Republic Bancorp(RBCAA) - 2024 Q1 - Quarterly Report

Company Structure and Operations - The Company dissolved its wholly owned insurance subsidiary, Republic Insurance Services, Inc., during the last quarter of 2023[197]. - The Company operates through five reportable segments: Traditional Banking, Warehouse Lending, TRS, RPS, and RCS[211]. - The Traditional Banking segment includes 47 banking centers located primarily in Kentucky[213]. - The Bank's principal lending activities include retail mortgage lending, commercial lending, and consumer lending[220]. - The Bank's Correspondent Lending channel began acquiring single-family, first-lien mortgage loans for investment in Q1 2023[226]. - The Bank's Internet and Mobile Banking services enhance market penetration and service delivery[227]. - The Company maintains an acquisition strategy to selectively grow its franchise alongside organic growth strategies[228]. Financial Performance - Total net income for Q1 2024 was $30.6 million, a 9% increase from Q1 2023, with diluted EPS rising to$ 1.58 from $1.42[251]. - Net interest income decreased by$ 1.9 million, or 4%, in Q1 2024 compared to Q1 2023[254]. - Noninterest income decreased by $175,000, or 2%, for Q1 2024 compared to the same period in 2023[255]. - Noninterest expense decreased by$ 2.0 million, or 5%, for Q1 2024 compared to Q1 2023[255]. - Net income increased by $67,000, or 9%, for Q1 2024 compared to the same period in 2023[260]. - Net interest income increased by$ 3.4 million, or 39%, to $12.0 million for Q1 2024 compared to Q1 2023[265]. - Total Company net interest income was$ 96.9 million during Q1 2024, an increase of $4.3 million, or 5%, from Q1 2023[269]. Credit Losses and Provisions - As of March 31, 2024, the Company maintained an Allowance for Credit Losses (ACLL) for expected credit losses inherent in its loan portfolio[206]. - The provision for credit losses was a net charge of$ 358,000 in Q1 2024, down from $3.0 million in Q1 2023[254]. - The Traditional Banking segment's Allowance for Credit Losses (ACLL) was 1.29% of total loans as of March 31, 2024, slightly down from 1.33% as of March 31, 2023[288]. - The total provision for loan losses increased to$ 30,622,000 in Q1 2024 from $26,766,000 in Q1 2023[300]. - The ACLL (Allowance for Credit Losses) at the end of the period increased to$ 108,702,000 in Q1 2024 from $96,121,000 in Q1 2023[300]. Loan and Deposit Trends - Total Traditional Bank loans decreased by$ 45 million, or 1%, during Q1 2024[260]. - Total Traditional Bank deposits increased by $444 million, or 10%, during Q1 2024[260]. - Total loans decreased by$ 16 million, or less than 1%, to $5.2 billion as of March 31, 2024[323]. - Tax Refund Solutions loans decreased by$ 92 million, reflecting substantial paydowns of loans originated in December 2023[327]. - Total deposits increased by $367 million to$ 5.4 billion as of March 31, 2024, representing a 7% increase from December 31, 2023[355]. - Core Bank deposits rose by $445 million, or 10%, with interest-bearing deposits increasing by$ 505 million and noninterest-bearing deposits decreasing by $59 million[355]. Asset Quality and Nonperforming Loans - Nonperforming loans to total loans for the RCS segment was 1.63% as of March 31, 2024, compared to 1.11% as of December 31, 2023[265]. - Total classified and special mention loans increased by$ 5.6 million, or 8%, driven primarily by commercial loan downgrades[335]. - The total balance of nonperforming assets increased to $22.9 million, up from$ 22.0 million at December 31, 2023[341]. - Total nonperforming loans increased to $21,374 thousand as of March 31, 2024, up from$ 20,618 thousand on December 31, 2023, representing a 3.67% increase[343]. - The percentage of total nonperforming loans to total loans rose to 0.41% as of March 31, 2024, compared to 0.39% as of December 31, 2023[343]. Interest Rate and Capital Management - The dynamic earnings simulation model projected a 2.1% increase in net interest income under a -400 basis points scenario as of March 31, 2024[385]. - The projected net interest income for the Bank showed a deterioration in down-rate scenarios, with significant declines expected due to higher interest-earning cash balances and revised deposit beta assumptions[386]. - The Company elected to defer the impact of CECL on regulatory capital, which will phase in over five years, affecting capital ratios by approximately 6 basis points[379]. - The interest rate risk is considered significant to the Bank's overall earnings and balance sheet, with ongoing monitoring and management strategies in place[381]. - The Bank's average stockholders' equity to average assets ratio was 12.92% as of March 31, 2024, down from 14.21% at the end of 2023[376].