News Column

Republic Bancorp, Inc. Reports Second Quarter 2014 Net Income of $6.3 Million and Year-to-Date Net Income of $18.3 Million

July 18, 2014

LOUISVILLE, Ky.--(BUSINESS WIRE)-- Republic Bancorp, Inc.(NASDAQ: RBCAA), headquartered in Louisville, Kentucky, is the holding company for Republic Bank & Trust Company (the “Bank”).

Republic Bancorp, Inc. (“Republic” or the “Company”) is pleased to report solid net income of $6.3 million for the second quarter of 2014, an increase of 3.3% over the second quarter of 2013, while Diluted Earnings per Class A Common Share remained level at $0.30 for both quarters. Return on average assets (“ROA”) and return on average equity (“ROE”) were 0.73% and 4.54%, respectively, for the second quarter of 2014. For the first six months of 2014, net income was $18.3 million, with Diluted Earnings per Class A Common Share of $0.88 and an ROA and ROE of 1.04% and 6.60%, respectively.

Steve Trager, Republic’s Chairman and Chief Executive Officer, commented: “We made meaningful strides during the second quarter of 2014 in reinvesting cash from lower-yielding overnight investments into higher yielding loan products, growing total loans by $151 million for the second quarter alone. The overall growth in our loan portfolio came from multiple sources including our Mortgage Warehouse line-of-credit product, as well as new production from our Correspondent Lending division, which began purchasing loans during the second quarter of 2014. After three months of operation, this new division has purchased $12 million of conforming and jumbo 5/1 and 7/1 adjustable rate mortgage (“ARM”) loans from a small portion of the Company’s existing Mortgage Warehouse clients. The Company is excited about the growth potential in the correspondent channel, as its new loan pipeline continues to grow and the Company continues the process of approving additional Mortgage Warehouse clients as correspondent originators.”

The following chart highlights Republic’s second quarter and year-to-date 2014 financial performance compared to the same period in 2013:

               
Three Months Ended%Six Months Ended%
(dollars in thousands, except per share data)     6/30/14         6/30/13     Change     6/30/14         6/30/13     Change
   
Income before income taxes$9,654$8,9468%$28,177$29,924-6%
Net Income$6,322$6,1193%$18,306$19,475-6%
Diluted Earnings per Class A Share$0.30$0.300%$0.88$0.94-6%
ROA0.73%0.73%0%1.04%1.14%-9%
ROE4.54%4.46%2%6.60%7.13%-7%
 



Quarterly Results of Operations

Traditional Banking and Mortgage Banking (collectively “Core Banking”)

Net income from Core Banking was $5.9 million for the second quarter of 2014, a decrease of $1.1 million, or 15%, from the second quarter of 2013. Compared to the second quarter of 2013, the decline in net income at the Core Bank was largely attributable to lower net interest income and lower mortgage banking income. On a linked quarter basis, however, the Core Bank’s net income increased $513,000 from the $5.4 million achieved during the first quarter of 2014. The increase in net income on a linked quarter basis occurred primarily as a result of the aforementioned $151 million growth in the Core Bank’s loan portfolio and an uptick in customer demand for secondary market loan products stemming from a rise in home purchase activity.

Net interest income within the Core Bank decreased $1.3 million, or 4%, to $27.5 million for the second quarter of 2014 compared to the same period in 2013. On a linked quarter basis, net interest income increased $331,000 from the $27.2 million achieved during the first quarter of 2014. The Core Bank’s net interest margin was 3.35% during the second quarter of 2014, decreasing 22 basis points from 3.57% during the second quarter of 2013 but increasing six basis points from 3.29% achieved for the first quarter of 2014. Net interest income at the Core Bank continued to benefit from discount accretion on loans acquired from the Company’s 2012 FDIC-assisted acquisitions (the “Legacy” loans). Altogether, the Company recorded discount accretion of $1.4 million during the second quarter of 2014, $1.8 million during the second quarter of 2013 and $2.1 million during the first quarter of 2014. The discount accretion added approximately 17, 22 and 25 basis points, respectively, to the Core Bank’s net interest margin for these periods.

On a linked quarter basis, the Company’s Mortgage Warehouse lines-of-credit outstanding increased $108 million from March 31, 2014 to June 30, 2014 due to increases in total line-of-credit commitments and usage of those lines by Republic’s Mortgage Warehouse clients. Overall, outstanding Mortgage Warehouse commitments increased $59 million during the second quarter to $395 million. Usage of these lines-of-credit grew during the quarter as a result of increased origination activity among the Company’s Mortgage Warehouse clients. The average usage rate among all Mortgage Warehouse clients was 47% for the second quarter of 2014, up from 34% for the first quarter of 2014. While the growth in commitments for the second quarter and first six months of 2014 is in line with Company’s internal projections for the year, the usage rate of these lines exceeded the Company’s expectations. Republic’s management is optimistic that the Company can continue to modestly grow this program during the remainder of the year as it continues to add new clients.

