|
|
|
|
Total loans** |
| 4,410,669 |
|
| 4,148,227 |
|
Allowance for loan and lease losses |
| (45,983) |
|
| (44,675) |
|
|
|
|
|
|
|
|
Total loans, net | $ | 4,364,686 |
| $ | 4,103,552 |
|
*Identifies loans to borrowers located primarily outside of the Bank’s market footprint.
**Total loans are presented inclusive of premiums, discounts and net loan origination fees and costs. See table directly below for expanded detail.
The following table reconciles the contractually receivable and carrying amounts of loans:
|
|
|
|
|
|
|
(in thousands) | June 30, 2019 |
| December 31, 2018 |
| ||
|
|
|
|
|
|
|
Contractually receivable | $ | 4,409,882 |
| $ | 4,147,249 |
|
Unearned income(1) |
| (1,287) |
|
| (1,038) |
|
Unamortized premiums(2) |
| 487 |
|
| 588 |
|
Unaccreted discounts(3) |
| (3,064) |
|
| (3,400) |
|
Net unamortized deferred origination fees and costs(4) |
| 4,651 |
|
| 4,828 |
|
Carrying value of loans | $ | 4,410,669 |
| $ | 4,148,227 |
|
(1) | Unearned income relates to lease financing receivables. |
(2) | Unamortized premiums predominately relate to loans acquired through the Bank’s Correspondent Lending channel. |
(3) | Unaccreted discounts include accretable and non-accretable discounts and relate to loans acquired in the Bank’s 2016 Cornerstone acquisition and its 2012 FDIC-assisted transactions. |
(4) | Primarily attributable to the Traditional Banking segment. |
21
Purchased Credit-Impaired Loans
The following table reconciles the contractually required and carrying amounts of all PCI loans:
|
|
|
|
|
|
|
|
(in thousands) |
| June 30, 2019 |
| December 31, 2018 |
| ||
|
|
|
|
|
|
|
|
Contractually required principal |
| $ | 3,882 |
| $ | 4,251 |
|
Non-accretable amount |
|
| (1,379) |
|
| (1,521) |
|
Accretable amount |
|
| (50) |
|
| (50) |
|
Carrying value of loans |
| $ | 2,453 |
| $ | 2,680 |
|
The following table presents a rollforward of the accretable amount on all PCI loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Six Months Ended |
| ||||||||
|
| June 30, |
| June 30, |
| ||||||||
(in thousands) |
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period |
| $ | (50) |
| $ | (140) |
| $ | (50) |
| $ | (140) |
|
Transfers between non-accretable and accretable* |
|
| (26) |
|
| (241) |
|
| (142) |
|
| (241) |
|
Net accretion into interest income on loans, including loan fees |
|
| 26 |
|
| 281 |
|
| 142 |
|
| 281 |
|
Balance, end of period |
| $ | (50) |
| $ | (100) |
| $ | (50) |
| $ | (100) |
|
*Transfers are primarily attributable to changes in estimated cash flows of the underlying loans.
22
Allowance for Loan and Lease Losses
FDIC
Federal Deposit Insurance Corporation
Prime
The following table presentsWall Street Journal Prime Interest Rate
AOCI
Accumulated Other Comprehensive Income
FFTR
Federal Funds Target Rate
Provision
Provision for Loan and Lease Losses
APR
Annual Percentage Rate
FHLB
Federal Home Loan Bank
PSU
Performance Stock Unit
ASC
Accounting Standards Codification
FHLMC
Federal Home Loan Mortgage Corporation
R&D
Research and Development
ASU
Accounting Standards Update
FICO
Fair Isaac Corporation
RB&T / the activityBank
Republic Bank & Trust Company
Basic EPS
Basic earnings per Class A Common Share
FNMA
Federal National Mortgage Association
RBCT
Republic Bancorp Capital Trust
BOLI
Bank Owned Life Insurance
FRB
Federal Reserve Bank
RCS
Republic Credit Solutions
BPO
Brokered Price Opinion
FTE
Full Time Equivalent
Republic / the Company
Republic Bancorp, Inc.
C&D
Construction and Development
GAAP
Generally Accepted Accounting Principles in the Allowance by portfolio class:United States
ROA
Return on Average Assets
C&I
Commercial and Industrial
HELOC
Home Equity Line of Credit
ROE
Return on Average Equity
CECL
Current Expected Credit Loss
HTM
Held to Maturity
RPG
Republic Processing Group
CMO
Collateralized Mortgage Obligation
IRS
Internal Revenue Service
RPS
Republic Payment Solutions
Core Bank
The Traditional Banking, Warehouse Lending, and Mortgage Banking reportable segments
LIBOR
London Interbank Offered Rate
RT
Refund Transfer
CRA
Community Reinvestment Act
LPO
Loan Production Office
SEC
Securities and Exchange Commission
CRE
Commercial Real Estate
LTV
Loan to Value
SSUAR
Securities Sold Under Agreements to Repurchase
Diluted EPS
Diluted earnings per Class A Common Share
MBS
Mortgage Backed Securities
SVP
Senior Vice President
DTA
Deferred Tax Assets
MSRs
Mortgage Servicing Rights
TCJA
2017 Tax Cuts and Jobs Act
DTL
Deferred Tax Liabilities
NA
Not Applicable
TDR
Troubled Debt Restructuring
EA
Easy Advance
NM
Not Meaningful
The Captive
Republic Insurance Services, Inc.
EBITDA
Earnings Before Interest, Taxes, Depreciation and Amortization
OCI
Other Comprehensive Income
TPS
Trust Preferred Securities
EFTA
Electronic Fund Transfers Act
OREO
Other Real Estate Owned
TRS
Tax Refund Solutions
ESPP
Employee Stock Purchase Plan
OTTI
Other than Temporary Impairment
TRUP
TPS Investment
EVP
Executive Vice President
PCI
Purchased Credit Impaired
Warehouse
Warehouse Lending
3
PART I — FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands)
|
|
|
|
|
|
|
| June 30, |
| December 31, |
| ||
| 2019 |
| 2018 |
| ||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents | $ | 473,779 |
| $ | 351,474 |
|
Available-for-sale debt securities |
| 380,356 |
|
| 475,738 |
|
Held-to-maturity debt securities (fair value of $64,433 in 2019 and $64,858 in 2018) |
| 63,902 |
|
| 65,227 |
|
Equity securities with readily determinable fair value |
| 3,254 |
|
| 2,806 |
|
Mortgage loans held for sale, at fair value |
| 13,883 |
|
| 8,971 |
|
Reverse mortgage loans held for sale, at the lower of cost or fair value |
| 12,457 |
|
| — |
|
Consumer loans held for sale, at the lower of cost or fair value |
| 37,609 |
|
| 12,838 |
|
Loans held for sale in connection with sale of banking centers, at the lower of cost or fair value |
| 111,745 |
|
| — |
|
Loans (loans carried at fair value of $1,369 in 2019 and $1,922 in 2018) |
| 4,410,669 |
|
| 4,148,227 |
|
Allowance for loan and lease losses |
| (45,983) |
|
| (44,675) |
|
Loans, net |
| 4,364,686 |
|
| 4,103,552 |
|
Federal Home Loan Bank stock, at cost |
| 32,242 |
|
| 32,067 |
|
Premises and equipment, net |
| 42,647 |
|
| 43,126 |
|
Premises, held for sale |
| 1,552 |
|
| 1,694 |
|
Right-of-use assets |
| 37,450 |
|
| — |
|
Goodwill |
| 16,300 |
|
| 16,300 |
|
Other real estate owned |
| 1,095 |
|
| 160 |
|
Bank owned life insurance |
| 65,642 |
|
| 64,883 |
|
Other assets and accrued interest receivable |
| 64,535 |
|
| 61,568 |
|
|
|
|
|
|
|
|
TOTAL ASSETS | $ | 5,723,134 |
| $ | 5,240,404 |
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
Noninterest-bearing | $ | 1,003,793 |
| $ | 1,003,969 |
|
Interest-bearing |
| 2,557,127 |
|
| 2,452,176 |
|
Deposits held for assumption in connection with sale of banking centers |
| 152,954 |
|
| — |
|
Total deposits |
| 3,713,874 |
|
| 3,456,145 |
|
|
|
|
|
|
|
|
Securities sold under agreements to repurchase and other short-term borrowings |
| 226,002 |
|
| 182,990 |
|
Operating lease liabilities |
| 38,852 |
|
| — |
|
Federal Home Loan Bank advances |
| 915,000 |
|
| 810,000 |
|
Subordinated note |
| 41,240 |
|
| 41,240 |
|
Other liabilities and accrued interest payable |
| 56,738 |
|
| 60,095 |
|
|
|
|
|
|
|
|
Total liabilities |
| 4,991,706 |
|
| 4,550,470 |
|
|
|
|
|
|
|
|
Commitments and contingent liabilities (Footnote 9) |
| — |
|
| — |
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, no par value |
| — |
|
| — |
|
Class A Common Stock and Class B Common Stock, no par value |
| 4,907 |
|
| 4,900 |
|
Additional paid in capital |
| 141,525 |
|
| 141,018 |
|
Retained earnings |
| 581,734 |
|
| 545,013 |
|
Accumulated other comprehensive income (loss) |
| 3,262 |
|
| (997) |
|
|
|
|
|
|
|
|
Total stockholders’ equity |
| 731,428 |
|
| 689,934 |
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 5,723,134 |
| $ | 5,240,404 |
|
See accompanying footnotes to consolidated financial statements.
4
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Six Months Ended |
| ||||||||
| June 30, |
| June 30, |
| ||||||||
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
INTEREST INCOME: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, including fees | $ | 60,211 |
| $ | 53,944 |
| $ | 137,039 |
| $ | 123,571 |
|
Taxable investment securities |
| 3,284 |
|
| 2,708 |
|
| 6,875 |
|
| 5,342 |
|
Federal Home Loan Bank stock and other |
| 2,169 |
|
| 1,704 |
|
| 4,383 |
|
| 3,276 |
|
Total interest income |
| 65,664 |
|
| 58,356 |
|
| 148,297 |
|
| 132,189 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST EXPENSE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
| 6,903 |
|
| 3,934 |
|
| 13,651 |
|
| 7,294 |
|
Securities sold under agreements to repurchase and other short-term borrowings |
| 330 |
|
| 222 |
|
| 751 |
|
| 435 |
|
Federal Home Loan Bank advances |
| 4,062 |
|
| 2,723 |
|
| 6,792 |
|
| 4,997 |
|
Subordinated note |
| 423 |
|
| 393 |
|
| 858 |
|
| 714 |
|
Total interest expense |
| 11,718 |
|
| 7,272 |
|
| 22,052 |
|
| 13,440 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INTEREST INCOME |
| 53,946 |
|
| 51,084 |
|
| 126,245 |
|
| 118,749 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan and lease losses |
| 4,460 |
|
| 4,932 |
|
| 21,691 |
|
| 22,187 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES |
| 49,486 |
|
| 46,152 |
|
| 104,554 |
|
| 96,562 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONINTEREST INCOME: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges on deposit accounts |
| 3,598 |
|
| 3,574 |
|
| 6,901 |
|
| 7,129 |
|
Net refund transfer fees |
| 3,629 |
|
| 3,473 |
|
| 20,729 |
|
| 19,825 |
|
Mortgage banking income |
| 2,416 |
|
| 1,316 |
|
| 3,955 |
|
| 2,336 |
|
Interchange fee income |
| 3,257 |
|
| 2,891 |
|
| 6,014 |
|
| 5,558 |
|
Program fees |
| 1,037 |
|
| 1,323 |
|
| 2,111 |
|
| 3,019 |
|
Increase in cash surrender value of bank owned life insurance |
| 377 |
|
| 379 |
|
| 759 |
|
| 750 |
|
Net gains on other real estate owned |
| 90 |
|
| 320 |
|
| 220 |
|
| 452 |
|
Other |
| 721 |
|
| 1,020 |
|
| 1,853 |
|
| 2,772 |
|
Total noninterest income |
| 15,125 |
|
| 14,296 |
|
| 42,542 |
|
| 41,841 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONINTEREST EXPENSE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
| 25,286 |
|
| 22,766 |
|
| 50,362 |
|
| 46,600 |
|
Occupancy and equipment, net |
| 6,472 |
|
| 6,391 |
|
| 13,056 |
|
| 12,612 |
|
Communication and transportation |
| 1,071 |
|
| 1,241 |
|
| 2,232 |
|
| 2,623 |
|
Marketing and development |
| 1,278 |
|
| 1,283 |
|
| 2,380 |
|
| 2,199 |
|
FDIC insurance expense |
| 295 |
|
| 345 |
|
| 743 |
|
| 870 |
|
Bank franchise tax expense |
| 935 |
|
| 860 |
|
| 3,431 |
|
| 3,378 |
|
Data processing |
| 2,217 |
|
| 2,443 |
|
| 4,313 |
|
| 4,829 |
|
Interchange related expense |
| 1,302 |
|
| 1,098 |
|
| 2,617 |
|
| 2,105 |
|
Supplies |
| 582 |
|
| 303 |
|
| 1,066 |
|
| 684 |
|
Other real estate owned and other repossession expense |
| 148 |
|
| 16 |
|
| 194 |
|
| 61 |
|
Legal and professional fees |
| 844 |
|
| 728 |
|
| 1,730 |
|
| 1,771 |
|
Other |
| 2,998 |
|
| 3,158 |
|
| 6,813 |
|
| 5,945 |
|
Total noninterest expense |
| 43,428 |
|
| 40,632 |
|
| 88,937 |
|
| 83,677 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAX EXPENSE |
| 21,183 |
|
| 19,816 |
|
| 58,159 |
|
| 54,726 |
|
INCOME TAX EXPENSE |
| 3,176 |
|
| 4,150 |
|
| 10,636 |
|
| 11,591 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME | $ | 18,007 |
| $ | 15,666 |
| $ | 47,523 |
| $ | 43,135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC EARNINGS PER SHARE: |
|
|
|
|
|
|
|
|
|
|
|
|
Class A Common Stock | $ | 0.86 |
| $ | 0.75 |
| $ | 2.29 |
| $ | 2.08 |
|
Class B Common Stock |
| 0.79 |
|
| 0.68 |
|
| 2.08 |
|
| 1.89 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED EARNINGS PER SHARE: |
|
|
|
|
|
|
|
|
|
|
|
|
Class A Common Stock | $ | 0.86 |
| $ | 0.74 |
| $ | 2.28 |
| $ | 2.06 |
|
Class B Common Stock |
| 0.78 |
|
| 0.68 |
|
| 2.07 |
|
| 1.88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying footnotes to consolidated financial statements.
5
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Six Months Ended |
| ||||||||
| June 30, |
| June 30, |
| ||||||||
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income | $ | 18,007 |
| $ | 15,666 |
| $ | 47,523 |
| $ | 43,135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE INCOME |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of derivatives used for cash flow hedges |
| (146) |
|
| 77 |
|
| (215) |
|
| 276 |
|
Reclassification amount for net derivative losses realized in income |
| (13) |
|
| 9 |
|
| (32) |
|
| 35 |
|
Change in unrealized (loss) gain on AFS debt securities |
| 2,014 |
|
| (546) |
|
| 5,673 |
|
| (2,663) |
|
Adjustment for adoption of ASU 2016-01 |
| — |
|
| — |
|
| — |
|
| (428) |
|
Change in unrealized gain on AFS debt security for which a portion of OTTI has been recognized in earnings |
| (1) |
|
| (15) |
|
| (34) |
|
| (17) |
|
Total other comprehensive income (loss) before income tax |
| 1,854 |
|
| (475) |
|
| 5,392 |
|
| (2,797) |
|
Tax effect |
| (389) |
|
| 99 |
|
| (1,133) |
|
| 588 |
|
Total other comprehensive income (loss), net of tax |
| 1,465 |
|
| (376) |
|
| 4,259 |
|
| (2,209) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME | $ | 19,472 |
| $ | 15,290 |
| $ | 51,782 |
| $ | 40,926 |
|
See accompanying footnotes to consolidated financial statements.
6
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended June 30, 2019 |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common Stock |
|
|
|
|
|
|
| Accumulated |
|
|
|
| ||||||
|
| Class A |
| Class B |
|
|
|
| Additional |
|
|
|
| Other |
| Total |
| |||
|
| Shares |
| Shares |
|
|
|
| Paid In |
| Retained |
| Comprehensive |
| Stockholders’ |
| ||||
(in thousands) |
| Outstanding |
| Outstanding |
| Amount |
| Capital |
| Earnings |
| Income (Loss) |
| Equity |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 1, 2019 |
| 18,698 |
| 2,213 |
| $ | 4,899 |
| $ | 141,206 |
| $ | 569,189 |
| $ | 1,797 |
| $ | 717,091 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| — |
| — |
|
| — |
|
| — |
|
| 18,007 |
|
| — |
|
| 18,007 |
|
Net change in accumulated other comprehensive income |
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| 1,465 |
|
| 1,465 |
|
Dividends declared on Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A Shares ($0.264 per share) |
| — |
| — |
|
| — |
|
| — |
|
| (4,932) |
|
| — |
|
| (4,932) |
|
Class B Shares ($0.240 per share) |
| — |
| — |
|
| — |
|
| — |
|
| (530) |
|
| — |
|
| (530) |
|
Stock options exercised, net of shares redeemed |
| 34 |
| — |
|
| 8 |
|
| (110) |
|
| — |
|
| — |
|
| (102) |
|
Conversion of Class B to Class A Common Shares |
| 5 |
| (5) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Net change in notes receivable on Class A Common Stock |
| — |
| — |
|
| — |
|
| (158) |
|
| — |
|
| — |
|
| (158) |
|
Deferred compensation - Class A Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors |
| — |
| — |
|
| — |
|
| 41 |
|
| — |
|
| — |
|
| 41 |
|
Designated key employees |
| — |
| — |
|
| — |
|
| 58 |
|
| — |
|
| — |
|
| 58 |
|
Employee stock purchase plan - Class A Common Stock |
| 2 |
| — |
|
| — |
|
| 114 |
|
| — |
|
| — |
|
| 114 |
|
Stock-based awards - Class A Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance stock units |
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Restricted stock |
| 1 |
| — |
|
| — |
|
| 295 |
|
| — |
|
| — |
|
| 295 |
|
Stock options |
| — |
| — |
|
| — |
|
| 79 |
|
| — |
|
| — |
|
| 79 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2019 |
| 18,740 |
| 2,208 |
| $ | 4,907 |
| $ | 141,525 |
| $ | 581,734 |
| $ | 3,262 |
| $ | 731,428 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended June 30, 2018 |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common Stock |
|
|
|
|
|
|
| Accumulated |
|
|
|
| ||||||
|
| Class A |
| Class B |
|
|
|
| Additional |
|
|
|
| Other |
| Total |
| |||
|
| Shares |
| Shares |
|
|
|
| Paid In |
| Retained |
| Comprehensive |
| Stockholders’ |
| ||||
(in thousands) |
| Outstanding |
| Outstanding |
| Amount |
| Capital |
| Earnings |
| Income |
| Equity |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 1, 2018 |
| 18,645 |
| 2,243 |
| $ | 4,902 |
| $ | 139,646 |
| $ | 510,123 |
| $ | (1,417) |
| $ | 653,254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| — |
| — |
|
| — |
|
| — |
|
| 15,666 |
|
| — |
|
| 15,666 |
|
Net change in accumulated other comprehensive income |
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| (376) |
|
| (376) |
|
Dividends declared Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A Shares ($0.242 per share) |
| — |
| — |
|
| — |
|
| — |
|
| (4,518) |
|
| — |
|
| (4,518) |
|
Class B Shares ($0.220 per share) |
| — |
| — |
|
| — |
|
| — |
|
| (487) |
|
| — |
|
| (487) |
|
Stock options exercised, net of shares redeemed |
| 2 |
| — |
|
| — |
|
| 48 |
|
| — |
|
| — |
|
| 48 |
|
Conversion of Class B to Class A Common Shares |
| 28 |
| (28) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Net change in notes receivable on Class A Common Stock |
| — |
| — |
|
| — |
|
| 36 |
|
| — |
|
| — |
|
| 36 |
|
Deferred director compensation expense - Class A Common Stock |
| 2 |
| — |
|
| 1 |
|
| 47 |
|
| — |
|
| — |
|
| 48 |
|
Stock-based awards - Class A Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance stock units |
| — |
| — |
|
| — |
|
| 27 |
|
| — |
|
| — |
|
| 27 |
|
Restricted stock |
| — |
| — |
|
| — |
|
| 254 |
|
| — |
|
| — |
|
| 254 |
|
Stock options |
| — |
| — |
|
| — |
|
| 56 |
|
| — |
|
| — |
|
| 56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2018 |
| 18,677 |
| 2,215 |
| $ | 4,903 |
| $ | 140,114 |
| $ | 520,784 |
| $ | (1,793) |
| $ | 664,008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying footnotes to consolidated financial statements.
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended June 30, 2019 |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common Stock |
|
|
|
|
|
|
| Accumulated |
|
|
|
| ||||||
|
| Class A |
| Class B |
|
|
|
| Additional |
|
|
|
| Other |
| Total |
| |||
|
| Shares |
| Shares |
|
|
|
| Paid In |
| Retained |
| Comprehensive |
| Stockholders’ |
| ||||
(in thousands) |
| Outstanding |
| Outstanding |
| Amount |
| Capital |
| Earnings |
| Income (Loss) |
| Equity |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2019 |
| 18,675 |
| 2,213 |
| $ | 4,900 |
| $ | 141,018 |
| $ | 545,013 |
| $ | (997) |
| $ | 689,934 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment for adoption of ASU 2016-02 |
| — |
| — |
|
| — |
|
| — |
|
| 126 |
|
| — |
|
| 126 |
|
Net income |
| — |
| — |
|
| — |
|
| — |
|
| 47,523 |
|
| — |
|
| 47,523 |
|
Net change in accumulated other comprehensive income |
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| 4,259 |
|
| 4,259 |
|
Dividends declared on Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A Shares ($0.528 per share) |
| — |
| — |
|
| — |
|
| — |
|
| (9,865) |
|
| — |
|
| (9,865) |
|
Class B Shares ($0.480 per share) |
| — |
| — |
|
| — |
|
| — |
|
| (1,061) |
|
| — |
|
| (1,061) |
|
Stock options exercised, net of shares redeemed |
| 34 |
| — |
|
| 8 |
|
| (110) |
|
| — |
|
| — |
|
| (102) |
|
Conversion of Class B to Class A Common Shares |
| 5 |
| (5) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Repurchase of Class A Common Stock |
| (8) |
| — |
|
| (1) |
|
| (376) |
|
| (2) |
|
| — |
|
| (379) |
|
Net change in notes receivable on Class A Common Stock |
| — |
| — |
|
| — |
|
| (192) |
|
| — |
|
| — |
|
| (192) |
|
Deferred compensation - Class A Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors |
| 5 |
| — |
|
| — |
|
| 106 |
|
| — |
|
| — |
|
| 106 |
|
Designated key employees |
| — |
| — |
|
| — |
|
| 226 |
|
| — |
|
| — |
|
| 226 |
|
Employee stock purchase plan - Class A Common Stock |
| 5 |
| — |
|
| — |
|
| 235 |
|
| — |
|
| — |
|
| 235 |
|
Stock-based awards - Class A Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance stock units |
| 23 |
| — |
|
| — |
|
| (57) |
|
| — |
|
| — |
|
| (57) |
|
Restricted stock |
| 1 |
| — |
|
| — |
|
| 475 |
|
| — |
|
| ��— |
|
| 475 |
|
Stock options |
| — |
| — |
|
| — |
|
| 200 |
|
| — |
|
| — |
|
| 200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2019 |
| 18,740 |
| 2,208 |
| $ | 4,907 |
| $ | 141,525 |
| $ | 581,734 |
| $ | 3,262 |
| $ | 731,428 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended June 30, 2018 |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common Stock |
|
|
|
|
|
|
| Accumulated |
|
|
|
| ||||||
|
| Class A |
| Class B |
|
|
|
| Additional |
|
|
|
| Other |
| Total |
| |||
|
| Shares |
| Shares |
|
|
|
| Paid In |
| Retained |
| Comprehensive |
| Stockholders’ |
| ||||
(in thousands) |
| Outstanding |
| Outstanding |
| Amount |
| Capital |
| Earnings |
| Income |
| Equity |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2018 |
| 18,607 |
| 2,243 |
| $ | 4,902 |
| $ | 139,406 |
| $ | 487,700 |
| $ | 416 |
| $ | 632,424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment for adoption of ASU 2016-01 |
| — |
| — |
|
| — |
|
| — |
|
| (35) |
|
| (338) |
|
| (373) |
|
Net income |
| — |
| — |
|
| — |
|
| — |
|
| 43,135 |
|
| — |
|
| 43,135 |
|
Net change in accumulated other comprehensive income |
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| (1,871) |
|
| (1,871) |
|
Dividends declared Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A Shares ($0.484 per share) |
| — |
| — |
|
| — |
|
| — |
|
| (9,035) |
|
| — |
|
| (9,035) |
|
Class B Shares ($0.440 per share) |
| — |
| — |
|
| — |
|
| — |
|
| (981) |
|
| — |
|
| (981) |
|
Stock options exercised, net of shares redeemed |
| 2 |
| — |
|
| — |
|
| 48 |
|
| — |
|
| — |
|
| 48 |
|
Conversion of Class B to Class A Common Shares |
| 28 |
| (28) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Net change in notes receivable on Class A Common Stock |
| — |
| — |
|
| — |
|
| 69 |
|
| — |
|
| — |
|
| 69 |
|
Deferred director compensation expense - Class A Common Stock |
| 5 |
| — |
|
| 1 |
|
| 102 |
|
| — |
|
| — |
|
| 103 |
|
Stock-based awards - Class A Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance stock units |
| — |
| — |
|
| — |
|
| 53 |
|
| — |
|
| — |
|
| 53 |
|
Restricted stock |
| 35 |
| — |
|
| — |
|
| 318 |
|
| — |
|
| — |
|
| 318 |
|
Stock options |
| — |
| — |
|
| — |
|
| 118 |
|
| — |
|
| — |
|
| 118 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2018 |
| 18,677 |
| 2,215 |
| $ | 4,903 |
| $ | 140,114 |
| $ | 520,784 |
| $ | (1,793) |
| $ | 664,008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying footnotes to consolidated financial statements.
8
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
|
|
|
|
|
|
|
| Six Months Ended |
| ||||
| June 30, |
| ||||
| 2019 |
| 2018 |
| ||
OPERATING ACTIVITIES: |
|
|
|
|
|
|
Net income | $ | 47,523 |
| $ | 43,135 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
Net amortization on investment securities |
| (21) |
|
| (231) |
|
Net accretion on loans and amortization of core deposit intangible and operating lease components |
| (1,833) |
|
| (1,863) |
|
Unrealized (gains) losses on equity securities with readily determinable fair value |
| (448) |
|
| 135 |
|
Depreciation of premises and equipment |
| 4,572 |
|
| 4,998 |
|
Amortization of mortgage servicing rights |
| 733 |
|
| 731 |
|
Provision for loan and lease losses |
| 21,691 |
|
| 22,187 |
|
Net gain on sale of mortgage loans held for sale |
| (3,478) |
|
| (1,862) |
|
Origination of mortgage loans held for sale |
| (122,696) |
|
| (84,124) |
|
Proceeds from sale of mortgage loans held for sale |
| 121,262 |
|
| 79,094 |
|
Net gain on sale of consumer loans held for sale |
| (2,618) |
|
| (2,836) |
|
Origination of consumer loans held for sale |
| (346,413) |
|
| (373,409) |
|
Proceeds from sale of consumer loans held for sale |
| 324,260 |
|
| 371,552 |
|
Net gain realized on sale of other real estate owned |
| (220) |
|
| (452) |
|
Impairment of premises held for sale |
| 132 |
|
| 230 |
|
Deferred compensation expense - Class A Common Stock |
| 332 |
|
| 103 |
|
Stock-based awards expense - Class A Common Stock |
| 618 |
|
| 489 |
|
Increase in cash surrender value of bank owned life insurance |
| (759) |
|
| (750) |
|
Net change in other assets and liabilities: |
|
|
|
|
|
|
Accrued interest receivable |
| (774) |
|
| (476) |
|
Accrued interest payable |
| 491 |
|
| (30) |
|
Other assets |
| 581 |
|
| 2,778 |
|
Other liabilities |
| (7,775) |
|
| 3,574 |
|
Net cash provided by operating activities |
| 35,160 |
|
| 62,973 |
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES: |
|
|
|
|
|
|
Purchases of available-for-sale debt securities |
| — |
|
| (99,026) |
|
Purchases of held-to-maturity debt securities |
| — |
|
| (4,934) |
|
Proceeds from calls, maturities and paydowns of available-for-sale debt securities |
| 101,051 |
|
| 204,811 |
|
Proceeds from calls, maturities and paydowns of held-to-maturity debt securities |
| 1,315 |
|
| 2,400 |
|
Net change in outstanding warehouse lines of credit |
| (269,099) |
|
| (108,269) |
|
Net change in other loans |
| (137,490) |
|
| (89,503) |
|
Proceeds from redemption of Federal Home Loan Bank stock |
| 2,102 |
|
| — |
|
Purchase of Federal Home Loan Bank stock |
| (2,277) |
|
| — |
|
Proceeds from sales of other real estate owned |
| 580 |
|
| 751 |
|
Net purchases of premises and equipment |
| (4,083) |
|
| (6,108) |
|
Net cash used in investing activities |
| (307,901) |
|
| (99,878) |
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES: |
|
|
|
|
|
|
Net change in deposits |
| 257,729 |
|
| 40,211 |
|
Net change in securities sold under agreements to repurchase and other short-term borrowings |
| 43,012 |
|
| (28,730) |
|
Payments of Federal Home Loan Bank advances |
| (565,000) |
|
| (377,500) |
|
Proceeds from Federal Home Loan Bank advances |
| 670,000 |
|
| 500,000 |
|
Repurchase of Class A Common Stock |
| (379) |
|
| — |
|
Net proceeds from Class A Common Stock purchased through employee stock purchase plan |
| 235 |
|
| 48 |
|
Net proceeds from Class A Common Stock options exercised |
| (102) |
|
| — |
|
Cash dividends paid |
| (10,449) |
|
| (9,519) |
|
Net cash provided by (used in) financing activities |
| 395,046 |
|
| 124,510 |
|
|
|
|
|
|
|
|
NET CHANGE IN CASH AND CASH EQUIVALENTS |
| 122,305 |
|
| 87,605 |
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
| 351,474 |
|
| 299,351 |
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 473,779 |
| $ | 386,956 |
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASHFLOW INFORMATION: |
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
Interest | $ | 21,561 |
| $ | 13,470 |
|
Income taxes |
| 6,726 |
|
| 8,177 |
|
|
|
|
|
|
|
|
SUPPLEMENTAL NONCASH DISCLOSURES: |
|
|
|
|
|
|
Transfers from loans to real estate acquired in settlement of loans | $ | 1,295 |
| $ | 184 |
|
Transfers from loans held for sale to held for investment |
| — |
|
| 2,237 |
|
Transfers from loans held for investment to held for sale |
| 124,202 |
|
| — |
|
Unfunded commitments in low-income-housing investments |
| — |
|
| 9,033 |
|
Right-of-use assets recorded upon adoption of ASU 2016-02 |
| 40,202 |
|
| — |
|
See accompanying footnotes to consolidated financial statements.
9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – JUNE 30, 2019 and 2018 AND DECEMBER 31, 2018 (UNAUDITED)
1.BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation — The consolidated financial statements include the accounts of Republic Bancorp, Inc. (the “Parent Company”) and its wholly-owned subsidiaries, Republic Bank & Trust Company and Republic Insurance Services, Inc. As used in this filing, the terms “Republic,” the “Company,” “we,” “our,” and “us” refer to Republic Bancorp, Inc., and, where the context requires, Republic Bancorp, Inc. and its subsidiaries. The term the “Bank” refers to the Company’s subsidiary bank: Republic Bank & Trust Company. The term the “Captive” refers to the Company’s insurance subsidiary: Republic Insurance Services, Inc. All significant intercompany balances and transactions are eliminated in consolidation.
Republic is a financial holding company headquartered in Louisville, Kentucky. The Bank is a Kentucky-based, state-chartered non-member financial institution that provides both traditional and non-traditional banking products through five reportable segments using a multitude of delivery channels. While the Bank operates primarily in its market footprint, its non-brick-and-mortar delivery channels allow it to reach clients across the United States. The Captive is a Nevada-based, wholly-owned insurance subsidiary of the Company. The Captive provides property and casualty insurance coverage to the Company and the Bank as well as a group of third-party insurance captives for which insurance may not be available or economically feasible.
Republic Bancorp Capital Trust is a Delaware statutory business trust that is a wholly-owned unconsolidated finance subsidiary of Republic Bancorp, Inc.
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. For further information, refer to the consolidated financial statements and footnotes thereto included in Republic’s Form 10-K for the year ended December 31, 2018.
As of June 30, 2019, the Company was divided into five reportable segments: Traditional Banking, Warehouse, Mortgage Banking, TRS, and RCS. Management considers the first three segments to collectively constitute “Core Bank” or “Core Banking” operations, while the last two segments collectively constitute 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.
10
Core Bank
Traditional Banking segment — The Traditional Banking segment provides traditional banking products primarily to customers in the Company’s market footprint. As of June 30, 2019, Republic had 45 full-service banking centers and two LPOs with locations as follows:
Kentucky — 32
Metropolitan Louisville — 18
Central Kentucky — 9
Elizabethtown — 1*
Frankfort — 1*
Georgetown — 1
Lexington — 5
Shelbyville — 1
Western Kentucky — 2
Owensboro — 2*
Northern Kentucky — 3
Covington — 1
Crestview Hills — 1
Florence — 1
Southern Indiana — 3
Floyds Knobs — 1
Jeffersonville — 1
New Albany — 1
Metropolitan Tampa, Florida — 8**
Metropolitan Cincinnati, Ohio — 1
Metropolitan Nashville, Tennessee — 3**
* The Company agreed to sell banking center(s) in July 2019. See Note 18 in this section of the filing for additional information.
** Includes an LPO
Republic’s headquarters are in Louisville, which is the largest city in Kentucky based on population.
Traditional Banking results of operations are primarily dependent upon net interest income, which represents the difference between the interest income and fees on interest-earning assets and the interest expense on interest-bearing liabilities. Principal interest-earning Traditional Banking assets represent investment securities and commercial and consumer loans primarily secured by real estate and/or personal property. Interest-bearing liabilities primarily consist of interest-bearing deposit accounts, securities sold under agreements to repurchase, as well as short-term and long-term borrowing sources. FHLB advances have traditionally been a significant borrowing source for the Bank.
Other sources of Traditional Banking income include service charges on deposit accounts, debit and credit card interchange fee income, title insurance commissions, fees charged to clients for trust services, and increases in the cash surrender value of BOLI.
Traditional Banking operating expenses consist primarily of salaries and employee benefits, occupancy and equipment expenses, communication and transportation costs, data processing, interchange related expenses, marketing and development expenses, FDIC insurance expense, franchise tax expense and various other general and administrative costs. Traditional Banking results of operations are significantly impacted by general economic and competitive conditions, particularly changes in market interest rates, government laws and policies and actions of regulatory agencies.
The Traditional Bank has acquired for investment single family, first lien mortgage loans that meet the Traditional Bank’s specifications through its Correspondent Lending channel. Substantially all loans purchased through the Correspondent Lending channel are purchased at a premium.
11
Warehouse Lending segment — Through its Warehouse Lending segment, the Core Bank provides short-term, revolving credit facilities to mortgage bankers across the United States through mortgage warehouse lines of credit. These credit facilities are primarily secured by single family, first lien residential real estate loans. The credit facility enables the mortgage banking clients to close single family, first lien residential real estate loans in their own name and temporarily fund their inventory of these closed loans until the loans are sold to investors approved by the Bank. Individual loans are expected to remain on the warehouse line for an average of 15 to 30 days. Reverse mortgage loans typically remain on the line longer than conventional mortgage loans. Interest income and loan fees are accrued for each individual loan during the time the loan remains on the warehouse line and collected when the loan is sold. The Core Bank receives the sale proceeds of each loan directly from the investor and applies the funds to pay off the warehouse advance and related accrued interest and fees. The remaining proceeds are credited to the mortgage-banking client.
Mortgage Banking segment — Mortgage Banking activities primarily include 15-, 20- and 30-year fixed-term single family, first lien residential real estate loans that are originated and sold into the secondary market, primarily to the FHLMC and the FNMA. The Bank typically retains servicing on loans sold into the secondary market. Administration of loans with servicing retained by the Bank includes collecting principal and interest payments, escrowing funds for property taxes and property insurance, and remitting payments to secondary market investors. The Bank receives fees for performing these standard servicing functions.
Republic Processing Group
Tax Refund Solutions segment — Through the TRS segment, the Bank is one of a limited number of financial institutions that facilitates the receipt and payment of federal and state tax refund products and offers a credit product through third-party tax preparers located throughout the United States, as well as tax-preparation software providers (collectively, the “Tax Providers”). Substantially all of the business generated by the TRS segment occurs in the first half of the year. The TRS segment traditionally operates at a loss during the second half of the year, during which time the segment incurs costs preparing for the upcoming year’s tax season.
RTs are fee-based products whereby a tax refund is issued to the taxpayer after the Bank has received the refund from the federal or state government. There is no credit risk or borrowing cost associated with these products because they are only delivered to the taxpayer upon receipt of the tax refund directly from the governmental paying authority. Fees earned by the Company on RTs, net of revenue share, are reported as noninterest income under the line item “Net refund transfer fees.”
The EA tax credit product is a loan that allows a taxpayer to borrow funds as an advance of a portion of their tax refund. In response to changes in the legal, regulatory and competitive environment, management annually reviews and revises the EA’s product parameters. Further changes in EA product parameters do not ensure positive results and could have an overall material negative impact on the performance of the EA and therefore on the Company’s financial condition and results of operations. For the 2018 and 2019 fiscal years, the EA product had the following features:
EA features consistent during 2018 and 2019:
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| Allowance Rollforward |
| |||||||||||||||||||||||||||||
|
|
| Three Months Ended June 30, |
| |||||||||||||||||||||||||||||
|
|
| 2018 |
|
| 2017 |
| ||||||||||||||||||||||||||
|
|
| Beginning |
|
|
| Charge- |
|
|
| Ending |
|
| Beginning |
|
|
| Charge- |
|
|
| Ending |
| ||||||||||
(in thousands) |
|
| Balance |
| Provision |
| offs |
| Recoveries |
| Balance |
|
| Balance |
| Provision |
| offs |
| Recoveries |
| Balance |
| ||||||||||
|
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Traditional Banking: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Residential real estate: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
|
| $ | 5,988 |
| $ | (116) |
| $ | (15) |
| $ | 178 |
| $ | 6,035 |
|
| $ | 7,071 |
| $ | (288) |
| $ | (108) |
| $ | 65 |
| $ | 6,740 |
|
Owner occupied - correspondent |
|
|
| 278 |
|
| (15) |
|
| — |
|
| — |
|
| 263 |
|
|
| 353 |
|
| (29) |
|
| — |
|
| — |
|
| 324 |
|
Nonowner occupied |
|
|
| 1,461 |
|
| 93 |
|
| (7) |
|
| 5 |
|
| 1,552 |
|
|
| 1,198 |
|
| 42 |
|
| (3) |
|
| — |
|
| 1,237 |
|
Commercial real estate |
|
|
| 9,460 |
|
| 352 |
|
| — |
|
| 3 |
|
| 9,815 |
|
|
| 7,898 |
|
| 449 |
|
| — |
|
| 21 |
|
| 8,368 |
|
Construction & land development |
|
|
| 2,720 |
|
| 80 |
|
| — |
|
| 25 |
|
| 2,825 |
|
|
| 2,233 |
|
| 274 |
|
| — |
|
| 1 |
|
| 2,508 |
|
Commercial & industrial |
|
|
| 2,247 |
|
| 84 |
|
| (17) |
|
| 4 |
|
| 2,318 |
|
|
| 1,488 |
|
| 193 |
|
| — |
|
| 1 |
|
| 1,682 |
|
Lease financing receivables |
|
|
| 165 |
|
| (5) |
|
| — |
|
| — |
|
| 160 |
|
|
| 145 |
|
| 6 |
|
| — |
|
| — |
|
| 151 |
|
Home equity |
|
|
| 3,669 |
|
| (180) |
|
| (34) |
|
| 203 |
|
| 3,658 |
|
|
| 3,831 |
|
| (21) |
|
| (91) |
|
| 68 |
|
| 3,787 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit cards |
|
|
| 756 |
|
| 124 |
|
| (95) |
|
| 20 |
|
| 805 |
|
|
| 506 |
|
| 93 |
|
| (21) |
|
| 10 |
|
| 588 |
|
Overdrafts |
|
|
| 791 |
|
| 296 |
|
| (270) |
|
| 61 |
|
| 878 |
|
|
| 641 |
|
| 337 |
|
| (227) |
|
| 55 |
|
| 806 |
|
Automobile loans |
|
|
| 706 |
|
| (39) |
|
| (4) |
|
| 1 |
|
| 664 |
|
|
| 563 |
|
| 84 |
|
| (7) |
|
| — |
|
| 640 |
|
Other consumer |
|
|
| 990 |
|
| (151) |
|
| (136) |
|
| 73 |
|
| 776 |
|
|
| 825 |
|
| 321 |
|
| (306) |
|
| 78 |
|
| 918 |
|
Total Traditional Banking |
|
|
| 29,231 |
|
| 523 |
|
| (578) |
|
| 573 |
|
| 29,749 |
|
|
| 26,752 |
|
| 1,461 |
|
| (763) |
|
| 299 |
|
| 27,749 |
|
Warehouse lines of credit |
|
|
| 1,335 |
|
| 250 |
|
| — |
|
| — |
|
| 1,585 |
|
|
| 1,238 |
|
| 264 |
|
| — |
|
| — |
|
| 1,502 |
|
Total Core Banking |
|
|
| 30,566 |
|
| 773 |
|
| (578) |
|
| 573 |
|
| 31,334 |
|
|
| 27,990 |
|
| 1,725 |
|
| (763) |
|
| 299 |
|
| 29,251 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Republic Processing Group: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Refund Solutions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Easy Advances |
|
|
| 9,572 |
|
| (881) |
|
| (8,773) |
|
| 82 |
|
| — |
|
|
| 7,741 |
|
| (721) |
|
| (7,261) |
|
| 241 |
|
| — |
|
Other TRS loans |
|
|
| 125 |
|
| (7) |
|
| (55) |
|
| 4 |
|
| 67 |
|
|
| — |
|
| (17) |
|
| — |
|
| 17 |
|
| — |
|
Republic Credit Solutions |
|
|
| 12,078 |
|
| 5,047 |
|
| (3,769) |
|
| 290 |
|
| 13,646 |
|
|
| 6,631 |
|
| 4,074 |
|
| (2,251) |
|
| 193 |
|
| 8,647 |
|
Total Republic Processing Group |
|
|
| 21,775 |
|
| 4,159 |
|
| (12,597) |
|
| 376 |
|
| 13,713 |
|
|
| 14,372 |
|
| 3,336 |
|
| (9,512) |
|
| 451 |
|
| 8,647 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
| $ | 52,341 |
| $ | 4,932 |
| $ | (13,175) |
| $ | 949 |
| $ | 45,047 |
|
| $ | 42,362 |
| $ | 5,061 |
| $ | (10,275) |
| $ | 750 |
| $ | 37,898 |
|
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|
|
· | Offered only during the first two months of each year; |
· | No requirement that the taxpayer pays for another bank product, such as an RT; |
| Multiple funds disbursement methods, including direct deposit, prepaid card, check, or Walmart Direct2Cash®, based on the taxpayer-customer’s election; |
· | Repayment of the EA to the Bank is deducted from the taxpayer’s tax refund proceeds; and |
· | If an insufficient refund to repay the EA occurs: |
o | there is no recourse to the taxpayer, |
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|
|
|
|
|
|
|
|
|
| Allowance Rollforward | |||||||||||||||||||||||||||||
|
|
| Six Months Ended June 30, | |||||||||||||||||||||||||||||
|
|
| 2018 |
|
| 2017 | ||||||||||||||||||||||||||
|
|
| Beginning |
|
|
| Charge- |
|
|
| Ending |
|
| Beginning |
|
|
| Charge- |
|
|
| Ending | ||||||||||
(in thousands) |
|
| Balance |
| Provision |
| offs |
| Recoveries |
| Balance |
|
| Balance |
| Provision |
| offs |
| Recoveries |
| Balance | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional Banking: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
|
| $ | 6,182 |
| $ | (307) |
| $ | (39) |
| $ | 199 |
| $ | 6,035 |
|
| $ | 7,158 |
| $ | (431) |
| $ | (111) |
| $ | 124 |
| $ | 6,740 |
Owner occupied - correspondent |
|
|
| 292 |
|
| (29) |
|
| — |
|
| — |
|
| 263 |
|
|
| 373 |
|
| (49) |
|
| — |
|
| — |
|
| 324 |
Nonowner occupied |
|
|
| 1,396 |
|
| 449 |
|
| (319) |
|
| 26 |
|
| 1,552 |
|
|
| 1,139 |
|
| 112 |
|
| (14) |
|
| — |
|
| 1,237 |
Commercial real estate |
|
|
| 9,043 |
|
| 644 |
|
| — |
|
| 128 |
|
| 9,815 |
|
|
| 8,078 |
|
| 252 |
|
| — |
|
| 38 |
|
| 8,368 |
Construction & land development |
|
|
| 2,364 |
|
| 434 |
|
| — |
|
| 27 |
|
| 2,825 |
|
|
| 1,850 |
|
| 657 |
|
| — |
|
| 1 |
|
| 2,508 |
Commercial & industrial |
|
|
| 2,198 |
|
| 210 |
|
| (125) |
|
| 35 |
|
| 2,318 |
|
|
| 1,511 |
|
| 149 |
|
| — |
|
| 22 |
|
| 1,682 |
Lease financing receivables |
|
|
| 174 |
|
| (14) |
|
| — |
|
| — |
|
| 160 |
|
|
| 136 |
|
| 15 |
|
| — |
|
| — |
|
| 151 |
Home equity |
|
|
| 3,754 |
|
| (291) |
|
| (34) |
|
| 229 |
|
| 3,658 |
|
|
| 3,757 |
|
| 48 |
|
| (95) |
|
| 77 |
|
| 3,787 |
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit cards |
|
|
| 607 |
|
| 359 |
|
| (188) |
|
| 27 |
|
| 805 |
|
|
| 490 |
|
| 131 |
|
| (48) |
|
| 15 |
|
| 588 |
Overdrafts |
|
|
| 974 |
|
| 313 |
|
| (559) |
|
| 150 |
|
| 878 |
|
|
| 675 |
|
| 420 |
|
| (411) |
|
| 122 |
|
| 806 |
Automobile loans |
|
|
| 687 |
|
| (20) |
|
| (4) |
|
| 1 |
|
| 664 |
|
|
| 526 |
|
| 120 |
|
| (7) |
|
| 1 |
|
| 640 |
Other consumer |
|
|
| 1,162 |
|
| (286) |
|
| (256) |
|
| 156 |
|
| 776 |
|
|
| 771 |
|
| 504 |
|
| (536) |
|
| 179 |
|
| 918 |
Total Traditional Banking |
|
|
| 28,833 |
|
| 1,462 |
|
| (1,524) |
|
| 978 |
|
| 29,749 |
|
|
| 26,464 |
|
| 1,928 |
|
| (1,222) |
|
| 579 |
|
| 27,749 |
Warehouse lines of credit |
|
|
| 1,314 |
|
| 271 |
|
| — |
|
| — |
|
| 1,585 |
|
|
| 1,464 |
|
| 38 |
|
| — |
|
| — |
|
| 1,502 |
Total Core Banking |
|
|
| 30,147 |
|
| 1,733 |
|
| (1,524) |
|
| 978 |
|
| 31,334 |
|
|
| 27,928 |
|
| 1,966 |
|
| (1,222) |
|
| 579 |
|
| 29,251 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Republic Processing Group: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Refund Solutions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Easy Advances |
|
|
| — |
|
| 12,396 |
|
| (12,478) |
|
| 82 |
|
| — |
|
|
| — |
|
| 7,880 |
|
| (8,121) |
|
| 241 |
|
| — |
Other TRS loans |
|
|
| 12 |
|
| 105 |
|
| (55) |
|
| 5 |
|
| 67 |
|
|
| 25 |
|
| (277) |
|
| — |
|
| 252 |
|
| — |
Republic Credit Solutions |
|
|
| 12,610 |
|
| 7,953 |
|
| (7,465) |
|
| 548 |
|
| 13,646 |
|
|
| 4,967 |
|
| 7,843 |
|
| (4,536) |
|
| 373 |
|
| 8,647 |
Total Republic Processing Group |
|
|
| 12,622 |
|
| 20,454 |
|
| (19,998) |
|
| 635 |
|
| 13,713 |
|
|
| 4,992 |
|
| 15,446 |
|
| (12,657) |
|
| 866 |
|
| 8,647 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
| $ | 42,769 |
| $ | 22,187 |
| $ | (21,522) |
| $ | 1,613 |
| $ | 45,047 |
|
| $ | 32,920 |
| $ | 17,412 |
| $ | (13,879) |
| $ | 1,445 |
| $ | 37,898 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
o |
|
o | no collection efforts against the taxpayer. |
EA features modified from 2018 to 2019:
|
|
|
|
|
|
|
|
|
(dollars in thousands) |
| June 30, 2018 |
| December 31, 2017 |
|
| ||
|
|
|
|
|
|
|
|
|
Loans on nonaccrual status* |
| $ | 17,502 |
| $ | 14,118 |
|
|
Loans past due 90-days-or-more and still on accrual** |
|
| 858 |
|
| 956 |
|
|
Total nonperforming loans |
|
| 18,360 |
|
| 15,074 |
|
|
Other real estate owned |
|
| — |
|
| 115 |
|
|
Total nonperforming assets |
| $ | 18,360 |
| $ | 15,189 |
|
|
|
|
|
|
|
|
|
|
|
Credit Quality Ratios - Total Company: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming loans to total loans |
|
| 0.44 | % |
| 0.38 | % |
|
Nonperforming assets to total loans (including OREO) |
|
| 0.44 |
|
| 0.38 |
|
|
Nonperforming assets to total assets |
|
| 0.35 |
|
| 0.30 |
|
|
|
|
|
|
|
|
|
|
|
Credit Quality Ratios - Core Bank: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming loans to total loans |
|
| 0.43 | % |
| 0.36 | % |
|
Nonperforming assets to total loans (including OREO) |
|
| 0.43 |
|
| 0.36 |
|
|
Nonperforming assets to total assets |
|
| 0.34 |
|
| 0.28 |
|
|
· | During 2019, the taxpayer was given the option to choose from multiple loan-amount tiers, subject to underwriting, up to a maximum advance amount of $6,250. This compares to a maximum loan amount of $3,500 during 2018; and |
|
| During 2018, EA fees were charged only to the Tax Providers. In 2019, the fee charged to the Tax Providers was lowered; and
|
12
The Company reports fees paid for the EA product as interest income on loans. EAs are generally repaid within three weeks after the taxpayer’s tax return is submitted to the applicable taxing authority. EAs do not have a contractual due date but the Company considers an EA delinquent if it remains unpaid three weeks after the taxpayer’s tax return is submitted to the applicable taxing authority. Provisions for loan losses on EAs are estimated when advances are made, with provisions for all probable EA losses made in the first quarter of each year. Unpaid EAs are charged off by June 30th of each year, with EAs collected during the second half of each year recorded as recoveries of previously charged off loans.
Related to the overall credit losses on EAs, the Bank’s ability to control losses is highly dependent upon its ability to predict the taxpayer’s likelihood to receive the tax refund as claimed on the taxpayer’s tax return. Each year, the Bank’s EA approval model is based primarily on the prior-year’s tax refund payment patterns. Because the substantial majority of the EA volume occurs each year before that year’s tax refund payment patterns can be analyzed and subsequent underwriting changes made, credit losses during a current year could be higher than management’s predictions if tax refund payment patterns change materially between years.
Republic Payment Solutions — RPS is managed and operated within the TRS segment. The RPS division is an issuing bank offering general-purpose reloadable prepaid cards through third-party service providers. For the projected near-term, as the prepaid card program matures, the operating results of the RPS division are expected to be immaterial to the Company’s overall results of operations and will be reported as part of the TRS segment. The RPS division will not be considered a separate reportable segment until such time, if any, that it meets quantitative reporting thresholds.
The Company reports fees related to RPS programs under Program fees. Additionally, the Company’s portion of interchange revenue generated by prepaid card transactions is reported as noninterest income under “Interchange fee income.”
Republic Credit Solutions segment — Through the RCS segment, the Bank offers consumer credit products. In general, the credit products are unsecured, small dollar consumer loans and are dependent on various factors including the consumer’s ability to repay. RCS loans typically earn a higher yield but also have higher credit risk compared to loans originated through the Traditional Banking segment, with a significant portion of RCS clients considered subprime or near-prime borrowers. Additional information regarding consumer loan products offered through RCS follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Past Due 90-Days-or-More |
| ||||
|
| Nonaccrual |
|
| and Still Accruing Interest* |
| ||||||||
(in thousands) |
| June 30, 2018 |
| December 31, 2017 |
|
| June 30, 2018 |
| December 31, 2017 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional Banking: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
| $ | 10,238 |
| $ | 9,230 |
|
| $ | — |
| $ | — |
|
Owner occupied - correspondent |
|
| 389 |
|
| — |
|
|
| — |
|
| — |
|
Nonowner occupied |
|
| 730 |
|
| 257 |
|
|
| — |
|
| — |
|
Commercial real estate |
|
| 4,100 |
|
| 3,247 |
|
|
| — |
|
| — |
|
Construction & land development |
|
| 58 |
|
| 67 |
|
|
| — |
|
| — |
|
Commercial & industrial |
|
| 999 |
|
| — |
|
|
| — |
|
| — |
|
Lease financing receivables |
|
| — |
|
| — |
|
|
| — |
|
| — |
|
Home equity |
|
| 896 |
|
| 1,217 |
|
|
| — |
|
| — |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit cards |
|
| — |
|
| — |
|
|
| — |
|
| — |
|
Overdrafts |
|
| — |
|
| — |
|
|
| — |
|
| — |
|
Automobile loans |
|
| 68 |
|
| 68 |
|
|
| — |
|
| — |
|
Other consumer |
|
| 24 |
|
| 32 |
|
|
| 22 |
|
| 19 |
|
Total Traditional Banking |
|
| 17,502 |
|
| 14,118 |
|
|
| 22 |
|
| 19 |
|
Warehouse lines of credit |
|
| — |
|
| — |
|
|
| — |
|
| — |
|
Total Core Banking |
|
| 17,502 |
|
| 14,118 |
|
|
| 22 |
|
| 19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Republic Processing Group: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Refund Solutions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Easy Advances |
|
| — |
|
| — |
|
|
| — |
|
| — |
|
Other TRS loans |
|
| — |
|
| — |
|
|
| — |
|
| — |
|
Republic Credit Solutions |
|
| — |
|
| — |
|
|
| 836 |
|
| 937 |
|
Total Republic Processing Group |
|
| — |
|
| — |
|
|
| 836 |
|
| 937 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
| $ | 17,502 |
| $ | 14,118 |
|
| $ | 858 |
| $ | 956 |
|
| · |
| RCS line-of-credit product – The Bank originates a line-of-credit product to
|
· | RCS healthcare receivables product – The Bank originates healthcare-receivables products across the United States through two different third-party service providers. In one program, the Bank retains 100% of the receivables originated. In the other program, the Bank retains 100% of the receivables originated in |
From the fourth quarter of 2015 through the first quarter of 2018, the Bank piloted through RCS a credit-card product to generally subprime borrowers across the United States through one third-party marketer/servicer. For outstanding cards, RCS sold 90% of the balances generated within two business days of each transaction occurrence to a special purpose entity related to its third-party marketer/servicer and retained the remaining 10% interest. During the fourth quarter of 2018, the Bank and its third-party marketer/servicer finalized an agreement to sell 100% of the existing portfolio to an unrelated third party. The sale of the RCS credit-card portfolio receivables was settled in January 2019 and all accounts and related assets were transferred in March 2019.
The Company reports interest income and loan origination fees earned on RCS loans under “Loans, including fees,” while any gains or losses on sale of RCS loans are reported as noninterest income under “Program fees.”
13
Accounting Standards Updates Issued
The following ASUs were issued prior to June 30, 2019 and are considered relevant to the Company’s financial statements. Generally, if an issued-but-not-yet-effective ASU with an expected immaterial impact to the Company has been disclosed in prior Company financial statements, it will not be re-disclosed below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 30 - 59 |
| 60 - 89 |
| 90 or More |
|
|
|
|
|
|
|
|
|
| |||
June 30, 2018 | Days |
| Days |
| Days |
| Total |
| Total |
|
|
|
| ||||||
(dollars in thousands) |
| Delinquent |
| Delinquent |
| Delinquent* |
| Delinquent** |
| Current |
| Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional Banking: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
| $ | 1,407 |
| $ | 1,382 |
| $ | 1,333 |
| $ | 4,122 |
| $ | 915,311 |
| $ | 919,433 |
|
Owner occupied - correspondent |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 105,170 |
|
| 105,170 |
|
Nonowner occupied |
|
| 274 |
|
| — |
|
| 195 |
|
| 469 |
|
| 220,474 |
|
| 220,943 |
|
Commercial real estate |
|
| — |
|
| 262 |
|
| 2,135 |
|
| 2,397 |
|
| 1,233,030 |
|
| 1,235,427 |
|
Construction & land development |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 163,080 |
|
| 163,080 |
|
Commercial & industrial |
|
| 304 |
|
| 100 |
|
| 249 |
|
| 653 |
|
| 368,536 |
|
| 369,189 |
|
Lease financing receivables |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 15,238 |
|
| 15,238 |
|
Home equity |
|
| 127 |
|
| 254 |
|
| 166 |
|
| 547 |
|
| 336,147 |
|
| 336,694 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit cards |
|
| 52 |
|
| 41 |
|
| — |
|
| 93 |
|
| 17,685 |
|
| 17,778 |
|
Overdrafts |
|
| 231 |
|
| — |
|
| — |
|
| 231 |
|
| 647 |
|
| 878 |
|
Automobile loans |
|
| 80 |
|
| 8 |
|
| 22 |
|
| 110 |
|
| 62,033 |
|
| 62,143 |
|
Other consumer |
|
| 35 |
|
| 24 |
|
| 22 |
|
| 81 |
|
| 31,372 |
|
| 31,453 |
|
Total Traditional Banking |
|
| 2,510 |
|
| 2,071 |
|
| 4,122 |
|
| 8,703 |
|
| 3,468,723 |
|
| 3,477,426 |
|
Warehouse lines of credit |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 633,841 |
|
| 633,841 |
|
Total Core Banking |
|
| 2,510 |
|
| 2,071 |
|
| 4,122 |
|
| 8,703 |
|
| 4,102,564 |
|
| 4,111,267 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Republic Processing Group: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Refund Solutions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Easy Advances |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Other TRS loans |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 101 |
|
| 101 |
|
Republic Credit Solutions |
|
| 2,984 |
|
| 609 |
|
| 836 |
|
| 4,429 |
|
| 80,187 |
|
| 84,616 |
|
Total Republic Processing Group |
|
| 2,984 |
|
| 609 |
|
| 836 |
|
| 4,429 |
|
| 80,288 |
|
| 84,717 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
| $ | 5,494 |
| $ | 2,680 |
| $ | 4,958 |
| $ | 13,132 |
| $ | 4,182,852 |
| $ | 4,195,984 |
|
Delinquency ratio*** |
|
| 0.13 | % |
| 0.06 | % |
| 0.12 | % |
| 0.31 | % |
|
|
|
|
|
|
ASU. No. | Topic | Nature of Update | Date Adoption Required | Permitted Adoption Methods | Expected Financial Statement Impact | |||||
2016-13 | Financial Instruments – Credit Losses (Topic 326) | This ASU amends guidance on reporting credit losses for assets held at amortized-cost basis and available-for-sale debt securities. | January 1, 2020 | Modified-retrospective approach. | As a result of this ASU, the Company expects an as yet undetermined increase in its allowance for credit losses. A committee formed by the Company to oversee its transition to a current expected credit losses (“CECL”) methodology has analyzed the Company’s loan-level data and preliminarily concluded that no additional loan level segmentation beyond its current methodology segmentation would be warranted under CECL. The Company is also currently performing iterations of its allowance calculation under a “beta” CECL model provided by the same third-party software solution currently-employed to calculate the Company's allowance for loan and lease losses. | |||||
2019-04 | Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments | This ASU clarifies and improves areas of guidance related to the recently issued standards on credit losses, hedging, and recognition and measurement. | Based on areas amended. | Based on areas amended. | Immaterial | |||||
2019-05 | Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief | This ASU provides the fair value option for certain instruments within the scope of Subtopic 326-20, Financial Instruments—Credit Losses. | January 1, 2020 | Modified-retrospective approach. | The Company has this ASU under consideration. | |||||
Accounting Standards Updates Adopted
The following ASUs were adopted by the Company during the six months ended June 30, 2019:
| ||||||||||
ASU. No. | Topic | Nature of Update | Date Adopted | Method of Adoption | Financial Statement Impact | |||||
2016-02 | Leases (Topic 842) | Most leases are considered operating leases, which are not accounted for on the lessees’ balance sheets. The significant change under this ASU is that those operating leases will be recorded on the balance sheet. | January 1, 2019 | Modified-retrospective approach, which includes a number of optional practical expedients. | The Company adopted this ASU on January 1, 2019 and upon adoption recorded $40 million of right-of-use lease assets and $42 million of operating lease liabilities on its balance sheet. The adoption of this ASU did not have a meaningful impact on the Company's performance metrics, including regulatory capital ratios and return on average assets. Additionally, the Company does not believe that the adoption of this ASU by its clients will have a significant impact on the Company's ability to underwrite credit when client financial statements are presented inclusive of the requirements of this ASU. See Note 7 in this section of the filing regarding disclosures by the Company to comply with this ASU. | |||||
2018-10 | Codification Improvements to Topic 842, Leases | This ASU affects narrow aspects of the guidance issued in the amendments in ASU 2016-02. | January 1, 2019 | Adoption should conform to the adoption of ASU 2016-02 above. | See Note 7 in this section of the filing regarding disclosures by the Company to comply with this ASU. | |||||
2018-11 | Leases (Topic 842): Targeted Improvements | This ASU provides the Company with an additional (and optional) transition method to adopt ASU 2016-02. This ASU also provides the Company with a practical expedient to not separate non-lease components from the associated lease component under certain circumstances. | January 1, 2019 | Adoption should conform to the adoption of ASU 2016-02 above. | The Company elected the optional transition method permitted by this ASU, allowing the Company to adopt ASU 2016-02, effective January 1, 2019 with a cumulative-effect adjustment to the opening balance of retained earnings on January 1, 2019. | |||||
2017-12 | Derivatives and Hedging (Topic 815) | The amendments in this ASU make certain targeted improvements to simplify the application of hedge accounting. | January 1, 2019 | Prospectively. | Immaterial |
14
2.INVESTMENT SECURITIES
Available-for-Sale Debt Securities
The gross amortized cost and fair value of AFS debt securities and the related gross unrealized gains and losses recognized in AOCI were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross |
| Gross |
|
|
|
| |||
|
| Amortized |
| Unrealized |
| Unrealized |
| Fair |
| ||||
June 30, 2019 (in thousands) |
| Cost |
| Gains |
| Losses |
| Value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities and U.S. Government agencies |
| $ | 139,608 |
| $ | 20 |
| $ | (293) |
| $ | 139,335 |
|
Private label mortgage backed security |
|
| 2,285 |
|
| 1,330 |
|
| — |
|
| 3,615 |
|
Mortgage backed securities - residential |
|
| 151,504 |
|
| 2,911 |
|
| (223) |
|
| 154,192 |
|
Collateralized mortgage obligations |
|
| 69,143 |
|
| 375 |
|
| (139) |
|
| 69,379 |
|
Corporate bonds |
|
| 10,000 |
|
| — |
|
| (165) |
|
| 9,835 |
|
Trust preferred security |
|
| 3,554 |
|
| 446 |
|
| — |
|
| 4,000 |
|
Total available-for-sale debt securities |
| $ | 376,094 |
| $ | 5,082 |
| $ | (820) |
| $ | 380,356 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross |
| Gross |
|
|
|
| |||
|
| Amortized |
| Unrealized |
| Unrealized |
| Fair |
| ||||
December 31, 2018 (in thousands) |
| Cost |
| Gains |
| Losses |
| Value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities and U.S. Government agencies |
| $ | 218,502 |
| $ | 25 |
| $ | (1,654) |
| $ | 216,873 |
|
Private label mortgage backed security |
|
| 2,348 |
|
| 1,364 |
|
| — |
|
| 3,712 |
|
Mortgage backed securities - residential |
|
| 168,992 |
|
| 1,470 |
|
| (1,253) |
|
| 169,209 |
|
Collateralized mortgage obligations |
|
| 73,740 |
|
| 222 |
|
| (1,151) |
|
| 72,811 |
|
Corporate bonds |
|
| 10,000 |
|
| — |
|
| (942) |
|
| 9,058 |
|
Trust preferred security |
|
| 3,533 |
|
| 542 |
|
| — |
|
| 4,075 |
|
Total available-for-sale debt securities |
| $ | 477,115 |
| $ | 3,623 |
| $ | (5,000) |
| $ | 475,738 |
|
Held-to-Maturity Debt Securities
The carrying value, gross unrecognized gains and losses, and fair value of HTM debt securities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross |
| Gross |
|
|
|
| ||
|
| Carrying |
| Unrecognized |
| Unrecognized |
| Fair |
| ||||
June 30, 2019 (in thousands) |
| Value |
| Gains |
| Losses |
| Value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage backed securities - residential |
| $ | 129 |
| $ | 8 |
| $ | — |
| $ | 137 |
|
Collateralized mortgage obligations |
|
| 18,232 |
|
| 116 |
|
| (17) |
|
| 18,331 |
|
Corporate bonds |
|
| 45,079 |
|
| 441 |
|
| (17) |
|
| 45,503 |
|
Obligations of state and political subdivisions |
|
| 462 |
|
| — |
|
| — |
|
| 462 |
|
Total held-to-maturity debt securities |
| $ | 63,902 |
| $ | 565 |
| $ | (34) |
| $ | 64,433 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross |
| Gross |
|
|
|
| ||
|
| Carrying |
| Unrecognized |
| Unrecognized |
| Fair |
| ||||
December 31, 2018 (in thousands) |
| Value |
| Gains |
| Losses |
| Value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage backed securities - residential |
| $ | 132 |
| $ | 8 |
| $ | — |
| $ | 140 |
|
Collateralized mortgage obligations |
|
| 19,544 |
|
| 178 |
|
| (46) |
|
| 19,676 |
|
Corporate bonds |
|
| 45,088 |
|
| 16 |
|
| (514) |
|
| 44,590 |
|
Obligations of state and political subdivisions |
|
| 463 |
|
| — |
|
| (11) |
|
| 452 |
|
Total held-to-maturity debt securities |
| $ | 65,227 |
| $ | 202 |
| $ | (571) |
| $ | 64,858 |
|
Sales of Available-for-Sale Debt Securities
During the three and six months ended June 30, 2019 and 2018, there were no gains or losses on sales or calls of AFS debt securities.
15
Debt Securities by Contractual Maturity
The amortized cost and fair value of debt securities by contractual maturity at June 30, 2019 follow. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are detailed separately.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Available-for-Sale |
| Held-to-Maturity |
| ||||||||
|
| Debt Securities |
| Debt Securities |
| ||||||||
|
| Amortized |
| Fair |
| Carrying |
| Fair |
| ||||
June 30, 2019 (in thousands) |
| Cost |
| Value |
| Value |
| Value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due in one year or less |
| $ | 77,383 |
| $ | 77,167 |
| $ | 5,075 |
| $ | 5,103 |
|
Due from one year to five years |
|
| 72,225 |
|
| 72,003 |
|
| 35,522 |
|
| 35,935 |
|
Due from five years to ten years |
|
| — |
|
| — |
|
| 4,944 |
|
| 4,927 |
|
Due beyond ten years |
|
| 3,554 |
|
| 4,000 |
|
| — |
|
| — |
|
Private label mortgage backed security |
|
| 2,285 |
|
| 3,615 |
|
| — |
|
| — |
|
Mortgage backed securities - residential |
|
| 151,504 |
|
| 154,192 |
|
| 129 |
|
| 137 |
|
Collateralized mortgage obligations |
|
| 69,143 |
|
| 69,379 |
|
| 18,232 |
|
| 18,331 |
|
Total debt securities |
| $ | 376,094 |
| $ | 380,356 |
| $ | 63,902 |
| $ | 64,433 |
|
Unrealized-Loss Analysis on Debt Securities
Debt securities with unrealized losses at June 30, 2019 and December 31, 2018, aggregated by investment category and length of time that individual debt securities have been in a continuous unrealized loss position, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Less than 12 months |
| 12 months or more |
| Total |
| ||||||||||||
|
|
|
|
| Unrealized |
|
|
|
| Unrealized |
|
|
|
| Unrealized |
| |||
June 30, 2019 (in thousands) |
| Fair Value |
| Losses |
| Fair Value |
| Losses |
| Fair Value |
| Losses |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities and U.S. Government agencies |
| $ | — |
| $ | — |
| $ | 107,091 |
| $ | (293) |
| $ | 107,091 |
| $ | (293) |
|
Mortgage backed securities - residential |
|
| — |
|
| — |
|
| 39,033 |
|
| (223) |
|
| 39,033 |
|
| (223) |
|
Collateralized mortgage obligations |
|
| 4,189 |
|
| (5) |
|
| 20,687 |
|
| (134) |
|
| 24,876 |
|
| (139) |
|
Corporate bonds |
|
| — |
|
| — |
|
| 9,835 |
|
| (165) |
|
| 9,835 |
|
| (165) |
|
Total available-for-sale debt securities |
| $ | 4,189 |
| $ | (5) |
| $ | 176,646 |
| $ | (815) |
| $ | 180,835 |
| $ | (820) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Less than 12 months |
| 12 months or more |
| Total |
| ||||||||||||
|
|
|
|
| Unrealized |
|
|
|
| Unrealized |
|
|
|
| Unrealized |
| |||
December 31, 2018 (in thousands) |
| Fair Value |
| Losses |
| Fair Value |
| Losses |
| Fair Value |
| Losses |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities and U.S. Government agencies |
| $ | 71,627 |
| $ | (598) |
| $ | 106,136 |
| $ | (1,056) |
| $ | 177,763 |
| $ | (1,654) |
|
Mortgage backed securities - residential |
|
| 43,691 |
|
| (484) |
|
| 32,003 |
|
| (769) |
|
| 75,694 |
|
| (1,253) |
|
Collateralized mortgage obligations |
|
| 16,487 |
|
| (473) |
|
| 31,071 |
|
| (678) |
|
| 47,558 |
|
| (1,151) |
|
Corporate bonds |
|
| 9,058 |
|
| (942) |
|
| — |
|
| — |
|
| 9,058 |
|
| (942) |
|
Total available-for-sale debt securities |
| $ | 140,863 |
| $ | (2,497) |
| $ | 169,210 |
| $ | (2,503) |
| $ | 310,073 |
| $ | (5,000) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Less than 12 months |
| 12 months or more |
| Total |
| ||||||||||||
|
|
|
|
| Unrealized |
|
|
|
| Unrealized |
|
|
|
| Unrealized |
| |||
June 30, 2019 (in thousands) |
| Fair Value |
| Losses |
| Fair Value |
| Losses |
| Fair Value |
| Losses |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized mortgage obligations |
| $ | — |
| $ | — |
| $ | 5,213 |
| $ | (17) |
| $ | 5,213 |
| $ | (17) |
|
Corporate bonds |
|
| 4,927 |
|
| (17) |
|
| — |
|
| — |
|
| 4,927 |
|
| (17) |
|
Total held-to-maturity debt securities: |
| $ | 4,927 |
| $ | (17) |
| $ | 5,213 |
| $ | (17) |
| $ | 10,140 |
| $ | (34) |
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Less than 12 months |
| 12 months or more |
| Total |
| ||||||||||||
|
|
|
|
| Unrealized |
|
|
|
| Unrealized |
|
|
|
| Unrealized |
| |||
December 31, 2018 (in thousands) |
| Fair Value |
| Losses |
| Fair Value |
| Losses |
| Fair Value |
| Losses |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized mortgage obligations |
| $ | — |
| $ | — |
| $ | 5,539 |
| $ | (46) |
| $ | 5,539 |
| $ | (46) |
|
Corporate bonds |
|
| 39,499 |
|
| (514) |
|
| — |
|
| — |
|
| 39,499 |
|
| (514) |
|
Obligations of state and political subdivisions |
|
| 105 |
|
| (1) |
|
| 347 |
|
| (10) |
|
| 452 |
|
| (11) |
|
Total held-to-maturity debt securities: |
| $ | 39,604 |
| $ | (515) |
| $ | 5,886 |
| $ | (56) |
| $ | 45,490 |
| $ | (571) |
|
At June 30, 2019, the Bank’s security portfolio consisted of 168 securities, 37 of which were in an unrealized loss position.
At December 31, 2018, the Bank’s security portfolio consisted of 182 securities, 65 of which were in an unrealized loss position.
At June 30, 2019 and December 31, 2018, there were no holdings of debt securities of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of stockholders’ equity.
