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RB

REPUBLIC BANCORP INC /KY/ (RBCAA)·Q4 2024 Earnings Summary

Executive Summary

  • Core Bank delivered solid performance with net interest margin expansion to 3.64% and net interest income up $7.0 million year over year; total company diluted EPS was $0.98 and net income $19.0 million for Q4 2024 .
  • Segment mix was a headwind: Republic Processing Group (RPG) net income fell $2.4 million YoY as TRS recorded a larger ERA provision; RCS offset with 44% YoY net income growth to $6.1 million .
  • Management revised TRS economics for the current tax season, adding a loss-cap guarantee and enhanced ERA fees (~$2.8 million incremental fee income Dec 2024–Mar 2025; ~$1.4 million recognized in Q4), which should mitigate downside and support near‑term fee income .
  • Balance sheet trends remained healthy: period-end total deposits ex-brokered grew $157 million for 2024, loan-to-deposit ratio held at 104% at both year-end 2023 and 2024, and credit quality stayed strong (Core Bank net charge-offs 0.02% for Q4) .
  • Dividend was raised 11% in January, providing an income-supportive catalyst heading into Q1 2025 (Class A to $0.451/share, payable April 18, 2025) .

What Went Well and What Went Wrong

What Went Well

  • Core Bank margin expansion and net interest income growth: “strong growth in our net interest margin (‘NIM’) from 3.40%… to 3.64%… [and] a $7.0 million increase in net interest income,” driven by asset yield increases and disciplined funding/pricing .
  • Credit quality remained robust: Core Bank net charge-offs to average loans were 0.02% in Q4; nonperforming loans and delinquency ratios remained low, supporting only a minimal Core Bank provision ($0.367 million) .
  • RCS execution: RCS net income rose to $6.1 million (+44% YoY), benefiting from 18% growth in higher‑yielding small-dollar products and lower provision on those products .

What Went Wrong

  • TRS early-season loss pressure: TRS net loss widened to $6.4 million (vs. $3.6 million YoY) as estimated ERA loss rates increased (7.07% vs. 3.81% in prior year), requiring a higher provision .
  • RPG aggregate decline: RPG net income fell $2.4 million YoY due to TRS losses and lower RPS yield plus a $1.1 million interest expense revenue-share charge that began in 2024 .
  • Operating expenses linked-quarter: Core Bank salaries/benefits increased by $4.6 million YoY, largely due to a $3.9 million swing in bonus accruals (net credit in Q4’23 vs. net charge in Q4’24), lifting the efficiency ratio to 60% (from 55% in Q3) .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Net Interest Income ($USD Millions)$66.8 $71.3 $75.4
Noninterest Income ($USD Millions)$14.8 $16.8 $14.1
Total Adjusted Income - Non-GAAP ($USD Millions)$81.6 $88.1 $89.5
Income Before Tax ($USD Millions)$23.5 $33.8 $23.1
Net Income ($USD Millions)$19.7 $26.5 $19.0
Diluted EPS ($USD)$1.01 $1.37 $0.98
ROA (%)1.21 1.58 1.10
ROE (%)8.68 10.88 7.63
Net Interest Margin - Total Company (%)4.36 4.49 4.62
Net Interest Margin - Core Bank (%)3.40 3.53 3.64
Efficiency Ratio - Non-GAAP (%)58 55 60

Segment net income

Segment Net Income ($USD Millions)Q4 2023Q3 2024Q4 2024
Traditional Banking$14.5 $15.2 $15.3
Warehouse Lending$1.3 $2.0 $2.3
Tax Refund Solutions (TRS)$(3.6) $0.9 $(6.4)
Republic Payment Solutions (RPS)$3.2 $2.2 $1.7
Republic Credit Solutions (RCS)$4.2 $6.3 $6.1
RPG Total$3.9 $9.4 $1.4
Total Company$19.7 $26.5 $19.0

KPIs and balance sheet

KPIQ4 2023Q3 2024Q4 2024
Total Deposits ($USD Billions)$5.053 $5.102 $5.211
Total Loans ($USD Billions)$5.240 $5.297 $5.439
Loan-to-Deposit Ratio (%)104 —104
Core Bank Nonperforming Loans / Total Loans (%)0.39 0.38 0.44
Core Bank Delinquent Loans / Total Loans (%)0.16 0.19 0.20
Core Bank Net Charge-offs to Avg Loans (annualized, %)0.01 0.14 0.02

