Republic Bancorp, Inc. Reports Record 2012 Net Income of $119.3 Million, a 27% Increase Over 2011. F
Republic Bancorp, Inc. Reports Record 2012 Net Income of $119.3 Million, a 27% Increase Over 2011. Fourth Quarter 2012 Net Income Increases 7% Over Fourth Quarter 2011
LOUISVILLE, Ky.--(BUSINESS WIRE)-- Republic Bancorp, Inc. ("Republic" or the "Company") is pleased to report its fifth consecutive year of increased earnings by ending 2012 with net income of $119.3 million, representing a $25.2 million, or 27%, increase over 2011. Annual return on average assets ("ROA") and return on average equity ("ROE") during 2012 were both industry-strong at 3.35% and 22.51%. Diluted Earnings per Class A Common Share increased 27% for 2012 to $5.69 for the year ended December 31, 2012.
Republic earned fourth quarter net income of $6.6 million, a $417,000 increase over the fourth quarter of 2011. Diluted Earnings per Class A Common Share increased to $0.33 for the fourth quarter of 2012. ROA and ROE were both solid during the quarter at 0.77% and 4.95%. Steve Trager, Republic's Chairman and CEO, commented: "In addition to strong earnings, we generated solid loan and deposit growth during 2012 with loans increasing $365 million, or 16%, and deposits growing $249 million, or 14%, while maintaining strong credit quality and plentiful capital."
Republic Bancorp, Inc.
The following chart highlights Republic's fourth quarter and year-to-date 2012 financial performance compared to the same period in 2011:
|Three Months Ended||%||Year Ended||%|
|(dollars in thousands, except per share data)||12/31/12||12/31/11||Change||12/31/12||12/31/11||Change|
|Income Before Income Tax Expense||$||10,186||$||8,363||22||%||$||183,945||$||144,197||28||%|
|Diluted Earnings per Class A Share||$||0.33||$||0.30||10||%||$||5.69||$||4.49||27||%|
Year in Review
The year 2012 represented a record year for Republic. In addition to strong earnings results, the Company also achieved many other successes while positioning itself well for the future. Following are a few highlights from this past year:
Acquisitions - On January 27, 2012, Republic entered the Nashville, Tennessee market by acquiring selected assets and substantially all deposits of Tennessee Commerce Bank ("TCB"). On September 7, 2012, Republic entered the Minneapolis, Minnesota market by acquiring substantially all assets and assuming all liabilities of First Commercial Bank ("FCB"). Both transactions were Federal Deposit Insurance Corporation ("FDIC") assisted transactions without loss share agreements. As a result of the significant discount in both transactions, Republic recorded total bargain purchase gains of $55.4 million in 2012.
Special Cash Dividend - Republic paid a one-time special cash dividend on December 21, 2012 of $1.10 per share on its Class A common stock and $1.00 per share on its Class B common stock for its shareholders of record on November 30, 2012. The total payout by the Company for this special dividend was $22.9 million. The special dividend was not only a reward for past successes, but also represents the confidence that management and the board of directors have for the Company's future prospects. After the special dividend, Republic's capital ratios continue to be very strong, as the Company remains well-positioned to support continued organic balance sheet growth and expansion through future acquisitions, should opportunities arise.
Increased Quarterly Cash Dividends - Despite continued uncertainty in the economic environment, Republic once again increased its cash dividend by 7% in the second quarter of 2012 thanks to its strong earnings and capital position. This represented the 12th consecutive year that the Company increased its quarterly cash dividend.
Stock Repurchase Program - The Company increased its repurchase activity of the Company's stock during the fourth quarter of 2012 through its board authorized repurchase program. During the fourth quarter, the Company bought back 63,000 shares of Republic's stock with 524,000 shares still authorized for repurchase by the Company's board of directors.