Corporate Bonds
From 2013 to 2018, the Bank purchased various floating-rate corporate bonds. These bonds were rated “investment grade” by accredited rating agencies as of their respective purchase dates. The total fair value of the Bank’s corporate bonds represented 10% and 10% of the Bank’s investment portfolio as of June 30, 2019 and December 31, 2018. During 2018, one of these bonds was downgraded to BBB+ (S&P/Fitch), driving a significant decrease in the bond’s market value. As of June 30, 2019, this bond reflected an unrealized loss of $165,000. The Bank does not intend to sell this bond, and it is likely that it will not be required to sell this bond before the bond’s anticipated recovery, therefore, management does not consider this bond to have OTTI.
Mortgage Backed Securities and Collateralized Mortgage Obligations
At June 30, 2019, with the exception of the $3.6 million private label mortgage backed security, all other mortgage backed securities and CMOs held by the Bank were issued by U.S. government-sponsored entities and agencies, primarily the FHLMC and FNMA. At June 30, 2019 and December 31, 2018, there were gross unrealized losses of $362,000 and $2.4 million related to AFS mortgage backed securities and CMOs. Because these unrealized losses are attributable to changes in interest rates and illiquidity, and not credit quality, and because the Bank does not have the intent to sell these securities, and it is likely that it will not be required to sell the securities before their anticipated recovery, management does not consider these securities to have OTTI.
Trust Preferred Security
During 2015, the Parent Company purchased a $3 million floating rate TRUP at a price of 68% of par. The coupon on this security is based on the 3-month LIBOR rate plus 159 basis points. The Company performed an initial analysis prior to acquisition and performs ongoing analysis of the credit risk of the underlying borrower in relation to its TRUP.
Other-than-temporary impairment
Unrealized losses for all debt securities are reviewed to determine whether the losses are “other-than-temporary.” Debt securities are evaluated for OTTI on at least a quarterly basis and more frequently when economic or market conditions warrant such an evaluation to determine whether a decline in value below amortized cost is other-than-temporary. In conducting this assessment, the Bank evaluates a number of factors including, but not limited to the following:
· | The length of time and the extent to which fair value has been less than the amortized cost basis; |
· | The Bank’s intent to hold until maturity or sell the debt security prior to maturity; |
· | An analysis of whether it is more-likely-than-not that the Bank will be required to sell the debt security before its anticipated recovery; |
· | Adverse conditions specifically related to the security, an industry, or a geographic area; |
· | The historical and implied volatility of the fair value of the security; |
· | The payment structure of the security and the likelihood of the issuer being able to make payments; |
· | Failure of the issuer to make scheduled interest or principal payments; |
· | Any rating changes by a rating agency; and |
· | Recoveries or additional decline in fair value subsequent to the balance sheet date. |
17
The term “other-than-temporary” is not intended to indicate that the decline is permanent, but indicates that the prospects for a near-term recovery of value are not necessarily favorable, or that there is a general lack of evidence to support a realizable value equal to or greater than the carrying value of the investment. Once a decline in value is determined to be other-than-temporary, the value of the security is reduced and a corresponding charge to earnings is recognized for the anticipated credit losses.
The Bank owns one private label mortgage backed security with a total carrying value of $3.6 million at June 30, 2019. This security is mostly backed by “Alternative A” first lien mortgage loans, but also has an insurance “wrap” or guarantee as an added layer of protection to the security holder. This asset is illiquid, and as such, the Bank determined it to be a Level 3 security in accordance with ASC Topic 820, Fair Value Measurement. Based on this determination, the Bank utilized an income valuation model (“present value model”) approach, in determining the fair value of the security. This approach is beneficial for positions that are not traded in active markets or are subject to transfer restrictions, and/or where valuations are adjusted to reflect illiquidity and/or non-transferability. Such adjustments are generally based on available market evidence. In the absence of such evidence, management’s best estimate is used. Management’s best estimate consists of both internal and external support for this investment.
See additional discussion regarding the Bank’s private label mortgage backed security under Footnote 10 “Fair Value” in this section of the filing.
Pledged Debt Securities
Debt securities pledged to secure public deposits, securities sold under agreements to repurchase and debt securities held for other purposes, as required or permitted by law are as follows:
|
|
|
|
|
|
|
|
(in thousands) |
| June 30, 2019 |
| December 31, 2018 |
| ||
|
|
|
|
|
|
|
|
Carrying amount |
| $ | 274,545 |
| $ | 240,590 |
|
Fair value |
|
| 274,652 |
|
| 240,700 |
|
Equity Securities
The carrying value, gross unrealized gains and losses, and fair value of equity securities with readily determinable fair values were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross |
| Gross |
|
|
|
| |||
|
|
| Amortized |
| Unrealized |
| Unrealized |
| Fair |
| ||||
June 30, 2019 (in thousands) |
|
| Cost |
| Gains |
| Losses |
| Value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Freddie Mac preferred stock |
|
| $ | — |
| $ | 787 |
| $ | — |
| $ | 787 |
|
Community Reinvestment Act mutual fund |
|
|
| 2,500 |
|
| — |
|
| (33) |
|
| 2,467 |
|
Total equity securities with readily determinable fair values |
|
| $ | 2,500 |
| $ | 787 |
| $ | (33) |
| $ | 3,254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross |
| Gross |
|
|
|
| |||
|
|
| Amortized |
| Unrealized |
| Unrealized |
| Fair |
| ||||
December 31, 2018 (in thousands) |
|
| Cost |
| Gains |
| Losses |
| Value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Freddie Mac preferred stock |
|
| $ | — |
| $ | 410 |
| $ | — |
| $ | 410 |
|
Community Reinvestment Act mutual fund |
|
|
| 2,500 |
|
| — |
|
| (104) |
|
| 2,396 |
|
Total equity securities with readily determinable fair values |
|
| $ | 2,500 |
| $ | 410 |
| $ | (104) |
| $ | 2,806 |
|
18
For equity securities with readily determinable fair values, the gross realized and unrealized gains and losses recognized in the Company’s consolidated statements of income were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gains (Losses) Recognized on Equity Securities |
| ||||||||||||||||
|
|
| Three Months Ended June 30, 2019 |
| Three Months Ended June 30, 2018 |
| ||||||||||||||
(in thousands) |
|
| Realized |
| Unrealized |
| Total |
| Realized |
| Unrealized |
| Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Freddie Mac preferred stock |
|
| $ | — |
| $ | 126 |
| $ | 126 |
| $ | — |
| $ | 60 |
| $ | 60 |
|
Community Reinvestment Act mutual fund |
|
|
| — |
|
| 33 |
|
| 33 |
|
| — |
|
| (14) |
|
| (14) |
|
Total equity securities with readily determinable fair value |
|
| $ | — |
| $ | 159 |
| $ | 159 |
| $ | — |
| $ | 46 |
| $ | 46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gains (Losses) Recognized on Equity Securities |
| ||||||||||||||||
|
|
| Six Months Ended June 30, 2019 |
| Six Months Ended June 30, 2018 |
| ||||||||||||||
(in thousands) |
|
| Realized |
| Unrealized |
| Total |
| Realized |
| Unrealized |
| Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Freddie Mac preferred stock |
|
| $ | — |
| $ | 378 |
| $ | 378 |
| $ | — |
| $ | (84) |
| $ | (84) |
|
Community Reinvestment Act mutual fund |
|
|
| — |
|
| 70 |
|
| 70 |
|
| — |
|
| (51) |
|
| (51) |
|
Total equity securities with readily determinable fair value |
|
| $ | — |
| $ | 448 |
| $ | 448 |
| $ | — |
| $ | (135) |
| $ | (135) |
|
19
3. LOANS HELD FOR SALE
In the ordinary course of business, the Bank originates for sale mortgage loans and consumer loans. Mortgage loans originated for sale are primarily originated and sold into the secondary market through the Bank’s Mortgage Banking segment, while consumer loans originated for sale are originated and sold through the RCS segment. Additionally, as described below, the Company took possession of a portfolio of reverse mortgages during the second quarter of 2019 and sold this portfolio in July 2019.
Mortgage Loans Held for Sale, at Fair Value
See additional detail regarding mortgage loans originated for sale, at fair value under Footnote 11 “Mortgage Banking Activities” of this section of the filing.
Reverse Mortgage Loans Held for Sale, at the Lower of Cost or Fair Value
During the second quarter of 2019, the Company reached an agreement with one of its Warehouse clients to take possession of certain first lien, residential reverse mortgage loans as payment for the approximate $12 million outstanding on the client’s Warehouse facility with the Bank. The Bank took possession of these loans as payment on the Warehouse facility after the client informed the Bank of its intent to close its business operations. These loans were sold by the Company in July 2019 at a loss of approximately $200,000.
Consumer Loans Held for Sale, at the Lower of Cost or Fair Value
RCS originates for sale 90% of its line-of-credit product and a portion of its hospital receivables product. Prior to the third quarter of 2018, RCS also originated for sale 90% of its credit-card product. During the third quarter of 2018, the Bank and its third-party marketer/servicer agreed to sell 100% of the existing RCS credit-card portfolio to an unrelated third party. As a result, the Bank reclassified 100% of its RCS credit-card portfolio into a held-for-sale category and charged this portfolio down to its estimated net realizable value. The Bank and its third-party marketer/servicer settled the sale of the RCS credit-card portfolio in January 2019. Ordinary gains or losses on the sale of RCS products are reported as a component of “Program fees.”
Activity for consumer loans held for sale and carried at the lower of cost or market value was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Six Months Ended |
| ||||||||
|
| June 30, |
| June 30, |
| ||||||||
(in thousands) |
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period |
| $ | 12,864 |
| $ | 7,380 |
| $ | 12,838 |
| $ | 8,551 |
|
Origination of consumer loans held for sale |
|
| 200,327 |
|
| 198,903 |
|
| 346,413 |
|
| 356,424 |
|
Proceeds from the sale of consumer loans held for sale |
|
| (176,759) |
|
| (194,263) |
|
| (324,260) |
|
| (354,529) |
|
Net gain on sale of consumer loans held for sale |
|
| 1,177 |
|
| 1,664 |
|
| 2,618 |
|
| 3,238 |
|
Balance, end of period |
| $ | 37,609 |
| $ | 13,684 |
| $ | 37,609 |
| $ | 13,684 |
|
Loans Held for Sale in Connection with Sale of Banking Centers, at the Lower of Cost or Fair Value
See additional detail regarding loans held for sale in connection with Sale of Banking Centers under Footnote 18 “Subsequent Event” in this section of the filing.
20
4.LOANS AND ALLOWANCE FOR LOAN AND LEASE LOSSES
The composition of the loan portfolio follows:
|
|
|
|
|
|
|
(in thousands) | June 30, 2019 |
| December 31, 2018 |
| ||
|
|
|
|
|
|
|
Traditional Banking: |
|
|
|
|
|
|
Residential real estate: |
|
|
|
|
|
|
Owner occupied | $ | 907,826 |
| $ | 907,005 |
|
Owner occupied - correspondent* |
| 78,943 |
|
| 94,827 |
|
Nonowner occupied |
| 259,166 |
|
| 242,846 |
|
Commercial real estate |
| 1,253,868 |
|
| 1,248,940 |
|
Construction & land development |
| 190,984 |
|
| 175,178 |
|
Commercial & industrial |
| 447,295 |
|
| 430,355 |
|
Lease financing receivables |
| 17,271 |
|
| 15,031 |
|
Home equity |
| 296,834 |
|
| 332,548 |
|
Consumer: |
|
|
|
|
|
|
Credit cards |
| 17,429 |
|
| 19,095 |
|
Overdrafts |
| 894 |
|
| 1,102 |
|
Automobile loans |
| 63,553 |
|
| 63,475 |
|
Other consumer |
| 53,768 |
|
| 46,642 |
|
Total Traditional Banking |
| 3,587,831 |
|
| 3,577,044 |
|
Warehouse lines of credit* |
| 725,337 |
|
| 468,695 |
|
Total Core Banking |
| 4,313,168 |
|
| 4,045,739 |
|
|
|
|
|
|
|
|
Republic Processing Group*: |
|
|
|
|
|
|
Tax Refund Solutions: |
|
|
|
|
|
|
Easy Advances |
| — |
|
| — |
|
Other TRS loans |
| 711 |
|
| 13,744 |
|
Republic Credit Solutions |
| 96,790 |
|
| 88,744 |
|
Total Republic Processing Group |
| 97,501 |
|
| 102,488 |
|
|
|
|
|
|
|
|
Total loans** |
| 4,410,669 |
|
| 4,148,227 |
|
Allowance for loan and lease losses |
| (45,983) |
|
| (44,675) |
|
|
|
|
|
|
|
|
Total loans, net | $ | 4,364,686 |
| $ | 4,103,552 |
|
*Identifies loans to borrowers located primarily outside of the Bank’s market footprint.
**Total loans are presented inclusive of premiums, discounts and net loan origination fees and costs. See table directly below for expanded detail.
The following table reconciles the contractually receivable and carrying amounts of loans:
|
|
|
|
|
|
|
(in thousands) | June 30, 2019 |
| December 31, 2018 |
| ||
|
|
|
|
|
|
|
Contractually receivable | $ | 4,409,882 |
| $ | 4,147,249 |
|
Unearned income(1) |
| (1,287) |
|
| (1,038) |
|
Unamortized premiums(2) |
| 487 |
|
| 588 |
|
Unaccreted discounts(3) |
| (3,064) |
|
| (3,400) |
|
Net unamortized deferred origination fees and costs(4) |
| 4,651 |
|
| 4,828 |
|
Carrying value of loans | $ | 4,410,669 |
| $ | 4,148,227 |
|
(1) | Unearned income relates to lease financing receivables. |
(2) | Unamortized premiums predominately relate to loans |
(3) | Unaccreted discounts include accretable and non-accretable discounts and relate to loans acquired in the Bank’s 2016 Cornerstone acquisition and its 2012 FDIC-assisted transactions. |
(4) | Primarily attributable to the Traditional Banking segment. |
21
Purchased Credit-Impaired Loans
The following table reconciles the contractually required and carrying amounts of all PCI loans:
|
|
|
|
|
|
|
|
(in thousands) |
| June 30, 2019 |
| December 31, 2018 |
| ||
|
|
|
|
|
|
|
|
Contractually required principal |
| $ | 3,882 |
| $ | 4,251 |
|
Non-accretable amount |
|
| (1,379) |
|
| (1,521) |
|
Accretable amount |
|
| (50) |
|
| (50) |
|
Carrying value of loans |
| $ | 2,453 |
| $ | 2,680 |
|
The following table presents a rollforward of the accretable amount on all PCI loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Six Months Ended |
| ||||||||
|
| June 30, |
| June 30, |
| ||||||||
(in thousands) |
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period |
| $ | (50) |
| $ | (140) |
| $ | (50) |
| $ | (140) |
|
Transfers between non-accretable and accretable* |
|
| (26) |
|
| (241) |
|
| (142) |
|
| (241) |
|
Net accretion into interest income on loans, including loan fees |
|
| 26 |
|
| 281 |
|
| 142 |
|
| 281 |
|
Balance, end of period |
| $ | (50) |
| $ | (100) |
| $ | (50) |
| $ | (100) |
|
*Transfers are primarily attributable to changes in estimated cash flows of the underlying loans.
22
Credit Quality Indicators
The following tables include loans by risk category based on the Bank’s internal analyses. Risk categories are defined in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019 |
|
|
| Special |
|
|
|
| Doubtful / |
| PCI Loans - |
| PCI Loans - |
| Total Rated |
| ||||||
(in thousands) |
| Pass |
| Mention |
| Substandard |
| Loss |
| Group 1 |
| Substandard |
| Loans* |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional Banking: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
| $ | — |
| $ | 13,234 |
| $ | 11,043 |
| $ | — |
| $ | 165 |
| $ | 1,378 |
| $ | 25,820 |
|
Owner occupied - correspondent |
|
| — |
|
| — |
|
| 848 |
|
| — |
|
| — |
|
| — |
|
| 848 |
|
Nonowner occupied |
|
| — |
|
| 491 |
|
| 1,310 |
|
| — |
|
| — |
|
| — |
|
| 1,801 |
|
Commercial real estate |
|
| 1,246,137 |
|
| 3,632 |
|
| 3,226 |
|
| — |
|
| 873 |
|
| — |
|
| 1,253,868 |
|
Construction & land development |
|
| 188,719 |
|
| 2,205 |
|
| 60 |
|
| — |
|
| — |
|
| — |
|
| 190,984 |
|
Commercial & industrial |
|
| 440,956 |
|
| 1,264 |
|
| 5,051 |
|
| — |
|
| 24 |
|
| — |
|
| 447,295 |
|
Lease financing receivables |
|
| 17,271 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 17,271 |
|
Home equity |
|
| — |
|
| — |
|
| 2,333 |
|
| — |
|
| 3 |
|
| 7 |
|
| 2,343 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit cards |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Overdrafts |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Automobile loans |
|
| — |
|
| — |
|
| 80 |
|
| — |
|
| — |
|
| — |
|
| 80 |
|
Other consumer |
|
| — |
|
| — |
|
| 386 |
|
| — |
|
| — |
|
| 3 |
|
| 389 |
|
Total Traditional Banking |
|
| 1,893,083 |
|
| 20,826 |
|
| 24,337 |
|
| — |
|
| 1,065 |
|
| 1,388 |
|
| 1,940,699 |
|
Warehouse lines of credit |
|
| 725,337 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 725,337 |
|
Total Core Banking |
|
| 2,618,420 |
|
| 20,826 |
|
| 24,337 |
|
| — |
|
| 1,065 |
|
| 1,388 |
|
| 2,666,036 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Republic Processing Group: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Refund Solutions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Easy Advances |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Other TRS loans |
|
| — |
|
| — |
|
| 13 |
|
| — |
|
| — |
|
| — |
|
| 13 |
|
Republic Credit Solutions |
|
| — |
|
| — |
|
| 108 |
|
| — |
|
| — |
|
| — |
|
| 108 |
|
Total Republic Processing Group |
|
| — |
|
| — |
|
| 121 |
|
| — |
|
| — |
|
| — |
|
| 121 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total rated loans |
| $ | 2,618,420 |
| $ | 20,826 |
| $ | 24,458 |
| $ | — |
| $ | 1,065 |
| $ | 1,388 |
| $ | 2,666,157 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018 |
|
|
| Special |
|
|
|
| Doubtful / |
| PCI Loans - |
| PCI Loans - |
| Total Rated |
| ||||||
(in thousands) |
| Pass |
| Mention |
| Substandard |
| Loss |
| Group 1 |
| Substandard |
| Loans* |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional Banking: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
| $ | — |
| $ | 14,536 |
| $ | 11,690 |
| $ | — |
| $ | 170 |
| $ | 1,476 |
| $ | 27,872 |
|
Owner occupied - correspondent |
|
| — |
|
| — |
|
| 382 |
|
| — |
|
| — |
|
| — |
|
| 382 |
|
Nonowner occupied |
|
| — |
|
| 575 |
|
| 1,889 |
|
| — |
|
| — |
|
| — |
|
| 2,464 |
|
Commercial real estate |
|
| 1,239,576 |
|
| 5,281 |
|
| 3,162 |
|
| — |
|
| 921 |
|
| — |
|
| 1,248,940 |
|
Construction & land development |
|
| 175,113 |
|
| — |
|
| 65 |
|
| — |
|
| — |
|
| — |
|
| 175,178 |
|
Commercial & industrial |
|
| 428,897 |
|
| 813 |
|
| 620 |
|
| — |
|
| 25 |
|
| — |
|
| 430,355 |
|
Lease financing receivables |
|
| 15,031 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 15,031 |
|
Home equity |
|
| — |
|
| — |
|
| 1,361 |
|
| — |
|
| 5 |
|
| 81 |
|
| 1,447 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit cards |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Overdrafts |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Automobile loans |
|
| — |
|
| — |
|
| 91 |
|
| — |
|
| — |
|
| — |
|
| 91 |
|
Other consumer |
|
| — |
|
| — |
|
| 462 |
|
| — |
|
| — |
|
| 2 |
|
| 464 |
|
Total Traditional Banking |
|
| 1,858,617 |
|
| 21,205 |
|
| 19,722 |
|
| — |
|
| 1,121 |
|
| 1,559 |
|
| 1,902,224 |
|
Warehouse lines of credit |
|
| 468,695 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 468,695 |
|
Total Core Banking |
|
| 2,327,312 |
|
| 21,205 |
|
| 19,722 |
|
| — |
|
| 1,121 |
|
| 1,559 |
|
| 2,370,919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Republic Processing Group: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Refund Solutions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Easy Advances |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Other TRS loans |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Republic Credit Solutions |
|
| — |
|
| — |
|
| 138 |
|
| — |
|
| — |
|
| — |
|
| 138 |
|
Total Republic Processing Group |
|
| — |
|
| — |
|
| 138 |
|
| — |
|
| — |
|
| — |
|
| 138 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total rated loans |
| $ | 2,327,312 |
| $ | 21,205 |
| $ | 19,860 |
| $ | — |
| $ | 1,121 |
| $ | 1,559 |
| $ | 2,371,057 |
|
*The above tables exclude all non-classified residential real estate, home equity and consumer loans at the respective period ends.
23
Allowance for Loan and Lease Losses
The following table presents the activity in the Allowance by portfolio class:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Allowance Rollforward |
| |||||||||||||||||||||||||||||
|
|
| Three Months Ended June 30, |
| |||||||||||||||||||||||||||||
|
|
| 2019 |
|
| 2018 |
| ||||||||||||||||||||||||||
|
|
| Beginning |
|
|
| Charge- |
|
|
| Ending |
|
| Beginning |
|
|
| Charge- |
|
|
| Ending |
| ||||||||||
(in thousands) |
|
| Balance |
| Provision |
| offs |
| Recoveries |
| Balance |
|
| Balance |
| Provision |
| offs |
| Recoveries |
| Balance |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional Banking: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
|
| $ | 5,579 |
| $ | (417) |
| $ | (367) |
| $ | 221 |
| $ | 5,016 |
|
| $ | 5,988 |
| $ | (116) |
| $ | (15) |
| $ | 178 |
| $ | 6,035 |
|
Owner occupied - correspondent |
|
|
| 222 |
|
| (25) |
|
| — |
|
| — |
|
| 197 |
|
|
| 278 |
|
| (15) |
|
| — |
|
| — |
|
| 263 |
|
Nonowner occupied |
|
|
| 1,720 |
|
| 48 |
|
| (1) |
|
| 8 |
|
| 1,775 |
|
|
| 1,461 |
|
| 93 |
|
| (7) |
|
| 5 |
|
| 1,552 |
|
Commercial real estate |
|
|
| 10,235 |
|
| 329 |
|
| — |
|
| 2 |
|
| 10,566 |
|
|
| 9,460 |
|
| 352 |
|
| — |
|
| 3 |
|
| 9,815 |
|
Construction & land development |
|
|
| 2,443 |
|
| 467 |
|
| — |
|
| — |
|
| 2,910 |
|
|
| 2,720 |
|
| 80 |
|
| — |
|
| 25 |
|
| 2,825 |
|
Commercial & industrial |
|
|
| 3,235 |
|
| 983 |
|
| — |
|
| 3 |
|
| 4,221 |
|
|
| 2,247 |
|
| 84 |
|
| (17) |
|
| 4 |
|
| 2,318 |
|
Lease financing receivables |
|
|
| 150 |
|
| 31 |
|
| — |
|
| — |
|
| 181 |
|
|
| 165 |
|
| (5) |
|
| — |
|
| — |
|
| 160 |
|
Home equity |
|
|
| 3,337 |
|
| (221) |
|
| — |
|
| 8 |
|
| 3,124 |
|
|
| 3,669 |
|
| (180) |
|
| (34) |
|
| 203 |
|
| 3,658 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit cards |
|
|
| 1,079 |
|
| 14 |
|
| (76) |
|
| 11 |
|
| 1,028 |
|
|
| 756 |
|
| 124 |
|
| (95) |
|
| 20 |
|
| 805 |
|
Overdrafts |
|
|
| 892 |
|
| 250 |
|
| (299) |
|
| 51 |
|
| 894 |
|
|
| 791 |
|
| 296 |
|
| (270) |
|
| 61 |
|
| 878 |
|
Automobile loans |
|
|
| 768 |
|
| (61) |
|
| — |
|
| 1 |
|
| 708 |
|
|
| 706 |
|
| (39) |
|
| (4) |
|
| 1 |
|
| 664 |
|
Other consumer |
|
|
| 512 |
|
| 29 |
|
| (48) |
|
| 56 |
|
| 549 |
|
|
| 990 |
|
| (151) |
|
| (136) |
|
| 73 |
|
| 776 |
|
Total Traditional Banking |
|
|
| 30,172 |
|
| 1,427 |
|
| (791) |
|
| 361 |
|
| 31,169 |
|
|
| 29,231 |
|
| 523 |
|
| (578) |
|
| 573 |
|
| 29,749 |
|
Warehouse lines of credit |
|
|
| 1,397 |
|
| 417 |
|
| — |
|
| — |
|
| 1,814 |
|
|
| 1,335 |
|
| 250 |
|
| — |
|
| — |
|
| 1,585 |
|
Total Core Banking |
|
|
| 31,569 |
|
| 1,844 |
|
| (791) |
|
| 361 |
|
| 32,983 |
|
|
| 30,566 |
|
| 773 |
|
| (578) |
|
| 573 |
|
| 31,334 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Republic Processing Group: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Refund Solutions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Easy Advances |
|
|
| 13,381 |
|
| 39 |
|
| (13,425) |
|
| 5 |
|
| — |
|
|
| 9,572 |
|
| (881) |
|
| (8,773) |
|
| 82 |
|
| — |
|
Other TRS loans |
|
|
| 149 |
|
| 353 |
|
| (264) |
|
| (6) |
|
| 232 |
|
|
| 125 |
|
| (7) |
|
| (55) |
|
| 4 |
|
| 67 |
|
Republic Credit Solutions |
|
|
| 12,862 |
|
| 2,224 |
|
| (2,683) |
|
| 365 |
|
| 12,768 |
|
|
| 12,078 |
|
| 5,047 |
|
| (3,769) |
|
| 290 |
|
| 13,646 |
|
Total Republic Processing Group |
|
|
| 26,392 |
|
| 2,616 |
|
| (16,372) |
|
| 364 |
|
| 13,000 |
|
|
| 21,775 |
|
| 4,159 |
|
| (12,597) |
|
| 376 |
|
| 13,713 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
| $ | 57,961 |
| $ | 4,460 |
| $ | (17,163) |
| $ | 725 |
| $ | 45,983 |
|
| $ | 52,341 |
| $ | 4,932 |
| $ | (13,175) |
| $ | 949 |
| $ | 45,047 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Allowance Rollforward | |||||||||||||||||||||||||||||
|
|
| Six Months Ended June 30, | |||||||||||||||||||||||||||||
|
|
| 2019 |
|
| 2018 | ||||||||||||||||||||||||||
|
|
| Beginning |
|
|
| Charge- |
|
|
| Ending |
|
| Beginning |
|
|
| Charge- |
|
|
| Ending | ||||||||||
(in thousands) |
|
| Balance |
| Provision |
| offs |
| Recoveries |
| Balance |
|
| Balance |
| Provision |
| offs |
| Recoveries |
| Balance | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional Banking: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
|
| $ | 5,798 |
| $ | (657) |
| $ | (384) |
| $ | 259 |
| $ | 5,016 |
|
| $ | 6,182 |
| $ | (307) |
| $ | (39) |
| $ | 199 |
| $ | 6,035 |
Owner occupied - correspondent |
|
|
| 237 |
|
| (40) |
|
| — |
|
| — |
|
| 197 |
|
|
| 292 |
|
| (29) |
|
| — |
|
| — |
|
| 263 |
Nonowner occupied |
|
|
| 1,662 |
|
| 178 |
|
| (73) |
|
| 8 |
|
| 1,775 |
|
|
| 1,396 |
|
| 449 |
|
| (319) |
|
| 26 |
|
| 1,552 |
Commercial real estate |
|
|
| 10,030 |
|
| 532 |
|
| — |
|
| 4 |
|
| 10,566 |
|
|
| 9,043 |
|
| 644 |
|
| — |
|
| 128 |
|
| 9,815 |
Construction & land development |
|
|
| 2,555 |
|
| 355 |
|
| — |
|
| — |
|
| 2,910 |
|
|
| 2,364 |
|
| 434 |
|
| — |
|
| 27 |
|
| 2,825 |
Commercial & industrial |
|
|
| 2,873 |
|
| 1,343 |
|
| — |
|
| 5 |
|
| 4,221 |
|
|
| 2,198 |
|
| 210 |
|
| (125) |
|
| 35 |
|
| 2,318 |
Lease financing receivables |
|
|
| 158 |
|
| 23 |
|
| — |
|
| — |
|
| 181 |
|
|
| 174 |
|
| (14) |
|
| — |
|
| — |
|
| 160 |
Home equity |
|
|
| 3,477 |
|
| (378) |
|
| (13) |
|
| 38 |
|
| 3,124 |
|
|
| 3,754 |
|
| (291) |
|
| (34) |
|
| 229 |
|
| 3,658 |
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit cards |
|
|
| 1,140 |
|
| 79 |
|
| (226) |
|
| 35 |
|
| 1,028 |
|
|
| 607 |
|
| 359 |
|
| (188) |
|
| 27 |
|
| 805 |
Overdrafts |
|
|
| 1,102 |
|
| 269 |
|
| (593) |
|
| 116 |
|
| 894 |
|
|
| 974 |
|
| 313 |
|
| (559) |
|
| 150 |
|
| 878 |
Automobile loans |
|
|
| 724 |
|
| (23) |
|
| — |
|
| 7 |
|
| 708 |
|
|
| 687 |
|
| (20) |
|
| (4) |
|
| 1 |
|
| 664 |
Other consumer |
|
|
| 591 |
|
| (65) |
|
| (114) |
|
| 137 |
|
| 549 |
|
|
| 1,162 |
|
| (286) |
|
| (256) |
|
| 156 |
|
| 776 |
Total Traditional Banking |
|
|
| 30,347 |
|
| 1,616 |
|
| (1,403) |
|
| 609 |
|
| 31,169 |
|
|
| 28,833 |
|
| 1,462 |
|
| (1,524) |
|
| 978 |
|
| 29,749 |
Warehouse lines of credit |
|
|
| 1,172 |
|
| 642 |
|
| — |
|
| — |
|
| 1,814 |
|
|
| 1,314 |
|
| 271 |
|
| — |
|
| — |
|
| 1,585 |
Total Core Banking |
|
|
| 31,519 |
|
| 2,258 |
|
| (1,403) |
|
| 609 |
|
| 32,983 |
|
|
| 30,147 |
|
| 1,733 |
|
| (1,524) |
|
| 978 |
|
| 31,334 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Republic Processing Group: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Refund Solutions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Easy Advances |
|
|
| — |
|
| 13,420 |
|
| (13,425) |
|
| 5 |
|
| — |
|
|
| — |
|
| 12,396 |
|
| (12,478) |
|
| 82 |
|
| — |
Other TRS loans |
|
|
| 107 |
|
| 406 |
|
| (281) |
|
| — |
|
| 232 |
|
|
| 12 |
|
| 105 |
|
| (55) |
|
| 5 |
|
| 67 |
Republic Credit Solutions |
|
|
| 13,049 |
|
| 5,607 |
|
| (6,507) |
|
| 619 |
|
| 12,768 |
|
|
| 12,610 |
|
| 7,953 |
|
| (7,465) |
|
| 548 |
|
| 13,646 |
Total Republic Processing Group |
|
|
| 13,156 |
|
| 19,433 |
|
| (20,213) |
|
| 624 |
|
| 13,000 |
|
|
| 12,622 |
|
| 20,454 |
|
| (19,998) |
|
| 635 |
|
| 13,713 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
| $ | 44,675 |
| $ | 21,691 |
| $ | (21,616) |
| $ | 1,233 |
| $ | 45,983 |
|
| $ | 42,769 |
| $ | 22,187 |
| $ | (21,522) |
| $ | 1,613 |
| $ | 45,047 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming Loans and Nonperforming Assets
Detail of nonperforming loans, nonperforming assets and select credit quality ratios follows:
|
|
|
|
|
|
|
|
|
(dollars in thousands) |
| June 30, 2019 |
| December 31, 2018 |
|
| ||
|
|
|
|
|
|
|
|
|
Loans on nonaccrual status* |
| $ | 19,238 |
| $ | 15,993 |
|
|
Loans past due 90-days-or-more and still on accrual** |
|
| 166 |
|
| 145 |
|
|
Total nonperforming loans |
|
| 19,404 |
|
| 16,138 |
|
|
Other real estate owned |
|
| 1,095 |
|
| 160 |
|
|
Total nonperforming assets |
| $ | 20,499 |
| $ | 16,298 |
|
|
|
|
|
|
|
|
|
|
|
Credit Quality Ratios - Total Company: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming loans to total loans |
|
| 0.44 | % |
| 0.39 | % |
|
Nonperforming assets to total loans (including OREO) |
|
| 0.46 |
|
| 0.39 |
|
|
Nonperforming assets to total assets |
|
| 0.36 |
|
| 0.31 |
|
|
|
|
|
|
|
|
|
|
|
Credit Quality Ratios - Core Bank: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming loans to total loans |
|
| 0.45 | % |
| 0.40 | % |
|
Nonperforming assets to total loans (including OREO) |
|
| 0.47 |
|
| 0.40 |
|
|
Nonperforming assets to total assets |
|
| 0.37 |
|
| 0.32 |
|
|
*Loans on nonaccrual status include impaired loans.
**Loans past due 90-days-or-more and still accruing consist of smaller balance consumer loans.
25
The following table presents the recorded investment in nonaccrual loans and loans past due 90-days-or-more and still on accrual by class of loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Past Due 90-Days-or-More |
| ||||
|
| Nonaccrual |
|
| and Still Accruing Interest* |
| ||||||||
(in thousands) |
| June 30, 2019 |
| December 31, 2018 |
|
| June 30, 2019 |
| December 31, 2018 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional Banking: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
| $ | 8,879 |
| $ | 10,800 |
|
| $ | — |
| $ | — |
|
Owner occupied - correspondent |
|
| 848 |
|
| 382 |
|
|
| — |
|
| — |
|
Nonowner occupied |
|
| 461 |
|
| 669 |
|
|
| — |
|
| — |
|
Commercial real estate |
|
| 2,361 |
|
| 2,318 |
|
|
| — |
|
| — |
|
Construction & land development |
|
| 134 |
|
| — |
|
|
| — |
|
| — |
|
Commercial & industrial |
|
| 5,046 |
|
| 630 |
|
|
| — |
|
| — |
|
Lease financing receivables |
|
| — |
|
| — |
|
|
| — |
|
| — |
|
Home equity |
|
| 1,444 |
|
| 1,095 |
|
|
| — |
|
| — |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit cards |
|
| — |
|
| — |
|
|
| — |
|
| — |
|
Overdrafts |
|
| — |
|
| — |
|
|
| — |
|
| — |
|
Automobile loans |
|
| 47 |
|
| 75 |
|
|
| — |
|
| — |
|
Other consumer |
|
| 18 |
|
| 24 |
|
|
| — |
|
| 13 |
|
Total Traditional Banking |
|
| 19,238 |
|
| 15,993 |
|
|
| — |
|
| 13 |
|
Warehouse lines of credit |
|
| — |
|
| — |
|
|
| — |
|
| — |
|
Total Core Banking |
|
| 19,238 |
|
| 15,993 |
|
|
| — |
|
| 13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Republic Processing Group: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Refund Solutions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Easy Advances |
|
| — |
|
| — |
|
|
| — |
|
| — |
|
Other TRS loans |
|
| — |
|
| — |
|
|
| 13 |
|
| 4 |
|
Republic Credit Solutions |
|
| — |
|
| — |
|
|
| 153 |
|
| 128 |
|
Total Republic Processing Group |
|
| — |
|
| — |
|
|
| 166 |
|
| 132 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
| $ | 19,238 |
| $ | 15,993 |
|
| $ | 166 |
| $ | 145 |
|
* Loans past due 90-days-or-more and still accruing consist of smaller balance consumer loans.
Nonaccrual loans and loans past due 90-days-or-more and still on accrual include both smaller balance, primarily retail, homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans. Nonaccrual loans are typically returned to accrual status when all the principal and interest amounts contractually due are brought current and held current for six consecutive months and future contractual payments are reasonably assured. TDRs on nonaccrual status are reviewed for return to accrual status on an individual basis, with additional consideration given to performance under the modified terms.
26
Delinquent Loans
The following tables present the aging of the recorded investment in loans by class of loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 30 - 59 |
| 60 - 89 |
| 90 or More |
|
|
|
|
|
|
|
|
|
| |||
June 30, 2019 | Days |
| Days |
| Days |
| Total |
| Total |
|
|
|
| ||||||
(dollars in thousands) |
| Delinquent |
| Delinquent |
| Delinquent* |
| Delinquent** |
| Current |
| Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional Banking: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
| $ | 1,252 |
| $ | 962 |
| $ | 1,844 |
| $ | 4,058 |
| $ | 903,768 |
| $ | 907,826 |
|
Owner occupied - correspondent |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 78,943 |
|
| 78,943 |
|
Nonowner occupied |
|
| 240 |
|
| — |
|
| 431 |
|
| 671 |
|
| 258,495 |
|
| 259,166 |
|
Commercial real estate |
|
| — |
|
| 597 |
|
| 301 |
|
| 898 |
|
| 1,252,970 |
|
| 1,253,868 |
|
Construction & land development |
|
| 412 |
|
| 128 |
|
| — |
|
| 540 |
|
| 190,444 |
|
| 190,984 |
|
Commercial & industrial |
|
| 507 |
|
| 4,426 |
|
| — |
|
| 4,933 |
|
| 442,362 |
|
| 447,295 |
|
Lease financing receivables |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 17,271 |
|
| 17,271 |
|
Home equity |
|
| 216 |
|
| 498 |
|
| 264 |
|
| 978 |
|
| 295,856 |
|
| 296,834 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit cards |
|
| 76 |
|
| 14 |
|
| — |
|
| 90 |
|
| 17,339 |
|
| 17,429 |
|
Overdrafts |
|
| 272 |
|
| 6 |
|
| — |
|
| 278 |
|
| 616 |
|
| 894 |
|
Automobile loans |
|
| 39 |
|
| 25 |
|
| — |
|
| 64 |
|
| 63,489 |
|
| 63,553 |
|
Other consumer |
|
| 7 |
|
| 7 |
|
| — |
|
| 14 |
|
| 53,754 |
|
| 53,768 |
|
Total Traditional Banking |
|
| 3,021 |
|
| 6,663 |
|
| 2,840 |
|
| 12,524 |
|
| 3,575,307 |
|
| 3,587,831 |
|
Warehouse lines of credit |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 725,337 |
|
| 725,337 |
|
Total Core Banking |
|
| 3,021 |
|
| 6,663 |
|
| 2,840 |
|
| 12,524 |
|
| 4,300,644 |
|
| 4,313,168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Republic Processing Group: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Refund Solutions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Easy Advances |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Other TRS loans |
|
| 38 |
|
| 24 |
|
| 13 |
|
| 75 |
|
| 636 |
|
| 711 |
|
Republic Credit Solutions |
|
| 5,322 |
|
| 1,252 |
|
| 153 |
|
| 6,727 |
|
| 90,063 |
|
| 96,790 |
|
Total Republic Processing Group |
|
| 5,360 |
|
| 1,276 |
|
| 166 |
|
| 6,802 |
|
| 90,699 |
|
| 97,501 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
| $ | 8,381 |
| $ | 7,939 |
| $ | 3,006 |
| $ | 19,326 |
| $ | 4,391,343 |
| $ | 4,410,669 |
|
Delinquency ratio*** |
|
| 0.19 | % |
| 0.18 | % |
| 0.07 | % |
| 0.44 | % |
|
|
|
|
|
|
*All loans past due 90-days-or-more, excluding small balance consumer loans, were on nonaccrual status.
**Delinquent status may be determined by either the number of days past due or number of payments past due.
***Represents total loans 30-days-or-more past due by aging category divided by total loans.
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 30 - 59 |
| 60 - 89 |
| 90 or More |
|
|
|
|
|
|
|
|
|
| |||
December 31, 2018 | Days |
| Days |
| Days |
| Total |
| Total |
|
|
|
| ||||||
(dollars in thousands) |
| Delinquent |
| Delinquent |
| Delinquent* |
| Delinquent** |
| Current |
| Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional Banking: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
| $ | 1,137 |
| $ | 748 |
| $ | 3,640 |
| $ | 5,525 |
| $ | 901,480 |
| $ | 907,005 |
|
Owner occupied - correspondent |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 94,827 |
|
| 94,827 |
|
Nonowner occupied |
|
| 349 |
|
| — |
|
| 659 |
|
| 1,008 |
|
| 241,838 |
|
| 242,846 |
|
Commercial real estate |
|
| 511 |
|
| — |
|
| 588 |
|
| 1,099 |
|
| 1,247,841 |
|
| 1,248,940 |
|
Construction & land development |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 175,178 |
|
| 175,178 |
|
Commercial & industrial |
|
| — |
|
| — |
|
| 25 |
|
| 25 |
|
| 430,330 |
|
| 430,355 |
|
Lease financing receivables |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 15,031 |
|
| 15,031 |
|
Home equity |
|
| 558 |
|
| — |
|
| 226 |
|
| 784 |
|
| 331,764 |
|
| 332,548 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit cards |
|
| 82 |
|
| 46 |
|
| 1 |
|
| 129 |
|
| 18,966 |
|
| 19,095 |
|
Overdrafts |
|
| 223 |
|
| 5 |
|
| 2 |
|
| 230 |
|
| 872 |
|
| 1,102 |
|
Automobile loans |
|
| — |
|
| 28 |
|
| — |
|
| 28 |
|
| 63,447 |
|
| 63,475 |
|
Other consumer |
|
| 27 |
|
| 7 |
|
| 13 |
|
| 47 |
|
| 46,595 |
|
| 46,642 |
|
Total Traditional Banking |
|
| 2,887 |
|
| 834 |
|
| 5,154 |
|
| 8,875 |
|
| 3,568,169 |
|
| 3,577,044 |
|
Warehouse lines of credit |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 468,695 |
|
| 468,695 |
|
Total Core Banking |
|
| 2,887 |
|
| 834 |
|
| 5,154 |
|
| 8,875 |
|
| 4,036,864 |
|
| 4,045,739 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Republic Processing Group: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Refund Solutions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Easy Advances |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Other TRS loans |
|
| 2 |
|
| 4 |
|
| 4 |
|
| 10 |
|
| 13,734 |
|
| 13,744 |
|
Republic Credit Solutions |
|
| 5,734 |
|
| 1,215 |
|
| 128 |
|
| 7,077 |
|
| 81,667 |
|
| 88,744 |
|
Total Republic Processing Group |
|
| 5,736 |
|
| 1,219 |
|
| 132 |
|
| 7,087 |
|
| 95,401 |
|
| 102,488 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
| $ | 8,623 |
| $ | 2,053 |
| $ | 5,286 |
| $ | 15,962 |
| $ | 4,132,265 |
| $ | 4,148,227 |
|
Delinquency ratio*** |
|
| 0.21 | % |
| 0.05 | % |
| 0.13 | % |
| 0.38 | % |
|
|
|
|
|
|
*All loans past due 90-days-or-more, excluding smaller balance consumer loans, were on nonaccrual status.
**Delinquent status may be determined by either the number of days past due or number of payments past due.
***Represents total loans 30-days-or-more past due by aging category divided by total loans.
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 30 - 59 |
| 60 - 89 |
| 90 or More |
|
|
|
|
|
|
|
|
|
| |||
December 31, 2017 | Days |
| Days |
| Days |
| Total |
| Total |
|
|
|
| ||||||
(dollars in thousands) |
| Delinquent |
| Delinquent |
| Delinquent* |
| Delinquent** |
| Current |
| Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional Banking: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
| $ | 2,559 |
| $ | 1,166 |
| $ | 1,057 |
| $ | 4,782 |
| $ | 916,783 |
| $ | 921,565 |
|
Owner occupied - correspondent |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 116,792 |
|
| 116,792 |
|
Nonowner occupied |
|
| 47 |
|
| — |
|
| 99 |
|
| 146 |
|
| 204,935 |
|
| 205,081 |
|
Commercial real estate |
|
| 398 |
|
| — |
|
| 1,329 |
|
| 1,727 |
|
| 1,205,566 |
|
| 1,207,293 |
|
Construction & land development |
|
| 67 |
|
| — |
|
| — |
|
| 67 |
|
| 149,998 |
|
| 150,065 |
|
Commercial & industrial |
|
| 15 |
|
| — |
|
| — |
|
| 15 |
|
| 341,677 |
|
| 341,692 |
|
Lease financing receivables |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 16,580 |
|
| 16,580 |
|
Home equity |
|
| 723 |
|
| 50 |
|
| 448 |
|
| 1,221 |
|
| 346,434 |
|
| 347,655 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit cards |
|
| 34 |
|
| 40 |
|
| — |
|
| 74 |
|
| 16,004 |
|
| 16,078 |
|
Overdrafts |
|
| 230 |
|
| 3 |
|
| — |
|
| 233 |
|
| 741 |
|
| 974 |
|
Automobile loans |
|
| 36 |
|
| — |
|
| 24 |
|
| 60 |
|
| 65,590 |
|
| 65,650 |
|
Other consumer |
|
| 93 |
|
| 21 |
|
| 21 |
|
| 135 |
|
| 20,366 |
|
| 20,501 |
|
Total Traditional Banking |
|
| 4,202 |
|
| 1,280 |
|
| 2,978 |
|
| 8,460 |
|
| 3,401,466 |
|
| 3,409,926 |
|
Warehouse lines of credit |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 525,572 |
|
| 525,572 |
|
Total Core Banking |
|
| 4,202 |
|
| 1,280 |
|
| 2,978 |
|
| 8,460 |
|
| 3,927,038 |
|
| 3,935,498 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Republic Processing Group: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Refund Solutions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Easy Advances |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Other TRS loans |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 11,648 |
|
| 11,648 |
|
Republic Credit Solutions |
|
| 3,631 |
|
| 1,073 |
|
| 937 |
|
| 5,641 |
|
| 61,247 |
|
| 66,888 |
|
Total Republic Processing Group |
|
| 3,631 |
|
| 1,073 |
|
| 937 |
|
| 5,641 |
|
| 72,895 |
|
| 78,536 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
| $ | 7,833 |
| $ | 2,353 |
| $ | 3,915 |
| $ | 14,101 |
| $ | 3,999,933 |
| $ | 4,014,034 |
|
Delinquency ratio*** |
|
| 0.20 | % |
| 0.06 | % |
| 0.10 | % |
| 0.35 | % |
|
|
|
|
|
|
*All loans past due 90-days-or-more, excluding smaller-balance consumer loans, were on nonaccrual status.
**Delinquent status may be determined by either the number of days past due or number of payments past due.
***Represents total loans 30-days-or-more past due by aging category divided by total loans.
Impaired Loans
Information regarding the Bank’s impaired loans follows:
|
|
|
|
|
|
|
|
|
|
| ||||
(in thousands) |
| June 30, 2018 |
| December 31, 2017 |
|
| June 30, 2019 |
| December 31, 2018 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans with no allocated Allowance |
| $ | 21,947 |
| $ | 18,540 |
|
| $ | 20,733 |
| $ | 19,555 |
|
Loans with allocated Allowance |
|
| 25,927 |
|
| 27,076 |
|
|
| 21,947 |
|
| 21,880 |
|
Total recorded investment in impaired loans |
| $ | 47,874 |
| $ | 45,616 |
|
| $ | 42,680 |
| $ | 41,435 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of the allocated Allowance |
| $ | 4,165 |
| $ | 4,685 |
|
| $ | 3,768 |
| $ | 3,764 |
|
Approximately $3$2 million and $4$3 million of impaired loans at June 30, 20182019 and December 31, 20172018 were PCI loans. Approximately $2 million and $2 million of impaired loans at June 30, 20182019 and December 31, 20172018 were formerly PCI loans that became classified as “impaired” through a post-acquisition troubled debt restructuring.
2728
The following tables present the balance in the Allowance and the recorded investment in loans by portfolio class based on impairment method as of June 30, 2018 and December 31, 2017:method:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
| Allowance for Loan and Lease Losses |
| Loans |
|
|
|
|
| Allowance for Loan and Lease Losses |
| Loans |
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||
|
| Individually |
|
|
| PCI with |
|
|
|
| Individually |
|
|
| PCI with |
| PCI without |
|
|
|
|
|
|
|
| Individually |
|
|
| PCI with |
|
|
|
| Individually |
|
|
| PCI with |
| PCI without |
|
|
|
|
|
|
| ||||||||||||||
June 30, 2018 |
| Evaluated |
| Collectively |
| Post Acquisition |
| Total |
| Evaluated |
| Collectively |
| Post Acquisition |
| Post Acquisition |
| Total |
| Allowance to | ||||||||||||||||||||||||||||||||||||||||||
June 30, 2019 |
| Evaluated |
| Collectively |
| Post-Acquisition |
| Total |
| Evaluated |
| Collectively |
| Post-Acquisition |
| Post-Acquisition |
| Total |
| Allowance to | ||||||||||||||||||||||||||||||||||||||||||
(dollars in thousands) |
| Excluding PCI |
| Evaluated |
| Impairment |
| Allowance |
| Excluding PCI |
| Evaluated |
| Impairment |
| Impairment |
| Loans |
| Total Loans |
| Excluding PCI |
| Evaluated |
| Impairment |
| Allowance |
| Excluding PCI |
| Evaluated |
| Impairment |
| Impairment |
| Loans |
| Total Loans | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional Banking: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
| $ | 2,423 |
| $ | 3,384 |
| $ | 228 |
| $ | 6,035 |
| $ | 27,963 |
| $ | 889,730 |
| $ | 1,740 |
| $ | — |
| $ | 919,433 |
|
| 0.66 | % |
| $ | 1,342 |
| $ | 3,392 |
| $ | 282 |
| $ | 5,016 |
| $ | 23,043 |
| $ | 883,240 |
| $ | 1,543 |
| $ | — |
| $ | 907,826 |
|
| 0.55 | % |
Owner occupied - correspondent |
|
| — |
|
| 263 |
|
| — |
|
| 263 |
|
| 389 |
|
| 104,781 |
|
| — |
|
| — |
|
| 105,170 |
|
| 0.25 |
|
|
| — |
|
| 197 |
|
| — |
|
| 197 |
|
| 848 |
|
| 78,095 |
|
| — |
|
| — |
|
| 78,943 |
|
| 0.25 |
|
Nonowner occupied |
|
| 2 |
|
| 1,550 |
|
| — |
|
| 1,552 |
|
| 2,716 |
|
| 218,227 |
|
| — |
|
| — |
|
| 220,943 |
|
| 0.70 |
|
|
| 3 |
|
| 1,772 |
|
| — |
|
| 1,775 |
|
| 1,477 |
|
| 257,689 |
|
| — |
|
| — |
|
| 259,166 |
|
| 0.68 |
|
Commercial real estate |
|
| 301 |
|
| 9,466 |
|
| 48 |
|
| 9,815 |
|
| 10,269 |
|
| 1,223,854 |
|
| 1,301 |
|
| 3 |
|
| 1,235,427 |
|
| 0.79 |
|
|
| 230 |
|
| 10,328 |
|
| 8 |
|
| 10,566 |
|
| 6,523 |
|
| 1,246,473 |
|
| 872 |
|
| — |
|
| 1,253,868 |
|
| 0.84 |
|
Construction & land development |
|
| 67 |
|
| 2,758 |
|
| — |
|
| 2,825 |
|
| 128 |
|
| 162,952 |
|
| — |
|
| — |
|
| 163,080 |
|
| 1.73 |
|
|
| — |
|
| 2,910 |
|
| — |
|
| 2,910 |
|
| 60 |
|
| 190,924 |
|
| — |
|
| — |
|
| 190,984 |
|
| 1.52 |
|
Commercial & industrial |
|
| 108 |
|
| 2,210 |
|
| — |
|
| 2,318 |
|
| 783 |
|
| 368,385 |
|
| — |
|
| 21 |
|
| 369,189 |
|
| 0.63 |
|
|
| 1,204 |
|
| 3,017 |
|
| — |
|
| 4,221 |
|
| 5,464 |
|
| 441,807 |
|
| — |
|
| 24 |
|
| 447,295 |
|
| 0.94 |
|
Lease financing receivables |
|
| — |
|
| 160 |
|
| — |
|
| 160 |
|
| — |
|
| 15,238 |
|
| — |
|
| — |
|
| 15,238 |
|
| 1.05 |
|
|
| — |
|
| 181 |
|
| — |
|
| 181 |
|
| — |
|
| 17,271 |
|
| — |
|
| — |
|
| 17,271 |
|
| 1.05 |
|
Home equity |
|
| 368 |
|
| 3,180 |
|
| 110 |
|
| 3,658 |
|
| 1,741 |
|
| 334,838 |
|
| 115 |
|
| — |
|
| 336,694 |
|
| 1.09 |
|
|
| 241 |
|
| 2,883 |
|
| — |
|
| 3,124 |
|
| 2,339 |
|
| 294,484 |
|
| 11 |
|
| — |
|
| 296,834 |
|
| 1.05 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit cards |
|
| — |
|
| 805 |
|
| — |
|
| 805 |
|
| — |
|
| 17,778 |
|
| — |
|
| — |
|
| 17,778 |
|
| 4.53 |
|
|
| — |
|
| 1,028 |
|
| — |
|
| 1,028 |
|
| — |
|
| 17,429 |
|
| — |
|
| — |
|
| 17,429 |
|
| 5.90 |
|
Overdrafts |
|
| — |
|
| 878 |
|
| — |
|
| 878 |
|
| — |
|
| 878 |
|
| — |
|
| — |
|
| 878 |
|
| 100.00 |
|
|
| — |
|
| 894 |
|
| — |
|
| 894 |
|
| — |
|
| 894 |
|
| — |
|
| — |
|
| 894 |
|
| 100.00 |
|
Automobile loans |
|
| 41 |
|
| 623 |
|
| — |
|
| 664 |
|
| 190 |
|
| 61,953 |
|
| — |
|
| — |
|
| 62,143 |
|
| 1.07 |
|
|
| 80 |
|
| 628 |
|
| — |
|
| 708 |
|
| 80 |
|
| 63,473 |
|
| — |
|
| — |
|
| 63,553 |
|
| 1.11 |
|
Other consumer |
|
| 448 |
|
| 325 |
|
| 3 |
|
| 776 |
|
| 486 |
|
| 30,964 |
|
| 3 |
|
| — |
|
| 31,453 |
|
| 2.47 |
|
|
| 364 |
|
| 185 |
|
| — |
|
| 549 |
|
| 386 |
|
| 53,379 |
|
| 3 |
|
| — |
|
| 53,768 |
|
| 1.02 |
|
Total Traditional Banking |
|
| 3,758 |
|
| 25,602 |
|
| 389 |
|
| 29,749 |
|
| 44,665 |
|
| 3,429,578 |
|
| 3,159 |
|
| 24 |
|
| 3,477,426 |
|
| 0.86 |
|
|
| 3,464 |
|
| 27,415 |
|
| 290 |
|
| 31,169 |
|
| 40,220 |
|
| 3,545,158 |
|
| 2,429 |
|
| 24 |
|
| 3,587,831 |
|
| 0.87 |
|
Warehouse lines of credit |
|
| — |
|
| 1,585 |
|
| — |
|
| 1,585 |
|
| — |
|
| 633,841 |
|
| — |
|
| — |
|
| 633,841 |
|
| 0.25 |
|
|
| — |
|
| 1,814 |
|
| — |
|
| 1,814 |
|
| — |
|
| 725,337 |
|
| — |
|
| — |
|
| 725,337 |
|
| 0.25 |
|
Total Core Banking |
|
| 3,758 |
|
| 27,187 |
|
| 389 |
|
| 31,334 |
|
| 44,665 |
|
| 4,063,419 |
|
| 3,159 |
|
| 24 |
|
| 4,111,267 |
|
| 0.76 |
|
|
| 3,464 |
|
| 29,229 |
|
| 290 |
|
| 32,983 |
|
| 40,220 |
|
| 4,270,495 |
|
| 2,429 |
|
| 24 |
|
| 4,313,168 |
|
| 0.76 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Republic Processing Group: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Refund Solutions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Easy Advances |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Other TRS loans |
|
| — |
|
| 67 |
|
| — |
|
| 67 |
|
| — |
|
| 101 |
|
| — |
|
| — |
|
| 101 |
|
| 66.34 |
|
|
| — |
|
| 232 |
|
| — |
|
| 232 |
|
| — |
|
| 711 |
|
| — |
|
| — |
|
| 711 |
|
| 32.63 |
|
Republic Credit Solutions |
|
| 18 |
|
| 13,628 |
|
| — |
|
| 13,646 |
|
| 50 |
|
| 84,566 |
|
| — |
|
| — |
|
| 84,616 |
|
| 16.13 |
|
|
| 14 |
|
| 12,754 |
|
| — |
|
| 12,768 |
|
| 31 |
|
| 96,759 |
|
| — |
|
| — |
|
| 96,790 |
|
| 13.19 |
|
Total Republic Processing Group |
|
| 18 |
|
| 13,695 |
|
| — |
|
| 13,713 |
|
| 50 |
|
| 84,667 |
|
| — |
|
| — |
|
| 84,717 |
|
| 16.19 |
|
|
| 14 |
|
| 12,986 |
|
| — |
|
| 13,000 |
|
| 31 |
|
| 97,470 |
|
| — |
|
| — |
|
| 97,501 |
|
| 13.33 |
|
Total |
| $ | 3,776 |
| $ | 40,882 |
| $ | 389 |
| $ | 45,047 |
| $ | 44,715 |
| $ | 4,148,086 |
| $ | 3,159 |
| $ | 24 |
| $ | 4,195,984 |
|
| 1.07 | % |
| $ | 3,478 |
| $ | 42,215 |
| $ | 290 |
| $ | 45,983 |
| $ | 40,251 |
| $ | 4,367,965 |
| $ | 2,429 |
| $ | 24 |
| $ | 4,410,669 |
|
| 1.04 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
| Allowance for Loan and Lease Losses |
| Loans |
|
|
|
|
| Allowance for Loan and Lease Losses |
| Loans |
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||
|
| Individually |
|
|
| PCI with |
|
|
|
| Individually | �� |
|
| PCI with |
| PCI without |
|
|
|
|
|
|
|
| Individually |
|
|
| PCI with |
|
|
|
| Individually |
|
|
| PCI with |
| PCI without |
|
|
|
|
|
|
| ||||||||||||||
December 31, 2017 |
| Evaluated |
| Collectively |
| Post Acquisition |
| Total |
| Evaluated |
| Collectively |
| Post Acquisition |
| Post Acquisition |
| Total |
| Allowance to | ||||||||||||||||||||||||||||||||||||||||||
December 31, 2018 |
| Evaluated |
| Collectively |
| Post-Acquisition |
| Total |
| Evaluated |
| Collectively |
| Post-Acquisition |
| Post-Acquisition |
| Total |
| Allowance to | ||||||||||||||||||||||||||||||||||||||||||
(dollars in thousands) |
| Excluding PCI |
| Evaluated |
| Impairment |
| Allowance |
| Excluding PCI |
| Evaluated |
| Impairment |
| Impairment |
| Loans |
| Total Loans |
| Excluding PCI |
| Evaluated |
| Impairment |
| Allowance |
| Excluding PCI |
| Evaluated |
| Impairment |
| Impairment |
| Loans |
| Total Loans | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional Banking: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
| $ | 2,361 |
| $ | 3,501 |
| $ | 320 |
| $ | 6,182 |
| $ | 27,605 |
| $ | 892,122 |
| $ | 1,838 |
| $ | — |
| $ | 921,565 |
|
| 0.67 | % |
| $ | 2,052 |
| $ | 3,365 |
| $ | 381 |
| $ | 5,798 |
| $ | 24,860 |
| $ | 880,500 |
| $ | 1,645 |
| $ | — |
| $ | 907,005 |
|
| 0.64 | % |
Owner occupied - correspondent |
|
| — |
|
| 292 |
|
| — |
|
| 292 |
|
| — |
|
| 116,792 |
|
| — |
|
| — |
|
| 116,792 |
|
| 0.25 |
|
|
| — |
|
| 237 |
|
| — |
|
| 237 |
|
| 382 |
|
| 94,445 |
|
| — |
|
| — |
|
| 94,827 |
|
| 0.25 |
|
Nonowner occupied |
|
| 4 |
|
| 1,390 |
|
| 2 |
|
| 1,396 |
|
| 1,814 |
|
| 203,019 |
|
| 248 |
|
| — |
|
| 205,081 |
|
| 0.68 |
|
|
| 4 |
|
| 1,658 |
|
| — |
|
| 1,662 |
|
| 2,406 |
|
| 240,440 |
|
| — |
|
| — |
|
| 242,846 |
|
| 0.68 |
|
Commercial real estate |
|
| 407 |
|
| 8,588 |
|
| 48 |
|
| 9,043 |
|
| 9,185 |
|
| 1,196,736 |
|
| 1,369 |
|
| 3 |
|
| 1,207,293 |
|
| 0.75 |
|
|
| 294 |
|
| 9,727 |
|
| 9 |
|
| 10,030 |
|
| 8,104 |
|
| 1,239,915 |
|
| 919 |
|
| 2 |
|
| 1,248,940 |
|
| 0.80 |
|
Construction & land development |
|
| 107 |
|
| 2,257 |
|
| — |
|
| 2,364 |
|
| 733 |
|
| 149,332 |
|
| — |
|
| — |
|
| 150,065 |
|
| 1.58 |
|
|
| 4 |
|
| 2,551 |
|
| — |
|
| 2,555 |
|
| 65 |
|
| 175,113 |
|
| — |
|
| — |
|
| 175,178 |
|
| 1.46 |
|
Commercial & industrial |
|
| 288 |
|
| 1,910 |
|
| — |
|
| 2,198 |
|
| 308 |
|
| 341,357 |
|
| — |
|
| 27 |
|
| 341,692 |
|
| 0.64 |
|
|
| 130 |
|
| 2,743 |
|
| — |
|
| 2,873 |
|
| 1,020 |
|
| 429,310 |
|
| — |
|
| 25 |
|
| 430,355 |
|
| 0.67 |
|
Lease financing receivables |
|
| — |
|
| 174 |
|
| — |
|
| 174 |
|
| — |
|
| 16,580 |
|
| — |
|
| — |
|
| 16,580 |
|
| 1.05 |
|
|
| — |
|
| 158 |
|
| — |
|
| 158 |
|
| — |
|
| 15,031 |
|
| — |
|
| — |
|
| 15,031 |
|
| 1.05 |
|
Home equity |
|
| 425 |
|
| 3,218 |
|
| 111 |
|
| 3,754 |
|
| 1,609 |
|
| 345,930 |
|
| 115 |
|
| 1 |
|
| 347,655 |
|
| 1.08 |
|
|
| 286 |
|
| 3,117 |
|
| 74 |
|
| 3,477 |
|
| 1,361 |
|
| 331,101 |
|
| 86 |
|
| — |
|
| 332,548 |
|
| 1.05 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit cards |
|
| — |
|
| 607 |
|
| — |
|
| 607 |
|
| — |
|
| 16,078 |
|
| — |
|
| — |
|
| 16,078 |
|
| 3.78 |
|
|
| — |
|
| 1,140 |
|
| — |
|
| 1,140 |
|
| — |
|
| 19,095 |
|
| — |
|
| — |
|
| 19,095 |
|
| 5.97 |
|
Overdrafts |
|
| — |
|
| 974 |
|
| — |
|
| 974 |
|
| — |
|
| 974 |
|
| — |
|
| — |
|
| 974 |
|
| 100.00 |
|
|
| — |
|
| 1,102 |
|
| — |
|
| 1,102 |
|
| — |
|
| 1,102 |
|
| — |
|
| — |
|
| 1,102 |
|
| 100.00 |
|
Automobile loans |
|
| 32 |
|
| 655 |
|
| — |
|
| 687 |
|
| 108 |
|
| 65,542 |
|
| — |
|
| — |
|
| 65,650 |
|
| 1.05 |
|
|
| 91 |
|
| 633 |
|
| — |
|
| 724 |
|
| 91 |
|
| 63,384 |
|
| — |
|
| — |
|
| 63,475 |
|
| 1.14 |
|
Other consumer |
|
| 528 |
|
| 631 |
|
| 3 |
|
| 1,162 |
|
| 552 |
|
| 19,946 |
|
| 3 |
|
| — |
|
| 20,501 |
|
| 5.67 |
|
|
| 421 |
|
| 170 |
|
| — |
|
| 591 |
|
| 449 |
|
| 46,190 |
|
| 3 |
|
| — |
|
| 46,642 |
|
| 1.27 |
|
Total Traditional Banking |
|
| 4,152 |
|
| 24,197 |
|
| 484 |
|
| 28,833 |
|
| 41,914 |
|
| 3,364,408 |
|
| 3,573 |
|
| 31 |
|
| 3,409,926 |
|
| 0.85 |
|
|
| 3,282 |
|
| 26,601 |
|
| 464 |
|
| 30,347 |
|
| 38,738 |
|
| 3,535,626 |
|
| 2,653 |
|
| 27 |
|
| 3,577,044 |
|
| 0.85 |
|
Warehouse lines of credit |
|
| — |
|
| 1,314 |
|
| — |
|
| 1,314 |
|
| — |
|
| 525,572 |
|
| — |
|
| — |
|
| 525,572 |
|
| 0.25 |
|
|
| — |
|
| 1,172 |
|
| — |
|
| 1,172 |
|
| — |
|
| 468,695 |
|
| — |
|
| — |
|
| 468,695 |
|
| 0.25 |
|
Total Core Banking |
|
| 4,152 |
|
| 25,511 |
|
| 484 |
|
| 30,147 |
|
| 41,914 |
|
| 3,889,980 |
|
| 3,573 |
|
| 31 |
|
| 3,935,498 |
|
| 0.77 |
|
|
| 3,282 |
|
| 27,773 |
|
| 464 |
|
| 31,519 |
|
| 38,738 |
|
| 4,004,321 |
|
| 2,653 |
|
| 27 |
|
| 4,045,739 |
|
| 0.78 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Republic Processing Group: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Refund Solutions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Easy Advances |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Other TRS loans |
|
| — |
|
| 12 |
|
| — |
|
| 12 |
|
| — |
|
| 11,648 |
|
| — |
|
| — |
|
| 11,648 |
|
| 0.10 |
|
|
| — |
|
| 107 |
|
| — |
|
| 107 |
|
| — |
|
| 13,744 |
|
| — |
|
| — |
|
| 13,744 |
|
| 0.78 |
|
Republic Credit Solutions |
|
| 49 |
|
| 12,561 |
|
| — |
|
| 12,610 |
|
| 129 |
|
| 66,759 |
|
| — |
|
| — |
|
| 66,888 |
|
| 18.85 |
|
|
| 18 |
|
| 13,031 |
|
| — |
|
| 13,049 |
|
| 44 |
|
| 88,700 |
|
| — |
| �� | — |
|
| 88,744 |
|
| 14.70 |
|
Total Republic Processing Group |
|
| 49 |
|
| 12,573 |
|
| — |
|
| 12,622 |
|
| 129 |
|
| 78,407 |
|
| — |
|
| — |
|
| 78,536 |
|
| 16.07 |
|
|
| 18 |
|
| 13,138 |
|
| — |
|
| 13,156 |
|
| 44 |
|
| 102,444 |
|
| — |
|
| — |
|
| 102,488 |
|
| 12.84 |
|
Total |
| $ | 4,201 |
| $ | 38,084 |
| $ | 484 |
| $ | 42,769 |
| $ | 42,043 |
| $ | 3,968,387 |
| $ | 3,573 |
| $ | 31 |
| $ | 4,014,034 |
|
| 1.07 | % |
| $ | 3,300 |
| $ | 40,911 |
| $ | 464 |
| $ | 44,675 |
| $ | 38,782 |
| $ | 4,106,765 |
| $ | 2,653 |
| $ | 27 |
| $ | 4,148,227 |
|
| 1.08 | % |
2829
The following tables present loans individually evaluated for impairment by class of loans as of June 30, 20182019 and December 31, 20172018 and for the three and six months ended June 30, 20182019 and 2017.2018. The difference between the “Unpaid Principal Balance” and “Recorded Investment” columns represents life-to-date partial write downs/charge offs taken on individual impaired credits.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
| As of |
| Three Months Ended |
| Six Months Ended |
|
| As of |
| Three Months Ended |
| Six Months Ended |
| ||||||||||||||||||||||||||||||||||||||||||
|
| June 30, 2018 |
| June 30, 2018 |
| June 30, 2018 |
|
| June 30, 2019 |
| June 30, 2019 |
| June 30, 2019 |
| ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
| Cash Basis |
|
|
|
|
|
| Cash Basis |
|
|
|
|
|
|
|
|
|
| Cash Basis |
|
|
|
|
|
|
| Cash Basis |
| ||||||||||||||||||||
|
| Unpaid |
|
|
|
|
| Average |
| Interest |
| Interest |
| Average |
| Interest |
| Interest |
|
| Unpaid |
|
|
|
|
| Average |
| Interest |
| Interest |
| Average |
| Interest |
| Interest |
| ||||||||||||||||||
|
| Principal |
| Recorded |
| Allocated |
| Recorded |
| Income |
| Income |
| Recorded |
| Income |
| Income |
|
| Principal |
| Recorded |
| Allocated |
| Recorded |
| Income |
| Income |
| Recorded |
| Income |
| Income |
| ||||||||||||||||||
(in thousands) |
| Balance |
| Investment |
| Allowance |
| Investment |
| Recognized |
| Recognized |
| Investment |
| Recognized |
| Recognized |
|
| Balance |
| Investment |
| Allowance |
| Investment |
| Recognized |
| Recognized |
| Investment |
| Recognized |
| Recognized |
| ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans with no allocated Allowance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
| $ | 12,391 |
| $ | 11,768 |
| $ | — |
| $ | 11,069 |
| $ | 67 |
| $ | — |
| $ | 10,976 |
| $ | 133 |
| $ | — |
|
| $ | 13,213 |
| $ | 12,452 |
| $ | — |
| $ | 10,913 |
| $ | 70 |
| $ | — |
| $ | 10,843 |
| $ | 139 |
| $ | — |
|
Owner occupied - correspondent |
|
| 389 |
|
| 389 |
|
| — |
|
| 386 |
|
| — |
|
| — |
|
| 257 |
|
| — |
|
| — |
|
|
| 848 |
|
| 848 |
|
| — |
|
| 855 |
|
| — |
|
| — |
|
| 697 |
|
| — |
|
| — |
|
Nonowner occupied |
|
| 3,040 |
|
| 2,648 |
|
| — |
|
| 2,699 |
|
| 22 |
|
| — |
|
| 2,367 |
|
| 45 |
|
| — |
|
|
| 1,113 |
|
| 1,046 |
|
| — |
|
| 1,424 |
|
| 17 |
|
| — |
|
| 1,733 |
|
| 34 |
|
| — |
|
Commercial real estate |
|
| 6,737 |
|
| 5,663 |
|
| — |
|
| 5,119 |
|
| 24 |
|
| — |
|
| 4,889 |
|
| 45 |
|
| — |
|
|
| 4,866 |
|
| 3,792 |
|
| — |
|
| 3,573 |
|
| 23 |
|
| — |
|
| 3,917 |
|
| 47 |
|
| — |
|
Construction & land development |
|
| — |
|
| — |
|
| — |
|
| 238 |
|
| — |
|
| — |
|
| 356 |
|
| — |
|
| — |
|
|
| 60 |
|
| 60 |
|
| — |
|
| 30 |
|
| 1 |
|
| — |
|
| 20 |
|
| 1 |
|
| — |
|
Commercial & industrial |
|
| 783 |
|
| 675 |
|
| — |
|
| 694 |
|
| — |
|
| — |
|
| 469 |
|
| — |
|
| — |
|
|
| 720 |
|
| 612 |
|
| — |
|
| 622 |
|
| — |
|
| — |
|
| 616 |
|
| — |
|
| — |
|
Lease financing receivables |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Home equity |
|
| 830 |
|
| 734 |
|
| — |
|
| 704 |
|
| 4 |
|
| — |
|
| 796 |
|
| 7 |
|
| — |
|
|
| 1,941 |
|
| 1,898 |
|
| — |
|
| 1,591 |
|
| 12 |
|
| — |
|
| 1,352 |
|
| 23 |
|
| — |
|
Consumer |
|
| 83 |
|
| 70 |
|
| — |
|
| 62 |
|
| 1 |
|
| — |
|
| 49 |
|
| 3 |
|
| — |
|
|
| 25 |
|
| 25 |
|
| — |
|
| 27 |
|
| 1 |
|
| — |
|
| 28 |
|
| 1 |
|
| — |
|
Impaired loans with allocated Allowance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
|
| 17,967 |
|
| 17,935 |
|
| 2,651 |
|
| 18,481 |
|
| 153 |
|
| — |
|
| 18,538 |
|
| 299 |
|
| — |
|
|
| 12,161 |
|
| 12,134 |
|
| 1,624 |
|
| 14,464 |
|
| 121 |
|
| — |
|
| 14,910 |
|
| 240 |
|
| — |
|
Owner occupied - correspondent |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Nonowner occupied |
|
| 79 |
|
| 68 |
|
| 2 |
|
| 195 |
|
| — |
|
| — |
|
| 249 |
|
| — |
|
| — |
|
|
| 622 |
|
| 431 |
|
| 3 |
|
| 216 |
|
| 41 |
|
| — |
|
| 162 |
|
| — |
|
| — |
|
Commercial real estate |
|
| 5,907 |
|
| 5,907 |
|
| 349 |
|
| 6,368 |
|
| 65 |
|
| — |
|
| 6,287 |
|
| 129 |
|
| — |
|
|
| 3,603 |
|
| 3,603 |
|
| 238 |
|
| 3,951 |
|
| — |
|
| — |
|
| 4,106 |
|
| 83 |
|
| — |
|
Construction & land development |
|
| 128 |
|
| 128 |
|
| 67 |
|
| 132 |
|
| 1 |
|
| — |
|
| 135 |
|
| 2 |
|
| — |
|
|
| — |
|
| — |
|
| — |
|
| 32 |
|
| — |
|
| — |
|
| 43 |
|
| — |
|
| — |
|
Commercial & industrial |
|
| 108 |
|
| 108 |
|
| 108 |
|
| 98 |
|
| 1 |
|
| — |
|
| 161 |
|
| 1 |
|
| — |
|
|
| 4,852 |
|
| 4,852 |
|
| 1,204 |
|
| 2,662 |
|
| 7 |
|
| — |
|
| 1,913 |
|
| 15 |
|
| — |
|
Lease financing receivables |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Home equity |
|
| 1,123 |
|
| 1,122 |
|
| 478 |
|
| 992 |
|
| 10 |
|
| — |
|
| 909 |
|
| 19 |
|
| — |
|
|
| 452 |
|
| 452 |
|
| 241 |
|
| 480 |
|
| 2 |
|
| — |
|
| 510 |
|
| 4 |
|
| — |
|
Consumer |
|
| 659 |
|
| 659 |
|
| 510 |
|
| 668 |
|
| 6 |
|
| — |
|
| 700 |
|
| 14 |
|
| — |
|
|
| 477 |
|
| 475 |
|
| 458 |
|
| 505 |
|
| 4 |
|
| — |
|
| 520 |
|
| 10 |
|
| — |
|
Total impaired loans |
| $ | 50,224 |
| $ | 47,874 |
| $ | 4,165 |
| $ | 47,905 |
| $ | 354 |
| $ | — |
| $ | 47,138 |
| $ | 697 |
| $ | — |
|
| $ | 44,953 |
| $ | 42,680 |
| $ | 3,768 |
| $ | 41,345 |
| $ | 299 |
| $ | — |
| $ | 41,370 |
| $ | 597 |
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
| As of |
| Three Months Ended |
| Six Months Ended |
|
| As of |
| Three Months Ended |
| Six Months Ended |
| ||||||||||||||||||||||||||||||||||||||||||
|
| December 31, 2017 |
| June 30, 2017 |
| June 30, 2017 |
|
| December 31, 2018 |
| June 30, 2018 |
| June 30, 2018 |
| ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
| Cash Basis |
|
|
|
|
|
| Cash Basis |
|
|
|
|
|
|
|
|
|
| Cash Basis |
|
|
|
|
|
|
| Cash Basis |
| ||||||||||||||||||||
|
| Unpaid |
|
|
|
|
| Average |
| Interest |
| Interest |
| Average |
| Interest |
| Interest |
|
| Unpaid |
|
|
|
|
|
| Average |
| Interest |
| Interest |
| Average |
| Interest |
| Interest |
| |||||||||||||||||
|
| Principal |
| Recorded |
| Allocated |
| Recorded |
| Income |
| Income |
| Recorded |
| Income |
| Income |
|
| Principal |
| Recorded |
| Allocated |
| Recorded |
| Income |
| Income |
| Recorded |
| Income |
| Income |
| ||||||||||||||||||
(in thousands) |
| Balance |
| Investment |
| Allowance |
| Investment |
| Recognized |
| Recognized |
| Investment |
| Recognized |
| Recognized |
|
| Balance |
| Investment |
| Allowance |
| Investment |
| Recognized |
| Recognized |
| Investment |
| Recognized |
| Recognized |
| ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans with no allocated Allowance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
| $ | 11,664 |
| $ | 10,789 |
| $ | — |
| $ | 11,802 |
| $ | 48 |
| $ | — |
| $ | 12,380 |
| $ | 95 |
| $ | — |
|
| $ | 11,676 |
| $ | 10,703 |
| $ | — |
| $ | 11,069 |
| $ | 67 |
| $ | — |
| $ | 10,976 |
| $ | 133 |
| $ | — |
|
Owner occupied - correspondent |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 382 |
|
| 382 |
|
| — |
|
| 386 |
|
| — |
|
| — |
|
| 257 |
|
| — |
|
| — |
|
Nonowner occupied |
|
| 1,784 |
|
| 1,704 |
|
| — |
|
| 1,477 |
|
| 7 |
|
| — |
|
| 1,293 |
|
| 14 |
|
| — |
|
|
| 2,729 |
|
| 2,350 |
|
| — |
|
| 2,699 |
|
| 22 |
|
| — |
|
| 2,367 |
|
| 45 |
|
| — |
|
Commercial real estate |
|
| 5,504 |
|
| 4,430 |
|
| — |
|
| 4,702 |
|
| 20 |
|
| — |
|
| 5,235 |
|
| 40 |
|
| — |
|
|
| 5,688 |
|
| 4,607 |
|
| — |
|
| 5,119 |
|
| 24 |
|
| — |
|
| 4,889 |
|
| 45 |
|
| — |
|
Construction & land development |
|
| 591 |
|
| 591 |
|
| — |
|
| 537 |
|
| 7 |
|
| — |
|
| 507 |
|
| 15 |
|
| — |
|
|
| — |
|
| — |
|
| — |
|
| 238 |
|
| — |
|
| — |
|
| 356 |
|
| — |
|
| — |
|
Commercial & industrial |
|
| 20 |
|
| 20 |
|
| — |
|
| 200 |
|
| 1 |
|
| — |
|
| 136 |
|
| 2 |
|
| — |
|
|
| 712 |
|
| 604 |
|
| — |
|
| 694 |
|
| — |
|
| — |
|
| 469 |
|
| — |
|
| — |
|
Lease financing receivables |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Home equity |
|
| 1,071 |
|
| 981 |
|
| — |
|
| 1,443 |
|
| 6 |
|
| — |
|
| 1,434 |
|
| 13 |
|
| — |
|
|
| 919 |
|
| 876 |
|
| — |
|
| 704 |
|
| 4 |
|
| — |
|
| 796 |
|
| 7 |
|
| — |
|
Consumer |
|
| 25 |
|
| 25 |
|
| — |
|
| 41 |
|
| — |
|
| — |
|
| 43 |
|
| — |
|
| — |
|
|
| 33 |
|
| 33 |
|
| — |
|
| 62 |
|
| 1 |
|
| — |
|
| 49 |
|
| 3 |
|
| — |
|
Impaired loans with allocated Allowance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
|
| 18,676 |
|
| 18,654 |
|
| 2,681 |
|
| 20,780 |
|
| 178 |
|
| — |
|
| 21,314 |
|
| 357 |
|
| — |
|
|
| 16,215 |
|
| 15,802 |
|
| 2,433 |
|
| 18,481 |
|
| 153 |
|
| — |
|
| 18,538 |
|
| 299 |
|
| — |
|
Owner occupied - correspondent |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Nonowner occupied |
|
| 361 |
|
| 358 |
|
| 6 |
|
| 483 |
|
| 6 |
|
| — |
|
| 620 |
|
| 11 |
|
| — |
|
|
| 78 |
|
| 56 |
|
| 4 |
|
| 195 |
|
| — |
|
| — |
|
| 249 |
|
| — |
|
| — |
|
Commercial real estate |
|
| 6,124 |
|
| 6,124 |
|
| 455 |
|
| 5,229 |
|
| 49 |
|
| — |
|
| 6,579 |
|
| 95 |
|
| — |
|
|
| 4,416 |
|
| 4,416 |
|
| 303 |
|
| 6,368 |
|
| 65 |
|
| — |
|
| 6,287 |
|
| 129 |
|
| — |
|
Construction & land development |
|
| 142 |
|
| 142 |
|
| 107 |
|
| 273 |
|
| 1 |
|
| — |
|
| 342 |
|
| 2 |
|
| — |
|
|
| 65 |
|
| 65 |
|
| 4 |
|
| 132 |
|
| 1 |
|
| — |
|
| 135 |
|
| 2 |
|
| — |
|
Commercial & industrial |
|
| 288 |
|
| 288 |
|
| 288 |
|
| 150 |
|
| — |
|
| — |
|
| 274 |
|
| — |
|
| — |
|
|
| 416 |
|
| 416 |
|
| 130 |
|
| 98 |
|
| 1 |
|
| — |
|
| 161 |
|
| 1 |
|
| — |
|
Lease financing receivables |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Home equity |
|
| 743 |
|
| 743 |
|
| 536 |
|
| 826 |
|
| 5 |
|
| — |
|
| 698 |
|
| 9 |
|
| — |
|
|
| 572 |
|
| 571 |
|
| 360 |
|
| 992 |
|
| 10 |
|
| — |
|
| 909 |
|
| 19 |
|
| — |
|
Consumer |
|
| 767 |
|
| 767 |
|
| 612 |
|
| 114 |
|
| — |
|
| — |
|
| 76 |
|
| — |
|
| — |
|
|
| 554 |
|
| 554 |
|
| 530 |
|
| 668 |
|
| 6 |
|
| — |
|
| 700 |
|
| 14 |
|
| — |
|
Total impaired loans |
| $ | 47,760 |
| $ | 45,616 |
| $ | 4,685 |
| $ | 48,057 |
| $ | 328 |
| $ | — |
| $ | 50,931 |
| $ | 653 |
| $ | — |
|
| $ | 44,455 |
| $ | 41,435 |
| $ | 3,764 |
| $ | 47,905 |
| $ | 354 |
| $ | — |
| $ | 47,138 |
| $ | 697 |
| $ | — |
|
2930
Troubled Debt Restructurings
A TDR is a situation where, due to a borrower’s financial difficulties, the Bank grants a concession to the borrower that the Bank would not otherwise have considered. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of their debt in the foreseeable future without the modification. This evaluation is performed in accordance with the Bank’s internal underwriting policy.
