Republic Bancorp, Inc. ("Republic" or the "Company") concluded 2013 with annual net income of $25.4 million resulting in Diluted Earnings per Class A Common share of $1.22. Return on average assets ("ROA") and return on average equity ("ROE") in 2013 were 0.75% and 4.65%, respectively. Net income for the fourth quarter of 2013 was $1.3 million resulting in Diluted Earnings per Class A Common Share of $0.07 with ROA and ROE of 0.16% and 0.98%, respectively.

Steve Trager, Chairman and CEO of Republic, made the following comment in regards to that announcement:

"This past year was challenging in many regards, but we managed to maintain beneficial returns despite industry-wide margin compression. With our industry-strong credit quality and capital levels, we remain well-positioned to take advantage of emerging opportunities in an ever-changing marketplace. While FDIC-assisted bank acquisitions did not materialize for us in 2013, growing our Bank and leveraging our capital through acquisition(s) remains a high priority for our Company in 2014."

Republic Bancorp, Inc. (NASDAQ: RBCAA), headquartered in Louisville, Kentucky, is the holding company for Republic Bank & Trust Company ("RB&T") and Republic Bank ("RB"), (collectively the "Bank").

Results of Operations for the Fourth Quarter of 2013 Compared to the Fourth Quarter of 2012

Traditional Banking and Mortgage Banking (collectively "Core Banking")

Net income from Core Banking was $5.1 million for the fourth quarter of 2013, a decrease of $3.7 million from the fourth quarter of 2012. In general, the decline in net income at the Core Bank was largely attributable to lower net interest income and lower Mortgage Banking income, which was partially offset by improvement in the Core Bank's provision for loan losses.

Net interest income within the Core Bank for the fourth quarter of 2013 was $26.7 million compared to $30.5 million for the fourth quarter of 2012. The Core Bank's net interest margin for the fourth quarter of 2013 was 3.27% compared to 3.69% for the fourth quarter of 2012. As expected, the Core Bank's net interest income continued to benefit from its 2012 FDIC-assisted acquisitions, although to a lesser degree than the fourth quarter of 2012. Overall, the total contribution to net interest income from the Bank's Tennessee and Minnesota portfolios for the fourth quarter of 2013 was $2.4 million, a decline of $1.0 million from the fourth quarter of 2012. The decline in net interest income from the Tennessee and Minnesota markets was due to a $42 million decrease in their combined portfolios from year-end 2012, as the Bank's Special Assets group continued to successfully reduce its problem credits from the 2012 FDIC-assisted acquisitions. For the fourth quarter of 2013, the Bank's 2012 FDIC-assisted acquisitions added approximately 18 basis points to the Core Bank's net interest margin, as compared to a 20 basis point contribution for the fourth quarter of 2012.

Within the Core Bank's historical footprint, net interest income was lower during the quarter as a result of the reinvestment of strong cash in-flows during the previous twelve months into lower yielding assets. In addition, the Core Bank's net interest income also experienced a $732,000 decline from its mortgage warehouse lending product, as a slowdown in consumer refinance activity of 1-4 single family mortgages contributed to a decrease in demand for the product. Management believes that maintaining current net interest income and net interest margin levels will remain a challenge for its Core Bank operations, as well as the banking industry as a whole.

The Core Bank's provision for loan losses was $552,000 for the fourth quarter of 2013 reflecting a positive $1.1 million, or 67%, decrease from the fourth quarter of 2012. Approximately $281,000 of the Core Bank's provision expense for the fourth quarter of 2013 related to its purchased credit-impaired loans acquired as part of its 2012-FDIC assisted acquisitions compared to $213,000 for the same quarter in the prior year. A significant portion of the Core Bank's provision for loan losses for the fourth quarter of 2012 related to charges associated with troubled debt restructurings.