Also on a linked quarter basis, the Core Bank’s residential real estate and commercial and industrial loans increased $21 million and $19 million, respectively, from March 31, 2014 to June 30, 2014, as economic activity within the Core Bank’s footprint expanded. Aiding the increase in the residential real estate portfolio during the quarter was the Company’s previously discussed Correspondent Lending division.

The Core Bank’s provision for loan losses was $710,000 for the second quarter of 2014 compared to $1.0 million during the second quarter of 2013. The Core Bank’s required provisions for the second quarter of 2014 and 2013 were both positively low and compared favorably to peer in both quarters. The second quarter 2014 provision was reflective of an increase in general loan loss reserves driven by the growth in the Core Bank’s loan portfolio during the quarter. The Core Bank experienced no individually large loan impairment charges within its loan loss provision during the second quarters of 2014 or 2013, with minimal impact in both periods related to its aforementioned Legacy loans.

The table below illustrates the Core Bank’s continuing well-regarded 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   6/30/14   3/31/14   12/31/13   12/31/12   12/31/11
 
Non-performing loans to total loans 0.75% 0.93% 0.81% 0.82% 1.02%
 
Non-performing assets to total loans (including OREO) 1.17% 1.58% 1.46% 1.79% 1.49%
 
Delinquent loans to total loans 0.44% 0.56% 0.63% 0.79% 1.07%
 
Net charge-offs to average loans 0.05% 0.07% 0.18% 0.34% 0.24%
(Annualized as of 6/30/14 and 3/31/14)
                               

OREO = Other Real Estate Owned

 


Non-interest income for the Core Bank was $7.2 million for the second quarter of 2014 compared to $8.9 million for the second quarter of 2013. Primarily driving the overall decrease in non-interest income was a $1.4 million decline in mortgage banking income, as the Core Bank achieved a solid $2.2 million during the second quarter of 2013, the last quarter of significant refinance volume on a national basis for long-term fixed-rate mortgage loans. The decrease in mortgage banking income was partially offset by a $379,000 increase in the cash surrender value of the Company’s Bank Owned Life Insurance (“BOLI”). The increase in the cash surrender value of the Company’s BOLI represents tax advantaged income, which is used to offset employee-related expenses.

Core Bank non-interest expenses decreased $1.4 million from the second quarter of 2013 to $24.9 million during the same period in 2014. As previously disclosed, the Bank implemented a modest reduction in force during the fourth quarter of 2013, which drove an $898,000 decrease in salaries and benefits expense from the second quarter of 2013 to the same period in 2014. Additionally, other real estate owned (“OREO”) expense and legal expenses decreased $385,000 and $459,000, respectively, from the second quarter of 2013. The reduction in OREO and legal expenses was the result of a further decrease in the Company’s non-performing assets on a year-to-year basis.

Republic Processing Group (“RPG”) – RPG’s second quarter 2014 net income was $421,000 compared to a net loss of $862,000 during the second quarter of 2013. The higher profitability was primarily driven by an increase in net Refund Transfer (“RT”) fees, lower salary costs and reduced legal fees within RPG’s Tax Refund Solutions (“TRS”) division. The TRS division of RPG derives substantially all of its revenues during the first and second quarters of the year and historically operates at a net loss during the second half of the year as the Company prepares for the next tax season.

Conclusion

“With solid loan growth and economic activity in our core footprint appearing to expand during the second quarter, we look ahead to the remainder of 2014 with great optimism. As always, our number one priority going forward will be to grow our existing business lines while maintaining our industry-strong credit quality. In addition, we focused a significant amount of time during the first half of 2014 seeking an acquisition in the traditional mergers and acquisition market. We plan to continue our search until we find the right bank with which to partner and deploy our excess capital.

"Lastly, as we disclosed in our first quarter earnings release, we kicked off our first branding marketing campaign during the second quarter of 2014. We believe the campaign has been well received and has accomplished our goal of further enhancing the public’s awareness of our Company and the industry-leading products and services we offer. The campaign’s message is simple - Republic Bank. It’s just easier here SM. It represents a message that we successfully fulfilled to our clients yesterday, are fulfilling to our clients today, and plan to fulfill to them tomorrow and for many years to come,”concluded Trager.

