Republic Bancorp, Inc. Reports Record Year-to-Date and Third Quarter Net Income

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)

  9/30/12     9/30/11 Change   9/30/12     9/30/11 Change
 
Gross Operating Profit $ 31,572 $ 11,341 178% $ 173,759 $ 135,834 28%
Net Income $ 20,668 $ 7,870 163% $ 112,718 $ 87,945 28%
Diluted Earnings per Class A Share $ 0.98 $ 0.38 158% $ 5.36 $ 4.19 28%
ROA 2.49% 1.00% 149% 4.18% 3.37% 24%
ROE 15.31% 7.01% 118% 28.44% 26.98% 5%
 

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:
Quarter Ending Year Ending
 
 
 
Core Banking Credit Quality Ratios 9/30/12 6/30/12 3/31/2012 12/31/11 12/31/10 12/31/09
 
Non-performing loans / Total loans 0.77 % 0.93 % 1.03 % 1.02 % 1.30 % 1.90 %
 
Non-performing assets / Total loans including OREO 1.71 % 1.66 % 2.02 % 1.49 % 1.84 % 2.11 %
 
Delinquent loans / Total loans 0.68 % 0.74 % 1.14 % 1.07 % 1.24 % 1.98 %
 
Net loan charge-offs / Average loans 0.15 % 0.28 % 0.65 % 0.24 % 0.51 % 0.34 %
(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.

TCB

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.

FCB

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.

Conclusion

“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 at www.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. ®

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, 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
Assets:
Cash and cash equivalents $ 96,187 $ 362,971 $ 75,573
Investment securities 581,262 674,022 702,142
Mortgage loans held for sale 3,385 4,392 4,721
Loans 2,642,357 2,285,295 2,219,916
Allowance for loan losses (24,100 ) (24,063 ) (23,945 )
Federal Home Loan Bank stock, at cost 28,784 25,980 26,153
Premises and equipment, net 32,984 34,681 34,044
Goodwill 10,168 10,168 10,168
Other assets and accrued interest receivable   64,749     46,545     46,369  
Total assets $ 3,435,776   $ 3,419,991   $ 3,095,141  
 
Liabilities and Stockholders' Equity:
Deposits:
Non interest-bearing $ 514,893 $ 408,483 $ 385,511
Interest-bearing   1,540,717     1,325,495     1,416,887  
Total deposits 2,055,610 1,733,978 1,802,398
 
Securities sold under agreements to repurchase and other short-term borrowings 169,839 230,231 227,504
Federal Home Loan Bank advances 553,487 934,630 524,731
Subordinated note 41,240 41,240 41,240
Other liabilities and accrued interest payable   57,844     27,545     46,197  
Total liabilities 2,878,020 2,967,624 2,642,070
 
Stockholders' equity   557,756     452,367     453,071  
Total liabilities and Stockholders' equity $ 3,435,776   $ 3,419,991   $ 3,095,141  

               
Average Balance Sheet Data
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
2012 2011 2012 2011
Assets:
Investment securities, including FHLB stock $ 629,542 $ 711,050 $ 666,531 $ 659,753
Federal funds sold and other interest-earning deposits 82,404 68,108 277,550 379,713
Loans and fees, including loans held for sale 2,520,174 2,237,559 2,453,313 2,243,059
Total earning assets 3,232,120 3,016,717 3,397,394 3,282,525
Total assets 3,322,077 3,147,230 3,593,576 3,474,431
 
Liabilities and Stockholders' Equity:
Non interest-bearing deposits $ 505,127 $ 396,568 $ 652,498 $ 536,007
Interest-bearing deposits 1,462,069 1,444,577 1,513,644 1,594,889

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

208,051 249,002 243,168 280,133
Federal Home Loan Bank advances 523,053 517,739 561,072 535,738
Subordinated note 41,240 41,240 41,240 41,240
Total interest-bearing liabilities 2,234,413 2,252,558 2,359,124 2,452,000
Stockholders' equity 539,863 449,177 528,366 434,687
 

               
Republic Bancorp, Inc. Financial Information

Third Quarter 2012 Earnings Release (continued)

 
Income Statement Data
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
2012 2011 2012 2011
 
