Republic Bancorp, Inc. Reports Second Quarter Net Income of $6.1 Million and Year to Date Net Income
Republic Bancorp, Inc. Reports Second Quarter Net Income of $6.1 Million and Year to Date Net Income of $19.5 million
LOUISVILLE, Ky.--(BUSINESS WIRE)-- Republic Bancorp, Inc. ("Republic" or the "Company") is pleased to report net income of $6.1 million for the second quarter of 2013 resulting in Diluted Earnings per Class A Common Share of $0.30. Return on average assets ("ROA") and return on average equity ("ROE") were 0.73% and 4.46%, respectively, for the quarter. Net income for the first six months of 2013 was $19.5 million, with diluted Earnings per Class A Common share of $0.94. ROA and ROE for the first six months of 2013 were 1.14% and 7.13%, respectively.
"Net income for the second quarter and first six months of 2013 continued to benefit from growth in net interest income and low loan loss provisions as credit quality remained sound. Comparability between the first six months of 2013 and the first six months of 2012 were negatively impacted by the fact that we haven't been able to repeat our overwhelming successes from 2012, which included a near-record tax season within our Republic Processing Group ('RPG') business segment and a large bargain purchase gain earned from the acquisition of a failed bank in Tennessee," commented Steve Trager, Chairman & CEO of Republic.
In line with Republic's non-traditional banking growth objectives, the Company announced on July 11, 2013, that its wholly-owned subsidiary, Republic Bank & Trust Company ("RB&T"), has entered into a Purchase and Assumption Agreement (the "Agreement") to acquire certain assets and substantially all of the deposits of H&R Block Bank. As part of that announcement, the Company also disclosed that RB&T and H&R Block, Inc. and its affiliates are currently in separate contract negotiations to enter into a Joint Marketing Master Services Agreement ("MSA"), pursuant to which RB&T would offer H&R Block-branded financial services products to H&R Block's clients. For additional information on the Agreement and the on-going contract negotiations for the MSA, see Republic's Form 8-K filed with the Securities and Exchange Commission on July 11, 2013.
Republic Bancorp, Inc. (Nasdaq: RBCAA) , headquartered in Louisville, Kentucky, is the holding company for RB&T and Republic Bank.
The following chart highlights Republic's second quarter and year-to-date 2013 financial performance compared to the same period in 2012:
Three Months Ended | % | Six Months Ended | % | |||||||||||||||||||
(dollars in thousands, except per share data) | 6/30/13 | 6/30/12 | Change | 6/30/13 | 6/30/12 | Change | ||||||||||||||||
Income before income taxes | $ | 8,946 | $ | 14,481 | -38 | % | $ | 29,924 | $ | 142,187 | -79 | % | ||||||||||
Net Income | $ | 6,119 | $ | 9,578 | -36 | % | $ | 19,475 | $ | 92,050 | -79 | % | ||||||||||
Diluted Earnings per Class A Share | $ | 0.30 | $ | 0.46 | -35 | % | $ | 0.94 | $ | 4.38 | -79 | % | ||||||||||
ROA | 0.73 | % | 1.16 | % | -37 | % | 1.14 | % | 4.94 | % | -77 | % | ||||||||||
ROE | 4.46 | % | 7.17 | % | -38 | % | 7.13 | % | 35.19 | % | -80 | % | ||||||||||
Results of Operations for the Second Quarter of 2013 Compared to the Second Quarter of 2012
Traditional Banking and Mortgage Banking (collectively "Core Banking")
Net income from Core Banking was $7.0 million for the second quarter of 2013, a decrease of 3% from a solid second quarter of 2012. The Company's second quarter 2013 operating results were negatively impacted compared to the second quarter of 2012 by higher overhead costs, which were partially offset by an increase in net interest income, along with growth in mortgage banking income and service charges on deposits.
Net interest income within the Core Bank was $28.8 million for the second quarter of 2013, an increase of $608,000 over the second quarter of 2012. The increase in net interest income for the quarter was primarily attributable to growth in the loan portfolio and the on-going impact of the Company's 2012 acquisitions. Comparing June 30, 2013 to June 30, 2012, total loans grew $178 million, with the Company's outstanding warehouse lines-of-credit contributing $88 million of that growth. In addition, net interest income from the Company's Minnesota and Tennessee banking centers acquired in 2012 was $3.3 million for the second quarter of 2013 compared to $1.1 million for the second quarter of 2012. The increase in loan balances and the contribution from the Company's 2012 acquisitions assisted in overcoming industry-wide margin challenges as the Core Bank's net interest margin remained solid at 3.57% for the quarter.