National Recognition - In February 2012, Republic was identified as the best performing bank in the United States by Bank Director magazine. Republic's top rating was based on its core return on tangible common equity and its ratio of average tangible common equity to tangible assets. Data was collected by the New York-based investment banking firm Sandler O'Neill + Partners from 484 publicly traded U.S. banks from July 1, 2009 through June 30, 2011.
Industry-solid Credit Quality - As it has throughout the Company's history, credit quality remains a primary focus at Republic. The Company continued to dedicate many resources and high level associates to improving its already industry solid credit metrics in 2012. As a result of the efforts of all Republic associates, the Core Banking credit metrics continue to place it among the best in its peer group as illustrated below:
|Peer(1)||As of and for the Year Ending|
|Core Banking Credit Quality Ratios||09/30/12||12/31/12||12/31/11||12/31/10|
|Non-performing loans / Total loans||2.52||%||0.82||%||1.02||%||1.30||%|
|Non-performing assets / Total loans (including OREO) (2)||3.17||%||1.79||%||1.49||%||1.84||%|
|Delinquent loans / Total loans||3.35||%||0.79||%||1.07||%||1.24||%|
|Net loan charge-offs / Average loans||0.62||%||0.34||%||0.24||%||0.51||%|
|(1) Peer information obtained from the Uniform Bank Performance Report, Peer Group #1 - Insured Commercial Banks having assets greater than $3 billion.|
|(2) OREO = Other Real Estate Owned|
Traditional Bank Deposit Growth - The year 2012 represented another solid year of core deposit growth. Despite historically low interest rates, the Traditional Bank was able to grow its low cost core deposit account base by $227 million during the year, with $54 million of this growth attributable to its newly acquired banks. The Company was able to attract these low cost deposit accounts by capitalizing on its attractive technology offerings, such as business on-site deposit and business on-line banking, in combination with superior customer service and the safety and soundness of a high performing institution.
Mortgage Warehouse Lending - In June 2011, the Bank began offering its new warehouse lending product. With this product, the Bank provides short-term, revolving credit facilities to mortgage banking companies secured by single family first lien residential real estate loans. As of December 31, 2012, after 19 months of operations, warehouse lines of credit outstanding were $217 million from total credit commitments of $331 million.
Mortgage Banking - Mortgage banking income increased $4.5 million for 2012, as the Company's application volume increased from $585 million during 2011 to $782 million during 2012. Republic experienced increased demand over the prior year primarily due to a lower rate environment and favorable secondary market conditions. As the Company enters 2013, it hopes to continue to capitalize on a favorable interest rate environment for long-term fixed rate loans through a new $0 closing cost promotion.
Republic Bank Foundation - The Republic Bank Foundation was created in March 2010 to ensure the on-going legacy of giving that Republic has displayed throughout its 30-year history. An initial $5 million contribution was made to the Foundation in 2010, with an additional $5 million contributed in 2011. Thanks to another strong year in 2012, Republic was able to further its support of the Foundation with a $2.5 million contribution during the first quarter of the year.
Republic Processing Group ("RPG") and Tax Refund Solutions ("TRS") - The TRS division, which is part of the larger RPG segment, completed another strong year in 2012 generating net income of $60.8 million, as it processed over $10.7 billion in tax refunds for 3.5 million clients across the United States.
As part of its discontinuance of the Refund Anticipation Loan ("RAL") product during 2012, the Company realigned its TRS segment to become a division of the newly formed RPG. Along with the TRS division, the Company operates Republic Payment Solutions ("RPS") and Republic Credit Solutions ("RCS") as divisions of RPG, which were formed in 2012 to capitalize on the internal resources of TRS by expanding the Company's consumer product offerings in 2013 and beyond.
During the first half of 2013, through the RPS division, RB plans to become an issuing bank which offers general purpose reloadable prepaid debit, payroll, gift and incentive cards through third party program managers, while through the RCS division, RB&T plans to pilot short-term consumer credit products through on-line channels.