Total interest income (1) $ 34,128 $ 34,426 $ 147,529 $ 161,508
Total interest expense   5,556     7,263     17,425   23,545
 
Net interest income 28,572 27,163 130,104 137,963
 
Provision for loan losses 2,083 (140 ) 13,719 17,503
 
Non interest income:
Service charges on deposit accounts 3,438 3,421 10,027 10,581
Refund transfer fees 231 425 78,127 88,071
Mortgage banking income 2,274 1,352 5,591 3,092
Debit card interchange fee income 1,390 1,415 4,387 4,392
Bargain purchase gain - Tennessee Commerce Bank (189 ) - 27,614 -
Bargain purchase gain - First Commercial Bank 27,112 - 27,112 -
Gain on sale of banking center - 2,856 - 2,856
Net gain on sales, calls and impairment of securities - 301 56 1,929
Other   589     706     2,826   2,235
Total non interest income   34,845     10,476     155,740   113,156
 
Non interest expenses:
Salaries and employee benefits 14,921 13,145 46,205 43,634
Occupancy and equipment, net 5,718 5,138 16,936 16,436
Communication and transportation 1,045 1,081 4,667 4,468
Marketing and development 828 736 2,670 2,508
FDIC insurance expense 287 918 1,008 3,718
Bank franchise tax expense 729 713 3,363 2,992
Data processing 1,030 787 3,446 2,352
Debit card interchange expense 648 566 1,909 1,690
Supplies 270 409 1,748 1,617
Other real estate owned expense 1,328 608 2,488 1,467
Charitable contributions 232 178 3,110 5,710
Legal expense 388 784 1,283 3,123
FDIC civil money penalty - - - 2,000
FHLB advance prepayment penalty - - 2,436 -
Other   2,338     1,375     7,097   6,067
Total non interest expenses   29,762     26,438     98,366   97,782
 
Income before income tax expense 31,572 11,341 173,759 135,834
Income tax expense   10,904     3,471     61,041   47,889
 
Net income $ 20,668   $ 7,870   $ 112,718 $ 87,945

               
Republic Bancorp, Inc. Financial Information

Third Quarter 2012 Earnings Release (continued)

 
As of and for the As of and for the
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
2012 2011 2012 2011
Per Share Data:
Basic average shares outstanding 20,948 20,953 20,954 20,942
Diluted average shares outstanding 21,029 20,994 21,032 20,992
 
End of period shares outstanding:
Class A Common Stock 18,673 18,655 18,673 18,655
Class B Common Stock 2,271 2,300 2,271 2,300
 
Book value per share $ 26.63 $ 21.62 $ 26.63 $ 21.62
Tangible book value per share (2) 25.88 20.81 25.88 20.81
 
Earnings per share:
Basic earnings per Class A Common Stock 0.99 0.38 5.38 4.20
Basic earnings per Class B Common Stock 0.97 0.36 5.34 4.16
Diluted earnings per Class A Common Stock 0.98 0.38 5.36 4.19
Diluted earnings per Class B Common Stock 0.97 0.36 5.32 4.15
 
Cash dividends declared per share:
Class A Common Stock 0.165 0.154 0.484 0.451
Class B Common Stock 0.150 0.140 0.440 0.410
 
Performance Ratios:
Return on average assets 2.49 % 1.00 % 4.18 % 3.37 %
Return on average equity 15.31 7.01 28.44 26.98
Efficiency ratio (3) 47 71 34 39
Yield on average interest-earning assets

4.22

4.56 5.79 6.56
Cost of interest-bearing liabilities 0.99 1.29 0.98 1.28
Net interest spread

3.23

3.27 4.81 5.28
Net interest margin - Total Company 3.54 3.60 5.11 5.60
Net interest margin - Traditional Banking 3.54 3.61 3.51 3.48
 
Asset Quality Ratios:
Loans on non-accrual status $ 20,436 $ 23,822 $ 20,436 $ 23,822
Loans past due 90 days or more and still on accrual - - - -
Total non-performing loans 20,436 23,822 20,436 23,822
Other real estate owned 25,148 11,185 25,148 11,185
Total non-performing assets 45,584 35,007 45,584 35,007
 