The Core Bank's provision for loan losses increased from $831,000 during the second quarter of 2012 to $1.0 million during the second quarter of 2013. While nominally higher than the second quarter of 2012, overall provision expense for the second quarter of 2013 remained favorably low and benefitted from continued strong asset quality with no new significant classified loans identified during the quarter. The Company ended the quarter with a solid "non-performing loans to total loans ratio" of 0.67%, its best such measure since the fourth quarter ended December 31, 2008. In addition, the Company's strong "delinquent loans to total loans ratio" ended the second quarter of 2013 at 0.63%, its best mark since March 31, 2007.
The table below illustrates the Core Bank's continuing solid credit quality ratios for the most recent quarter-ends and the previous three calendar year-ends.
As of and for the: | |||||||||||||||
Quarter Ending: | Year Ending: | ||||||||||||||
Core Banking Credit Quality Ratios | 6/30/13 | 3/31/13 | 12/31/12 | 12/31/11 | 12/31/10 | ||||||||||
Non-performing loans to total loans | 0.67 | % | 0.80 | % | 0.82 | % | 1.02 | % | 1.30 | % | |||||
Non-performing assets to total loans (including OREO) | 1.24 | % | 1.51 | % | 1.79 | % | 1.49 | % | 1.84 | % | |||||
Delinquent loans to total loans | 0.63 | % | 0.76 | % | 0.79 | % | 1.07 | % | 1.24 | % | |||||
Net loan charge-offs to average loans | 0.21 | % | 0.02 | % | 0.34 | % | 0.24 | % | 0.51 | % | |||||
(Annualized as of 6/30/13 and 3/31/13) | |||||||||||||||
OREO = Other Real Estate Owned | |||||||||||||||
Non-interest income for the Core Bank was $8.9 million for the second quarter of 2013 compared to $7.9 million for the second quarter of 2012. Republic experienced a solid performance for mortgage banking income during the second quarter of 2013, as the Core Bank continued to capitalize on a favorably low interest rate environment at the beginning of the quarter combined with its $0 closing cost promotion. These factors drove strong consumer demand for secondary market loans during the first half of the second quarter. As long term interest rates began to rise dramatically during May 2013, consumer demand for fixed rate secondary market loan products began to meaningfully slow. At June 30, 2013, the Company's pipeline of secondary market loan applications, in which the consumer had locked his or her loan, was $31 million compared to $70 million at the beginning of the second quarter. The dramatic increase in long-term rates will present challenges for the Company to maintain the same level of mortgage banking income during the second half of 2013 as it achieved during the first and second quarters of the year.
The Core Bank's non-interest expenses increased $1.8 million for the second quarter of 2013 to $26.3 million. The increase was primarily due to increased staffing added during 2012 in connection with the Company's acquisition of two failed banks and its on-going acquisition strategies, which require additional support staff to be available to respond to immediate opportunities. In addition, the Company continues to add experienced, high-level sales staff as Republic remains an attractive employment option throughout its markets.
Republic Processing Group
During the second quarter of 2013, RPG generated a net loss of $862,000 compared to net income of $2.4 million during the second quarter of 2012. As discussed in previous reports, the decrease in net income at RPG is consistent with the Company's decline in product volume resulting from the cancelation during the second half of 2012 of two of the Company's large third party processing contracts. In addition, the Company continues to maintain considerable staffing levels at RPG as it is seeks to grow its product lines within the non-traditional banking space, most notably with prepaid cards.
Conclusion
"While the performance of our Core Bank remains sound, we are eager to leverage our strong capital base and grow the Company through strategic acquisition opportunities. While unsuccessful in our attempts to acquire a failed bank through the first six months of 2013, we remain diligent in our efforts and faithful to our acquisition strategies, which have produced worthwhile results for the Company over the past 18 months. While we reflect on our past with great pride, we also look forward to our future with great optimism. With this pride and optimism, I once again remind our clients, our associates and our shareholders, 'We were here for you yesterday. We are here for you today. We will be here for you tomorrow,'" concluded Steve Trager.
Republic Bancorp, Inc. (NAS: RBCAA) , headquartered in Louisville, Kentucky, is the holding company for Republic Bank & Trust Company ("RB&T") and Republic Bank ("RB"). 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 $3.3 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.