All TDRs are considered “Impaired,” including PCI loans subsequently restructured. The majority of the Bank’s commercial related and construction TDRs involve a restructuring of financing terms such as a reduction in the payment amount to require only interest and escrow (if required) and/or extending the maturity date of the debt. The substantial majority of the Bank’s residential real estate TDR concessions involve reducing the client’s loan payment through a rate reduction for a set period based on the borrower’s ability to service the modified loan payment. Retail loans may also be classified as TDRs due to legal modifications, such as bankruptcies.
Nonaccrual loans modified as TDRs typically remain on nonaccrual status and continue to be reported as nonperforming loans for a minimum of six consecutive months. Accruing loans modified as TDRs are evaluated for nonaccrual status based on a current evaluation of the borrower’s financial condition and ability and willingness to service the modified debt. At June 30, 20182019 and December 31, 2017, $92018, $11 million and $6$8 million of TDRs were on nonaccrual status.
Detail of TDRs differentiated by loan type and accrual status follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| Troubled Debt |
| Troubled Debt |
| Total |
|
| Troubled Debt |
| Troubled Debt |
| Total |
| ||||||||||||||||||
|
| Restructurings on |
| Restructurings on |
| Troubled Debt |
|
| Restructurings on |
| Restructurings on |
| Troubled Debt |
| ||||||||||||||||||
|
| Nonaccrual Status |
| Accrual Status |
| Restructurings |
|
| Nonaccrual Status |
| Accrual Status |
| Restructurings |
| ||||||||||||||||||
|
| Number of |
| Recorded |
| Number of |
| Recorded |
| Number of |
| Recorded |
|
| Number of |
| Recorded |
| Number of |
| Recorded |
| Number of |
| Recorded |
| ||||||
June 30, 2018 (dollars in thousands) |
| Loans |
| Investment |
| Loans |
| Investment |
| Loans |
| Investment |
| |||||||||||||||||||
June 30, 2019 (dollars in thousands) |
| Loans |
| Investment |
| Loans |
| Investment |
| Loans |
| Investment |
| |||||||||||||||||||
Residential real estate |
| 67 |
| $ | 6,683 |
| 177 |
| $ | 19,917 |
| 244 |
| $ | 26,600 |
|
| 54 |
| $ | 4,777 |
| 152 |
| $ | 16,401 |
| 206 |
| $ | 21,178 |
|
Commercial real estate |
| 2 |
|
| 1,316 |
| 15 |
|
| 6,647 |
| 17 |
|
| 7,963 |
|
| 3 |
|
| 1,714 |
| 8 |
|
| 4,247 |
| 11 |
|
| 5,961 |
|
Construction & land development |
| 1 |
|
| 58 |
| 1 |
|
| 70 |
| 2 |
|
| 128 |
|
| — |
|
| — |
| 1 |
|
| 60 |
| 1 |
|
| 60 |
|
Commercial & industrial |
| 3 |
|
| 750 |
| 2 |
|
| 12 |
| 5 |
|
| 762 |
|
| 5 |
|
| 4,913 |
| 4 |
|
| 417 |
| 9 |
|
| 5,330 |
|
Consumer |
| — |
|
| — |
| 325 |
|
| 511 |
| 325 |
|
| 511 |
|
| — |
|
| — |
| 210 |
|
| 382 |
| 210 |
|
| 382 |
|
Total troubled debt restructurings |
| 73 |
| $ | 8,807 |
| 520 |
| $ | 27,157 |
| 593 |
| $ | 35,964 |
|
| 62 |
| $ | 11,404 |
| 375 |
| $ | 21,507 |
| 437 |
| $ | 32,911 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| Troubled Debt |
| Troubled Debt |
| Total |
|
| Troubled Debt |
| Troubled Debt |
| Total |
| ||||||||||||||||||
|
| Restructurings on |
| Restructurings on |
| Troubled Debt |
|
| Restructurings on |
| Restructurings on |
| Troubled Debt |
| ||||||||||||||||||
|
| Nonaccrual Status |
| Accrual Status |
| Restructurings |
|
| Nonaccrual Status |
| Accrual Status |
| Restructurings |
| ||||||||||||||||||
|
| Number of |
| Recorded |
| Number of |
| Recorded |
| Number of |
| Recorded |
|
| Number of |
| Recorded |
| Number of |
| Recorded |
| Number of |
| Recorded |
| ||||||
December 31, 2017 (dollars in thousands) |
| Loans |
| Investment |
| Loans |
| Investment |
| Loans |
| Investment |
| |||||||||||||||||||
December 31, 2018 (dollars in thousands) |
| Loans |
| Investment |
| Loans |
| Investment |
| Loans |
| Investment |
| |||||||||||||||||||
Residential real estate |
| 62 |
| $ | 4,926 |
| 183 |
| $ | 20,189 |
| 245 |
| $ | 25,115 |
|
| 60 |
| $ | 6,378 |
| 156 |
| $ | 17,232 |
| 216 |
| $ | 23,610 |
|
Commercial real estate |
| 2 |
|
| 1,366 |
| 14 |
|
| 6,499 |
| 16 |
|
| 7,865 |
|
| 3 |
|
| 1,203 |
| 14 |
|
| 6,571 |
| 17 |
|
| 7,774 |
|
Construction & land development |
| 1 |
|
| 67 |
| 3 |
|
| 666 |
| 4 |
|
| 733 |
|
| — |
|
| — |
| 1 |
|
| 65 |
| 1 |
|
| 65 |
|
Commercial & industrial |
| — |
|
| — |
| 2 |
|
| 287 |
| 2 |
|
| 287 |
|
| 2 |
|
| 571 |
| 3 |
|
| 408 |
| 5 |
|
| 979 |
|
Consumer |
| — |
|
| — |
| 830 |
|
| 637 |
| 830 |
|
| 637 |
|
| — |
|
| — |
| 256 |
|
| 435 |
| 256 |
|
| 435 |
|
Total troubled debt restructurings |
| 65 |
| $ | 6,359 |
| 1,032 |
| $ | 28,278 |
| 1,097 |
| $ | 34,637 |
|
| 65 |
| $ | 8,152 |
| 430 |
| $ | 24,711 |
| 495 |
| $ | 32,863 |
|
3031
The Bank considers a TDR to be performing to its modified terms if the loan is in accrual status and not past due 30-days-or-more as of the reporting date. A summary of the categories of TDR loan modifications outstanding and respective performance under modified terms at June 30, 20182019 and December 31, 20172018 follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
| Troubled Debt |
| Troubled Debt |
|
|
|
|
|
|
| Troubled Debt |
| Troubled Debt |
|
|
|
|
|
| ||||||||||||
|
| Restructurings |
| Restructurings |
| Total |
|
| Restructurings |
| Restructurings |
| Total |
| ||||||||||||||||||
|
| Performing to |
| Not Performing to |
| Troubled Debt |
|
| Performing to |
| Not Performing to |
| Troubled Debt |
| ||||||||||||||||||
|
| Modified Terms |
| Modified Terms |
| Restructurings |
|
| Modified Terms |
| Modified Terms |
| Restructurings |
| ||||||||||||||||||
|
| Number of |
| Recorded |
| Number of |
| Recorded |
| Number of |
| Recorded |
|
| Number of |
| Recorded |
| Number of |
| Recorded |
| Number of |
| Recorded |
| ||||||
June 30, 2018 (dollars in thousands) |
| Loans |
| Investment |
| Loans |
| Investment |
| Loans |
| Investment |
| |||||||||||||||||||
June 30, 2019 (dollars in thousands) |
| Loans |
| Investment |
| Loans |
| Investment |
| Loans |
| Investment |
| |||||||||||||||||||
Residential real estate loans (including home equity loans): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest only payments |
| 2 |
| $ | 1,207 |
| — |
| $ | — |
| 2 |
| $ | 1,207 |
|
| — |
| $ | — |
| 1 |
| $ | 945 |
| 1 |
| $ | 945 |
|
Rate reduction |
| 156 |
|
| 17,770 |
| 15 |
|
| 1,699 |
| 171 |
|
| 19,469 |
|
| 138 |
|
| 15,535 |
| 5 |
|
| 589 |
| 143 |
|
| 16,124 |
|
Principal deferral |
| 14 |
|
| 3,288 |
| 3 |
|
| 299 |
| 17 |
|
| 3,587 |
|
| 9 |
|
| 873 |
| 3 |
|
| 610 |
| 12 |
|
| 1,483 |
|
Legal modification |
| 46 |
|
| 2,082 |
| 8 |
|
| 255 |
| 54 |
|
| 2,337 |
|
| 43 |
|
| 2,311 |
| 7 |
|
| 315 |
| 50 |
|
| 2,626 |
|
Total residential TDRs |
| 218 |
|
| 24,347 |
| 26 |
|
| 2,253 |
| 244 |
|
| 26,600 |
|
| 190 |
|
| 18,719 |
| 16 |
|
| 2,459 |
| 206 |
|
| 21,178 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial related and construction/land development loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest only payments |
| 2 |
|
| 783 |
| — |
|
| — |
| 2 |
|
| 783 |
|
| 2 |
|
| 719 |
| — |
|
| — |
| 2 |
|
| 719 |
|
Rate reduction |
| 7 |
|
| 3,061 |
| 1 |
|
| 80 |
| 8 |
|
| 3,141 |
|
| 4 |
|
| 1,352 |
| — |
|
| — |
| 4 |
|
| 1,352 |
|
Principal deferral |
| 13 |
|
| 4,854 |
| 1 |
|
| 75 |
| 14 |
|
| 4,929 |
|
| 12 |
|
| 4,257 |
| 1 |
|
| 597 |
| 13 |
|
| 4,854 |
|
Legal modification |
| — |
|
| — |
| 2 |
|
| 4,426 |
| 2 |
|
| 4,426 |
| ||||||||||||||||
Total commercial TDRs |
| 22 |
|
| 8,698 |
| 2 |
|
| 155 |
| 24 |
|
| 8,853 |
|
| 18 |
|
| 6,328 |
| 3 |
|
| 5,023 |
| 21 |
|
| 11,351 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate reduction |
| 1 |
|
| 17 |
| — |
|
| — |
| 1 |
|
| 17 |
|
| — |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
Principal deferral |
| 323 |
|
| 451 |
| — |
|
| — |
| 323 |
|
| 451 |
|
| 210 |
|
| 382 |
| — |
|
| — |
| 210 |
|
| 382 |
|
Legal modification |
| — |
|
| — |
| 1 |
|
| 43 |
| 1 |
|
| 43 |
| ||||||||||||||||
Total consumer TDRs |
| 324 |
|
| 468 |
| 1 |
|
| 43 |
| 325 |
|
| 511 |
|
| 210 |
|
| 382 |
| — |
|
| — |
| 210 |
|
| 382 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total troubled debt restructurings |
| 564 |
| $ | 33,513 |
| 29 |
| $ | 2,451 |
| 593 |
| $ | 35,964 |
|
| 418 |
| $ | 25,429 |
| 19 |
| $ | 7,482 |
| 437 |
| $ | 32,911 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Troubled Debt |
| Troubled Debt |
|
|
|
|
|
| ||||||
|
| Restructurings |
| Restructurings |
| Total |
| |||||||||
|
| Performing to |
| Not Performing to |
| Troubled Debt |
| |||||||||
|
| Modified Terms |
| Modified Terms |
| Restructurings |
| |||||||||
|
| Number of |
| Recorded |
| Number of |
| Recorded |
| Number of |
| Recorded |
| |||
December 31, 2017 (dollars in thousands) |
| Loans |
| Investment |
| Loans |
| Investment |
| Loans |
| Investment |
| |||
Residential real estate loans (including home equity loans): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest only payments |
| 2 |
| $ | 463 |
| — |
| $ | — |
| 2 |
| $ | 463 |
|
Rate reduction |
| 161 |
|
| 18,777 |
| 17 |
|
| 1,902 |
| 178 |
|
| 20,679 |
|
Principal deferral |
| 14 |
|
| 1,455 |
| 2 |
|
| 121 |
| 16 |
|
| 1,576 |
|
Legal modification |
| 42 |
|
| 1,997 |
| 7 |
|
| 400 |
| 49 |
|
| 2,397 |
|
Total residential TDRs |
| 219 |
|
| 22,692 |
| 26 |
|
| 2,423 |
| 245 |
|
| 25,115 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial related and construction/land development loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest only payments |
| 3 |
|
| 837 |
| — |
|
| — |
| 3 |
|
| 837 |
|
Rate reduction |
| 7 |
|
| 3,185 |
| 1 |
|
| 79 |
| 8 |
|
| 3,264 |
|
Principal deferral |
| 9 |
|
| 3,430 |
| 2 |
|
| 1,354 |
| 11 |
|
| 4,784 |
|
Total commercial TDRs |
| 19 |
|
| 7,452 |
| 3 |
|
| 1,433 |
| 22 |
|
| 8,885 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal deferral |
| 830 |
|
| 637 |
| — |
|
| — |
| 830 |
|
| 637 |
|
Total troubled debt restructurings |
| 1,068 |
| $ | 30,781 |
| 29 |
| $ | 3,856 |
| 1,097 |
| $ | 34,637 |
|
3132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Troubled Debt |
| Troubled Debt |
|
|
|
|
|
| ||||||
|
| Restructurings |
| Restructurings |
| Total |
| |||||||||
|
| Performing to |
| Not Performing to |
| Troubled Debt |
| |||||||||
|
| Modified Terms |
| Modified Terms |
| Restructurings |
| |||||||||
|
| Number of |
| Recorded |
| Number of |
| Recorded |
| Number of |
| Recorded |
| |||
December 31, 2018 (dollars in thousands) |
| Loans |
| Investment |
| Loans |
| Investment |
| Loans |
| Investment |
| |||
Residential real estate loans (including home equity loans): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest only payments |
| — |
| $ | — |
| 1 |
| $ | 970 |
| 1 |
| $ | 970 |
|
Rate reduction |
| 145 |
|
| 16,892 |
| 12 |
|
| 978 |
| 157 |
|
| 17,870 |
|
Principal deferral |
| 11 |
|
| 1,171 |
| 4 |
|
| 1,871 |
| 15 |
|
| 3,042 |
|
Legal modification |
| 35 |
|
| 1,500 |
| 8 |
|
| 228 |
| 43 |
|
| 1,728 |
|
Total residential TDRs |
| 191 |
|
| 19,563 |
| 25 |
|
| 4,047 |
| 216 |
|
| 23,610 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial related and construction/land development loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest only payments |
| 2 |
|
| 752 |
| — |
|
| — |
| 2 |
|
| 752 |
|
Rate reduction |
| 8 |
|
| 2,962 |
| — |
|
| — |
| 8 |
|
| 2,962 |
|
Principal deferral |
| 12 |
|
| 5,076 |
| — |
|
| — |
| 12 |
|
| 5,076 |
|
Legal modification |
| — |
|
| — |
| 1 |
|
| 28 |
| 1 |
|
| 28 |
|
Total commercial TDRs |
| 22 |
|
| 8,790 |
| 1 |
|
| 28 |
| 23 |
|
| 8,818 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate reduction |
| 1 |
|
| 16 |
| — |
|
| — |
| 1 |
|
| 16 |
|
Principal deferral |
| 255 |
|
| 419 |
| — |
|
| — |
| 255 |
|
| 419 |
|
Legal modification |
| — |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
Total consumer TDRs |
| 256 |
|
| 435 |
| — |
|
| — |
| 256 |
|
| 435 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total troubled debt restructurings |
| 469 |
| $ | 28,788 |
| 26 |
| $ | 4,075 |
| 495 |
| $ | 32,863 |
|
As of June 30, 20182019 and December 31, 2017, 93%2018, 77% and 89%88% of the Bank’s TDRs were performing according to their modified terms. The Bank had provided $3 million and $4$3 million of specific reserve allocations to clients whose loan terms have been modified in TDRs as of June 30, 20182019 and December 31, 2017.2018. The Bank had no commitments to lend any additional material amounts to its existing TDR relationships at June 30, 20182019 or December 31, 2017.2018.
A summary of the categories of TDR loan modifications by respective performance as of June 30, 20182019 and 20172018 that were modified during the three months ended June 30, 20182019 and 20172018 follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Troubled Debt |
| Troubled Debt |
|
|
|
|
|
|
| Troubled Debt |
| Troubled Debt |
|
|
|
|
|
| ||||||||||||
|
| Restructurings |
| Restructurings |
| Total |
|
| Restructurings |
| Restructurings |
| Total |
| ||||||||||||||||||
|
| Performing to |
| Not Performing to |
| Troubled Debt |
|
| Performing to |
| Not Performing to |
| Troubled Debt |
| ||||||||||||||||||
|
| Modified Terms |
| Modified Terms |
| Restructurings |
|
| Modified Terms |
| Modified Terms |
| Restructurings |
| ||||||||||||||||||
|
| Number of |
| Recorded |
| Number of |
| Recorded |
| Number of |
| Recorded |
|
| Number of |
| Recorded |
| Number of |
| Recorded |
| Number of |
| Recorded |
| ||||||
June 30, 2018 (dollars in thousands) |
| Loans |
| Investment |
| Loans |
| Investment |
| Loans |
| Investment |
| |||||||||||||||||||
June 30, 2019 (dollars in thousands) |
| Loans |
| Investment |
| Loans |
| Investment |
| Loans |
| Investment |
| |||||||||||||||||||
Residential real estate loans (including home equity loans): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate reduction |
| 1 |
| $ | 389 |
| — |
| $ | — |
| 1 |
| $ | 389 |
| ||||||||||||||||
Principal deferral |
| 2 |
|
| 1,501 |
| 1 |
|
| 169 |
| 3 |
|
| 1,670 |
|
| — |
| $ | — |
| — |
| $ | — |
| — |
| $ | — |
|
Legal modification |
| 9 |
|
| 273 |
| 1 |
|
| 46 |
| 10 |
|
| 319 |
|
| 7 |
|
| 804 |
| 2 |
|
| 161 |
| 9 |
|
| 965 |
|
Total residential TDRs |
| 12 |
|
| 2,163 |
| 2 |
|
| 215 |
| 14 |
|
| 2,378 |
|
| 7 |
|
| 804 |
| 2 |
|
| 161 |
| 9 |
|
| 965 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial related and construction/land development loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate reduction |
| — |
|
| — |
| — |
|
| — |
| — |
|
| — |
| ||||||||||||||||
Principal deferral |
| 3 |
|
| 859 |
| 1 |
|
| 75 |
| 4 |
|
| 934 |
| ||||||||||||||||
Legal modification |
| — |
|
| — |
| 2 |
|
| 4,426 |
| 2 |
|
| 4,426 |
| ||||||||||||||||
Total commercial TDRs |
| 3 |
|
| 859 |
| 1 |
|
| 75 |
| 4 |
|
| 934 |
|
| — |
|
| — |
| 2 |
|
| 4,426 |
| 2 |
|
| 4,426 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Legal modification |
| — |
|
| — |
| 1 |
|
| 43 |
| 1 |
|
| 43 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total troubled debt restructurings |
| 15 |
| $ | 3,022 |
| 4 |
| $ | 333 |
| 19 |
| $ | 3,355 |
|
| 7 |
| $ | 804 |
| 4 |
| $ | 4,587 |
| 11 |
| $ | 5,391 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Troubled Debt |
| Troubled Debt |
|
|
|
|
|
| ||||||
|
| Restructurings |
| Restructurings |
| Total |
| |||||||||
|
| Performing to |
| Not Performing to |
| Troubled Debt |
| |||||||||
|
| Modified Terms |
| Modified Terms |
| Restructurings |
| |||||||||
|
| Number of |
| Recorded |
| Number of |
| Recorded |
| Number of |
| Recorded |
| |||
June 30, 2017 (dollars in thousands) |
| Loans |
| Investment |
| Loans |
| Investment |
| Loans |
| Investment |
| |||
Residential real estate loans (including home equity loans): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate reduction |
| 1 |
| $ | 220 |
| — |
| $ | — |
| 1 |
| $ | 220 |
|
Principal deferral |
| 2 |
|
| 810 |
| — |
|
| — |
| 2 |
|
| 810 |
|
Legal modification |
| 1 |
|
| 11 |
| — |
|
| — |
| 1 |
|
| 11 |
|
Total residential TDRs |
| 4 |
|
| 1,041 |
| — |
|
| — |
| 4 |
|
| 1,041 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total troubled debt restructurings |
| 4 |
| $ | 1,041 |
| — |
| $ | — |
| 4 |
| $ | 1,041 |
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Troubled Debt |
| Troubled Debt |
|
|
|
|
|
| ||||||
|
| Restructurings |
| Restructurings |
| Total |
| |||||||||
|
| Performing to |
| Not Performing to |
| Troubled Debt |
| |||||||||
|
| Modified Terms |
| Modified Terms |
| Restructurings |
| |||||||||
|
| Number of |
| Recorded |
| Number of |
| Recorded |
| Number of |
| Recorded |
| |||
June 30, 2018 (dollars in thousands) |
| Loans |
| Investment |
| Loans |
| Investment |
| Loans |
| Investment |
| |||
Residential real estate loans (including home equity loans): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate reduction |
| 1 |
| $ | 389 |
| — |
| $ | — |
| 1 |
| $ | 389 |
|
Principal deferral |
| 2 |
|
| 1,501 |
| 1 |
|
| 169 |
| 3 |
|
| 1,670 |
|
Legal modification |
| 9 |
|
| 273 |
| 1 |
|
| 46 |
| 10 |
|
| 319 |
|
Total residential TDRs |
| 12 |
|
| 2,163 |
| 2 |
|
| 215 |
| 14 |
|
| 2,378 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial related and construction/land development loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal deferral |
| 3 |
|
| 859 |
| 1 |
|
| 75 |
| 4 |
|
| 934 |
|
Total commercial TDRs |
| 3 |
|
| 859 |
| 1 |
|
| 75 |
| 4 |
|
| 934 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal modification |
| — |
|
| — |
| 1 |
|
| 43 |
| 1 |
|
| 43 |
|
Total consumer TDRs |
| — |
|
| — |
| 1 |
|
| 43 |
| 1 |
|
| 43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total troubled debt restructurings |
| 15 |
| $ | 3,022 |
| 4 |
| $ | 333 |
| 19 |
| $ | 3,355 |
|
The tables above are inclusive of loans that were TDRs at the end of previous periods and were re-modified, e.g., a maturity date extension during the current period.
As of June 30, 2019 and 2018, 15% and 2017, 90% and 100% of the Bank’s TDRs that occurred during the second quarters of 20182019 and 20172018 were performing according to their modified terms. The Bank provided approximately $422,000$980,000 and $30,000$422,000 in specific reserve allocations to clients whose loan terms were modified in TDRs during the second quarters of 20182019 and 2017.2018.
There was no significant change between the pre and post modification loan balances for the three months ending June 30, 20182019 and 2017.2018.
32
A summary of the categories of TDR loan modifications by respective performance as of June 30, 20182019 and 20172018 that were modified during the six months ended June 30, 20182019 and 20172018 follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
| Troubled Debt |
| Troubled Debt |
|
|
|
|
|
|
| Troubled Debt |
| Troubled Debt |
|
|
|
|
|
| ||||||||||||
|
| Restructurings |
| Restructurings |
| Total |
|
| Restructurings |
| Restructurings |
| Total |
| ||||||||||||||||||
|
| Performing to |
| Not Performing to |
| Troubled Debt |
|
| Performing to |
| Not Performing to |
| Troubled Debt |
| ||||||||||||||||||
|
| Modified Terms |
| Modified Terms |
| Restructurings |
|
| Modified Terms |
| Modified Terms |
| Restructurings |
| ||||||||||||||||||
|
| Number of |
| Recorded |
| Number of |
| Recorded |
| Number of |
| Recorded |
|
| Number of |
| Recorded |
| Number of |
| Recorded |
| Number of |
| Recorded |
| ||||||
June 30, 2018 (dollars in thousands) |
| Loans |
| Investment |
| Loans |
| Investment |
| Loans |
| Investment |
| |||||||||||||||||||
June 30, 2019 (dollars in thousands) |
| Loans |
| Investment |
| Loans |
| Investment |
| Loans |
| Investment |
| |||||||||||||||||||
Residential real estate loans (including home equity loans): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest only payments |
| 1 |
| $ | 1,204 |
| — |
| $ | — |
| 1 |
| $ | 1,204 |
| ||||||||||||||||
Rate reduction |
| 2 |
|
| 474 |
| — |
|
| — |
| 2 |
|
| 474 |
| ||||||||||||||||
Principal deferral |
| 3 |
|
| 2,002 |
| 1 |
|
| 170 |
| 4 |
|
| 2,172 |
|
| 1 |
| $ | 6 |
| — |
| $ | — |
| 1 |
| $ | 6 |
|
Legal modification |
| 9 |
|
| 273 |
| 1 |
|
| 46 |
| 10 |
|
| 319 |
|
| 11 |
|
| 901 |
| 3 |
|
| 211 |
| 14 |
|
| 1,112 |
|
Total residential TDRs |
| 15 |
|
| 3,953 |
| 2 |
|
| 216 |
| 17 |
|
| 4,169 |
|
| 12 |
|
| 907 |
| 3 |
|
| 211 |
| 15 |
|
| 1,118 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial related and construction/land development loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest only payments |
| 1 |
|
| 566 |
| — |
|
| — |
| 1 |
|
| 566 |
| ||||||||||||||||
Principal deferral |
| 4 |
|
| 870 |
| 1 |
|
| 75 |
| 5 |
|
| 945 |
|
| 2 |
|
| 26 |
| — |
|
| — |
| 2 |
|
| 26 |
|
Legal modification |
| — |
|
| — |
| 2 |
|
| 4,426 |
| 2 |
|
| 4,426 |
| ||||||||||||||||
Total commercial TDRs |
| 4 |
|
| 870 |
| 1 |
|
| 75 |
| 5 |
|
| 945 |
|
| 3 |
|
| 592 |
| 2 |
|
| 4,426 |
| 5 |
|
| 5,018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Principal deferral |
| 1 |
|
| 58 |
| — |
|
| — |
| 1 |
|
| 58 |
| ||||||||||||||||
Legal modification |
| — |
|
| — |
| 1 |
|
| 43 |
| 1 |
|
| 43 |
| ||||||||||||||||
Total consumer TDRs |
| 1 |
|
| 58 |
| 1 |
|
| 43 |
| 2 |
|
| 101 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total troubled debt restructurings |
| 20 |
| $ | 4,881 |
| 4 |
| $ | 334 |
| 24 |
| $ | 5,215 |
|
| 15 |
| $ | 1,499 |
| 5 |
| $ | 4,637 |
| 20 |
| $ | 6,136 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Troubled Debt |
| Troubled Debt |
|
|
|
|
|
| ||||||
|
| Restructurings |
| Restructurings |
| Total |
| |||||||||
|
| Performing to |
| Not Performing to |
| Troubled Debt |
| |||||||||
|
| Modified Terms |
| Modified Terms |
| Restructurings |
| |||||||||
|
| Number of |
| Recorded |
| Number of |
| Recorded |
| Number of |
| Recorded |
| |||
June 30, 2017 (dollars in thousands) |
| Loans |
| Investment |
| Loans |
| Investment |
| Loans |
| Investment |
| |||
Residential real estate loans (including home equity loans): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest only payments |
| — |
| $ | — |
| — |
| $ | — |
| — |
| $ | — |
|
Rate reduction |
| 2 |
|
| 379 |
| — |
|
| — |
| 2 |
|
| 379 |
|
Principal deferral |
| 2 |
|
| 810 |
| — |
|
| — |
| 2 |
|
| 810 |
|
Legal modification |
| 3 |
|
| 49 |
| — |
|
| — |
| 3 |
|
| 49 |
|
Total residential TDRs |
| 7 |
|
| 1,238 |
| — |
|
| — |
| 7 |
|
| 1,238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total troubled debt restructurings |
| 7 |
| $ | 1,238 |
| — |
| $ | — |
| 7 |
| $ | 1,238 |
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Troubled Debt |
| Troubled Debt |
|
|
|
|
|
| ||||||
|
| Restructurings |
| Restructurings |
| Total |
| |||||||||
|
| Performing to |
| Not Performing to |
| Troubled Debt |
| |||||||||
|
| Modified Terms |
| Modified Terms |
| Restructurings |
| |||||||||
|
| Number of |
| Recorded |
| Number of |
| Recorded |
| Number of |
| Recorded |
| |||
June 30, 2018 (dollars in thousands) |
| Loans |
| Investment |
| Loans |
| Investment |
| Loans |
| Investment |
| |||
Residential real estate loans (including home equity loans): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest only payments |
| 1 |
| $ | 1,204 |
| — |
| $ | — |
| 1 |
| $ | 1,204 |
|
Rate reduction |
| 2 |
|
| 474 |
| — |
|
| — |
| 2 |
| $ | 474 |
|
Principal deferral |
| 3 |
|
| 2,002 |
| 1 |
|
| 170 |
| 4 |
|
| 2,172 |
|
Legal modification |
| 9 |
|
| 273 |
| 1 |
|
| 46 |
| 10 |
|
| 319 |
|
Total residential TDRs |
| 15 |
|
| 3,953 |
| 2 |
|
| 216 |
| 17 |
|
| 4,169 |
|
Commercial related and construction/land development loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal deferral |
| 4 |
|
| 870 |
| 1 |
|
| 75 |
| 5 |
|
| 945 |
|
Total commercial TDRs |
| 4 |
|
| 870 |
| 1 |
|
| 75 |
| 5 |
|
| 945 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal deferral |
| 1 |
|
| 58 |
| — |
|
| — |
| 1 |
|
| 58 |
|
Legal modification |
| — |
|
| — |
| 1 |
|
| 43 |
| 1 |
|
| 43 |
|
Total consumer TDRs |
| 1 |
|
| 58 |
| 1 |
|
| 43 |
| 2 |
|
| 101 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total troubled debt restructurings |
| 20 |
| $ | 4,881 |
| 4 |
| $ | 334 |
| 24 |
| $ | 5,215 |
|
The tables above are inclusive of loans that were TDRs at the end of previous periods and were re-modified, e.g., a maturity date extension during the current period.
As of June 30, 2019 and 2018, 24% and 2017, 94% and 100% of the Bank’s TDRs that occurred during the first six months of 20182019 and 20172018 were performing according to their modified terms. The Bank provided approximately $539,000$1.0 million and $65,000$539,000 in specific reserve allocations to clients whose loan terms were modified in TDRs during the first six months of 20182019 and 2017.2018.
There was no significant change between the pre and post modification loan balances for the six months ending June 30, 20182019 and 2017.2018.
33
The following table presents loans by class modified as troubled debt restructurings within the previous 12 months of June 30, 20182019 and 20172018 and for which there was a payment default during the three and/or six months ended June 30, 20182019 and 2017.2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
| Three Months Ended |
| Six Months Ended |
|
| Three Months Ended |
| Six Months Ended |
| ||||||||||||||||||||||||||||||||
|
| June 30, |
| June 30, |
|
| June 30, |
| June 30, |
| ||||||||||||||||||||||||||||||||
|
| 2018 |
| 2017 |
| 2018 |
| 2017 |
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||||||||||||||||||||||
|
|
|
| Recorded |
| Number of |
| Recorded |
| Number of |
| Recorded |
| Number of |
| Recorded |
|
|
|
| Recorded |
| Number of |
| Recorded |
| Number of |
| Recorded |
| Number of |
| Recorded |
| ||||||||
(dollars in thousands) |
| Loans |
| Investment |
| Loans |
| Investment |
| Loans |
| Investment |
| Loans |
| Investment |
|
| Loans |
| Investment |
| Loans |
| Investment |
| Loans |
| Investment |
| Loans |
| Investment |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
| 2 |
| $ | 215 |
| — |
| $ | — |
| 2 |
| $ | 215 |
| — |
| $ | — |
|
| 3 |
| $ | 211 |
| 2 |
| $ | 215 |
| 3 |
| $ | 211 |
| 2 |
| $ | 215 |
|
Commercial real estate |
| — |
|
| — |
| — |
|
| — |
| 1 |
|
| 566 |
| — |
|
| — |
| |||||||||||||||||||||
Commercial & industrial |
| 1 |
|
| 75 |
| — |
|
| — |
| 1 |
|
| 75 |
| — |
|
| — |
|
| 2 |
|
| 4,426 |
| 1 |
|
| 75 |
| 2 |
|
| 4,426 |
| 1 |
|
| 75 |
|
Home equity |
| — |
|
| — |
| — |
|
| — |
| 1 |
|
| 6 |
| — |
|
| — |
| |||||||||||||||||||||
Consumer |
| 1 |
|
| 43 |
| — |
|
| — |
| 1 |
|
| 43 |
| — |
|
| — |
|
| — |
|
| — |
| 1 |
|
| 43 |
| — |
|
| — |
| 1 |
|
| 43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
| 4 |
| $ | 333 |
| — |
| $ | — |
| 4 |
| $ | 333 |
| — |
| $ | — |
|
| 5 |
| $ | 4,637 |
| 4 |
| $ | 333 |
| 7 |
| $ | 5,209 |
| 4 |
| $ | 333 |
|
35
Foreclosures
The following table presents the carrying amount of foreclosed properties held at June 30, 2018 and December 31, 2017 as a result of the Bank obtaining physical possession of such properties:
|
|
|
|
|
|
|
|
|
|
| ||||
(in thousands) |
| June 30, 2018 |
| December 31, 2017 |
|
| June 30, 2019 |
| December 31, 2018 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Residential real estate |
| $ | — |
| $ | 115 |
|
| $ | 1,095 |
| $ | 160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Total other real estate owned |
| $ | — |
| $ | 115 |
|
| $ | 1,095 |
| $ | 160 |
|
The following table presents the recorded investment in consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process according to local requirements of the applicable jurisdictionjurisdiction:
|
|
|
|
|
|
|
|
(in thousands) |
| June 30, 2019 |
| December 31, 2018 |
| ||
|
|
|
|
|
|
|
|
Recorded investment in consumer residential real estate mortgage loans in the process of foreclosure* |
| $ | 10,081 |
| $ | 3,293 |
|
*Includes $7 million of reverse mortgage loans held for sale as of June 30, 20182019 and Decembersold on July 31, 2017:2019.
|
|
|
|
|
|
|
|
(in thousands) |
| June 30, 2018 |
| December 31, 2017 |
| ||
|
|
|
|
|
|
|
|
Recorded investment in consumer residential real estate mortgage loans in the process of foreclosure |
| $ | 1,455 |
| $ | 1,392 |
|
34
Easy Advances
The Company’s TRS segment offered its EA product during the first two months of 20182019 and 2017.2018. The Company based its estimated provision for EAloan losses of EAs on the current yearyear’s EA delinquency information and the prior year IRS funding patterns.year’s tax refund payment patterns subsequent to the first quarter. Each year, all unpaid EAs are charged-offcharged off by the end of the second quarter.June 30th.
Information regarding EAs follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
|
| Six Months Ended | |||||||||||
|
| June 30, |
|
| June 30, | |||||||||||
(in thousands) |
| 2019 |
| 2018 |
|
| 2019 |
|
| 2018 |
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Easy Advances originated |
| $ | — |
| $ | — |
|
| $ | 388,970 |
|
| $ | 430,210 |
|
|
Net charge to the Provision for Easy Advances |
|
| 39 |
|
| (881) |
|
|
| 13,420 |
|
|
| 12,396 |
|
|
Provision to total Easy Advances originated |
|
| NA |
|
| NA |
|
|
| 3.45 | % |
|
| 2.88 | % |
|
Easy Advances net charge-offs* |
| $ | 13,420 |
| $ | 8,691 |
|
| $ | 13,420 |
|
| $ | 12,396 |
|
|
Easy Advances net charge-offs to total Easy Advances originated* |
|
| NA |
|
| NA |
|
|
| 3.45 | % |
|
| 2.88 | % |
|
*The Company amended its charge-off policy for EAs during the second half of 2018 to charge-off EAs at 111 days past due instead of 60 days past due.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
|
| Six Months Ended |
|
| ||||||||
|
| June 30, |
|
| June 30, |
|
| ||||||||
(in thousands) |
| 2018 |
| 2017 |
|
| 2018 |
| 2017 |
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Easy Advances originated |
| $ | — |
| $ | — |
|
| $ | 430,210 |
| $ | 328,519 |
|
|
Net Charge (Credit) to the Provision for Easy Advances |
|
| (881) |
|
| (721) |
|
|
| 12,396 |
|
| 7,880 |
|
|
Provision to total Easy Advances originated |
|
| NA |
|
| NA |
|
|
| 2.88 | % |
| 2.40 | % |
|
Easy Advances net charge-offs |
| $ | 8,691 |
| $ | 7,020 |
|
| $ | 12,396 |
| $ | 7,880 |
|
|
Easy Advances net charge-offs to total Easy Advances originated |
|
| NA |
|
| NA |
|
|
| 2.88 | % |
| 2.40 | % |
|
36
NA - Not applicableTable of Contents
5. DEPOSITS
The following table presents endingcomposition of the deposit balances at June 30, 2018 and December 31, 2017:portfolio follows:
|
|
|
|
|
|
|
|
|
|
| ||||
(in thousands) |
| June 30, 2018 |
| December 31, 2017 |
|
| June 30, 2019 |
| December 31, 2018 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core Bank: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand |
| $ | 933,792 |
| $ | 944,812 |
|
| $ | 906,179 |
| $ | 937,402 |
|
Money market accounts |
|
| 615,731 |
|
| 546,998 |
|
|
| 727,718 |
|
| 717,954 |
|
Savings |
|
| 189,121 |
|
| 182,800 |
|
|
| 177,421 |
|
| 187,868 |
|
Individual retirement accounts(1) |
|
| 51,549 |
|
| 47,982 |
|
|
| 50,970 |
|
| 53,524 |
|
Time deposits, $250 and over(1) |
|
| 81,638 |
|
| 77,891 |
|
|
| 93,713 |
|
| 84,104 |
|
Other certificates of deposit(1) |
|
| 223,106 |
|
| 189,661 |
|
|
| 246,392 |
|
| 239,324 |
|
Reciprocal money market and time deposits(1)(2) |
|
| 283,229 |
|
| 373,242 |
|
|
| 192,792 |
|
| 217,153 |
|
Brokered deposits(1) |
|
| 32,878 |
|
| 46,089 |
|
|
| 159,615 |
|
| 9,394 |
|
Total Core Bank interest-bearing deposits |
|
| 2,411,044 |
|
| 2,409,475 |
|
|
| 2,554,800 |
|
| 2,446,723 |
|
Total Core Bank noninterest-bearing deposits |
|
| 1,003,443 |
|
| 988,537 |
|
|
| 937,487 |
|
| 971,422 |
|
Total Core Bank deposits |
|
| 3,414,487 |
|
| 3,398,012 |
|
|
| 3,492,287 |
|
| 3,418,145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Republic Processing Group ("RPG"): |
|
|
|
|
|
|
| |||||||
Republic Processing Group: |
|
|
|
|
|
|
| |||||||
Money market accounts |
|
| 1,143 |
|
| 1,641 |
|
|
| 2,327 |
|
| 5,453 |
|
Total RPG interest-bearing deposits |
|
| 1,143 |
|
| 1,641 |
|
|
| 2,327 |
|
| 5,453 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brokered prepaid card deposits |
|
| 5,637 |
|
| 1,509 |
|
|
| 10,854 |
|
| 4,350 |
|
Other noninterest-bearing deposits |
|
| 52,102 |
|
| 31,996 |
|
|
| 55,452 |
|
| 28,197 |
|
Total RPG noninterest-bearing deposits |
|
| 57,739 |
|
| 33,505 |
|
|
| 66,306 |
|
| 32,547 |
|
Total RPG deposits |
|
| 58,882 |
|
| 35,146 |
|
|
| 68,633 |
|
| 38,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits held for assumption in connection with sale of banking centers(3) |
|
| 152,954 |
|
| — |
| |||||||
|
|
|
|
|
|
|
| |||||||
Total deposits |
| $ | 3,473,369 |
| $ | 3,433,158 |
|
| $ | 3,713,874 |
| $ | 3,456,145 |
|
(1) |
|
(2) | Prior to June 2018, reciprocal deposits were classified as “brokered deposits.” The Economic Growth, Regulatory Relief, and Consumer Protection Act, enacted in May 2018, provides that most reciprocal deposits are no longer classified as brokered deposits if the Bank meets certain regulatory criteria. |
(3) | See Footnote 18 “Subsequent Event” in this section of the filing. |
3537
6. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND OTHER SHORT-TERM BORROWINGS
Securities sold under agreements to repurchase consist of short-term excess funds from correspondent banks, repurchase agreements and overnight liabilities to deposit clients arising from the Bank’s treasury management program. While comparable to deposits in their transactional nature, these overnight liabilities to clients are in the form of repurchase agreements. Repurchase agreements collateralized by securities are treated as financings; accordingly, the securities involved with the agreements are recorded as assets and are held by a safekeeping agent and the obligations to repurchase the securities are reflected as liabilities. Should the fair value of currently pledged securities fall below the associated repurchase agreements, the Bank would be required to pledge additional securities. To mitigate the risk of under collateralization, the Bank typically pledges at least two percent more in securities than the associated repurchase agreements. All such securities are under the Bank’s control.
At June 30, 20182019 and December 31, 2017,2018, all securities sold under agreements to repurchase had overnight maturities. The following tables present additionalAdditional information regarding securities sold under agreements to repurchase:repurchase follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
(dollars in thousands) |
| June 30, 2018 |
|
| December 31, 2017 |
|
|
| June 30, 2019 |
|
| December 31, 2018 |
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Outstanding balance at end of period |
| $ | 175,291 |
| $ | 204,021 |
|
| $ | 226,002 |
| $ | 182,990 |
| ||||||
Weighted average interest rate at end of period |
|
| 0.58 | % |
|
| 0.31 | % |
|
|
| 0.50 | % |
|
| 0.83 | % |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Fair value of securities pledged: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
U.S. Treasury securities and U.S. Government agencies |
| $ | 206,570 |
|
| $ | 71,824 |
|
| $ | 109,716 |
|
| $ | 110,854 |
| ||||
Mortgage backed securities - residential |
|
| 16,904 |
|
|
| 83,452 |
|
|
| 83,893 |
|
|
| 84,657 |
| ||||
Collateralized mortgage obligations |
|
| 9,352 |
|
|
| 84,693 |
|
|
| 59,049 |
|
|
| 10,136 |
| ||||
Total securities pledged |
| $ | 232,826 |
| $ | 239,969 |
|
| $ | 252,658 |
| $ | 205,647 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
|
| Six Months Ended |
|
|
| ||||||||||
|
| June 30, |
|
| June 30, |
|
|
| ||||||||||
(dollars in thousands) |
| 2018 |
|
| 2017 |
|
| 2018 |
| 2017 |
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average outstanding balance during the period |
| $ | 178,063 |
|
| $ | 179,594 |
|
| $ | 217,532 |
|
| $ | 198,896 |
|
|
|
Average interest rate during the period |
|
| 0.50 | % |
|
| 0.33 | % |
|
| 0.40 | % |
|
| 0.17 | % |
|
|
Maximum outstanding at any month end during the period |
| $ | 175,291 |
|
| $ | 156,339 |
|
| $ | 215,281 |
|
| $ | 183,709 |
|
|
|
7.FEDERAL HOME LOAN BANK ADVANCES
At June 30, 2018 and December 31, 2017, FHLB advances were as follows:
|
|
|
|
|
|
|
|
(dollars in thousands) |
| June 30, 2018 |
| December 31, 2017 |
| ||
|
|
|
|
|
|
|
|
Overnight advances |
| $ | 500,000 |
| $ | 330,000 |
|
Variable interest rate advance indexed to 3-Month LIBOR plus 0.14% |
|
| 10,000 |
|
| 10,000 |
|
Fixed interest rate advances |
|
| 350,000 |
|
| 397,500 |
|
Total FHLB advances |
| $ | 860,000 |
| $ | 737,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
|
| Six Months Ended |
|
|
| ||||||||||
|
| June 30, |
|
| June 30, |
|
|
| ||||||||||
(dollars in thousands) |
| 2019 |
|
| 2018 |
|
| 2019 |
| 2018 |
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average outstanding balance during the period |
| $ | 220,189 |
|
| $ | 178,063 |
|
| $ | 225,864 |
|
| $ | 217,532 |
|
|
|
Average interest rate during the period |
|
| 0.60 | % |
|
| 0.50 | % |
|
| 0.67 | % |
|
| 0.40 | % |
|
|
Maximum outstanding at any month end during the period |
| $ | 226,002 |
|
| $ | 175,291 |
|
| $ | 226,002 |
|
| $ | 215,281 |
|
|
|
3638
7.RIGHT-OF-USE ASSETS AND OPERATNG LEASE LIABILITIES
The Company adopted ASU 2016-02 Leases (Topic 842), effective January 1, 2019. The adoption of this ASU did not have a meaningful impact on the Company’s net income, earnings per share, return on average assets, or return on average equity for the three and six months ended June 30, 2019.
ASU 2016-02 requires the Company to record on its balance sheet the assets and liabilities that arise from leases. The Company is therefore required to record as operating lease liabilities the present value of its required minimum lease payments plus any amounts probable of being owed under a residual value guarantee. Offsetting these operating lease liabilities, the Company records right-of-use assets for the underlying leased property. Prior to January 1, 2019, operating leases were not recorded on a lessee’s balance sheet in this manner.
As permitted by ASU 2018-11, the Company adopted ASU 2016-02 with a cumulative-effect adjustment as of January 1, 2019. Additionally, the Company elected the following list of practical expedients upon adoption of and as permitted by ASU 2016-02:
· | Concerning lease classification, the Company elected not to reassess the lease classification for any expired or existing leases accounted for in accordance with ASC Topic 840. |
· | Concerning lease identification, the Company elected not to reassess whether any expired or existing contracts, not previously classified as a lease, are, or contain, leases. |
· | Concerning initial direct costs, the Company elected not to reassess initial direct costs for any existing leases. |
· | The Company elected to use hindsight in determining the lease term, whether or not to purchase the underlying leased asset, and in assessing impairment in right-of-use assets. |
· | The Company elected that all short-term leases will not be placed on the balance sheet. Short-term leases include leases that have a lease term of 12 months or less at their commencement date and do not include a purchase option that the Company is reasonably certain to exercise. |
Upon adoption of ASU 2016-02 on January 1, 2019, the Company was under 50 separate and distinct operating lease contracts to lease the land and/or buildings for 38 of its offices, with 15 such operating leases contracted with a related party of the Company. As of January 1, 2019, the Company recorded total operating lease liabilities of $42 million and total right-of-use assets of $40 million, primarily reflecting the present value of its expected remaining lease payments plus any residual guarantees under its operating lease contracts. In order to discount these remaining lease payments and guarantees, the Company made assumptions concerning the expected remaining lease term and the discount rate.
The Company’s assumption regarding the expected remaining lease term included the fixed noncancelable term, plus all periods for which failure to renew the lease imposed a penalty on the Company, plus all periods for which the Company was reasonably certain to exercise a lease renewal option, plus all periods for which the Company was reasonably certain not to exercise a lease termination option. In determining whether it was reasonably certain to exercise a lease renewal or termination option, the Company considered its overall strategic plan and all economic and environmental circumstances connected to the leased property. Expected remaining lease terms upon adoption of ASU 2016-02 ranged from 0.75 to 18.51 years, with a weighted average remaining term of 8.60 years.
The Company employed the interest rate curve published by the FHLB of Cincinnati for the FHLB’s collateralized term borrowings as of January 1, 2019 to discount its operating lease payments and guarantees, matching expected lease term to borrowing term. Discount rates employed upon adoption of ASU 2016-02 ranged from 2.94% to 3.70%, with a weighted average rate of 3.48%.
As of June 30, 2019, payments on 25 of the Company’s operating leases were considered variable because such payments were adjustable based on periodic changes in the Consumer Price Index.
Prior to the release of these financial statements, the Company had executed one lease contract that had not commenced for one of its banking centers. The estimated operating lease liability and offsetting right-of-use asset to be recorded for this lease totaled approximately $493,000.
39
The following table presents information concerning the Company’s operating lease expense recorded as a noninterest expense within the category “Occupancy and equipment, net” for the three and six months ended June 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
|
| Six Months Ended | ||||
|
| June 30, |
|
| June 30, | ||||
(dollars in thousands) |
| 2019 |
|
| 2019 | ||||
|
|
|
|
|
|
|
|
|
|
Operating lease expense: |
|
|
|
|
|
|
|
|
|
Related Party: |
|
|
|
|
|
|
|
|
|
Variable lease expense |
| $ | 1,156 |
|
|
| $ | 2,314 |
|
Fixed lease expense |
|
| 10 |
|
|
|
| 18 |
|
Third Party: |
|
|
|
|
|
|
|
|
|
Variable lease expense |
|
| 211 |
|
|
|
| 435 |
|
Fixed lease expense |
|
| 384 |
|
|
|
| 745 |
|
Short-term lease expense |
|
| 12 |
|
|
|
| 26 |
|
Total operating lease expense |
| $ | 1,773 |
|
|
| $ | 3,538 |
|
|
|
|
|
|
|
|
|
|
|
Other information concerning operating leases: |
|
|
|
|
|
|
|
|
|
Cash paid for amounts included in the measurement of operating lease liabilities |
| $ | 1,794 |
|
|
| $ | 3,577 |
|
Short-term lease payments not included in the measurement of lease liabilities |
|
| 12 |
|
|
|
| 26 |
|
The following table presents the weighted average remaining term and weighted average discount rate for the Company’s non-short-term operating leases as of June 30, 2019:
June 30, 2019 | ||||
Weighted average remaining term in years | 8.30 | |||
Weighted average discount rate | 3.48 | % |
The following table presents a maturity schedule of the Company’s operating lease liabilities based on undiscounted cash flows, and a reconciliation of those undiscounted cash flows to the operating lease liabilities recognized on the Company’s balance sheet as of June 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
Year (in thousands) |
| Related Party |
| Third Party |
| Total |
| |||
|
|
|
|
|
|
|
|
|
|
|
Remainder of 2019 |
| $ | 2,314 |
| $ | 1,274 |
| $ | 3,588 |
|
2020 |
|
| 4,585 |
|
| 2,513 |
|
| 7,098 |
|
2021 |
|
| 4,171 |
|
| 2,294 |
|
| 6,465 |
|
2022 |
|
| 3,310 |
|
| 1,888 |
|
| 5,198 |
|
2023 |
|
| 3,310 |
|
| 1,363 |
|
| 4,673 |
|
Thereafter |
|
| 15,910 |
|
| 2,572 |
|
| 18,482 |
|
Total undiscounted cash flows |
| $ | 33,600 |
| $ | 11,904 |
| $ | 45,504 |
|
Discount applied to cash flows |
|
| (5,029) |
|
| (1,623) |
|
| (6,652) |
|
Total discounted cash flows reported as operating lease liabilities |
| $ | 28,571 |
| $ | 10,281 |
| $ | 38,852 |
|
40
8.FEDERAL HOME LOAN BANK ADVANCES
FHLB advances were as follows:
|
|
|
|
|
|
|
|
(dollars in thousands) |
| June 30, 2019 |
| December 31, 2018 |
| ||
|
|
|
|
|
|
|
|
Overnight advances |
| $ | 670,000 |
| $ | 510,000 |
|
Variable interest rate advance indexed to 3-Month LIBOR plus 0.14% |
|
| 10,000 |
|
| 10,000 |
|
Fixed interest rate advances |
|
| 235,000 |
|
| 290,000 |
|
Total FHLB advances |
| $ | 915,000 |
| $ | 810,000 |
|
Each FHLB advance is payable at its maturity date, with a prepayment penalty for fixed rate advances that are paid off earlier than maturity. FHLB advances are collateralized by a blanket pledge of eligible real estate loans. At June 30, 20182019 and December 31, 2017,2018, Republic had available borrowing capacity of $209$502 million and $378$254 million, respectively, from the FHLB. In addition to its borrowing capacity with the FHLB, Republic also had unsecured lines of credit totaling $125 million and $125 million available through various other financial institutions as of June 30, 20182019 and December 31, 2017.2018.
Aggregate future principal payments on FHLB advances based on contractual maturity and the weighted average cost of such advances are detailed below:
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
| Weighted |
|
|
|
| Weighted |
| ||
|
|
|
| Average |
|
|
|
| Average |
| ||
Year (dollars in thousands) |
| Principal |
| Rate |
|
| Principal |
| Rate |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
2018 (Overnight) |
| $ | 500,000 |
| 1.92 | % | ||||||
2018 (Term) |
|
| 80,000 |
| 1.70 |
| ||||||
2019 |
|
| 100,000 |
| 1.80 |
| ||||||
Remainder of 2019 (Overnight) |
| $ | 670,000 |
| 2.46 | % | ||||||
Remainder of 2019 (Term) |
|
| 55,000 |
| 1.97 |
| ||||||
2020 |
|
| 120,000 |
| 1.81 |
|
|
| 120,000 |
| 1.81 |
|
2021 |
|
| 30,000 |
| 1.93 |
|
|
| 30,000 |
| 1.93 |
|
2022 |
|
| 20,000 |
| 2.12 |
|
|
| 20,000 |
| 2.12 |
|
2023 |
|
| 10,000 |
| 2.14 |
|
|
| 20,000 |
| 2.56 |
|
Thereafter |
|
| — |
| — |
|
|
| — |
| — |
|
Total |
| $ | 860,000 |
| 1.88 | % |
| $ | 915,000 |
| 2.32 | % |
Due to their short term,nature, the Bank considers average balance information more meaningful than period-end balances for its overnight borrowings from the FHLB. Information regarding overnight FHLB advances follows:
|
|
|
|
|
|
|
|
|
(dollars in thousands) |
| June 30, 2018 |
|
| December 31, 2017 |
| ||
|
|
|
|
|
|
|
|
|
Outstanding balance at end of period |
| $ | 500,000 |
|
| $ | 330,000 |
|
Weighted average interest rate at end of period |
|
| 1.92 | % |
|
| 1.42 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
| Three Months Ended |
| Six Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| |||||||||||||||||||||
|
| June 30, |
|
| June 30, |
|
| June 30, |
|
| June 30, |
| ||||||||||||||||||||
(dollars in thousands) |
| 2018 |
|
| 2017 |
|
| 2018 |
|
| 2017 |
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Average outstanding balance during the period |
| $ | 226,264 |
| $ | 114,121 |
| $ | 185,801 |
| $ | 111,740 |
|
| $ | 448,077 |
|
| $ | 226,264 |
|
| $ | 331,768 |
|
| $ | 185,801 |
| |||
Average interest rate during the period |
|
| 1.88 | % |
|
| 1.06 | % |
| 1.70 | % |
| 0.88 | % |
|
| 2.50 | % |
|
| 1.88 | % |
|
| 2.49 | % |
| 1.70 | % | |||
Maximum outstanding at any month end during the period |
| $ | 500,000 |
| $ | 625,000 |
| $ | 560,000 |
| $ | 625,000 |
|
| $ | 785,000 |
|
| $ | 500,000 |
|
| $ | 785,000 |
|
| $ | 560,000 |
|
The following table illustrates real estate loans pledged to collateralize advances and letters of credit with the FHLB:
|
|
|
|
|
|
|
|
|
|
| ||||
(in thousands) |
| June 30, 2018 |
| December 31, 2017 |
|
| June 30, 2019 |
| December 31, 2018 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First lien, single family residential real estate |
| $ | 1,130,464 |
| $ | 1,123,402 |
|
| $ | 1,161,088 |
| $ | 1,129,588 |
|
Home equity lines of credit |
|
| 313,029 |
|
| 320,649 |
|
|
| 297,862 |
|
| 311,419 |
|
3741
8.9. OFF BALANCE SHEET RISKS, COMMITMENTS AND CONTINGENT LIABILITIES
The Company, in the normal course of business, is party to financial instruments with off balance sheet risk. These financial instruments primarily include commitments to extend credit and standby letters of credit. The contract or notional amounts of these instruments reflect the potential future obligations of the Company pursuant to those financial instruments. Creditworthiness for all instruments is evaluated on a case-by-case basis in accordance with the Company’s credit policies. Collateral from the client may be required based on the Company’s credit evaluation of the client and may include business assets of commercial clients, as well as personal property and real estate of individual clients or guarantors.
The Company also extends binding commitments to clients and prospective clients. Such commitments assure a borrower of financing for a specified period of time at a specified rate. Additionally, the Company makes binding purchase commitments to third-party loan correspondent originators. These commitments assure that the Company will purchase a loan from such correspondent originators at a specific price for a specific period of time. The risk to the Company under such loan commitments is limited by the terms of the contracts. For example, the Company may not be obligated to advance funds if the client’s financial condition deteriorates or if the client fails to meet specific covenants.
An approved but unfunded loan commitment represents a potential credit risk and a liquidity risk, since the Company’s client(s) may demand immediate cash that would require funding. In addition, unfunded loan commitments represent interest rate risk as market interest rates may rise above the rate committed to the Company’s client. Since a portion of these loan commitments normally expire unused, the total amount of outstanding commitments at any point in time may not require future funding.
The following table presents the Company’s commitments, exclusive of Mortgage Banking loan commitments, for each period ended:
|
|
|
|
|
|
|
|
|
|
| ||||
(in thousands) |
| June 30, 2018 |
| December 31, 2017 |
|
| June 30, 2019 |
| December 31, 2018 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unused warehouse lines of credit |
| $ | 456,159 |
| $ | 525,328 |
|
| $ | 393,663 |
| $ | 591,305 |
|
Unused home equity lines of credit |
|
| 378,796 |
|
| 367,887 |
|
|
| 383,772 |
|
| 377,277 |
|
Unused loan commitments - other |
|
| 646,824 |
|
| 598,002 |
|
|
| 758,439 |
|
| 720,645 |
|
Standby letters of credit |
|
| 12,813 |
|
| 12,643 |
|
|
| 11,766 |
|
| 10,642 |
|
FHLB letter of credit |
|
| 10,000 |
|
| 10,000 |
|
|
| 10,000 |
|
| 10,000 |
|
Total commitments |
| $ | 1,504,592 |
| $ | 1,513,860 |
|
| $ | 1,557,640 |
| $ | 1,709,869 |
|
Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a client to a third party. The terms and risk of loss involved in issuing standby letters of credit are similar to those involved in issuing loan commitments and extending credit. In addition to credit risk, the Company also has liquidity risk associated with standby letters of credit because funding for these obligations could be required immediately. The Company does not deem this risk to be material.
3842
9.10. FAIR VALUE
Fair value represents the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
The Bank used the following methods and significant assumptions to estimate the fair value:value of each type of financial instrument:
Available-for-sale debt securities: Except for the Bank’s private label mortgage backed security and its TRUP investment, the fair value of available-for-sale debt securities is typically determined by matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).
The Bank’s private label mortgage backed security remains illiquid, and as such, the Bank classifies this security as a Level 3 security in accordance with ASC Topic 820, Fair Value Measurement. Based on this determination, the Bank utilized an income valuation model (present value model) approach in determining the fair value of this security.
See in this section of the filing under Footnote 2 “Investment Securities” for additional discussion regarding the Bank’s private label mortgage backed security.
The Company acquired its TRUP investment in 2015 and considered the most recent bid price for the same instrument to approximate market value at June 30, 2018.2019. The Company’s TRUP investment is considered highly illiquid and also valued using Level 3 inputs, as the most recent bid price for this instrument is not always considered generally observable.
Equity securities with readily determinable fair value: Quoted market prices in an active market are available for the Bank’s Community Reinvestment Act (“CRA”)CRA mutual fund investment and fall within Level 1 of the fair value hierarchy.
The fair value of the Company’s Freddie Mac preferred stock is determined by matrix pricing, as described above (Level 2 inputs).
Mortgage loans held for sale, at fair value: The fair value of mortgage loans held for sale is determined using quoted secondary market prices. Mortgage loans held for sale are classified as Level 2 in the fair value hierarchy.
Consumer loans held for investment/sale, at fair value: From the first quarter of 2016 through the first quarter of 2018, the Bank continued to pilotpiloted a consumer installment-loan product across the United States using a third-party marketer/service. As part of the program, the Bank sold 100% of the balances generated through the program back to the third-party marketer/servicer approximately 21 days after origination. The Bank carried all unsold loans under the program as “held for sale” on the its balance sheet. At the initiation of this program in 2016, the Bank elected to carry these loans at fair value under a fair-value option, with the portfolio thereafter marked to market on a monthly basis.
During the second quarter of 2018, the Bank and its third-party marketer/service provider suspended the origination of any new loans, and the subsequent sale of all recently-originated loans under this program, while the two parties evaluate the future offering of this product due to changes in the applicable state law impacting the product. Concurrent with the suspension of this program, the Bank reclassified approximately $2.2 million of these loans from “heldheld for sale”sale on the balance sheet to “heldinto the held for investment”investment category and recorded a $427,000 charge to its mark-to-market fair value adjustment forrevalued these loans.loans accordingly.
Through the first quarter of 2018, theThe fair value for these loans was based on contractual sales terms, which are classified as Level 3 inputs. As of June 30, 2018, the fair value of these loans wasis based on the discounted cash flows of the underlying loans, which are also classified as Level 3 inputs.
3943
Mortgage Banking derivatives: Mortgage Banking derivatives used in the ordinary course of business primarily consist of mandatory forward sales contracts (“forward contracts”) and interest rate lock loan commitments. The fair value of the Bank’s derivative instruments is primarily measured by obtaining pricing from broker-dealers recognized to be market participants. The pricing is derived from market observable inputs that can generally be verified and do not typically involve significant judgment by the Bank. Forward contracts and rate-lock loan commitments are classified as Level 2 in the fair value hierarchy.
Interest rate swap agreements: Interest rate swaps are recorded at fair value on a recurring basis. The Company values its interest rate swaps using a third-party valuation service and classifies such valuations as Level 2. Valuations of these interest rate swaps are also received from the relevant dealer counterparty and validated against the Company’s calculations. The Company has considered counterparty credit risk in the valuation of its interest rate swap assets and has considered its own credit risk in the valuation of its interest rate swap liabilities.
Impaired loans: Collateral-dependent impaired loans generally reflect partial charge-downs to their respective fair value, which is commonly based on recent real estate appraisals or broker price opinions (“BPOs”).BPOs. These appraisals or BPOs may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the process by the independent experts to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Collateral-dependent loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.
Premises carried at fair value: Premises and equipment are accounted for at the lower of cost less accumulated depreciation or fair value less estimated costs to sell. The fair value of Bank premises is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches, including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments may be significant and typically result in a Level 3 classification of the inputs for determining fair value.
Other real estate owned: Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals or BPOs. These appraisals or BPOs may utilize a single approach or a combination of approaches, including comparable sales and the income approach. Adjustments are routinely made in the process by the independent experts to adjust for differences between the comparable sales and income data available. Such adjustments may be significant and typically result in a Level 3 classification of the inputs for determining fair value.
Appraisals for collateral-dependent impaired loans, impaired premises and other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Bank. Once the appraisal is received, a member of the Bank’s Credit Administration Department reviews the assumptions and approaches utilized in the appraisal, as well as the overall resulting fair value in comparison with independent data sources, such as recent market data or industry-wide statistics. On at least an annual basis, the Bank performs a back test of collateral appraisals by comparing actual selling prices on recent collateral sales to the most recent appraisal of such collateral. Back tests are performed for each collateral class, e.g., residential real estate or commercial real estate, and may lead to additional adjustments to the value of unliquidated collateral of similar class.
Mortgage servicing rights: On at least a quarterly basis, MSRs are evaluated for impairment based upon the fair value of the MSRs as compared to carrying amount. If the carrying amount of an individual tranche exceeds fair value, impairment is recorded, and the respective individual tranche is carried at fair value. If the carrying amount of an individual tranche does not exceed fair value, impairment is reversed if previously recognized and the carrying value of the individual tranche is based on the amortization method. The valuation model utilizes assumptions that market participants would use in estimating future net servicing income and can generally be validated against available market data (Level 2). There were no MSR tranches carried at fair value at June 30, 20182019 and December 31, 2017.2018.