Republic Bancorp, Inc. (the “Company”) is the parent company of Republic Bank & Trust Company (the “Bank”). The Bank currently has 42 total banking centers: 33 banking centers in 12 Kentucky communities - Covington, Crestwood, Elizabethtown, Florence, Frankfort, Georgetown, Independence, Lexington, Louisville, Owensboro, Shelbyville and Shepherdsville; three banking centers in southern IndianaFloyds Knobs, Jeffersonville and New Albany; three banking centers in FloridaHudson, Port Richey and Temple Terrace; two banking centers in TennesseeCool Springs (Franklin) and Green Hills (Nashville); and one banking center in Blue Ash (Cincinnati), Ohio. The Bank offers internet banking at www.republicbank.com. The Company has $3.5 billion in assets and is headquartered in Louisville, Kentucky. The Company’s Class A Common Stock is listed under the symbol “RBCAA” on the NASDAQ Global Select Market.

Republic Bank. It’s just easier here SM.

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 impact of expense reduction initiatives, the future strength of the Core Bank’s overall credit quality, the future growth in outstanding loan balances from the Core Bank’s mortgage warehouse lines-of-credit, the future growth of loans from the Core Bank’s Correspondent Lending division, and the future growth and performance of the Republic Processing Group, as well as 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,” “appear,” “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, 2013. 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 2014 Earnings Release

(all amounts other than per share amounts, number of employees and number of banking centers are expressed in thousands unless otherwise noted)

 
Balance Sheet Data
June 30, 2014Dec. 31, 2013June 30, 2013
Assets:
Cash and cash equivalents $ 84,273 $ 170,863 $ 97,690
Investment securities 511,984 483,537 475,500
Mortgage loans held for sale, at fair value 6,809 3,506 24,174
Loans 2,725,017 2,589,792 2,618,029
Allowance for loan losses   (22,772)   (23,026)   (22,491)
Loans, net 2,702,245 2,566,766 2,595,538
Federal Home Loan Bank stock, at cost 28,208 28,342 28,342
Premises and equipment, net 32,481 32,908 32,629
Goodwill 10,168 10,168 10,168
Other real estate owned ("OREO") 11,613 17,102 15,248
Bank owned life insurance ("BOLI") 50,655 25,086 -
Other assets and accrued interest receivable   26,888     33,626     37,776  
Total assets $3,465,324   $3,371,904   $3,317,065  
 
Liabilities and Stockholders' Equity:
Deposits:
Non interest-bearing $ 519,651 $ 488,642 $ 487,787
Interest-bearing   1,485,332     1,502,215     1,483,260  
Total deposits 2,004,983 1,990,857 1,971,047
 
Securities sold under agreements to repurchase and other short-term borrowings 197,439 165,555 128,532
Federal Home Loan Bank advances 640,000 605,000 592,044
Subordinated note 41,240 41,240 41,240
Other liabilities and accrued interest payable   26,371     26,459     40,135  
Total liabilities 2,910,033 2,829,111 2,772,998
 
Stockholders' equity   555,291     542,793     544,067  
Total liabilities and Stockholders' equity $3,465,324   $3,371,904   $3,317,065  
Average Balance Sheet Data        
Three Months Ended June 30,Six Months Ended June 30,
  2014   2013   2014   2013
Assets:
Investment securities, including FHLB stock $ 530,472 $ 511,225 $ 515,170 $ 510,122
Federal funds sold and other interest-earning deposits 128,473 127,696 217,228 156,805
Loans and fees, including loans held for sale 2,632,190 2,590,643 2,598,376 2,586,809
Total interest-earning assets 3,291,135 3,229,564 3,330,774 3,253,736
Total assets 3,459,171 3,355,109 3,515,181 3,402,133
 
Liabilities and Stockholders' Equity:
Non interest-bearing deposits $ 526,599 $ 492,442 $ 583,258 $ 531,314
Interest-bearing deposits 1,497,494 1,515,878 1,501,137 1,513,903
Securities sold under agreements to
repurchase and other short-term borrowings 259,132 149,237 241,205 175,932
Federal Home Loan Bank advances 562,209 588,712 578,544 570,497
Subordinated note 41,240 41,240 41,240 41,240
Total interest-bearing liabilities 2,360,075 2,295,067 2,362,126 2,301,572
Stockholders' equity 557,109 548,644 554,510 546,089


   

Republic Bancorp, Inc. Financial Information

Second Quarter 2014 Earnings Release (continued)

(all amounts other than per share amounts, 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,
  2014   2013   2014     2013
 
Total interest income(1) $ 32,405 $ 34,119 $ 64,902 $ 68,520
Total interest expense   4,855   5,352   10,048     10,623
 
Net interest income 27,550 28,767 54,854 57,897
 
Provision for loan losses 693 905 (10 ) 280
 
Non-interest income:
Service charges on deposit accounts 3,563 3,498 6,858 6,708
Net refund transfer fees 1,836 1,683 16,224 13,697
Mortgage banking income 812 2,180 1,298 5,454
Debit card interchange fee income 1,738 1,656 3,673 3,467
Bargain purchase gain - First Commercial Bank ("FCB") - - - 1,324
Net gain on sales of OREO 264 1,034 666 1,311
Increase in cash surrender value of BOLI 379 - 570 -
Other   920   732   1,683     1,347
Total non-interest income   9,512   10,783   30,972     33,308
 