Forward-Looking Statements
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, future challenges of growing or maintaining non interest income, net interest income and net interest margin in the Company's Core Bank operations, the future growth and performance of Republic Processing Group, current expectations and assumptions regarding its business, the economy and other future conditions. Important factors that could cause actual results to differ materially from those in the forward-looking statements include the ability for all parties to receive regulatory approvals as provided for in the Agreement with H&R Block Bank, the ability of the parties to successfully negotiate the MSA and previously disclosed Receivables Purchase Agreement as anticipated, and the ability of the parties to successfully consummate the transaction as contemplated in the Agreement. 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 Annual Report on Form 10-K for the period ended December 31, 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 | ||||||||||||
Balance Sheet Data | ||||||||||||
June 30, 2013 | Dec. 31, 2012 | June 30, 2012 | ||||||||||
Assets: | ||||||||||||
Cash and cash equivalents | $ | 97,690 | $ | 137,691 | $ | 124,357 | ||||||
Investment securities | 475,500 | 484,256 | 608,090 | |||||||||
Mortgage loans held for sale | 24,174 | 10,614 | 4,093 | |||||||||
Loans | 2,618,764 | 2,650,197 | 2,440,394 | |||||||||
Allowance for loan losses | (23,226 | ) | (23,729 | ) | (22,510 | ) | ||||||
Federal Home Loan Bank stock, at cost | 28,342 | 28,377 | 28,391 | |||||||||
Premises and equipment, net | 32,629 | 33,197 | 32,962 | |||||||||
Goodwill | 10,168 | 10,168 | 10,168 | |||||||||
Other real estate owned ("OREO") | 15,248 | 26,203 | 18,345 | |||||||||
Other assets and accrued interest receivable | 37,776 | 37,425 | 34,510 | |||||||||
Total assets | $ | 3,317,065 | $ | 3,394,399 | $ | 3,278,800 | ||||||
Liabilities and Stockholders' Equity: | ||||||||||||
Deposits: | ||||||||||||
Non interest-bearing | $ | 487,787 | $ | 479,046 | $ | 513,136 | ||||||
Interest-bearing | 1,483,260 | 1,503,882 | 1,392,155 | |||||||||
Total deposits | 1,971,047 | 1,982,928 | 1,905,291 | |||||||||
Securities sold under agreements to repurchase and other short-term borrowings | 128,532 | 250,884 | 194,412 | |||||||||
Federal Home Loan Bank advances | 592,044 | 542,600 | 538,555 | |||||||||
Subordinated note | 41,240 | 41,240 | 41,240 | |||||||||
Other liabilities and accrued interest payable | 40,135 | 40,045 | 59,589 | |||||||||
Total liabilities | 2,772,998 | 2,857,697 | 2,739,087 | |||||||||
Stockholders' equity | 544,067 | 536,702 | 539,713 | |||||||||
Total liabilities and Stockholders' equity | $ | 3,317,065 | $ | 3,394,399 | $ | 3,278,800 | ||||||
Average Balance Sheet Data | ||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||
Assets: | ||||||||||||
Investment securities, including FHLB stock | $ | 511,225 | $ | 680,134 | $ | 510,122 | $ | 685,230 | ||||
Federal funds sold and other interest-earning deposits | 127,696 | 117,497 | 156,805 | 434,542 | ||||||||
Loans and fees, including loans held for sale | 2,590,643 | 2,406,180 | 2,586,809 | 2,422,756 | ||||||||
Total earning assets | 3,229,564 | 3,203,811 | 3,253,736 | 3,542,528 | ||||||||
Total assets | 3,355,109 | 3,302,987 | 3,402,133 | 3,727,091 | ||||||||
Liabilities and Stockholders' Equity: | ||||||||||||
Non interest-bearing deposits | $ | 492,442 | $ | 533,649 | $ | 531,314 | $ | 727,546 | ||||
Interest-bearing deposits | 1,515,878 | 1,414,427 | 1,513,903 | 1,542,296 | ||||||||
Securities sold under agreements to repurchase and other short-term borrowings | 149,237 | 250,515 | 175,932 | 260,919 | ||||||||
Federal Home Loan Bank advances | 588,712 | 479,064 | 570,497 | 580,291 | ||||||||
Subordinated note | 41,240 | 41,240 | 41,240 | 41,240 | ||||||||
Total interest-bearing liabilities | 2,295,067 | 2,185,246 | 2,301,572 | 2,424,746 | ||||||||
Stockholders' equity | 548,644 | 534,576 | 546,089 | 523,135 | ||||||||
Republic Bancorp, Inc. Financial Information | |||||||||||||
Income Statement Data | |||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||
Total interest income(1) | $ | 34,119 | $ | 33,814 | $ | 68,520 | $ | 113,401 | |||||
Total interest expense | 5,352 | 5,502 | 10,623 | 11,869 | |||||||||
Net interest income | 28,767 | 28,312 | 57,897 | 101,532 | |||||||||
Provision for loan losses | 905 | ||||||||||||