The following chart highlights Core Banking credit quality at year end, which continues to place it among the best in its peer group:

 
  Peer(1)   As of and for the Year Ending
Core Banking Credit Quality Ratios 09/30/1312/31/13   12/31/12   12/31/11
 
Non-performing loans / Total loans 1.67 % 0.81 % 0.82 % 1.02 %
 

Non-performing assets / Total loans (including OREO)(2)

 2.12 % 1.46 % 1.79 % 1.49 %
 
Delinquent loans / Total loans 2.25 % 0.63 % 0.79 % 1.07 %
 
Net loan charge-offs / Average loans 0.31 % 0.18 % 0.34 % 0.24 %
 
(1) Peer information obtained from the Uniform Bank Performance Report, Peer Group #1 - Insured Commercial Banks having assets greater than $3 billion.
(2) OREO = Other Real Estate Owned
 

Non-interest income for the Core Bank was $7.0 million for the fourth quarter of 2013 compared to $9.1 million for the fourth quarter of 2012. The decline in non-interest income was primarily due to a decrease of $2.1 million in Mortgage Banking income, as long-term interest rates increased substantially during 2013, dramatically reducing consumer demand for long-term secondary market mortgage loans. As a result, the Core Bank's pipeline of secondary market loan applications, in which the consumer had locked the rate on his or her loan, declined to $4 million at December 31, 2013 compared to $29 million at December 31, 2012. With long-term mortgage interest rates forecasted to remain near or higher than current levels, management anticipates Mortgage Banking income will likely remain at or below its fourth quarter 2013 level for the foreseeable future.

The Core Bank's fourth quarter 2013 non-interest expenses increased $1.5 million from the fourth quarter of 2012 to $26.1 million. The increase primarily related to the following:

  • Salaries and benefits expense increased $253,000 for the fourth quarter of 2013 compared to 2012. The Core Bank incurred a $932,000 benefit during the fourth quarter of 2013, as the Company further reduced its incentive compensation accruals to be in-line with its revised payout estimates for 2013 bonuses. By comparison, the Core Bank recorded a credit to salary expense for reduced incentive compensation accruals of $1.3 million during the fourth quarter of 2012.
  • Bank franchise tax expense increased $283,000 for the quarter in direct correlation to the increase in the Bank's five-year average capital.
  • Other non-interest expense categories that experienced meaningful fluctuations included "audit and professional fees" and "core deposit intangible amortization," which increased from the fourth quarter of 2012 by $258,000 and $210,000, respectively. The overall increase in audit and professional fees primarily related to valuations performed on certain assets from the 2012-FDIC assisted acquisitions and additional services for the Bank's warehouse lending division and correspondent lending initiative. Amortization expense related to the Company's core deposit intangible from its Minnesota acquisition was accelerated during the fourth quarter of 2013, consistent with the Company's decision to close its sole banking center in the Minnesota market.

Republic Processing Group ("RPG")

RPG, which derives substantially all of its revenues during the first and second quarters of the year, historically operates at a net loss during the third and fourth quarters, as the Company prepares for the upcoming tax season. For the fourth quarter of 2013, RPG recorded a net loss of $3.7 million compared to a net loss of $2.1 million for the fourth quarter of 2012. RPG's net loss during the fourth quarter of 2013 was significantly impacted by higher legal expense and higher state income tax expense.

Overall, RPG experienced a $1.0 million increase in legal expenses during the fourth quarter of 2013, which was primarily driven by its third-party arbitration with Jackson Hewitt Tax Services. RPG's third party arbitration with Jackson Hewitt was concluded during the fourth quarter of 2013 and the Company does not anticipate any additional future legal expenses associated with this matter. With the matter resolved, the Company entered into a new two-year agreement with Jackson Hewitt that begins in January 2014 and is expected to increase RPG's 2014 and 2015 annual net revenues by approximately 12% over its 2013 net revenue. Additional overhead expenses with the new contract are expected to be minimal.

In addition to the higher legal expenses during the quarter, RPG also experienced a notable increase in income tax expense for the fourth quarter of 2013. The increase in income tax expenses for the quarter was related to additional accruals recorded for possible state income tax payments beyond the Company's original estimates related to the tax years 2010 through 2013. The Company attributed the increased state income taxes to the RPG segment, as RPG generated the substantial majority of all of the Company's state income tax exposure outside of its geographic footprint during those tax years.