Total Company Credit Quality Ratios:
Non-performing loans to total loans 0.77 % 1.07 % 0.77 % 1.07 %
Non-performing assets to total loans (including OREO) 1.71 1.57 1.71 1.57
Non-performing assets to total assets 1.33 1.13 1.33 1.13
Allowance for loan losses to total loans 0.91 1.08 0.91 1.08
Allowance for loan losses to non-performing loans 118 101 118 101
Delinquent loans to total loans (4) 0.68 0.90 0.68 0.90
Net loan charge-offs to average loans (annualized) 0.08 0.33 0.74 0.99
 
Traditional Banking Credit Quality Ratios:
Non-performing loans to total loans 0.77 1.07 0.77 1.07
Non-performing assets to total loans (including OREO) 1.71 1.57 1.71 1.57
Non-performing assets to total assets 1.33 1.14 1.33 1.14
Allowance for loan losses to total loans 0.91 1.08 0.91 1.08
Allowance for loan losses to non-performing loans 118 101 118 101
Delinquent loans to total loans (4) 0.68 0.90 0.68 0.90
Net loan charge-offs to average loans (annualized) 0.15 0.45 0.36 0.28
 
Other Information:
End of period full-time equivalent employees 772 705 772 705
Number of banking centers 44 42 44 42

                   
Republic Bancorp, Inc. Financial Information

Third Quarter 2012 Earnings Release (continued)

 

Balance Sheet Data
Quarterly Comparison
Sept. 30, 2012 June 30, 2012 March 31, 2012 Dec. 31, 2011 Sept. 30, 2011
Assets:
Cash and cash equivalents $ 96,187 $ 124,357 $ 186,504 $ 362,971 $ 75,573
Investment securities 581,262 608,090 630,298 674,022 702,142
Mortgage loans held for sale 3,385 4,093 4,459 4,392 4,721
Loans held for sale - - 17,003 - -
Loans 2,642,357 2,440,394 2,394,787 2,285,295 2,219,916
Allowance for loan losses (24,100 ) (22,510 ) (23,732 ) (24,063 ) (23,945 )
Federal Home Loan Bank stock, at cost 28,784 28,391 28,439 25,980 26,153
Premises and Equipment, net 32,984 32,962 34,321 34,681 34,044
Goodwill 10,168 10,168 10,168 10,168 10,168
Other assets and interest receivable   64,749     52,855     62,587     46,545     46,369  
Total assets $ 3,435,776   $ 3,278,800   $ 3,344,834   $ 3,419,991   $ 3,095,141  
 
Liabilities and Stockholders' Equity:
Deposits:
Non interest-bearing $ 514,893 $ 513,136 $ 595,498 $ 408,483 $ 385,511
Interest-bearing   1,540,717     1,392,155     1,453,301     1,325,495     1,416,887  
Total deposits 2,055,610 1,905,291 2,048,799 1,733,978 1,802,398
 

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

169,839 194,412 225,719 230,231 227,504
Federal Home Loan Bank advances 553,487 538,555 413,593 934,630 524,731
Subordinated note 41,240 41,240 41,240 41,240 41,240
Other liabilities and accrued interest payable   57,844  

 

59,589     81,990     27,545     46,197  
Total liabilities 2,878,020 2,739,087 2,811,341 2,967,624 2,642,070
 
Stockholders' equity   557,756     539,713     533,493     452,367     453,071  
Total liabilities and Stockholders' equity $ 3,435,776   $ 3,278,800   $ 3,344,834   $ 3,419,991   $ 3,095,141  
 
 
 
Average Balance Sheet Data
Quarterly Comparison
Sept. 30, 2012 June 30, 2012 March 31, 2012 Dec. 31, 2011 Sept. 30, 2011
Assets:
Investment securities, including FHLB stock $ 629,542 $ 680,134 $ 690,328 $ 735,336 $ 711,050
Federal funds sold and other interest-earning deposits 82,404 100,407 695,863 126,045 68,108
Loans and fees, including loans held for sale 2,520,174 2,406,180 2,439,331 2,255,757 2,237,559
Total earning assets 3,232,120 3,186,721 3,775,523 3,117,138 3,016,717
Total assets 3,322,077 3,309,764 4,153,256 3,246,296 3,147,230
 
