Republic Bancorp, Inc. Reports Record Year-to-Date and Third Quarter Net Income
LOUISVILLE, Ky.--(BUSINESS WIRE)-- Republic Bancorp, Inc. ("Republic" or the "Company") is pleased to report record net income of $112.7 million for the first nine months of 2012, representing a $24.8 million, or 28%, increase over the first nine months of 2011. Diluted Earnings per Class A Common Share increased to $5.36 for the first nine months of 2012, while return on average assets ("ROA") and return on average equity ("ROE") during the same period were both industry-strong at 4.18% and 28.44%, respectively.
Republic also earned record third quarter net income of $20.7 million, a $12.8 million increase over the third quarter of 2011. Diluted Earnings per Class A Common Share increased to $0.98 for the third quarter of 2012. ROA and ROE were both solid during the quarter at 2.49% and 15.31%, respectively.
Steve Trager, Republic's Chairman and CEO, commented: "We are proud of our third quarter results, as we were able to continue our trend of strong organic loan growth, healthy net interest margin and solid asset quality ratios. In addition, we are most excited that we were able to capitalize on the experience we gained through our first quarter purchase of Tennessee Commerce Bank ("TCB") by acquiring another failed institution from the Federal Deposit Insurance Corporation ("FDIC") during September. With the purchase of First Commercial Bank ("FCB") in Bloomington, Minnesota, we were able to once again extend the reach of our franchise while adding to our industry-strong capital base through the recording of a pre-tax bargain purchase gain of $27.1 million. We look forward to providing the same high level of customer service to our new Minnesota clients as we have provided to our long-time clients in our more traditional markets."
Republic Bancorp, Inc. (Nasdaq: RBCAA) , headquartered in Louisville, Kentucky, is the holding company for Republic Bank & Trust Company ("RB&T") and Republic Bank.
The following chart highlights Republic's third quarter and year-to-date 2012 financial performance compared to the same period in 2011:
Three Months Ended
Nine Months Ended
(dollars in thousands, except per share data)
Gross Operating Profit
Diluted Earnings per Class A Share
Results of Operations for the Third Quarter of 2012 Compared to the Third Quarter of 2011
Traditional Banking and Mortgage Banking (collectively "Core Banking")
Net income from Core Banking increased from $9.3 million during the third quarter of 2011 to $22.0 million during the third quarter of 2012. The increase in the Core Bank's earnings was primarily driven by the bargain purchase gain from the FCB acquisition in combination with an increase in mortgage banking income.
Net interest income within the Core Bank rose to $28.6 million for the third quarter of 2012, an increase of $1.4 million, or 5%, over the third quarter of 2011. The increase in net interest income for the quarter was primarily attributable to year-over-year growth in loans of $422 million. Included in the year-over-year growth in loans was approximately $160 million in loans outstanding as of September 30, 2012 related to the two failed bank acquisitions.In addition, Republic's existing franchise grew loans by $262 million from September 30, 2011 with $150 million of that growth attributable to the Company's mortgage warehouse lending division. As a result, the Core Bank's net interest margin remained healthy at 3.54% for the third quarter of 2012, compared to 3.61% for the third quarter of 2011.
The Core Bank's provision for loan losses was higher during the third quarter of 2012, increasing from $547,000 during the third quarter of 2011 to $2.5 million. Approximately $550,000 of the provision expense for the third quarter of 2012 was the result of an increase in the Core Bank's general allowance for loan losses, which was driven by growth in its loan portfolio. This compares to a decrease in the Core Bank's general allowance for loan losses of $109,000 during the third quarter of 2011, which resulted from a decline in loan balances related primarily to a branch divestiture. Furthermore, the Core Bank also recorded additional provisions during the quarter related to a few classified loan relationships. In contrast, the Core Bank's delinquent loans to total loans and non-performing loans to total loans ratios reached their lowest levels since 2007. Overall, the Core Bank's credit metrics continue to place it among the highest performers in the banking industry.
The table below illustrates the Core Bank's credit quality ratios for the most recent quarter-ends and the previous three calendar year-ends.