4044
Assets and liabilities measured at fair value on a recurring basis, including financial assets and liabilities for which the Bank has elected the fair value option, are summarized below:
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| ||
|
| Fair Value Measurements at |
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| Fair Value Measurements at |
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| ||||||||||||||||
|
| June 30, 2018 Using: |
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|
| June 30, 2019 Using: |
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| ||||||||||||||||
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| Quoted Prices in |
| Significant |
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| Quoted Prices in |
| Significant |
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| ||||||
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| Active Markets |
| Other |
| Significant |
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| Active Markets |
| Other |
| Significant |
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| ||||||||
|
| for Identical |
| Observable |
| Unobservable |
| Total |
|
| for Identical |
| Observable |
| Unobservable |
| Total |
| ||||||||
|
| Assets |
| Inputs |
| Inputs |
| Fair |
|
| Assets |
| Inputs |
| Inputs |
| Fair |
| ||||||||
(in thousands) |
| (Level 1) |
| (Level 2) |
| (Level 3) |
| Value |
|
| (Level 1) |
| (Level 2) |
| (Level 3) |
| Value |
| ||||||||
Financial assets: |
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|
Available-for-sale debt securities: |
|
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|
|
|
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|
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|
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|
U.S. Treasury securities and U.S. Government agencies |
| $ | — |
| $ | 225,937 |
| $ | — |
| $ | 225,937 |
|
| $ | — |
| $ | 139,335 |
| $ | — |
| $ | 139,335 |
|
Private label mortgage backed security |
|
| — |
|
| — |
|
| 3,926 |
|
| 3,926 |
|
|
| — |
|
| — |
|
| 3,615 |
|
| 3,615 |
|
Mortgage backed securities - residential |
|
| — |
|
| 93,070 |
|
| — |
|
| 93,070 |
|
|
| — |
|
| 154,192 |
|
| — |
|
| 154,192 |
|
Collateralized mortgage obligations |
|
| — |
|
| 78,883 |
|
| — |
|
| 78,883 |
|
|
| — |
|
| 69,379 |
|
| — |
|
| 69,379 |
|
Corporate bonds |
|
| — |
|
| 10,087 |
|
| — |
|
| 10,087 |
|
|
| — |
|
| 9,835 |
|
| — |
|
| 9,835 |
|
Trust preferred security |
|
| — |
|
| — |
|
| 4,150 |
|
| 4,150 |
|
|
| — |
|
| — |
|
| 4,000 |
|
| 4,000 |
|
Total available-for-sale debt securities |
| $ | — |
| $ | 407,977 |
| $ | 8,076 |
| $ | 416,053 |
|
| $ | — |
| $ | 372,741 |
| $ | 7,615 |
| $ | 380,356 |
|
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|
Equity securities with readily determinable fair value: |
|
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|
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|
|
|
|
|
|
|
| ||
Freddie Mac preferred stock |
| $ | — |
| $ | 389 |
| $ | — |
| $ | 389 |
|
| $ | — |
| $ | 787 |
| $ | — |
| $ | 787 |
|
Community Reinvestment Act mutual fund |
|
| 2,404 |
|
| — |
|
| — |
|
| 2,404 |
|
|
| 2,467 |
|
| — |
|
| — |
|
| 2,467 |
|
Total equity securities with readily determinable fair value |
| $ | 2,404 |
| $ | 389 |
| $ | — |
| $ | 2,793 |
|
| $ | 2,467 |
| $ | 787 |
| $ | — |
| $ | 3,254 |
|
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|
|
|
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|
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|
|
|
|
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|
Mortgage loans held for sale |
| $ | — |
| $ | 12,653 |
| $ | — |
| $ | 12,653 |
|
| $ | — |
| $ | 13,883 |
| $ | — |
| $ | 13,883 |
|
Consumer loans held for investment |
|
| — |
|
| — |
|
| 2,237 |
| 2,237 |
|
|
| — |
|
| — |
|
| 1,369 |
| 1,369 |
| ||
Rate lock loan commitments |
|
| — |
|
| 432 |
|
| — |
|
| 432 |
|
|
| — |
|
| 1,222 |
|
| — |
|
| 1,222 |
|
Interest rate swap agreements |
|
| — |
|
| 2,105 |
|
| — |
|
| 2,105 |
|
|
| — |
|
| 4,645 |
|
| — |
|
| 4,645 |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mandatory forward contracts |
| $ | — |
| $ | 110 |
| $ | — |
| $ | 110 |
|
| $ | — |
| $ | 467 |
| $ | — |
| $ | 467 |
|
Interest rate swap agreements |
|
| — |
|
| 1,885 |
|
| — |
| 1,885 |
|
|
| — |
|
| 4,778 |
|
| — |
| 4,778 |
|
4145
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| Fair Value Measurements at |
|
|
|
| Fair Value Measurements at |
|
|
| ||||||||||||||||
|
| December 31, 2017 Using: |
|
|
|
| December 31, 2018 Using: |
|
|
| ||||||||||||||||
|
| Quoted Prices in |
| Significant |
|
|
|
|
|
|
| Quoted Prices in |
| Significant |
|
|
|
|
|
| ||||||
|
| Active Markets |
| Other |
| Significant |
|
|
|
| Active Markets |
| Other |
| Significant |
|
|
| ||||||||
|
| for Identical |
| Observable |
| Unobservable |
| Total |
|
| for Identical |
| Observable |
| Unobservable |
| Total |
| ||||||||
|
| Assets |
| Inputs |
| Inputs |
| Fair |
|
| Assets |
| Inputs |
| Inputs |
| Fair |
| ||||||||
(in thousands) |
| (Level 1) |
| (Level 2) |
| (Level 3) |
| Value |
|
| (Level 1) |
| (Level 2) |
| (Level 3) |
| Value |
| ||||||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities and U.S. Government agencies |
| $ | — |
| $ | 307,592 |
| $ | — |
| $ | 307,592 |
|
| $ | — |
| $ | 216,873 |
| $ | — |
| $ | 216,873 |
|
Private label mortgage backed security |
|
| — |
|
| — |
|
| 4,449 |
|
| 4,449 |
|
|
| — |
|
| — |
|
| 3,712 |
|
| 3,712 |
|
Mortgage backed securities - residential |
|
| — |
|
| 106,374 |
|
| — |
|
| 106,374 |
|
|
| — |
|
| 169,209 |
|
| — |
|
| 169,209 |
|
Collateralized mortgage obligations |
|
| — |
|
| 87,163 |
|
| — |
|
| 87,163 |
|
|
| — |
|
| 72,811 |
|
| — |
|
| 72,811 |
|
Corporate bonds |
|
| — |
|
| 15,125 |
|
| — |
|
| 15,125 |
|
|
| — |
|
| 9,058 |
|
| — |
|
| 9,058 |
|
Trust preferred security |
|
| — |
|
| — |
|
| 3,600 |
|
| 3,600 |
|
|
| — |
|
| — |
|
| 4,075 |
|
| 4,075 |
|
Total available-for-sale debt securities |
| $ | — |
| $ | 516,254 |
| $ | 8,049 |
| $ | 524,303 |
|
| $ | — |
| $ | 467,951 |
| $ | 7,787 |
| $ | 475,738 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Equity securities with readily determinable fair value: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Freddie Mac preferred stock |
| $ | — |
| $ | 473 |
| $ | — |
| $ | 473 |
|
| $ | — |
| $ | 410 |
| $ | — |
| $ | 410 |
|
Community Reinvestment Act mutual fund |
|
| 2,455 |
|
| — |
|
| — |
|
| 2,455 |
|
|
| 2,396 |
|
| — |
|
| — |
|
| 2,396 |
|
Total equity securities with readily determinable fair value |
| $ | 2,455 |
| $ | 473 |
| $ | — |
| $ | 2,928 |
|
| $ | 2,396 |
| $ | 410 |
| $ | — |
| $ | 2,806 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Mortgage loans held for sale |
| $ | — |
| $ | 5,761 |
| $ | — |
| $ | 5,761 |
|
| $ | — |
| $ | 8,971 |
| $ | — |
| $ | 8,971 |
|
Consumer loans held for sale |
|
| — |
|
| — |
|
| 2,677 |
| 2,677 |
| ||||||||||||||
Consumer loans held for investment |
|
| — |
|
| — |
|
| 1,922 |
| 1,922 |
| ||||||||||||||
Rate lock loan commitments |
|
| — |
|
| 310 |
|
| — |
|
| 310 |
|
|
| — |
|
| 356 |
|
| — |
|
| 356 |
|
Interest rate swap agreements |
|
| — |
|
| 312 |
|
| — |
|
| 312 |
|
|
| — |
|
| 1,264 |
|
| — |
|
| 1,264 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mandatory forward contracts |
| $ | — |
| $ | 9 |
| $ | — |
| $ | 9 |
|
| $ | — |
| $ | 262 |
| $ | — |
| $ | 262 |
|
Interest rate swap agreements |
|
| — |
|
| 403 |
|
| — |
| 403 |
|
|
| — |
|
| 1,149 |
|
| — |
| 1,149 |
|
All transfers between levels are generally recognized at the end of each quarter. There were no transfers into or out of Level 1, 2 or 3 assets during the three and six months ended June 30, 20182019 and 2017.2018.
Private Label Mortgage Backed Security
The following table presents a reconciliation of the Bank’s private label mortgage backed security measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the periods ended June 30, 2018 and 2017::
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
| Three Months Ended |
| Six Months Ended |
|
| Three Months Ended |
| Six Months Ended |
| ||||||||||||||||
|
| June 30, |
| June 30, |
|
| June 30, |
| June 30, |
| ||||||||||||||||
(in thousands) |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period |
| $ | 4,120 |
| $ | 4,682 |
| $ | 4,449 |
| $ | 4,777 |
|
| $ | 3,660 |
| $ | 4,120 |
| $ | 3,712 |
| $ | 4,449 |
|
Total gains or losses included in earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in unrealized gain |
|
| (15) |
|
| 101 |
|
| (17) |
|
| 154 |
|
|
| (2) |
|
| (15) |
|
| (34) |
|
| (17) |
|
Recovery of actual losses previously recorded |
|
| 37 |
|
| — |
|
| 75 |
|
| — |
|
|
| 38 |
|
| 37 |
|
| 75 |
|
| 75 |
|
Principal paydowns |
|
| (216) |
|
| (243) |
|
| (581) |
|
| (391) |
|
|
| (81) |
|
| (216) |
|
| (138) |
|
| (581) |
|
Balance, end of period |
| $ | 3,926 |
| $ | 4,540 |
| $ | 3,926 |
| $ | 4,540 |
|
| $ | 3,615 |
| $ | 3,926 |
| $ | 3,615 |
| $ | 3,926 |
|
The fair value of the Bank’s single private label mortgage backed security is supported by analysis prepared by an independent third party. The third party’s approach to determining fair value involved several steps: 1) detailed collateral analysis of the underlying mortgages, including consideration of geographic location, original loan-to-value and the weighted average FICO score of the borrowers; 2) collateral performance projections for each pool of mortgages underlying the security (probability of default, severity of default, and prepayment probabilities) and 3) discounted cash flow modeling.
The significant unobservable inputs in the fair value measurement of the Bank’s single private label mortgage backed security are prepayment rates, probability of default and loss severity in the event of default. Significant fluctuations in any of those inputs in isolation would result in a significantly different fair value measurement.
.
4246
Quantitative information about recurring Level 3 fair value measurement inputs for the Bank’s single private label mortgage backed security follows:
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|
|
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|
|
|
|
| Fair |
| Valuation |
|
|
|
|
|
| Fair |
| Valuation |
|
|
|
|
| ||
June 30, 2018 (dollars in thousands) |
| Value |
| Technique |
| Unobservable Inputs |
| Range |
| |||||||||||
June 30, 2019 (dollars in thousands) |
| Value |
| Technique |
| Unobservable Inputs |
| Range |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private label mortgage backed security |
| $ | 3,926 |
| Discounted cash flow |
| (1) Constant prepayment rate |
| 5.0% - 6.5% |
|
| $ | 3,615 |
| Discounted cash flow |
| (1) Constant prepayment rate |
| 3.9% - 4.5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (2) Probability of default |
| 1.8% - 8.0% |
|
|
|
|
|
|
| (2) Probability of default |
| 1.8% - 6.1% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3) Loss severity |
| 50% - 85% |
|
|
|
|
|
|
| (3) Loss severity |
| 50% - 75% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fair |
| Valuation |
|
|
|
|
|
| Fair |
| Valuation |
|
|
|
|
| ||
December 31, 2017 (dollars in thousands) |
| Value |
| Technique |
| Unobservable Inputs |
| Range |
| |||||||||||
December 31, 2018 (dollars in thousands) |
| Value |
| Technique |
| Unobservable Inputs |
| Range |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private label mortgage backed security |
| $ | 4,449 |
| Discounted cash flow |
| (1) Constant prepayment rate |
| 3.5% - 6.5% |
|
| $ | 3,712 |
| Discounted cash flow |
| (1) Constant prepayment rate |
| 6.5% - 8.9% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (2) Probability of default |
| 1.8% - 8.0% |
|
|
|
|
|
|
| (2) Probability of default |
| 1.8% - 4.7% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3) Loss severity |
| 60% - 85% |
|
|
|
|
|
|
| (3) Loss severity |
| 50% - 75% |
|
Trust Preferred Security
The following table presents a reconciliation of the Company’s TRUP measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2018 and 2017::
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Six Months Ended |
|
| Three Months Ended |
| Six Months Ended |
| ||||||||||||||||
|
| June 30, |
| June 30, |
|
| June 30, |
| June 30, |
| ||||||||||||||||
(in thousands) |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period |
| $ | 3,900 |
| $ | 3,200 |
| $ | 3,600 |
| $ | 3,200 |
|
| $ | 4,100 |
| $ | 3,900 |
| $ | 4,075 |
| $ | 3,600 |
|
Total gains or losses included in earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount accretion |
|
| 10 |
|
| 11 |
|
| 20 |
|
| 22 |
|
|
| 11 |
|
| 10 |
|
| 21 |
|
| 20 |
|
Net change in unrealized gain |
|
| 240 |
|
| 242 |
|
| 530 |
|
| 231 |
|
|
| (111) |
|
| 240 |
|
| (96) |
|
| 530 |
|
Balance, end of period |
| $ | 4,150 |
| $ | 3,453 |
| $ | 4,150 |
| $ | 3,453 |
|
| $ | 4,000 |
| $ | 4,150 |
| $ | 4,000 |
| $ | 4,150 |
|
The fair value of the Company’s TRUP investment is based on the most recent bid price for this instrument, as provided by a third-party broker.
4347
Mortgage Loans Held for Sale
The Bank has elected the fair value option for mortgage loans held for sale. These loans are intended for sale and the Bank believes that the fair value is the best indicator of the resolution of these loans. Interest income is recorded based on the contractual terms of the loans and in accordance with Bank policy for such instruments. None of these loans were past due 90-days-or-more or on nonaccrual as of June 30, 20182019 and December 31, 2017.2018.
As of June 30, 2018, and December 31, 2017, theThe aggregate fair value, contractual balance, and unrealized gain waswere as follows:
|
|
|
|
|
|
|
|
|
|
| ||||
(in thousands) |
| June 30, 2018 |
| December 31, 2017 |
|
| June 30, 2019 |
| December 31, 2018 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate fair value |
| $ | 12,653 |
| $ | 5,761 |
|
| $ | 13,883 |
| $ | 8,971 |
|
Contractual balance |
|
| 12,417 |
|
| 5,668 |
|
|
| 13,542 |
|
| 8,676 |
|
Unrealized gain |
|
| 236 |
|
| 93 |
|
|
| 341 |
|
| 295 |
|
The total amount of gains and losses from changes in fair value included in earnings for the three and six months ended June 30, 20182019 and 20172018 for mortgage loans held for sale are presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
| Three Months Ended |
| Six Months Ended |
|
| Three Months Ended |
| Six Months Ended |
| ||||||||||||||||
|
| June 30, |
| June 30, |
|
| June 30, |
| June 30, |
| ||||||||||||||||
(in thousands) |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
| $ | 103 |
| $ | 86 |
| $ | 175 |
| $ | 153 |
|
| $ | 170 |
| $ | 103 |
| $ | 272 |
| $ | 175 |
|
Change in fair value |
|
| 152 |
|
| 118 |
|
| 143 |
|
| 111 |
|
|
| 128 |
|
| 152 |
|
| 46 |
|
| 143 |
|
Total included in earnings |
| $ | 255 |
| $ | 204 |
| $ | 318 |
| $ | 264 |
|
| $ | 298 |
| $ | 255 |
| $ | 318 |
| $ | 318 |
|
Consumer Loans Held for Investment/SaleInvestment
Prior to the second quarter of 2018, all consumer installmentRCS carries loans originated through RCS were originated with the intent to sale and carriedits installment loan program at fair value. During the second quarter of 2018, approximately $2 million of these loans were transferred from the held for sale category into the held for investment category and recorded at their fair market value as of the date of transfer. Interest income for these loans is recorded based on the contractual terms of the loan and in accordance with Bank policy for such instruments. None of these loans were past due 90-days-or-more or on nonaccrual as of June 30, 20182019 and December 31, 2017.2018.
A reconciliation of the Company’s consumer loans measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2018 and 2017 is included in Footnote 3 of this section of the filing.
Prior to the second quarter of 2018, the significant unobservable inputs in the fair value measurement of the Bank’s consumer loans were the net contractual premiums and level of loans sold at a discount price. As of June 30, 2018, theThe significant unobservable inputs in the fair value measurement of the Bank’s consumer loans were the constant prepayment rate, probability of default, and loss severity for these loans under a discounted-cash-flow model. Significant fluctuations in any of these inputs in isolation would result in a significantly lower/higher fair value measurement.
44
The following table presents quantitative information about recurring Level 3 fair value measurement inputs for consumer loans as of June 30, 2018 and December 31, 2017:installment loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fair |
| Valuation |
|
|
|
|
| Fair |
| Valuation |
|
|
|
| ||
June 30, 2018 (dollars in thousands) |
| Value |
| Technique |
| Unobservable Inputs |
| Rate | ||||||||||
June 30, 2019 (dollars in thousands) |
| Value |
| Technique |
| Unobservable Inputs |
| Rate | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer loans held for investment |
| $ | 2,237 |
| Discounted Cash Flows |
| (1) Constant prepayment rate |
| 15.0% |
| $ | 1,369 |
| Discounted Cash Flows |
| (1) Constant prepayment rate |
| 15.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (2) Probability of default |
| 45.0% |
|
|
|
|
|
| (2) Probability of default |
| 50.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3) Loss severity |
| 11.5% |
|
|
|
|
|
| (3) Loss severity |
| 25.0 |
|
|
|
|
|
|
|
|
|
|
|
| Fair |
| Valuation |
|
|
|
| |
December 31, 2017 (dollars in thousands) |
| Value |
| Technique |
| Unobservable Inputs |
| Rate | |
|
|
|
|
|
|
|
|
|
|
Consumer loans held for sale |
| $ | 2,677 |
| Contractual Sales Terms |
| (1) Net Premium |
| 0.9% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (2) Discounted Sales |
| 5.0% |
|
|
|
|
|
|
|
|
|
|
|
| Fair |
| Valuation |
|
|
|
| |
December 31, 2018 (dollars in thousands) |
| Value |
| Technique |
| Unobservable Inputs |
| Rate | |
|
|
|
|
|
|
|
|
|
|
Consumer loans held for investment |
| $ | 1,922 |
| Discounted Cash Flows |
| (1) Constant prepayment rate |
| 15.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (2) Probability of default |
| 45.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3) Loss severity |
| 20.0% |
48
As of June 30, 2018 and December 31, 2017, theThe aggregate fair value, contractual balance, and unrealized (loss) gain on consumer loans held for investment/sale,investment, at fair value, were as follows:
|
|
|
|
|
|
|
|
|
|
| ||||
(in thousands) |
| June 30, 2018 |
| December 31, 2017 |
|
| June 30, 2019 |
| December 31, 2018 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate fair value |
| $ | 2,237 |
| $ | 2,677 |
|
| $ | 1,369 |
| $ | 1,922 |
|
Contractual balance |
|
| 2,522 |
|
| 2,535 |
|
|
| 1,580 |
|
| 2,170 |
|
Unrealized (loss) gain |
|
| (285) |
|
| 142 |
|
|
| (211) |
|
| (248) |
|
The total amount of net (losses) gains from changes in fair value included in earnings for the three and six months ended June 30, 2018 and 2017 for consumer loans held for investment/sale,investment, at fair value, are presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
| Three Months Ended |
| Six Months Ended |
|
| Three Months Ended |
| Six Months Ended |
| ||||||||||||||||
|
| June 30, |
| June 30, |
|
| June 30, |
| June 30, |
| ||||||||||||||||
(in thousands) |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
| $ | 152 |
| $ | 322 |
| $ | 328 |
| $ | 508 |
|
| $ | 90 |
| $ | 152 |
| $ | 201 |
| $ | 328 |
|
Change in fair value |
|
| (414) |
|
| (24) |
|
| (427) |
|
| 58 |
|
|
| 19 |
|
| (414) |
|
| 37 |
|
| (427) |
|
Total included in earnings |
| $ | (262) |
| $ | 298 |
| $ | (99) |
| $ | 566 |
|
| $ | 109 |
| $ | (262) |
| $ | 238 |
| $ | (99) |
|
4549
Assets measured at fair value on a non-recurring basis are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| Fair Value Measurements at |
|
|
|
| Fair Value Measurements at |
|
|
| ||||||||||||||||
|
| June 30, 2018 Using: |
|
|
|
| June 30, 2019 Using: |
|
|
| ||||||||||||||||
|
| Quoted Prices in |
| Significant |
|
|
|
|
|
|
| Quoted Prices in |
| Significant |
|
|
|
|
|
| ||||||
|
| Active Markets |
| Other |
| Significant |
|
|
|
| Active Markets |
| Other |
| Significant |
|
|
| ||||||||
|
| for Identical |
| Observable |
| Unobservable |
| Total |
|
| for Identical |
| Observable |
| Unobservable |
| Total |
| ||||||||
|
| Assets |
| Inputs |
| Inputs |
| Fair |
|
| Assets |
| Inputs |
| Inputs |
| Fair |
| ||||||||
(in thousands) |
| (Level 1) |
| (Level 2) |
| (Level 3) |
| Value |
|
| (Level 1) |
| (Level 2) |
| (Level 3) |
| Value |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
| $ | — |
| $ | — |
| $ | 2,857 |
| $ | 2,857 |
|
| $ | — |
| $ | — |
| $ | 3,777 |
| $ | 3,777 |
|
Nonowner occupied |
|
| — |
|
| — |
|
| 1,242 |
|
| 1,242 |
|
|
| — |
|
| — |
|
| 511 |
|
| 511 |
|
Commercial real estate |
|
| — |
|
| — |
|
| 1,315 |
|
| 1,315 |
|
|
| — |
|
| — |
|
| 1,117 |
|
| 1,117 |
|
Commercial & industrial |
|
| — |
|
| — |
|
| 713 |
|
| 713 |
|
|
| — |
|
| — |
|
| 512 |
|
| 512 |
|
Home equity |
|
| — |
|
| — |
|
| 310 |
|
| 310 |
|
|
| — |
|
| — |
|
| 347 |
|
| 347 |
|
Total impaired loans* |
| $ | — |
| $ | — |
| $ | 6,437 |
| $ | 6,437 |
|
| $ | — |
| $ | — |
| $ | 6,264 |
| $ | 6,264 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Premises |
| $ | — |
| $ | — |
| $ | 2,751 |
| $ | 2,751 |
|
| $ | — |
| $ | — |
| $ | 1,552 |
| $ | 1,552 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| Fair Value Measurements at |
|
|
|
| Fair Value Measurements at |
|
|
| ||||||||||||||||
|
| December 31, 2017 Using: |
|
|
|
| December 31, 2018 Using: |
|
|
| ||||||||||||||||
|
| Quoted Prices in |
| Significant |
|
|
|
|
|
|
| Quoted Prices in |
| Significant |
|
|
|
|
|
| ||||||
|
| Active Markets |
| Other |
| Significant |
|
|
|
| Active Markets |
| Other |
| Significant |
|
|
| ||||||||
|
| for Identical |
| Observable |
| Unobservable |
| Total |
|
| for Identical |
| Observable |
| Unobservable |
| Total |
| ||||||||
|
| Assets |
| Inputs |
| Inputs |
| Fair |
|
| Assets |
| Inputs |
| Inputs |
| Fair |
| ||||||||
(in thousands) |
| (Level 1) |
| (Level 2) |
| (Level 3) |
| Value |
|
| (Level 1) |
| (Level 2) |
| (Level 3) |
| Value |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer loans held for sale |
| $ | — |
| $ | — |
| $ | 1,249 |
| $ | 1,249 |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Impaired loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
| $ | — |
| $ | — |
| $ | 4,107 |
| $ | 4,107 |
|
| $ | — |
| $ | — |
| $ | 4,708 |
| $ | 4,708 |
|
Nonowner occupied |
|
| — |
|
| — |
|
| 237 |
|
| 237 |
|
|
| — |
|
| — |
|
| 1,007 |
|
| 1,007 |
|
Commercial real estate |
|
| — |
|
| — |
|
| 1,366 |
|
| 1,366 |
|
|
| — |
|
| — |
|
| 1,255 |
|
| 1,255 |
|
Commercial & industrial |
|
| — |
|
| — |
|
| 609 |
|
| 609 |
| |||||||||||||
Home equity |
|
| — |
|
| — |
|
| 393 |
|
| 393 |
|
|
| — |
|
| — |
|
| 356 |
|
| 356 |
|
Total impaired loans* |
| $ | — |
| $ | — |
| $ | 6,103 |
| $ | 6,103 |
|
| $ | — |
| $ | — |
| $ | 7,935 |
| $ | 7,935 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Residential real estate |
| $ | — |
| $ | — |
| $ | 83 |
| $ | 83 |
| |||||||||||||
Total other real estate owned |
| $ | — |
| $ | — |
| $ | 83 |
| $ | 83 |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Premises |
| $ | — |
| $ | — |
| $ | 3,017 |
| $ | 3,017 |
|
| $ | — |
| $ | — |
| $ | 1,694 |
| $ | 1,694 |
|
* The difference between the carrying value and the fair value of impaired loans measured at fair value is reconciled in a subsequent table of this Footnote.
4650
The following tables present quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
| Range |
|
|
|
|
|
|
|
|
| Range |
|
|
| Fair |
| Valuation |
| Unobservable |
| (Weighted |
|
| Fair |
| Valuation |
| Unobservable |
| (Weighted |
| ||
June 30, 2018 (dollars in thousands) |
| Value |
| Technique |
| Inputs |
| Average) |
| |||||||||||
June 30, 2019 (dollars in thousands) |
| Value |
| Technique |
| Inputs |
| Average) |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Impaired loans - residential real estate owner occupied |
| $ | 2,857 |
| Sales comparison approach |
| Adjustments determined for differences between comparable sales |
| 0% - 54% (11%) |
|
| $ | 3,777 |
| Sales comparison approach |
| Adjustments determined for differences between comparable sales |
| 0% - 62% (11%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Impaired loans - residential real estate nonowner occupied |
| $ | 1,242 |
| Sales comparison approach |
| Adjustments determined for differences between comparable sales |
| 0% - 27% (13%) |
|
| $ | 511 |
| Sales comparison approach |
| Adjustments determined for differences between comparable sales |
| 5% - 12% (12%) |
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Impaired loans - commercial real estate |
| $ | 78 |
| Sales comparison approach |
| Adjustments determined for differences between comparable sales |
| 21% (21%) |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Impaired loans - commercial real estate |
| $ | 1,237 |
| Income approach |
| Adjustments for differences between net operating income expectations |
| 17% (17%) |
|
| $ | 1,117 |
| Sales comparison approach |
| Adjustments determined for differences between comparable sales |
| 22% - 25% (22%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Impaired loans - commercial & industrial |
| $ | 713 |
| Sales comparison approach |
| Adjustments determined for differences between comparable sales |
| 3% (3%) |
|
| $ | 512 |
| Sales comparison approach |
| Adjustments determined for differences between comparable sales |
| 3% (3%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Impaired loans - home equity |
| $ | 310 |
| Sales comparison approach |
| Adjustments determined for differences between comparable sales |
| 0% - 22% (14%) |
|
| $ | 347 |
| Sales comparison approach |
| Adjustments determined for differences between comparable sales |
| 0% - 2% (2%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Premises |
| $ | 2,751 |
| Sales comparison approach |
| Adjustments determined for differences between comparable sales |
| 15% - 69% (28%) |
|
| $ | 1,552 |
| Sales comparison approach |
| Adjustments determined for differences between comparable sales |
| 33% - 75% (45%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
| Range |
|
|
|
|
|
|
|
| Range |
|
| Fair |
| Valuation |
| Unobservable |
| (Weighted |
| Fair |
| Valuation |
| Unobservable |
| (Weighted | ||
December 31, 2017 (dollars in thousands) |
| Value |
| Technique |
| Inputs |
| Average) | ||||||||||
December 31, 2018 (dollars in thousands) |
| Value |
| Technique |
| Inputs |
| Average) | ||||||||||
|
|
|
|
|
|
|
|
| ||||||||||
Consumer loans held for sale |
| $ | 1,249 |
| Sales comparison approach |
| Adjustments determined for differences between comparable sales |
| 6% (6%) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Impaired loans - residential real estate owner occupied |
| $ | 4,107 |
| Sales comparison approach |
| Adjustments determined for differences between comparable sales |
| 0% - 54% (10%) |
| $ | 4,708 |
| Sales comparison approach |
| Adjustments determined for differences between comparable sales |
| 0% - 67% (9%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Impaired loans - residential real estate nonowner occupied |
| $ | 237 |
| Sales comparison approach |
| Adjustments determined for differences between comparable sales |
| 0% - 8% (5%) |
| $ | 1,007 |
| Sales comparison approach |
| Adjustments determined for differences between comparable sales |
| 0% - 27% (15%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Impaired loans - commercial real estate |
| $ | 79 |
| Sales comparison approach |
| Adjustments determined for differences between comparable sales |
| 21% (21%) |
| $ | 123 |
| Sales comparison approach |
| Adjustments determined for differences between comparable sales |
| 21% (21%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Impaired loans - commercial real estate |
| $ | 1,287 |
| Income approach |
| Adjustments for differences between net operating income expectations |
| 17% (17%) |
| $ | 1,132 |
| Income approach |
| Adjustments for differences between net operating income expectations |
| 17% (17%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Impaired loans - commercial & industrial |
| $ | 609 |
| Sales comparison approach |
| Adjustments determined for differences between comparable sales |
| 3% (3%) | |||||||||
|
|
|
|
|
|
|
|
| ||||||||||
Impaired loans - home equity |
| $ | 393 |
| Sales comparison approach |
| Adjustments determined for differences between comparable sales |
| 0% - 23% (15%) |
| $ | 356 |
| Sales comparison approach |
| Adjustments determined for differences between comparable sales |
| 0% - 22% (8%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Other real estate owned - residential real estate |
| $ | 83 |
| Sales comparison approach |
| Adjustments determined for differences between comparable sales |
| 86% (86%) | |||||||||
|
|
|
|
|
|
|
|
| ||||||||||
Premises |
| $ | 3,017 |
| Sales comparison approach |
| Adjustments determined for differences between comparable sales |
| 4% - 67% (21%) |
| $ | 1,694 |
| Sales comparison approach |
| Adjustments determined for differences between comparable sales |
| 27% - 72% (40%) |
4751
Impaired Loans
Collateral-dependent impaired loans are generally measured for impairment using the fair value for reasonable disposition of the underlying collateral. The Bank’s practice is to obtain new or updated appraisals or BPOs on the loans subject to the initial impairment review and then to evaluate the need for an update to this value on an as-necessary or possibly annual basis thereafter (depending on the market conditions impacting the value of the collateral). The Bank may discount the valuation amount as necessary for selling costs and past due real estate taxes. If a new or updated appraisal or BPO is not available at the time of a loan’s impairment review, the Bank may apply a discount to the existing value of an old valuation to reflect the property’s current estimated value if it is believed to have deteriorated in either: (i) the physical or economic aspects of the subject property or (ii) material changes in market conditions. The impairment review generally results in a partial charge-off of the loan if fair value less selling costs are below the loan’s carrying value. Impaired loans that are collateral dependent are classified within Level 3 of the fair value hierarchy when impairment is determined using the fair value method.
Impaired collateral-dependent loans are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
| June 30, 2018 |
| December 31, 2017 |
|
| June 30, 2019 |
| December 31, 2018 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount of loans measured at fair value |
| $ | 5,774 |
| $ | 5,358 |
|
| $ | 5,559 |
| $ | 7,380 |
|
Estimated selling costs considered in carrying amount |
|
| 680 |
|
| 752 |
|
|
| 724 |
|
| 913 |
|
Valuation allowance |
|
| (17) |
|
| (7) |
|
|
| (19) |
|
| (358) |
|
Total fair value |
| $ | 6,437 |
| $ | 6,103 |
|
| $ | 6,264 |
| $ | 7,935 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
| Three Months Ended |
| Six Months Ended |
|
| Three Months Ended |
| Six Months Ended |
| ||||||||||||||||
| June 30, |
| June 30, |
|
| June 30, |
| June 30, |
| ||||||||||||||||
(in thousands) | 2018 |
| 2017 |
| 2018 |
| 2017 |
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provisions on collateral-dependent, impaired loans | $ | 28 |
| $ | 118 |
| $ | 457 |
| $ | 190 |
|
| $ | 5 |
| $ | 28 |
| $ | 27 |
| $ | 457 |
|
Other Real Estate Owned
Other real estate owned, which is carried at the lower of cost or fair value, is periodically assessed for impairment based on fair value at the reporting date. Fair value is determined from external appraisals or BPOs using judgments and estimates of external professionals. Many of these inputs are not observable and, accordingly, these measurements are classified as Level 3.
Details of other real estate owned carrying value and write downs follow:
|
|
|
|
|
|
|
|
|
|
|
|
| |||
(in thousands) |
| June 30, 2018 |
| December 31, 2017 |
| ||
|
|
|
|
|
|
|
|
Other real estate owned carried at fair value |
| $ | — |
| $ | 83 |
|
Other real estate owned carried at cost |
|
| — |
|
| 32 |
|
Total carrying value of other real estate owned |
| $ | — |
| $ | 115 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Six Months Ended |
| ||||||||
|
| June 30, |
| June 30, |
| ||||||||
(in thousands) |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned write-downs during the period |
| $ | — |
| $ | 9 |
| $ | — |
| $ | 79 |
|
48
Premises
The Company’s Traditional Banking segment classified fourthree of its former banking centers as held for sale as of June 30, 20182019 and December 31, 2017.2018. Impairment charges are recorded when the value of a piece of property is reappraised or reassessed below the property’s then-carrying value. Impairment charges related to these properties held for sale were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
| Three Months Ended |
| Six Months Ended |
|
|
|
| Three Months Ended |
| Six Months Ended |
|
|
| ||||||||||||||||
|
| June 30, |
| June 30, |
|
|
| June 30, |
| June 30, |
|
| ||||||||||||||||||
(in thousands) |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
|
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
|
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment charges on premises |
| $ | 126 |
| $ | 58 |
| $ | 230 |
| $ | 116 |
|
|
| $ | 66 |
| $ | 126 |
| $ | 132 |
| $ | 230 |
|
|
52
The carrying amounts and estimated exit price fair values of all financial instruments at June 30, 2018 and December 31, 2017 follow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
| Fair Value Measurements at |
|
|
|
|
| Fair Value Measurements at |
| ||||||||||||||||||||
|
|
|
|
| June 30, 2018: |
|
|
|
|
| June 30, 2019: |
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
|
|
|
|
|
|
|
|
| Total |
| ||||||||
|
| Carrying |
|
|
|
|
|
|
| Fair |
|
| Carrying |
|
|
|
|
|
|
| Fair |
| ||||||||||
(in thousands) |
| Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Value |
|
| Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Value |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 386,956 |
| $ | 386,956 |
| $ | — |
| $ | — |
| $ | 386,956 |
|
| $ | 473,779 |
| $ | 473,779 |
| $ | — |
| $ | — |
| $ | 473,779 |
|
Available-for-sale debt securities |
|
| 416,053 |
|
| — |
|
| 407,977 |
|
| 8,076 |
|
| 416,053 |
|
|
| 380,356 |
|
| — |
|
| 372,741 |
|
| 7,615 |
|
| 380,356 |
|
Held-to-maturity debt securities |
|
| 66,776 |
|
| — |
|
| 67,513 |
|
| — |
|
| 67,513 |
|
|
| 63,902 |
|
| — |
|
| 64,433 |
|
| — |
|
| 64,433 |
|
Equity securities with readily determinable fair values |
|
| 2,793 |
|
| 2,404 |
|
| 389 |
|
| — |
|
| 2,793 |
|
|
| 3,254 |
|
| 2,467 |
|
| 787 |
|
| — |
|
| 3,254 |
|
Mortgage loans held for sale, at fair value |
|
| 12,653 |
|
| — |
|
| 12,653 |
|
| — |
|
| 12,653 |
|
|
| 13,883 |
|
| — |
|
| 13,883 |
|
| — |
|
| 13,883 |
|
Reverse mortgage loans held for sale, at the lower of cost or fair value |
|
| 12,457 |
|
| — |
|
| 12,457 |
|
| — |
|
| 12,457 |
| ||||||||||||||||
Consumer loans held for sale, at the lower of cost or fair value |
|
| 13,684 |
|
| — |
|
| 13,684 |
|
| — |
|
| 13,684 |
|
|
| 37,609 |
|
| — |
|
| 37,609 |
|
| — |
|
| 37,609 |
|
Loans held for sale in connection with sale of banking centers, at the lower of cost or fair value |
|
| 111,745 |
|
| — |
|
| 111,745 |
|
| — |
|
| 111,745 |
| ||||||||||||||||
Loans, net |
|
| 4,150,937 |
|
| — |
|
| — |
|
| 4,122,775 |
|
| 4,122,775 |
|
|
| 4,364,686 |
|
| — |
|
| — |
|
| 4,397,565 |
|
| 4,397,565 |
|
Federal Home Loan Bank stock |
|
| 32,067 |
|
| — |
|
| — |
|
| — |
|
| NA |
|
|
| 32,242 |
|
| — |
|
| — |
|
| — |
|
| NA |
|
Accrued interest receivable |
|
| 12,558 |
|
| — |
|
| 12,558 |
|
| — |
|
| 12,558 |
|
|
| 14,716 |
|
| — |
|
| 14,716 |
|
| — |
|
| 14,716 |
|
Rate lock loan commitments |
|
| 432 |
|
| — |
|
| 432 |
|
| — |
|
| 432 |
|
|
| 1,222 |
|
| — |
|
| 1,222 |
|
| — |
|
| 1,222 |
|
Interest rate swap agreements |
|
| 2,105 |
|
| — |
|
| 2,105 |
|
| — |
|
| 2,105 |
|
|
| 4,645 |
|
| — |
|
| 4,645 |
|
| — |
|
| 4,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing deposits |
| $ | 1,061,182 |
|
| — |
| $ | 1,061,182 |
|
| — |
| $ | 1,061,182 |
|
| $ | 1,003,793 |
|
| — |
| $ | 1,003,793 |
|
| — |
| $ | 1,003,793 |
|
Transaction deposits |
|
| 2,000,321 |
|
| — |
|
| 2,000,321 |
|
| — |
|
| 2,000,321 |
|
|
| 1,959,252 |
|
| — |
|
| 1,959,252 |
|
| — |
|
| 1,959,252 |
|
Time deposits |
|
| 411,866 |
|
| — |
|
| 405,971 |
|
| — |
|
| 405,971 |
|
|
| 597,875 |
|
| — |
|
| 600,352 |
|
| — |
|
| 600,352 |
|
Deposits held for assumption in connection with sale of banking centers |
|
| 152,954 |
|
| — |
|
| 152,954 |
|
| — |
|
| 152,954 |
| ||||||||||||||||
Securities sold under agreements to repurchase and other short-term borrowings |
|
| 175,291 |
|
| — |
|
| 175,291 |
|
| — |
|
| 175,291 |
|
|
| 226,002 |
|
| — |
|
| 226,002 |
|
| — |
|
| 226,002 |
|
Federal Home Loan Bank advances |
|
| 860,000 |
|
| — |
|
| 852,203 |
|
| — |
|
| 852,203 |
|
|
| 915,000 |
|
| — |
|
| 913,453 |
|
| — |
|
| 913,453 |
|
Subordinated note |
|
| 41,240 |
|
| — |
|
| 32,561 |
|
| — |
|
| 32,561 |
|
|
| 41,240 |
|
| — |
|
| 33,181 |
|
| — |
|
| 33,181 |
|
Accrued interest payable |
|
| 1,070 |
|
| — |
|
| 1,070 |
|
| — |
|
| 1,070 |
|
|
| 1,575 |
|
| — |
|
| 1,575 |
|
| — |
|
| 1,575 |
|
Mandatory forward contracts |
|
| 110 |
|
| — |
|
| 110 |
|
| — |
|
| 110 |
|
|
| 467 |
|
| — |
|
| 467 |
|
| — |
|
| 467 |
|
Interest rate swap agreements |
|
| 1,885 |
|
| — |
|
| 1,885 |
|
| — |
|
| 1,885 |
|
|
| 4,778 |
|
| — |
|
| 4,778 |
|
| — |
|
| 4,778 |
|
NA - Not applicable
4953
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
| Fair Value Measurements at |
|
|
|
| Fair Value Measurements at |
| ||||||||||||||||||||||
|
|
|
| December 31, 2017: |
|
|
|
| December 31, 2018: |
| ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| Total |
|
|
|
|
|
|
|
|
|
| Total |
| ||||||||||
|
| Carrying |
|
|
|
|
|
|
| Fair |
|
| Carrying |
|
|
|
|
|
|
| Fair |
| ||||||||||
(in thousands) |
| Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Value |
|
| Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Value |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 299,351 |
| $ | 299,351 |
| $ | — |
| $ | — |
| $ | 299,351 |
|
| $ | 351,474 |
| $ | 351,474 |
| $ | — |
| $ | — |
| $ | 351,474 |
|
Available-for-sale debt securities |
|
| 524,303 |
|
| — |
|
| 516,254 |
|
| 8,049 |
|
| 524,303 |
|
|
| 475,738 |
|
| — |
|
| 467,951 |
|
| 7,787 |
|
| 475,738 |
|
Held-to-maturity debt securities |
|
| 64,227 |
|
| — |
|
| 65,133 |
|
| — |
|
| 65,133 |
|
|
| 65,227 |
|
| — |
|
| 64,858 |
|
| — |
|
| 64,858 |
|
Equity securities with readily determinable fair values |
|
| 2,928 |
|
| 2,455 |
|
| 473 |
|
| — |
|
| 2,928 |
|
|
| 2,806 |
|
| 2,396 |
|
| 410 |
|
| — |
|
| 2,806 |
|
Mortgage loans held for sale, at fair value |
|
| 5,761 |
|
| — |
|
| 5,761 |
|
| — |
|
| 5,761 |
|
|
| 8,971 |
|
| — |
|
| 8,971 |
|
| — |
|
| 8,971 |
|
Consumer loans held for sale, at fair value |
|
| 2,677 |
|
| — |
|
| — |
|
| 2,677 |
|
| 2,677 |
| ||||||||||||||||
Consumer loans held for sale, at the lower of cost or fair value |
|
| 8,551 |
|
| — |
|
| 8,551 |
|
| — |
|
| 8,551 |
|
|
| 12,838 |
|
| — |
|
| 12,838 |
|
| — |
|
| 12,838 |
|
Loans, net |
|
| 3,971,265 |
|
| — |
|
| — |
|
| 3,938,998 |
|
| 3,938,998 |
|
|
| 4,103,552 |
|
| — |
|
| — |
|
| 4,062,457 |
|
| 4,062,457 |
|
Federal Home Loan Bank stock |
|
| 32,067 |
|
| — |
|
| — |
|
| — |
|
| NA |
|
|
| 32,067 |
|
| — |
|
| — |
|
| — |
|
| NA |
|
Accrued interest receivable |
|
| 12,082 |
|
| — |
|
| 12,082 |
|
| — |
|
| 12,082 |
|
|
| 13,942 |
|
| — |
|
| 13,942 |
|
| — |
|
| 13,942 |
|
Rate lock loan commitments |
|
| 310 |
|
| — |
|
| 310 |
|
| — |
|
| 310 |
|
|
| 356 |
|
| — |
|
| 356 |
|
| — |
|
| 356 |
|
Interest rate swap agreements |
|
| 312 |
|
| — |
|
| 312 |
|
| — |
|
| 312 |
|
|
| 1,264 |
|
| — |
|
| 1,264 |
|
| — |
|
| 1,264 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing deposits |
| $ | 1,022,042 |
|
| — |
| $ | 1,022,042 |
|
| — |
| $ | 1,022,042 |
|
| $ | 1,003,969 |
|
| — |
| $ | 1,003,969 |
|
| — |
| $ | 1,003,969 |
|
Transaction deposits |
|
| 2,049,493 |
|
| — |
|
| 2,049,493 |
|
| — |
|
| 2,049,493 |
|
|
| 2,035,701 |
|
| — |
|
| 2,035,701 |
|
| — |
|
| 2,035,701 |
|
Time deposits |
|
| 361,623 |
|
| — |
|
| 358,627 |
|
| — |
|
| 358,627 |
|
|
| 416,475 |
|
| — |
|
| 412,477 |
|
| — |
|
| 412,477 |
|
Securities sold under agreements to repurchase and other short-term borrowings |
|
| 204,021 |
|
| — |
|
| 204,021 |
|
| — |
|
| 204,021 |
|
|
| 182,990 |
|
| — |
|
| 182,990 |
|
| — |
|
| 182,990 |
|
Federal Home Loan Bank advances |
|
| 737,500 |
|
| — |
|
| 730,712 |
|
| — |
|
| 730,712 |
|
|
| 810,000 |
|
| — |
|
| 804,251 |
|
| — |
|
| 804,251 |
|
Subordinated note |
|
| 41,240 |
|
| — |
|
| 31,763 |
|
| — |
|
| 31,763 |
|
|
| 41,240 |
|
| — |
|
| 33,724 |
|
| — |
|
| 33,724 |
|
Accrued interest payable |
|
| 1,100 |
|
| — |
|
| 1,100 |
|
| — |
|
| 1,100 |
|
|
| 1,084 |
|
| — |
|
| 1,084 |
|
| — |
|
| 1,084 |
|
Mandatory forward contracts |
|
| 9 |
|
| — |
|
| 9 |
|
| — |
|
| 9 |
|
|
| 262 |
|
| — |
|
| 262 |
|
| — |
|
| 262 |
|
Interest rate swap agreements |
|
| 403 |
|
| — |
|
| 403 |
|
| — |
|
| 403 |
|
|
| 1,149 |
|
| — |
|
| 1,149 |
|
| — |
|
| 1,149 |
|
NA - Not applicable
5054
10.11. MORTGAGE BANKING ACTIVITIES
Mortgage Banking activities primarily include residential mortgage originations and servicing.
The following table presents activityActivity for mortgage loans held for sale, at fair value:value, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
| Three Months Ended |
| Six Months Ended |
|
| Three Months Ended |
| Six Months Ended |
| ||||||||||||||||
|
| June 30, |
| June 30, |
|
| June 30, |
| June 30, |
| ||||||||||||||||
(in thousands) |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period |
| $ | 4,496 |
| $ | 5,193 |
| $ | 5,761 |
| $ | 11,662 |
|
| $ | 11,313 |
| $ | 4,496 |
| $ | 8,971 |
| $ | 5,761 |
|
Origination of mortgage loans held for sale |
|
| 54,714 |
|
| 42,531 |
|
| 84,124 |
|
| 75,776 |
|
|
| 81,982 |
|
| 54,714 |
|
| 122,696 |
|
| 84,124 |
|
Proceeds from the sale of mortgage loans held for sale |
|
| (47,642) |
|
| (42,946) |
|
| (79,094) |
|
| (83,637) |
|
|
| (81,630) |
|
| (47,642) |
|
| (121,262) |
|
| (79,094) |
|
Net gain on sale of mortgage loans held for sale |
|
| 1,085 |
|
| 1,279 |
|
| 1,862 |
|
| 2,256 |
|
|
| 2,218 |
|
| 1,085 |
|
| 3,478 |
|
| 1,862 |
|
Balance, end of period |
| $ | 12,653 |
| $ | 6,057 |
| $ | 12,653 |
| $ | 6,057 |
|
| $ | 13,883 |
| $ | 12,653 |
| $ | 13,883 |
| $ | 12,653 |
|
The following table presents the components of Mortgage Banking income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
| Three Months Ended |
| Six Months Ended |
|
| Three Months Ended |
| Six Months Ended |
| ||||||||||||||||
|
| June 30, |
| June 30, |
|
| June 30, |
| June 30, |
| ||||||||||||||||
(in thousands) |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain realized on sale of mortgage loans held for sale |
| $ | 1,101 |
| $ | 1,173 |
| $ | 1,698 |
| $ | 2,114 |
|
| $ | 1,896 |
| $ | 1,101 |
| $ | 2,771 |
| $ | 1,698 |
|
Net change in fair value recognized on loans held for sale |
|
| 152 |
|
| 118 |
|
| 143 |
|
| 111 |
|
|
| 128 |
|
| 152 |
|
| 46 |
|
| 143 |
|
Net change in fair value recognized on rate lock loan commitments |
|
| (11) |
|
| (36) |
|
| 122 |
|
| 283 |
|
|
| 379 |
|
| (11) |
|
| 866 |
|
| 122 |
|
Net change in fair value recognized on forward contracts |
|
| (157) |
|
| 23 |
|
| (101) |
|
| (252) |
|
|
| (185) |
|
| (157) |
|
| (205) |
|
| (101) |
|
Net gain recognized |
|
| 1,085 |
|
| 1,278 |
|
| 1,862 |
|
| 2,256 |
|
|
| 2,218 |
|
| 1,085 |
|
| 3,478 |
|
| 1,862 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan servicing income |
|
| 600 |
|
| 528 |
|
| 1,205 |
|
| 1,063 |
|
|
| 609 |
|
| 600 |
|
| 1,210 |
|
| 1,205 |
|
Amortization of mortgage servicing rights |
|
| (369) |
|
| (361) |
|
| (731) |
|
| (714) |
|
|
| (411) |
|
| (369) |
|
| (733) |
|
| (731) |
|
Net servicing income recognized |
|
| 231 |
|
| 167 |
|
| 474 |
|
| 349 |
|
|
| 198 |
|
| 231 |
|
| 477 |
|
| 474 |
|
Total Mortgage Banking income |
| $ | 1,316 |
| $ | 1,445 |
| $ | 2,336 |
| $ | 2,605 |
|
| $ | 2,416 |
| $ | 1,316 |
| $ | 3,955 |
| $ | 2,336 |
|
The following table presents activityActivity for capitalized mortgage servicing rights:rights was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
| Three Months Ended |
| Six Months Ended |
|
| Three Months Ended |
| Six Months Ended |
| ||||||||||||||||
|
| June 30, |
| June 30, |
|
| June 30, |
| June 30, |
| ||||||||||||||||
(in thousands) |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period |
| $ | 4,925 |
| $ | 5,158 |
| $ | 5,044 |
| $ | 5,180 |
|
| $ | 4,935 |
| $ | 4,925 |
| $ | 4,919 |
| $ | 5,044 |
|
Additions |
|
| 359 |
|
| 361 |
|
| 602 |
|
| 692 |
|
|
| 634 |
|
| 359 |
|
| 972 |
|
| 602 |
|
Amortized to expense |
|
| (369) |
|
| (361) |
|
| (731) |
|
| (714) |
|
|
| (411) |
|
| (369) |
|
| (733) |
|
| (731) |
|
Balance, end of period |
| $ | 4,915 |
| $ | 5,158 |
| $ | 4,915 |
| $ | 5,158 |
|
| $ | 5,158 |
| $ | 4,915 |
| $ | 5,158 |
| $ | 4,915 |
|
There was no balance or activity in the valuation allowance for capitalized mortgage servicing rights for the three and six months ended June 30, 20182019 and 2017.2018.
5155
The following table presents otherOther information forrelating to mortgage servicing rights:rights follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) | June 30, 2018 |
| December 31, 2017 |
|
|
| June 30, 2019 |
| December 31, 2018 |
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of mortgage servicing rights portfolio | $ | 9,277 |
|
| $ | 7,984 |
|
|
|
| $ | 7,708 |
|
| $ | 9,357 |
|
|
|
Monthly weighted average prepayment rate of unpaid principal balance* |
| 175 | % |
|
| 200 | % |
|
|
|
| 232 | % |
|
| 160 | % |
|
|
Discount rate |
| 10 | % |
|
| 10 | % |
|
|
|
| 10.00 | % |
|
| 10.00 | % |
|
|
Weighted average default rate |
| 4.04 | % |
|
| 3.75 | % |
|
| ||||||||||
Weighted average default (foreclosure) rate |
|
| 0.07 | % |
|
| 0.14 | % |
|
| |||||||||
Weighted average life in years |
| 6.02 |
|
|
| 5.49 |
|
|
|
|
| 5.69 |
|
|
| 6.32 |
|
|
|
* Rates are applied to individual tranches with similar characteristics.
Mortgage Banking derivatives used in the ordinary course of business primarily consist of mandatory forward sales contracts and interest rate lock loan commitments. Mandatory forward contracts represent future commitments to deliver loans at a specified price and date and are used to manage interest rate risk on loan commitments and mortgage loans held for sale. Interest rate lock loan commitments represent commitments to fund loans at a specific rate. These derivatives involve underlying items, such as interest rates, and are designed to transfer risk. Substantially all of these instruments expire within 90 days from the date of issuance. Notional amounts are amounts on which calculations and payments are based, but which do not represent credit exposure, as credit exposure is limited to the amounts required to be received or paid.
Mandatory forward contracts also contain an element of risk in that the counterparties may be unable to meet the terms of such agreements. In the event the counterparties fail to deliver commitments or are unable to fulfill their obligations, the Bank could potentially incur significant additional costs by replacing the positions at then current market rates. The Bank manages its risk of exposure by limiting counterparties to those banks and institutions deemed appropriate by management and the Board of Directors. The Bank does not expect any counterparty to default on their obligations and therefore, the Bank does not expect to incur any cost related to counterparty default.
The Bank is exposed to interest rate risk on loans held for sale and rate lock loan commitments. As market interest rates fluctuate, the fair value of mortgage loans held for sale and rate lock commitments will decline or increase. To offset this interest rate risk the Bank enters into derivatives, such as mandatory forward contracts to sell loans. The fair value of these mandatory forward contracts will fluctuate as market interest rates fluctuate, and the change in the value of these instruments is expected to largely, though not entirely, offset the change in fair value of loans held for sale and rate lock commitments. The objective of this activity is to minimize the exposure to losses on rate loan lock commitments and loans held for sale due to market interest rate fluctuations. The net effect of derivatives on earnings will depend on risk management activities and a variety of other factors, including: market interest rate volatility; the amount of rate lock commitments that close; the ability to fill the forward contracts before expiration; and the time period required to close and sell loans.
The following table includes the notional amounts and fair values of mortgage loans held for sale and mortgage banking derivatives as of the period ends presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
| June 30, 2018 |
| December 31, 2017 |
|
| June 30, 2019 |
| December 31, 2018 |
| ||||||||||||||||
|
| Notional |
|
|
| Notional |
|
|
|
| Notional |
|
|
| Notional |
|
|
| ||||||||
(in thousands) |
| Amount |
| Fair Value |
| Amount |
| Fair Value |
|
| Amount |
| Fair Value |
| Amount |
| Fair Value |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Included in Mortgage loans held for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans held for sale, at fair value |
| $ | 12,417 |
| $ | 12,653 |
| $ | 5,668 |
| $ | 5,761 |
|
| $ | 13,542 |
| $ | 13,883 |
| $ | 8,676 |
| $ | 8,971 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in other assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate lock loan commitments |
| $ | 20,196 |
| $ | 432 |
| $ | 14,696 |
| $ | 310 |
|
| $ | 52,789 |
| $ | 1,222 |
| $ | 14,788 |
| $ | 356 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in other liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mandatory forward contracts |
| $ | 27,902 |
| $ | 110 |
| $ | 17,159 |
| $ | 9 |
|
| $ | 55,442 |
| $ | 467 |
| $ | 20,063 |
| $ | 262 |
|
5256
11.12. INTEREST RATE SWAPS
Interest rate swap derivatives are reported at fair value in other assets or other liabilities. The accounting for changes in the fair value of a derivative depends on whether it has been designated and qualifies as part of a cash flow hedging relationship. For a derivative designated as a cash flow hedge, the effective portion of the derivative’s unrealized gain or loss is recorded as a component of other comprehensive income (“OCI”).OCI. For derivatives not designated as hedges, the gain or loss is recognized in current period earnings.
Interest Rate Swaps Used as Cash Flow Hedges
The Bank entered into two interest rate swap agreements (“swaps”) during 2013 as part of its interest rate risk management strategy. The Bank designated the swaps as cash flow hedges intended to reduce the variability in cash flows attributable to either FHLB advances tied to the 3-month LIBOR or the overall changes in cash flows on certain money market deposit accounts tied to 1-month LIBOR. The counterparty for both swaps met the Bank’s credit standards and the Bank believes that the credit risk inherent in the swap contracts is not significant.
The swaps were determined to be fully effective during all periods presented; therefore, no amount of ineffectiveness was included in net income. The aggregate fair value of the swaps is recorded in other liabilities with changes in fair value recorded in OCI. The amount included in AOCI would be reclassified to current earnings should the hedge no longer be considered effective. The Bank expects the hedges to remain fully effective during the remaining term of the swaps.
The following table reflects information about swaps designated as cash flow hedges as of June 30, 2018 and December 31, 2017:hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| June 30, 2018 |
|
| December 31, 2017 |
|
|
|
|
|
|
|
|
|
|
|
| June 30, 2019 |
|
| December 31, 2018 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Unrealized |
|
|
|
|
| Unrealized |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Unrealized |
|
|
|
|
| Unrealized |
|
|
| Notional |
| Pay |
|
| Receive |
|
|
|
| Assets / |
|
| Gain (Loss) |
|
| Assets / |
|
| Gain (Loss) |
|
| Notional |
| Pay |
|
| Receive |
|
|
|
| Assets / |
|
| Gain (Loss) |
|
| Assets / |
|
| Gain (Loss) |
(dollars in thousands) |
|
| Amount |
| Rate |
|
| Rate |
| Term |
|
| (Liabilities) |
|
| AOCI |
|
| (Liabilities) |
|
| in AOCI |
|
| Amount |
| Rate |
|
| Rate |
| Term |
|
| (Liabilities) |
|
| AOCI |
|
| (Liabilities) |
|
| in AOCI |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap on money market deposits |
| $ | 10,000 |
| 2.17 | % |
| 1M LIBOR |
| 12/2013 - 12/2020 |
| $ | 111 |
| $ | 88 |
| $ | (60) |
| $ | (25) |
| $ | 10,000 |
| 2.17 | % |
| 1M LIBOR |
| 12/2013 - 12/2020 |
| $ | (72) |
| $ | (56) |
| $ | 58 |
| $ | 45 |
Interest rate swap on FHLB advance |
|
| 10,000 |
| 2.33 | % |
| 3M LIBOR |
| 12/2013 - 12/2020 |
|
| 109 |
|
| 86 |
|
| (31) |
|
| (48) |
|
| 10,000 |
| 2.33 | % |
| 3M LIBOR |
| 12/2013 - 12/2020 |
|
| (61) |
|
| (48) |
|
| 57 |
|
| 45 |
Total |
| $ | 20,000 |
|
|
|
|
|
|
|
| $ | 220 |
| $ | 174 |
| $ | (91) |
| $ | (73) |
| $ | 20,000 |
|
|
|
|
|
|
|
| $ | (133) |
| $ | (104) |
| $ | 115 |
| $ | 90 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table reflects the total interest expense recorded on these swap transactions in the consolidated statements of income for the three and six months ended June 30, 2018 and 2017:income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
| Three Months Ended |
| Six Months Ended |
|
| Three Months Ended |
| Six Months Ended |
| ||||||||||||||||
|
| June 30, |
| June 30, |
|
| June 30, |
| June 30, |
| ||||||||||||||||
(in thousands) |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap on money market deposits |
| $ | 3 |
| $ | 29 |
| $ | 20 |
| $ | 63 |
|
| $ | (8) |
| $ | 3 |
| $ | (16) |
| $ | 20 |
|
Interest rate swap on FHLB advance |
|
| 6 |
|
| 29 |
|
| 15 |
|
| 61 |
|
|
| (5) |
|
| 6 |
|
| (16) |
|
| 15 |
|
Total interest expense on swap transactions |
| $ | 9 |
| $ | 58 |
| $ | 35 |
| $ | 124 |
| |||||||||||||
Total interest (benefit) expense on swap transactions |
| $ | (13) |
| $ | 9 |
| $ | (32) |
| $ | 35 |
|
The following table presents the net gains (losses) recorded in OCI and the consolidated statements of income relating to the swaps designated as cash flow hedges for the three and six months ended June 30, 2018 and 2017:hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
| Three Months Ended |
| Six Months Ended |
|
| Three Months Ended |
| Six Months Ended |
|
| ||||||||||||||||
|
| June 30, |
| June 30, |
|
| June 30, |
| June 30, |
|
| ||||||||||||||||
(in thousands) |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gains (losses) recognized in OCI on derivative (effective portion) |
| $ | 77 |
| $ | (104) |
| $ | 276 |
| $ | (76) |
| ||||||||||||||
(Gains) losses recognized in OCI on derivative (effective portion) |
| $ | (146) |
| $ | 77 |
| $ | (215) |
| $ | 276 |
|
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Losses reclassified from OCI on derivative (effective portion) |
| (9) |
| (58) |
| (35) |
| (124) |
| ||||||||||||||||||
Gains (losses) reclassified from OCI on derivative (effective portion) |
|
| 13 |
|
| (9) |
|
| 32 |
|
| (35) |
|
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gains (losses) recognized in income on derivative (ineffective portion) |
| — |
| — |
| — |
| — |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
The estimated net amount of the existing losses reported in AOCI at June 30, 20182019 expected to be reclassified into earnings within the next 12 months is considered immaterial. immaterial.
5357
Non-hedge Interest Rate Swaps
The Bank enters into interest rate swaps to facilitate client transactions and meet their financing needs. Upon entering into these instruments to meet client needs, the Bank enters into offsetting positions in order to minimize the Bank’s interest rate risk. These swaps are derivatives, but are not designated as hedging instruments, and therefore changes in fair value are reported in current year earnings.
Interest rate swap contracts involve the risk of dealing with counterparties and their ability to meet contractual terms. When the fair value of a derivative instrument contract is positive, this generally indicates that the counter partycounterparty or client owes the Bank, and results in credit risk to the Bank. When the fair value of a derivative instrument contract is negative, the Bank owes the client or counterparty, and therefore, has no credit risk.
The following table presents aA summary of the Bank’s interest rate swaps related to clients as of June 30, 2018 and December 31, 2017:is included in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
| June 30, 2018 |
| December 31, 2017 |
|
|
|
|
| June 30, 2019 |
| December 31, 2018 |
|
| ||||||||||||||||
|
|
|
| Notional |
|
|
|
| Notional |
|
|
|
|
|
|
|
| Notional |
|
|
|
| Notional |
|
|
|
|
| ||||
(in thousands) |
| Bank Position |
| Amount |
| Fair Value |
| Amount |
| Fair Value |
|
|
| Bank Position |
| Amount |
| Fair Value |
| Amount |
| Fair Value |
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps with Bank clients - Assets |
| Pay variable/receive fixed |
| $ | 6,200 |
| $ | 142 |
| $ | 48,942 |
| $ | 312 |
|
|
| Pay variable/receive fixed |
| $ | 81,453 |
| $ | 4,645 |
| $ | 26,398 |
| $ | 1,264 |
|
|
Interest rate swaps with Bank clients - Liabilities |
| Pay variable/receive fixed |
|
| 60,439 |
|
| (1,885) |
|
| 12,477 |
|
| (228) |
|
|
| Pay variable/receive fixed |
|
| 1,174 |
|
| (6) |
|
| 54,718 |
|
| (908) |
|
|
Interest rate swaps with Bank clients - Total |
| Pay variable/receive fixed |
| $ | 66,639 |
| $ | (1,743) |
| $ | 61,419 |
| $ | 84 |
|
|
| Pay variable/receive fixed |
| $ | 82,627 |
| $ | 4,639 |
| $ | 81,116 |
| $ | 356 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Offsetting interest rate swaps with institutional swap dealer |
| Pay fixed/receive variable |
|
| 66,639 |
|
| 1,743 |
|
| 61,419 |
|
| (84) |
|
|
| Pay fixed/receive variable |
|
| 82,627 |
|
| (4,639) |
|
| 81,116 |
|
| (356) |
|
|
Total |
|
|
| $ | 133,278 |
| $ | — |
| $ | 122,838 |
| $ | — |
|
|
|
|
| $ | 165,254 |
| $ | — |
| $ | 162,232 |
| $ | — |
|
|
The Bank is required to pledge securities as collateral when the Bank is in a net loss position for all swaps with dealer counterparties when such net loss positions exceed $250,000. The fair value of cash or investment securities pledged as collateral by the Bank to cover such net loss positions totaled $1.5$4.8 million and $1.5$0.0 million at June 30, 20182019 and December 31, 2017.2018.
5458
12.13. EARNINGS PER SHARE
The Company calculates earnings per share under the two-class method. Under the two-class method, earnings available to common shareholders for the period are allocated between Class A Common Stock and Class B Common Stock according to dividends declared (or accumulated) and participation rights in undistributed earnings. The difference in earnings per share between the two classes of common stock results from the 10% per share cash dividend premium paid on Class A Common Stock over that paid on Class B Common Stock.
A reconciliation of the combined Class A and Class B Common Stock numerators and denominators of the earnings per share and diluted earnings per share computations is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
|
| Three Months Ended |
| Six Months Ended |
|
|
| Three Months Ended |
| Six Months Ended |
| ||||||||||||||||
|
| June 30, |
| June 30, |
|
| June 30, |
| June 30, |
| ||||||||||||||||||
(in thousands, except per share data) |
|
| 2018 |
| 2017 |
| 2018 |
| 2017 |
|
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Net income |
| $ | 15,666 |
| $ | 10,071 |
| $ | 43,135 |
| $ | 30,088 |
|
| $ | 18,007 |
| $ | 15,666 |
| $ | 47,523 |
| $ | 43,135 |
| ||
Dividends declared on Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Class A Shares |
| (4,518) |
| (4,095) |
| (9,035) |
| (7,986) |
|
| (4,932) |
| (4,518) |
| (9,865) |
| (9,035) |
| ||||||||||
Class B Shares |
|
| (487) |
|
| (449) |
|
| (981) |
|
| (876) |
|
|
| (530) |
|
| (487) |
|
| (1,061) |
|
| (981) |
| ||
Undistributed net income for basic earnings per share |
|
| 10,661 |
|
| 5,527 |
|
| 33,119 |
|
| 21,226 |
|
|
| 12,545 |
|
| 10,661 |
|
| 36,597 |
|
| 33,119 |
| ||
Weighted average potential dividends on Class A shares upon exercise of dilutive options |
|
| (35) |
|
| (17) |
|
| (64) |
|
| (34) |
|
|
| (32) |
|
| (35) |
|
| (68) |
|
| (64) |
| ||
Undistributed net income for diluted earnings per share |
| $ | 10,626 |
| $ | 5,510 |
| $ | 33,055 |
| $ | 21,192 |
|
| $ | 12,513 |
| $ | 10,626 |
| $ | 36,529 |
| $ | 33,055 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Class A Shares |
|
| 18,935 |
|
| 18,883 |
|
| 18,704 |
|
| 18,675 |
|
|
| 18,804 |
|
| 18,935 |
|
| 18,785 |
|
| 18,704 |
| ||
Class B Shares |
|
| 2,252 |
|
| 2,268 |
|
| 2,235 |
|
| 2,243 |
|
|
| 2,212 |
|
| 2,252 |
|
| 2,212 |
|
| 2,235 |
| ||
Effect of dilutive securities on Class A Shares outstanding |
|
| 144 |
|
| 79 |
|
| 133 |
|
| 78 |
|
|
| 122 |
|
| 144 |
|
| 128 |
|
| 133 |
| ||
Weighted average shares outstanding including dilutive securities |
|
| 21,331 |
|
| 21,230 |
|
| 21,072 |
|
| 20,996 |
|
|
| 21,138 |
|
| 21,331 |
|
| 21,125 |
|
| 21,072 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Basic earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Class A Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Per share dividends distributed |
| $ | 0.24 |
| $ | 0.22 |
| $ | 0.48 |
| $ | 0.43 |
|
| $ | 0.26 |
| $ | 0.24 |
| $ | 0.53 |
| $ | 0.48 |
| ||
Undistributed earnings per share* |
|
| 0.51 |
|
| 0.26 |
|
| 1.60 |
|
| 1.02 |
|
|
| 0.60 |
|
| 0.51 |
|
| 1.76 |
|
| 1.60 |
| ||
Total basic earnings per share - Class A Common Stock |
| $ | 0.75 |
| $ | 0.48 |
| $ | 2.08 |
| $ | 1.45 |
|
| $ | 0.86 |
| $ | 0.75 |
| $ | 2.29 |
| $ | 2.08 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Class B Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Per share dividends distributed |
| $ | 0.22 |
| $ | 0.20 |
| $ | 0.44 |
| $ | 0.39 |
|
| $ | 0.24 |
| $ | 0.22 |
| $ | 0.48 |
| $ | 0.44 |
| ||
Undistributed earnings per share* |
|
| 0.46 |
|
| 0.24 |
|
| 1.45 |
|
| 0.93 |
|
|
| 0.55 |
|
| 0.46 |
|
| 1.60 |
|
| 1.45 |
| ||
Total basic earnings per share - Class B Common Stock |
| $ | 0.68 |
| $ | 0.44 |
| $ | 1.89 |
| $ | 1.32 |
|
| $ | 0.79 |
| $ | 0.68 |
| $ | 2.08 |
| $ | 1.89 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Diluted earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Class A Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Per share dividends distributed |
| $ | 0.24 |
| $ | 0.22 |
| $ | 0.48 |
| $ | 0.43 |
|
| $ | 0.26 |
| $ | 0.24 |
| $ | 0.53 |
| $ | 0.48 |
| ||
Undistributed earnings per share* |
|
| 0.50 |
|
| 0.26 |
|
| 1.58 |
|
| 1.02 |
|
|
| 0.60 |
|
| 0.50 |
|
| 1.75 |
|
| 1.58 |
| ||
Total diluted earnings per share - Class A Common Stock |
| $ | 0.74 |
| $ | 0.48 |
| $ | 2.06 |
| $ | 1.45 |
|
| $ | 0.86 |
| $ | 0.74 |
| $ | 2.28 |
| $ | 2.06 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Class B Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Per share dividends distributed |
| $ | 0.22 |
| $ | 0.20 |
| $ | 0.44 |
| $ | 0.39 |
|
| $ | 0.24 |
| $ | 0.22 |
| $ | 0.48 |
| $ | 0.44 |
| ||
Undistributed earnings per share* |
|
| 0.46 |
|
| 0.24 |
|
| 1.44 |
|
| 0.93 |
|
|
| 0.54 |
|
| 0.46 |
|
| 1.59 |
|
| 1.44 |
| ||
Total diluted earnings per share - Class B Common Stock |
| $ | 0.68 |
| $ | 0.44 |
| $ | 1.88 |
| $ | 1.32 |
|
| $ | 0.78 |
| $ | 0.68 |
| $ | 2.07 |
| $ | 1.88 |
|
*To arrive at undistributed earnings per share, undistributed net income is first pro rated between Class A and Class B Common Shares, with Class A Common Shares receiving a 10% premium. The resulting pro-rated, undistributed net income for each class is then divided by the weighted average shares for each class.
The following table presents stockStock options excluded from the detailed earnings per share calculation because their impact was antidilutive:antidilutive are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Six Months Ended |
|
| Three Months Ended |
| Six Months Ended |
| ||||||||
|
| June 30, |
| June 30, |
|
| June 30, |
| June 30, |
| ||||||||
|
| 2018 |
| 2017 |
| 2018 |
| 2017 |
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Antidilutive stock options |
| 3,000 |
| 2,500 |
| 3,000 |
| 2,500 |
|
| 160,000 |
| 3,000 |
| 165,000 |
| 3,000 |
|
Average antidilutive stock options |
| 400 |
| 1,166 |
| 200 |
| 584 |
|
| 156,000 |
| 400 |
| 159,000 |
| 200 |
|
55
13. STOCK PLANS AND STOCK BASED COMPENSATION
In 2015, the Company’s Board of Directors adopted the Republic Bancorp, Inc. 2015 Stock Incentive Plan (the “2015 Plan”), which became effective April 23, 2015 when the Company’s shareholders approved the 2015 Plan. The 2015 Plan replaced the Company’s 2005 Stock Incentive Plan, which expired on March 15, 2015.
The number of authorized shares under the 2015 Plan is fixed at 3,000,000, with such number subject to adjustment in the event of certain circumstances, such as stock dividends, stock splits, or the like. There is a minimum three-year vesting period for awards granted to employees under the 2015 Plan that vest based solely on the completion of a specified period of service, with options generally exercisable five to six years after the issue date. Stock options generally must be exercised within one year from the date the options become exercisable and have an exercise price that is at least equal to the fair market value of the Company’s stock on their grant date.
All shares issued under the above-mentioned plans were from authorized and reserved unissued shares. The Company has a sufficient number of authorized and reserved unissued shares to satisfy all anticipated option exercises. There are no Class B stock options outstanding or available for exercise under the Company’s plans.
Stock Options
The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes based stock option valuation model. This model requires the input of subjective assumptions that will usually have a significant impact on the fair value estimate. Expected volatilities are based on historical volatility of Republic’s stock and other factors. Expected dividends are based on dividend trends and the market price of Republic’s stock price at grant. Republic uses historical data to estimate option exercises and employee terminations within the valuation model. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve at the time of grant.