Liabilities and Stockholders' Equity:
Non interest-bearing deposits $ 505,127 $ 533,649 $ 922,628 $ 430,705 $ 396,568
Interest-bearing deposits 1,462,069 1,414,427 1,670,167 1,379,159 1,444,577

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

208,051 250,515 271,322 275,085 249,002
Federal Home Loan Bank advances 523,053 479,064 681,518 625,047 517,739
Subordinated note 41,240 41,240 41,240 41,240 41,240
Total interest-bearing liabilities 2,234,413 2,185,246 2,664,247 2,320,531 2,252,558
Stockholders' equity 539,863 534,576 511,694 454,343 449,177

                   
Republic Bancorp, Inc. Financial Information

Third Quarter 2012 Earnings Release (continued)

 
Income Statement Data
Three Months Ended
Sept. 30, 2012 June 30, 2012 March 31, 2012 Dec. 31, 2011 Sept. 30, 2011
 
Total interest income (5) $ 34,128 $ 33,814 $ 79,587 $ 33,607 $ 34,426
Total interest expense   5,556     5,502     6,367   6,710     7,263  
Net interest income 28,572 28,312 73,220 26,897 27,163
 
Provision for loan losses 2,083 466 11,170 463 (140 )
 
Non interest income:
Service charges on deposit accounts 3,438 3,286 3,303 3,524 3,421
Refund transfer fees 231 6,147 71,749 124 425
Mortgage banking income 2,274 1,963 1,354 807 1,352
Debit card interchange fee income 1,390 1,441 1,556 1,399 1,415
Bargain purchase gain - TCB (189 ) (96 ) 27,899 - -
Bargain purchase gain - FCB 27,112 - - - -
Gain on sale of banking center - - - - 2,856

Net gain on sales, calls and impairment of securities

- - 56 77 301
Other   589     1,345     892   537     706  
Total non interest income   34,845     14,086     106,809   6,468     10,476  
 
Non interest expenses:
Salaries and employee benefits 14,921 14,313 16,971 11,332 13,145
Occupancy and equipment, net 5,718 5,144 6,074 5,277 5,138
Communication and transportation 1,045 961 2,661 1,227 1,081
Marketing and development 828 904 938 729 736
FDIC insurance expense 287 291 430 707 918
Bank franchise tax expense 729 703 1,931 653 713
Data processing 1,030 1,195 1,221 855 787
Debit card interchange expense 648 660 601 549 566
Supplies 270 529 949 736 409
Other real estate owned expense 1,328 555 605 889 608
Charitable contributions 232 200 2,678 223 178
Legal expense 388 527 368 846 784
FDIC civil money penalty - - - (1,100 ) -
FHLB advance prepayment penalty - - 2,436 - -
Other   2,338     1,469     3,290   1,616     1,375  
Total non interest expenses   29,762     27,451     41,153   24,539     26,438  
 
Income before income tax expense 31,572 14,481 127,706 8,363 11,341
Income tax expense   10,904     4,903     45,234   2,159     3,471  
 
Net income $ 20,668   $ 9,578   $ 82,472 $ 6,204   $ 7,870  

               

Republic Bancorp, Inc. Financial Information

Third Quarter 2012 Earnings Release (continued)

 
As of and for the Three Months Ended
Sept. 30, 2012     June 30, 2012 March 31, 2012 Dec. 31, 2011 Sept. 30, 2011
Per Share Data:
Basic average shares outstanding 20,948 20,958 20,956 20,954 20,953
Diluted average shares outstanding 21,029 21,017 21,055 20,996 20,994
 
End of period shares outstanding:
Class A Common Stock 18,673 18,658 18,662 18,652 18,655
Class B Common Stock 2,271 2,299 2,299 2,300 2,300
 
Book value per share $ 26.63 $ 25.75 $ 25.45 $ 21.59 $ 21.62
Tangible book value per share (2) 25.88 25.01 24.69 20.81 20.81
 
Earnings per share:
Basic earnings per Class A Common Stock 0.99 0.46 3.94 0.30 0.38
Basic earnings per Class B Common Stock 0.97 0.44 3.92 0.28 0.36
Diluted earnings per Class A Common Stock 0.98 0.46 3.92 0.30 0.38
Diluted earnings per Class B Common Stock 0.97 0.44 3.90 0.28 0.36
 