Non-interest expenses:
Salaries and employee benefits 13,965 15,086 28,448 31,200
Occupancy and equipment, net 5,508 5,315 11,330 10,892
Communication and transportation 856 991 1,882 2,021
Marketing and development 983 880 1,575 1,782
FDIC insurance expense 414 402 983 815
Bank franchise tax expense 831 857 3,170 2,572
Data processing 913 792 1,754 1,508
Debit card interchange expense 807 718 1,761 1,561
Supplies 60 218 500 572
OREO expense 560 945 1,630 1,834
Legal expense 88 1,338 500 1,768
Other   1,730   2,157   4,126     4,476
Total non-interest expenses   26,715   29,699   57,659     61,001
 
Income before income tax expense 9,654 8,946 28,177 29,924
Income tax expense   3,332   2,827   9,871     10,449
 
Net income $6,322$6,119$18,306   $19,475


     

Republic Bancorp, Inc. Financial Information

Second Quarter 2014 Earnings Release (continued)

(all amounts other than per share amounts, number of employees and number of banking centers are expressed in thousands unless otherwise noted)

 
Selected Data and Statistics
As of and for theAs of and for the
Three Months Ended June 30,Six Months Ended June 30,
2014201320142013
Per Share Data:
 
Basic average shares outstanding 20,793 20,782 20,795 20,823
Diluted average shares outstanding 20,888 20,858 20,891 20,895
 
End of period shares outstanding:
Class A Common Stock 18,548 18,522 18,548 18,522
Class B Common Stock 2,245 2,260 2,245 2,260
 
Book value per share(2) $ 26.71$ 26.18$ 26.71$ 26.18
Tangible book value per share(2) 25.98 25.42 25.98 25.42
 
Earnings per share:
Basic earnings per Class A Common Stock $ 0.31$ 0.30$ 0.88$ 0.94
Basic earnings per Class B Common Stock 0.29 0.28 0.85 0.91
Diluted earnings per Class A Common Stock 0.30 0.30 0.88 0.94
Diluted earnings per Class B Common Stock 0.29 0.28 0.85 0.90
 
Cash dividends declared per share:
Class A Common Stock $ 0.187$ 0.176$ 0.363$ 0.341
Class B Common Stock 0.170 0.160 0.330 0.310
 
Performance Ratios:
 
Return on average assets 0.73% 0.73% 1.04% 1.14%
Return on average equity 4.54 4.46 6.60 7.13
Efficiency ratio(3) 72 75 67 67
Yield on average interest-earning assets 3.94 4.23 3.90 4.21
Cost of interest-bearing liabilities 0.82 0.93 0.85 0.92
Cost of deposits(4) 0.19 0.19 0.18 0.20
Net interest spread 3.12 3.30 3.05 3.29
Net interest margin - Total Company 3.35 3.56 3.29 3.56
Net interest margin - Traditional Bank(5) 3.35 3.57 3.32 3.58
 
Other Information:
 
End of period full-time equivalent employees 726 791 726 791
Number of banking centers 42 44 42 44


       

 Republic Bancorp, Inc. Financial Information

Second Quarter 2014 Earnings Release (continued)

(all amounts other than per share amounts, number of employees and number of banking centers are expressed in thousands unless otherwise noted)

 
Credit Quality Data and StatisticsAs of and for theAs of and for the
Three Months Ended June 30,Six Months Ended June 30,
  2014     2013     2014     2013  
Credit Quality Asset Balances:
 
Loans on non-accrual status $ 19,606 $ 21,922 $ 19,606 $ 21,922
Loans past due 90-days-or-more and still on accrual   734     2,159     734     2,159  
Total non-performing loans 20,340 24,081 20,340 24,081
OREO   11,613     15,248     11,613     15,248  
Total non-performing assets $ 31,953   $ 39,329   $ 31,953   $ 39,329  
Total delinquent loans $ 12,062 $ 16,197 $ 12,062 $ 16,197
 
 
Credit Quality Ratios:
 
Non-performing loans to total loans 0.75 % 0.92 % 0.75 % 0.92 %
Non-performing assets to total loans (including OREO) 1.17 1.49 1.17 1.49
Non-performing assets to total assets 0.92 1.19 0.92 1.19
Allowance for loan losses to total loans 0.84 0.86 0.84 0.86
Allowance for loan losses to non-performing loans 112 93 112 93
Delinquent loans to total loans(6) 0.44 0.62 0.44 0.62
Net charge-offs to average loans (annualized) - Total Company 0.04 0.31 0.01 0.12
Net charge-offs to average loans (annualized) - Traditional Banking(5) 0.05 0.33 0.03 0.17