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
TRS Early Season Refund Advances (ERAs) economicsTax season Dec 2024–Mar 2025Prior structure without ERA loss-cap and lower ERA feesRevised: loss cap guarantee for ERAs; enhanced ERA fees; reduced fee for in-season RAs; ~+$2.8M incremental fee income est. season; ~$1.4M recognized in Q4; no additional loss estimates for Dec 2024 ERAs via marketer-servicerRevised favorably
Dividend per share (Class A)Q1 2025 (payable Apr 18, 2025)$0.407 quarterly (2024) $0.451 quarterly (11% increase)Raised
Dividend per share (Class B)Q1 2025 (payable Apr 18, 2025)$0.370 quarterly (2024) $0.410 quarterlyRaised

Earnings Call Themes & Trends

TopicQ2 2024 (Jul)Q3 2024 (Oct)Q4 2024 (Jan)Trend
Core Bank NIM3.46%; funding mix shift to interest-bearing deposits; noninterest-bearing down; asset yields up 3.53%; NIM expansion; slower increase in funding costs QoQ 3.64%; yield on IEAs +25 bps; cost of funds +1 bp YoY Improving NIM across H2
Warehouse LendingAvg balances decreased YoY in Q2; usage 49% Avg balances up; usage 56% Avg balances up further; usage 59% Rising usage/supports NII
TRS Refund Advances/ERAsFavorable RA provision and yield enhancement payment TRS net income modestly positive on recoveries and fees ERAs provision elevated; loss-rate estimate up; revised contract adds loss cap and higher ERA fees Mixed: operational fix in Q4 to mitigate losses
RPS economicsHigher yield YoY offset by ~$1.3M revenue-share charge initiated in 2024 Lower yield and continued revenue-share drag Yield 4.39% vs. 5.10% YoY; $1.1M revenue-share charge persists Ongoing yield headwind
Mortgage bankingQ2 rate-lock demand improved; gains up $0.7M YoY Q3 fixed-rate lock apps +$47.5M, mortgage income +$1.2M YoY Modest mortgage income YoY; core noninterest income flat Stabilizing with rate cuts
Deposit mixInterest-bearing deposits increased; noninterest-bearing continued secular decline Noninterest-bearing down YoY Noninterest-bearing down $68M YoY Higher-cost funding mix persists

Management Commentary

  • “We are pleased to report another strong performance for the fourth quarter, particularly within our Core Bank… net interest margin (‘NIM’) from 3.40%… to 3.64%” .
  • “We estimate the revised contract will provide approximately $2.8 million of additional fee income for the current tax season… [and] we will receive a loss cap guarantee specific to ERAs” .
  • “We continued to add additional on-balance-sheet liquidity… deposits, excluding wholesale brokered deposits, growing by a net $157 million… maintained… loan-to-deposit ratio at 104% as of December 31, 2023 and December 31, 2024” .

Q&A Highlights

  • No earnings call transcript was available in the document set; therefore, Q&A themes and clarifications could not be reviewed [ListDocuments: earnings-call-transcript returned 0].

Estimates Context

  • Attempts to retrieve S&P Global consensus for Q4 2024 EPS and revenue were unsuccessful due to API limits. As a result, Wall Street consensus comparisons are unavailable for this recap [GetEstimates error].

Key Takeaways for Investors

  • Core Bank margin expansion and disciplined pricing drove net interest income growth; continued NIM improvement is a key driver for earnings resilience in 2025 .
  • The TRS contract revision (ERA loss-cap, enhanced fees) should reduce volatility and add ~$2.8 million seasonal fees, partly recognized in Q4; watch real-time loss rates through tax season for execution risk .
  • RPG headwinds persist (TRS losses, RPS revenue-sharing drag); RCS remains the bright spot with 44% net income growth—monitor mix and credit in sub/near-prime exposure .
  • Credit quality remains robust at the Core Bank (NCOs 0.02% in Q4; low nonperforming and delinquency ratios), supporting modest provisioning and capital flexibility .
  • Balance sheet is stable with deposit growth ex-brokered and loan-to-deposit ratio at 104%; sustained deposit pricing discipline remains crucial as noninterest-bearing balances decline .
  • Operating expense cadence may normalize after Q4 bonus accrual swing; track efficiency ratio improvement back toward mid‑50s as revenue mix stabilizes .
  • Dividend increase (11%) enhances total return profile near term; supports income investors and could provide incremental technical support .