Cash dividends declared per share:
Class A Common Stock 0.165 0.165 0.154 0.154 0.154
Class B Common Stock 0.150 0.150 0.140 0.140 0.140
 
Performance Ratios:
Return on average assets 2.49 % 1.16 % 7.94 % 0.76 % 1.00 %
Return on average equity 15.31 7.17 64.47 5.46 7.01
Efficiency ratio (3) 47 65 23 74 71
Yield on average interest-earning assets

4.22

4.22 8.56 4.31 4.56
Cost of interest-bearing liabilities 0.99 1.01 0.96 1.16 1.29
Net interest spread

3.23

3.21 7.60 3.15 3.27
Net interest margin - Total Company 3.54 3.55 7.76 3.45 3.60
Net interest margin - Traditional Banking 3.54 3.57 3.40 3.56 3.61
 
Asset Quality Data:
Loans on non-accrual status $ 20,436 $ 22,578 $ 24,710 $ 23,306 $ 23,822
Loans past due 90 days or more and still on accrual - - - - -
Total non-performing loans 20,436 22,578 24,710 23,306 23,822
Other real estate owned 25,148 18,345 24,149 10,956 11,185
Total non-performing assets 45,584 40,923 48,859 34,262 35,007
 
Total Company Credit Quality Ratios:
Non-performing loans to total loans 0.77 % 0.93 % 1.03 % 1.02 % 1.07 %
Non-performing assets to total loans (including OREO) 1.71 1.66 2.02 1.49 1.57
Non-performing assets to total assets 1.33 1.25 1.46 1.00 1.13
Allowance for loan losses to total loans 0.91 0.92 0.99 1.05 1.08
Allowance for loan losses to non-performing loans 118 100 96 103 101
Delinquent loans to total loans (4) 0.68 0.74 1.14 1.07 0.90
Net loan charge-offs to average loans (annualized) 0.08 0.28 1.89 0.06 0.33
 
Traditional Banking Credit Quality Ratios:
Non-performing loans to total loans 0.77 0.93 1.03 1.02 1.07
Non-performing assets to total loans (including OREO) 1.71 1.66 2.02 1.49 1.57
Non-performing assets to total assets 1.33 1.26 1.51 1.10 1.14
Allowance for loan losses to total loans 0.91 0.92 0.98 1.05 1.08
Allowance for loan losses to non-performing loans 118 100 95 103 101
Delinquent loans to total loans (4) 0.68 0.74 1.14 1.07 0.90
Net loan charge-offs to average loans (annualized) 0.15 0.28 0.65 0.15 0.45
 
Other Information:
End of period full-time equivalent employees 772 749 723 710 705
Number of banking centers 44 43 43 42 42

Republic Bancorp, Inc. Financial Information
Third Quarter 2012 Earnings Release (continued)

Segment Data:

Reportable segments are determined by the type of products and services offered and the level of information provided to the chief operating decision maker, who uses such information to review performance of various components of the business (such as branches and subsidiary banks), which are then aggregated if operating performance, products/services, and customers are similar.

As of September 30, 2012, the Company was divided into three distinct business operating segments: Traditional Banking, Mortgage Banking and Republic Processing Group (“RPG”). During 2012, the Company realigned the previously reported Tax Refund Solutions (“TRS”) segment as a division of the newly formed RPG segment. Along with the TRS division, Republic Payment Solutions (“RPS”) and Republic Credit Solutions (“RCS”) were created to operate as divisions of the RPG segment.

Nationally, through Republic Bank & Trust Company (“RB&T”), RPG facilitates the receipt and payment of federal and state tax refund products under the TRS division. Nationally, through Republic Bank, the RPS division is preparing to become an issuing bank to offer general purpose reloadable prepaid debit, payroll, gift and incentive cards through third party program managers. Nationally, through RB&T, the RCS division is preparing to pilot short-term consumer credit products through multiple channels, including the internet and retail locations. For the projected near-term, as the programs are established, the operating results of the RPS and RCS divisions are expected to be immaterial to the Company’s overall results of operations and will therefore not be reported as a separate business operating segment until such time, if any, that they become material to the Company’s overall results of operations.