         

Republic Bancorp, Inc. Financial Information

Second Quarter 2014 Earnings Release (continued)

(all amounts other than per share amounts, number of employees and number of banking centers are expressed in thousands unless otherwise noted)

 
Balance Sheet Data
Quarterly Comparison
June 30, 2014Mar. 31, 2014Dec. 31, 2013Sept. 30, 2013June 30, 2013
Assets:
Cash and cash equivalents $ 84,273 $ 343,386 $ 170,863 $ 141,585 $ 97,690
Investment securities 511,984 466,002 483,537 533,681 475,500
Mortgage loans held for sale, at fair value 6,809 2,414 3,506 9,803 24,174
Loans 2,725,017 2,574,334 2,589,792 2,553,435 2,618,029
Allowance for loan losses   (22,772)   (22,367)   (23,026)   (23,492)   (22,491)
Loans, net 2,702,245 2,551,967 2,566,766 2,529,943 2,595,538
Federal Home Loan Bank stock, at cost 28,208 28,310 28,342 28,342 28,342
Premises and equipment, net 32,481 32,948 32,908 32,626 32,629
Goodwill 10,168 10,168 10,168 10,168 10,168
Other real estate owned 11,613 16,914 17,102 15,247 15,248
Bank owned life insurance 50,655 30,277 25,086 - -
Other assets and accrued interest receivable   26,888     24,786     33,626     30,486     37,776  
Total assets $3,465,324   $3,507,172   $3,371,904   $3,331,881   $3,317,065  
 
Liabilities and Stockholders' Equity:
Deposits:
Non interest-bearing $ 519,651 $ 568,162 $ 488,642 $ 492,126 $ 487,787
Interest-bearing   1,485,332     1,516,050     1,502,215     1,527,659     1,483,260  
Total deposits 2,004,983 2,084,212 1,990,857 2,019,785 1,971,047
 
Securities sold under agreements to
repurchase and other short-term borrowings 197,439 222,174 165,555 106,373 128,532
Federal Home Loan Bank advances 640,000 582,000 605,000 587,020 592,044
Subordinated note 41,240 41,240 41,240 41,240 41,240
Other liabilities and accrued interest payable   26,371     26,688     26,459     31,953     40,135  
Total liabilities 2,910,033 2,956,314 2,829,111 2,786,371 2,772,998
 
Stockholders' equity   555,291     550,858     542,793     545,510     544,067  
Total liabilities and Stockholders' equity $3,465,324   $3,507,172   $3,371,904   $3,331,881   $3,317,065  
 
 
 
Average Balance Sheet Data
Quarterly Comparison
June 30, 2014Mar. 31, 2014Dec. 31, 2013Sept. 30, 2013June 30, 2013
Assets:
Investment securities, including FHLB stock $ 530,472 $ 499,698 $ 559,146 $ 530,759 $ 511,225
Federal funds sold and other interest-earning deposits 128,473 306,535 157,579 113,042 127,696
Loans and fees, including loans held for sale 2,632,190 2,564,188 2,550,770 2,576,606 2,590,643
Total interest-earning assets 3,291,135 3,370,421 3,267,495 3,220,407 3,229,564
Total assets 3,459,171 3,571,061 3,398,055 3,339,596 3,355,109
 
Liabilities and Stockholders' Equity:
Non interest-bearing deposits $ 526,599 $ 639,785 $ 505,115 $ 488,386 $ 492,442
Interest-bearing deposits 1,497,494 1,504,820 1,518,221 1,513,330 1,515,878
Securities sold under agreements to
repurchase and other short-term borrowings 259,132 223,079 190,568 139,293 149,237
Federal Home Loan Bank advances 562,209 595,061 580,537 592,735 588,712
Subordinated note 41,240 41,240 41,240 41,240 41,240
Total interest-bearing liabilities 2,360,075 2,364,200 2,330,566 2,286,598 2,295,067
Stockholders' equity 557,109 551,909 547,946 547,439 548,644


       

Republic Bancorp, Inc. Financial Information

Second Quarter 2014 Earnings Release (continued)

(all amounts other than per share amounts, number of employees and number of banking centers are expressed in thousands unless otherwise noted)

 
Income Statement Data
Three Months Ended
June 30, 2014Mar. 31, 2014Dec. 31, 2013   Sept. 30, 2013   June 30, 2013
 
Total interest income(1) $ 32,405 $ 32,497 $ 32,039 $ 34,009 $ 34,119
Total interest expense   4,855   5,193     5,300   5,470   5,352
Net interest income 27,550 27,304 26,739 28,539 28,767
 