Conclusion

"While everyone at Republic is proud of the Company's successful history, all businesses must continue to challenge everything they do and how they do it in order to thrive. These on-going self-evaluations are both necessary and vital for the long-term health and well-being of any company. Looking ahead to 2014, the Company has implemented several measures on both the revenue and expense sides of the ledger intended to enhance earnings.

One of our new initiatives for 2014 includes a plan to introduce a correspondent lending channel in the first quarter to partner with our relatively new and successful mortgage warehouse lending division. If successful, the new correspondent lending channel is expected to provide a supplement to our existing branch network as a source of new loan growth for the Bank. Additionally, the Bank began offering a new conservatively underwritten, 100%-financing residential real estate loan product during the fourth quarter of 2013, which we expect to grow to $40 million in outstanding balances by July 2014.

On the expense side of the ledger, we implemented several initiatives during the fourth quarter in order to reduce our non-interest expenses. More specifically we implemented a modest reduction to our workforce during the fourth quarter of 2013, with the expectation of saving approximately $2.3 million in salaries and benefits on an annual basis going forward. In addition, we announced plans to close three low-traffic banking centers during the first quarter of 2014, while we look to deploy our resources into locations that can provide the Bank greater access to clients. The closing of the three low-traffic banking centers is expected to save the Company nearly $1 million in overhead expenses on an annual basis.

Overall, we remain excited about our position in the industry as a very well-capitalized, high performing financial institution poised to take advantage of opportunities as they arise. We are committed to appropriately managing risk, while achieving long-term returns for our shareholders. As always, '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. currently has 43 banking centers and is the parent company of Republic Bank & Trust Company ("RB&T") and Republic Bank ("RB"). RB&T 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; and two banking centers in Tennessee - Cool Springs (Franklin) and Green Hills (Nashville). RB has banking centers in Hudson, Port Richey and Temple Terrace, Florida as well as Blue Ash (Cincinnati), Ohio. 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, 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 growth and performance of Republic Processing Group, 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 Annual Report on Form 10-K for the period ended December 31, 2012 and quarterly report on Form 10-Q for the period ended June 30, 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
Fourth Quarter 2013 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    
Dec. 31, 2013 Dec. 31, 2012
Assets:
Cash and cash equivalents $ 170,863 $ 137,691
Investment securities 483,537 484,256
Mortgage loans held for sale, at fair value 3,506 10,614
Loans 2,589,792 2,650,197
Allowance for loan losses   (23,026 )   (23,729 )
Loans, net 2,566,766 2,626,468
Federal Home Loan Bank stock, at cost 28,342 28,377
Premises and equipment, net 32,908 33,197
Goodwill 10,168 10,168
Other real estate owned ("OREO") 17,102 26,203
Bank owned life insurance ("BOLI") 25,086 -
Other assets and accrued interest receivable   33,626     37,425  
Total assets $ 3,371,904   $ 3,394,399  
 
Liabilities and Stockholders' Equity:
Deposits:
Non interest-bearing $ 488,642 $ 479,046
Interest-bearing   1,502,215     1,503,882  
Total deposits 1,990,857 1,982,928
 
Securities sold under agreements to repurchase and other short-term borrowings 165,555 250,884
Federal Home Loan Bank advances 605,000 542,600
Subordinated note 41,240 41,240
Other liabilities and accrued interest payable   26,459     40,045  
Total liabilities 2,829,111 2,857,697
 
Stockholders' equity   542,793     536,702  
Total liabilities and Stockholders' equity $ 3,371,904   $ 3,394,399  
 