As of and for the:
Core Banking Credit Quality Ratios
Non-performing loans / Total loans
Non-performing assets / Total loans including OREO
Delinquent loans / Total loans
Net loan charge-offs / Average loans
(Annualized as of 9/30/12, 6/30/12 and 3/31/12)
OREO = Other Real Estate Owned
Non-interest income for the Core Bank was $34.6 million for the third quarter of 2012 compared to $10.0 million for the third quarter of 2011. In addition to the previously discussed bargain purchase gain, the Core Bank also had a solid quarter of mortgage banking income, which increased $922,000, or 68%, over the third quarter of 2011. The increase in mortgage banking income was driven by continued strong application volume for long-term fixed rate mortgages combined with favorable secondary market pricing terms. Partially offsetting these quarter-over quarter increases was a $2.9 million gain the Core Bank recorded during the third quarter of 2011 related to the divestiture of a banking center.
The Core Bank's non-interest expenses increased $4.2 million, or 18%, for the third quarter of 2012 to $27.0 million. Included in the salaries and benefits category was $467,000 for short-term retention bonuses for FCB personnel, incentive compensation bonuses for Republic associates that are contingent upon a successful core system conversion of FCB, and a two-year profit goal specific to the performance of FCB. Also related to FCB in the other non-interest expense category was $695,000 in expenses for third party legal, valuation and consulting services.
Republic Processing Group ("RPG")
The Company has combined its previous business segment Tax Refund Solutions ("TRS") with its relatively new prepaid card division, Republic Payment Solutions ("RPS"), and its newly formed consumer credit division, Republic Credit Solutions ("RCS"). Collectively, this combination is designated as RPG for the Company's business segment reporting. RPS is preparing to expand its client base into general purpose reloadable prepaid debit and payroll cards, while RCS is preparing to pilot short-term consumer credit products through multiple channels, including the internet and retail locations. These programs are expected to serve as a source of net interest income, fee income and low-cost deposits for the Company.
RPG, which derives substantially all of its revenues during the first and second quarters of the year, historically operates at a net loss during the third and fourth quarters, as the Company prepares for the upcoming tax season. For the third quarter of 2012, RPG recorded a net loss of $1.3 million compared to a net loss of $1.5 million for the third quarter of 2011. RPG recorded a net credit of $460,000 to its provision for loan losses during the third quarter of 2012 compared to a net credit of $687,000 for the third quarter of 2011. The net credit in both periods resulted from better-than-previously-projected paydowns within RB&T's Refund Anticipation Loan ("RAL") portfolio. The estimated loss rate on RALs decreased from 1.43% of total RALs originated as of September 30, 2011 to 1.35% of total RALs originated as of September 30, 2012. The current year tax season represents the last season that RB&T will originate RALs. RB&T will continue to offer Refund Transfer (formerly referred to as Electronic Refund Checks/Electronic Refund Deposits) products in the future.
During the first quarter of 2012, the Company recorded an initial bargain purchase gain of $27.9 million, as a result of the TCB acquisition. The bargain purchase gain was realized because the overall price paid by RB&T was substantially less than the fair value of the TCB assets acquired and liabilities assumed in the transaction. During the third quarter of 2012, the Bank posted adjustments to the acquired assets for the Day One fair values in the transaction and recorded a slight decrease to the bargain purchase gain of $189,000, as additional information relative to the acquisition date fair values became available.
Overall, the contractual amount of the loans purchased through the TCB acquisition was reduced from $79 million as of March 31, 2012 to $46 million as of September 30, 2012. The carrying value of the loans purchased in the TCB transaction was $57 million as of March 31, 2012 compared to $34 million as of September 30, 2012.
On September 7, 2012, RB&T acquired, without a loss indemnification agreement, specific assets and assumed substantially all of the liabilities of FCB, headquartered in Bloomington, Minnesota from the FDIC, as receiver for FCB. On September 10, 2012, FCB's sole location re-opened as a banking center of RB&T.
RB&T acquired approximately $215 million in notional assets from the FDIC as receiver for FCB. In addition, RB&T received cash from the FDIC of approximately $64 million, which represented the net difference between the assets acquired and the liabilities assumed adjusted for the discount RB&T received for the transaction. Because the overall price paid by RB&T was substantially less than the fair value of the FCB assets acquired and liabilities assumed in the transaction, the Company recorded a bargain purchase gain of $27.1 million during the third quarter of 2012.