Results of Operations for the Fourth Quarter of 2012 Compared to the Fourth Quarter of 2011
Traditional Banking and Mortgage Banking (collectively "Core Banking")
Net income from Core Banking increased from $7.8 million during the fourth quarter of 2011 to $8.7 million during the fourth quarter of 2012. The increase in the Core Bank's earnings was primarily driven by higher net interest income and another solid quarter in mortgage banking.
Net interest income within the Core Bank rose to $30.5 million for the fourth quarter of 2012, an increase of $3.7 million, or 14%, over the fourth quarter of 2011. The increase in net interest income for the quarter was primarily attributable to year-over-year growth in loans of $365 million. Included in the year-over-year growth in loans was approximately $139 million in loans outstanding as of December 31, 2012 related to the TCB and FCB acquisitions.In addition, Republic's existing franchise grew loans by $226 million during 2012 with $176 million of that growth attributable to the Company's mortgage warehouse lending product. As a result, the Traditional Bank's net interest margin remained healthy at 3.69% for the fourth quarter of 2012, compared to 3.56% for the fourth quarter of 2011.
The Core Bank's provision for loan losses was higher during the fourth quarter of 2012, increasing from $952,000 during the fourth quarter of 2011 to $1.7 million during the fourth quarter of 2012. The overall higher provision was a result of provisions from successful refinance activity to retail borrowers displaying weaknesses in their ability to make payments under their previous contractual loan terms. These additional provisions were partially offset by a decrease in the Bank's general allowance for loan losses resulting from improved credit metrics. Overall, the Core Bank's credit metrics continue to place it among the highest performers in the banking industry. The Core Bank's delinquent loans to total loans and non-performing loans to total loans ratios remained near their lowest levels since 2007. In addition, the Core Bank's net charge-offs continued to trend in a favorable direction since its peak in 2009.
Non-interest income for the Core Bank was $9.1 million for the fourth quarter of 2012 compared to $6.3 million for the fourth quarter of 2011. The Core Bank had a solid quarter of mortgage banking income, which increased $2.1 million over the fourth quarter of 2011, as overall application volume during the quarter increased from $133 million during the fourth quarter of 2011 to $175 million during the fourth quarter of 2012. Also contributing to the increase in non-interest income was a positive adjustment of $712,000 to the FCB bargain purchase gain as additional information relative to the acquisition date fair values became available.
Core Banking non-interest expenses increased $3.9 million for the fourth quarter of 2012 to $24.5 million. Primarily driving this increase was an increase of $3.2 million in the salaries and employee benefits category. The Core Bank experienced growth in its number of associates due to the new staff added from the two banks acquired during 2012 in addition to the increase in support staff to facilitate its on-going acquisition strategy. The increased staffing costs were partially offset during the fourth quarter of 2012 by a $1.3 million credit to salary expense for reduced incentive compensation accruals as the Company finalized its incentive compensation payouts for the year. By comparison, the Company recorded a credit to salary expense for reduced incentive compensation accruals of $1.9 million during the fourth quarter of 2011.
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 fourth quarter of 2012, RPG recorded a net loss of $2.1 million compared to a net loss of $1.5 million for the fourth quarter of 2011. RPG's net loss during the fourth quarter of 2011 benefited from a $1.1 million credit to non-interest expense related to the positive resolution of certain previously accrued penalties assessed to TRS by the FDIC.
Continuing operations in Tennessee (formerly TCB) reached profitability on a monthly basis when the Company converted its operating systems in July of 2012. During the fourth quarter of 2012, the Company's Tennessee market contributed $556,000 to the Company's income before income tax expense.
Overall, the contractual amount of the loans purchased through the TCB acquisition was reduced from $79 million as of the acquisition date to $42 million as of December 31, 2012. The carrying value of the loans purchased in the TCB transaction was $57 million as of the acquisition date compared to $31 million as of December 31, 2012.