Loans, investments and deposits provide the majority of the net revenue from Traditional Banking operations; servicing fees and loan sales provide the majority of revenue from Mortgage Banking operations; Refund Anticipation Loan (“RAL”) fees and Refund Transfer fees (“RTs”) (formerly referred to as Electronic Refund Checks/Electronic Refund Deposits or “ERCs/ERDs” or “ARs/ARDs”) provide the majority of the revenue from TRS. All Company operations are domestic.

The accounting policies used for Republic’s reportable segments are the same as those described in the summary of significant accounting policies. Segment performance is evaluated using operating income. Goodwill is not allocated. Income taxes which are not segment specific are allocated based on income before income tax expense. Transactions among reportable segments are made at fair value.

Segment information for the three and nine months ended September 30, 2012 and 2011 follows:

   
Republic Bancorp, Inc. Financial Information

Third Quarter 2012 Earnings Release (continued)

 
Three Months Ended September 30, 2012
(dollars in thousands)    

Traditional

Banking

   

Mortgage

Banking

   

Republic

Processing Group

    Total Company
           
Net interest income $ 28,444 $ 110 $ 18 $ 28,572
 
Provision for loan losses 2,543 - (460 ) 2,083
 
Refund transfer fees - - 231 231
Mortgage banking income - 2,274 - 2,274
Bargain purchase gains 26,923 - - 26,923
Other non interest income   5,387         11       19         5,417  
Total non interest income 32,310 2,285 250 34,845
 
Total non interest expenses   26,118         851       2,793         29,762  
 
Gross operating profit (loss) 32,093 1,544 (2,065 ) 31,572
Income tax expense (benefit)   11,145         541       (782 )       10,904  
Net income (loss) $ 20,948       $ 1,003     $ (1,283 )     $ 20,668  
 
Segment end of period assets $ 3,413,293 $ 8,765 $ 13,718 $ 3,435,776
 
Net interest margin 3.54 % NM NM 3.54 %
 
Three Months Ended September 30, 2011
(dollars in thousands)    

Traditional

Banking

   

Mortgage

Banking

   

Republic

Processing Group

    Total Company
 
Net interest income $ 27,059 $ 100 $ 4 $ 27,163
 
Provision for loan losses 547 - (687 ) (140 )
 
Refund transfer fees - - 425 425
Mortgage banking income - 1,352 - 1,352

Net gain on sales, calls and impairment of securities

301 - - 301
Other non interest income   8,367         26       5         8,398  
Total non interest income 8,668 1,378 430 10,476
 
Total non interest expenses   22,065         705       3,668         26,438  
 
Gross operating profit (loss) 13,115 773 (2,547 ) 11,341
Income tax expense (benefit)   4,293         270       (1,092 )       3,471  
Net income (loss) $ 8,822       $ 503     $ (1,455 )     $ 7,870  
 
Segment end of period assets $ 3,067,504 $ 11,810 $ 15,827 $ 3,095,141
 
Net interest margin 3.61 % NM NM 3.60 %

   
Republic Bancorp, Inc. Financial Information

Third Quarter 2012 Earnings Release (continued)

 
Nine Months Ended September 30, 2012
(dollars in thousands)    

Traditional

Banking

 

Mortgage

Banking

 

Republic

Processing Group

  Total Company
     
Net interest income $ 84,406 $ 283 $ 45,415 $ 130,104
 
Provision for loan losses 6,505 - 7,214 13,719
 
Refund transfer fees - - 78,127 78,127
Mortgage banking income - 5,591 - 5,591

Net gain on sales, calls and impairment of securities

56 - - 56
Bargain purchase gains 54,726 - - 54,726
Other non interest income   17,005       27     208     17,240  
Total non interest income 71,787 5,618 78,335 155,740
 
Total non interest expenses   76,752       2,928     18,686     98,366  
 
Gross operating profit 72,936 2,973 97,850 173,759
Income tax expense   25,150       1,041     34,850     61,041  
Net income $ 47,786     $ 1,932   $ 63,000   $ 112,718  
 
Segment end of period assets $ 3,413,293 $ 8,765 $ 13,718 $ 3,435,776
 
Net interest margin 3.51 % NM NM 5.11 %
 
Nine Months Ended September 30, 2011
(dollars in thousands)    