Provision for loan losses 693 (703 ) 503 2,200 905
 
Non-interest income:
Service charges on deposit accounts 3,563 3,295 3,569 3,676 3,498
Net refund transfer fees 1,836 14,388 35 152 1,683
Mortgage banking income 812 486 778 1,026 2,180
Debit card interchange fee income 1,738 1,935 1,526 1,519 1,656
Net gain on sales of OREO 264 402 457 403 1,034
Increase in cash surrender value of BOLI 379 191 86 - -
Other   920   763     671   763   732
Total non-interest income   9,512   21,460     7,122   7,539   10,783
 
Non-interest expenses:
Salaries and employee benefits 13,965 14,483 14,352 12,226 15,086
Occupancy and equipment, net 5,508 5,822 5,564 5,462 5,315
Communication and transportation 856 1,026 1,117 990 991
Marketing and development 983 592 786 785 880
FDIC insurance expense 414 569 448 419 402
Bank franchise tax expense 831 2,339 836 707 857
Data processing 913 841 891 934 792
Debit card interchange expense 807 954 634 655 718
Supplies 60 440 357 228 218
OREO expense 560 1,070 1,115 497 945
Legal expense 88 412 1,516 1,343 1,338
Other   1,730   2,396     2,721   2,079   2,157
Total non-interest expenses   26,715   30,944     30,337   26,325   29,699
 
Income before income tax expense 9,654 18,523 3,021 7,553 8,946
Income tax expense   3,332   6,539     1,676   2,950   2,827
 
Net income $ 6,322 $ 11,984   $ 1,345 $ 4,603 $ 6,119


 

Republic Bancorp, Inc. Financial Information

Second Quarter 2014 Earnings Release (continued)

(all amounts other than per share amounts, number of employees and number of banking centers are expressed in thousands unless otherwise noted)

 
Selected Data and Statistics
As of and for the Three Months Ended
June 30, 2014Mar. 31, 2014Dec. 31, 2013Sept. 30, 2013June 30, 2013
Per Share Data:
 
Basic average shares outstanding 20,793 20,796 20,796 20,787 20,782
Diluted average shares outstanding 20,888 20,893 20,899 20,927 20,858
 
End of period shares outstanding:
Class A Common Stock 18,548 18,530 18,541 18,534 18,522
Class B Common Stock 2,245 2,260 2,260 2,260 2,260
 
Book value per share(2) $ 26.71 $ 26.50 $ 26.09 $ 26.23 $ 26.18
Tangible book value per share(2) 25.98 25.76 25.35 25.47 25.42
 
Earnings per share:
Basic earnings per Class A Common Stock $ 0.31 $ 0.58 $ 0.07 $ 0.22 $ 0.30
Basic earnings per Class B Common Stock 0.29 0.56 0.05 0.21 0.28
Diluted earnings per Class A Common Stock 0.30 0.58 0.07 0.22 0.30
Diluted earnings per Class B Common Stock 0.29 0.56 0.05 0.21 0.28
 
Cash dividends declared per share:
Class A Common Stock $ 0.187 $ 0.176 $ 0.176 $ 0.176 $ 0.176
Class B Common Stock 0.170 0.160 0.160 0.160 0.160
 
Performance Ratios:
 
Return on average assets 0.73 % 1.34 % 0.16 % 0.55 % 0.73 %
Return on average equity 4.54 8.69 0.98 3.36 4.46
Efficiency ratio(3) 72 63 90 73 75
Yield on average interest-earning assets 3.94 3.86 3.92 4.22 4.23
Cost of interest-bearing liabilities 0.82 0.88 0.91 0.96 0.93
Cost of deposits(4) 0.19 0.18 0.20 0.21 0.19
Net interest spread 3.12 2.98 3.01 3.26 3.30
Net interest margin - Total Company 3.35 3.24 3.27 3.54 3.56
Net interest margin - Traditional Bank(5) 3.35 3.29 3.27 3.54 3.57
 
Other Information:
 
End of period full-time equivalent employees 726 735 736 796 791
Number of banking centers 42 42 45 45 44


         

 Republic Bancorp, Inc. Financial Information

Second Quarter 2014 Earnings Release (continued)

(all amounts other than per share amounts, number of employees and number of banking centers are expressed in thousands unless otherwise noted)

 
Credit Quality Data and Statistics
As of and for the Three Months Ended
June 30, 2014Mar. 31, 2014Dec. 31, 2013Sept. 30, 2013June 30, 2013
Credit Quality Asset Balances:
Loans on non-accrual status $ 19,606 $ 21,792 $ 19,104 $ 18,407 $ 21,922
Loans past due 90-days-or-more and still on accrual   734     2,247     1,974     1,839     2,159  
Total non-performing loans 20,340 24,039 21,078 20,246 24,081
OREO   11,613     16,914     17,102     15,247     15,248  
Total non-performing assets $ 31,953   $ 40,953   $ 38,180   $ 35,493   $ 39,329  
Total delinquent loans $ 12,062 $ 14,443 $ 16,223 $ 15,087 $ 16,197
 