 
Average Balance Sheet Data
  Three Months Ended Dec. 31,   Year Ended Dec. 31,
2013   2012 2013   2012
Assets:
Investment securities, including FHLB stock $ 559,146 $ 564,272 $ 527,681 $ 640,830
Federal funds sold and other interest-earning cash 157,579 106,359 145,970 187,790
Loans and fees, including loans held for sale 2,550,770 2,650,267 2,575,146 2,504,150
Total earning assets 3,267,495 3,320,898 3,248,797 3,332,770
Total assets 3,398,055 3,448,191 3,385,345 3,560,739
 
Liabilities and Stockholders' Equity:
Non interest-bearing deposits $ 505,115 $ 542,973 $ 513,891 $ 624,053
Interest-bearing deposits 1,518,221 1,505,108 1,514,847 1,512,455

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

190,568 220,279 170,386 237,414
Federal Home Loan Bank advances 580,537 570,147 578,633 560,659
Subordinated note 41,240 41,240 41,240 41,240
Total interest-bearing liabilities 2,330,566 2,336,774 2,305,106 2,351,768
Stockholders' equity 547,946 534,724 546,880 530,096

 
 
 

Republic Bancorp, Inc. Financial Information
Fourth Quarter 2013 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 Dec. 31, Year Ended Dec. 31,
2013 2012 2013 2012
 
Total interest income(1) $ 32,039 $ 35,930 $ 134,568 $ 183,459
Total interest expense   5,300   5,379   21,393   22,804
 
Net interest income 26,739 30,551 113,175 160,655
 
Provision for loan losses 503 1,324 2,983 15,043
 
Non interest income:
Service charges on deposit accounts 3,569 3,469 13,953 13,496
Net refund transfer fees 35 177 13,884 78,304
Mortgage banking income 778 2,856 7,258 8,447
Debit card interchange fee income 1,526 1,430 6,512 5,817
Bargain purchase gain - Tennessee Commerce Bank ("TCB") - - - 27,614
Bargain purchase gain - First Commercial Bank ("FCB") - 712 1,324 27,824
Net gain on sale of securities - - - 56
Net gain on sales of OREO 457 35 2,170 416
Increase in cash surrender value of BOLI 86 - 86 -
Other   671   659   2,782   3,104
Total non interest income   7,122   9,338   47,969   165,078
 
Non interest expenses:
Salaries and employee benefits 14,352 14,428 57,778 60,633
Occupancy and equipment, net 5,564 5,538 21,918 22,474
Communication and transportation 1,117 1,139 4,128 5,806
Marketing and development 786 759 3,353 3,429
FDIC insurance expense 448 395 1,682 1,403
Bank franchise tax expense 836 553 4,115 3,916
Data processing 891 863 3,333 4,309
Debit card processing expense 634 553 2,850 2,462
Supplies 357 366 1,157 2,114
OREO expense 1,115 1,049 3,446 3,537
Charitable contributions 316 231 1,004 3,341
Legal expense 1,516 583 4,627 1,866
FHLB advance prepayment penalty - - - 2,436
Other   2,405   1,922   8,272   9,019
Total non interest expenses   30,337   28,379   117,663   126,745
 
Income before income tax expense 3,021 10,186 40,498 183,945
Income tax expense   1,676   3,565   15,075   64,606
 
Net income $ 1,345 $ 6,621 $ 25,423 $ 119,339

 
 
 

Republic Bancorp, Inc. Financial Information
Fourth Quarter 2013 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   As of and for the
Three Months Ended Dec. 31, Year Ended Dec. 31,
2013   2012 2013   2012
Per Share Data:
 
Basic average shares outstanding 20,796 20,971 20,807 20,959
Diluted average shares outstanding 20,899 21,020 20,904 21,028
 
End of period shares outstanding:
Class A Common Stock 18,541 18,694 18,541 18,694
Class B Common Stock 2,260 2,271 2,260 2,271
 
Book value per share(2) $ 26.09 $ 25.60 $ 26.09 $ 25.60
Tangible book value per share(2) 25.35 24.86 25.35 24.86
 