Traditional

Banking

 

Mortgage

Banking

 

Republic

Processing Group

  Total Company
 
Net interest income $ 78,580 $ 291 $ 59,092 $ 137,963
 
Provision for loan losses 5,454 - 12,049 17,503
 
Refund transfer fees - - 88,071 88,071
Mortgage banking income - 3,092 - 3,092

Net gain on sales, calls and impairment of securities

1,929 - - 1,929
Other non interest income   19,663       51     350     20,064  
Total non interest income 21,592 3,143 88,421 113,156
 
Total non interest expenses   67,840       2,755     27,187     97,782  
 
Gross operating profit (loss) 26,878 679 108,277 135,834
Income tax expense (benefit)   8,263       237     39,389     47,889  
Net income (loss) $ 18,615     $ 442   $ 68,888   $ 87,945  
 
Segment end of period assets $ 3,067,504 $ 11,810 $ 15,827 $ 3,095,141
 
Net interest margin 3.48 % NM NM 5.60 %

Republic Bancorp, Inc. Financial Information
Third Quarter 2012 Earnings Release (continued)

_____________________________________

(1) – The amount of loan fee income included in total interest income was $1.1 million and $1.1 million for the quarters ended September 30, 2012 and 2011. The amount of loan fee income included in total interest income was $48.4 million and $61.5 million for the nine months ended September 30, 2012 and 2011.

(2) – The following table provides a reconciliation of total stockholders’ equity in accordance with GAAP to tangible stockholders’ equity in accordance with applicable regulatory requirements. The Company provides the tangible common equity ratio, in addition to those defined by banking regulators, because of its widespread use by investors as a means to evaluate capital adequacy.

    Quarterly Comparison
(in thousands, except per share data) Sept. 30, 2012   June 30, 2012   March 31, 2012   Dec. 31, 2011   Sept. 30, 2011
Total stockholders' equity (a) $ 557,756 $ 539,713 $ 533,493 $ 452,367 $ 453,071
Less: Goodwill 10,168 10,168 10,168 10,168 10,168
Less: Core deposit intangible 589 104 113 58 73
Less: Mortgage servicing rights   4,980     5,351     5,606     6,087     6,688  
Tangible stockholders' equity (c ) $ 542,019   $ 524,090   $ 517,606   $ 436,054   $ 436,142  
 
Total assets (b) $ 3,435,776 $ 3,278,800 $ 3,344,834 $ 3,419,991 $ 3,095,141
Less: Goodwill 10,168 10,168 10,168 10,168 10,168
Less: Core deposit intangible 589 104 113 58 73
Less: Mortgage servicing rights   4,980     5,351     5,606     6,087     6,688  
Tangible assets (d) $ 3,420,039   $ 3,263,177   $ 3,328,947   $ 3,403,678   $ 3,078,212  
 
Total stockholders' equity to total assets (a/b) 16.23 % 16.46 % 15.95 % 13.23 % 14.64 %
Tangible stockholders' equity to tangible assets (c/d) 15.85 % 16.06 % 15.55 % 12.81 % 14.17 %
 
Number of shares outstanding (e)   20,944     20,957     20,961     20,952     20,955  
 
Book value per share (a/e) $ 26.63 $ 25.75 $ 25.45 $ 21.59 $ 21.62
Tangible book value per share (c/e) 25.88 25.01 24.69 20.81 20.81

(3) – Equals total non-interest expense divided by the sum of net interest income and non interest income. The ratio excludes net gain (loss) on sales, calls and impairment of investment securities.

(4) – Equals total loans exceeding 30 days past due divided by total loans.

(5) – The amount of loan fee income included in total interest income per quarter was as follows: $1.1 million (quarter ended September 30, 2012), $1.3 million (quarter ended June 30, 2012), $46.0 million (quarter ended March 31, 2012), $788,000 (quarter ended December 31, 2011) and $1.1 million (quarter ended September 30, 2011).

NM – Not meaningful



Republic Bancorp, Inc.
Kevin Sipes, 502-560-8628
Executive Vice President and Chief Financial Officer

KEYWORDS:   United States  North America  Indiana  Kentucky

INDUSTRY KEYWORDS:

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