 
Credit Quality Ratios:
Non-performing loans to total loans 0.75 % 0.93 % 0.81 % 0.79 % 0.92 %
Non-performing assets to total loans (including OREO) 1.17 1.58 1.46 1.38 1.49
Non-performing assets to total assets 0.92 1.17 1.13 1.07 1.19
Allowance for loan losses to total loans 0.84 0.87 0.89 0.92 0.86
Allowance for loan losses to non-performing loans 112 93 109 116 93
Delinquent loans to total loans(6) 0.44 0.56 0.63 0.59 0.62
Net charge-offs (recoveries)to average loans (annualized) - Total Company 0.04 (0.01 ) 0.15 0.19 0.31
Net charge-offs to average loans (annualized) - Traditional Bank(5) 0.05 0.07 0.16 0.19 0.33


 

Republic Bancorp, Inc. Financial Information

Second Quarter 2014 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 banking centers and business units), which are then aggregated if operating performance, products/services, and customers are similar.
 
As of June 30, 2014, the Company was divided into three distinct business operating segments: Traditional Banking, Mortgage Banking and Republic Processing Group (“RPG”). Along with the Tax Refund Solutions (“TRS”) division, Republic Payment Solutions (“RPS”) and Republic Credit Solutions (“RCS”) operate as divisions of the RPG segment.
 
All divisions of the RPG segment operate through the Bank. The TRS division facilitates the receipt and payment of federal and state tax refund products. The RPS division is an issuing bank offering general purpose reloadable prepaid debit cards through third party program managers. The RCS division is piloting short-term consumer credit products.
 
Loans, investments and deposits provide the majority of the net revenue from Traditional Banking operations, while servicing fees and loan sales provide the majority of revenue from Mortgage Banking operations. Net refund transfer fees provide the majority of revenue for RPG. 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 in the Company’s 2013 Annual Report on Form 10-K. Segment performance is evaluated using operating income. Goodwill is not allocated. Income taxes are generally allocated based on income before income tax expense unless specific segment allocations can be reasonably made. Transactions among reportable segments are made at carrying value.


   

Republic Bancorp, Inc. Financial Information

Second Quarter 2014 Earnings Release (continued)

 

Segment information for the three and six months ended June 30, 2014 and 2013 follows:

 
Three Months Ended June 30, 2014
(dollars in thousands)  

Traditional

Banking

 

Mortgage

Banking

 

Republic

Processing Group

 

Total

Company

   
Net interest income $ 27,441 $ 49 $ 60 $ 27,550
 
Provision for loan losses 710 - (17 ) 693
 
Net refund transfer fees - - 1,836 1,836
Mortgage banking income - 812 - 812
Other non-interest income   6,361     71     432     6,864  
Total non-interest income 6,361 883 2,268 9,512
 
Total non-interest expenses   23,929     1,013     1,773     26,715  
 
Income (loss) before income tax expense 9,163 (81 ) 572 9,654
Income tax expense (benefit)   3,210     (29 )   151     3,332  
Net income (loss) $ 5,953   $ (52 ) $ 421   $ 6,322  
 
Segment end of period assets $ 3,434,716 $ 12,231 $ 18,377 $ 3,465,324
 
Net interest margin 3.35 % NM NM 3.35 %
 
Three Months Ended June 30, 2013
(dollars in thousands)  

Traditional

Banking

 

Mortgage

Banking

 

Republic

Processing Group

 

Total

Company

 
Net interest income $ 28,606 $ 145 $ 16 $ 28,767
 
Provision for loan losses 1,045 - (140 ) 905
 
Net refund transfer fees - - 1,683 1,683
Mortgage banking income - 2,180 - 2,180
Other non-interest income   6,660     75     185     6,920  
Total non-interest income 6,660 2,255 1,868 10,783
 
Total non-interest expenses   25,443     906     3,350     29,699  
 
Income (loss) before income tax expense 8,778 1,494 (1,326 ) 8,946
Income tax expense (benefit)   2,768     523     (464 )   2,827  
Net income (loss) $ 6,010   $ 971   $ (862 ) $ 6,119  
 
Segment end of period assets $ 3,277,181 $ 29,891 $ 9,993 $ 3,317,065
 
Net interest margin 3.57 % NM NM 3.56 %


 

Republic Bancorp, Inc. Financial Information

Second Quarter 2014 Earnings Release (continued)

 
Six Months Ended June 30, 2014
(dollars in thousands)  

Traditional

Banking

 

Mortgage

Banking

 

Republic

Processing Group

 

Total

Company

     
Net interest income $ 54,554 $ 95 $ 205 $ 54,854
 
Provision for loan losses 470 - (480 ) (10 )
 