The following table summarizes stock option activity from January 1, 2017 through June 30, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted |
|
|
|
|
|
|
|
| Weighted |
| Average |
|
|
|
| |
|
| Options |
| Average |
| Remaining |
| Aggregate |
| ||
|
| Class A |
| Exercise |
| Contractual |
| Intrinsic |
| ||
|
| Shares |
| Price |
| Term |
| Value |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, January 1, 2017 |
| 312,600 |
| $ | 24.49 |
|
|
|
|
|
|
Granted |
| 4,500 |
|
| 35.54 |
|
|
|
|
|
|
Exercised |
| (3,500) |
|
| 19.63 |
|
|
|
|
|
|
Forfeited or expired |
| (18,600) |
|
| 24.99 |
|
|
|
|
|
|
Outstanding, December 31, 2017 |
| 295,000 |
| $ | 24.68 |
| 2.86 |
| $ | 3,935,010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, January 1, 2018 |
| 295,000 |
| $ | 24.68 |
|
|
|
|
|
|
Granted |
| 3,000 |
|
| 45.50 |
|
|
|
|
|
|
Exercised |
| (2,000) |
|
| 24.44 |
|
|
|
|
|
|
Forfeited or expired |
| (4,600) |
|
| 24.47 |
|
|
|
|
|
|
Outstanding, June 30, 2018 |
| 291,400 |
| $ | 24.90 |
| 2.41 |
| $ | 5,945,072 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested |
| 291,400 |
| $ | 24.90 |
| 2.41 |
| $ | 5,945,072 |
|
Exercisable (vested) at June 30, 2018 |
| — |
| $ | — |
| — |
| $ | — |
|
56
The following table presents information related to stock options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended June 30, |
| Six Months Ended June 30, |
| ||||||||
(in thousands, except per share data) |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intrinsic value of options exercised |
| $ | 42 |
| $ | — |
| $ | 42 |
| $ | 44 |
|
Cash received from options exercised, net of shares redeemed |
|
| 48 |
|
| — |
|
| 48 |
|
| 33 |
|
Weighted-average fair value per share of options granted |
|
| 8.01 |
|
| 5.61 |
|
| NA |
|
| 5.61 |
|
NA - Not applicable
Restricted Stock Awards
Restricted stock awards generally vest within six years after issue, with accelerated vesting due to “change in control” or “death or disability of a participant” as defined and outlined in the 2015 Plan.
The following table summarizes restricted stock awards activity from January 1, 2017 through June 30, 2018:
|
|
|
|
|
|
|
| Restricted |
|
| |
|
| Stock Awards |
| Weighted-Average | |
|
| Class A Shares |
| Grant Date Fair Value | |
Outstanding, January 1, 2017 |
| 77,000 |
| $ | 20.02 |
Granted |
| 7,413 |
|
| 35.77 |
Forfeited |
| (750) |
|
| 19.85 |
Earned and issued |
| (42,053) |
|
| 21.66 |
Outstanding, December 31, 2017 |
| 41,610 |
| $ | 21.18 |
|
|
|
|
|
|
Outstanding, January 1, 2018 |
| 41,610 |
| $ | 21.18 |
Granted |
| 38,323 |
|
| 38.64 |
Forfeited |
| (750) |
|
| 19.85 |
Earned and issued |
| (2,323) |
|
| 43.60 |
Outstanding, June 30, 2018 |
| 76,860 |
| $ | 29.22 |
|
|
|
|
|
|
Unvested |
| 76,860 |
| $ | 29.22 |
Performance Stock Units
The Company first granted performance stock units (“PSUs”) under the 2015 Plan in January 2016. Shares of stock underlying the PSUs may be earned over a four-year performance period commencing on January 1, 2017 and ending on December 31, 2020 as follows:
|
|
|
|
57
|
|
The following table summarizes PSU activity from January 1, 2017 through June 30, 2018:
|
|
|
|
|
|
|
| Performance |
|
|
|
|
| Stock Units |
| Weighted-Average | |
|
| Class A Shares |
| Grant Date Fair Value | |
Outstanding, January 1, 2017 |
| 55,000 |
| $ | 23.13 |
Granted |
| — |
|
| — |
Forfeited |
| (6,500) |
|
| 23.48 |
Earned and issued |
| — |
|
| — |
Outstanding, December 31, 2017 |
| 48,500 |
| $ | 23.08 |
|
|
|
|
|
|
Outstanding, January 1, 2018 |
| 48,500 |
| $ | 23.08 |
Granted |
| — |
|
| — |
Forfeited |
| — |
|
| — |
Earned and issued |
| — |
|
| — |
Outstanding, June 30, 2018 |
| 48,500 |
| $ | 23.08 |
|
|
|
|
|
|
Unvested |
| 48,500 |
| $ | 23.08 |
Expense Related to the 2015 Stock Incentive Plan
All share-based payments to employees, including grants of employee stock options, are recognized as compensation expense over the service period (generally the vesting period) in the consolidated financial statements based on their fair values. Grants to non-employee directors are included within director fees, a component of other noninterest expense.
The Company recorded expense related to the 2015 Plan for the three and six months ended June 30, 2018 and 2017 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Six Months Ended |
| ||||||||
|
| June 30, |
| June 30, |
| ||||||||
(in thousands) |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock option expense |
| $ | 56 |
| $ | 63 |
| $ | 118 |
| $ | 126 |
|
Restricted stock award expense |
|
| 254 |
|
| 77 |
|
| 318 |
|
| 292 |
|
Performance stock unit expense |
|
| 27 |
|
| 105 |
|
| 53 |
|
| 237 |
|
Total expense |
| $ | 337 |
| $ | 245 |
| $ | 489 |
| $ | 655 |
|
Unrecognized expenses related to unvested awards (net of estimated forfeitures) under the 2015 Plan are estimated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock |
|
| Restricted | Performance |
|
|
|
| |||
Year Ended (in thousands) |
| Options |
|
| Stock Awards | Stock Units |
| Total |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018 |
| $ | 122 |
| $ | 212 |
| $ | 91 |
| $ | 425 |
|
2019 |
|
| 142 |
|
| 261 |
|
| — |
|
| 403 |
|
2020 |
|
| 39 |
|
| 261 |
|
| — |
|
| 300 |
|
2021 |
|
| 9 |
|
| 261 |
|
| — |
|
| 270 |
|
2022 |
|
| 6 |
|
| 237 |
|
| — |
|
| 243 |
|
2023 and beyond |
|
| 2 |
|
| 135 |
|
| — |
|
| 137 |
|
Total |
| $ | 320 |
| $ | 1,367 |
| $ | 91 |
| $ | 1,778 |
|
58
Deferred Compensation
On April 19, 2018, the shareholders of Republic approved an amendment and restatement of the Non-Employee Director and Key Employee Deferred Compensation Plan (the “Plan”). Prior to the Plan’s 2018 amendment and restatement, only directors participated in the plan, with the 2018 amendment and restatement initiating key-employee participation. The Plan provides non-employee directors and designated key employees the ability to defer compensation and have those deferred amounts then paid later in Company Class A Common shares based on the shares that could have been acquired as the deferrals were made. The Company maintains a bookkeeping account for each director or key-employee participant, and at the end of each fiscal quarter, deferred compensation is converted to “stock units” equal to the amount of compensation deferred during the quarter divided by the quarter-end fair market value of the Company’s Class A Common stock. Stock units for each participant’s account are also credited with an amount equal to the cash dividends that would have been paid on the number of stock units in the account if the stock units were deemed to be outstanding shares of stock. Any dividends credited are converted into additional stock units at the end of the fiscal quarter in which the dividends were paid.
DIRECTORS
Members of the Board of Directors may defer board and committee fees from two to five years, with each director participant retaining a nonforfeitable interest in his or her deferred compensation account.
The following table presents information on director deferred compensation under the Plan for the periods presented:
|
|
|
|
|
|
|
| Outstanding |
| Weighted-Average | |
|
| Stock |
| Market Price | |
|
| Units |
| at Date of Deferral | |
Outstanding, January 1, 2017 |
| 64,155 |
| $ | 22.94 |
Deferred fees and dividend equivalents converted to stock units |
| 5,199 |
|
| 36.81 |
Stock units converted to Class A Common Shares |
| (5,456) |
|
| 22.84 |
Outstanding, December 31, 2017 |
| 63,898 |
| $ | 24.08 |
|
|
|
|
|
|
Outstanding, January 1, 2018 |
| 63,898 |
| $ | 24.08 |
Deferred fees and dividend equivalents converted to stock units |
| 2,426 |
|
| 41.16 |
Stock units converted to Class A Common Shares |
| (2,835) |
|
| 23.94 |
Outstanding, June 30, 2018 |
| 63,489 |
| $ | 24.74 |
|
|
|
|
|
|
Vested |
| 63,489 |
| $ | 24.74 |
KEY EMPLOYEES
Designated key employees may defer a portion of their base salaries on a pre-tax basis under the Plan, with the Company matching employee deferrals up to a prescribed limit. With limited exception, the Company match amount remains unvested until December 31st of the year that is five years from the beginning of the year that the Company match is made.
The following table presents information on key employee deferred compensation under the Plan for the periods presented:
|
|
|
|
|
|
|
| Outstanding |
| Weighted-Average | |
|
| Stock |
| Market Price | |
|
| Units |
| at Date of Deferral | |
Outstanding, January 1, 2018 |
| — |
| $ | — |
Deferred base salaries and dividend equivalents converted to stock units |
| 1,241 |
|
| 45.30 |
Matching stock units credited |
| 1,241 |
|
| 45.30 |
Stock units converted to Class A Common Shares |
| — |
|
| — |
Outstanding, June 30, 2018 |
| 2,482 |
| $ | 45.30 |
|
|
|
|
|
|
Vested |
| 1,241 |
| $ | 45.30 |
Unvested |
| 1,241 |
| $ | 45.30 |
59
14. INCOME TAXES
On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) reduced the federal corporate rate from 35% to 21%, effective January 1, 2018. Primarily as a result of the TCJA, the Company’s effective tax rate decreased significantly from 2017 to 2018. The following table illustrates the difference between the Company’s effective tax rate and the federal rates for the three and six months ended June 30, 2018 and 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Six Months Ended |
| ||||||||
|
| June 30, |
| June 30, |
| ||||||||
(in thousands) |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal rate times financial statement income |
|
| 21.00 | % |
| 35.00 | % |
| 21.00 | % |
| 35.00 | % |
Effect of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
State taxes, net of federal benefit |
|
| 0.82 |
|
| 1.41 |
|
| 1.54 |
|
| 0.64 |
|
General business tax credits |
|
| (0.63) |
|
| — |
|
| (0.31) |
|
| — |
|
Nontaxable income |
|
| (1.35) |
|
| (2.54) |
|
| (0.94) |
|
| (1.55) |
|
Other, net |
|
| 1.10 |
|
| 0.17 |
|
| (0.11) |
|
| (0.45) |
|
Effective tax rate |
|
| 20.94 |
|
| 34.04 |
|
| 21.18 |
|
| 33.64 |
|
As a result of the reduced tax rate, the Company incurred a charge of $6.3 million to income tax expense during the fourth quarter of 2017 representing the decrease in value of its net DTA upon enactment of the TCJA. With the exception of deferred taxes related to depreciation on a portion of its property and equipment, the Company has materially completed its accounting for the tax effects upon enactment of the TCJA. Regarding its deferred taxes related to depreciation, the Company awaits the completion of a cost segregation study. At June 30, 2018 and December 31, 2017, the Company did not have the necessary information available, analyzed or prepared to make a reasonable estimate of the impact of the cost segregation study on its deferred taxes related to depreciation. The cost segregation study is scheduled to be completed in the latter half of 2018, prior to the Company’s filing of its 2017 income tax returns. The cost segregation study is expected to provide the Company with the necessary information to complete the accounting for the deferred taxes related to depreciation.
60
15.
14. OTHER COMPREHENSIVE INCOME
The following table presents OCI components and related tax effects:effects were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Six Months Ended |
|
| Three Months Ended |
| Six Months Ended |
| ||||||||||||||||
|
| June 30, |
| June 30, |
|
| June 30, |
| June 30, |
| ||||||||||||||||
(in thousands) |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-Sale Debt Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized (loss) gain on available-for-sale debt securities (2018), debt and equity securities (2017) |
| $ | (546) |
| $ | 423 |
| $ | (2,663) |
| $ | 1,129 |
| |||||||||||||
Change in unrealized (loss) gain on AFS debt securities |
| $ | 2,014 |
| $ | (546) |
| $ | 5,673 |
| $ | (2,663) |
| |||||||||||||
Adjustment for adoption of ASU 2016-01 |
|
| — |
|
| — |
|
| (428) |
|
| — |
|
|
| — |
|
| — |
|
| — |
|
| (428) |
|
Change in unrealized gain on available-for-sale debt security for which a portion of an other-than-temporary impairment has been recognized in earnings |
|
| (15) |
|
| 101 |
|
| (17) |
|
| 154 |
| |||||||||||||
Change in unrealized gain on AFS debt security for which a portion of OTTI has been recognized in earnings |
|
| (1) |
|
| (15) |
|
| (34) |
|
| (17) |
| |||||||||||||
Net unrealized (losses) gains |
|
| (561) |
|
| 524 |
|
| (3,108) |
|
| 1,283 |
|
|
| 2,013 |
|
| (561) |
|
| 5,639 |
|
| (3,108) |
|
Tax effect |
|
| 118 |
|
| (183) |
|
| 652 |
|
| (450) |
|
|
| (422) |
|
| 118 |
|
| (1,186) |
|
| 652 |
|
Net of tax |
|
| (443) |
|
| 341 |
|
| (2,456) |
|
| 833 |
|
|
| 1,591 |
|
| (443) |
|
| 4,453 |
|
| (2,456) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow Hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of derivatives used for cash flow hedges |
|
| 77 |
|
| (104) |
|
| 276 |
|
| (76) |
|
|
| (146) |
|
| 77 |
|
| (215) |
|
| 276 |
|
Reclassification amount for derivative losses realized in income |
|
| 9 |
|
| 58 |
|
| 35 |
|
| 124 |
| |||||||||||||
Reclassification amount for net derivative losses realized in income |
|
| (13) |
|
| 9 |
|
| (32) |
|
| 35 |
| |||||||||||||
Net unrealized gains |
|
| 86 |
|
| (46) |
|
| 311 |
|
| 48 |
|
|
| (159) |
|
| 86 |
|
| (247) |
|
| 311 |
|
Tax effect |
|
| (19) |
|
| 16 |
|
| (64) |
|
| (16) |
|
|
| 33 |
|
| (19) |
|
| 53 |
|
| (64) |
|
Net of tax |
|
| 67 |
|
| (30) |
|
| 247 |
|
| 32 |
|
|
| (126) |
|
| 67 |
|
| (194) |
|
| 247 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive (loss) income components, net of tax |
| $ | (376) |
| $ | 311 |
| $ | (2,209) |
| $ | 865 |
|
| $ | 1,465 |
| $ | (376) |
| $ | 4,259 |
| $ | (2,209) |
|
The following table below presents the significant amounts reclassified out of each component of AOCI for the three and six months ended June 30, 2018 and 2017:AOCI:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
| Amounts Reclassified from Accumulated |
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
|
|
| Other Comprehensive Income |
|
|
|
| Amounts Reclassified from AOCI |
| ||||||||||||||||||||
|
| Affected Line Items |
| Three Months Ended |
| Six Months Ended |
|
| Affected Line Items |
| Three Months Ended |
| Six Months Ended |
| ||||||||||||||||
|
| in the Consolidated |
| June 30, |
| June 30, |
|
| in the Consolidated |
| June 30, |
| June 30, |
| ||||||||||||||||
(in thousands) |
| Statements of Income |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
|
| Statements of Income |
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Cash Flow Hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Interest rate swap on money market deposits |
| Interest expense on deposits |
| $ | (3) |
| $ | (29) |
| $ | (20) |
| $ | (63) |
|
| Interest benefit (expense) on deposits |
| $ | 8 |
| $ | (3) |
| $ | 16 |
| $ | (20) |
|
Interest rate swap on FHLB advance |
| Interest expense on FHLB advances |
|
| (6) |
|
| (29) |
|
| (15) |
|
| (61) |
|
| Interest benefit (expense) on FHLB advances |
|
| 5 |
|
| (6) |
|
| 16 |
|
| (15) |
|
Total derivative losses on cash flow hedges |
| Total interest expense |
|
| (9) |
|
| (58) |
|
| (35) |
|
| (124) |
|
| Total interest benefit (expense) |
|
| 13 |
|
| (9) |
|
| 32 |
|
| (35) |
|
Tax effect |
| Income tax expense |
|
| 2 |
|
| 20 |
|
| 7 |
|
| 43 |
|
| Income tax (benefit) expense |
|
| (3) |
|
| 2 |
|
| (7) |
|
| 7 |
|
Net of tax |
| Net income |
| $ | (7) |
| $ | (38) |
| $ | (28) |
| $ | (81) |
|
| Net income |
| $ | 10 |
| $ | (7) |
| $ | 25 |
| $ | (28) |
|
The following tables summarizeis a summary of the AOCI balances, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2018 |
|
|
|
| |
(in thousands) |
| December 31, 2017 |
| Change |
| June 30, 2018 |
| |||
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on available-for-sale debt securities and reclassification of equity securities |
| $ | (604) |
| $ | (2,443) |
| $ | (3,047) |
|
Unrealized gain (loss) on available-for-sale debt security for which a portion of an other-than-temporary impairment has been recognized in earnings |
|
| 1,093 |
|
| (13) |
|
| 1,080 |
|
Unrealized gain (loss) on cash flow hedges |
|
| (73) |
|
| 247 |
|
| 174 |
|
Total unrealized gain (loss) |
| $ | 416 |
| $ | (2,209) |
| $ | (1,793) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2019 |
|
|
|
| |
(in thousands) |
| December 31, 2018 |
| Change |
| June 30, 2019 |
| |||
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on AFS debt securities |
| $ | (2,165) |
| $ | 4,480 |
| $ | 2,315 |
|
Unrealized gain (loss) on AFS debt security for which a portion of OTTI has been recognized in earnings |
|
| 1,078 |
|
| (27) |
|
| 1,051 |
|
Unrealized gain (loss) on cash flow hedges |
|
| 90 |
|
| (194) |
|
| (104) |
|
Total unrealized (loss) gain |
| $ | (997) |
| $ | 4,259 |
| $ | 3,262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2017 |
|
|
|
| |
(in thousands) |
| December 31, 2016 |
| Change |
| June 30, 2017 |
| |||
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on available-for-sale debt and equity securities |
| $ | 237 |
| $ | 733 |
| $ | 970 |
|
Unrealized gain on available-for-sale debt security for which a portion of an other-than-temporary impairment has been recognized in earnings |
|
| 706 |
|
| 100 |
|
| 806 |
|
Unrealized gain (loss) on cash flow hedges |
|
| (256) |
|
| 32 |
|
| (224) |
|
Total unrealized gain |
| $ | 687 |
| $ | 865 |
| $ | 1,552 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2018 |
|
|
|
| |
(in thousands) |
| December 31, 2017 |
| Change |
| June 30, 2018 |
| |||
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on AFS debt securities |
| $ | (604) |
| $ | (2,443) |
| $ | (3,047) |
|
Unrealized gain (loss) on AFS debt security for which a portion of OTTI has been recognized in earnings |
|
| 1,093 |
|
| (13) |
|
| 1,080 |
|
Unrealized gain (loss) on cash flow hedges |
|
| (73) |
|
| 247 |
|
| 174 |
|
Total unrealized gain (loss) |
| $ | 416 |
| $ | (2,209) |
| $ | (1,793) |
|
6160
16.15. REVENUE FROM CONTRACTS WITH CUSTOMERS
On January 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers and all subsequent amendments to the ASU (collectively, “ASC 606”). While this update modified guidance for recognizing revenue, it did not have a material impact on the timing or presentation of the Company’s revenue. The majority of the Company’s revenue comes from interest income and other sources, including loans, leases, securities, and derivatives, which are not subject to ASC 606. The Company’s services that fall within the scope of ASC 606 are presented within noninterest income and are recognized as revenue as the Company satisfies its obligation to its client. The Company did elect a practical expedient permitted under this guidance which allows it to expense as-incurred incremental costs of obtaining a contract when the amortization period of those costs would be less than one year.
The following tables present the Company’s net revenue by reportable segment for the three and six months ended June 30, 2018 and 2017:segment:
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| Three Months Ended June 30, 2018 |
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| Three Months Ended June 30, 2019 |
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| Core Banking |
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| Republic Processing Group ("RPG") |
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| Core Banking |
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| Republic Processing Group |
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| Total |
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| Tax |
| Republic |
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| Total |
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| Tax |
| Republic |
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| Traditional |
| Warehouse |
| Mortgage |
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| Core |
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| Refund |
| Credit |
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| Total |
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| Total |
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| Traditional |
| Warehouse |
| Mortgage |
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| Core |
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| Refund |
| Credit |
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| Total |
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| Total |
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(dollars in thousands) |
| Banking |
| Lending |
| Banking |
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| Banking |
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| Solutions |
| Solutions |
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| RPG |
|
|
| Company |
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| Banking |
| Lending |
| Banking |
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| Banking |
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| Solutions |
| Solutions |
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| RPG |
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| Company |
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Net interest income(1) |
| $ | 39,348 |
| $ | 4,164 |
| $ | 103 |
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| $ | 43,615 |
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| $ | 328 |
| $ | 7,141 |
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| $ | 7,469 |
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| $ | 51,084 |
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| $ | 41,877 |
| $ | 3,957 |
| $ | 170 |
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| $ | 46,004 |
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| $ | 710 |
| $ | 7,232 |
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| $ | 7,942 |
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| $ | 53,946 |
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Noninterest income: |
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Service charges on deposit accounts |
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| 3,563 |
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| 11 |
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| — |
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| 3,574 |
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| — |
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| — |
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| — |
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| 3,574 |
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| 3,585 |
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| 13 |
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| — |
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| 3,598 |
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| — |
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| — |
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| — |
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| 3,598 |
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Net refund transfer fees |
|
| — |
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| — |
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| — |
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| — |
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| 3,473 |
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| — |
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| 3,473 |
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| 3,473 |
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|
| — |
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| — |
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| — |
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| — |
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| 3,629 |
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| — |
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| 3,629 |
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| 3,629 |
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Mortgage banking income(1) |
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| — |
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| — |
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| 1,316 |
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| 1,316 |
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| — |
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| — |
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| — |
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| 1,316 |
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| — |
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| — |
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| 2,416 |
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| 2,416 |
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| — |
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| — |
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| — |
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| 2,416 |
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Interchange fee income |
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| 2,793 |
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| — |
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| — |
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| 2,793 |
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|
| 79 |
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| 19 |
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| 98 |
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| 2,891 |
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|
| 3,168 |
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| — |
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| — |
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| 3,168 |
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|
| 89 |
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| — |
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| 89 |
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| 3,257 |
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Program fees(1) |
|
| — |
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| — |
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| — |
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| — |
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| 124 |
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| 1,199 |
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|
| 1,323 |
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| 1,323 |
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|
| — |
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| — |
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| — |
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| — |
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| 50 |
|
| 987 |
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| 1,037 |
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| 1,037 |
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Increase in cash surrender value of BOLI(1) |
|
| 379 |
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| — |
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| — |
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| 379 |
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| — |
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| — |
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| — |
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| 379 |
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| 377 |
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| — |
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| — |
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|
| 377 |
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| — |
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| — |
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| — |
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|
| 377 |
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Net gains (losses) on OREO |
|
| 320 |
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| — |
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| — |
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| 320 |
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|
| — |
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| — |
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| — |
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|
|
| 320 |
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|
| 90 |
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| — |
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| — |
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| 90 |
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| — |
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| — |
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| — |
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| 90 |
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Other |
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| 670 |
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| — |
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| 49 |
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| 719 |
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| 1 |
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| 300 |
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| 301 |
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| 1,020 |
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| 633 |
|
| — |
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| 56 |
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|
| 689 |
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| — |
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| 32 |
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| 32 |
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|
| 721 |
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Total noninterest income |
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| 7,725 |
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| 11 |
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| 1,365 |
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| 9,101 |
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| 3,677 |
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| 1,518 |
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| 5,195 |
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| 14,296 |
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| 7,853 |
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| 13 |
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| 2,472 |
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| 10,338 |
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| 3,768 |
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| 1,019 |
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| 4,787 |
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| 15,125 |
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Total net revenue |
| $ | 47,073 |
| $ | 4,175 |
| $ | 1,468 |
|
| $ | 52,716 |
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| $ | 4,005 |
| $ | 8,659 |
|
| $ | 12,664 |
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| $ | 65,380 |
|
| $ | 49,730 |
| $ | 3,970 |
| $ | 2,642 |
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| $ | 56,342 |
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| $ | 4,478 |
| $ | 8,251 |
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| $ | 12,729 |
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| $ | 69,071 |
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Net-revenue concentration(2) |
|
| 73 | % |
| 6 | % |
| 2 | % |
|
| 81 | % |
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| 6 | % |
| 13 | % |
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| 19 | % |
|
|
| 100 | % |
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| 72 | % |
| 6 | % |
| 4 | % |
|
| 82 | % |
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| 6 | % |
| 12 | % |
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| 18 | % |
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| 100 | % |
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| ||||||||||||
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| Three Months Ended June 30, 2017 |
|
| Three Months Ended June 30, 2018 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Core Banking |
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| Republic Processing Group ("RPG") |
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| Core Banking |
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| Republic Processing Group |
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| ||||||||||||||||||||||||||||||||||||||||
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| Total |
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| Tax |
| Republic |
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| Total |
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| Tax |
| Republic |
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| |||||||||
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| Traditional |
| Warehouse |
| Mortgage |
|
| Core |
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| Refund |
| Credit |
|
| Total |
|
|
| Total |
|
| Traditional |
| Warehouse |
| Mortgage |
|
| Core |
|
| Refund |
| Credit |
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| Total |
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| Total |
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(dollars in thousands) |
| Banking |
| Lending |
| Banking |
|
| Banking |
|
| Solutions |
| Solutions |
|
| RPG |
|
|
| Company |
|
| Banking |
| Lending |
| Banking |
|
| Banking |
|
| Solutions |
| Solutions |
|
| RPG |
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| Company |
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Net interest income(1) |
| $ | 33,434 |
| $ | 4,435 |
| $ | 86 |
|
| $ | 37,955 |
|
| $ | 157 |
| $ | 5,025 |
|
| $ | 5,182 |
|
|
| $ | 43,137 |
|
| $ | 39,348 |
| $ | 4,164 |
| $ | 103 |
|
| $ | 43,615 |
|
| $ | 328 |
| $ | 7,141 |
|
| $ | 7,469 |
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| $ | 51,084 |
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Noninterest income: |
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Service charges on deposit accounts |
|
| 3,380 |
|
| 10 |
|
| — |
|
|
| 3,390 |
|
|
| — |
|
| — |
|
|
| — |
|
|
|
| 3,390 |
|
|
| 3,563 |
|
| 11 |
|
| — |
|
|
| 3,574 |
|
|
| — |
|
| — |
|
|
| — |
|
|
|
| 3,574 |
|
Net refund transfer fees |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| 2,770 |
|
| — |
|
|
| 2,770 |
|
|
|
| 2,770 |
|
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| 3,473 |
|
| — |
|
|
| 3,473 |
|
|
|
| 3,473 |
|
Mortgage banking income(1) |
|
| — |
|
| — |
|
| 1,445 |
|
|
| 1,445 |
|
|
| — |
|
| — |
|
|
| — |
|
|
|
| 1,445 |
|
|
| — |
|
| — |
|
| 1,316 |
|
|
| 1,316 |
|
|
| — |
|
| — |
|
|
| — |
|
|
|
| 1,316 |
|
Interchange fee income |
|
| 2,457 |
|
| — |
|
| — |
|
|
| 2,457 |
|
|
| 74 |
|
| 16 |
|
|
| 90 |
|
|
|
| 2,547 |
|
|
| 2,793 |
|
| — |
|
| — |
|
|
| 2,793 |
|
|
| 79 |
|
| 19 |
|
|
| 98 |
|
|
|
| 2,891 |
|
Program fees(1) |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| 56 |
|
| 1,228 |
|
|
| 1,284 |
|
|
|
| 1,284 |
|
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| 124 |
|
| 1,199 |
|
|
| 1,323 |
|
|
|
| 1,323 |
|
Increase in cash surrender value of BOLI(1) |
|
| 393 |
|
| — |
|
| — |
|
|
| 393 |
|
|
| — |
|
| — |
|
|
| — |
|
|
|
| 393 |
|
|
| 379 |
|
| — |
|
| — |
|
|
| 379 |
|
|
| — |
|
| — |
|
|
| — |
|
|
|
| 379 |
|
Net gains (losses) on OREO |
|
| 249 |
|
| — |
|
| — |
|
|
| 249 |
|
|
| — |
|
| — |
|
|
| — |
|
|
|
| 249 |
|
|
| 320 |
|
| — |
|
| — |
|
|
| 320 |
|
|
| — |
|
| — |
|
|
| — |
|
|
|
| 320 |
|
Other |
|
| 490 |
|
| — |
|
| 115 |
|
|
| 605 |
|
|
| (5) |
|
| 249 |
|
|
| 244 |
|
|
|
| 849 |
|
|
| 670 |
|
| — |
|
| 49 |
|
|
| 719 |
|
|
| 1 |
|
| 300 |
|
|
| 301 |
|
|
|
| 1,020 |
|
Total noninterest income |
|
| 6,969 |
|
| 10 |
|
| 1,560 |
|
|
| 8,539 |
|
|
| 2,895 |
|
| 1,493 |
|
|
| 4,388 |
|
|
|
| 12,927 |
|
|
| 7,725 |
|
| 11 |
|
| 1,365 |
|
|
| 9,101 |
|
|
| 3,677 |
|
| 1,518 |
|
|
| 5,195 |
|
|
|
| 14,296 |
|
|
|
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|
|
|
|
|
|
|
|
Total net revenue |
| $ | 40,403 |
| $ | 4,445 |
| $ | 1,646 |
|
| $ | 46,494 |
|
| $ | 3,052 |
| $ | 6,518 |
|
| $ | 9,570 |
|
|
| $ | 56,064 |
|
| $ | 47,073 |
| $ | 4,175 |
| $ | 1,468 |
|
| $ | 52,716 |
|
| $ | 4,005 |
| $ | 8,659 |
|
| $ | 12,664 |
|
|
| $ | 65,380 |
|
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|
|
Net-revenue concentration(2) |
|
| 72 | % |
| 8 | % |
| 3 | % |
|
| 83 | % |
|
| 5 | % |
| 12 | % |
|
| 17 | % |
|
|
| 100 | % |
|
| 73 | % |
| 6 | % |
| 2 | % |
|
| 81 | % |
|
| 6 | % |
| 13 | % |
|
| 19 | % |
|
|
| 100 | % |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) | This revenue is not subject to ASU 2014-09, Revenue from Contracts with Customers. |
(2) | Net revenue represents net interest income plus total noninterest income. Net-revenue concentration equals segment-level net revenue divided by total Company net revenue. |
6261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
| Six Months Ended June 30, 2018 |
|
| Six Months Ended June 30, 2019 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Core Banking |
|
| Republic Processing Group ("RPG") |
|
|
|
|
|
| Core Banking |
|
| Republic Processing Group |
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| Total |
|
| Tax |
| Republic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
| Tax |
| Republic |
|
|
|
|
|
|
|
|
| |||||||||
|
| Traditional |
| Warehouse |
| Mortgage |
|
| Core |
|
| Refund |
| Credit |
|
| Total |
|
|
| Total |
|
| Traditional |
| Warehouse |
| Mortgage |
|
| Core |
|
| Refund |
| Credit |
|
| Total |
|
|
| Total |
| ||||||||||||||||
(dollars in thousands) |
| Banking |
| Lending |
| Banking |
|
| Banking |
|
| Solutions |
| Solutions |
|
| RPG |
|
|
| Company |
|
| Banking |
| Lending |
| Banking |
|
| Banking |
|
| Solutions |
| Solutions |
|
| RPG |
|
|
| Company |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income(1) |
| $ | 77,536 |
| $ | 7,755 |
| $ | 175 |
|
| $ | 85,466 |
|
| $ | 19,014 |
| $ | 14,269 |
|
| $ | 33,283 |
|
|
| $ | 118,749 |
|
| $ | 83,224 |
| $ | 6,852 |
| $ | 272 |
|
| $ | 90,348 |
|
| $ | 21,148 |
| $ | 14,749 |
|
| $ | 35,897 |
|
|
| $ | 126,245 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges on deposit accounts |
|
| 7,110 |
|
| 19 |
|
| — |
|
|
| 7,129 |
|
|
| — |
|
| — |
|
|
| — |
|
|
|
| 7,129 |
|
|
| 6,878 |
|
| 23 |
|
| — |
|
|
| 6,901 |
|
|
| — |
|
| — |
|
|
| — |
|
|
|
| 6,901 |
|
Net refund transfer fees |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| 19,825 |
|
| — |
|
|
| 19,825 |
|
|
|
| 19,825 |
|
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| 20,729 |
|
| — |
|
|
| 20,729 |
|
|
|
| 20,729 |
|
Mortgage banking income(1) |
|
| — |
|
| — |
|
| 2,336 |
|
|
| 2,336 |
|
|
| — |
|
| — |
|
|
| — |
|
|
|
| 2,336 |
|
|
| — |
|
| — |
|
| 3,955 |
|
|
| 3,955 |
|
|
| — |
|
| — |
|
|
| — |
|
|
|
| 3,955 |
|
Interchange fee income |
|
| 5,331 |
|
| — |
|
| — |
|
|
| 5,331 |
|
|
| 188 |
|
| 39 |
|
|
| 227 |
|
|
|
| 5,558 |
|
|
| 5,794 |
|
| — |
|
| — |
|
|
| 5,794 |
|
|
| 220 |
|
| — |
|
|
| 220 |
|
|
|
| 6,014 |
|
Program fees(1) |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| 183 |
|
| 2,836 |
|
|
| 3,019 |
|
|
|
| 3,019 |
|
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| 196 |
|
| 1,915 |
|
|
| 2,111 |
|
|
|
| 2,111 |
|
Increase in cash surrender value of BOLI(1) |
|
| 750 |
|
| — |
|
| — |
|
|
| 750 |
|
|
| — |
|
| — |
|
|
| — |
|
|
|
| 750 |
|
|
| 759 |
|
| — |
|
| — |
|
|
| 759 |
|
|
| — |
|
| — |
|
|
| — |
|
|
|
| 759 |
|
Net gains (losses) on OREO |
|
| 452 |
|
| — |
|
| — |
|
|
| 452 |
|
|
| — |
|
| — |
|
|
| — |
|
|
|
| 452 |
|
|
| 220 |
|
| — |
|
| — |
|
|
| 220 |
|
|
| — |
|
| — |
|
|
| — |
|
|
|
| 220 |
|
Other |
|
| 1,084 |
|
| — |
|
| 87 |
|
|
| 1,171 |
|
|
| 1,002 |
|
| 599 |
|
|
| 1,601 |
|
|
|
| 2,772 |
|
|
| 1,098 |
|
| — |
|
| 96 |
|
|
| 1,194 |
|
|
| — |
|
| 659 |
|
|
| 659 |
|
|
|
| 1,853 |
|
Total noninterest income |
|
| 14,727 |
|
| 19 |
|
| 2,423 |
|
|
| 17,169 |
|
|
| 21,198 |
|
| 3,474 |
|
|
| 24,672 |
|
|
|
| 41,841 |
|
|
| 14,749 |
|
| 23 |
|
| 4,051 |
|
|
| 18,823 |
|
|
| 21,145 |
|
| 2,574 |
|
|
| 23,719 |
|
|
|
| 42,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue |
| $ | 92,263 |
| $ | 7,774 |
| $ | 2,598 |
|
| $ | 102,635 |
|
| $ | 40,212 |
| $ | 17,743 |
|
| $ | 57,955 |
|
|
| $ | 160,590 |
|
| $ | 97,973 |
| $ | 6,875 |
| $ | 4,323 |
|
| $ | 109,171 |
|
| $ | 42,293 |
| $ | 17,323 |
|
| $ | 59,616 |
|
|
| $ | 168,787 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net-revenue concentration* |
|
| 57 | % |
| 5 | % |
| 2 | % |
|
| 64 | % |
|
| 25 | % |
| 11 | % |
|
| 36 | % |
|
|
| 100 | % | ||||||||||||||||||||||||||||||
Net-revenue concentration(2) |
|
| 58 | % |
| 4 | % |
| 3 | % |
|
| 65 | % |
|
| 25 | % |
| 10 | % |
|
| 35 | % |
|
|
| 100 | % | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
| Six Months Ended June 30, 2017 |
|
| Six Months Ended June 30, 2018 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Core Banking |
|
| Republic Processing Group ("RPG") |
|
|
|
|
|
| Core Banking |
|
| Republic Processing Group |
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| Total |
|
| Tax |
| Republic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
| Tax |
| Republic |
|
|
|
|
|
|
|
|
| |||||||||
|
| Traditional |
| Warehouse |
| Mortgage |
|
| Core |
|
| Refund |
| Credit |
|
| Total |
|
|
| Total |
|
| Traditional |
| Warehouse |
| Mortgage |
|
| Core |
|
| Refund |
| Credit |
|
| Total |
|
|
| Total |
| ||||||||||||||||
(dollars in thousands) |
| Banking |
| Lending |
| Banking |
|
| Banking |
|
| Solutions |
| Solutions |
|
| RPG |
|
|
| Company |
|
| Banking |
| Lending |
| Banking |
|
| Banking |
|
| Solutions |
| Solutions |
|
| RPG |
|
|
| Company |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income(1) |
| $ | 66,095 |
| $ | 8,335 |
| $ | 153 |
|
| $ | 74,583 |
|
| $ | 15,119 |
| $ | 9,873 |
|
| $ | 24,992 |
|
|
| $ | 99,575 |
|
| $ | 77,536 |
| $ | 7,755 |
| $ | 175 |
|
| $ | 85,466 |
|
| $ | 19,014 |
| $ | 14,269 |
|
| $ | 33,283 |
|
|
| $ | 118,749 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges on deposit accounts |
|
| 6,660 |
|
| 16 |
|
| — |
|
|
| 6,676 |
|
|
| (39) |
|
| — |
|
|
| (39) |
|
|
|
| 6,637 |
|
|
| 7,110 |
|
| 19 |
|
| — |
|
|
| 7,129 |
|
|
| — |
|
| — |
|
|
| — |
|
|
|
| 7,129 |
|
Net refund transfer fees |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| 18,152 |
|
| — |
|
|
| 18,152 |
|
|
|
| 18,152 |
|
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| 19,825 |
|
| — |
|
|
| 19,825 |
|
|
|
| 19,825 |
|
Mortgage banking income(1) |
|
| — |
|
| — |
|
| 2,605 |
|
|
| 2,605 |
|
|
| — |
|
| — |
|
|
| — |
|
|
|
| 2,605 |
|
|
| — |
|
| — |
|
| 2,336 |
|
|
| 2,336 |
|
|
| — |
|
| — |
|
|
| — |
|
|
|
| 2,336 |
|
Interchange fee income |
|
| 4,674 |
|
| — |
|
| — |
|
|
| 4,674 |
|
|
| 171 |
|
| 28 |
|
|
| 199 |
|
|
|
| 4,873 |
|
|
| 5,331 |
|
| — |
|
| — |
|
|
| 5,331 |
|
|
| 188 |
|
| 39 |
|
|
| 227 |
|
|
|
| 5,558 |
|
Program fees(1) |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| 39 |
|
| 2,336 |
|
|
| 2,375 |
|
|
|
| 2,375 |
|
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| 183 |
|
| 2,836 |
|
|
| 3,019 |
|
|
|
| 3,019 |
|
Increase in cash surrender value of BOLI(1) |
|
| 784 |
|
| — |
|
| — |
|
|
| 784 |
|
|
| — |
|
| — |
|
|
| — |
|
|
|
| 784 |
|
|
| 750 |
|
| — |
|
| — |
|
|
| 750 |
|
|
| — |
|
| — |
|
|
| — |
|
|
|
| 750 |
|
Net gains (losses) on OREO |
|
| 366 |
|
| — |
|
| 25 |
|
|
| 391 |
|
|
| — |
|
| — |
|
|
| — |
|
|
|
| 391 |
|
|
| 452 |
|
| — |
|
| — |
|
|
| 452 |
|
|
| — |
|
| — |
|
|
| — |
|
|
|
| 452 |
|
Other |
|
| 1,004 |
|
| — |
|
| 102 |
|
|
| 1,106 |
|
|
| 5 |
|
| 922 |
|
|
| 927 |
|
|
|
| 2,033 |
|
|
| 1,084 |
|
| — |
|
| 87 |
|
|
| 1,171 |
|
|
| 1,002 |
|
| 599 |
|
|
| 1,601 |
|
|
|
| 2,772 |
|
Total noninterest income |
|
| 13,488 |
|
| 16 |
|
| 2,732 |
|
|
| 16,236 |
|
|
| 18,328 |
|
| 3,286 |
|
|
| 21,614 |
|
|
|
| 37,850 |
|
|
| 14,727 |
|
| 19 |
|
| 2,423 |
|
|
| 17,169 |
|
|
| 21,198 |
|
| 3,474 |
|
|
| 24,672 |
|
|
|
| 41,841 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue |
| $ | 79,583 |
| $ | 8,351 |
| $ | 2,885 |
|
| $ | 90,819 |
|
| $ | 33,447 |
| $ | 13,159 |
|
| $ | 46,606 |
|
|
| $ | 137,425 |
|
| $ | 92,263 |
| $ | 7,774 |
| $ | 2,598 |
|
| $ | 102,635 |
|
| $ | 40,212 |
| $ | 17,743 |
|
| $ | 57,955 |
|
|
| $ | 160,590 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net-revenue concentration* |
|
| 58 | % |
| 6 | % |
| 2 | % |
|
| 66 | % |
|
| 24 | % |
| 10 | % |
|
| 34 | % |
|
|
| 100 | % | ||||||||||||||||||||||||||||||
Net-revenue concentration(2) |
|
| 57 | % |
| 5 | % |
| 2 | % |
|
| 64 | % |
|
| 25 | % |
| 11 | % |
|
| 36 | % |
|
|
| 100 | % | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
(1) | This revenue is not subject to ASU 2014-09, Revenue from Contracts with Customers. |
(2) | Net revenue represents net interest income plus total noninterest income. Net-revenue concentration equals segment-level net revenue divided by total Company net revenue. |
6362
The following represents information for significant revenue streams subject to ASC 606:
Service charges on deposits – The Company earns revenue for account-based and event-driven services on its retail and commercial deposit accounts. Contracts for these services are generally in the form of deposit agreements, which disclose fees for deposit services. Revenue for event-driven services is recognized in close proximity or simultaneously with service performance. Revenue for certain account-based services may be recognized at a point in time or over the period the service is rendered, typically no longer than a month. Examples of account-based and event-driven service charges on deposits include per item fees, paper-statement fees, check-cashing fees, and analysis fees.
Net refund transfer fees – A Refund Transfer (“RT”)An RT is a fee-based product offered by the Bank through third-party tax preparers located throughout the United States, as well as tax-preparation software providers (collectively, the “Tax Providers”), with the Bank acting as an independent contractor of the Tax Providers. An RT allows a taxpayer to pay any applicable tax preparation and filing related fees directly from his federal or state government tax refund, with the remainder of the tax refund disbursed directly to the taxpayer. RT fees and all applicable tax preparation, transmitter, audit, and any other taxpayer authorized amounts are deducted from the tax refund by either the Bank or the Bank’s service provider and automatically forwarded to the appropriate party as authorized by the taxpayer. RT fees generally receive first priority when applying fees against the taxpayer’s refund, with the Bank’s share of RT fees generally superior to the claims of other third-party service providers, including the Tax Providers. The remainder of the refund is disbursed to the taxpayer by a Bank check printed at a tax office, direct deposit to the taxpayer’s personal bank account, loaded to a Net SpendNetSpend Visa® Prepaid Card or Walmart Direct2Cash.
The Company executes contracts with individual Tax Providers to offer RTs to their taxpayer customers.taxpayers. RT revenue is recognized by the Bank immediately after the taxpayer’s refund is disbursed in accordance with the RT contract with the taxpayer customer.taxpayer. The fee paid by the taxpayer for the RT is shared between the Bank and the Tax Providers based on contracts executed between the parties.
The Company presents RT revenue net of any amounts shared with the Tax Providers. The Bank’s share of RT revenue is generally based on the obligations undertaken by the Tax Provider for each individual RT program, with more obligations generally corresponding to higher RT revenue share. The significant majority of net RT revenue is recognized and obligations under RT contracts fulfilled by the Bank during the first half of each year. Incremental expenses associated with the fulfilment of RT contracts are generally expensed during the first half of the year.
Interchange fee income – As an “issuing bank” for card transactions, the Company earns interchange fee income on transactions executed by its cardholders with various third-party merchants. Through third-party intermediaries, merchants compensate the Company for each transaction for the ability to efficiently settle the transaction and for the Company’s willingness to accept certain risks inherent in the transaction. There is no written contract between the merchant and the Company, but a contract is implied between the two parties by customary business practices. Interchange fee income is recognized almost simultaneously by the Company upon the completion of a related card transaction.
The Company compensates its cardholders by way of cash or other “rewards” for generating card transactions. These rewards are disclosed in cardholder agreements between the Company and its cardholders. Reward costs are accrued over time based on card transactions generated by the cardholder. Interchange fee income is presented net of reward costs within noninterest income.
Net gains/(losses) on other real estate – The Company routinely sells other real estate (“OREO”)OREO it has acquired through loan foreclosure. Net gains/(losses) on OREO reflect both 1) the gain or loss recognized upon an executed deed and 2) mark-to-market write-downswritedowns the Company takes on its OREO inventory.
The Company generally recognizes gains or losses on OREO at the time of an executed deed, although gains may be recognized over a financing period if the Company finances the sale. For financed OREO sales, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on sale, the Company adjusts the transaction price and related gain/(loss) on sale if a significant financing component is present.
63
Mark-to-market write-downswritedowns taken by the Company during the property’s holding period are generally at least 10% per year but may be higher based on updated real estate appraisals or BPOs. Incremental expenditures to bring OREO to salable condition are generally expensed as-incurred.
64
Capital commitment fee – The Company received and recorded a $1.0 million nonrefundable capital commitment fee during the first quarter of 2018. The fee was paid by a third party upon the Company’s completion of its contractual obligations to build the infrastructure and disburse funds for a new collaborative credit product offered to the third party’s customers through the Bank. The completion of the infrastructure and the first disbursement of funds were made for this new credit product during the first quarter of 2018. Incremental expenses incurred by the Company to fulfilfulfill its obligation under this contract were expensed as-incurred.
17.16. SEGMENT INFORMATION
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 June 30, 2018,2019, the Company was divided into five reportable segments: Traditional Banking, Warehouse, Lending (“Warehouse”), Mortgage Banking, Tax Refund Solutions (“TRS”),TRS and Republic Credit Solutions (“RCS”).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)RPG operations. The Bank’s Correspondent Lending channel and the Company’s national branchless banking platform, MemoryBank®,MemoryBank, are considered part of the Traditional Banking segment.
Prior to the third quarter of 2017, management reported RPG as a segment consisting of its largest division, TRS, along with its relatively smaller divisions, Republic Payment Solutions (“RPS”), and RCS. During the third quarter of 2017, due to RCS’s growth in revenues relative to the total Company’s revenues, management identified TRS and RCS as separate reportable segments under the newly classified RPG operations. Also, as part of the updated segmentation, management is reporting the RPS division, which remained below thresholds to be classified a separate reportable segment, within the newly classified TRS segment. The reportable segments within RPG operations and the divisions within those segments operate through the Bank. The Company has reclassified all prior periods to conform to the current presentation.
The table below provides the nature of segment operations and the primary drivers of net revenuesrevenue by reportable segment:segment are provided below:
|
|
|
|
|
Reportable Segment: |
| Nature of Operations: |
| Primary Drivers of Net Revenue: |
|
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|
|
|
Core Banking: |
|
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|
|
|
|
|
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 |
| 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 |
| 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 20172018 Annual Report on Form 10-K. Republic evaluates segmentSegment performance is evaluated using operating income. The Company allocates goodwillGoodwill is allocated to the Traditional Banking segment. RepublicIncome taxes are generally allocates income taxesallocated based on income before income tax expense unless Republic can reasonably make specific segment allocations. The Company makes transactionsallocations can be reasonably made. Transactions among reportable segments are made at carrying value.
6564
Segment information for the three and six months ended June 30, 2018 and 2017 follows:
|
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|
|
|
|
|
|
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|
|
|
|
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| ||||||||||||
|
| Three Months Ended June 30, 2018 |
|
| Three Months Ended June 30, 2019 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Core Banking |
|
| Republic Processing Group ("RPG") |
|
|
|
|
|
| Core Banking |
|
| Republic Processing Group |
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
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|
|
|
|
| Total |
|
| Tax |
| Republic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
| Tax |
| Republic |
|
|
|
|
|
|
|
|
| ||||||||||
|
| Traditional |
| Warehouse |
| Mortgage |
|
| Core |
|
| Refund |
| Credit |
|
| Total |
|
|
| Total |
|
| Traditional |
| Warehouse |
| Mortgage |
|
| Core |
|
| Refund |
| Credit |
|
| Total |
|
|
| Total |
| ||||||||||||||||
(dollars in thousands) |
| Banking |
| Lending |
| Banking |
|
| Banking |
|
| Solutions |
| Solutions |
|
| RPG |
|
|
| Company |
|
| Banking |
| Lending |
| Banking |
|
| Banking |
|
| Solutions |
| Solutions |
|
| RPG |
|
|
| Company |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
| $ | 39,348 |
| $ | 4,164 |
| $ | 103 |
|
| $ | 43,615 |
|
| $ | 328 |
| $ | 7,141 |
|
| $ | 7,469 |
|
|
| $ | 51,084 |
|
| $ | 41,877 |
| $ | 3,957 |
| $ | 170 |
|
| $ | 46,004 |
|
| $ | 710 |
| $ | 7,232 |
|
| $ | 7,942 |
|
|
| $ | 53,946 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan and lease losses |
|
| 523 |
|
| 250 |
|
| — |
|
|
| 773 |
|
|
| (888) |
|
| 5,047 |
|
|
| 4,159 |
|
|
|
| 4,932 |
|
|
| 1,427 |
|
| 417 |
|
| — |
|
|
| 1,844 |
|
|
| 392 |
|
| 2,224 |
|
|
| 2,616 |
|
|
|
| 4,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net refund transfer fees |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| 3,473 |
|
| — |
|
|
| 3,473 |
|
|
|
| 3,473 |
|
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| 3,629 |
|
| — |
|
|
| 3,629 |
|
|
|
| 3,629 |
|
Mortgage banking income |
|
| — |
|
| — |
|
| 1,316 |
|
|
| 1,316 |
|
|
| — |
|
| — |
|
|
| — |
|
|
|
| 1,316 |
|
|
| — |
|
| — |
|
| 2,416 |
|
|
| 2,416 |
|
|
| — |
|
| — |
|
|
| — |
|
|
|
| 2,416 |
|
Program fees |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| 124 |
|
| 1,199 |
|
|
| 1,323 |
|
|
|
| 1,323 |
|
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| 50 |
|
| 987 |
|
|
| 1,037 |
|
|
|
| 1,037 |
|
Other noninterest income |
|
| 7,725 |
|
| 11 |
|
| 49 |
|
|
| 7,785 |
|
|
| 80 |
|
| 319 |
|
|
| 399 |
|
|
|
| 8,184 |
|
|
| 7,853 |
|
| 13 |
|
| 56 |
|
|
| 7,922 |
|
|
| 89 |
|
| 32 |
|
|
| 121 |
|
|
|
| 8,043 |
|
Total noninterest income |
|
| 7,725 |
|
| 11 |
|
| 1,365 |
|
|
| 9,101 |
|
|
| 3,677 |
|
| 1,518 |
|
|
| 5,195 |
|
|
|
| 14,296 |
|
|
| 7,853 |
|
| 13 |
|
| 2,472 |
|
|
| 10,338 |
|
|
| 3,768 |
|
| 1,019 |
|
|
| 4,787 |
|
|
|
| 15,125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense |
|
| 35,415 |
|
| 850 |
|
| 1,176 |
|
|
| 37,441 |
|
|
| 2,273 |
|
| 918 |
|
|
| 3,191 |
|
|
|
| 40,632 |
|
|
| 37,764 |
|
| 792 |
|
| 1,354 |
|
|
| 39,910 |
|
|
| 2,849 |
|
| 669 |
|
|
| 3,518 |
|
|
|
| 43,428 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense |
|
| 11,135 |
|
| 3,075 |
|
| 292 |
|
|
| 14,502 |
|
|
| 2,620 |
|
| 2,694 |
|
|
| 5,314 |
|
|
|
| 19,816 |
|
|
| 10,539 |
|
| 2,761 |
|
| 1,288 |
|
|
| 14,588 |
|
|
| 1,237 |
|
| 5,358 |
|
|
| 6,595 |
|
|
|
| 21,183 |
|
Income tax expense |
|
| 2,168 |
|
| 702 |
|
| 62 |
|
|
| 2,932 |
|
|
| 609 |
|
| 609 |
|
|
| 1,218 |
|
|
|
| 4,150 |
|
|
| 744 |
|
| 621 |
|
| 270 |
|
|
| 1,635 |
|
|
| 288 |
|
| 1,253 |
|
|
| 1,541 |
|
|
|
| 3,176 |
|
Net income |
| $ | 8,967 |
| $ | 2,373 |
| $ | 230 |
|
| $ | 11,570 |
|
| $ | 2,011 |
| $ | 2,085 |
|
| $ | 4,096 |
|
|
| $ | 15,666 |
|
| $ | 9,795 |
| $ | 2,140 |
| $ | 1,018 |
|
| $ | 12,953 |
|
| $ | 949 |
| $ | 4,105 |
|
| $ | 5,054 |
|
|
| $ | 18,007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Period-end assets |
| $ | 4,501,539 |
| $ | 634,452 |
| $ | 17,998 |
|
| $ | 5,153,989 |
|
| $ | 27,192 |
| $ | 84,764 |
|
| $ | 111,956 |
|
|
| $ | 5,265,945 |
|
| $ | 4,805,449 |
| $ | 738,300 |
| $ | 20,568 |
|
| $ | 5,564,317 |
|
| $ | 36,834 |
| $ | 121,983 |
|
| $ | 158,817 |
|
|
| $ | 5,723,134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net interest margin |
|
| 3.71 | % |
| 3.08 | % |
| NM |
|
|
| 3.64 | % |
|
| NM |
|
| NM |
|
|
| NM |
|
|
|
| 4.19 | % |
|
| 3.75 | % |
| 2.49 | % |
| NM |
|
|
| 3.62 | % |
|
| NM |
|
| NM |
|
|
| NM |
|
|
|
| 4.12 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net-revenue concentration* |
|
| 73 | % |
| 6 | % |
| 2 | % |
|
| 81 | % |
|
| 6 | % |
| 13 | % |
|
| 19 | % |
|
|
| 100 | % |
|
| 72 | % |
| 6 | % |
| 4 | % |
|
| 82 | % |
|
| 6 | % |
| 12 | % |
|
| 18 | % |
|
|
| 100 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
| Three Months Ended June 30, 2017 |
|
| Three Months Ended June 30, 2018 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Core Banking |
|
| Republic Processing Group ("RPG") |
|
|
|
|
|
| Core Banking |
|
| Republic Processing Group |
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
| Tax |
| Republic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
| Tax |
| Republic |
|
|
|
|
|
|
|
|
| ||||||||
|
| Traditional |
| Warehouse |
| Mortgage |
|
| Core |
|
| Refund |
| Credit |
|
| Total |
|
|
| Total |
|
| Traditional |
| Warehouse |
| Mortgage |
|
| Core |
|
| Refund |
| Credit |
|
| Total |
|
|
| Total |
| ||||||||||||||||
(dollars in thousands) |
| Banking |
| Lending |
| Banking |
|
| Banking |
|
| Solutions |
| Solutions |
|
| RPG |
|
|
| Company |
|
| Banking |
| Lending |
| Banking |
|
| Banking |
|
| Solutions |
| Solutions |
|
| RPG |
|
|
| Company |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
| $ | 33,434 |
| $ | 4,435 |
| $ | 86 |
|
| $ | 37,955 |
|
| $ | 157 |
| $ | 5,025 |
|
| $ | 5,182 |
|
|
| $ | 43,137 |
|
| $ | 39,348 |
| $ | 4,164 |
| $ | 103 |
|
| $ | 43,615 |
|
| $ | 328 |
| $ | 7,141 |
|
| $ | 7,469 |
|
|
| $ | 51,084 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan and lease losses |
|
| 1,461 |
|
| 264 |
|
| — |
|
|
| 1,725 |
|
|
| (738) |
|
| 4,074 |
|
|
| 3,336 |
|
|
|
| 5,061 |
|
|
| 523 |
|
| 250 |
|
| — |
|
|
| 773 |
|
|
| (888) |
|
| 5,047 |
|
|
| 4,159 |
|
|
|
| 4,932 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net refund transfer fees |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| 2,770 |
|
| — |
|
|
| 2,770 |
|
|
|
| 2,770 |
|
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| 3,473 |
|
| — |
|
|
| 3,473 |
|
|
|
| 3,473 |
|
Mortgage banking income |
|
| — |
|
| — |
|
| 1,445 |
|
|
| 1,445 |
|
|
| — |
|
| — |
|
|
| — |
|
|
|
| 1,445 |
|
|
| — |
|
| — |
|
| 1,316 |
|
|
| 1,316 |
|
|
| — |
|
| — |
|
|
| — |
|
|
|
| 1,316 |
|
Program fees |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| 56 |
|
| 1,228 |
|
|
| 1,284 |
|
|
|
| 1,284 |
|
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| 124 |
|
| 1,199 |
|
|
| 1,323 |
|
|
|
| 1,323 |
|
Other noninterest income |
|
| 6,969 |
|
| 10 |
|
| 115 |
|
|
| 7,094 |
|
|
| 69 |
|
| 265 |
|
|
| 334 |
|
|
|
| 7,428 |
|
|
| 7,725 |
|
| 11 |
|
| 49 |
|
|
| 7,785 |
|
|
| 80 |
|
| 319 |
|
|
| 399 |
|
|
|
| 8,184 |
|
Total noninterest income |
|
| 6,969 |
|
| 10 |
|
| 1,560 |
|
|
| 8,539 |
|
|
| 2,895 |
|
| 1,493 |
|
|
| 4,388 |
|
|
|
| 12,927 |
|
|
| 7,725 |
|
| 11 |
|
| 1,365 |
|
|
| 9,101 |
|
|
| 3,677 |
|
| 1,518 |
|
|
| 5,195 |
|
|
|
| 14,296 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense |
|
| 31,185 |
|
| 822 |
|
| 984 |
|
|
| 32,991 |
|
|
| 1,971 |
|
| 772 |
|
|
| 2,743 |
|
|
|
| 35,734 |
|
|
| 35,415 |
|
| 850 |
|
| 1,176 |
|
|
| 37,441 |
|
|
| 2,273 |
|
| 918 |
|
|
| 3,191 |
|
|
|
| 40,632 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense |
|
| 7,757 |
|
| 3,359 |
|
| 662 |
|
|
| 11,778 |
|
|
| 1,819 |
|
| 1,672 |
|
|
| 3,491 |
|
|
|
| 15,269 |
|
|
| 11,135 |
|
| 3,075 |
|
| 292 |
|
|
| 14,502 |
|
|
| 2,620 |
|
| 2,694 |
|
|
| 5,314 |
|
|
|
| 19,816 |
|
Income tax expense |
|
| 2,471 |
|
| 1,228 |
|
| 232 |
|
|
| 3,931 |
|
|
| 660 |
|
| 607 |
|
|
| 1,267 |
|
|
|
| 5,198 |
|
|
| 2,168 |
|
| 702 |
|
| 62 |
|
|
| 2,932 |
|
|
| 609 |
|
| 609 |
|
|
| 1,218 |
|
|
|
| 4,150 |
|
Net income |
| $ | 5,286 |
| $ | 2,131 |
| $ | 430 |
|
| $ | 7,847 |
|
| $ | 1,159 |
| $ | 1,065 |
|
| $ | 2,224 |
|
|
| $ | 10,071 |
|
| $ | 8,967 |
| $ | 2,373 |
| $ | 230 |
|
| $ | 11,570 |
|
| $ | 2,011 |
| $ | 2,085 |
|
| $ | 4,096 |
|
|
| $ | 15,666 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Period-end assets |
| $ | 4,283,741 |
| $ | 600,060 |
| $ | 13,920 |
|
| $ | 4,897,721 |
|
| $ | 18,849 |
| $ | 39,091 |
|
| $ | 57,940 |
|
|
| $ | 4,955,661 |
|
| $ | 4,501,539 |
| $ | 634,452 |
| $ | 17,998 |
|
| $ | 5,153,989 |
|
| $ | 27,192 |
| $ | 84,764 |
|
| $ | 111,956 |
|
|
| $ | 5,265,945 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Net interest margin |
|
| 3.44 | % |
| 3.62 | % |
| NM |
|
|
| 3.46 | % |
|
| NM |
|
| NM |
|
|
| NM |
|
|
|
| 3.87 | % |
|
| 3.71 | % |
| 3.08 | % |
| NM |
|
|
| 3.64 | % |
|
| NM |
|
| NM |
|
|
| NM |
|
|
|
| 4.19 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net-revenue concentration* |
|
| 72 | % |
| 8 | % |
| 3 | % |
|
| 83 | % |
|
| 5 | % |
| 12 | % |
|
| 17 | % |
|
|
| 100 | % |
|
| 73 | % |
| 6 | % |
| 2 | % |
|
| 81 | % |
|
| 6 | % |
| 13 | % |
|
| 19 | % |
|
|
| 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.
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended June 30, 2019 |
| |||||||||||||||||||||||||||
|
| Core Banking |
|
| Republic Processing Group |
|
|
|
|
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| 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 |
| $ | 83,224 |
| $ | 6,852 |
| $ | 272 |
|
| $ | 90,348 |
|
| $ | 21,148 |
| $ | 14,749 |
|
| $ | 35,897 |
|
|
| $ | 126,245 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan and lease losses |
|
| 1,616 |
|
| 642 |
|
| — |
|
|
| 2,258 |
|
|
| 13,826 |
|
| 5,607 |
|
|
| 19,433 |
|
|
|
| 21,691 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net refund transfer fees |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| 20,729 |
|
| — |
|
|
| 20,729 |
|
|
|
| 20,729 |
|
Mortgage banking income |
|
| — |
|
| — |
|
| 3,955 |
|
|
| 3,955 |
|
|
| — |
|
| — |
|
|
| — |
|
|
|
| 3,955 |
|
Program fees |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| 196 |
|
| 1,915 |
|
|
| 2,111 |
|
|
|
| 2,111 |
|
Other noninterest income |
|
| 14,749 |
|
| 23 |
|
| 96 |
|
|
| 14,868 |
|
|
| 220 |
|
| 659 |
|
|
| 879 |
|
|
|
| 15,747 |
|
Total noninterest income |
|
| 14,749 |
|
| 23 |
|
| 4,051 |
|
|
| 18,823 |
|
|
| 21,145 |
|
| 2,574 |
|
|
| 23,719 |
|
|
|
| 42,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense |
|
| 73,314 |
|
| 1,550 |
|
| 2,674 |
|
|
| 77,538 |
|
|
| 9,963 |
|
| 1,436 |
|
|
| 11,399 |
|
|
|
| 88,937 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense |
|
| 23,043 |
|
| 4,683 |
|
| 1,649 |
|
|
| 29,375 |
|
|
| 18,504 |
|
| 10,280 |
|
|
| 28,784 |
|
|
|
| 58,159 |
|
Income tax expense |
|
| 2,509 |
|
| 1,054 |
|
| 346 |
|
|
| 3,909 |
|
|
| 4,318 |
|
| 2,409 |
|
|
| 6,727 |
|
|
|
| 10,636 |
|
Net income |
| $ | 20,534 |
| $ | 3,629 |
| $ | 1,303 |
|
| $ | 25,466 |
|
| $ | 14,186 |
| $ | 7,871 |
|
| $ | 22,057 |
|
|
| $ | 47,523 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period-end assets |
| $ | 4,805,449 |
| $ | 738,300 |
| $ | 20,568 |
|
| $ | 5,564,317 |
|
| $ | 36,834 |
| $ | 121,983 |
|
| $ | 158,817 |
|
|
| $ | 5,723,134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin |
|
| 3.81 | % |
| 2.63 | % |
| NM |
|
|
| 3.69 | % |
|
| NM |
|
| NM |
|
|
| NM |
|
|
|
| 4.88 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net-revenue concentration* |
|
| 58 | % |
| 4 | % |
| 3 | % |
|
| 65 | % |
|
| 25 | % |
| 10 | % |
|
| 35 | % |
|
|
| 100 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended June 30, 2018 |
| |||||||||||||||||||||||||||
|
| Core Banking |
|
| Republic Processing Group |
|
|
|
|
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| 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 |
| $ | 77,536 |
| $ | 7,755 |
| $ | 175 |
|
| $ | 85,466 |
|
| $ | 19,014 |
| $ | 14,269 |
|
| $ | 33,283 |
|
|
| $ | 118,749 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan and lease losses |
|
| 1,462 |
|
| 271 |
|
| — |
|
|
| 1,733 |
|
|
| 12,501 |
|
| 7,953 |
|
|
| 20,454 |
|
|
|
| 22,187 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net refund transfer fees |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| 19,825 |
|
| — |
|
|
| 19,825 |
|
|
|
| 19,825 |
|
Mortgage banking income |
|
| — |
|
| — |
|
| 2,336 |
|
|
| 2,336 |
|
|
| — |
|
| — |
|
|
| — |
|
|
|
| 2,336 |
|
Program fees |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| 183 |
|
| 2,836 |
|
|
| 3,019 |
|
|
|
| 3,019 |
|
Other noninterest income |
|
| 14,727 |
|
| 19 |
|
| 87 |
|
|
| 14,833 |
|
|
| 1,190 |
|
| 638 |
|
|
| 1,828 |
|
|
|
| 16,661 |
|
Total noninterest income |
|
| 14,727 |
|
| 19 |
|
| 2,423 |
|
|
| 17,169 |
|
|
| 21,198 |
|
| 3,474 |
|
|
| 24,672 |
|
|
|
| 41,841 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense |
|
| 68,807 |
|
| 1,689 |
|
| 2,380 |
|
|
| 72,876 |
|
|
| 8,798 |
|
| 2,003 |
|
|
| 10,801 |
|
|
|
| 83,677 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense |
|
| 21,994 |
|
| 5,814 |
|
| 218 |
|
|
| 28,026 |
|
|
| 18,913 |
|
| 7,787 |
|
|
| 26,700 |
|
|
|
| 54,726 |
|
Income tax expense |
|
| 3,940 |
|
| 1,329 |
|
| 46 |
|
|
| 5,315 |
|
|
| 4,463 |
|
| 1,813 |
|
|
| 6,276 |
|
|
|
| 11,591 |
|
Net income |
| $ | 18,054 |
| $ | 4,485 |
| $ | 172 |
|
| $ | 22,711 |
|
| $ | 14,450 |
| $ | 5,974 |
|
| $ | 20,424 |
|
|
| $ | 43,135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period-end assets |
| $ | 4,501,539 |
| $ | 634,452 |
| $ | 17,998 |
|
| $ | 5,153,989 |
|
| $ | 27,192 |
| $ | 84,764 |
|
| $ | 111,956 |
|
|
| $ | 5,265,945 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin |
|
| 3.65 | % |
| 3.13 | % |
| NM |
|
|
| 3.60 | % |
|
| NM |
|
| NM |
|
|
| NM |
|
|
|
| 4.85 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net-revenue concentration* |
|
| 57 | % |
| 5 | % |
| 2 | % |
|
| 64 | % |
|
| 25 | % |
| 11 | % |
|
| 36 | % |
|
|
| 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.
NM — Not Meaningful
66
The following table illustrates the difference between the Company’s effective tax rate and the federal rates for the three and six months ended June 30, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended June 30, 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 |
| $ | 77,536 |
| $ | 7,755 |
| $ | 175 |
|
| $ | 85,466 |
|
| $ | 19,014 |
| $ | 14,269 |
|
| $ | 33,283 |
|
|
| $ | 118,749 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan and lease losses |
|
| 1,462 |
|
| 271 |
|
| — |
|
|
| 1,733 |
|
|
| 12,501 |
|
| 7,953 |
|
|
| 20,454 |
|
|
|
| 22,187 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net refund transfer fees |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| 19,825 |
|
| — |
|
|
| 19,825 |
|
|
|
| 19,825 |
|
Mortgage banking income |
|
| — |
|
| — |
|
| 2,336 |
|
|
| 2,336 |
|
|
| — |
|
| — |
|
|
| — |
|
|
|
| 2,336 |
|
Program fees |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| 183 |
|
| 2,836 |
|
|
| 3,019 |
|
|
|
| 3,019 |
|
Other noninterest income |
|
| 14,727 |
|
| 19 |
|
| 87 |
|
|
| 14,833 |
|
|
| 1,190 |
|
| 638 |
|
|
| 1,828 |
|
|
|
| 16,661 |
|
Total noninterest income |
|
| 14,727 |
|
| 19 |
|
| 2,423 |
|
|
| 17,169 |
|
|
| 21,198 |
|
| 3,474 |
|
|
| 24,672 |
|
|
|
| 41,841 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense |
|
| 68,807 |
|
| 1,689 |
|
| 2,380 |
|
|
| 72,876 |
|
|
| 8,798 |
|
| 2,003 |
|
|
| 10,801 |
|
|
|
| 83,677 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense |
|
| 21,994 |
|
| 5,814 |
|
| 218 |
|
|
| 28,026 |
|
|
| 18,913 |
|
| 7,787 |
|
|
| 26,700 |
|
|
|
| 54,726 |
|
Income tax expense |
|
| 3,940 |
|
| 1,329 |
|
| 46 |
|
|
| 5,315 |
|
|
| 4,463 |
|
| 1,813 |
|
|
| 6,276 |
|
|
|
| 11,591 |
|
Net income |
| $ | 18,054 |
| $ | 4,485 |
| $ | 172 |
|
| $ | 22,711 |
|
| $ | 14,450 |
| $ | 5,974 |
|
| $ | 20,424 |
|
|
| $ | 43,135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period-end assets |
| $ | 4,501,539 |
| $ | 634,452 |
| $ | 17,998 |
|
| $ | 5,153,989 |
|
| $ | 27,192 |
| $ | 84,764 |
|
| $ | 111,956 |
|
|
| $ | 5,265,945 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin |
|
| 3.65 | % |
| 3.13 | % |
| NM |
|
|
| 3.60 | % |
|
| NM |
|
| NM |
|
|
| NM |
|
|
|
| 4.85 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net-revenue concentration* |
|
| 57 | % |
| 5 | % |
| 2 | % |
|
| 64 | % |
|
| 25 | % |
| 11 | % |
|
| 36 | % |
|
|
| 100 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Six Months Ended |
|
| ||||||||
|
| June 30, |
| June 30, |
|
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal rate times financial statement income |
|
| 21.00 | % |
| 21.00 | % |
| 21.00 | % |
| 21.00 | % |
|
Effect of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State taxes, net of federal benefit |
|
| (2.47) |
|
| 0.82 |
|
| (0.51) |
|
| 1.54 |
|
|
General business tax credits |
|
| (0.55) |
|
| (0.63) |
|
| (0.68) |
|
| (0.31) |
|
|
Nontaxable income |
|
| (1.27) |
|
| (1.35) |
|
| (0.89) |
|
| (0.94) |
|
|
Other, net |
|
| (1.72) |
|
| 1.10 |
|
| (0.63) |
|
| (0.11) |
|
|
Effective tax rate |
|
| 14.99 | % |
| 20.94 | % |
| 18.29 | % |
| 21.18 | % |
|
The following matters positively impacted the Company’s effective tax rate for the three and six months ended June 30, 2019:
· | As a financial institution doing business in Kentucky, the Bank is subject to a capital-based Kentucky bank franchise tax and exempt from Kentucky corporate income tax. In March 2019, however, Kentucky enacted HB354, which will transition the Bank from the bank franchise tax to a corporate income tax beginning January 1, 2021. The current Kentucky corporate income tax rate is 5%. As of March 31, 2019, the Company recorded a deferred tax asset, net of the federal benefit, of $350,000 due to the enactment of HB354, with the majority of this benefit attributed to the Traditional Bank. |
· | In April 2019, Kentucky enacted HB458, which allows for combined filing for Republic Bancorp and the Bank. Republic Bancorp had previously filed a separate company income tax return for Kentucky and generated net operating losses, for which it had maintained a valuation allowance against the related deferred tax asset. HB458 also allows for certain net operating losses to be utilized on a combined return. Republic Bancorp expects to file a combined return beginning in 2021 and to utilize these previously generated net operating losses. The tax benefit to reverse the valuation allowance on the deferred tax asset for these losses is approximately $815,000. This benefit was recorded in the second quarter of 2019, with 100% of this benefit attributed to the Traditional Bank. |
· | In addition to the tax benefit recognized during the second quarter associated with passage of HB458, the Company also received $388,000 in income tax benefit during the second quarter of 2019 associated with equity compensation. Substantially all of this benefit was attributed to the Traditional Bank. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended June 30, 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 |
| $ | 66,095 |
| $ | 8,335 |
| $ | 153 |
|
| $ | 74,583 |
|
| $ | 15,119 |
| $ | 9,873 |
|
| $ | 24,992 |
|
|
| $ | 99,575 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan and lease losses |
|
| 1,928 |
|
| 38 |
|
| — |
|
|
| 1,966 |
|
|
| 7,603 |
|
| 7,843 |
|
|
| 15,446 |
|
|
|
| 17,412 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net refund transfer fees |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| 18,152 |
|
| — |
|
|
| 18,152 |
|
|
|
| 18,152 |
|
Mortgage banking income |
|
| — |
|
| — |
|
| 2,605 |
|
|
| 2,605 |
|
|
| — |
|
| — |
|
|
| — |
|
|
|
| 2,605 |
|
Program fees |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| 39 |
|
| 2,336 |
|
|
| 2,375 |
|
|
|
| 2,375 |
|
Other noninterest income |
|
| 13,488 |
|
| 16 |
|
| 127 |
|
|
| 13,631 |
|
|
| 137 |
|
| 950 |
|
|
| 1,087 |
|
|
|
| 14,718 |
|
Total noninterest income |
|
| 13,488 |
|
| 16 |
|
| 2,732 |
|
|
| 16,236 |
|
|
| 18,328 |
|
| 3,286 |
|
|
| 21,614 |
|
|
|
| 37,850 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense |
|
| 61,273 |
|
| 1,599 |
|
| 2,198 |
|
|
| 65,070 |
|
|
| 8,040 |
|
| 1,563 |
|
|
| 9,603 |
|
|
|
| 74,673 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense |
|
| 16,382 |
|
| 6,714 |
|
| 687 |
|
|
| 23,783 |
|
|
| 17,804 |
|
| 3,753 |
|
|
| 21,557 |
|
|
|
| 45,340 |
|
Income tax expense |
|
| 4,733 |
|
| 2,455 |
|
| 241 |
|
|
| 7,429 |
|
|
| 6,461 |
|
| 1,362 |
|
|
| 7,823 |
|
|
|
| 15,252 |
|
Net income |
| $ | 11,649 |
| $ | 4,259 |
| $ | 446 |
|
| $ | 16,354 |
|
| $ | 11,343 |
| $ | 2,391 |
|
| $ | 13,734 |
|
|
| $ | 30,088 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period-end assets |
| $ | 4,283,741 |
| $ | 600,060 |
| $ | 13,920 |
|
| $ | 4,897,721 |
|
| $ | 18,849 |
| $ | 39,091 |
|
| $ | 57,940 |
|
|
| $ | 4,955,661 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin |
|
| 3.37 | % |
| 3.60 | % |
| NM |
|
|
| 3.39 | % |
|
| NM |
|
| NM |
|
|
| NM |
|
|
|
| 4.44 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net-revenue concentration* |
|
| 58 | % |
| 6 | % |
| 2 | % |
|
| 66 | % |
|
| 24 | % |
| 10 | % |
|
| 34 | % |
|
|
| 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.18. SUBSEQUENT EVENT
NM — Not MeaningfulSale of Four Banking Centers
In July 2019, the Bank entered into a definitive agreement to sell its four banking centers located in the Kentucky cities of Owensboro, Elizabethtown and Frankfort to Limestone Bank (“Limestone”), a subsidiary of Limestone Bancorp, Inc. The agreement provides that Limestone will acquire loans, including credit cards, with balances of approximately $112 million as of June 30, 2019, and assume deposits with balances of approximately $153 million as of the same date, associated with the four banking centers. In addition, Limestone will acquire substantially all the fixed assets of these locations, which had a book value of $1.3 million as of June 30, 2019. Based on the June 30, 2019 deposits, the all-in blended premium for the transaction is expected to be near 6% of the total deposits transferred. The final calculated premium will be primarily based on the trailing 10-day average amount of the deposits as of the closing date, as well as the branch location for the deposits. The transaction is subject to customary closing conditions, including regulatory approvals, and is anticipated to be completed in the fourth quarter of 2019.