These fair value estimates are considered preliminary and are subject to change for up to one year after the closing date of the acquisition, as additional information relative to the acquisition date fair values becomes available. More specifically, fair value adjustments for loans and other real estate owned may be made as market value data applicable to the date of acquisition is received by the Bank. Due to the compressed due diligence period of a FDIC acquisition, the measurement period analysis of information that may be reflective of conditions existing as of the acquisition date generally extends longer within the one year measurement period compared to non-assisted transactions.
"We are pleased with our third quarter operating results and excited about the long-term direction of the Company. Our strong capital base, industry-solid asset quality and history of performance have afforded Republic a wealth of opportunities for the future. In addition to the expansion of our footprint into exciting new markets, the Company is also expanding its product offering in the non-traditional banking space, as we seek to diversify our revenue streams and increase the long-term value for our shareholders. As always, we will embrace these and all opportunities with an air of caution, as we seek to grow the Company in a prudent and steady manner. It is this philosophy that focuses on growing our Company over the long-term horizon, which allows me to always remind our associates, our clients and our shareholders: "We were here for you yesterday. We are here for you today. We will be here for you tomorrow," concluded Trager.
Republic Bancorp, Inc. (Republic) has 44 banking centers and is the parent company of Republic Bank & Trust Company and Republic Bank. Republic Bank & Trust Company has 34 banking centers in 12 Kentucky communities - Covington, Crestwood, Elizabethtown, Florence, Frankfort, Georgetown, Independence, Lexington, Louisville, Owensboro, Shelbyville and Shepherdsville, three banking centers in southern Indiana - Floyds Knobs, Jeffersonville and New Albany, one banking center in Franklin (Nashville), Tennessee, and one banking center in Bloomington (Minneapolis), Minnesota. Republic Bank has banking centers in Hudson, Palm Harbor, Port Richey and Temple Terrace, Florida as well as Blue Ash (Cincinnati), Ohio. Republic operates Tax Refund Solutions, a nationwide tax refund check provider. Republic offers internet banking atwww.republicbank.com. Republic has $3.4 billion in assets and is headquartered in Louisville, Kentucky. Republic's Class A Common Stock is listed under the symbol "RBCAA" on the NASDAQ Global Select Market.
We were here for you yesterday. We are here for you today. We will be here for you tomorrow.®
This release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, future acquisitions, current expectations and assumptions regarding its business, the economy and other future conditions. Forward-looking statements can be identified by the use of the words "expect," "anticipate," "believe," "intend," "could" and "should," and other words of similar meaning. These forward-looking statements express management's current expectations or forecasts of future events and, by their nature, are subject to risks and uncertainties and there are a number of factors that could cause actual results to differ materially from those in such statements.
Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual results may differ materially from those contemplated by the forward-looking statements. The Company cautions you therefore against relying on any of these forward-looking statements, which speak only as of the date on which they are made. They are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include factors disclosed from time to time in the Company's filings with the U.S. Securities and Exchange Commission, including those factors set forth as "Risk Factors" in the Company's Form 10-K for the year ended December 31, 2011. The Company undertakes no obligation to update any forward-looking statements. These forward-looking statements are made only as of the date of this release, and the Company undertakes no obligation to release revisions to these forward-looking statements to reflect events or conditions after the date of this release.
Republic Bancorp, Inc. Financial Information
Third Quarter 2012 Earnings Release
(all amounts other than per share amounts and number of employees and number of banking centers are expressed in thousands unless otherwise noted)
Balance Sheet Data
Sept. 30, 2012
Dec. 31, 2011
Sept. 30, 2011
Cash and cash equivalents
Mortgage loans held for sale
Allowance for loan losses
Federal Home Loan Bank stock, at cost
Premises and equipment, net
Other assets and accrued interest receivable
Liabilities and Stockholders' Equity:
Securities sold under agreements to repurchase and other short-term borrowings
Federal Home Loan Bank advances
Other liabilities and accrued interest payable
Total liabilities and Stockholders' equity
Average Balance Sheet Data
Three Months Ended Sept. 30,
Nine Months Ended Sept. 30,
Investment securities, including FHLB stock
Federal funds sold and other interest-earning deposits
Loans and fees, including loans held for sale
Total earning assets
Liabilities and Stockholders' Equity:
Non interest-bearing deposits
Securities sold under agreements to repurchase and other short-term borrowings
Federal Home Loan Bank advances