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 6/30/12Change6/30/13 6/30/12Change
 
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%
ROA0.73%1.16%-37%1.14%4.94%-77%
ROE4.46%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 Ratios6/30/133/31/1312/31/1212/31/1112/31/10
 
Non-performing loans to total loans0.67%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 loans0.63%0.76%0.79%1.07%1.24%
 
Net loan charge-offs to average loans0.21%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
Second Quarter 2013 Earnings Release
(all amounts other than per share amount, number of employees and number of banking centers are expressed in thousands unless otherwise noted)

 
Balance Sheet Data   
June 30, 2013Dec. 31, 2012June 30, 2012
Assets:
Cash and cash equivalents$97,690$137,691$124,357
Investment securities475,500484,256608,090
Mortgage loans held for sale24,17410,6144,093
Loans2,618,7642,650,1972,440,394
Allowance for loan losses(23,226)(23,729)(22,510)
Federal Home Loan Bank stock, at cost28,34228,37728,391
Premises and equipment, net32,62933,19732,962
Goodwill10,16810,16810,168
Other real estate owned ("OREO")15,24826,20318,345
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 deposits1,971,0471,982,9281,905,291
 
Securities sold under agreements to repurchase and other short-term borrowings128,532250,884194,412
Federal Home Loan Bank advances592,044542,600538,555
Subordinated note41,24041,24041,240
Other liabilities and accrued interest payable 40,135  40,045  59,589 
Total liabilities2,772,9982,857,6972,739,087
 
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 20122013 2012
Assets:
Investment securities, including FHLB stock$511,225$680,134$510,122$685,230
Federal funds sold and other interest-earning deposits127,696117,497156,805434,542
Loans and fees, including loans held for sale2,590,6432,406,1802,586,8092,422,756
Total earning assets3,229,5643,203,8113,253,7363,542,528
Total assets3,355,1093,302,9873,402,1333,727,091
 
Liabilities and Stockholders' Equity:
Non interest-bearing deposits$492,442$533,649$531,314$727,546
Interest-bearing deposits1,515,8781,414,4271,513,9031,542,296

Securities sold under agreements to repurchase and other short-term borrowings

149,237250,515175,932260,919
Federal Home Loan Bank advances588,712479,064570,497580,291
Subordinated note41,24041,24041,24041,240
Total interest-bearing liabilities2,295,0672,185,2462,301,5722,424,746
Stockholders' equity548,644534,576546,089523,135

 
 
 

Republic Bancorp, Inc. Financial Information
Second Quarter 2013 Earnings Release (continued)
(all amounts other than per share amount, number of employees and number of banking centers are expressed in thousands unless otherwise noted)

 
Income Statement Data    
Three Months Ended June 30,Six Months Ended June 30,
2013201220132012
 
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 income28,76728,31257,897101,532
 
Provision for loan losses905 Read Full Story

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