67
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The consolidated financial statements include the accounts of Republic Bancorp, Inc. (the “Parent Company”) and its wholly-owned subsidiaries, Republic Bank & Trust Company (“RB&T” or the “Bank”) and Republic Insurance Services, Inc. (the “Captive”). As used in this filing, the terms “Republic,” the “Company,” “we,” “our”“our,” and “us” refer to Republic Bancorp, Inc., and, where the context requires, Republic Bancorp, Inc. and its subsidiaries; and thesubsidiaries. The term the “Bank” refers to the Company’s subsidiary bank, RB&T.bank: Republic Bank & Trust Company. The term the “Captive” refers to the Company’s insurance subsidiary: Republic Insurance Services, Inc. All significant intercompany balances and transactions are eliminated in consolidation.
Management’s Discussion and Analysis of Financial Condition and Results of Operations of Republic should be read in conjunction with Part I Item 1 “Financial Statements.”
Republic Bancorp, Inc. is a financial holding company headquartered in Louisville, Kentucky.
The Bank is a Kentucky-based, state-chartered non-member financial institution that provides both traditional and non-traditional banking products through five reportable segments using a multitude of delivery channels. While the Bank operates primarily in its market footprint, its non-brick-and-mortar delivery channels allow it to reach clients across the United States.
The Captive is a Nevada-based, wholly-owned insurance subsidiary of the Company. The Captive provides property and casualty insurance coverage to the Company and the Bank as well as a group of third-party insurance captives for which insurance may not be available or economically feasible.
Republic Bancorp Capital Trust (“RBCT”) is a Delaware statutory business trust that is a wholly-owned unconsolidated finance subsidiary of Republic Bancorp, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations of Republic should be read in conjunction with Part I Item 1 “Financial Statements.”
Forward-looking statements discuss matters that are not historical facts. As forward-looking statements discuss future events or conditions, the statements often include words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,” “should,” “will,” “would,���would,” “potential,” or similar expressions. Do not rely on forward-looking statements. Forward-looking statements detail management’s expectations regarding the future and are not guarantees. Forward-looking statements are assumptions based on information known to management only as of the date the statements are made and management may not update them to reflect changes that occur subsequent to the date the statements are made.
Broadly speaking, forward-looking statements include:
· | projections of revenue, income, expenses, losses, earnings per share, capital expenditures, dividends, capital structure, or other financial items; |
· | descriptions of plans or objectives for future operations, products, or services; |
· | forecasts of future economic performance; and |
· | descriptions of assumptions underlying or relating to any of the foregoing. |
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by the forward-looking statements. Actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties, including, but not limited to the following:
· | changes in political and economic conditions; |
· | new information concerning the impact of the |
· | the magnitude and frequency of changes to the |
· | long-term and short-term interest rate fluctuations as well as the overall steepness of the yield curve; |
· | competitive product and pricing pressures in each of the Company’s five reportable segments; |
· | equity and fixed income market fluctuations; |
· | client bankruptcies and loan defaults; |
· | inflation; |
· | recession; |
· | natural disasters impacting Company operations; |
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· | future acquisitions; |
· | integrations of acquired businesses; |
· | changes in technology; |
· | changes in applicable laws and regulations or the interpretation and enforcement thereof; |
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· | changes in fiscal, monetary, regulatory and tax policies; |
· | changes in accounting standards; |
· | monetary fluctuations; |
· | changes to the Company’s overall internal control environment; |
· | success in gaining regulatory approvals when required; |
· | the Company’s ability to qualify for future R&D federal tax credits; |
· | information security breaches or cyber security attacks involving either the Company or one of the Company’s third-party service providers; and |
· | other risks and uncertainties reported from time to time in the Company’s filings with the |
Issued but Not Yet Effective Accounting Standards Updates
For disclosure regarding the impact to the Company’s financial statements of issued-but-not-yet-effective ASUs, see Footnote 1 “Basis of Presentation and Summary of Significant Accounting Policies” of Part I Item 1 “Financial Statements.”
RECENT DEVELOPMENTS
Sale of Banking Centers
In July 2019, the Bank entered into a definitive agreement to sell its four banking centers located in the Kentucky cities of Owensboro, Elizabethtown and Frankfort to Limestone Bank (“Limestone”), a subsidiary of Limestone Bancorp, Inc. The agreement provides that Limestone will acquire loans, including credit cards, with balances of approximately $112 million as of June 30, 2019, and assume deposits with balances of approximately $153 million as of the same date, associated with the four banking centers. In addition, Limestone will acquire substantially all the fixed assets of these locations, which had a book value of $1.3 million as of June 30, 2019. Based on the June 30, 2019 deposits, the all-in blended premium for the transaction is expected to be near 6% of the total deposits transferred. The final calculated premium will be primarily based on the trailing 10-day average amount of the deposits as of the closing date, as well as the branch location for the deposits. The transaction is subject to customary closing conditions, including regulatory approvals, and is anticipated to be completed in the fourth quarter of 2019.
See Footnote 18 “Subsequent Event” of Part I Item 1 “Financial Statements” for additional information concerning the Bank’s agreement to sell four of its banking centers.
Sale of Reverse Mortgage Loans Held for Sale
During the second quarter of 2019, the Company reached an agreement with one of its Warehouse clients to take possession of certain first lien, residential reverse mortgage loans as payment for the approximate $12 million outstanding on the client’s Warehouse facility with the Bank. The Bank took possession of these loans as payment on the Warehouse facility after the client informed the Bank of its intent to close its business operations. These loans were sold by the Company in July 2019 at a loss of approximately $200,000.
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BUSINESS SEGMENT COMPOSITION
As of June 30, 2018,2019, the Company was divided into five reportable segments: Traditional Banking, Warehouse, Lending (“Warehouse”), Mortgage Banking, Tax Refund Solutions (“TRS”),TRS, and Republic Credit Solutions (“RCS”).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)RPG operations. The Bank’s Correspondent Lending channel and the Company’s national branchless banking platform, MemoryBank®MemoryBank®, are considered part of the Traditional Banking segment.
Prior to the third quarter of 2017, management reported RPG as a segment consisting of its largest division, TRS, along with its relatively smaller divisions, Republic Payment Solutions (“RPS”), and RCS. During the third quarter of 2017, due to RCS’s growth in revenues relative to the total Company’s revenues, management identified TRS and RCS as separate reportable segments under the newly classified RPG operations. Also, as part of the updated segmentation, management is reporting the RPS division, which remained below thresholds to be classified a separate reportable segment, within the newly classified TRS segment. The reportable segments within RPG operations and the divisions within those segments operate through the Bank. The Company has reclassified all prior periods to conform to the current presentation.
Table 1 — Segment Information
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| Three Months Ended June 30, 2018 | |||||||||||||||||||||||||
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| Core Banking |
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| Republic Processing Group ("RPG") |
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| Total |
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| Tax |
| Republic |
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| Traditional |
| Warehouse |
| Mortgage |
| Core |
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| Refund |
| Credit |
| Total |
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| Total |
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(dollars in thousands) |
| Banking |
| Lending |
| Banking |
| Banking |
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| Solutions |
| Solutions |
| RPG |
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| Company |
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Net income |
| $ | 8,967 |
| $ | 2,373 |
| $ | 230 |
| $ | 11,570 |
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| $ | 2,011 |
| $ | 2,085 |
| $ | 4,096 |
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| $ | 15,666 |
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Period-end assets |
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| 4,501,539 |
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| 634,452 |
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| 17,998 |
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| 5,153,989 |
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| 27,192 |
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| 84,764 |
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| 111,956 |
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| 5,265,945 |
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Net interest margin |
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| 3.71 | % |
| 3.08 | % |
| NM |
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| 3.64 | % |
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| NM |
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| NM |
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| NM |
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| 4.19 | % |
Net-revenue concentration* |
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| 73 | % |
| 6 | % |
| 2 | % |
| 81 | % |
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| 6 | % |
| 13 | % |
| 19 | % |
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| 100 | % |
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| Three Months Ended June 30, 2017 | |||||||||||||||||||||||||
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| Core Banking |
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| Republic Processing Group ("RPG") |
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| Total |
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| Tax |
| Republic |
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| Traditional |
| Warehouse |
| Mortgage |
| Core |
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| Refund |
| Credit |
| Total |
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| Total |
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(dollars in thousands) |
| Banking |
| Lending |
| Banking |
| Banking |
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| Solutions |
| Solutions |
| RPG |
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| Company |
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Net income |
| $ | 5,286 |
| $ | 2,131 |
| $ | 430 |
| $ | 7,847 |
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| $ | 1,159 |
| $ | 1,065 |
| $ | 2,224 |
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| $ | 10,071 |
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Period-end assets |
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| 4,283,741 |
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| 600,060 |
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| 13,920 |
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| 4,897,721 |
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| 18,849 |
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| 39,091 |
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| 57,940 |
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| 4,955,661 |
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Net interest margin |
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| 3.44 | % |
| 3.62 | % |
| NM |
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| 3.46 | % |
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| NM |
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| NM |
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| NM |
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| 3.87 | % |
Net-revenue concentration* |
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| 72 | % |
| 8 | % |
| 3 | % |
| 83 | % |
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| 5 | % |
| 12 | % |
| 17 | % |
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| 100 | % |
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| Six Months Ended June 30, 2018 | |||||||||||||||||||||||||
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| Core Banking |
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| Republic Processing Group ("RPG") |
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| Total |
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| Tax |
| Republic |
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| Traditional |
| Warehouse |
| Mortgage |
| Core |
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| Refund |
| Credit |
| Total |
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| Total |
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(dollars in thousands) |
| Banking |
| Lending |
| Banking |
| Banking |
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| Solutions |
| Solutions |
| RPG |
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| Company |
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Net income |
| $ | 18,054 |
| $ | 4,485 |
| $ | 172 |
| $ | 22,711 |
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| $ | 14,450 |
| $ | 5,974 |
| $ | 20,424 |
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| $ | 43,135 |
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Period-end assets |
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| 4,501,539 |
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| 634,452 |
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| 17,998 |
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| 5,153,989 |
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| 27,192 |
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| 84,764 |
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| 111,956 |
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| 5,265,945 |
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Net interest margin |
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| 3.65 | % |
| 3.13 | % |
| NM |
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| 3.60 | % |
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| NM |
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| NM |
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| NM |
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| 4.85 | % |
Net-revenue concentration* |
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| 57 | % |
| 5 | % |
| 2 | % |
| 64 | % |
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| 25 | % |
| 11 | % |
| 36 | % |
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| 100 | % |
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| Six Months Ended June 30, 2017 | |||||||||||||||||||||||||
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| Core Banking |
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| Republic Processing Group ("RPG") |
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| Total |
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| Tax |
| Republic |
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| Traditional |
| Warehouse |
| Mortgage |
| Core |
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| Refund |
| Credit |
| Total |
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| Total |
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(dollars in thousands) |
| Banking |
| Lending |
| Banking |
| Banking |
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| Solutions |
| Solutions |
| RPG |
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| Company |
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Net income |
| $ | 11,649 |
| $ | 4,259 |
| $ | 446 |
| $ | 16,354 |
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| $ | 11,343 |
| $ | 2,391 |
| $ | 13,734 |
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| $ | 30,088 |
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Period-end assets |
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| 4,283,741 |
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| 600,060 |
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| 13,920 |
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| 4,897,721 |
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| 18,849 |
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| 39,091 |
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| 57,940 |
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| 4,955,661 |
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Net interest margin |
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| 3.37 | % |
| 3.60 | % |
| NM |
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| 3.39 | % |
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| NM |
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| NM |
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| NM |
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| 4.44 | % |
Net-revenue concentration* |
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| 58 | % |
| 6 | % |
| 2 | % |
| 66 | % |
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| 24 | % |
| 10 | % |
| 34 | % |
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| 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.
NM — Not Meaningful
For expanded segment financial data see Footnote 17 “Segment Information” of Part I Item 1 “Financial Statements.”
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(I) Traditional Banking segment
The Traditional Banking segment provides traditional banking products primarily to customers in the Company’s market footprint. As of June 30, 2018,2019, Republic had 45 full-service banking centers and one loan production office (“LPO”)two LPOs with locations as follows:
Kentucky — 32
Metropolitan Louisville — 18
Central Kentucky — 9
Elizabethtown — 11*
Frankfort — 11*
Georgetown — 1
Lexington — 5
Shelbyville — 1
Western Kentucky — 2
Owensboro — 22*
Northern Kentucky — 3
Covington — 1
Crestview Hills — 1
Florence — 1
Southern Indiana — 3
Floyds Knobs — 1
Jeffersonville — 1
New Albany — 1
Metropolitan Tampa, Florida — 78**
Metropolitan Cincinnati, Ohio — 1
Metropolitan Nashville, Tennessee — 3**
* The Company agreed to sell banking center(s) in July 2019. See additional information under Note 18 of Part I Item 1 “Financial Statements.”
** Includes onean LPO
Republic’s headquarters are located in Louisville, which is the largest city in Kentucky based on population.
As of June 30, 2018,2019 and through the date of this filing, generally all Traditional Banking products and services, except for a selection of deposit products offered through the Bank’s separately branded national branchless banking platform, MemoryBank, were offered through the Company’s traditional RB&T brand.
The Bank’s principal lending activities consist of the following:
Retail Mortgage Lending — Through its retail banking centers its Correspondent Lending channel, and its Internet BankingConsumer Direct channel, the Bank originates single family, residential real estate loans. In addition, the Bank originates home equity amortizing loans (“HEALs”)HEALs and home equity lines of credit (“HELOCs”)HELOCs through its retail banking centers. Such loans are generally collateralized by owner occupied property.
Commercial Lending — The Bank conducts commercial lending activities primarily through Corporate Banking, Commercial Lending, Business Banking, and Retail Banking channels.
In general, commercial lending credit approvals and processing are prepared and underwritten through the Bank’s Commercial Credit Administration Department (“CAD”). Clients are generally located within the Bank’s market footprint, or in an adjacent area to the market footprint.
Credit opportunities are generally driven by the following: companies expanding their businesses; companies acquiring new businesses; and/or companies refinancing existing debt from other institutions. The Bank has a focus on Commercial & Industrial (“C&I”), Commercial Real Estate (“CRE”), and to a lesser degree Construction and Development (“C&D”) lending. The targeted C&I credit size for client relationships is typically between $2 million and $15 million, with some exceptions for large corporate borrowers of higher credit quality.
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Corporate Banking focuses on larger C&I and CRE opportunities. For CRE loans, Corporate Banking focuses on stabilized properties with low leverage and strong cash flows. Borrowers are generally single-asset entities and loan sizes typically range between $5 million and $20 million. Primary underwriting considerations are property cash flow (current and historical), quality of leases, financial capacity of sponsors, and collateral value of property financed. The majority of interest rates offered are based on the 30-day London Interbank Offered Rate (“LIBOR”). Fixed rate terms of up to 10 years are available to borrowers by utilizing interest rate swaps. In some cases, limited or non-recourse (of owners) loans will be issued, with such cases based upon the capital position, cash flows, and stabilization of the borrowing entity.
The Business Banking Department, and to some extent the Bank’s Retail Banking group, focuses on locally based small-to-medium sized businesses in the Bank’s market footprint with annual revenue between $1 million and $20 million. The needs of these clients range from expansion or acquisition, equipment financing, owner-occupied real estate financing, and operating lines of credit. The Bank’s lenders utilize all appropriate programs of the Small Business Administration (“SBA”) to reduce credit risk exposure. Additionally, the Bank looks to make loans to real estate investors for various types of investment properties, including rental homes and apartments, shopping centers, office buildings, and loans to various not-for-profit agencies located within the Bank’s market footprint. The targeted credit size for a relationship in this area is between $500,000 and $5 million.
Construction and Land Development Lending — TheTo a lesser extent, the Bank originates business loans for the construction of both single familysingle-family residential properties and commercial properties (apartment complexes, shopping centers, office buildings). While not a focus for the Bank, the Bank may originate loans for the acquisition and development of residential or commercial land into buildable lots.
InternetConsumer Direct Lending — TheThrough its Consumer Direct Lending channel, formerly named its Internet Lending channel, the Bank accepts online loan applications for its RB&T brandbranded products through its website at www.republicbank.com. Historically, the majority of loans originated through Internetits Consumer Direct Lending channel have been within the Bank’s traditional markets of Kentucky, Florida and Indiana. Other states where loans are marketed include Alabama, Arizona, California, Colorado, Georgia, Illinois, Michigan, Minnesota, Missouri, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Utah, Washington, Wisconsin, and Virginia, as well as, the District of Columbia.
Correspondent Lending — Primarily from its Warehouse clients, the Bank may occasionally acquire for investment through its Correspondent Lending channel single family, first lien mortgage loans that meet the Bank’s specifications. Substantially all loans purchased through the Correspondent Lending channel are purchased at a premium. The volume of loans purchased through the Correspondent Lending channel may fluctuate from time to time based on several factors, including, but not limited to, borrower demand, other investment options and the Bank’s current and forecasted liquidity position.
Consumer Lending — — Traditional Banking consumer loans made by the Bank include home improvement and home equity loans, other secured and unsecured personal loans, and credit cards. With the exception ofExcept for home equity loans, which are actively marketed in conjunction with single family, first lien residential real estate loans, other traditionalTraditional Banking consumer loan products (not including products offered through RPG), while available, are not and have not been actively promoted in the Bank’s markets.
The Bank has, from time to time, acquired unsecured consumer installment loans for investment from a third-party originator. Such consumer loans were purchased at par and were selected by the Bank based on certain underwriting characteristics.
Dealer Services — The Bank offers dealer floor plan loans, consumer indirect automobiledealer-floor-plan loans and consumer aircraftconsumer-indirect automobile loans through its Dealer Services Department. Dealer floor planDealer-floor-plan loans are commercial loanslines of credit to automobile dealers secured by the dealer’s current inventory of vehicles, typically in or around the Bank’s market footprint. The indirect automobile programIndirect Automobile Program involves establishing relationships with automobile dealers and obtaining consumer automobile loans in a low-cost delivery method.
Aircraft Lending — Also included in the Bank’s Dealer Services Department is the Aircraft Lending Division. First offered by the Bank in AugustOctober 2017, consumer aircraft loans typically range in amounts from $55,000 to $500,000,$1,000,000, with terms up to 20 years, to purchase or refinance aircrafts,a piston aircraft (non-jet aircraft), along with engine overhauls and avionic upgrades. The aircraft loan program is open to all states, except for Alaska and Hawaii.
The Bank’s other Traditional Banking activities generally consistsconsist of the following:
MemoryBank — In October 2016, the Bank opened the “digital doors” of MemoryBank, a national branchless banking platform. MemoryBank is a separately branded division of the Bank, which from a marketing perspective, focuses on technologically savvy clients that prefer to carry larger balances in highly liquid interest-bearing bank accounts. MemoryBank products are offered through its website, www.mymemorybank.com
Private Banking — The Bank provides financial products and services to high net worth individuals through its Private Banking department. The Bank’s Private Banking officers have extensive banking experience and are trained to meet the unique financial needs of this clientele.
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Treasury Management Services — The Bank provides various deposit products designed for commercial business clients located throughout its market footprint. Lockbox processing, remote deposit capture, business on-line banking, account reconciliation, and Automated Clearing House (“ACH”)ACH processing are additional services offered to commercial businesses through the Bank’s Treasury Management department.
Internet Banking — The Bank expands its market penetration and service delivery of its RB&T brand by offering clients Internet Banking services and products through its website, www.republicbank.com.
Mobile Banking — The Bank allows clients to easily and securely access and manage their accounts through its mobile banking application.
Other Banking Services — The Bank also provides title insurance and other financial institution relatedinstitution-related products and services.
Bank Acquisitions — The Bank maintains an acquisition strategy to selectively grow its franchise as a complement to its organic growth strategies.
See additional detail regarding the Traditional Banking segment under Footnote 1716 “Segment Information” of Part I Item 1 “Financial Statements.”
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(II) Warehouse Lending segment
Through its Warehouse Lending segment, the Core Bank provides short-term, revolving credit facilities to mortgage bankers across the United States through mortgage warehouse lines of credit. These credit facilities are primarily secured by single family, first lien residential real estate loans. The credit facility enables the mortgage banking clients to close single family, first lien residential real estate loans in their own name and temporarily fund their inventory of these closed loans until the loans are sold to investors approved by the Bank or purchased by the Bank through its Correspondent Lending channel.Bank. Individual loans are expected to remain on the warehouse line for an average of 15 to 30 days. Reverse mortgage loans typically remain on the line longer than conventional mortgage loans. Interest income and loan fees are accrued for each individual loan during the time the loan remains on the warehouse line and collected when the loan is sold. The Core Bank receives the sale proceeds of each loan directly from the investor and applies the funds to pay off the warehouse advance and related accrued interest and fees. The remaining proceeds are credited to the mortgage-banking client.
See additional detail regarding the Warehouse Lending segment under Footnote 1716 “Segment Information” of Part I Item 1 “Financial Statements.”
(III) Mortgage Banking segment
Mortgage Banking activities primarily include 15-, 20- and 30-year fixed-term single family, first lien residential real estate loans that are originated and sold into the secondary market, primarily to the Federal Home Loan Mortgage Corporation (“FHLMC” or “Freddie Mac”)FHLMC and the Federal National Mortgage Association (“FNMA” or “Fannie Mae”).FNMA. The Bank typically retains servicing on loans sold into the secondary market. Administration of loans with servicing retained by the Bank includes collecting principal and interest payments, escrowing funds for property taxes and property insurance, and remitting payments to secondary market investors. TheA fee is received by the Bank receives fees for performing these standard servicing functions.
See additional detail regarding the Mortgage Banking segment under Footnote 1011 “Mortgage Banking Activities” and Footnote 1716 “Segment Information” of Part I Item 1 “Financial Statements.”
(IV) Tax Refund Solutions segment
Through the TRS segment, the Bank is one of a limited number of financial institutions that facilitates the receipt and payment of federal and state tax refund products and offers a credit product through third-party tax preparers located throughout the United States, as well as tax-preparation software providers (collectively, the “Tax Providers”). Substantially all of the business generated by the TRS segment occurs in the first half of the year. The TRS segment traditionally operates at a loss during the second half of the year, during which time the segment incurs costs preparing for the upcoming year’s tax season.
Refund Transfers (“RTs”)RTs are fee-based products whereby a tax refund is issued to the taxpayer after the Bank has received the refund from the federal or state government. There is no credit risk or borrowing cost associated with these products because they are only
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delivered to the taxpayer upon receipt of the tax refund directly from the governmental paying authority. Fees earned by the Company on RTs, net of revenue share, are reported as noninterest income under the line item “Net refund transfer fees.”
The Easy Advance (“EA”)EA tax credit product is a loan that allows a taxpayer to receiveborrow funds as an advance of a portion of their refund, withtax refund. In response to changes in the taxpayer’s Tax Provider paying all fees to RB&T forlegal, regulatory and competitive environment, management annually reviews and revises the advance. First offered by TRSEA’s product parameters. Further changes in 2016,EA product parameters do not ensure positive results and could have an overall material negative impact on the performance of the EA hasand therefore on the Company’s financial condition and results of operations. For the 2018 and 2019 fiscal years, the EA product had the following features:
EA features consistent during 2018 and 2019:
· | Offered only during the first two months of each year; |
· | No |
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· | Multiple funds disbursement methods, including direct deposit, prepaid card, check, or Walmart Direct2Cash®, based on the taxpayer-customer’s election; |
· | Repayment of the EA to the Bank is deducted from the |
· | If an insufficient refund to repay the EA occurs: |
o | there is no recourse to the taxpayer, |
o | no negative credit reporting on the taxpayer, |
o | no collection efforts against the |
Fees
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EA features modified from 2018 to 2019:
· | During 2019, the taxpayer was given the option to choose from multiple loan-amount tiers, subject to underwriting, up to a maximum advance amount of $6,250. This compares to a maximum loan amount of $3,500 during 2018; and |
· | During 2018, EA fees were charged only to the Tax Providers. In 2019, the fee charged to the Tax Providers was lowered; and a direct fee to the taxpayer was charged. The APR to the taxpayer for his or her portion of the total fee equated to less than 36% for all offering tiers. |
The Company reports fees paid by the Tax Providers to the Company for the EA product are reported as interest income on loans. EAs are generally repaid within three weeks after the taxpayer customer’staxpayer’s tax return is submitted to the applicable taxing authority. EAs do not have a contractual due date but the Company considers an EA delinquent if it remains unpaid three weeks after the taxpayer customer’staxpayer’s tax return is submitted to the applicable taxing authority. Provisions for loan losses on EAs are estimated when advances are made, with provisions for all probable EA losses made in the first quarter of each year. Unpaid EAs are charged-off within 111 days after the taxpayer customer’s tax return is submitted to the applicable taxing authority,charged off by June 30th of each year, with the majority of charge-offs typically recordedEAs collected during the second quarterhalf of the year.each year recorded as recoveries of previously charged off loans.
Related to the overall credit losses on EAs, the Bank’s ability to control losses is highly dependent upon its ability to predict the taxpayer’s likelihood to receive the tax refund as claimed on the taxpayer’s tax return. Each year, the Bank’s EA approval model is based primarily on the prior-year’s tax refund fundingpayment patterns. Because muchthe substantial majority of the loanEA volume occurs each year before that year’s tax refund fundingpayment patterns can be analyzed and subsequent underwriting changes made, credit losses during a current year could be higher than management’s predictions if tax refund fundingpayment patterns change materially between years.
See additional detail regarding the Easy Advance (“EA”) product under Footnote 4 “Loans and Allowance for Loan and Lease Losses” of Part I Item 1 “Financial Statements.”
Republic Payment Solutions division — RPS is managed and operated within the TRS segment. The RPS division is an issuing bank offering general-purpose reloadable prepaid cards through third-party service providers.
For the projected near-term, as the prepaid card program matures, the operating results of the RPS division are expected to be immaterial to the Company’s overall results of operations and will be reported as part of the TRS segment. The RPS division will not be considered a separate reportable segment until such time, if any, that it meets quantitative reporting thresholds.
(V) Republic Credit Solutions segment
Through the RCS segment, the Bank offers consumer credit products. In general, the credit products are unsecured, small dollar consumer loans with maturities of 30-days-or-more, and are dependent on various factors including the consumer’s ability to repay. RCS loans typically earn a higher yield but also have higher credit risk compared to loans originated through the Traditional Banking segment, with a significant portion of RCS clients considered subprime or near-prime borrowers. Additional information regarding consumer loan products offered through RCS follows:
· |
|
74
· |
|
|
|
|
|
From the fourth quarter of 2015 through the first quarter of 2018, the Bank piloted through RCS a credit-card product to generally subprime borrowers across the United States through one third-party marketer/servicer. For outstanding cards, RCS sold 90% of the balances generated within two business days of each transaction occurrence to a special purpose entity related to its third-party marketer/servicer and retained the remaining 10% interest. During the secondfourth quarter of 2018, the Bank and its third-party marketer/service provider suspendedservicer finalized an agreement to sell 100% of the origination of any new loans, and the subsequentexisting portfolio to an unrelated third party. The sale of the RCS credit-card portfolio receivables was settled in January 2019 and all recently-originated loans under this program, while the two parties evaluate the future offering of this product due to changesaccounts and related assets were transferred in the applicable state law impacting the product. Concurrent with the suspension of this program, the Bank reclassified approximately $2.2 million of these loans from “held for sale” on the balance sheet to “held for investment” and recorded a $427,000 charge to its mark-to-market fair value adjustment for these loans.March 2019.
73
OVERVIEW (Three Months Ended June 30, 20182019 Compared to Three Months Ended June 30, 2017)2018)
Total Company net income for the second quarter of 20182019 was $15.7$18.0 million, a $5.6$2.3 million, or 56%15%, increase from the same period in 2017.2018. Diluted earnings per Class A Common Share (“Diluted EPS”)EPS increased to $0.74$0.86 for the quarter ended June 30, 20182019 compared to $0.48$0.74 for the same period in 2017.2018.
Pre-tax income increased 30% from the second quarter of 2017 to the second quarter of 2018, as the Company’s net interest margin remained strong. As will be the case for each quarter in 2018, a reduction in the federal corporate tax rate from 35% to 21%, effective January 1, 2018, positively impacted the comparability of the Company’s performance metrics between the second quarter of 2018 and the second quarter of 2017. The Company estimates that the lower effective tax rate for 2018 benefitted its second quarter 2018 Diluted EPS by approximately $0.10 per share.
The following areOther general highlights by reportable segment:segment consisted of the following:
Traditional Banking segment
· | Net income increased |
· | Net interest income increased |
· | The Traditional Banking |
· | Total noninterest income increased |
· | Total noninterest expense increased |
75
Warehouse Lending segment
· | Net income |
· | Net interest income decreased |
· | The Warehouse Provision was a net charge of |
· | Total committed Warehouse lines remained at $1.1 billion from December 31, 2018 to June 30, 2019. |
· | Average line usage was |
Mortgage Banking segment
· | Within the Mortgage Banking segment and as a component of noninterest income, mortgage banking income |
· | Overall, Republic’s originations of secondary market loans totaled |
Tax Refund Solutions segment
· | Net income |
· | Net interest income increased |
· | Overall, TRS recorded a net |
· | Noninterest income increased |
· | Net RT revenue increased |
· | Noninterest expense was |
74
Republic Credit Solutions segment
· | Net income increased |
· | Net interest income increased |
· | Overall, RCS recorded a net charge to the Provision of |
· | Noninterest income |
· | Noninterest expense was |
RESULTS OF OPERATIONS (Three Months Ended June 30, 20182019 Compared to Three Months Ended June 30, 2017)
Net Interest Income
Banking operations are significantly dependent upon net interest income. Net interest income is the difference between interest income on interest-earning assets, such as loans and investment securities and the interest expense on interest-bearing liabilities used to fund those assets, such as interest-bearing deposits, securities sold under agreements to repurchase, and Federal Home Loan Bank
76
(“FHLB”) advances. Net interest income is impacted by both changes in the amount and composition of interest-earning assets and interest-bearing liabilities, as well as market interest rates.
A large amount of the Company’s financial instruments track closely with or are primarily indexed to either the FFTR, the Wall Street Journal Prime Rate (“WSJ Prime”), or LIBOR. These market rates have trended higher since December 2015. Additionally, the FOMC of the FRB has provided further guidance that additional FFTR increases are probable during the second half of 2018. Additional increases in short-term interest rates and overall market rates are generally believed by management to be favorable to the Bank’s net interest income and net interest margin in the near term. Increases in short-term interest rates, however, could have a negative impact on net interest income and net interest margin if the Bank is unable to maintain its deposit balances and the cost of those deposits at the levels assumed in its interest-rate-risk model. In addition, a flattening of the yield curve, causing the spread between long-term interest rates and short-term interest rates to decrease, could negatively impact the Company’s net interest income and net interest margin. Unknown variables, which may impact the Company’s net interest income and net interest margin in the future, include, but are not limited to, the actual steepness of the yield curve, future demand for the Bank’s financial products and the Bank’s overall future liquidity needs.
Total Company net interest income increased $7.9 million, or 18%, during the second quarter of 2018 compared to the same period in 2017. Net Interest margin expansion was the primary driver of the increase in net interest income, with loan growth providing a meaningful boost as well. Total Company net interest margin increased to 4.19% during the second quarter of 2018 compared to 3.87% for the same period in 2017.
The following were the most significant components affecting the Company’s net interest income by reportable segment:
Traditional Banking segment
The Traditional Banking’s net interest income increased $5.9 million, or 18%, for the second quarter of 2018 compared to the same period in 2017. Traditional Banking’s net interest margin was 3.71% for the second quarter of 2018, an increase of 27 basis points over the same period in 2017.
The following factors primarily drove the increases in the Traditional Bank’s net interest income and net interest margin during the second quarter of 2018:
|
|
|
|
|
|
Warehouse Lending segment
Warehouse’s net interest income decreased $271,000, or 6%, for the second quarter of 2018 compared to the same period in 2017. An internal change in the way the Company assigns cost of funds to its Warehouse segment through its Funds Transfer Pricing (“FTP”) methodology resulted in 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 that used for other Core Bank loan products with similar pricing and duration characteristics. This change had a $304,000 negative comparable impact on the Warehouse segment’s net interest income for the second quarter of 2018 and a corresponding positive comparable impact of $304,000 to the Traditional Banking segment’s net interest income.
77
Republic Credit Solutions segment
RCS’s net interest income increased $2.1 million, or 42%, from the second quarter of 2017 to the second quarter of 2018. The increase was driven primarily by growth in fee income from the segment’s line-of-credit product. Loan fees on RCS’s line-of-credit product recorded as interest income increased to $6.1 million during the second quarter of 2018 compared to $4.4 million during the same period in 2017 and accounted for 84% and 88% of all RCS interest income on loans during the periods.
Future long-term growth in interest income from RCS’s line-of-credit product will be restricted by a current on-balance-sheet Board-approved risk limit of $37 million for the Company. As of June 30, 2018, the total outstanding on-balance-sheet amount, including loans held for sale, related to this product was $31 million.
78
Table 2 — Total Company Average Balance Sheets and Interest Rates
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|
|
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|
|
|
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|
|
| Three Months Ended June 30, 2018 |
|
| Three Months Ended June 30, 2017 |
|
| ||||||||||||
|
| Average |
|
|
|
| Average |
|
| Average |
|
|
|
| Average |
|
| ||
(dollars in thousands) |
| Balance |
| Interest |
| Rate |
|
| Balance |
| Interest |
| Rate |
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities, including FHLB stock(1) |
| $ | 506,209 |
| $ | 3,167 |
| 2.50 | % |
| $ | 597,818 |
| $ | 2,741 |
| 1.83 | % |
|
Federal funds sold and other interest-earning deposits |
|
| 276,246 |
|
| 1,245 |
| 1.80 |
|
|
| 130,650 |
|
| 346 |
| 1.06 |
|
|
TRS Easy Advance loans (2) |
|
| 10,380 |
|
| 38 |
| 1.46 |
|
|
| 3,064 |
|
| 3 |
| 0.39 |
|
|
Other RPG loans(3)(6) |
|
| 78,287 |
|
| 7,281 |
| 37.20 |
|
|
| 36,755 |
|
| 5,031 |
| 54.75 |
|
|
Outstanding Warehouse lines of credit(4)(6) |
|
| 541,537 |
|
| 6,890 |
| 5.09 |
|
|
| 489,384 |
|
| 5,495 |
| 4.49 |
|
|
All other Traditional Bank loans(5)(6) |
|
| 3,462,184 |
|
| 39,735 |
| 4.59 |
|
|
| 3,201,176 |
|
| 34,205 |
| 4.27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets |
|
| 4,874,843 |
|
| 58,356 |
| 4.79 |
|
|
| 4,458,847 |
|
| 47,821 |
| 4.29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan and lease losses |
|
| (52,279) |
|
|
|
|
|
|
|
| (38,282) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-earning cash and cash equivalents |
|
| 74,087 |
|
|
|
|
|
|
|
| 75,295 |
|
|
|
|
|
|
|
Premises and equipment, net |
|
| 46,843 |
|
|
|
|
|
|
|
| 44,154 |
|
|
|
|
|
|
|
Bank owned life insurance |
|
| 63,974 |
|
|
|
|
|
|
|
| 62,341 |
|
|
|
|
|
|
|
Other assets(1) |
|
| 67,313 |
|
|
|
|
|
|
|
| 65,693 |
|
|
|
|
|
|
|
Total assets |
| $ | 5,074,781 |
|
|
|
|
|
|
| $ | 4,668,048 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| �� |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction accounts |
| $ | 1,113,097 |
| $ | 982 |
| 0.35 | % |
| $ | 1,086,740 |
| $ | 564 |
| 0.21 | % |
|
Money market accounts |
|
| 609,693 |
|
| 864 |
| 0.57 |
|
|
| 549,313 |
|
| 371 |
| 0.27 |
|
|
Time deposits |
|
| 340,861 |
|
| 1,336 |
| 1.57 |
|
|
| 248,937 |
|
| 717 |
| 1.15 |
|
|
Reciprocal money market and time deposits |
|
| 315,285 |
|
| 601 |
| 0.76 |
|
|
| 178,013 |
|
| 151 |
| 0.34 |
|
|
Brokered deposits |
|
| 31,394 |
|
| 151 |
| 1.92 |
|
|
| 161,124 |
|
| 521 |
| 1.29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing deposits |
|
| 2,410,330 |
|
| 3,934 |
| 0.65 |
|
|
| 2,224,127 |
|
| 2,324 |
| 0.42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities sold under agreements to repurchase and other short-term borrowings |
|
| 178,063 |
|
| 222 |
| 0.50 |
|
|
| 179,594 |
|
| 146 |
| 0.33 |
|
|
Federal Home Loan Bank advances |
|
| 593,187 |
|
| 2,723 |
| 1.84 |
|
|
| 500,027 |
|
| 1,943 |
| 1.55 |
|
|
Subordinated note |
|
| 41,240 |
|
| 393 |
| 3.81 |
|
|
| 41,240 |
|
| 271 |
| 2.63 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities |
|
| 3,222,820 |
|
| 7,272 |
| 0.90 |
|
|
| 2,944,988 |
|
| 4,684 |
| 0.64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing liabilities and Stockholders’ equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing deposits |
|
| 1,146,403 |
|
|
|
|
|
|
|
| 1,063,215 |
|
|
|
|
|
|
|
Other liabilities |
|
| 42,481 |
|
|
|
|
|
|
|
| 31,905 |
|
|
|
|
|
|
|
Stockholders’ equity |
|
| 663,077 |
|
|
|
|
|
|
|
| 627,940 |
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity |
| $ | 5,074,781 |
|
|
|
|
|
|
| $ | 4,668,048 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
|
| $ | 51,084 |
|
|
|
|
|
|
| $ | 43,137 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest spread |
|
|
|
|
|
|
| 3.89 | % |
|
|
|
|
|
|
| 3.65 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin |
|
|
|
|
|
|
| 4.19 | % |
|
|
|
|
|
|
| 3.87 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79
Table 3 illustrates the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities impacted Republic’s interest income and interest expense during the periods indicated. Information is provided in each category with respect to (i) changes attributable to changes in volume (changes in volume multiplied by prior rate), (ii) changes attributable to changes in rate (changes in rate multiplied by prior volume) and (iii) net change. The changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate.
Table 3 — Total Company Volume/Rate Variance Analysis
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|
|
|
|
|
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|
|
| Three Months Ended June 30, 2018 |
|
| ||||||
|
|
| Compared to |
|
| ||||||
|
|
| Three Months Ended June 30, 2017 |
|
| ||||||
|
| Total Net |
| Increase / (Decrease) Due to |
|
| |||||
(in thousands) |
| Change |
| Volume |
| Rate |
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities, including FHLB stock |
| $ | 426 |
| $ | (465) |
| $ | 891 |
|
|
Federal funds sold and other interest-earning deposits |
|
| 899 |
|
| 551 |
|
| 348 |
|
|
TRS Easy Advance loans |
|
| 35 |
|
| 16 |
|
| 19 |
|
|
Other RPG loans |
|
| 2,250 |
|
| 4,265 |
|
| (2,015) |
|
|
Outstanding Warehouse lines of credit |
|
| 1,395 |
|
| 620 |
|
| 775 |
|
|
All other Traditional Bank loans |
|
| 5,530 |
|
| 2,897 |
|
| 2,633 |
|
|
Net change in interest income |
|
| 10,535 |
|
| 7,884 |
|
| 2,651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction accounts |
|
| 418 |
|
| 14 |
|
| 404 |
|
|
Money market accounts |
|
| 493 |
|
| 45 |
|
| 448 |
|
|
Time deposits |
|
| 619 |
|
| 313 |
|
| 306 |
|
|
Reciprocal money market and time deposits |
|
| 450 |
|
| 172 |
|
| 278 |
|
|
Brokered deposits |
|
| (370) |
|
| (547) |
|
| 177 |
|
|
Securities sold under agreements to repurchase and other short-term borrowings |
|
| 76 |
|
| (1) |
|
| 77 |
|
|
Federal Home Loan Bank advances |
|
| 780 |
|
| 395 |
|
| 385 |
|
|
Subordinated note |
|
| 122 |
|
| — |
|
| 122 |
|
|
Net change in interest expense |
|
| 2,588 |
|
| 391 |
|
| 2,197 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in net interest income |
| $ | 7,947 |
| $ | 7,493 |
| $ | 454 |
|
|
80
Provision for Loan and Lease Losses
The Company recorded a Provision of $4.9 million for the second quarter of 2018, compared to $5.1 million for the same period in 2017. The following were the most significant components comprising the Company’s Provision by reportable segment:
Traditional Banking segment
The Traditional Banking Provision during the second quarter of 2018 was $523,000 compared to $1.5 million for the second quarter of 2017. The following is an analysis of the Provision for the second quarter of 2018 compared to the same period in 2017:
|
|
|
|
|
|
As a percentage of total loans, the Traditional Banking Allowance for Loan and Lease Losses (“Allowance”) was 0.86% at June 30, 2018 compared to 0.85% at both December 31, 2017 and June 30, 2017. The Company believes, based on information presently available, that it has adequately provided for Traditional Banking loan losses at June 30, 2018.
See the sections titled “Allowance for Loan and Lease Losses” and “Asset Quality” in this section of the filing under “Comparison of Financial Condition” for additional discussion regarding the Provision and the Bank’s credit quality.
Warehouse Lending segment
Warehouse recorded a net charge to the Provision of $250,000 for the second quarter of 2018 compared to a net charge of $264,000 for the same period in 2017. The Provision for both periods reflected changes in general reserves consistent with changes in outstanding period-end balances. Outstanding Warehouse period-end balances increased $100 million during the second quarter of 2018 compared to an increase of $106 million during the second quarter of 2017.
As a percentage of total Warehouse outstanding balances, the Warehouse Allowance was 0.25% at June 30, 2018, December 31, 2017 and June 30, 2017. The Company believes, based on information presently available, that it has adequately provided for Warehouse loan losses at June 30, 2018.
Tax Refund Solutions segment
TRS recorded a net credit to the Provision of $888,000 during the second quarter of 2018 compared to a net credit of $738,000 for the same period in 2017. These credits resulted from downward adjustments to the Provision for EA losses previously made during the first quarters of 2018 and 2017. The Company adjusted downward its Provision as a percent of total EA originations 0.21% during the second quarter of 2018 from 3.09% at March 31, 2018 to 2.88% at June 30, 2018, while a similar downward adjustment of 0.22% was made during the second quarter of 2017 from 2.62% at March 31, 2017 to 2.40% at June 30, 2017. Each 0.10% in estimated loan loss reserves for EAs during 2018 equates to approximately $430,000 in Provision expense, while each 0.10% during 2017 equated to approximately $329,000.
As of June 30, 2018 and 2017, all unpaid EAs originated during each year had been charged-off.
See additional detail regarding the EA product under Footnote 4 “Loans and Allowance for Loan and Lease Losses” of Part I Item 1 “Financial Statements.”
81
Republic Credit Solutions segment
RCS recorded a net charge to the Provision of $5.0 million during the second quarter of 2018 compared to a net charge to the Provision of $4.1 million for the same period in 2017. A $1.1 million increase in Provision related to RCS’s subprime credit card product resulting primarily from an increase of $962,000 in quarterly net charge-offs for this product drove the overall increase in RCS Provision. During the second quarter of 2018, the Bank and its third-party marketer/servicer discontinued marketing the Bank’s subprime credit card to potential new clients, as the parties strategically wind down this product.
The following table presents RCS Provision by product:
Table 4 — RCS Provision by Product
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|
|
|
|
|
| Provision Expense |
|
|
|
| ||||
|
| for the |
|
|
|
| ||||
(dollars in thousands) |
| Three Months Ended Jun. 30, |
|
|
|
| ||||
RCS Product |
| 2018 |
|
| 2017 |
| $ Change |
| ||
|
|
|
|
|
|
|
|
|
|
|
Line of credit |
| $ | 3,445 |
| $ | 3,559 |
| $ | (114) |
|
Credit card |
|
| 1,556 |
|
| 500 |
|
| 1,056 |
|
Hospital receivables |
|
| 46 |
|
| 15 |
|
| 31 |
|
Total RCS |
| $ | 5,047 |
| $ | 4,074 |
| $ | 973 |
|
|
|
|
|
|
|
|
|
|
|
|
RCS loans generally return higher yields but also present a greater credit risk than Traditional Banking loan products. As a percentage of total RCS loans, the RCS Allowance was 16.13% at June 30, 2018, 18.85% at December 31, 2017 and 20.59% at June 30, 2017. The Company believes, based on information presently available, that it has adequately provided for RCS loan losses at June 30, 2018.
82
Table 5 — Summary of Loan and Lease Loss Experience
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| ||||
|
| June 30, |
| ||||
(dollars in thousands) |
| 2018 |
| 2017 |
| ||
|
|
|
|
|
|
|
|
Allowance at beginning of period |
| $ | 52,341 |
| $ | 42,362 |
|
|
|
|
|
|
|
|
|
Charge-offs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional Banking: |
|
|
|
|
|
|
|
Residential real estate |
|
| (22) |
|
| (111) |
|
Commercial real estate |
|
| — |
|
| — |
|
Construction & land development |
|
| — |
|
| — |
|
Commercial & industrial |
|
| (17) |
|
| — |
|
Lease financing receivables |
|
| — |
|
| — |
|
Home equity |
|
| (34) |
|
| (91) |
|
Consumer |
|
| (505) |
|
| (561) |
|
Total Traditional Banking |
|
| (578) |
|
| (763) |
|
Warehouse lines of credit |
|
| — |
|
| — |
|
Total Core Banking |
|
| (578) |
|
| (763) |
|
|
|
|
|
|
|
|
|
Republic Processing Group: |
|
|
|
|
|
|
|
Tax Refund Solutions: |
|
|
|
|
|
|
|
Easy Advances |
|
| (8,773) |
|
| (7,261) |
|
Other TRS loans |
|
| (55) |
|
| — |
|
Republic Credit Solutions |
|
| (3,769) |
|
| (2,251) |
|
Total Republic Processing Group |
|
| (12,597) |
|
| (9,512) |
|
Total charge-offs |
|
| (13,175) |
|
| (10,275) |
|
|
|
|
|
|
|
|
|
Recoveries: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional Banking: |
|
|
|
|
|
|
|
Residential real estate |
|
| 183 |
|
| 65 |
|
Commercial real estate |
|
| 3 |
|
| 21 |
|
Construction & land development |
|
| 25 |
|
| 1 |
|
Commercial & industrial |
|
| 4 |
|
| 1 |
|
Lease financing receivables |
|
| — |
|
| — |
|
Home equity |
|
| 203 |
|
| 68 |
|
Consumer |
|
| 155 |
|
| 143 |
|
Total Traditional Banking |
|
| 573 |
|
| 299 |
|
Warehouse lines of credit |
|
| — |
|
| — |
|
Total Core Banking |
|
| 573 |
|
| 299 |
|
|
|
|
|
|
|
|
|
Republic Processing Group: |
|
|
|
|
|
|
|
Tax Refund Solutions: |
|
|
|
|
|
|
|
Easy Advances |
|
| 82 |
|
| 241 |
|
Other TRS loans |
|
| 4 |
|
| 17 |
|
Republic Credit Solutions |
|
| 290 |
|
| 193 |
|
Total Republic Processing Group |
|
| 376 |
|
| 451 |
|
|
|
|
|
|
|
|
|
Total recoveries |
|
| 949 |
|
| 750 |
|
|
|
|
|
|
|
|
|
Net loan charge-offs |
|
| (12,226) |
|
| (9,525) |
|
|
|
|
|
|
|
|
|
Provision - Core Banking |
|
| 773 |
|
| 1,725 |
|
Provision - RPG |
|
| 4,159 |
|
| 3,336 |
|
Total Provision |
|
| 4,932 |
|
| 5,061 |
|
Allowance at end of period |
| $ | 45,047 |
| $ | 37,898 |
|
|
|
|
|
|
|
|
|
Credit Quality Ratios - Total Company: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance to total loans |
|
| 1.07 | % |
| 0.97 | % |
Allowance to nonperforming loans |
|
| 245 |
|
| 240 |
|
Net loan charge-offs to average loans |
|
| 1.19 |
|
| 1.02 |
|
|
|
|
|
|
|
|
|
Credit Quality Ratios - Core Banking: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance to total loans |
|
| 0.76 | % |
| 0.76 | % |
Allowance to nonperforming loans |
|
| 179 |
|
| 189 |
|
Net loan charge-offs to average loans |
|
| — |
|
| 0.05 |
|
83
Noninterest Income
Total Company noninterest income increased $1.4 million, or 11%, during the second quarter of 2018 compared to the same period in 2017. The following were the most significant components comprising the total Company’s noninterest income by reportable segment:
Traditional Banking segment
Traditional Banking’s noninterest income increased $756,000, or 11%, for the second quarter of 2018 compared to the same period in 2017. The following were the most significant categories affecting the change in noninterest income for the quarter:
|
|
|
|
Mortgage Banking segment
Mortgage banking income decreased $129,000, or 9%, during the second quarter of 2018 compared to the same period in 2017. The decrease in mortgage banking income was primarily driven by competitive pricing pressures, which resulted in the Company offering customer incentives during the second quarter of 2018 for secondary market loans related to home-purchase transactions. These incentives contributed to a decrease in the Company’s gains as a percentage of loans originated from 3.01% during the second quarter of 2017 to 1.98% during the same period in 2018. The decline in revenue as a result of a lower gain percentage was partially offset by higher overall origination volume during the second quarter of 2018. Overall, Republic’s origination of secondary market loans totaled $55 million during the second quarter of 2018 compared to $43 million during the same period in 2017.
Tax Refund Solutions segment
TRS’s noninterest income increased $782,000, or 27%, during the second quarter of 2018 compared to the same period in 2017. Net RT revenue increased $703,000, or 25%, compared to the second quarter of 2017, as the pace of client tax refunds received during the second quarter of 2018 accelerated compared to the second quarter of 2017.
Republic Credit Solutions segment
RCS’s noninterest income increased $25,000, or 2%, during the second quarter of 2018 compared to the same period in 2017, with a $51,000 increase in other noninterest income partially offset by a $29,000 decrease in program fees. Program fees are the largest component of RCS’s noninterest income and primarily represent net gains from the sale of consumer loans. RCS loans sold totaled $201 million for the second quarter of 2018 compared to $149 million for the same period in 2017. As illustrated in Table 6 below, the decrease in program fees resulted from a decrease in fees associated with RCS’s installment loan product largely offset by increases in fees associated with RCS’s line-of-credit and credit card products.
The decrease in program fees associated with RCS’s installment loan product resulted from the suspension of loan originations and sales through this program during the second quarter of 2018. Concurrent with the suspension of this program, the Bank reclassified approximately $2.2 million of these loans from “held for sale” on the balance sheet to “held for investment” and recorded a $427,000 charge to its mark-to-market fair value adjustment for these loans. Mark-to-market adjustments for this product are recorded as a component of program fees.
84
The following table presents RCS program fees by product:
Table 6 — RCS Program Fees by Product
|
|
|
|
|
|
|
|
|
|
|
|
| Program Fees |
|
|
|
| ||||
|
| for the |
|
|
|
| ||||
(dollars in thousands) |
| Three Months Ended Jun. 30, |
|
|
|
| ||||
RCS Product |
| 2018 |
|
| 2017 |
| $ Change |
| ||
|
|
|
|
|
|
|
|
|
|
|
Line of credit |
| $ | 1,158 |
| $ | 885 |
| $ | 273 |
|
Credit card |
|
| 464 |
|
| 239 |
|
| 225 |
|
Hospital receivables |
|
| 41 |
|
| — |
|
| 41 |
|
Installment loans* |
|
| (464) |
|
| 104 |
|
| (568) |
|
Total RCS |
| $ | 1,199 |
| $ | 1,228 |
| $ | (29) |
|
|
|
|
|
|
|
|
|
|
|
|
*The Company has elected the fair value option for this product, with fair value adjustments recorded as a component of program fees.
Noninterest Expense
Total Company noninterest expense increased $4.9 million, or 14%, during the second quarter of 2018 compared to the same period in 2017. The following were the most significant components comprising the increase in noninterest expense by reportable segment:
Traditional Banking segment
Traditional Banking noninterest expense increased $4.2 million, or 14%, for the second quarter of 2018 compared to the same period in 2017. The following were the most significant categories affecting the change in noninterest expense for the quarter:
|
|
|
|
|
|
Tax Refund Solutions segment
TRS’s noninterest expense increased $302,000, or 15%, during the second quarter of 2018 compared to the same period in 2017 primarily due to a $196,000 increase in salaries and benefits expense. Annual merit increases and additional staff added during the previous 12 months to support growth primarily drove the increase in salaries and benefits expense.
Republic Credit Solutions segment
RCS’s noninterest expense increased $146,000, or 19%, during the second quarter of 2018 compared to the same period in 2017 due to a $123,000 increase in salaries and benefits expense. Annual merit increases and additional staff added during the previous 12 months to support growth primarily drove the increase in salaries and benefits expense.
85
OVERVIEW (Six Months Ended June 30, 2018 Compared to Six Months Ended June 30, 2017)
Total Company net income for the first six months of 2018 was $43.1 million, a $13.0 million, or 43%, increase from the same period in 2017. Diluted EPS increased to $2.06 for the six months ended June 30, 2018 compared to $1.45 for the same period in 2017.
Pre-tax income increased 21% from the first six months of 2017 to the first six months in 2018, as the Company’s net interest margin remained strong. As will be the case for each period in 2018, a reduction in the federal corporate tax rate from 35% to 21%, effective January 1, 2018, positively impacted the comparability of the Company’s performance metrics between the first six months of 2018 and 2017. The Company estimates that the lower effective tax rate for 2018 benefitted its Diluted EPS for the first six months of 2018 by approximately $0.29 per share.
The following are general highlights by reportable segment:
Traditional Banking segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warehouse Lending segment
|
|
|
|
|
|
|
|
|
|
Mortgage Banking segment
|
|
|
|
86
Tax Refund Solutions segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Republic Credit Solutions segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RESULTS OF OPERATIONS (Six Months Ended June 30, 2018 Compared to Six Months Ended June 30, 2017)2018)
Net Interest Income
Banking operations are significantly dependent upon net interest income. Net interest income is the difference between interest income on interest-earning assets, such as loans and investment securities and the interest expense on interest-bearing liabilities used to fund those assets, such as interest-bearing deposits, securities sold under agreements to repurchase and FHLB advances. Net interest income is impacted by both changes in the amount and composition of interest-earning assets and interest-bearing liabilities, as well as market interest rates.
A large amountThe Core Bank indexes many of the Company’sits financial instruments track closely with or are primarily indexed to either the FFTR, the WSJ Prime, or LIBOR. These short-term market rates have generally trended higher since December 2015. Additionally,During this period, longer-term market rates have generally not increased as much, causing the FOMC ofyield curve to flatten. During the FRB has provided further guidance that additional FFTR increases are probable during the secondfirst half of 2018. Additional increases2019, longer-term market rates began to generally trend lower, while the short-term market rates remained relatively stable, causing short-term market rates to be higher than some longer-term market rates on the yield curve. This event, in which short-term interest rates and overall market rates are generally believed by management to be favorable to the Bank’s net interest income and net interest margin in the near term. Increases in short-term interesthigher than longer-term market rates, however, could have a negative impact on net interest income and net interest margin if the Bank is unable to maintain its deposit balances and the cost of those deposits at the levels assumed in its interest rate risk model. In addition, alabelled an inverted yield curve.
A continued flattening or inverting of the yield curve, causing the spread between long-term interest rates and short-term interest rates to decrease could negativelyfurther or further invert, will likely have a negative impact on the Company’s net interest income and net interest margin. Additionally, while parallel increases in short-term and long-term interest rates are generally believed by management to be more favorable to the Core Bank’s net interest income and net interest margin in the near term, management believes stable interest rates or a parallel decrease in short-term and long-term interest rates will likely have a negative impact on the Bank’s net interest income and net interest margin. Under any interest rate scenario, however, if the Core Bank is unable to reasonably maintain its deposit balances and the cost of those deposits at acceptable levels, it will likely have a negative impact to the Core Bank’s net interest income and net interest margin.
Unknown variables, which may impact the Company’s net interest income and net interest margin in the future, include, but are not limited to, the actual shape and steepness of the yield curve, future demand for the Bank’s financial products and the Bank’s overall future liquidity needs.
See the section titled “Asset/Liability Management and Market Risk” in this section of the filing regarding the Bank’s interest rate sensitivity.
Total Company net interest income increased $2.9 million, or 6%, during the second quarter of 2019 compared to the same period in 2018. Growth in average loans generally drove the Company’s rise in net interest income.
Total Company net interest margin decreased to 4.12% during the second quarter of 2019 compared to 4.19% for the same period in 2018. The Company’s overall net interest margin decreased due mainly to a change in its earning-assets mix, as the average balance of RCS’ substantially-higher-yielding line-of-credit and subprime credit card products as a percent of total interest-earning assets decreased from the second quarter of 2018 to the second quarter of 2019. In addition, the Core Bank’s average outstanding balances of the Company’s Warehouse lines of credit increased as a percent of total interest-earning assets during this same period. Concurrently, while the average outstanding Warehouse balances to total interest-earning assets increased from the second quarter of 2018 to the second quarter of 2019, the Warehouse net interest margin compressed due to higher funding costs combined with competitive pricing
8775
Total Company net interest income increased $19.2 million, or 19%,pressures, which caused the overall Warehouse loan yield to decline during the first six monthssame period. The margin compression resulting from the change in the Company’s interest-earning asset mix described above, more than offset the margin expansion that occurred within the Traditional Banking segment during the second quarter of 20182019 compared to the same period in 2017. Loan growth and margin expansion both contributed to the Company’s growth in net interest income. Total Company net interest margin increased to 4.85% during the first six months of 2018 compared to 4.44% for the same period in 2017.2018.
The following were the most significant components affecting the Company’s net interest income by reportable segment:segment follow:
Traditional Banking segment
The Traditional Banking’s net interest income increased $11.4$2.5 million, or 17%6%, for the first six monthssecond quarter of 20182019 compared to the same period in 2017.2018. Traditional Banking’s net interest margin was 3.65%3.75% for the first six monthssecond quarter of 2018,2019, an increaseexpansion of 28 basis pointsfour basis points over the same period in 2017.2018.
The following factors primarily drove the increases in the Traditional Bank’s net interest income and net interest margin during the first six monthssecond quarter of 2018:2019 were primarily attributable to the following factors:
· | Average |
· |
|
| its noninterest-bearing funding. The difference between the Traditional |
Warehouse Lending segment
Warehouse’s net interest income decreased $580,000, or 7%, forDespite a 17% increase in average outstanding Warehouse balances during the first six monthssecond quarter of 20182019 compared to the same period in 2017. An internal change in the way the Company assigns costsecond quarter of funds to its Warehouse segment through its FTP methodology resulted2018, a 59-basis-point compression in 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 that used for other Core Bank loan products with similar pricing and duration characteristics. This change had a $714,000 negative comparable impact on the Warehouse net interest income for the first six months of 2018 and a corresponding positive comparable impact of $714,000 to the Traditional Bank’s net interest income.
Tax Refund Solutions segment
TRS’s net interest income increased $3.9 million, or 26%, for the first six months of 2018 compared to the same period in 2017. TRS’s EA product earned $17.8 million in interest income during the first six months of 2018, a $3.6 million, or 25%, increase from the same period in 2017. The higher EA income was driven by an increase in EA origination volume, as the Company originated $430 million in EAs during the first six months of 2018 compared to $329 million during the first six months of 2017. The increase in EA origination volume during the first six months of 2018 resulted from an increase in the maximum EA advance amount.
See additional detail regarding the EA product under Footnote 4 “Loans and Allowance for Loan and Lease Losses” of Part I Item 1 “Financial Statements.”
Republic Credit Solutions segment
RCS’s net interest income increased $4.4 million, or 45%, from the first six months of 2017 to the first six months of 2018. The increase was driven primarily by an increase in fee income from RCS’s line-of-credit product. Loan fees on RCS’s line-of-credit
88
product recorded as interest income increased to $12.3 million during the first six months of 2018 compared to $8.9 millionmargin during the same period drove a $207,000 decrease in 2017 and accounted for 85% and 90% of all RCSits net interest income on loans duringincome. The following factors led to the periods.
Future long-term growth in interest income from RCS’s line-of-credit product will be restricted by a current on-balance-sheet Board-approved risk limit of $37 million for the Company. As of June 30, 2018, the total outstanding on-balance-sheet amount, including loans held for sale, related to this product was $31 million.
Table 7 — Total Company Average Balance Sheets and Interest Rates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended June 30, 2018 |
|
| Six Months Ended June 30, 2017 |
|
| ||||||||||||
|
| Average |
|
|
|
| Average |
|
| Average |
|
|
|
| Average |
|
| ||
(dollars in thousands) |
| Balance |
| Interest |
| Rate |
|
| Balance |
| Interest |
| Rate |
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
| �� |
|
|
|
|
|
|
|
Investment securities, including FHLB stock(1) |
| $ | 529,356 |
| $ | 6,297 |
| 2.38 | % |
| $ | 592,250 |
| $ | 5,257 |
| 1.78 | % |
|
Federal funds sold and other interest-earning deposits |
|
| 279,684 |
|
| 2,321 |
| 1.66 |
|
|
| 157,181 |
|
| 708 |
| 0.90 |
|
|
TRS Easy Advance loans (2) |
|
| 62,855 |
|
| 17,830 |
| 56.73 |
|
|
| 39,580 |
|
| 14,220 |
| 71.85 |
|
|
Other RPG loans(3)(6) |
|
| 83,983 |
|
| 15,499 |
| 36.91 |
|
|
| 40,330 |
|
| 10,560 |
| 52.37 |
|
|
Outstanding Warehouse lines of credit(4)(6) |
|
| 495,046 |
|
| 12,300 |
| 4.97 |
|
|
| 463,068 |
|
| 10,081 |
| 4.35 |
|
|
All other Traditional Bank loans(5)(6) |
|
| 3,445,363 |
|
| 77,942 |
| 4.52 |
|
|
| 3,197,026 |
|
| 67,878 |
| 4.25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets |
|
| 4,896,287 |
|
| 132,189 |
| 5.40 |
|
|
| 4,489,435 |
|
| 108,704 |
| 4.84 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan and lease losses |
|
| (50,950) |
|
|
|
|
|
|
|
| (38,313) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-earning cash and cash equivalents |
|
| 159,303 |
|
|
|
|
|
|
|
| 136,702 |
|
|
|
|
|
|
|
Premises and equipment, net |
|
| 46,569 |
|
|
|
|
|
|
|
| 43,995 |
|
|
|
|
|
|
|
Bank owned life insurance |
|
| 63,781 |
|
|
|
|
|
|
|
| 62,164 |
|
|
|
|
|
|
|
Other assets(1) |
|
| 60,937 |
|
|
|
|
|
|
|
| 63,412 |
|
|
|
|
|
|
|
Total assets |
| $ | 5,175,927 |
|
|
|
|
|
|
| $ | 4,757,395 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction accounts |
| $ | 1,109,066 |
| $ | 1,742 |
| 0.31 | % |
| $ | 1,066,194 |
| $ | 945 |
| 0.18 | % |
|
Money market accounts |
|
| 590,986 |
|
| 1,496 |
| 0.51 |
|
|
| 552,152 |
|
| 682 |
| 0.25 |
|
|
Time deposits |
|
| 332,164 |
|
| 2,452 |
| 1.48 |
|
|
| 238,187 |
|
| 1,290 |
| 1.08 |
|
|
Reciprocal money market and time deposits |
|
| 329,031 |
|
| 1,127 |
| 0.69 |
|
|
| 197,002 |
|
| 310 |
| 0.31 |
|
|
Brokered deposits |
|
| 51,973 |
|
| 477 |
| 1.84 |
|
|
| 164,670 |
|
| 976 |
| 1.19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing deposits |
|
| 2,413,220 |
|
| 7,294 |
| 0.60 |
|
|
| 2,218,205 |
|
| 4,203 |
| 0.38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities sold under agreements to repurchase and other short-term borrowings |
|
| 217,532 |
|
| 435 |
| 0.40 |
|
|
| 198,896 |
|
| 171 |
| 0.17 |
|
|
Federal Home Loan Bank advances |
|
| 569,613 |
|
| 4,997 |
| 1.75 |
|
|
| 548,826 |
|
| 4,235 |
| 1.54 |
|
|
Subordinated note |
|
| 41,240 |
|
| 714 |
| 3.46 |
|
|
| 41,240 |
|
| 520 |
| 2.52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities |
|
| 3,241,605 |
|
| 13,440 |
| 0.83 |
|
|
| 3,007,167 |
|
| 9,129 |
| 0.61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing liabilities and Stockholders’ equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing deposits |
|
| 1,232,652 |
|
|
|
|
|
|
|
| 1,097,711 |
|
|
|
|
|
|
|
Other liabilities |
|
| 49,263 |
|
|
|
|
|
|
|
| 33,288 |
|
|
|
|
|
|
|
Stockholders’ equity |
|
| 652,407 |
|
|
|
|
|
|
|
| 619,229 |
|
|
|
|
|
|
|
Total liabilities and stock-holders’ equity |
| $ | 5,175,927 |
|
|
|
|
|
|
| $ | 4,757,395 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
|
| $ | 118,749 |
|
|
|
|
|
|
| $ | 99,575 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest spread |
|
|
|
|
|
|
| 4.57 | % |
|
|
|
|
|
|
| 4.23 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin |
|
|
|
|
|
|
| 4.85 | % |
|
|
|
|
|
|
| 4.44 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
89
Table 8 illustrates the extent to which changes in interest rates andoverall changes in the volume of interest-earning assetsWarehouse segment’s net interest margin and interest-bearing liabilities impacted Republic’snet interest income and interest expense during the periods indicated. Information is provided in each category with respect to (i) changes attributable to changes in volume (changes in volume multiplied by prior rate), (ii) changes attributable to changes in rate (changes in rate multiplied by prior volume) and (iii) net change. The changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate.
Table 8 — Total Company Volume/Rate Variance Analysis
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended June 30, 2018 |
| ||||||
|
|
| Compared to |
| ||||||
|
|
| Six Months Ended June 30, 2017 |
| ||||||
|
| Total Net |
| Increase / (Decrease) Due to |
| |||||
(in thousands) |
| Change |
| Volume |
| Rate |
| |||
|
|
|
|
|
|
|
|
|
|
|
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities, including FHLB stock |
| $ | 1,040 |
| $ | (603) |
| $ | 1,643 |
|
Federal funds sold and other interest-earning deposits |
|
| 1,613 |
|
| 775 |
|
| 838 |
|
TRS Easy Advance loans |
|
| 3,610 |
|
| 7,066 |
|
| (3,456) |
|
Other RPG loans |
|
| 4,939 |
|
| 8,779 |
|
| (3,840) |
|
Outstanding Warehouse lines of credit |
|
| 2,219 |
|
| 727 |
|
| 1,492 |
|
All other Traditional Bank loans |
|
| 10,064 |
|
| 5,461 |
|
| 4,603 |
|
Net change in interest income |
|
| 23,485 |
|
| 22,205 |
|
| 1,280 |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction accounts |
|
| 797 |
|
| 39 |
|
| 758 |
|
Money market accounts |
|
| 814 |
|
| 51 |
|
| 763 |
|
Time deposits |
|
| 1,162 |
|
| 605 |
|
| 557 |
|
Reciprocal money market and time deposits |
|
| 817 |
|
| 297 |
|
| 520 |
|
Brokered deposits |
|
| (499) |
|
| (872) |
|
| 373 |
|
Securities sold under agreements to repurchase and other short-term borrowings |
|
| 264 |
|
| 17 |
|
| 247 |
|
Federal Home Loan Bank advances |
|
| 762 |
|
| 165 |
|
| 597 |
|
Subordinated note |
|
| 194 |
|
| — |
|
| 194 |
|
Net change in interest expense |
|
| 4,311 |
|
| 302 |
|
| 4,009 |
|
|
|
|
|
|
|
|
|
|
|
|
Net change in net interest income |
| $ | 19,174 |
| $ | 21,903 |
| $ | (2,729) |
|
90
Provision for Loan and Lease Losses
The Company recorded a Provision of $22.2 million for the first six months of 2018 compared to $17.4 million for the same period in 2017. The following were the most significant components comprising the Company’s Provision by reportable segment:
Traditional Banking segment
The Traditional Banking Provision during the first six months of 2018 was $1.5 million, compared to $1.9 million for the first six months of 2017. An analysis of the Provision for the first six months of 2018 compared to the same period in 2017 follows:income:
· |
|
|
|
|
|
As a percentage of total loans, the Traditional Banking Allowance was 0.86% at June 30, 2018 compared to 0.85% at both December 31, 2017 and June 30, 2017. The Company believes, based on information presently available, that it has adequately provided for Traditional Banking loan losses at June 30, 2018.
See the sections titled “Allowance for Loan and Lease Losses” and “Asset Quality” in this section of the filing under “Comparison of Financial Condition” for additional discussion regarding the Provision and the Bank’s credit quality.
Warehouse Lending segment
Warehouse recorded a net charge to the Provision of $271,000 for the first six months of 2018 compared to a net charge of $38,000 for the same period in 2017. Provision expense for both periods reflected changes in general reserves consistent with changes in outstanding period-end balances. Outstanding Warehouse period-end balances increased $108 million during the first six months of 2018 compared to an increase of $15 million during the first six months of 2017.
As a percentage of total Warehouse outstanding balances, the Warehouse Allowance was 0.25% at June 30, 2018, December 31, 2017 and June 30, 2017. The Company believes, based on information presently available, that it has adequately provided for Warehouse loan losses at June 30, 2018.
Tax Refund Solutions segment
TRS recorded a net charge to the Provision of $12.5 million during the first six months of 2018 compared to a net charge of $7.6 million for the same period in 2017. An increase in net loss on EA loans resulting from both a higher volume of EA originations and a higher EA loss rate drove the increased TRS Provision. TRS originated $430 million of EAs during the first six months of 2018 compared to $329 million for the same period in 2017. The Company’s net loss on EAs to total EA originations for the first six months of 2018 increased 48 basis points from the first six months of 2017 to 2.88%. Each 0.10% in estimated loan loss reserves for EAs during 2018 equates to approximately $430,000 in Provision expense, while each 0.10% during 2017 equated to approximately $329,000. The Company finished 2017 with an actual net loss on EAs of 2.07% of total 2017 EA originations.
As of June 30, 2018 and 2017, all unpaid EAs originated during each year had been charged-off.
See additional detail regarding the EA product under Footnote 4 “Loans and Allowance for Loan and Lease Losses” of Part I Item 1 “Financial Statements.”