Net refund transfer fees - - 16,224 16,224
Mortgage banking income - 1,298 - 1,298
Other non-interest income   12,180     145     1,125     13,450  
Total non-interest income 12,180 1,443 17,349 30,972
 
Total non-interest expenses   48,536     2,223     6,900     57,659  
 
Income (loss) before income tax expense 17,728 (685 ) 11,134 28,177
Income tax expense (benefit)   5,994     (240 )   4,117     9,871  
Net income (loss) $ 11,734   $ (445 ) $ 7,017   $ 18,306  
 
Segment end of period assets $ 3,434,716 $ 12,231 $ 18,377 $ 3,465,324
 
Net interest margin 3.32 % NM NM 3.29 %
 
Six Months Ended June 30, 2013
(dollars in thousands)

Traditional

Banking

Mortgage

Banking

Republic

Processing Group

Total

Company

 
Net interest income $ 57,567 $ 258 $ 72 $ 57,897
 
Provision for loan losses 1,019 - (739 ) 280
 
Net refund transfer fees - - 13,697 13,697
Mortgage banking income - 5,454 - 5,454
Bargain purchase gain - FCB 1,324 - - 1,324
Other non-interest income   12,057     83     693     12,833  
Total non-interest income 13,381 5,537 14,390 33,308
 
Total non-interest expenses   50,625     1,769     8,607     61,001  
 
Income before income tax expense 19,304 4,026 6,594 29,924
Income tax expense   6,732     1,409     2,308     10,449  
Net income $ 12,572   $ 2,617   $ 4,286   $ 19,475  
 
Segment end of period assets $ 3,277,181 $ 29,891 $ 9,993 $ 3,317,065
 
Net interest margin 3.58 % NM NM 3.56 %


 

Republic Bancorp, Inc. Financial Information

Second Quarter 2014 Earnings Release (continued)

 

(1) – The amount of loan fee income included in total interest income was $2.3 million and $2.9 million for the quarters ended June 30, 2014 and 2013. The amount of loan fee income included in total interest income was $5.4 million and $5.6 million for the six months ended June 30, 2014 and 2013.

 

The amount of loan fee income included in total interest income per quarter was as follows: $2.3 million (quarter ended June 30, 2014), $3.1 million (quarter ended March 31, 2014); $2.1 million (quarter ended December 31, 2013), $3.3 million (quarter ended September 30, 2013), and $2.9 million (quarter ended June 30, 2013).

 

(2) – The following table provides a reconciliation of total stockholders’ equity in accordance with U.S. generally accepted accounting principles (“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)June 30, 2014   Mar. 31, 2014   Dec. 31, 2013   Sept. 30, 2013   June 30, 2013
Total stockholders' equity (a) $ 555,291 $ 550,858 $ 542,793 $ 545,510 $ 544,067
Less: Goodwill 10,168 10,168 10,168 10,168 10,168
Less: Core deposit intangible - - - 289 388
Less: Mortgage servicing rights   5,009     5,227     5,409     5,482     5,305  
Tangible stockholders' equity (c ) $ 540,114   $ 535,463   $ 527,216   $ 529,571   $ 528,206  
 
Total assets (b) $ 3,465,324 $ 3,507,172 $ 3,371,904 $ 3,331,881 $ 3,317,065
Less: Goodwill 10,168 10,168 10,168 10,168 10,168
Less: Core deposit intangible - - - 289 388
Less: Mortgage servicing rights   5,009     5,227     5,409     5,482     5,305  
Tangible assets (d) $ 3,450,147   $ 3,491,777   $ 3,356,327   $ 3,315,942   $ 3,301,204  
 
Total stockholders' equity to total assets (a/b) 16.02 % 15.71 % 16.10 % 16.37 % 16.40 %
Tangible stockholders' equity to tangible assets (c/d) 15.65 % 15.33 % 15.71 % 15.97 % 16.00 %
 
Number of shares outstanding (e)   20,793     20,790     20,801     20,794     20,782  
 
Book value per share (a/e) $ 26.71 $ 26.50 $ 26.09 $ 26.23 $ 26.18
Tangible book value per share (c/e) 25.98 25.76 25.35 25.47 25.42

(3) – The efficiency ratio 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, if applicable.

 

(4) – The cost of deposits ratio equals annualized total interest expense on deposits divided by total average interest-bearing deposits plus total average non interest-bearing deposits.

 

(5) – Ratios relate only to the Traditional Banking segment.

 

(6) – The delinquent loans to total loans ratio equals loans 30-days-or-more past due loans divided by total loans.

 

NA – Not applicable

 

NM – Not meaningful






Republic Bancorp, Inc.

Kevin Sipes, 502-560-8628

Executive Vice President and Chief Financial Officer


Source: Republic Bancorp, Inc.


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