With a market president firmly in place, Republic will now seek to grow its franchise in the Nashville market using the same business principles that brought the Company success in the past. In addition, the Company will also seek to expand its footprint in the market beyond its current location.
During the fourth quarter of 2012, Minnesota (formerly FCB) contributed $1.2 million to the Company's overall income before income tax expense due to the profitability of its on-going operations in combination with a positive adjustment to the bargain purchase gain of $712,000 as previously mentioned.
Overall, the contractual amount of the loans purchased through the FCB acquisition was reduced from $172 million as of the acquisition date to $139 million as of December 31, 2012. The carrying value of the loans purchased in the FCB transaction was $128 million as of the acquisition date compared to $108 million as of December 31, 2012.
The operating systems of Minnesota will be converted during the middle of the first quarter of 2013. After the system conversion, Minnesota, which has been profitable since acquisition, is expected to marginally increase its contribution to the gross operating profit of the Core Bank.
"As we complete another solid year at Republic, we look forward once again to a new year with great optimism. With strong capital, solid asset quality and 750+ associates that are second to none, we are ready to tackle the challenges and take advantage of the opportunities the new year will undoubtedly bring. We are enthusiastic about our new markets in Tennessee and Minnesota and are extremely excited with the thought of adding more markets in 2013 through additional acquisitions. We are also optimistic about the future opportunities with RPG. Despite the fact that the Company will likely experience a substantial decrease in earnings during 2013 as a result of the projected decline in business at RPG, we are excited about the growth and diversification opportunities that RPG's expanded product offerings will create if we are successful with our plans. It is the great pride I have in our past success and the optimism that I have for our future which allows me to say to 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 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-Q for the period ended September 30, 2012. The Company undertakes no obligation to update any forward-looking statements. These forward-looking statements are made only as of the date of this release, and the Company undertakes no obligation to release revisions to these forward-looking statements to reflect events or conditions after the date of this release.
Republic Bancorp, Inc. Financial Information
Fourth Quarter 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|
|Dec. 31, 2012||Dec. 31, 2011|
|Cash and cash equivalents||$||137,691||$||362,971|
|Mortgage loans held for sale||10,614||4,392|
|Allowance for loan losses||(23,729||)||(24,063||)|
|Federal Home Loan Bank stock, at cost||28,377||25,980|
|Premises and equipment, net||33,197||34,681|
|Other real estate owned||26,203||10,956|
|Other assets and accrued interest receivable||37,425||35,589|
|Liabilities and Stockholders' Equity:|
|Securities sold under agreements to repurchase and other short-term borrowings||250,884||230,231|
|Federal Home Loan Bank advances||542,600||934,630|
|Other liabilities and accrued interest payable||40,045||27,545|
|Total liabilities and Stockholders' equity||$||3,394,399||$||3,419,991|
|Average Balance Sheet Data|
|Three Months Ended Dec. 31,||Year Ended Dec. 31,|
|Investment securities, including FHLB stock||$||564,272||$||735,336||$||640,830||$||678,804|
|Federal funds sold and other interest-earning deposits||106,359||126,045||187,790||315,530|
|Loans and fees, including loans held for sale||2,650,267||2,255,757||2,504,150||2,246,259|
|Total earning assets||3,320,898||3,117,138||3,332,770||3,240,593|
|Liabilities and Stockholders' Equity:|
|Non interest-bearing deposits||$||542,973||$||430,705||$||624,053||$||509,457|
Securities sold under agreements to repurchase and other short-term borrowings
|Federal Home Loan Bank advances||570,147||625,047||560,659||558,249|
|Total interest-bearing liabilities||2,336,774||2,320,531||2,351,768||2,418,865|
Republic Bancorp, Inc. Financial Information
Fourth Quarter 2012 Earnings Release (continued)
|Income Statement Data|
|Three Months Ended Dec. 31,||Year Ended Dec. 31,|
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