91
Republic Credit Solutions segment
RCS recorded a net charge to the Provision of $8.0 million during the first six months of 2018 compared to a net charge to the Provision of $7.8 million for the same period in 2017. A $1.5 million increase in Provision related to RCS’s subprime credit card product was offset almost entirely by a $1.5 million reduction in Provision related to RCS’s line-of-credit product. An increase of $1.5 million in net charge-offs from the first six months of 2017 to the first six months of 2018 drove the increase in Provision related to the credit card product, while the lower Provision for RCS’s line-of-credit product resulted from seasoning of the portfolio coupled with stabilization of net charge-offs for this product from period to period. During the second quarter of 2018, the Bank and its third-party marketer/servicer discontinued marketing the Bank’s subprime credit card to potential new clients, as the parties strategically wind down this product.
The following table presents RCS Provision by product:
Table 9 — RCS Provision by Product
|
|
|
|
|
|
|
|
|
|
|
|
| Provision Expense |
|
|
|
| ||||
|
| for the |
|
|
|
| ||||
(dollars in thousands) |
| Six Months Ended Jun. 30, |
|
|
|
| ||||
RCS Product |
| 2018 |
|
| 2017 |
| $ Change |
| ||
|
|
|
|
|
|
|
|
|
|
|
Line of credit |
| $ | 5,644 |
| $ | 7,098 |
| $ | (1,454) |
|
Credit card |
|
| 2,268 |
|
| 729 |
|
| 1,539 |
|
Hospital receivables |
|
| 41 |
|
| 16 |
|
| 25 |
|
Total RCS |
| $ | 7,953 |
| $ | 7,843 |
| $ | 110 |
|
|
|
|
|
|
|
|
|
|
|
|
While RCS loans generally return higher yields, they also present a greater credit risk than Traditional Banking loan products. As a percentage of total RCS loans, the RCS Allowance was 16.13% at June 30, 2018, 18.85% at December 31, 2017 and 20.59% at June 30, 2017. The Company believes, based on information presently available, that it has adequately provided for RCS loan losses at June 30, 2018.
92
Table 10 — Summary of Loan and Lease Loss Experience
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| ||||
|
| June 30, |
| ||||
(dollars in thousands) |
| 2018 |
| 2017 |
| ||
|
|
|
|
|
|
|
|
Allowance at beginning of period |
| $ | 42,769 |
| $ | 32,920 |
|
|
|
|
|
|
|
|
|
Charge-offs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional Banking: |
|
|
|
|
|
|
|
Residential real estate |
|
| (358) |
|
| (125) |
|
Commercial real estate |
|
| — |
|
| — |
|
Construction & land development |
|
| — |
|
| — |
|
Commercial & industrial |
|
| (125) |
|
| — |
|
Lease financing receivables |
|
| — |
|
| — |
|
Home equity |
|
| (34) |
|
| (95) |
|
Consumer |
|
| (1,007) |
|
| (1,002) |
|
Total Traditional Banking |
|
| (1,524) |
|
| (1,222) |
|
Warehouse lines of credit |
|
| — |
|
| — |
|
Total Core Banking |
|
| (1,524) |
|
| (1,222) |
|
|
|
|
|
|
|
|
|
Republic Processing Group: |
|
|
|
|
|
|
|
Tax Refund Solutions: |
|
|
|
|
|
|
|
Easy Advances |
|
| (12,478) |
|
| (8,121) |
|
Commercial & industrial |
|
| (55) |
|
| — |
|
Republic Credit Solutions |
|
| (7,465) |
|
| (4,536) |
|
Total Republic Processing Group |
|
| (19,998) |
|
| (12,657) |
|
Total charge-offs |
|
| (21,522) |
|
| (13,879) |
|
|
|
|
|
|
|
|
|
Recoveries: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional Banking: |
|
|
|
|
|
|
|
Residential real estate |
|
| 225 |
|
| 124 |
|
Commercial real estate |
|
| 128 |
|
| 38 |
|
Construction & land development |
|
| 27 |
|
| 1 |
|
Commercial & industrial |
|
| 35 |
|
| 22 |
|
Lease financing receivables |
|
| — |
|
| — |
|
Home equity |
|
| 229 |
|
| 77 |
|
Consumer |
|
| 334 |
|
| 317 |
|
Total Traditional Banking |
|
| 978 |
|
| 579 |
|
Warehouse lines of credit |
|
| — |
|
| — |
|
Total Core Banking |
|
| 978 |
|
| 579 |
|
|
|
|
|
|
|
|
|
Republic Processing Group: |
|
|
|
|
|
|
|
Tax Refund Solutions: |
|
|
|
|
|
|
|
Easy Advances |
|
| 82 |
|
| 241 |
|
Refund Anticipation Loans |
|
| — |
|
| — |
|
Commercial & industrial |
|
| 5 |
|
| 252 |
|
Republic Credit Solutions |
|
| 548 |
|
| 373 |
|
Total Republic Processing Group |
|
| 635 |
|
| 866 |
|
Total recoveries |
|
| 1,613 |
|
| 1,445 |
|
|
|
|
|
|
|
|
|
Net loan charge-offs |
|
| (19,909) |
|
| (12,434) |
|
|
|
|
|
|
|
|
|
Provision - Core Banking |
|
| 1,733 |
|
| 1,966 |
|
Provision - RPG |
|
| 20,454 |
|
| 15,446 |
|
Total Provision |
|
| 22,187 |
|
| 17,412 |
|
Allowance at end of period |
| $ | 45,047 |
| $ | 37,898 |
|
|
|
|
|
|
|
|
|
Credit Quality Ratios - Total Company: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance to total loans |
|
| 1.07 | % |
| 0.97 | % |
Allowance to nonperforming loans |
|
| 245 |
|
| 240 |
|
Net loan charge-offs to average loans |
|
| 0.97 |
|
| 0.66 |
|
|
|
|
|
|
|
|
|
Credit Quality Ratios - Core Banking: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance to total loans |
|
| 0.76 | % |
| 0.76 | % |
Allowance to nonperforming loans |
|
| 179 |
|
| 189 |
|
Net loan charge-offs to average loans |
|
| 0.03 |
|
| 0.04 |
|
93
Noninterest Income
Total Company noninterest income increased $4.0 million, or 11%, during the first six months of 2018 compared to the same period in 2017. The following were the most significant components comprising the total Company’s noninterest income by reportable segment:
Traditional Banking segment
Traditional Banking’s noninterest income increased $1.2 million, or 9%, for the first six months of 2018 compared to the same period in 2017. The following were the most significant categories affecting the change in noninterest income:
|
|
|
|
Mortgage Banking segment
Mortgage banking income decreased $657,000, or 14%, during the first six months of 2018 compared to the same period in 2017. The decrease in mortgage banking income was primarily driven by competitive pricing pressures, which resulted in the Company offering customer incentives during the first six months of 2018 for secondary market loans related to home-purchase transactions. These incentives contributed to a decrease in the Company’s gains as a percentage of loans originated from 2.98% during the first six months of 2017 to 2.21% during the same period in 2018. The decline in revenue as a result of a lower gain percentage was partially offset by higher origination volume during the first six months of 2018. Overall, Republic’s origination of secondary market loans totaled $84 million during the first six months of 2018 compared to $76 million during the same period in 2017.
Tax Refund Solutions segment
TRS’s noninterest income increased $2.9 million, or 16%, during the first six months of 2018 compared to the same period in 2017. Net RT revenue increased $1.7 million, or 9%, compared to the first six months of 2017, consistent with a 7% increase in the number of RTs funded when comparing the two periods. Additionally, TRS received and recorded a $1.0 million nonrefundable capital commitment fee during the first six months of 2018. The fee was paid by a third party upon the Company’s completion of its contractual obligations to build the infrastructure and disburse funds for a new collaborative credit product offered through the Bank to the third party’s customers.
Republic Credit Solutions segment
RCS’s noninterest income increased $188,000, or 6%, during the first six months of 2018 compared to the same period in 2017. A $500,000 increase in program fees partially offset by a $323,000 decrease in other noninterest income related to a first-year volume-guarantee payment recorded during the first six months of 2017 drove this increase in noninterest income. Program fees are the largest component of RCS’s noninterest income and primarily represent net gains from the sale of consumer loans. RCS loans sold totaled $372 million for the first six months of 2018 compared to $275 million for the same period in 2017. As illustrated in Table 11 below, the increase in program fees resulted from an increase in fees associated with RCS’s credit card and line-of-credit products partially offset by a decrease in fees associated with RCS’s installment loan product.
The decrease in program fees associated with RCS’s installment loan product resulted from the suspension of loan originations and sales through this program during the second quarter of 2018. Concurrent with the suspension of this program, the Bank reclassified approximately $2.2 million of these loans from “held for sale” on the balance sheet to “held for investment” and recorded a $427,000 charge to its mark-to-market fair value adjustment for these loans. Mark-to-market adjustments for this product are recorded as a component of program fees.
94
The following table presents RCS program fees by product:
Table 11 — RCS Program Fees by Product
|
|
|
|
|
|
|
|
|
|
|
|
| Program Fees |
|
|
|
| ||||
|
| for the |
|
|
|
| ||||
(dollars in thousands) |
| Six Months Ended Jun. 30, |
|
|
|
| ||||
RCS Product |
| 2018 |
|
| 2017 |
| $ Change |
| ||
|
|
|
|
|
|
|
|
|
|
|
Line of credit |
| $ | 2,129 |
| $ | 1,829 |
| $ | 300 |
|
Credit card |
|
| 1,036 |
|
| 378 |
|
| 658 |
|
Hospital receivables |
|
| 73 |
|
| — |
|
| 73 |
|
Installment loans* |
|
| (402) |
|
| 129 |
|
| (531) |
|
Total RCS |
| $ | 2,836 |
| $ | 2,336 |
| $ | 500 |
|
|
|
|
|
|
|
|
|
|
|
|
*The Company has elected the fair value option for this product, with mark-to-market adjustments recorded as a component of program fees.
Noninterest Expense
Total Company noninterest expense increased $9.0 million, or 12%, during the first six months of 2018 compared to the same period in 2017. The following were the most significant components comprising the increase in noninterest expense by reportable segment:
Traditional Banking segment
Traditional Banking noninterest expense increased $7.5 million, or 12%, for the first six months of 2018 compared to the same period in 2017. The following were the most significant categories affecting the change in noninterest expense:
|
|
· | A |
|
|
Tax Refund Solutions segment
TRS’s noninterest expense increased $758,000, or 9%, during the first six months of 2018 compared to the same period in 2017 primarily due to a $597,000 increase in salaries and benefits expense. Annual merit increases and additional staff added during the previous 12 months to support growth primarily drove the increase in salaries and benefits expense.
Republic Credit Solutions segment
RCS’s noninterest expense increased $440,000, or 28%, during the first six months of 2018 compared to the same period in 2017 due to a $284,000 increase in salaries and benefits expense. Annual merit increases and additional staff added during the previous 12 months to support growth primarily drove the increase in salaries and benefits expense.
95
COMPARISON OF FINANCIAL CONDITION AT June 30, 2018 AND December 31, 2017
Table 12 — Loan Portfolio Composition
|
|
|
|
|
|
|
(in thousands) | June 30, 2018 |
| December 31, 2017 |
| ||
|
|
|
|
|
|
|
Traditional Banking: |
|
|
|
|
|
|
Residential real estate: |
|
|
|
|
|
|
Owner occupied | $ | 919,433 |
| $ | 921,565 |
|
Owner occupied - correspondent* |
| 105,170 |
|
| 116,792 |
|
Nonowner occupied |
| 220,943 |
|
| 205,081 |
|
Commercial real estate |
| 1,235,427 |
|
| 1,207,293 |
|
Construction & land development |
| 163,080 |
|
| 150,065 |
|
Commercial & industrial |
| 369,189 |
|
| 341,692 |
|
Lease financing receivables |
| 15,238 |
|
| 16,580 |
|
Home equity |
| 336,694 |
|
| 347,655 |
|
Consumer: |
|
|
|
|
|
|
Credit cards |
| 17,778 |
|
| 16,078 |
|
Overdrafts |
| 878 |
|
| 974 |
|
Automobile loans |
| 62,143 |
|
| 65,650 |
|
Other consumer |
| 31,453 |
|
| 20,501 |
|
Total Traditional Banking |
| 3,477,426 |
|
| 3,409,926 |
|
Warehouse lines of credit* |
| 633,841 |
|
| 525,572 |
|
Total Core Banking |
| 4,111,267 |
|
| 3,935,498 |
|
|
|
|
|
|
|
|
Republic Processing Group*: |
|
|
|
|
|
|
Tax Refund Solutions: |
|
|
|
|
|
|
Easy Advances |
| — |
|
| — |
|
Other TRS loans |
| 101 |
|
| 11,648 |
|
Republic Credit Solutions |
| 84,616 |
|
| 66,888 |
|
Total Republic Processing Group |
| 84,717 |
|
| 78,536 |
|
|
|
|
|
|
|
|
Total loans** |
| 4,195,984 |
|
| 4,014,034 |
|
Allowance for loan and lease losses |
| (45,047) |
|
| (42,769) |
|
|
|
|
|
|
|
|
Total loans, net | $ | 4,150,937 |
| $ | 3,971,265 |
|
* Identifies loans to borrowers located primarily outside of the Bank’s market footprint.
** Total loans are presented inclusive of premiums, discounts and net loan origination fees and costs.
Gross loans increased by $182 million, or 5%, during 2018 to $4.2 billion at June 30, 2018. The following were the most significant components comprising the change in loans by reportable segment:
Traditional Banking segment
Traditional Banking loans increased $68 million, or 2%, during the first six months of 2018. Growth was primarily concentrated in commercial purpose loans, which is the Company’s primary sales focus for on-balance sheet loan growth. CRE, C&I, nonowner-occupied residential real estate, and construction and land development portfolios experienced growth of $28 million, $27 million, $16 million, and $13 million, respectively, during the first six months of 2018. Additionally, a $9 million increase in loans collateralized by consumer aircraft drove an $11 million increase in other consumer loans during the first six months of 2018.
The Bank’s owner occupied residential real estate loans, including correspondent loans, declined $14 million in total. These category fluctuations were generally in-line with the Company’s overall long-term loan growth strategy, which is to reduce the Bank’s reliance on residential real estate loans for balance sheet growth and to rely more on commercial purpose loans for future growth. While the Company does currently intend to reduce its reliance on owner occupied residential real estate loans for future balance sheet growth, it also continues to make plans to expand its agency-eligible volume of first mortgage residential real estate loans, which it intends to sell into the secondary market in order to generate fee income.
96
Driven by a seasonal surge in Warehouse usage at the end of June 2018, Warehouse outstanding month-end balances increased $108 million, or 21%, from December 31, 2017. Due to the volatility and seasonality of the mortgage market, it is difficult to project future outstanding balances of Warehouse lines of credit. The growth of the Bank’s Warehouse Lending business greatly depends on the overall mortgage market and typically follows industry trends. Since its entrance into this business during 2011, the Bank has experienced volatility in the Warehouse portfolio consistent with overall demand for mortgage products. Weighted average quarterly usage rates on the Bank’s Warehouse lines have ranged from a low of 31% during the fourth quarter of 2013 to a high of 64% during the third quarter of 2015. On an annual basis, weighted average usage rates on the Bank’s Warehouse lines have ranged from a low of 40% during 2013 to a high of 57% during 2016.
76
Republic Credit Solutions segment
RCS’s net interest income increased $91,000, or 1%, from the second quarter of 2018 to the second quarter of 2019. The increase was driven primarily by increases in interest income from RCS’s line-of-credit and hospital receivables products partially offset by a decrease in interest income from RCS’s discontinued credit-card product. The overall net interest margin at RCS declined from 36.6% during the second quarter of 2018 to 26.6% for the second quarter of 2019. The decline in net interest margin at RCS was driven by a change in the mix of interest earning assets, as RCS discontinued its higher-yielding subprime credit card product in January of 2019 and substantially increased the average balances of its lower-yielding hospital receivables over the second quarter of 2018.
Future long-term growth in interest income from RCS’s higher-yielding line-of-credit product is restricted by a current on-balance-sheet Board-approved risk limit of $40 million for the Company. As of June 30, 2019, the total outstanding on-balance-sheet amount, including loans held for sale, related to this product was $30 million.
77
Table 1 — Total Company Average Balance Sheets and Interest Rates
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended June 30, 2019 |
| Three Months Ended June 30, 2018 |
| ||||||||||||||
|
| Average |
|
|
|
| Average |
|
| Average |
|
|
|
| Average |
|
| ||
(dollars in thousands) |
| Balance |
| Interest |
| Rate |
|
| Balance |
| Interest |
| Rate |
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds sold and other interest-earning deposits |
| $ | 297,205 |
| $ | 1,753 |
| 2.36 | % |
| $ | 276,246 |
| $ | 1,245 |
| 1.80 | % |
|
Investment securities, including FHLB stock(1) |
|
| 514,366 |
|
| 3,700 |
| 2.88 |
|
|
| 506,209 |
|
| 3,167 |
| 2.50 |
|
|
TRS Easy Advance loans (2) |
|
| 16,687 |
|
| 195 |
| 4.67 |
|
|
| 10,380 |
|
| 38 |
| 1.46 |
|
|
Other RPG loans(3)(6) |
|
| 109,747 |
|
| 7,659 |
| 27.92 |
|
|
| 78,287 |
|
| 7,281 |
| 37.20 |
|
|
Outstanding Warehouse lines of credit(4)(6) |
|
| 634,688 |
|
| 7,872 |
| 4.96 |
|
|
| 541,537 |
|
| 6,890 |
| 5.09 |
|
|
All other Traditional Bank loans(5)(6) |
|
| 3,663,783 |
|
| 44,485 |
| 4.86 |
|
|
| 3,462,184 |
|
| 39,735 |
| 4.59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets |
|
| 5,236,476 |
|
| 65,664 |
| 5.02 |
|
|
| 4,874,843 |
|
| 58,356 |
| 4.79 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan and lease losses |
|
| (58,825) |
|
|
|
|
|
|
|
| (52,279) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-earning cash and cash equivalents |
|
| 74,763 |
|
|
|
|
|
|
|
| 74,087 |
|
|
|
|
|
|
|
Premises and equipment, net |
|
| 43,783 |
|
|
|
|
|
|
|
| 46,843 |
|
|
|
|
|
|
|
Bank owned life insurance |
|
| 65,470 |
|
|
|
|
|
|
|
| 63,974 |
|
|
|
|
|
|
|
Other assets(1) |
|
| 118,858 |
|
|
|
|
|
|
|
| 67,313 |
|
|
|
|
|
|
|
Total assets |
| $ | 5,480,525 |
|
|
|
|
|
|
| $ | 5,074,781 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction accounts |
| $ | 1,138,347 |
| $ | 1,586 |
| 0.56 | % |
| $ | 1,113,097 |
| $ | 982 |
| 0.35 | % |
|
Money market accounts |
|
| 754,207 |
|
| 2,024 |
| 1.07 |
|
|
| 609,693 |
|
| 864 |
| 0.57 |
|
|
Time deposits |
|
| 413,530 |
|
| 2,058 |
| 1.99 |
|
|
| 340,861 |
|
| 1,336 |
| 1.57 |
|
|
Reciprocal money market and time deposits |
|
| 192,486 |
|
| 685 |
| 1.42 |
|
|
| 315,285 |
|
| 601 |
| 0.76 |
|
|
Brokered deposits |
|
| 90,266 |
|
| 550 |
| 2.44 |
|
|
| 31,394 |
|
| 151 |
| 1.92 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing deposits |
|
| 2,588,836 |
|
| 6,903 |
| 1.07 |
|
|
| 2,410,330 |
|
| 3,934 |
| 0.65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities sold under agreements to repurchase and other short-term borrowings |
|
| 220,189 |
|
| 330 |
| 0.60 |
|
|
| 178,063 |
|
| 222 |
| 0.50 |
|
|
Federal Home Loan Bank advances |
|
| 710,879 |
|
| 4,062 |
| 2.29 |
|
|
| 593,187 |
|
| 2,723 |
| 1.84 |
|
|
Subordinated note |
|
| 41,240 |
|
| 423 |
| 4.10 |
|
|
| 41,240 |
|
| 393 |
| 3.81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities |
|
| 3,561,144 |
|
| 11,718 |
| 1.32 |
|
|
| 3,222,820 |
|
| 7,272 |
| 0.90 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing liabilities and Stockholders’ equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing deposits |
|
| 1,098,817 |
|
|
|
|
|
|
|
| 1,146,403 |
|
|
|
|
|
|
|
Other liabilities |
|
| 91,841 |
|
|
|
|
|
|
|
| 42,481 |
|
|
|
|
|
|
|
Stockholders’ equity |
|
| 728,723 |
|
|
|
|
|
|
|
| 663,077 |
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity |
| $ | 5,480,525 |
|
|
|
|
|
|
| $ | 5,074,781 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
|
| $ | 53,946 |
|
|
|
|
|
|
| $ | 51,084 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest spread |
|
|
|
|
|
|
| 3.70 | % |
|
|
|
|
|
|
| 3.89 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin |
|
|
|
|
|
|
| 4.12 | % |
|
|
|
|
|
|
| 4.19 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) | For the purpose of this calculation, the fair market value adjustment on debt securities is included as a component of other assets. |
(2) | Interest income for Easy Advances is composed entirely of loan fees. |
(3) | Interest income includes loan fees of $6.2 million and $6.1 million for the three months ended June 30, 2019 and 2018. |
(4) | Interest income includes loan fees of $786,000 and $833,000 for the three months ended June 30, 2019 and 2018. |
(5) | Interest income includes loan fees of $1.3 million and $1.5 million for the three months ended June 30, 2019 and 2018. |
(6) | Average balances for loans include the principal balance of nonaccrual loans and loans held for sale, and are inclusive of all loan premiums, discounts, fees, and costs. |
78
Table 2 illustrates the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities impacted Republic’s interest income and interest expense during the periods indicated. Information is provided in each category with respect to (i) changes attributable to changes in volume (changes in volume multiplied by prior rate), (ii) changes attributable to changes in rate (changes in rate multiplied by prior volume) and (iii) net change. The changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate.
Table 2 — Total Company Volume/Rate Variance Analysis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended June 30, 2019 |
|
| ||||||
|
|
| Compared to |
|
| ||||||
|
|
| Three Months Ended June 30, 2018 |
|
| ||||||
|
| Total Net |
| Increase / (Decrease) Due to |
|
| |||||
(in thousands) |
| Change |
| Volume |
| Rate |
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds sold and other interest-earning deposits |
| $ | 508 |
| $ | 100 |
| $ | 408 |
|
|
Investment securities, including FHLB stock |
|
| 533 |
|
| 52 |
|
| 481 |
|
|
TRS Easy Advance loans* |
|
| 157 |
|
| (4) |
|
| 161 |
|
|
Other RPG loans |
|
| 378 |
|
| 2,476 |
|
| (2,098) |
|
|
Outstanding Warehouse lines of credit |
|
| 982 |
|
| 1,159 |
|
| (177) |
|
|
All other Traditional Bank loans |
|
| 4,750 |
|
| 2,381 |
|
| 2,369 |
|
|
Net change in interest income |
|
| 7,308 |
|
| 6,164 |
|
| 1,144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction accounts |
|
| 604 |
|
| 23 |
|
| 581 |
|
|
Money market accounts |
|
| 1,160 |
|
| 243 |
|
| 917 |
|
|
Time deposits |
|
| 722 |
|
| 319 |
|
| 403 |
|
|
Reciprocal money market and time deposits |
|
| 84 |
|
| (297) |
|
| 381 |
|
|
Brokered deposits |
|
| 399 |
|
| 349 |
|
| 50 |
|
|
Securities sold under agreements to repurchase and other short-term borrowings |
|
| 108 |
|
| 58 |
|
| 50 |
|
|
Federal Home Loan Bank advances |
|
| 1,339 |
|
| 599 |
|
| 740 |
|
|
Subordinated note |
|
| 30 |
|
| — |
|
| 30 |
|
|
Net change in interest expense |
|
| 4,446 |
|
| 1,294 |
|
| 3,152 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in net interest income |
| $ | 2,862 |
| $ | 4,870 |
| $ | (2,008) |
|
|
*Volume for Easy Advances is based on total fees earned during the period presented.
79
Provision for Loan and Lease Losses
The Company recorded a Provision of $4.5 million for the second quarter of 2019, compared to $4.9 million for the same period in 2018. The significant components comprising the Company’s Provision by reportable segment were as follows:
Traditional Banking segment
The Traditional Banking Provision during the second quarter of 2019 was $1.4 million, compared to $523,000 for the second quarter of 2018. An analysis of the Provision for the second quarter of 2019 compared to the same period in 2018 follows:
· | Related to the Bank’s pass-rated and non-rated credits, the Bank recorded net charges of $890,000 and $868,000 to the Provision for the second quarters of 2019 and 2018. Loan growth primarily drove the charge to the Provision in both periods. |
· | Related to the Bank’s loans rated Substandard and Special Mention, the Bank recorded a net charge to the Provision of $588,000 for the second quarter of 2019 compared to a net credit to the Provision of $298,000 for the second quarter 2018. The charge during the second quarter of 2019 includes a $1.2 million Provision for one C&I relationship that defaulted during the quarter.Despite personal guarantees associated with this relationship, the Bank recorded a large estimated Provision due to the potential for a protracted legal conflict and the uncertainty associated with these types of legal conflicts, in general. |
As a percentage of total loans, the Traditional Banking Allowance was 0.87% at June 30, 2019 compared to 0.85% at December 31, 2018 and 0.86% at June 30, 2018. The Company believes, based on information presently available, that it has adequately provided for Traditional Banking loan losses at June 30, 2019.
See the sections titled “Allowance for Loan and Lease Losses” and “Asset Quality” in this section of the filing under “Comparison of Financial Condition” for additional discussion regarding the Provision and the Bank’s credit quality.
Warehouse Lending segment
Warehouse recorded a net charge to the Provision of $417,000 for the second quarter of 2019 compared to a net charge of $250,000 for the same period in 2018. Provision expense for both periods reflected changes in general reserves consistent with changes in outstanding period-end balances. Outstanding Warehouse period-end balances increased $167 million during the second quarter of 2019 compared to an increase of $100 million during the second quarter of 2018.
As a percentage of total Warehouse outstanding balances, the Warehouse Allowance was 0.25% at June 30, 2019, December 31, 2018 and June 30, 2018. The Company believes, based on information presently available, that it has adequately provided for Warehouse loan losses at June 30, 2019.
Tax Refund Solutions segment
TRS recorded a net charge to the Provision of $392,000 for the second quarter of 2019 compared to a net credit to the Provision of $888,000 during the same period in 2018. The net credit during the second quarter of 2018 resulted from better than expected paydowns from the US Treasury on unpaid EA loans, allowing the Company to reverse a portion of the loan loss provisions it recorded during the first quarter of 2018. Conversely, loan paydowns from the US Treasury during the second quarter of 2019 approximated the Company’s estimate from the first quarter of 2019, causing the Company’s loan loss reserve for EA loans to remain relatively unchanged from the first quarter. Provision expense at TRS during the second quarter of 2019 primarily reflects net charges of $353,000 to the Provision for TRS’s non-EA products, including its receivable assistance program loans and its small-dollar line of credit program. A net credit to the Provision of $7,000 was made during the second quarter of 2018 for similar non-EA loan products.
With the second quarter EA paydowns, the percent of unpaid EAs to total EAs originated dropped to 3.45% at June 30, 2019. This compares to 2.88% at June 30, 2018, a gap of 57 basis points. By comparison, the unpaid EA percentage was 5.84% at March 31, 2019, compared to 4.49% at March 31, 2018, representing a gap of 135 basis points. Management remains optimistic that this gap can continue to shrink through the remainder of 2019. With all unpaid EAs having been charged off as of June 30, 2019, any EA payments received throughout the remainder of 2019 will represent recovery credits directly to income.
See additional detail regarding the EA product under Footnote 4 “Loans and Allowance for Loan and Lease Losses” of Part I Item 1 “Financial Statements.”
80
Republic Credit Solutions segment
As illustrated in Table 3 below, RCS recorded a Provision of $2.2 million during the second quarter of 2019 compared to a Provision of $5.0 million for the same period in 2018. The $2.8 million decrease in the Provision resulted from lower Provisions of $1.2 million and $1.6 million, respectively, for RCS’s line-of-credit product and its discontinued credit card product. The overall improvement in the Provision for the line-of-credit product was driven by a decline in its annualized historical loss rate combined with a year-to-year decrease in average outstanding balances. The decrease in losses within the RCS credit-card portfolio was due to the discontinuance of the program, effective January of this year.
While RCS loans increased $18 million fromgenerally return higher yields, they also present a greater credit risk than Traditional Banking loan products. As a percentage of total RCS loans, the RCS Allowance was 13.19% at June 30, 2019, 14.70% at December 31, 20172018 and 16.13% at June 30, 2018. The Company believes, based on information presently available, that it has adequately provided for RCS loan losses at June 30, 2019.
Table 3 — RCS Provision by Product
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended Jun. 30, |
|
|
|
| ||||
(in thousands) |
| 2019 |
|
| 2018 |
| $ Change |
| ||
|
|
|
|
|
|
|
|
|
|
|
Product: |
|
|
|
|
|
|
|
|
|
|
Line of credit |
| $ | 2,213 |
| $ | 3,445 |
| $ | (1,232) |
|
Credit card |
|
| — |
|
| 1,556 |
|
| (1,556) |
|
Hospital receivables |
|
| 11 |
|
| 46 |
|
| (35) |
|
Total |
| $ | 2,224 |
| $ | 5,047 |
| $ | (2,823) |
|
|
|
|
|
|
|
|
|
|
|
|
81
Table 4 — Summary of Loan and Lease Loss Experience
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| ||||
|
| June 30, |
| ||||
(dollars in thousands) |
| 2019 |
| 2018 |
| ||
|
|
|
|
|
|
|
|
Allowance at beginning of period |
| $ | 57,961 |
| $ | 52,341 |
|
|
|
|
|
|
|
|
|
Charge-offs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional Banking: |
|
|
|
|
|
|
|
Residential real estate |
|
| (368) |
|
| (22) |
|
Commercial & industrial |
|
| — |
|
| (17) |
|
Home equity |
|
| — |
|
| (34) |
|
Consumer |
|
| (423) |
|
| (505) |
|
Total Traditional Banking |
|
| (791) |
|
| (578) |
|
Warehouse lines of credit |
|
| — |
|
| — |
|
Total Core Banking |
|
| (791) |
|
| (578) |
|
|
|
|
|
|
|
|
|
Republic Processing Group: |
|
|
|
|
|
|
|
Tax Refund Solutions: |
|
|
|
|
|
|
|
Easy Advances |
|
| (13,425) |
|
| (8,773) |
|
Other TRS loans |
|
| (264) |
|
| (55) |
|
Republic Credit Solutions |
|
| (2,683) |
|
| (3,769) |
|
Total Republic Processing Group |
|
| (16,372) |
|
| (12,597) |
|
Total charge-offs |
|
| (17,163) |
|
| (13,175) |
|
|
|
|
|
|
|
|
|
Recoveries: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional Banking: |
|
|
|
|
|
|
|
Residential real estate |
|
| 229 |
|
| 183 |
|
Commercial real estate |
|
| 2 |
|
| 3 |
|
Construction & land development |
|
| — |
|
| 25 |
|
Commercial & industrial |
|
| 3 |
|
| 4 |
|
Home equity |
|
| 8 |
|
| 203 |
|
Consumer |
|
| 119 |
|
| 155 |
|
Total Traditional Banking |
|
| 361 |
|
| 573 |
|
Warehouse lines of credit |
|
| — |
|
| — |
|
Total Core Banking |
|
| 361 |
|
| 573 |
|
|
|
|
|
|
|
|
|
Republic Processing Group: |
|
|
|
|
|
|
|
Tax Refund Solutions: |
|
|
|
|
|
|
|
Easy Advances |
|
| 5 |
|
| 82 |
|
Other TRS loans |
|
| (6) |
|
| 4 |
|
Republic Credit Solutions |
|
| 365 |
|
| 290 |
|
Total Republic Processing Group |
|
| 364 |
|
| 376 |
|
|
|
|
|
|
|
|
|
Total recoveries |
|
| 725 |
|
| 949 |
|
|
|
|
|
|
|
|
|
Net loan charge-offs |
|
| (16,438) |
|
| (12,226) |
|
|
|
|
|
|
|
|
|
Provision - Core Banking |
|
| 1,844 |
|
| 773 |
|
Provision - RPG |
|
| 2,616 |
|
| 4,159 |
|
Total Provision |
|
| 4,460 |
|
| 4,932 |
|
Allowance at end of period |
| $ | 45,983 |
| $ | 45,047 |
|
|
|
|
|
|
|
|
|
Credit Quality Ratios - Total Company: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance to total loans |
|
| 1.04 | % |
| 1.07 | % |
Allowance to nonperforming loans |
|
| 237 |
|
| 245 |
|
Net loan charge-offs to average loans |
|
| 1.49 |
|
| 1.19 |
|
|
|
|
|
|
|
|
|
Credit Quality Ratios - Core Banking: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance to total loans |
|
| 0.76 | % |
| 0.76 | % |
Allowance to nonperforming loans |
|
| 171 |
|
| 179 |
|
Net loan charge-offs to average loans |
|
| 0.04 |
|
| — |
|
82
Noninterest Income
Total Company noninterest income increased $829,000, or 6%, during the second quarter of 2019 compared to the same period in 2018. The most significant components comprising the total Company’s noninterest income by reportable segment were as follows:
Traditional Banking segment
Traditional Banking’s noninterest income increased $128,000, or 2%, for the second quarter of 2019 compared to the same period in 2018. The most significant categories affecting the change in noninterest income for the quarter were as follows:
· | Service charges on deposit accounts remained at $3.6 million for the second quarter of 2019 compared the same period in 2018. The Bank earns a substantial majority of its fee income related to its overdraft service program from the per item fee it assesses its customers for each insufficient funds check or electronic debit presented for payment. The total per item fees, net of refunds, included in service charges on deposits for the quarters ended June 30, 2019 and 2018 was $2.2 million and $2.1 million. The total daily overdraft charges, net of refunds, included in interest income for the quarters ended June 30, 2019 and 2018 were $566,000 and $451,000. |
· | Interchange income increased $375,000, or 13%, with debit card interchange fees up $281,000, or 12%, and credit card interchange fees up $94,000, or 24%. Increases of 7% in active debit cards and 4% in active credit cards over the previous 12 months, as well as the corresponding usage on those cards, drove the increase in interchange fees. |
Mortgage Banking segment
Within the Mortgage Banking segment, mortgage banking income increased $1.1 million, or 84%, during the second quarter of 2019 compared to the same period in 2018, which resulted from a $27 million increase in secondary market loans originated from period to period combined with a $33 million increase in the Bank’s pipeline of secondary market loans in process from June 30, 2018 to June 30, 2019. Over the previous 12 months, the Bank has continued to invest in staffing and other resources for the mortgage banking function. A sharp decline in long-term mortgage rates during the quarter, combined with the Bank’s continued investments in mortgage resources, contributed to the increased quarter-over-quarter mortgage activity.
Republic Credit Solutions segment
RCS’s noninterest income decreased $499,000, or 33%, during the second quarter of 2019 compared to the same period in 2018, resulting primarily from the discontinuation of its credit-card product.
RCS’s largest noninterest income item, programs fees, are presented by product in in the following table:
Table 5 — RCS Program Fees by Product
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended Jun. 30, |
|
|
|
| ||||
(in thousands) |
| 2019 |
|
| 2018 |
| $ Change |
| ||
|
|
|
|
|
|
|
|
|
|
|
Product: |
|
|
|
|
|
|
|
|
|
|
Line of credit |
| $ | 1,121 |
| $ | 1,158 |
| $ | (37) |
|
Credit card |
|
| — |
|
| 464 |
|
| (464) |
|
Hospital receivables |
|
| 58 |
|
| 41 |
|
| 17 |
|
Installment loans* |
|
| (192) |
|
| (464) |
|
| 272 |
|
Total |
| $ | 987 |
| $ | 1,199 |
| $ | (212) |
|
|
|
|
|
|
|
|
|
|
|
|
*The Company has elected the fair value option for this product, with mark-to-market adjustments recorded as a component of program fees.
83
Noninterest Expenses
Total Company noninterest expenses increased $2.8 million, or 7%, during the second quarter of 2019 compared to the same period in 2018. The most significant components comprising the increase in noninterest expense by reportable segment were as follows:
Traditional Banking segment
Traditional Banking noninterest expenses increased $2.3 million, or 7%, for the second quarter of 2019 compared to the same period in 2018. The most significant categories driving the change in noninterest expense were as follows:
· | Salaries and employee benefits expense increased $2.2 million, or 11%. Annual merit increases and the addition of 79 Traditional Bank FTE employees from June 30, 2018 to June 30, 2019 primarily drove the increase. |
· | Interchange related expense increased $266,000, or 25%, primarily driven by a 7% increase in active debit cards from June 30, 2018 to June 30, 2019, along with transactional rate increases for fraud prevention services provided by the Bank’s third-party service provider. |
Tax Refund Solutions segment
TRS’s noninterest expenses increased $576,000, or 25%, during the second quarter of 2019 compared to the same period in 2018 resulting primarily from a $374,000 increase in salaries and employee benefits expense.
Republic Credit Solutions segment
RCS’s noninterest expense decreased $249,000, or 27%, during the second quarter of 2019 compared to the same period in 2018. A reduction of $250,000 in RCS’s data processing costs resulting from the discontinuation of RCS’s credit-card portfolio primarily drove the overall decrease from period to period.
Income Tax Expense
The Total Company effective income tax rate was 15% for the second quarter of 2019 compared to 21% for the same period in 2018. The following drove the lower rate in 2019:
· | In April 2019, Kentucky enacted HB458, which allows for combined filing for Republic Bancorp and the Bank. Republic Bancorp had previously filed a separate company income tax return for Kentucky and generated net operating losses, for which it had maintained a valuation allowance against the related deferred tax asset. HB458 also allows for certain net operating losses to be utilized on a combined return. Republic Bancorp expects to file a combined return beginning in 2021 and to utilize these previously generated net operating losses. The tax benefit to reverse the valuation allowance on the deferred tax asset for these losses is approximately $815,000. This benefit was recorded in the second quarter of 2019, with 100% of this benefit attributed to the Traditional Bank. |
· | The Company received $388,000 in income tax benefit during the second quarter of 2019 associated with equity compensation. Substantially all of this benefit was attributed to the Traditional Bank. |
84
OVERVIEW (Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018)
Total Company net income for the first six months of 2019 was $47.5 million, a $4.4 million, or 10%, increase from the same period in 2018. Diluted EPS increased to $2.28 for the six months ended June 30, 2019 compared to $2.06 for the same period in 2018.
The following are general highlights by reportable segment:
Traditional Banking segment
· | Net income increased $2.5 million, or 14%, for the first six months of 2019 compared to the same period in 2018. |
· | Net interest income increased $5.7 million, or 7%, for the first six months of 2019 compared to the same period in 2018. |
· | The Traditional Banking Provision was $1.6 million for the first six months of 2019 compared to $1.5 million for the same period in 2018. |
· | Total noninterest income increased $22,000 for the first six months of 2019 compared to the same period in 2018. |
· | Total noninterest expense increased $4.5 million, or 7%, for the first six months of 2019 compared to same period in 2018. |
· | Total nonperforming loans to total loans for the Traditional Banking segment was 0.54% at June 30, 2019 compared to 0.45% at December 31, 2018. |
· | Delinquent loans to total loans for the Traditional Banking segment was 0.35% at June 30, 2019 compared to 0.25% at December 31, 2018. |
Warehouse Lending segment
· | Net income decreased $856,000, or 19%, for the first six months of 2019 compared to the same period in 2018. |
· | Net interest income decreased $903,000, or 12%, for the first six months of 2019 compared to the same period in 2018. |
· | The Warehouse Provision was a net charge of $642,000 for the first six months of 2019 compared to a net charge of $271,000 for the same period in 2018. |
· | Total committed Warehouse lines remained at $1.1 billion from December 31, 2018 to June 30, 2019. |
· | Average line usage was 48% during the first six months of 2019 compared to 48% during the same period in 2018. |
Mortgage Banking segment
· | Within the Mortgage Banking segment, mortgage banking income increased $1.6 million, or 69%, during the first six months of 2019 compared to the same period in 2018. |
· | Overall, Republic’s originations of secondary market loans totaled $123 million during the first six months of 2019 compared to $84 million during the same period in 2018, with the Company’s gain recognized as a percent of total originations increasing to 2.83% during the first six months of 2019 from 2.21% during the same period in 2018. |
Tax Refund Solutions segment
· | Net income decreased $264,000, or 2%, for the first six months of 2019 compared to the same period in 2018. |
· | Net interest income increased $2.1 million, or 11%, for the first six months of 2019 compared to the same period in 2018. |
· | Total EA originations were $389 million during the first six months of 2019 compared to $430 million for the same period in 2018. |
85
· | Overall, TRS recorded a net charge to the Provision of $13.8 million during the first six months of 2019 compared to a net charge of $12.5 million for the same period in 2018. |
· | Noninterest income decreased $53,000 for the first six months of 2019 compared to the same period in 2018. |
· | Net RT revenue increased $904,000, or 5%, for the first six months of 2019 compared to the same period in 2018. |
· | Noninterest expense was $10.0 million for the first six months of 2019 compared to $8.8 million for the same period in 2018. |
Republic Credit Solutions segment
· | Net income increased $1.9 million, or 32%, for the first six months of 2019 compared to the same period in 2018. |
· | Net interest income increased $480,000, or 3%, for the first six months of 2019 compared to the same period in 2018. |
· | Overall, RCS recorded a net charge to the Provision of $5.6 million during the first six months of 2019 compared to a net charge of $8.0 million for the same period in 2018. |
· | Noninterest income decreased $900,000, or 26%, for the first six months of 2019 compared to the same period in 2018. |
· | Noninterest expense was $1.4 million for the first six months of 2019 compared to $2.0 million for the same period in 2018. |
· | Total nonperforming loans to total loans for the RCS segment was 0.16% at June 30, 2019 compared to 0.14% at December 31, 2018. |
· | Delinquent loans to total loans for the RCS segment was 6.95% at June 30, 2019 compared to 7.97% at December 31, 2018. |
RESULTS OF OPERATIONS (Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018)
Net Interest Income
Banking operations are significantly dependent upon net interest income. Net interest income is the difference between interest income on interest-earning assets, such as loans and investment securities and the interest expense on interest-bearing liabilities used to fund those assets, such as interest-bearing deposits, securities sold under agreements to repurchase, and FHLB advances. Net interest income is impacted by both changes in the amount and composition of interest-earning assets and interest-bearing liabilities, as well as market interest rates.
The Core Bank indexes many of its financial instruments to either the FFTR, Prime, or LIBOR. These short-term market rates have generally trended higher since December 2015. During this period, longer-term market rates have generally not increased as much, causing the yield curve to flatten. During the first half of 2019, longer-term market rates began to generally trend lower, while the short-term market rates remained relatively stable, causing short-term market rates to be higher than some longer-term market rates on the yield curve. This event, in which short-term market rates are higher than longer-term market rates, is labelled an inverted yield curve.
A continued flattening or inverting of the yield curve, causing the spread between long-term interest rates and short-term interest rates to decrease further or further invert, will likely have a negative impact on the Company’s net interest income and net interest margin. Additionally, while parallel increases in short-term and long-term interest rates are generally believed by management to be more favorable to the Core Bank’s net interest income and net interest margin in the near term, management believes stable interest rates or a parallel decrease in short-term and long-term interest rates will likely have a negative impact on the Bank’s net interest income and net interest margin. Under any interest rate scenario, however, if the Core Bank is unable to reasonably maintain its deposit balances and the cost of those deposits at acceptable levels, it will likely have a negative impact to the Core Bank’s net interest income and net interest margin.
See the section titled “Asset/Liability Management and Market Risk” in this section of the filing regarding the Bank’s interest rate sensitivity.
86
Total Company net interest income increased $7.5 million, or 6%, during the first six months of 2019 compared to the same period in 2018. Loan growth and margin expansion both contributed to the Company’s growth in net interest income. Total Company net interest margin increased to 4.88% during the first six months of 2019 compared to 4.85% for the same period in 2018.
The following were the most significant components affecting the Company’s net interest income by reportable segment:
Traditional Banking segment
The Traditional Banking’s net interest income increased $5.7 million, or 7%, for the first six months of 2019 compared to the same period in 2018. Traditional Banking’s net interest margin was 3.81% for the first six months of 2019, an increase of 16 basis points over the same period in 2018.
The increases in the Traditional Bank’s net interest income and net interest margin during the first six months of 2019 were primarily attributable to the following factors:
· | Average loans increased $182 million, or 5%, during the first six months of 2019 compared to the same period in 2018. The primary contributors for the increase in the year-over-year average balances were C&I loans, which grew $81 million, and CRE loans, which grew $48 million. |
· | Despite a 31-basis-point increase in the Traditional Banking segment’s cost of interest-bearing liabilities, its net interest margin continued to expand due to the above-mentioned strong loan growth and increased value from its noninterest-bearing funding. The difference between the Traditional Banking segment’s net interest margin and net interest spread was 19 basis points during the first six months of 2019 compared to 13 basis points during the same period in 2018, with the differential representing the increased value to the net interest margin of noninterest-bearing deposits and stockholders’ equity. The increase in this value resulted from a 40-basis-point rise in the yield on the Traditional Banking segment’s interest-earning assets from period to period. |
Warehouse Lending segment
Despite a 5% increase in average outstanding Warehouse balances during the first six months of 2019 compared to the same period in 2018, a 50-basis-point compression in the Warehouse segment’s net interest margin during the same period drove a $903,000 decrease in its net interest income. The following factors led to the overall changes in the Warehouse segment’s net interest margin and net interest income:
· | Competitive pricing pressure to the Bank on Warehouse lines of credit resulting from the negative impact of an inverted yield curve on Warehouse clients primarily drove the 50-basis-point compression in the Warehouse segment’s net interest margin. More specifically, Warehouse clients utilize the Bank’s Warehouse lines of credit to fund long-term fixed rate loans on their balance sheets prior to these loans being sold to their end-buyers. The inverted yield curve has caused Warehouse clients to experience a small, and potentially negative, spread on these long-term fixed rate loans while they are held on their balance sheets. As a result, Warehouse clients have continued to consolidate their lines of credit from their various bank providers, including the Bank, in exchange for better pricing. |
· | A sharp decline in long-term fixed mortgage rates drove strong client usage of the Bank’s Warehouse lines of credit, particularly during the second quarter of 2019, driving average outstanding Warehouse balances from $495 million during the first six months of 2018 to $522 million during the first six months of 2019. While Warehouse usage rates remained consistent at 48% during the first six months of 2019 and 2018, the average outstanding Warehouse line was $1.1 billion during the first six months of 2019 compared to $1.0 billion during the same period in 2018. |
Due to the volatility and seasonality of the mortgage market, it is difficult to project future outstanding balances of Warehouse lines of credit. The growth of the Bank’s Warehouse Lending business greatly depends on the overall mortgage market and typically follows industry trends. Since its entrance into this business during 2011, the Bank has experienced volatility in the Warehouse portfolio consistent with overall demand for mortgage products. Weighted average quarterly usage rates on the Bank’s Warehouse lines have ranged from a low of 31% during the fourth quarter of 2013 to a high of 64% during the third quarter of 2015. On an annual basis, weighted average usage rates on the Bank’s Warehouse lines have ranged from a low of 40% during 2013 to a high of 57% during 2016.
87
Tax Refund Solutions segment
TRS’s net interest income increased $2.1 million for the first six months of 2019 compared to the same period in 2018, resulting from a $1.2 million increase in interest income from its EA product and a $426,000 increase in interest income from commercial loans to its Tax Providers.
TRS’s EA product earned $19.1 million in interest income during the first six months of 2019, a $1.2 million, or 7%, increase from the same period in 2018. For the first six months 2019 tax season, TRS modified its EA product offering with the following changes:
· | TRS allowed the taxpayer to choose from multiple loan-amount tiers, subject to underwriting, up to a maximum advance amount of $6,250, a substantial increase over the maximum of $3,500 the previous year; |
· | TRS lowered the fee charged to the Tax Providers for the EA; and |
· | TRS implemented a direct fee to the taxpayer for the EA, with the annual percentage rate to the taxpayer for his or her portion of the total fee being less than 36% for all offering tiers. |
Despite the increase in the available EA maximum amount, the average loan amount for the first six months of 2019 decreased by 9% compared to the first six months 2018 tax season, as the taxpayer base generally opted for lower loan amounts this tax season. While the average amount borrowed per loan decreased during 2019, the average fee per loan increased 7% for the same period, as the combined Tax Provider and taxpayer fee for 2019 resulted in a higher total average fee per loan than the lone tax provider fee in 2018.
See additional detail regarding the EA product under Footnote 4 “Loans and Allowance for Loan and Lease Losses” of Part I Item 1 “Financial Statements.”
Republic Credit Solutions segment
RCS’s net interest income increased $480,000, or 3%, from the first six months of 2018 to the first six months of 2019. The increase was driven primarily by an increase in fee income from RCS’s line-of-credit product. Loan fees on RCS’s line-of-credit product recorded as interest income increased to $12.7 million during the additionfirst six months of $162019 compared to $12.3 million during the same period in hospital receivables2018 and accounted for 80% and 83% of all RCS interest income on loans during the periods.
Future long-term growth in interest income from RCS’s higher-yielding line-of-credit product will be restricted by a current on-balance-sheet Board-approved risk limit of $40 million for the Company. As of June 30, 2019, the total outstanding on-balance-sheet amount, including loans held for sale, related to this product was $30 million.
88
Table 6 — Total Company Average Balance Sheets and Interest Rates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended June 30, 2019 |
| Six Months Ended June 30, 2018 |
| ||||||||||||||
|
| Average |
|
|
|
| Average |
|
| Average |
|
|
|
| Average |
|
| ||
(dollars in thousands) |
| Balance |
| Interest |
| Rate |
|
| Balance |
| Interest |
| Rate |
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds sold and other interest-earning deposits |
| $ | 293,587 |
| $ | 3,477 |
| 2.37 | % |
| $ | 279,684 |
| $ | 2,321 |
| 1.66 | % |
|
Investment securities, including FHLB stock(1) |
|
| 538,923 |
|
| 7,781 |
| 2.89 |
|
|
| 529,356 |
|
| 6,297 |
| 2.38 |
|
|
TRS Easy Advance loans (2) |
|
| 68,667 |
|
| 19,052 |
| 55.49 |
|
|
| 62,855 |
|
| 17,830 |
| 56.73 |
|
|
Other RPG loans(3)(6) |
|
| 119,632 |
|
| 16,930 |
| 28.30 |
|
|
| 83,983 |
|
| 15,499 |
| 36.91 |
|
|
Outstanding Warehouse lines of credit(4)(6) |
|
| 521,643 |
|
| 13,314 |
| 5.10 |
|
|
| 495,046 |
|
| 12,300 |
| 4.97 |
|
|
All other Traditional Bank loans(5)(6) |
|
| 3,631,312 |
|
| 87,743 |
| 4.83 |
|
|
| 3,445,363 |
|
| 77,942 |
| 4.52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets |
|
| 5,173,764 |
|
| 148,297 |
| 5.73 |
|
|
| 4,896,287 |
|
| 132,189 |
| 5.40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan and lease losses |
|
| (54,588) |
|
|
|
|
|
|
|
| (50,950) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-earning cash and cash equivalents |
|
| 132,931 |
|
|
|
|
|
|
|
| 159,303 |
|
|
|
|
|
|
|
Premises and equipment, net |
|
| 44,051 |
|
|
|
|
|
|
|
| 46,569 |
|
|
|
|
|
|
|
Bank owned life insurance |
|
| 65,283 |
|
|
|
|
|
|
|
| 63,781 |
|
|
|
|
|
|
|
Other assets(1) |
|
| 117,168 |
|
|
|
|
|
|
|
| 60,937 |
|
|
|
|
|
|
|
Total assets |
| $ | 5,478,609 |
|
|
|
|
|
|
| $ | 5,175,927 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction accounts |
| $ | 1,129,824 |
| $ | 3,104 |
| 0.55 | % |
| $ | 1,109,066 |
| $ | 1,742 |
| 0.31 | % |
|
Money market accounts |
|
| 750,434 |
|
| 3,803 |
| 1.01 |
|
|
| 590,986 |
|
| 1,496 |
| 0.51 |
|
|
Time deposits |
|
| 399,252 |
|
| 3,889 |
| 1.95 |
|
|
| 332,164 |
|
| 2,452 |
| 1.48 |
|
|
Reciprocal money market and time deposits |
|
| 194,971 |
|
| 1,274 |
| 1.31 |
|
|
| 329,031 |
|
| 1,127 |
| 0.69 |
|
|
Brokered deposits |
|
| 134,707 |
|
| 1,581 |
| 2.35 |
|
|
| 51,973 |
|
| 477 |
| 1.84 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing deposits |
|
| 2,609,188 |
|
| 13,651 |
| 1.05 |
|
|
| 2,413,220 |
|
| 7,294 |
| 0.60 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities sold under agreements to repurchase and other short-term borrowings |
|
| 225,864 |
|
| 751 |
| 0.67 |
|
|
| 217,532 |
|
| 435 |
| 0.40 |
|
|
Federal Home Loan Bank advances |
|
| 611,695 |
|
| 6,792 |
| 2.22 |
|
|
| 569,613 |
|
| 4,997 |
| 1.75 |
|
|
Subordinated note |
|
| 41,240 |
|
| 858 |
| 4.16 |
|
|
| 41,240 |
|
| 714 |
| 3.46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities |
|
| 3,487,987 |
|
| 22,052 |
| 1.26 |
|
|
| 3,241,605 |
|
| 13,440 |
| 0.83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing liabilities and Stockholders’ equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing deposits |
|
| 1,178,198 |
|
|
|
|
|
|
|
| 1,232,652 |
|
|
|
|
|
|
|
Other liabilities |
|
| 94,586 |
|
|
|
|
|
|
|
| 49,263 |
|
|
|
|
|
|
|
Stockholders’ equity |
|
| 717,838 |
|
|
|
|
|
|
|
| 652,407 |
|
|
|
|
|
|
|
Total liabilities and stock-holders’ equity |
| $ | 5,478,609 |
|
|
|
|
|
|
| $ | 5,175,927 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
|
| $ | 126,245 |
|
|
|
|
|
|
| $ | 118,749 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest spread |
|
|
|
|
|
|
| 4.47 | % |
|
|
|
|
|
|
| 4.57 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin |
|
|
|
|
|
|
| 4.88 | % |
|
|
|
|
|
|
| 4.85 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) | For the purpose of this calculation, the fair market value adjustment on debt securities is included as a component of other assets. |
(2) | Interest income for Easy Advances is composed entirely of loan fees. |
(3) | Interest income includes loan fees of $14.2 million and $13.3 million for the six months ended June 30, 2019 and 2018. |
(4) | Interest income includes loan fees of $1.3 million and $1.5 million for the six months ended June 30, 2019 and 2018. |
(5) | Interest income includes loan fees of $2.4 million and $2.7 million for the six months ended June 30, 2019 and 2018. |
(6) | Average balances for loans include the principal balance of nonaccrual loans and loans held for sale, and are inclusive of all loan premiums, discounts, fees and costs. |
89
Table 7 illustrates the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities impacted Republic’s interest income and interest expense during the periods indicated. Information is provided in each category with respect to (i) changes attributable to changes in volume (changes in volume multiplied by prior rate), (ii) changes attributable to changes in rate (changes in rate multiplied by prior volume) and (iii) net change. The changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate.
Table 7 — Total Company Volume/Rate Variance Analysis
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended June 30, 2019 |
| ||||||
|
|
| Compared to |
| ||||||
|
|
| Six Months Ended June 30, 2018 |
| ||||||
|
| Total Net |
| Increase / (Decrease) Due to |
| |||||
(in thousands) |
| Change |
| Volume |
| Rate |
| |||
|
|
|
|
|
|
|
|
|
|
|
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds sold and other interest-earning deposits |
| $ | 1,156 |
| $ | 120 |
| $ | 1,036 |
|
Investment securities, including FHLB stock |
|
| 1,484 |
|
| 116 |
|
| 1,368 |
|
TRS Easy Advance loans |
|
| 1,222 |
|
| (1,816) |
|
| 3,038 |
|
Other RPG loans |
|
| 1,431 |
|
| 5,589 |
|
| (4,158) |
|
Outstanding Warehouse lines of credit |
|
| 1,014 |
|
| 673 |
|
| 341 |
|
All other Traditional Bank loans |
|
| 9,801 |
|
| 4,333 |
|
| 5,468 |
|
Net change in interest income |
|
| 16,108 |
|
| 9,015 |
|
| 7,093 |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction accounts |
|
| 1,362 |
|
| 33 |
|
| 1,329 |
|
Money market accounts |
|
| 2,307 |
|
| 489 |
|
| 1,818 |
|
Time deposits |
|
| 1,437 |
|
| 556 |
|
| 881 |
|
Reciprocal money market and time deposits |
|
| 147 |
|
| (588) |
|
| 735 |
|
Brokered deposits |
|
| 1,104 |
|
| 939 |
|
| 165 |
|
Securities sold under agreements to repurchase and other short-term borrowings |
|
| 316 |
|
| 17 |
|
| 299 |
|
Federal Home Loan Bank advances |
|
| 1,795 |
|
| 390 |
|
| 1,405 |
|
Subordinated note |
|
| 144 |
|
| — |
|
| 144 |
|
Net change in interest expense |
|
| 8,612 |
|
| 1,836 |
|
| 6,776 |
|
|
|
|
|
|
|
|
|
|
|
|
Net change in net interest income |
| $ | 7,496 |
| $ | 7,179 |
| $ | 317 |
|
*Volume for Easy Advances is based on total loans originated during the period presented.
90
Provision for Loan and Lease Losses
The Company recorded a Provision of $21.7 million for the first six months of 2019 compared to $22.2 million for the same period in 2018. The following were the most significant components comprising the Company’s Provision by reportable segment:
Traditional Banking segment
The Traditional Banking Provision during the first six months of 2019 was $1.6 million, compared to $1.5 million for the first six months of 2018. An analysis of the Provision for the first six months of 2019 compared to the same period in 2018 follows:
· | Related to the Bank’s pass-rated and non-rated credits, the Bank recorded net charges of $1.2 million and $1.4 million to the Provision for the first six months of 2019 and 2018. Loan growth primarily drove the net charge to the Provision in both periods. |
· | The Bank recorded net charges to the Provision of $616,000 and $109,000 for the first six months of 2019 and 2018 related to loans rated Substandard or Special Mention. The charge during the first six months of 2019 includes a $1.2 million Provision for one C&I relationship that defaulted during the period, with this charge partially offset by payoffs and paydowns of other loans rated Substandard or Special Mention.Despite personal guarantees associated with this relationship, the Bank recorded a large estimated Provision due to the potential for a protracted legal conflict and the uncertainty associated with these types of legal conflicts, in general. |
As a percentage of total loans, the Traditional Banking Allowance was 0.87% at June 30, 2019 compared to 0.85% at December 31, 2018 and 0.86% at June 30, 2018. The Company believes, based on information presently available, that it has adequately provided for Traditional Banking loan losses at June 30, 2019.
See the sections titled “Allowance for Loan and Lease Losses” and “Asset Quality” in this section of the filing under “Comparison of Financial Condition” for additional discussion regarding the Provision and the Bank’s credit quality.
Warehouse Lending segment
Warehouse recorded a net charge to the Provision of $642,000 for the first six months of 2019 compared to a net charge of $271,000 for the same period in 2018. Provision expense for both periods reflected changes in general reserves consistent with changes in outstanding period-end balances. Outstanding Warehouse period-end balances increased $257 million during the first six months of 2019 compared to an increase of $108 million during the first six months of 2018.
As a percentage of total Warehouse outstanding balances, the Warehouse Allowance was 0.25% at June 30, 2019, December 31, 2018 and June 30, 2018. The Company believes, based on information presently available, that it has adequately provided for Warehouse loan losses at June 30, 2019.
Tax Refund Solutions segment
TRS recorded a net charge to the Provision of $13.8 million during the first six months of 2019 compared to a net charge of $12.5 million for the same period in 2018. TRS’s Provision for EA loan losses was $13.4 million, or 3.45% of its $389 million in EAs originated during the first six months of 2019, compared to a Provision of $12.4 million, or 2.88% of its $430 million of EAs originated during the first six months of 2018.
The unpaid EA percentage was 5.84% at March 31, 2019, compared to 4.49% at March 31, 2018, representing a gap of 135 basis points. The unpaid EAs to total EAs originated dropped to 3.45% at June 30, 2019. This compares to 2.88% at June 30, 2018, a gap of 57 basis points. Management remains optimistic that this gap can continue to shrink through the remainder of 2019. With all unpaid EAs having been charged off as of June 30, 2019, any EA payments received throughout the remainder of 2019 will represent recovery credits directly to income.
91
Provision expense at TRS during the first six months of 2019 also reflects net charges of $406,000 to the Provision for TRS’s non-EA products, including its receivable assistance program loans and its small-dollar line of credit program. A net charge to the Provision of $105,000 was made during the first six months of 2018 for similar non-EA loan products.
See additional detail regarding the EA product under Footnote 4 “Loans and Allowance for Loan and Lease Losses” of Part I Item 1 “Financial Statements.”
Republic Credit Solutions segment
As illustrated in Table 8 below, RCS recorded a Provision of $5.6 million during the first six months of 2019 compared to a Provision of $8.0 million for the same period in 2018. The $2.3 million decrease in the Provision from period to period was primarily attributable to a decrease in Provision for RCS’s discontinued credit-card product.
While RCS loans generally return higher yields, they also present a greater credit risk than Traditional Banking loan products. As a percentage of total RCS loans, the RCS Allowance was 13.19% at June 30, 2019, 14.70% at December 31, 2018 and 16.13% at June 30, 2018. The Company believes, based on information presently available, that it has adequately provided for RCS loan losses at June 30, 2019.
The following table presents RCS Provision by product:
Table 8 — RCS Provision by Product
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended Jun. 30, |
|
|
|
| ||||
(in thousands) |
| 2019 |
|
| 2018 |
| $ Change |
| ||
|
|
|
|
|
|
|
|
|
|
|
Product: |
|
|
|
|
|
|
|
|
|
|
Line of credit |
| $ | 5,573 |
| $ | 5,644 |
| $ | (71) |
|
Credit card |
|
| — |
|
| 2,268 |
|
| (2,268) |
|
Hospital receivables |
|
| 34 |
|
| 41 |
|
| (7) |
|
Total |
| $ | 5,607 |
| $ | 7,953 |
| $ | (2,346) |
|
|
|
|
|
|
|
|
|
|
|
|
92
Table 9 — Summary of Loan and Lease Loss Experience
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| ||||
|
| June 30, |
| ||||
(dollars in thousands) |
| 2019 |
| 2018 |
| ||
|
|
|
|
|
|
|
|
Allowance at beginning of period |
| $ | 44,675 |
| $ | 42,769 |
|
|
|
|
|
|
|
|
|
Charge-offs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional Banking: |
|
|
|
|
|
|
|
Residential real estate |
|
| (457) |
|
| (358) |
|
Commercial & industrial |
|
| — |
|
| (125) |
|
Home equity |
|
| (13) |
|
| (34) |
|
Consumer |
|
| (933) |
|
| (1,007) |
|
Total Traditional Banking |
|
| (1,403) |
|
| (1,524) |
|
Warehouse lines of credit |
|
| — |
|
| — |
|
Total Core Banking |
|
| (1,403) |
|
| (1,524) |
|
|
|
|
|
|
|
|
|
Republic Processing Group: |
|
|
|
|
|
|
|
Tax Refund Solutions: |
|
|
|
|
|
|
|
Easy Advances |
|
| (13,425) |
|
| (12,478) |
|
Commercial & industrial |
|
| (281) |
|
| (55) |
|
Republic Credit Solutions |
|
| (6,507) |
|
| (7,465) |
|
Total Republic Processing Group |
|
| (20,213) |
|
| (19,998) |
|
Total charge-offs |
|
| (21,616) |
|
| (21,522) |
|
|
|
|
|
|
|
|
|
Recoveries: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional Banking: |
|
|
|
|
|
|
|
Residential real estate |
|
| 267 |
|
| 225 |
|
Commercial real estate |
|
| 4 |
|
| 128 |
|
Construction & land development |
|
| — |
|
| 27 |
|
Commercial & industrial |
|
| 5 |
|
| 35 |
|
Home equity |
|
| 38 |
|
| 229 |
|
Consumer |
|
| 295 |
|
| 334 |
|
Total Traditional Banking |
|
| 609 |
|
| 978 |
|
Warehouse lines of credit |
|
| — |
|
| — |
|
Total Core Banking |
|
| 609 |
|
| 978 |
|
|
|
|
|
|
|
|
|
Republic Processing Group: |
|
|
|
|
|
|
|
Tax Refund Solutions: |
|
|
|
|
|
|
|
Easy Advances |
|
| 5 |
|
| 82 |
|
Commercial & industrial |
|
| — |
|
| 5 |
|
Republic Credit Solutions |
|
| 619 |
|
| 548 |
|
Total Republic Processing Group |
|
| 624 |
|
| 635 |
|
Total recoveries |
|
| 1,233 |
|
| 1,613 |
|
|
|
|
|
|
|
|
|
Net loan charge-offs |
|
| (20,383) |
|
| (19,909) |
|
|
|
|
|
|
|
|
|
Provision - Core Banking |
|
| 2,258 |
|
| 1,733 |
|
Provision - RPG |
|
| 19,433 |
|
| 20,454 |
|
Total Provision |
|
| 21,691 |
|
| 22,187 |
|
Allowance at end of period |
| $ | 45,983 |
| $ | 45,047 |
|
|
|
|
|
|
|
|
|
Credit Quality Ratios - Total Company: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance to total loans |
|
| 1.04 | % |
| 1.07 | % |
Allowance to nonperforming loans |
|
| 237 |
|
| 245 |
|
Net loan charge-offs to average loans |
|
| 0.94 |
|
| 0.97 |
|
|
|
|
|
|
|
|
|
Credit Quality Ratios - Core Banking: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance to total loans |
|
| 0.76 | % |
| 0.76 | % |
Allowance to nonperforming loans |
|
| 171 |
|
| 179 |
|
Net loan charge-offs to average loans |
|
| 0.04 |
|
| 0.03 |
|
93
Noninterest Income
Total Company noninterest income increased $701,000, or 2%, during the first six months of 2019 compared to the same period in 2018. The following were the most significant components comprising the total Company’s noninterest income by reportable segment:
Traditional Banking segment
Traditional Banking’s noninterest income increased $22,000 for the first six months of 2019 compared to the same period in 2018. The following were the most significant categories affecting the change in noninterest income:
· | Service charges on deposit accounts decreased $232,000, or 3%, to $6.9 million for the first six months of 2019 compared the same period in 2018. The Bank earns a substantial majority of its fee income related to its overdraft service program from the per item fee it assesses its customers for each insufficient funds check or electronic debit presented for payment. The total per item fees, net of refunds, included in service charges on deposits for the six months ended June 30, 2019 and 2018 were $4.2 million and $4.2 million. The total daily overdraft charges, net of refunds, included in interest income for the six months ended June 30, 2019 and 2018 were $1.1 million and $897,000. |
· | Interchange income increased $463,000, or 9%, with debit card interchange fees up $438,000, or 10%. An increase of 11% in active debit cards over the previous 12 months, as well as the corresponding usage on those cards, drove the increase in interchange fees. |
Mortgage Banking segment
Within the Mortgage Banking segment, mortgage banking income increased $1.6 million, or 69%, during the first six months of 2019 compared to the same period in 2018, which resulted from a $39 million increase in secondary market loans originated from period to period combined with a $33 million increase in the Bank’s pipeline of secondary market loans in process from June 30, 2018 to June 30, 2019. Over the previous 12 months, the Bank has continued to invest in staffing and other resources for the mortgage banking function. A sharp decline in long-term mortgage rates during the period, combined with the Bank’s continued investments in mortgage resources, contributed to the increased period-to-period mortgage activity.
Tax Refund Solutions segment
TRS’s noninterest income decreased $53,000, during the first six months of 2019 compared to the same period in 2018 resulting from a $904,000, or 5%, increase in net RT revenue that was more than fully offset by the lack of a one-time $1.0 million nonrefundable capital commitment fee recorded during the first six months of 2018. A nominal increase in RT pricing and a shift in the RT mix among the various Tax Providers primarily drove the rise in net RT revenues.
Republic Credit Solutions segment
RCS’s noninterest income decreased $900,000, or 26%, during the first six months of 2019 compared to the same period in 2018. As illustrated in Table 10 below, RCS program fees decreased $921,000, resulting primarily from a reduction in fees associated with the discontinuance of RCS’s credit-card product.
94
The following table presents RCS program fees by product:
Table 10 — RCS Program Fees by Product
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended Jun. 30, |
|
|
|
| ||||
(in thousands) |
| 2019 |
|
| 2018 |
| $ Change |
| ||
|
|
|
|
|
|
|
|
|
|
|
Product: |
|
|
|
|
|
|
|
|
|
|
Line of credit |
| $ | 2,047 |
| $ | 2,129 |
| $ | (82) |
|
Credit card |
|
| — |
|
| 1,036 |
|
| (1,036) |
|
Hospital receivables |
|
| 93 |
|
| 73 |
|
| 20 |
|
Installment loans* |
|
| (225) |
|
| (402) |
|
| 177 |
|
Total |
| $ | 1,915 |
| $ | 2,836 |
| $ | (921) |
|
|
|
|
|
|
|
|
|
|
|
|
*The Company has elected the fair value option for this product, with mark-to-market adjustments recorded as a component of program fees.
Noninterest Expense
Total Company noninterest expense increased $5.3 million, or 6%, during the first six months of 2019 compared to the same period in 2018. The following were the most significant components comprising the increase in noninterest expense by reportable segment:
Traditional Banking segment
Traditional Banking noninterest expense increased $4.5 million, or 7%, for the first six months of 2019 compared to the same period in 2018. The most significant categories driving the change in noninterest expense were as follows:
· | Salaries and employee benefits expense increased $3.6 million, or 9%. Annual merit increases and the addition of 79 Traditional Bank FTE employees from June 30, 2018 to June 30, 2019 primarily drove the increase. |
· | Interchange related expense increased $543,000, or 26%, primarily driven by a 7% increase in active debit cards from June 30, 2018 to June 30, 2019, along with transactional rate increases for fraud prevention services provided by the Bank’s third-party service provider. |
Tax Refund Solutions segment
TRS’s noninterest expense increased $1.2 million, or 13%, during the first six months of 2019 compared to the same period in 2018 primarily due to $567,000 in legal reserves recorded during the first six months of 2019.
Republic Credit Solutions segment
RCS’s noninterest expense decreased $567,000, or 28%, during the first six months of 2019 compared to the same period in 2018 due to a $550,000 decrease in data processing expense resulting from the discontinuance of RCS’s credit card product.
Income Tax Expense
The Total Company effective income tax rate was 18% for the first six months of 2019 compared to 21% for the same period in 2018. The following drove the lower rate in 2019:
· | As a financial institution doing business in Kentucky, the Bank is subject to a capital-based Kentucky bank franchise tax and exempt from Kentucky corporate income tax. In March 2019, however, Kentucky enacted HB354, which will transition the Bank from the bank franchise tax to a corporate income tax beginning January 1, 2021. The current Kentucky corporate income tax rate is 5%. As of March 31, 2019, the Company recorded a deferred tax asset, net of the federal benefit, of $350,000 due to the enactment of HB354, with the majority of this benefit attributed to the Traditional Bank. |
· | In April 2019, Kentucky enacted HB458, which allows for combined filing for Republic Bancorp and the Bank. Republic Bancorp had previously filed a separate company income tax return for Kentucky and generated net operating losses, for which it had maintained a valuation allowance against the related deferred tax asset. HB458 also allows for certain net operating losses to be utilized on a combined return. Republic Bancorp expects to file a combined return beginning in 2021 |
95
and to utilize these previously generated net operating losses. The tax benefit to reverse the valuation allowance on the deferred tax asset for these losses is approximately $815,000. This benefit was recorded in the second quarter of 2019, with 100% of this benefit attributed to the Traditional Bank. |
· | The Company received $388,000 in income tax benefit during the second quarter of 2019 associated with equity compensation. Substantially all of this benefit was attributed to the Traditional Bank. |
COMPARISON OF FINANCIAL CONDITION AT June 30, 2019 AND December 31, 2018
Table 11 — Loan Portfolio Composition
|
|
|
|
|
|
|
(in thousands) | June 30, 2019 |
| December 31, 2018 |
| ||
|
|
|
|
|
|
|
Traditional Banking: |
|
|
|
|
|
|
Residential real estate: |
|
|
|
|
|
|
Owner occupied | $ | 907,826 |
| $ | 907,005 |
|
Owner occupied - correspondent* |
| 78,943 |
|
| 94,827 |
|
Nonowner occupied |
| 259,166 |
|
| 242,846 |
|
Commercial real estate |
| 1,253,868 |
|
| 1,248,940 |
|
Construction & land development |
| 190,984 |
|
| 175,178 |
|
Commercial & industrial |
| 447,295 |
|
| 430,355 |
|
Lease financing receivables |
| 17,271 |
|
| 15,031 |
|
Home equity |
| 296,834 |
|
| 332,548 |
|
Consumer: |
|
|
|
|
|
|
Credit cards |
| 17,429 |
|
| 19,095 |
|
Overdrafts |
| 894 |
|
| 1,102 |
|
Automobile loans |
| 63,553 |
|
| 63,475 |
|
Other consumer |
| 53,768 |
|
| 46,642 |
|
Total Traditional Banking |
| 3,587,831 |
|
| 3,577,044 |
|
Warehouse lines of credit* |
| 725,337 |
|
| 468,695 |
|
Total Core Banking |
| 4,313,168 |
|
| 4,045,739 |
|
|
|
|
|
|
|
|
Republic Processing Group*: |
|
|
|
|
|
|
Tax Refund Solutions: |
|
|
|
|
|
|
Easy Advances |
| — |
|
| — |
|
Other TRS loans |
| 711 |
|
| 13,744 |
|
Republic Credit Solutions |
| 96,790 |
|
| 88,744 |
|
Total Republic Processing Group |
| 97,501 |
|
| 102,488 |
|
|
|
|
|
|
|
|
Total loans** |
| 4,410,669 |
|
| 4,148,227 |
|
Allowance for loan and lease losses |
| (45,983) |
|
| (44,675) |
|
|
|
|
|
|
|
|
Total loans, net | $ | 4,364,686 |
| $ | 4,103,552 |
|
* Identifies loans to borrowers located primarily outside of the Bank’s market footprint.
** Total loans are presented inclusive of premiums, discounts and net loan origination fees and costs.
Gross loans increased by $262 million, or 6%, during the first six months of 2019 to $4.4 billion at June 30, 2019. The most significant components comprising the change in loans by reportable segment follow:
Traditional Banking segment
Traditional Banking loans increased $11 million during the first six months of 2019, with $123 million of loan growth offset by $112 million of loans held for investment reclassified to held for sale during the second quarter of 2019. The Bank entered into a definitive agreement in July 2019 to sell four of its banking centers, with the loans related to this agreement classified as held for sale as of June 30, 2019.
96
See Footnote 18 “Subsequent Event” of Part I Item 1 “Financial Statements” for additional information concerning the Bank’s agreement to sell four of its banking centers.
Warehouse Lending segment
Outstanding Warehouse balances increased $257 million from December 31, 2018 to June 30, 2019. A sharp decline in long-term fixed mortgage rates during 2019, along with normal seasonal increases in Warehouse usage rates, drove the increase in Warehouse balances.
Due to the volatility and seasonality of the mortgage market, it is difficult to project future outstanding balances of Warehouse lines of credit. The growth of the Bank’s Warehouse Lending business greatly depends on the overall mortgage market and typically follows industry trends. Since its entrance into this business during 2011, the Bank has experienced volatility in the Warehouse portfolio consistent with overall demand for mortgage products. Weighted average quarterly usage rates on the Bank’s Warehouse lines have ranged from a low of 31% during the fourth quarter of 2013 to a high of 64% during the third quarter of 2015. On an annual basis, weighted average usage rates on the Bank’s Warehouse lines have ranged from a low of 40% during 2013 to a high of 57% during 2016.
Allowance for Loan and Lease Losses (“Allowance”)
The Bank maintains an allowanceAllowance for probable incurred credit losses inherent in the Bank’s loan portfolio, which includes overdrawn deposit accounts. Management evaluates the adequacy of the Allowance monthly and presents and discusses the analysis with the Audit Committee and the Board of Directors on a quarterly basis.
The Allowance consists of both specific and general components. The specific component relates to loans that are individually classified as impaired. The general component relates to pooled loans collectively evaluated on historical loss experience adjusted for qualitative factors.
Specific Component – Loans Individually Classified as Impaired
The Bank defines impaired loans as follows:
|
|
|
|
|
|
|
|
|
|
Generally, loans are designated as “Classified” or “Special Mention” to ensure more frequent monitoring. These loans are reviewed to ensure proper accrual status and management strategy. If it is determined that there is serious doubt as to performance in accordance with original or modified contractual terms, then the loan is generally downgraded and may be charged down to its estimated value and placed on nonaccrual status.
Under generally accepted accounting principles (“GAAP”), the Bank uses the following methods to measure specific loan impairment, including:
|
|
|
|
97
|
In addition to obtaining appraisals at the time of origination, the Bank typically updates appraisals and/or broker price opinions (“BPOs”) for loans with potential impairment. Updated valuations for commercial-related credits exhibiting an increased risk of loss are typically obtained within one year of the previous valuation. Collateral values for delinquent residential mortgage loans and home equity loans are generally updated prior to a loan becoming 90 days delinquent, but no more than 180 days past due. When measuring impairment, to the extent updated collateral values cannot be obtained due to the lack of recent comparable sales or for other reasons, the Bank discounts such stale valuations primarily based on age of valuation and market conditions of the underlying collateral.
General Component – Pooled Loans Collectively Evaluated
The general component of the Allowance covers loans collectively evaluated for impairment by loan class and is based on historical loss experience, with potential adjustments for current relevant qualitative factors. Historical loss experience is determined by loan performance and class and is based on the actual loss history experienced by the Bank. Large groups of smaller-balance, homogeneous loans are typically included in the general component but may be individually evaluated if classified as a TDR, on nonaccrual, or a case where the full collection of the total amount due for a such loan is improbable or otherwise meets the definition of impaired.
As this analysis, or any similar analysis, is an imprecise measure of loss, the Allowance is subject to ongoing adjustments. Therefore, management will often consider other significant factors that may be necessary or prudent in order to reflect probable incurred losses in the total loan portfolio.quarterly.
The Company’s Allowance increased $2$1 million, or 5%3%, from December 31, 20172018 to $45$46 million at June 30, 2018 and remained at 1.07%2019, primarily driven by general growth in some Core Bank portfolios. As a percent of total gross loans. The following is anloans, the total Company’s Allowance decreased to 1.04% at June 30, 2019 compared to 1.08% at December 31, 2018. An analysis of the Allowance by reportable segment:segment follows:
Traditional Banking segment
The Traditional Banking Allowance increased $1 million to $30$31 million, anddriven primarily by a $1.2 million Provision for one large C&I relationship that defaulted during the second quarter of 2019. The Traditional Bank Allowance to total Traditional Bank loans increased onetwo basis point to 0.86%0.87% when comparing June 30, 20182019 to December 31, 2017.2018. As historical losses within the Traditional Banking segment have remained relatively stable and low for a sustained period of time, no material changes to its reserve percentages were required for the first six months of 2018.2019.
Warehouse Lending segment
The Warehouse Allowance increased to $1.6approximately $2 million, and the Warehouse Allowance to total Warehouse loans remained at 0.25% when comparing June 30, 20182019 to December 31, 2017.2018. As of June 30, 2018,2019, Warehouse had not incurred any historical losses, and as a result, its Allowance was entirely qualitative in nature with no adjustments to the qualitative reserve percentage required for the first six monthsquarter of 2018.2019.
Republic Credit Solutions segment
The RCS Allowance increased $1remained at $13 million from December 31, 20172018 to $14 million at June 30, 2018. Additional reserves for the RCS’s subprime credit card product primarily drove the increase in RCS Allowance. The Allowance to total RCS loans decreased to 16.13% at June 30, 2018 from 18.85% at December 31, 2017, with this decrease driven by higher growth in RCS’s lower-risk healthcare receivables compared to lower growth in RCS’s higher-risk products.
2019. RCS maintained an Allowance for threetwo distinct credit products offered at June 30, 2018,2019, including its line-of-credit product, its credit card product and its healthcare-receivables product. At June 30, 2018,2019, the Allowance to total loans estimated for each RCS product ranged from as low as 0.25% for its healthcare-receivables portfolioproduct to as high as 60%46% for its subprime credit card portfolio.line-of-credit product. The lower reserve percentage of 0.25% was provided for RCS’s healthcare receivables, as such receivables have recourse back to the third-party providers.
9897
Asset Quality
Classified and Special Mention Loans
The Bank applies credit quality indicators, or “ratings,” to individual loans based on internal Bank policies. Such internal policies are informed by regulatory standards. Loans rated “Loss,” “Doubtful,” “Substandard”“Substandard,” and PCI-Substandard (“PCI-Sub”)PCI-Sub are considered “Classified.” Loans rated “Special Mention” or PCI Group 1 (“PCI-1”)PCI-1 are considered Special Mention. The Bank’s Classified and Special Mention loans increased $2$4 million during the first six months of 2018,2019 resulting primarily from the downgrade of one C&I relationship to Substandard during the second quarter of 2019. Despite personal guarantees associated with this relationship, the Company recorded a $1.2 million Provision for this C&I relationship due to the potential for a $4 million increaseprotracted legal conflict and the uncertainty associated with these types of legal conflicts, in Substandard loans.general.
See Footnote 4 “Loans and Allowance for Loan and Lease Losses” of Part I Item 1 “Financial Statements” for additional discussion regarding Classified and Special Mention loans.
Table 1312 — Classified and Special Mention Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
| June 30, 2018 |
| December 31, 2017 |
|
| June 30, 2019 |
| December 31, 2018 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss |
| $ | — |
| $ | — |
|
| $ | — |
| $ | — |
|
Doubtful |
|
| — |
|
| — |
|
|
| — |
|
| — |
|
Substandard |
|
| 25,527 |
|
| 21,202 |
|
|
| 24,458 |
|
| 19,860 |
|
Purchased Credit Impaired - Substandard |
|
| 1,678 |
|
| 1,771 |
|
|
| 1,388 |
|
| 1,559 |
|
Total Classified Loans |
|
| 27,205 |
|
| 22,973 |
|
|
| 25,846 |
|
| 21,419 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special Mention |
|
| 21,767 |
|
| 23,813 |
|
|
| 20,826 |
|
| 21,205 |
|
Purchased Credit Impaired - Group 1 |
|
| 1,505 |
|
| 1,833 |
|
|
| 1,065 |
|
| 1,121 |
|
Total Special Mention Loans |
|
| 23,272 |
|
| 25,646 |
|
|
| 21,891 |
|
| 22,326 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Classified and Special Mention Loans |
| $ | 50,477 |
| $ | 48,619 |
|
| $ | 47,737 |
| $ | 43,745 |
|
9998
Nonperforming Loans
Nonperforming loans include loans on nonaccrual status and loans past due 90-days-or-more and still accruing. Impaired loans that are not placed on nonaccrual status are not included as nonperforming loans. The nonperforming loan category includes TDRs totaling approximately $9$11 million and $6$8 million at June 30, 20182019 and December 31, 2017.2018. Generally, all nonperforming loans are considered impaired.
Nonperforming loans to total loans increased to 0.44% at June 30, 20182019 from 0.38%0.39% at December 31, 2017,2018, as the total balance of nonperforming loans increased by $3 million, or 22%20%, while total loans increased $182$262 million, or 5%6%, during the first six months of 2018.2019. One C&I relationship placed on nonaccrual status during the second quarter of 2019 primarily drove the increase in nonperforming loans.
Table 1413 — Nonperforming Loans and Nonperforming Assets Summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
| June 30, 2018 |
| December 31, 2017 |
|
|
| June 30, 2019 |
| December 31, 2018 |
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans on nonaccrual status* |
| $ | 17,502 |
| $ | 14,118 |
|
|
| $ | 19,238 |
| $ | 15,993 |
|
|
Loans past due 90-days-or-more and still on accrual** |
|
| 858 |
|
| 956 |
|
|
|
| 166 |
|
| 145 |
|
|
Total nonperforming loans |
|
| 18,360 |
|
| 15,074 |
|
|
|
| 19,404 |
|
| 16,138 |
|
|
Other real estate owned |
|
| — |
|
| 115 |
|
|
|
| 1,095 |
|
| 160 |
|
|
Total nonperforming assets |
| $ | 18,360 |
| $ | 15,189 |
|
|
| $ | 20,499 |
| $ | 16,298 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Quality Ratios - Total Company: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming loans to total loans |
|
| 0.44 | % |
| 0.38 | % |
|
|
| 0.44 | % |
| 0.39 | % |
|
Nonperforming assets to total loans (including OREO) |
|
| 0.44 |
|
| 0.38 |
|
|
|
| 0.46 |
|
| 0.39 |
|
|
Nonperforming assets to total assets |
|
| 0.35 |
|
| 0.30 |
|
|
|
| 0.36 |
|
| 0.31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Quality Ratios - Core Bank: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming loans to total loans |
|
| 0.43 | % |
| 0.36 | % |
|
|
| 0.45 | % |
| 0.40 | % |
|
Nonperforming assets to total loans (including OREO) |
|
| 0.43 |
|
| 0.36 |
|
|
|
| 0.47 |
|
| 0.40 |
|
|
Nonperforming assets to total assets |
|
| 0.34 |
|
| 0.28 |
|
|
|
| 0.37 |
|
| 0.32 |
|
|
*Loans on nonaccrual status include impaired loans. See Footnote 4 “Loans and Allowance for Loan and Lease Losses” of Part I Item 1 “Financial Statements” for additional discussion regarding impaired loans.
** Loans past due 90-days-or-more and still accruing consist of smaller-balancesmaller balance consumer loans.
Approximately $12 million, or 67%,
99
Table 14 — Nonperforming Loan Composition
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| June 30, 2019 | December 31, 2018 |
| ||||||||||
|
|
|
|
|
| Percent of |
|
|
|
| Percent of |
| ||
|
|
|
|
|
| Total |
|
|
|
| Total |
| ||
(in thousands) |
| Balance |
| Loan Class | Balance |
| Loan Class |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional Banking: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
|
| $ | 8,879 |
| 0.98 | % |
| $ | 10,800 |
| 1.19 | % |
|
Owner occupied - correspondent |
|
|
| 848 |
| 1.07 |
|
|
| 382 |
| 0.40 |
|
|
Nonowner occupied |
|
|
| 461 |
| 0.18 |
|
|
| 669 |
| 0.28 |
|
|
Commercial real estate |
|
|
| 2,361 |
| 0.19 |
|
|
| 2,318 |
| 0.19 |
|
|
Construction & land development |
|
|
| 134 |
| 0.07 |
|
|
| — |
| — |
|
|
Commercial & industrial |
|
|
| 5,046 |
| 1.13 |
|
|
| 630 |
| 0.15 |
|
|
Lease financing receivables |
|
|
| — |
| — |
|
|
| — |
| — |
|
|
Home equity |
|
|
| 1,444 |
| 0.49 |
|
|
| 1,095 |
| 0.33 |
|
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit cards |
|
|
| — |
| — |
|
|
| — |
| — |
|
|
Overdrafts |
|
|
| — |
| — |
|
|
| — |
| — |
|
|
Automobile loans |
|
|
| 47 |
| 0.07 |
|
|
| 75 |
| 0.12 |
|
|
Other consumer |
|
|
| 18 |
| 0.03 |
|
|
| 37 |
| 0.08 |
|
|
Total Traditional Banking |
|
|
| 19,238 |
| 0.54 |
|
|
| 16,006 |
| 0.45 |
|
|
Warehouse lines of credit |
|
|
| — |
| — |
|
|
| — |
| — |
|
|
Total Core Banking |
|
|
| 19,238 |
| 0.45 |
|
|
| 16,006 |
| 0.40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Republic Processing Group: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Refund Solutions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Easy Advances |
|
|
| — |
| — |
|
|
| — |
| — |
|
|
Other TRS loans |
|
|
| 13 |
| 1.83 |
|
|
| 4 |
| 0.03 |
|
|
Republic Credit Solutions |
|
|
| 153 |
| 0.16 |
|
|
| 128 |
| 0.14 |
|
|
Total Republic Processing Group |
|
|
| 166 |
| 0.17 |
|
|
| 132 |
| 0.13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonperforming loans |
|
| $ | 19,404 |
| 0.44 | % |
| $ | 16,138 |
| 0.39 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximately $4 million, or 23%, of the Bank’s total nonperforming loans at June 30, 2018, compared to $3 million, or 22%, at December 31, 2017 were concentrated in the CRE and construction and land development portfolios. While CRE is the primary collateral for such loans, the Bank also obtains in many cases, at the time of origination, personal guarantees from the principal borrowers and/or secured liens on the guarantors’ primary residences.
100
Table 15 — Stratification of Nonperforming Loan CompositionLoans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
| June 30, 2018 | December 31, 2017 |
|
| Number of Nonperforming Loans and Recorded Investment |
| |||||||||||||||||||||||||||||||
|
|
|
|
|
| Percent of |
|
|
|
| Percent of |
|
|
|
|
|
|
|
|
|
| Balance |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
| Total |
|
|
|
| Total |
| ||||||||||||||||||||||||||
(in thousands) |
| Balance |
| Loan Class | Balance |
| Loan Class |
| ||||||||||||||||||||||||||||||
June 30, 2019 |
|
|
| Balance |
|
|
|
| > $100 & |
|
|
|
| Balance |
|
|
|
| Total |
| ||||||||||||||||||
(dollars in thousands) |
| No. |
| <= $100 |
|
| No. |
| <= $500 |
|
| No. |
| > $500 |
|
| No. |
| Balance |
| ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional Banking: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
|
| $ | 10,238 |
| 1.11 | % |
| $ | 9,230 |
| 1.00 | % |
|
| 104 |
| $ | 4,499 |
|
| 12 |
| $ | 2,146 |
|
| 2 |
| $ | 2,234 |
|
| 118 |
| $ | 8,879 |
|
Owner occupied - correspondent |
|
|
| 389 |
| 0.37 |
|
|
| — |
| — |
|
|
| — |
|
| — |
|
| 2 |
|
| 848 |
|
| — |
|
| — |
|
| 2 |
|
| 848 |
|
Nonowner occupied |
|
|
| 730 |
| 0.33 |
|
|
| 257 |
| 0.13 |
|
|
| 2 |
|
| 30 |
|
| 1 |
|
| 431 |
|
| — |
|
| — |
|
| 3 |
|
| 461 |
|
Commercial real estate |
|
|
| 4,100 |
| 0.33 |
|
|
| 3,247 |
| 0.27 |
|
|
| 2 |
|
| 46 |
|
| 2 |
|
| 646 |
|
| 1 |
|
| 1,669 |
|
| 5 |
|
| 2,361 |
|
Construction & land development |
|
|
| 58 |
| 0.04 |
|
|
| 67 |
| 0.04 |
|
|
| — |
|
| — |
|
| 1 |
|
| 134 |
|
| — |
|
| — |
|
| 1 |
|
| 134 |
|
Commercial & industrial |
|
|
| 999 |
| 0.27 |
|
|
| — |
| — |
|
|
| 3 |
|
| 146 |
|
| 2 |
|
| 474 |
|
| 2 |
|
| 4,426 |
|
| 7 |
|
| 5,046 |
|
Lease financing receivables |
|
|
| — |
| — |
|
|
| — |
| — |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Home equity |
|
|
| 896 |
| 0.27 |
|
|
| 1,217 |
| 0.35 |
|
|
| 14 |
|
| 360 |
|
| 5 |
|
| 1,084 |
|
| — |
|
| — |
|
| 19 |
|
| 1,444 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit cards |
|
|
| — |
| — |
|
|
| — |
| — |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Overdrafts |
|
|
| — |
| — |
|
|
| — |
| — |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Automobile loans |
|
|
| 68 |
| 0.11 |
|
|
| 68 |
| 0.10 |
|
|
| 4 |
|
| 47 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 4 |
|
| 47 |
|
Other consumer |
|
|
| 46 |
| 0.15 |
|
|
| 51 |
| 0.25 |
|
|
| 9 |
|
| 18 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 9 |
|
| 18 |
|
Total Traditional Banking |
|
|
| 17,524 |
| 0.50 |
|
|
| 14,137 |
| 0.41 |
|
|
| 138 |
|
| 5,146 |
|
| 25 |
|
| 5,763 |
|
| 5 |
|
| 8,329 |
|
| 168 |
|
| 19,238 |
|
Warehouse lines of credit |
|
|
| — |
| — |
|
|
| — |
| — |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Total Core Banking |
|
|
| 17,524 |
| 0.43 |
|
|
| 14,137 |
| 0.36 |
|
|
| 138 |
|
| 5,146 |
|
| 25 |
|
| 5,763 |
|
| 5 |
|
| 8,329 |
|
| 168 |
|
| 19,238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Republic Processing Group: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Refund Solutions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Easy Advances |
|
|
| — |
| — |
|
|
| — |
| — |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Other TRS loans |
|
|
| — |
| — |
|
|
| — |
| — |
|
|
| 34 |
|
| 13 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 34 |
|
| 13 |
|
Republic Credit Solutions |
|
|
| 836 |
| 0.99 |
|
|
| 937 |
| 1.40 |
|
|
| 231 |
|
| 153 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 231 |
|
| 153 |
|
Total Republic Processing Group |
|
|
| 836 |
| 0.99 |
|
|
| 937 |
| 1.19 |
|
|
| 265 |
|
| 166 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 265 |
|
| 166 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonperforming loans |
|
| $ | 18,360 |
| 0.44 | % |
| $ | 15,074 |
| 0.38 | % |
| ||||||||||||||||||||||||
Total |
| 403 |
| $ | 5,312 |
|
| 25 |
| $ | 5,763 |
|
| 5 |
| $ | 8,329 |
|
| 433 |
| $ | 19,404 |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Number of Nonperforming Loans and Recorded Investment |
| |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| Balance |
|
|
|
|
|
|
|
|
|
|
|
|
| |
December 31, 2018 |
|
|
| Balance |
|
|
|
| > $100 & |
|
|
|
| Balance |
|
|
|
| Total |
| ||||
(dollars in thousands) |
| No. |
| <= $100 |
|
| No. |
| <= $500 |
|
| No. |
| > $500 |
|
| No. |
| Balance |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional Banking: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
| 108 |
| $ | 4,859 |
|
| 11 |
| $ | 2,401 |
|
| 3 |
| $ | 3,540 |
|
| 122 |
| $ | 10,800 |
|
Owner occupied - correspondent |
| — |
|
| — |
|
| 1 |
|
| 382 |
|
| — |
|
| — |
|
| 1 |
|
| 382 |
|
Nonowner occupied |
| 4 |
|
| 169 |
|
| — |
|
| — |
|
| 1 |
|
| 500 |
|
| 5 |
|
| 669 |
|
Commercial real estate |
| 5 |
|
| 201 |
|
| 1 |
|
| 397 |
|
| 2 |
|
| 1,720 |
|
| 8 |
|
| 2,318 |
|
Construction & land development |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Commercial & industrial |
| 2 |
|
| 59 |
|
| 2 |
|
| 571 |
|
| — |
|
| — |
|
| 4 |
|
| 630 |
|
Lease financing receivables |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Home equity |
| 19 |
|
| 417 |
|
| 4 |
|
| 678 |
|
| — |
|
| — |
|
| 23 |
|
| 1,095 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit cards |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Overdrafts |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Automobile loans |
| 5 |
|
| 75 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 5 |
|
| 75 |
|
Other consumer |
| 14 |
|
| 37 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 14 |
|
| 37 |
|
Total Traditional Banking |
| 157 |
|
| 5,817 |
|
| 19 |
|
| 4,429 |
|
| 6 |
|
| 5,760 |
|
| 182 |
|
| 16,006 |
|
Warehouse lines of credit |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Total Core Banking |
| 157 |
|
| 5,817 |
|
| 19 |
|
| 4,429 |
|
| 6 |
|
| 5,760 |
|
| 182 |
|
| 16,006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Republic Processing Group: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Refund Solutions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Easy Advances |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Other TRS loans |
| 6 |
|
| 4 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 6 |
|
| 4 |
|
Republic Credit Solutions |
| 960 |
|
| 128 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 960 |
|
| 128 |
|
Total Republic Processing Group |
| 966 |
|
| 132 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 966 |
|
| 132 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
| 1,123 |
| $ | 5,949 |
|
| 19 |
| $ | 4,429 |
|
| 6 |
| $ | 5,760 |
|
| 1,148 |
| $ | 16,138 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101
Table 16 — Stratification of Nonperforming Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Number of Nonperforming Loans and Recorded Investment |
| |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| Balance |
|
|
|
|
|
|
|
|
|
|
|
|
| |
June 30, 2018 |
|
|
| Balance |
|
|
|
| > $100 & |
|
|
|
| Balance |
|
|
|
| Total |
| ||||
(dollars in thousands) |
| No. |
| <= $100 |
|
| No. |
| <= $500 |
|
| No. |
| > $500 |
|
| No. |
| Balance |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional Banking: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
| 99 |
| $ | 4,621 |
|
| 14 |
| $ | 2,657 |
|
| 2 |
| $ | 2,960 |
|
| 115 |
| $ | 10,238 |
|
Owner occupied - correspondent |
| — |
|
| — |
|
| 1 |
|
| 389 |
|
| — |
|
| — |
|
| 1 |
|
| 389 |
|
Nonowner occupied |
| 5 |
|
| 230 |
|
| — |
|
| — |
|
| 1 |
|
| 500 |
|
| 6 |
|
| 730 |
|
Commercial real estate |
| 4 |
|
| 249 |
|
| 3 |
|
| 727 |
|
| 3 |
|
| 3,124 |
|
| 10 |
|
| 4,100 |
|
Construction & land development |
| 1 |
|
| 58 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 1 |
|
| 58 |
|
Commercial & industrial |
| 1 |
|
| 75 |
|
| 3 |
|
| 924 |
|
| — |
|
| — |
|
| 4 |
|
| 999 |
|
Lease financing receivables |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Home equity |
| 18 |
|
| 468 |
|
| 3 |
|
| 428 |
|
| — |
|
| — |
|
| 21 |
|
| 896 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit cards |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Overdrafts |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Automobile loans |
| 4 |
|
| 68 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 4 |
|
| 68 |
|
Other consumer |
| 16 |
|
| 46 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 16 |
|
| 46 |
|
Total Traditional Banking |
| 148 |
|
| 5,815 |
|
| 24 |
|
| 5,125 |
|
| 6 |
|
| 6,584 |
|
| 178 |
|
| 17,524 |
|
Warehouse lines of credit |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Total Core Banking |
| 148 |
|
| 5,815 |
|
| 24 |
|
| 5,125 |
|
| 6 |
|
| 6,584 |
|
| 178 |
|
| 17,524 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Republic Processing Group: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Refund Solutions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Easy Advances |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Other TRS loans |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Republic Credit Solutions |
| 12,327 |
|
| 836 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 12,327 |
|
| 836 |
|
Total Republic Processing Group |
| 12,327 |
|
| 836 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 12,327 |
|
| 836 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
| 12,475 |
| $ | 6,651 |
|
| 24 |
| $ | 5,125 |
|
| 6 |
| $ | 6,584 |
|
| 12,505 |
| $ | 18,360 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Number of Nonperforming Loans and Recorded Investment |
| |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| Balance |
|
|
|
|
|
|
|
|
|
|
|
|
| |
December 31, 2017 |
|
|
| Balance |
|
|
|
| > $100 & |
|
|
|
| Balance |
|
|
|
| Total |
| ||||
(dollars in thousands) |
| No. |
| <= $100 |
|
| No. |
| <= $500 |
|
| No. |
| > $500 |
|
| No. |
| Balance |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional Banking: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
| 102 |
| $ | 4,903 |
|
| 14 |
| $ | 2,760 |
|
| 1 |
| $ | 1,567 |
|
| 117 |
| $ | 9,230 |
|
Owner occupied - correspondent |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Nonowner occupied |
| 5 |
|
| 156 |
|
| 1 |
|
| 101 |
|
| — |
|
| — |
|
| 6 |
|
| 257 |
|
Commercial real estate |
| 2 |
|
| 112 |
|
| 3 |
|
| 767 |
|
| 2 |
|
| 2,368 |
|
| 7 |
|
| 3,247 |
|
Construction & land development |
| 1 |
|
| 67 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 1 |
|
| 67 |
|
Commercial & industrial |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Lease financing receivables |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Home equity |
| 26 |
|
| 615 |
|
| 4 |
|
| 602 |
|
| — |
|
| — |
|
| 30 |
|
| 1,217 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit cards |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Overdrafts |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Automobile loans |
| 3 |
|
| 68 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 3 |
|
| 68 |
|
Other consumer |
| 12 |
|
| 51 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 12 |
|
| 51 |
|
Total Traditional Banking |
| 151 |
|
| 5,972 |
|
| 22 |
|
| 4,230 |
|
| 3 |
|
| 3,935 |
|
| 176 |
|
| 14,137 |
|
Warehouse lines of credit |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Total Core Banking |
| 151 |
|
| 5,972 |
|
| 22 |
|
| 4,230 |
|
| 3 |
|
| 3,935 |
|
| 176 |
|
| 14,137 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Republic Processing Group: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Refund Solutions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Easy Advances |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Other TRS loans |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Republic Credit Solutions |
| 13,536 |
|
| 937 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 13,536 |
|
| 937 |
|
Total Republic Processing Group |
| 13,536 |
|
| 937 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 13,536 |
|
| 937 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
| 13,687 |
| $ | 6,909 |
|
| 22 |
| $ | 4,230 |
|
| 3 |
| $ | 3,935 |
|
| 13,712 |
| $ | 15,074 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
102
Table 17 — Rollforward of Nonperforming Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Six Months Ended |
| Three Months Ended |
| Six Months Ended |
| ||||||||||||||||
|
| June 30, |
| June 30, |
| June 30, |
| June 30, |
| ||||||||||||||||
(in thousands) |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming loans at the beginning of the period |
| $ | 16,128 |
| $ | 16,996 |
| $ | 15,074 |
| $ | 16,059 |
| $ | 15,560 |
| $ | 16,128 |
| $ | 16,138 |
| $ | 15,074 |
|
Loans added to nonperforming status during the period that remained nonperforming at the end of the period |
|
| 3,733 |
|
| 2,042 |
|
| 5,922 |
|
| 4,437 |
|
| 6,575 |
|
| 3,733 |
|
| 7,680 |
|
| 5,922 |
|
Loans removed from nonperforming status during the period that were nonperforming at the beginning of the period (see table below) |
|
| (639) |
|
| (2,956) |
|
| (1,944) |
|
| (4,234) |
|
| (2,119) |
|
| (639) |
|
| (3,478) |
|
| (1,944) |
|
Principal balance paydowns of loans nonperforming at both period ends |
|
| (441) |
|
| (408) |
|
| (594) |
|
| (623) |
|
| (578) |
|
| (441) |
|
| (956) |
|
| (594) |
|
Net change in principal balance of other loans nonperforming at both period ends* |
|
| (421) |
|
| 128 |
|
| (98) |
|
| 163 |
|
| (34) |
|
| (421) |
|
| 20 |
|
| (98) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming loans at the end of the period |
| $ | 18,360 |
| $ | 15,802 |
| $ | 18,360 |
| $ | 15,802 |
| $ | 19,404 |
| $ | 18,360 |
| $ | 19,404 |
| $ | 18,360 |
|
*Includes relatively small consumer portfolios, e.g., RCS loans.
Table 1817 — Detail of Loans Removed from Nonperforming Status
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Six Months Ended |
|
| Three Months Ended |
| Six Months Ended |
| ||||||||||||||||
|
| June 30, |
| June 30, |
|
| June 30, |
| June 30, |
| ||||||||||||||||
(in thousands) |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans charged-off |
| $ | — |
| $ | (48) |
| $ | (10) |
| $ | (48) |
| |||||||||||||
Loans charged off |
| $ | (285) |
| $ | — |
| $ | (298) |
| $ | (10) |
| |||||||||||||
Loans transferred to OREO |
|
| — |
|
| (142) |
|
| (184) |
|
| (472) |
|
|
| (980) |
|
| — |
|
| (1,036) |
|
| (184) |
|
Loans refinanced at other institutions |
|
| (639) |
|
| (498) |
|
| (1,520) |
|
| (1,587) |
|
|
| (830) |
|
| (639) |
|
| (2,060) |
|
| (1,520) |
|
Loans returned to accrual status |
|
| — |
|
| (2,268) |
|
| (230) |
|
| (2,127) |
|
|
| (24) |
|
| — |
|
| (84) |
|
| (230) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans removed from nonperforming status during the period that were nonperforming at the beginning of the period |
| $ | (639) |
| $ | (2,956) |
| $ | (1,944) |
| $ | (4,234) |
|
| $ | (2,119) |
| $ | (639) |
| $ | (3,478) |
| $ | (1,944) |
|
Based on the Bank’s review at June 30, 2018,2019, management believes that its reserves are adequate to absorb probable losses on all nonperforming loans.
Delinquent Loans
Total Company delinquent loans to total loans decreasedincreased to 0.31%0.44% at June 30, 2018,2019, from 0.35%0.38% at December 31, 2017.2018, primarily due to one C&I relationship that defaulted during the second quarter of 2019.
Core Bank delinquent loans to total Core Bank loans remainedincreased to 0.29% at 0.21%June 30, 2019 from 0.22% at December 31, 20172018, primarily due to June 30, 2018.the previously mentioned C&I relationship that defaulted during the second quarter of 2019. With the exception of small-dollar consumer loans, all Traditional Bank loans past due 90-days-or-more as of June 30, 20182019 and December 31, 20172018 were on nonaccrual status.
103102
Table 1918 — Delinquent Loan Composition*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
| June 30, 2018 | December 31, 2017 |
|
| June 30, 2019 | December 31, 2018 |
| ||||||||||||||||||||
|
|
|
|
|
| Percent of |
|
|
|
| Percent of |
|
|
|
|
|
| Percent of |
|
|
|
| Percent of |
| ||||
|
|
|
|
|
| Total |
|
|
|
| Total |
|
|
|
|
|
| Total |
|
|
|
| Total |
| ||||
(in thousands) |
| Balance |
| Loan Class | Balance |
| Loan Class |
|
| Balance |
| Loan Class | Balance |
| Loan Class |
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional Banking: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
|
| $ | 4,122 |
| 0.45 | % |
| $ | 4,782 |
| 0.52 | % |
|
|
| $ | 4,058 |
| 0.45 | % |
| $ | 5,525 |
| 0.61 | % |
|
Owner occupied - correspondent |
|
|
| — |
| — |
|
|
| — |
| — |
|
|
|
|
| — |
| — |
|
|
| — |
| — |
|
|
Nonowner occupied |
|
|
| 469 |
| 0.21 |
|
|
| 146 |
| 0.07 |
|
|
|
|
| 671 |
| 0.26 |
|
|
| 1,008 |
| 0.42 |
|
|
Commercial real estate |
|
|
| 2,397 |
| 0.19 |
|
|
| 1,727 |
| 0.14 |
|
|
|
|
| 898 |
| 0.07 |
|
|
| 1,099 |
| 0.09 |
|
|
Construction & land development |
|
|
| — |
| — |
|
|
| 67 |
| 0.04 |
|
|
|
|
| 540 |
| 0.28 |
|
|
| — |
| — |
|
|
Commercial & industrial |
|
|
| 653 |
| 0.18 |
|
|
| 15 |
| 0.00 |
|
|
|
|
| 4,933 |
| 1.10 |
|
|
| 25 |
| 0.01 |
|
|
Lease financing receivables |
|
|
| — |
| — |
|
|
| — |
| — |
|
|
|
|
| — |
| — |
|
|
| — |
| — |
|
|
Home equity |
|
|
| 547 |
| 0.16 |
|
|
| 1,221 |
| 0.35 |
|
|
|
|
| 978 |
| 0.33 |
|
|
| 784 |
| 0.24 |
|
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit cards |
|
|
| 93 |
| 0.52 |
|
|
| 74 |
| 0.46 |
|
|
|
|
| 90 |
| 0.52 |
|
|
| 129 |
| 0.68 |
|
|
Overdrafts |
|
|
| 231 |
| 26.31 |
|
|
| 233 |
| 23.92 |
|
|
|
|
| 278 |
| 31.10 |
|
|
| 230 |
| 20.87 |
|
|
Automobile loans |
|
|
| 110 |
| 0.18 |
|
|
| 60 |
| 0.09 |
|
|
|
|
| 64 |
| 0.10 |
|
|
| 28 |
| 0.04 |
|
|
Other consumer |
|
|
| 81 |
| 0.26 |
|
|
| 135 |
| 0.66 |
|
|
|
|
| 14 |
| 0.03 |
|
|
| 47 |
| 0.10 |
|
|
Total Traditional Banking |
|
|
| 8,703 |
| 0.25 |
|
|
| 8,460 |
| 0.25 |
|
|
|
|
| 12,524 |
| 0.35 |
|
|
| 8,875 |
| 0.25 |
|
|
Warehouse lines of credit |
|
|
| — |
| — |
|
|
| — |
| — |
|
|
|
|
| — |
| — |
|
|
| — |
| — |
|
|
Total Core Banking |
|
|
| 8,703 |
| 0.21 |
|
|
| 8,460 |
| 0.21 |
|
|
|
|
| 12,524 |
| 0.29 |
|
|
| 8,875 |
| 0.22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Republic Processing Group: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Refund Solutions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Easy Advances |
|
|
| — |
| — |
|
|
| — |
| — |
|
|
|
|
| — |
| — |
|
|
| — |
| — |
|
|
Other TRS loans |
|
|
| — |
| — |
|
|
| — |
| — |
|
|
|
|
| 75 |
| 10.55 |
|
|
| 10 |
| 0.07 |
|
|
Republic Credit Solutions |
|
|
| 4,429 |
| 5.23 |
|
|
| 5,641 |
| 8.43 |
|
|
|
|
| 6,727 |
| 6.95 |
|
|
| 7,077 |
| 7.97 |
|
|
Total Republic Processing Group |
|
|
| 4,429 |
| 5.23 |
|
|
| 5,641 |
| 7.18 |
|
|
|
|
| 6,802 |
| 6.98 |
|
|
| 7,087 |
| 6.91 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total delinquent loans |
|
| $ | 13,132 |
| 0.31 | % |
| $ | 14,101 |
| 0.35 | % |
|
|
| $ | 19,326 |
| 0.44 | % |
| $ | 15,962 |
| 0.38 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Represents total loans 30-days-or-more past due. Delinquent status may be determined by either the number of days past due or number of payments past due.
104103
Table 2019 — Rollforward of Delinquent Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Six Months Ended |
| Three Months Ended |
| Six Months Ended |
| ||||||||||||||||
|
| June 30, |
| June 30, |
| June 30, |
| June 30, |
| ||||||||||||||||
(in thousands) |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Delinquent loans at the beginning of the period |
| $ | 25,833 |
| $ | 16,163 |
| $ | 14,101 |
| $ | 8,958 |
| $ | 34,187 |
| $ | 25,833 |
| $ | 15,962 |
| $ | 14,101 |
|
Loans added to delinquency status during the period and remained in delinquency status at the end of the period |
|
| 3,472 |
|
| 3,473 |
|
| 4,456 |
|
| 4,500 |
|
| 8,685 |
|
| 3,472 |
|
| 8,519 |
|
| 4,456 |
|
Loans removed from delinquency status during the period that were in delinquency status at the beginning of the period (see table below) |
|
| (16,227) |
|
| (10,747) |
|
| (4,085) |
|
| (4,326) |
|
| (22,991) |
|
| (16,227) |
|
| (4,661) |
|
| (4,085) |
|
Principal balance paydowns of loans delinquent at both period ends |
|
| (69) |
|
| (122) |
|
| (106) |
|
| (93) |
|
| (84) |
|
| (69) |
|
| (293) |
|
| (106) |
|
Net change in principal balance of other loans delinquent at both period ends* |
|
| 123 |
|
| 246 |
|
| (1,234) |
|
| (26) | |||||||||||||
Net change in principal balance of other loans delinquent at both period ends** |
|
| (471) |
|
| 123 |
|
| (201) |
|
| (1,234) |
| ||||||||||||
Delinquent loans at the end of period |
| $ | 13,132 |
| $ | 9,013 |
| $ | 13,132 |
| $ | 9,013 |
| $ | 19,326 |
| $ | 13,132 |
| $ | 19,326 |
| $ | 13,132 |
|
*Includes relatively-small consumer portfolios, e.g., RCS loans.
Table 2120 — Detail of Loans Removed from Delinquent Status
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Six Months Ended |
|
| Three Months Ended |
| Six Months Ended |
| ||||||||||||||||
|
| June 30, |
| June 30, |
|
| June 30, |
| June 30, |
| ||||||||||||||||
(in thousands) |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans charged-off |
| $ | (136) |
| $ | (56) |
| $ | (33) |
| $ | (34) |
| |||||||||||||
Loans charged off |
| $ | (306) |
| $ | (136) |
| $ | (316) |
| $ | (33) |
| |||||||||||||
Easy Advances* paid-off or charged-off |
|
| (13,163) |
|
| (8,350) |
|
| — |
|
| — |
|
|
| (19,099) |
|
| (13,163) |
|
| — |
|
| — |
|
Loans transferred to OREO |
|
| — |
|
| (142) |
|
| (184) |
|
| (442) |
|
|
| (1,062) |
|
| — |
|
| (1,119) |
|
| (184) |
|
Loans refinanced at other institutions |
|
| (570) |
|
| (678) |
|
| (1,643) |
|
| (1,550) |
|
|
| (746) |
|
| (570) |
|
| (1,309) |
|
| (1,643) |
|
Loans paid current |
|
| (2,358) |
|
| (1,521) |
|
| (2,225) |
|
| (2,300) |
|
|
| (1,778) |
|
| (2,358) |
|
| (1,917) |
|
| (2,225) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| �� |
|
|
|
|
|
|
|
|
Total loans removed from delinquency status during the period that were in delinquency status at the beginning of the period |
| $ | (16,227) |
| $ | (10,747) |
| $ | (4,085) |
| $ | (4,326) |
|
| $ | (22,991) |
| $ | (16,227) |
| $ | (4,661) |
| $ | (4,085) |
|
*Easy Advances do not have a contractual due date, but the Company considers an Easy Advance delinquent if it remains unpaid three weeks after the taxpayer customer’s tax return is submitted to the applicable tax authority.
Impaired Loans and Troubled Debt Restructurings
The Bank’s policy is to charge-off all or that portion of its recorded investment in a collateral-dependent impaired credit upon a determination that it is probable the full amount of contractual principal and interest will not be collected. Impaired loans totaled $48$43 million at June 30, 20182019 compared to $46$41 million at December 31, 2017,2018, an increase of $2 million during the first six months of 2018.2019.
A TDR is the situation where, due to a borrower’s financial difficulties, the Bank grants a concession to the borrower that the Bank would not otherwise have considered. The majority of the Bank’s TDRs involve a restructuring of loan terms such as a temporary reduction in the payment amount to require only interest and escrow (if required), reducing the loan’s interest rate and/or extending the maturity date of the debt. Nonaccrual loans modified as TDRs remain on nonaccrual status and continue to be reported as nonperforming loans. Accruing loans modified as TDRs are evaluated for nonaccrual status based on a current evaluation of the borrower’s financial condition and ability and willingness to service the modified debt. As of June 30, 2018,2019, the Bank had $36$33 million in TDRs, of which $9$11 million were also on nonaccrual status. As of December 31, 2017,2018, the Bank had $35$33 million in TDRs, of which $6$8 million were also on nonaccrual status.
Table 2221 — Impaired Loan Composition
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
| June 30, 2018 |
| December 31, 2017 |
|
| June 30, 2019 |
| December 31, 2018 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Troubled debt restructurings |
| $ | 35,964 |
| $ | 34,637 |
|
| $ | 32,911 |
| $ | 32,863 |
|
Impaired loans (which are not TDRs) |
|
| 11,910 |
|
| 10,979 |
|
|
| 9,769 |
|
| 8,572 |
|
Total recorded investment in impaired loans |
| $ | 47,874 |
| $ | 45,616 |
|
| $ | 42,680 |
| $ | 41,435 |
|
See Footnote 4 “Loans and Allowance for Loan and Lease Losses” of Part I Item 1 “Financial Statements” for additional discussion regarding impaired loans and TDRs.
105104
Deposits
Table 2322 — Deposit Composition
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
(in thousands) |
| June 30, 2018 |
| December 31, 2017 |
|
|
| June 30, 2019 |
| December 31, 2018 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Core Bank: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Demand |
| $ | 933,792 |
| $ | 944,812 |
|
|
| $ | 906,179 |
| $ | 937,402 |
| |
Money market accounts |
|
| 615,731 |
|
| 546,998 |
|
|
|
| 727,718 |
|
| 717,954 |
| |
Savings |
|
| 189,121 |
|
| 182,800 |
|
|
|
| 177,421 |
|
| 187,868 |
| |
Individual retirement accounts(1) |
|
| 51,549 |
|
| 47,982 |
|
|
|
| 50,970 |
|
| 53,524 |
| |
Time deposits, $250 and over(1) |
|
| 81,638 |
|
| 77,891 |
|
|
|
| 93,713 |
|
| 84,104 |
| |
Other certificates of deposit(1) |
|
| 223,106 |
|
| 189,661 |
|
|
|
| 246,392 |
|
| 239,324 |
| |
Reciprocal money market and time deposits(1)(2) |
|
| 283,229 |
|
| 373,242 |
|
|
|
| 192,792 |
|
| 217,153 |
| |
Brokered deposits(1) |
|
| 32,878 |
|
| 46,089 |
|
|
|
| 159,615 |
|
| 9,394 |
| |
Total Core Bank interest-bearing deposits |
|
| 2,411,044 |
|
| 2,409,475 |
|
|
|
| 2,554,800 |
|
| 2,446,723 |
| |
Total Core Bank noninterest-bearing deposits |
|
| 1,003,443 |
|
| 988,537 |
|
|
|
| 937,487 |
|
| 971,422 |
| |
Total Core Bank deposits |
|
| 3,414,487 |
|
| 3,398,012 |
|
|
|
| 3,492,287 |
|
| 3,418,145 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Republic Processing Group ("RPG"): |
|
|
|
|
|
|
|
| ||||||||
Republic Processing Group: |
|
|
|
|
|
|
| |||||||||
Money market accounts |
|
| 1,143 |
|
| 1,641 |
|
|
|
| 2,327 |
|
| 5,453 |
| |
Total RPG interest-bearing deposits |
|
| 1,143 |
|
| 1,641 |
|
|
|
| 2,327 |
|
| 5,453 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Brokered prepaid card deposits |
|
| 5,637 |
|
| 1,509 |
|
|
|
| 10,854 |
|
| 4,350 |
| |
Other noninterest-bearing deposits |
|
| 52,102 |
|
| 31,996 |
|
|
|
| 55,452 |
|
| 28,197 |
| |
Total RPG noninterest-bearing deposits |
|
| 57,739 |
|
| 33,505 |
|
|
|
| 66,306 |
|
| 32,547 |
| |
Total RPG deposits |
|
| 58,882 |
|
| 35,146 |
|
|
|
| 68,633 | �� |
| 38,000 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Deposits held for assumption in connection with sale of banking centers(3) |
|
| 152,954 |
|
| — |
| |||||||||
|
|
|
|
|
|
|
| |||||||||
Total deposits |
| $ | 3,473,369 |
| $ | 3,433,158 |
|
|
| $ | 3,713,874 |
| $ | 3,456,145 |
|
(1) |
|
(2) | Prior to June 2018, reciprocal deposits were classified as “brokered deposits.” The Economic Growth, Regulatory Relief, and Consumer Protection Act, enacted in May 2018, provides that most reciprocal deposits are no longer classified as brokered deposits if the Bank meets certain regulatory criteria. |
(3) | See Footnote 18 “Subsequent Event” of Part I Item 1 “Financial Statements” for additional detail. |
Total Company deposits increased $40$258 million, or 1%7%, from December 31, 20172018 to $3.5$3.7 billion at June 30, 2018. 2019. Total deposits at June 30, 2019 includes $153 million of deposits held for assumption in connection with the Bank’s agreement to sell four of its banking centers. These deposits held for assumption at June 30, 2019 include $105 million of interest-bearing and $48 million of noninterest-bearing deposits.
See Footnote 18 “Subsequent Event” of Part I Item 1 “Financial Statements” for additional information concerning the Bank’s agreement to sell four of its banking centers.
Total Company interest-bearing deposits increased $1 million while total Company noninterest bearing deposits increased $39$210 million, or 4%.
Core Bank interest-bearing and noninterest-bearing deposits increased $2 million and $15 million, during the first six months of 2018. The limited growth in Core Bank deposits was partially2019 primarily due to the repaymentacquisition of $50$150 million during the period of wholesale-brokered deposits. Additionally, withdraws totaling approximately $100 million by two corporate clients to meet their seasonal cash-flow needs prior to June 30, 2018 also negatively impacted growth inPromotional rates for time deposits and money market accounts offered through the Core Bank’s interest-bearing and noninterest-bearing deposits. These withdrawn funds of approximately $100 million were redeposited into the Bank in July 2018.
Noninterest-bearing deposits at RPG increased $24 million from December 31, 2017 to $58 million at June 30, 2018. Short-term RT deposits at TRSCompany’s MemoryBank digital brand primarily drove the remaining growth in interest-bearing deposits.
Total Company noninterest-bearing deposits increased $48 million, or 5%, resulting primarily from a $34 million increase with these funds expected to exit the Bank during the second half of 2018.in RPG short-term deposits.
Securities Sold Under Agreements to Repurchase and Other Short-term Borrowings
Securities Sold under Agreements to Repurchase (“SSUARs”)SSUARs are collateralized by securities and are treated as financings; accordingly, the securities involved with the agreements are recorded as assets and are held by a safekeeping agent and the obligations to repurchase the securities are reflected as liabilities. All securities underlying the agreements are under the Bank’s control.
SSUARs decreasedincreased approximately $29$43 million, or 14%24%, during the first six months of 2018,2019, with this growth driven by a $31 million decrease for one large corporate client. The substantial majority of SSUARs are indexed to immediately repricing indices such as the Federal Funds Target Rate.FFTR.
106105
Federal Home Loan Bank Advances
Primarily due to fund a $170seasonal increase in usage rates on its warehouse lines of credit, the Company experienced a $160 million increase in its reliance on FHLB overnight advances the Company’s FHLB advances increased $123 million, or 17%, from December 31, 20172018 to $860 million at June 30, 2018.2019. The Bank held $500$670 million in overnight advances at a rate of 1.92%2.46% as of June 30, 2018,2019, compared to $330$510 million in overnight advances at a rate of 1.42%2.45% at December 31, 2017.2018. Management anticipates its usage of FHLB advances will decrease during the third quarter as usage rates on warehouse lines descend from their seasonal highs.
The Company’s overallOverall use of FHLB advances during a given year is dependent upon many factors including asset growth, deposit growth, current earnings, and expectations of future interest rates, among others. If a meaningful amount of the Bank’s loan originations in the future have repricing terms longer than five years, management will likely elect to borrow additional funds to mitigate its risk of future increases in market interest rates. Whether the Bank ultimately does so, and how much in advances it extends out, will be dependent upon circumstances at that time. If the Bank does obtain longer-term FHLB advances for interest rate risk mitigation, it will have a negative impact on then current earnings. The amount of the negative impact will be dependent upon the dollar amount, coupon and final maturity of the advances obtained.
Interest Rate Swaps
Interest Rate Swaps Used as Cash Flow Hedges
The Bank entered into two interest rate swap agreements during 2013 as part of its interest rate risk management strategy. The Bank designated the swaps as cash flow hedges intended to reduce the variability in cash flows attributable to either FHLB advances tied to the 3-month LIBOR or the overall changes in cash flows on certain money market deposit accounts tied to 1-month LIBOR. The counterparty for both swaps met the Bank’s credit standards and the Bank believes that the credit risk inherent in the swap contracts is not significant.
Non-hedge Interest Rate Swaps
The Bank also enters into interest rate swaps to facilitate client transactions and meet their financing needs. Upon entering into these instruments, the Bank enters into offsetting positions in order to minimize the Bank’s interest rate risk. These swaps are derivatives, but are not designated as hedging instruments, and therefore changes in fair value are reported in current year earnings.
See Footnote 1112 “Interest Rate Swaps” of Part I Item 1 “Financial Statements” for additional discussion regarding the Bank’s interest rate swaps.
Liquidity
The Bank had a loan to deposit ratio (excluding brokered deposits) of 122%181% at June 30, 20182019 and 120% at December 31, 2017. The December 31, 2017 ratio was recasted for the Economic Growth, Regulatory Relief, and Consumer Protection Act enacted in May 2018, which provides that most reciprocal deposits are no longer classified as brokered deposits if the Bank meets certain regulatory criteria.2018. At June 30, 20182019 and December 31, 2017,2018, the Company had cash and cash equivalents on-hand of $387$474 million and $299$351 million. In addition, theThe Bank also had available borrowing capacity of $209$166 million and $347$254 million from the FHLB at June 30, 20182019 and December 31, 2017.2018. In addition, to its borrowing capacity with the FHLB, the Bank’s liquidity resources included unencumbered debt securities of $221$169 million and $326$300 million as of June 30, 20182019 and December 31, 20172018 and unsecured lines of credit totalingof $125 million available through various other financial institutions as of June 30, 2018 and December 31, 2017.the same period-ends.
The Bank maintains sufficient liquidity to fund routine loan demand and routine deposit withdrawal activity. Liquidity is managed by maintaining sufficient liquid assets in the form of investment securities. Funding and cash flows can also be realized by the sale of available-for-saleAFS debt securities, principal paydowns on loans and mortgage backed securities and proceeds realized from loans held for sale. The Bank’s liquidity is impacted by its ability to sell certain investment securities, which is limited due to the level of investment securities that are needed to secure public deposits, securities sold under agreements to repurchase, FHLB borrowings, and for other purposes, as required by law. At June 30, 20182019 and December 31, 2017,2018, these pledged investment securities had a fair value of $262$275 million and $263$241 million. Republic’s banking centers and its websites, www.republicbank.com and www.mymemorybank.com, provide access to retail deposit markets. These retail deposit products, if offered at attractive rates, have historically been a source of additional funding when needed. If the Bank were to lose a significant funding source, such as a few major depositors, or if any of its lines of credit were canceled, or if the Bank cannot obtain brokered deposits, the Bank would be compelled to offer market leading deposit interest rates to meet its funding and liquidity needs.
107106
At June 30, 2018,2019, the Bank had approximately $912$974 million in deposits from 141154 large non-sweep deposit relationships, including reciprocal deposits, where the individual relationship exceeded $2 million. The 20 largest non-sweep deposit relationships represented approximately $589$497 million, or 17%13%, of the Company’s total deposit balances at June 30, 2018.2019. These accounts do not require collateral; therefore, cash from these accounts can generally be utilized to fund the loan portfolio. If any of these balances were moved from the Bank, the Bank would likely utilize overnight borrowing lines in the short-term to replace the balances. On a longer-term basis, the Bank would likely utilize wholesale-brokered deposits to replace withdrawn balances, or alternatively, higher-cost internet-sourced deposits. Based on past experience, utilizing brokered deposits and internet-sourced deposits, the Bank believes it can quickly obtain these types of deposits if needed. The overall cost of gathering these types of deposits, however, could be substantially higher than the Traditional Bank deposits they replace, potentially decreasing the Bank’s earnings.
Due to the its historical success of growing loans and its overall use of non-core funding sources, the Bank has approached, and periodically during each quarter, has fallen short of its minimum internal policy limits for liquidity management, as set forth by the Bank’s Board of Directors. As of June 30, 2018,2019, the Bank was in compliance with all Board-approved liquidity policies, however, the Bank will likely continue to maintain its liquidity levels near the Bank’s Board-approved minimums for the foreseeable future. It is also likely the Bank, as it manages its liquidity levels in order to maximize its overall earnings, will continue to fall short of these minimums on occasion in the future, particularly during the first quarter of each year when short-term Easy Advance loans are originated.
Capital
Total stockholders’ equity increased from $632$690 million at December 31, 20172018 to $664$731 million at June 30, 2018.2019. The increase in stockholders’ equity was primarily attributable to net income earned during 20182019 reduced by cash dividends declared.
See Part II, Item 2. “Unregistered Sales of Equity Securities and Use of Proceeds” for additional detail regarding stock repurchases and stock buyback programs.
Common Stock — The Class A Common shares are entitled to cash dividends equal to 110% of the cash dividend paid per share on Class B Common Stock. Class A Common shares have one vote per share and Class B Common shares have ten votes per share. Class B Common shares may be converted, at the option of the holder, to Class A Common shares on a share for share basis. The Class A Common shares are not convertible into any other class of Republic’s capital stock.
Dividend Restrictions — The Parent Company’s principal source of funds for dividend payments are dividends received from RB&T. Banking regulations limit the amount of dividends that may be paid to the Parent Company by the Bank without prior approval of the respective states’ banking regulators. Under these regulations, the amount of dividends that may be paid in any calendar year is limited to the current year’s net profits, combined with the retained net profits of the preceding two years. At June 30, 2018,2019, RB&T could, without prior approval, declare dividends of approximately $87$118 million.
Regulatory Capital Requirements — The Company and the Bank are subject to capital regulations in accordance with Basel III, as administered by banking regulators. Regulatory agencies measure capital adequacy within a framework that makes capital requirements, in part, dependent on the individual risk profiles of financial institutions. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on Republic’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Parent Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s assets, liabilities and certain off-balance-sheetoff-balance sheet items, as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators regarding components, risk weightings and other factors.
Banking regulators have categorized the Bank as well-capitalized. For prompt corrective action, the regulations in accordance with Basel III define “well capitalized” as a 6.5% Common Equity Tier 1 Risk-Based Capital ratio, an 8.0% Tier 1 Risk-Based Capital ratio, a 10.0% Total Risk-Based Capital ratio and a 5.0% Tier 1 Leverage ratio. Additionally, in order to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, the Company and Bank must hold a capital conservation buffer of 2.5% composed of Common Equity Tier 1 Risk-Based Capital above their minimum risk-based capital requirements. The capital conservation buffer began phasing in during 2016 and continues to phase in through 2019 on the following schedule: a capital conservation buffer of 0.625% effective January 1, 2016; 1.25% effective January 1, 2017; 1.875% effective January 1, 2018; and a fully phased in capital conservation buffer of 2.5% on January 1, 2019.
108107
Republic continues to exceed the regulatory requirements for Total Risk Based Capital, Common Equity Tier I Risk Based, Tier I Risk Based Capital and Tier I Leverage Capital. Republic and the Bank intend to maintain a capital position that meets or exceeds the “well-capitalized” requirements as defined by the FRB and the FDIC, in addition to the Capital Conservation Buffer. Republic’s average stockholders’ equity to average assets ratio was 12.60%13.10% at June 30, 20182019 compared to 13.02% at December 31, 2017.2018. Formal measurements of the capital ratios for Republic and the Bank are performed by the Company at each quarter end.
In 2005, Republic Bancorp Capital Trust (“RBCT”),RBCT, an unconsolidated trust subsidiary of Republic, was formed and issued $40 million in Trust Preferred Securities (“TPS”).TPS. The sole asset of RBCT represents the proceeds of the offering loaned to Republic in exchange for a subordinated note with similar terms to the TPS. The RBCT TPS are treated as part of Republic’s Tier I Capital.
The subordinated note and related interest expense are included in Republic’s consolidated financial statements. The subordinated note paid a fixed interest rate of 6.015% through September 30, 2015 and adjusted to 3-month LIBOR plus 1.42% on a quarterly basis thereafter. The subordinated note matures on December 31, 2035 and is redeemable at the Company’s option on a quarterly basis. The Company chose not to redeem the subordinated note on July 1, 20182019 and is currently carrying the note at a cost of LIBOR plus 1.42%.
Table 2423 — Capital Ratios
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
| As of June 30, 2018 |
| As of December 31, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| Actual |
| Actual |
|
|
| As of June 30, 2019 |
| As of December 31, 2018 |
|
| ||||||||||||
(dollars in thousands) |
| Amount |
| Ratio |
| Amount |
| Ratio |
|
|
| Amount |
| Ratio |
| Amount |
| Ratio |
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital to risk-weighted assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Republic Bancorp, Inc. |
| $ | 732,299 |
| 16.15 | % | $ | 694,369 |
| 16.04 | % |
|
| $ | 795,533 |
| 16.16 | % | $ | 757,727 |
| 16.80 | % |
|
Republic Bank & Trust Company |
|
| 628,326 |
| 13.88 |
|
| 591,592 |
| 13.69 |
|
|
|
| 692,049 |
| 14.07 |
|
| 654,258 |
| 14.52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common equity tier 1 capital to risk-weighted assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Republic Bancorp, Inc. |
| $ | 647,252 |
| 14.28 | % | $ | 612,315 |
| 14.15 | % |
|
| $ | 709,550 |
| 14.41 | % | $ | 673,052 |
| 14.92 | % |
|
Republic Bank & Trust Company |
|
| 583,279 |
| 12.88 |
|
| 548,823 |
| 12.70 |
|
|
|
| 646,066 |
| 13.14 |
|
| 609,583 |
| 13.53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 (core) capital to risk-weighted assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Republic Bancorp, Inc. |
| $ | 687,252 |
| 15.16 | % | $ | 651,600 |
| 15.06 | % |
|
| $ | 749,550 |
| 15.23 | % | $ | 713,052 |
| 15.81 | % |
|
Republic Bank & Trust Company |
|
| 583,279 |
| 12.88 |
|
| 548,823 |
| 12.70 |
|
|
|
| 646,066 |
| 13.14 |
|
| 609,583 |
| 13.53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 leverage capital to average assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Republic Bancorp, Inc. |
| $ | 687,252 |
| 13.59 | % | $ | 651,600 |
| 13.21 | % |
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| $ | 749,550 |
| 13.72 | % | $ | 713,052 |
| 14.11 | % |
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Republic Bank & Trust Company |
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| 583,279 |
| 11.54 |
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| 548,823 |
| 11.15 |
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| 646,066 |
| 11.83 |
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| 609,583 |
| 12.06 |
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109108
Asset/Liability Management and Market Risk
Asset/liability management is designed to ensure safety and soundness, maintain liquidity, meet regulatory capital standards and achieve acceptable net interest income based on the Bank’s risk tolerance. Interest rate risk is the exposure to adverse changes in net interest income as a result of market fluctuations in interest rates. The Bank, on an ongoing basis, monitors interest rate and liquidity risk in order to implement appropriate funding and balance sheet strategies. Management considers interest rate risk to be a significant risk to the Bank’s overall earnings and balance sheet.
The interest sensitivity profile of the Bank at any point in time will be impacted by a number of factors. These factors include the mix of interest sensitive assets and liabilities, as well as their relative pricing schedules. It is also influenced by changes in market interest rates, deposit and loan balances and other factors.
The Bank utilizes earnings simulation models as tools to measure interest rate sensitivity, including both a static and dynamic earnings simulation model. A static simulation model is based on current exposures and assumes a constant balance sheet. In contrast, a dynamic simulation model relies on detailed assumptions regarding changes in existing business lines, new business, and changes in management and customer behavior. While the Bank runs the static simulation model as one measure of interest rate risk, historically, the Bank has utilized aits dynamic earnings simulation model as its primary interest rate risk tool to measure the potential changes in market interest rates and their subsequent effects on net interest income for a one-year time period. This dynamic model projects a “Base” case net interest income over the next 12 months and the effect on net interest income of instantaneous movements in interest rates between various basis point increments equally across all points on the yield curve. Many assumptions based on growth expectations and on the historical behavior of the Bank’s deposit and loan rates and their related balances in relation to changes in interest rates are incorporated into this dynamic model. These assumptions are inherently uncertain and, as a result, the dynamic model cannot precisely measure future net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income. Actual results will differ from the model’s simulated results due to the actual timing, magnitude and frequency of interest rate changes, the actual timing and magnitude of changes in loan and deposit balances, as well as the actual changes in market conditions and the application and timing of various management strategies as compared to those projected in the various simulated models. Additionally, actual results could differ materially from the model if interest rates do not move equally across all points on the yield curve.
As of June 30, 2018,2019, a dynamic simulation model was run for interest rate changes from “Down 100”200” basis points to “Up 400”300” basis points. Since December 2015, the Federal Open Market Committee has incrementally raised the FFTR, with further guidance suggesting that increases to the FFTR were more likely than not for 2018.
The following table illustrates the Bank’s projected percent change from its Base net interest income over the period beginning July 1, 20182019 and ending June 30, 20192020 based on instantaneous movements in interest rates from Down 100200 to Up 400300 basis points equally across all points on the yield curve. The Bank’s dynamic earnings simulation model excludes Traditional Bank loan fees.
Table 2524 — Bank Interest Rate Sensitivity
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| Change in Rates |
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| -100 |
| +100 |
| +200 |
| +300 |
| +400 |
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| Basis Points |
| Basis Points |
| Basis Points |
| Basis Points |
| Basis Points |
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% Change from base net interest income at June 30, 2018 |
| (3.70) | % |
| 3.40 | % |
| 4.60 | % |
| 5.50 | % |
| 5.70 | % |
% Change from base net interest income at December 31, 2017 |
| (4.60) | % |
| 3.80 | % |
| 4.80 | % |
| 5.40 | % |
| 5.40 | % |
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| Change in Rates | ||||||||||||||
| -200 |
| -100 |
| +100 |
| +200 |
| +300 |
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| Basis Points |
| Basis Points |
| Basis Points |
| Basis Points |
| Basis Points |
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% Change from base net interest income at June 30, 2019 |
| (5.1) | % |
| (3.8) | % |
| 2.3 | % |
| 4.2 | % |
| 5.9 | % |
% Change from base net interest income at December 31, 2018 |
| NA |
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| (2.9) | % |
| 0.9 | % |
| 0.3 | % |
| (0.9) | % |
The Bank’s dynamic simulation model run for June 20182019 projected improvementa decrease in the Bank’s net interest income relative tofor the Base case for theDown 200 and 100 scenarios. The Up 100 through Up 300 scenarios for June 2019 reflected an increase in net interest income, with this increase more favorable than the Up 400comparable scenarios at December 2018. June 2019 scenarios were overall more favorable than December 2018. The primary drivers behind this change in the up-rate scenarios are general increases in variable rate assets, along with increases in low-beta deposits and decreases in high-beta deposits. In addition, the improvementsecond quarter and a 12-month forecast for market interest rates projected intermediate and long-term rates to be much lower than the December 2018 forecast.
The Core Bank indexes many of its financial instruments to either the FFTR, Prime, or LIBOR. These short-term market rates have generally trended higher since December 2015. During this period, longer-term market rates have generally not increased as much, causing the yield curve to flatten. During the first half of 2019, longer-term market rates began to generally trend lower, while the short-term market rates remained relatively stable, causing short-term market rates to be higher than some longer-term market rates on the yield curve. This event, in these scenarios within a reasonable rangewhich short-term market rates are higher than longer-term market rates, is labelled an inverted yield curve.
109
A continued flattening or inverting of the projected improvement reflectedyield curve, causing the spread between long-term interest rates and short-term interest rates to decrease further or further invert, will likely have a negative impact on the Company’s net interest income and net interest margin. Additionally, while parallel increases in short-term and long-term interest rates are generally believed by management to be more favorable to the Core Bank’s net interest income and net interest margin in the same scenarios for the December 2017 simulation. The Bank’s dynamic simulation model run for June 2018near term, management believes stable interest rates or a parallel decrease in short-term and December 2017 projectedlong-term interest will likely have a decline innegative impact on the Bank’s net interest income relativeand net interest margin. Under any interest rate scenario, however, if the Core Bank is unable to reasonably maintain its deposit balances and the cost of those deposits at acceptable levels, it will likely have a negative impact to the Base case for the Down 100 scenario.Core Bank’s net interest income and net interest margin.
For additional discussion regarding the Bank’s net interest income, see the sectionsections titled “Net Interest Income” in this section of the filing under “RESULTS OF OPERATIONS (Three Months Ended June 30, 2019 Compared to Three Months Ended June 30, 2018)” and RESULTS OF OPERATIONS (Six Months Ended June 30, 20182019 Compared to Six Months Ended June 30, 2017)2018).”
110
The Board of Directors of the Bank has established separate and distinct policy limits for acceptable percent changes in the Bank’s net interest income based on modeled changes in market interest rates. Historically, if model projections of the percent change in net interest income fall outside Board approved limits at a given point in time or are projected to fall outside such limits based on certain trends, Bank management has either taken certain actions intended to bring model projections back within Board approved limits or discussed with the Board how future anticipated events will likely correct the current situation. These actions have included, but are not limited to, restructuring of interest-earning assets and interest-bearing liabilities, seeking additional fixed rate term FHLB advances, executing interest rate swaps and modifying the pricing or terms of loans, leases and deposits. These actions have historically had a negative impact on current earnings.
Item 3.Quantitative and Qualitative Disclosures about Market Risk.
Information required by this item is included under Part I, Item 2., “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Item 4.Controls and Procedures.
As of the end of the period covered by this report, an evaluation was carried out by Republic Bancorp, Inc.’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective as of the end of the period covered by this report. In addition, no change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) occurred during the fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
There were no changes in Republic’s internal control over financial reporting as defined in Exchange Act Rules 13a-15(f) that occurred during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, Republic’s internal control over financial reporting.
In the ordinary course of operations, Republic and the Bank are defendants in various legal proceedings. There is no proceeding pending or threatened litigation, to the knowledge of management, in which an adverse decision could result in a material adverse change in the business or consolidated financial position of Republic or the Bank.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Except for the additional risk factor information described below, there have been no material changes in our risk factors as previously disclosed in Part 1, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. You should carefully consider the risk factors discussed below and in our 2018 Form 10-K, which could materially affect our business, financial condition or future results.
The planned discontinuance of LIBOR presents risks to the Company because the Company uses LIBOR as a reference rate for a portion of its financial instruments. LIBOR is used as a reference rate for a meaningful amount of the Company’s financial instruments, which means it is the base on which relevant interest rates are determined. Transactions include those in which the Company lends and borrows money, purchases securities, and enters into derivatives to manage client risk. The United Kingdom Financial Conduct Authority, the institution that regulates LIBOR, announced in July 2017 that it intends to stop persuading or compelling institutions to submit rates for the calculation of LIBOR to the administrator of LIBOR after 2021.
111110
There are ongoing efforts to establish an alternative reference rate. The Secured Overnight Financing Rate (“SOFR”) is considered the most likely alternative reference rate suitable for replacing LIBOR, but issues remain with respect to its implementation. As a result, the scope of its ultimate acceptance and the impact on rates, pricing and the ability to manage risk, including through derivatives, remain uncertain. No other alternative rate is currently under wide consideration. If SOFR or another rate does not achieve wide acceptance as the alternative to LIBOR, there likely will be disruption to all of the markets relying on the availability of a broadly accepted reference rate. Even if SOFR or another reference rate ultimately replaces LIBOR, risks will remain for the Company with respect to outstanding loans, derivatives or other instruments referencing LIBOR. Those risks arise in connection with transitioning those instruments to a new reference rate and the corresponding value transfer that may occur in connection with that transition. That is because a new reference rate likely will not exactly imitate LIBOR. As a result, for example, over the life of a transaction that transitions from LIBOR to a new reference rate, the Company’s monetary obligations to its counterparties and its yield from transactions with clients may change, potentially adversely to the Company. For some instruments, the method of transitioning to a new reference rate may be challenging, especially if parties to an instrument cannot agree as to how to perform that transition. If a contract is not transitioned to a new reference rate and LIBOR ceases to exist, the impact on the Company’s obligations is likely to vary by asset class and contract. In addition, prior to LIBOR discontinuance, instruments that continue to refer to LIBOR may be impacted if there is a change in the availability or calculation of LIBOR. Risks related to transitioning instruments to a new reference rate or to how LIBOR is derived, and its availability include impacts on the yield on loans or securities held by the Company, amounts paid on Company debt, or amounts received and paid on derivative instruments it has contracted. The value of loans, securities, or derivative instruments tied to LIBOR and the trading market for LIBOR-based securities could also be impacted upon its discontinuance or if it is limited.
While the Company expects LIBOR to continue to be available in substantially its current form until the end of 2021 or shortly before that, it is possible that LIBOR quotes will become unavailable prior to that point. This could result, for example, if a sufficient number of institutions decline to make submissions to the LIBOR administrator. In that case, the risks associated with the transition to an alternative reference rate will be accelerated and magnified. These risks may also be increased due to the shorter time for preparing for the transition.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.
Details of Republic’s Class A Common Stock purchases during the second quarter of 20182019 are included in the following table:
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| Total Number of |
| Maximum Number |
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| Shares Purchased |
| of Shares that May |
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| as Part of Publicly |
| Yet Be Purchased |
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| Total Number of |
| Average Price |
| Announced Plans |
| Under the Plan |
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Period |
| Shares Purchased |
| Paid Per Share |
| or Programs |
| or Programs |
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April 1 - April 30 |
| — |
| $ | — |
| — |
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May 1 - May 31 |
| — |
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| — |
| — |
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June 1 - June 30 |
| — |
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| — |
| — |
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Total |
| — |
| $ | — |
| — |
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The Company did not repurchase anyrepurchased no shares during the second quarter of 2018. Additionally, there2019. There were no42,452 shares exchanged for stock option exercises during the second quarter of 2018.2019. During 2011, the Company’s Board of Directors amended its existing share repurchase program by approving the repurchase of 300,000 additional shares from time to time, as market conditions are deemed attractive to the Company. The repurchase program will remain effective until the total number of shares authorized is repurchased or until Republic’s Board of Directors terminates the program. As of June 30, 2018,2019, the Company had 223,696195,520 shares that could be repurchased under its current share repurchase programs.
During the second quarter of 2018,2019, there were 28,1974,861 shares of Class A Common Stock issued upon conversion of shares of Class B Common Stock by stockholders of Republic in accordance with the share-for-share conversion provision option of the Class B Common Stock. The exemption from registration of newly issued Class A Common Stock relies upon Section (3)(a)(9) of the Securities Act of 1933.
There were no equity securities of the registrant sold without registration during the quarter covered by this report.
112111
The following exhibits are filed or furnished as a part of this report:
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Exhibit Number |
| Description of Exhibit |
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31.1 |
| Certification of Principal Executive Officer pursuant to the Sarbanes-Oxley Act of 2002 |
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31.2 |
| Certification of Principal Financial Officer pursuant to the Sarbanes-Oxley Act of 2002 |
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32* |
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101 |
| Interactive data files: (i) Consolidated Balance Sheets at June 30, |
* This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
113112
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| REPUBLIC BANCORP, INC. | |||
| (Registrant) | |||
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| Principal Executive Officer: | |||
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Date: August 9, | /s/ Steven E. Trager | |||
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| By: Steven E. Trager | ||
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| Chairman and Chief Executive Officer | ||
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| Principal Financial Officer: | |||
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Date: August 9, | /s/ Kevin Sipes | |||
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| By: Kevin Sipes | ||
Executive Vice President, Chief Financial | ||||
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| Officer and Chief Accounting Officer |
114113