Earnings per share:
Basic earnings per Class A Common Stock $ 0.07 $ 0.33 $ 1.23 $ 5.71
Basic earnings per Class B Common Stock 0.05 0.21 1.17 5.55
Diluted earnings per Class A Common Stock 0.07 0.33 1.22 5.69
Diluted earnings per Class B Common Stock 0.05 0.21 1.16 5.53
 
Cash dividends declared per share:
Class A Common Stock $ 0.176 $ 1.265 $ 0.693 $ 1.749
Class B Common Stock 0.160 1.150 0.630 1.590
 
Performance Ratios:
 
Return on average assets 0.16 % 0.77 % 0.75 % 3.35 %
Return on average equity 0.98 4.95 4.65 22.51
Efficiency ratio(3) 90 71 73 39
Yield on average interest-earning assets 3.92 4.33 4.14 5.50
Cost of interest-bearing liabilities 0.91 0.92 0.93 0.97
Net interest spread 3.01 3.41 3.21 4.53
Net interest margin - Total Company 3.27 3.68 3.48 4.82
Net interest margin - Traditional Bank 3.27 3.69 3.51 3.64
 
Other Information:
 
End of period full-time equivalent employees 736 797 736 797
Number of banking centers 45 44 45 44

 
 
 

Republic Bancorp, Inc. Financial Information
Fourth Quarter 2013 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   As of and for the
Three Months Ended December 31, Year Ended December 31,
2013   2012 2013   2012
Credit Quality Asset Balances - Total Company:
 
Loans on non-accrual status $ 19,104 $ 18,506 $ 19,104 $ 18,506
Loans past due 90-days-or-more and still on accrual   1,974     3,173     1,974     3,173  
Total non-performing loans 21,078 21,679 21,078 21,679
OREO   17,102     26,203     17,102     26,203  
Total non-performing assets $ 38,180   $ 47,882   $ 38,180   $ 47,882  
Total delinquent loans $ 16,223 $ 20,844 $ 16,223 $ 20,844
 
Credit Quality Asset Balances - Acquired Banks:
 
Loans on non-accrual status $ 290 $ - $ 290 $ -
Loans past due 90-days-or-more and still on accrual   1,974     3,173     1,974     3,173  
Total non-performing loans 2,264 3,173 2,264 3,173
OREO   9,463     14,498     9,463     14,498  
Total non-performing assets $ 11,727   $ 17,671   $ 11,727   $ 17,671  
Total delinquent loans $ 3,504 $ 5,967 $ 3,504 $ 5,967
 
Credit Quality Ratios - Total Company:
 
Non-performing loans to total loans 0.81 % 0.82 % 0.81 % 0.82 %
Non-performing assets to total loans (including OREO) 1.46 1.79 1.46 1.79
Non-performing assets to total assets 1.13 1.41 1.13 1.41
Allowance for loan losses to total loans 0.89 0.90 0.89 0.90
Allowance and non-accretable yield to total GCLPR(4) 1.61 2.34 1.61 2.34
Allowance for loan losses to non-performing loans 109 109 109 109
Delinquent loans to total loans(5) 0.63 0.79 0.63 0.79
Net loan charge-offs to average loans (annualized) 0.15 0.26 0.14 0.61
 
Credit Quality Ratios - Core Bank:
 
Non-performing loans to total loans 0.81 % 0.82 % 0.81 % 0.82 %
Non-performing assets to total loans (including OREO) 1.46 1.79 1.46 1.79
Non-performing assets to total assets 1.13 1.41 1.13 1.41
Allowance for loan losses to total loans 0.89 0.90 0.89 0.90
Allowance and non-accretable yield to total GCLPR(4) 1.61 2.34 1.61 2.34
Allowance for loan losses to non-performing loans 109 109 109 109
Delinquent loans to total loans(5) 0.63 0.79 0.63 0.79
Net loan charge-offs to average loans (annualized) 0.16 0.31 0.18 0.34
 
Credit Quality Ratios - Core Bank Excluding Acquired Banks:
 
Non-performing loans to total loans 0.75 % 0.74 % 0.75 % 0.74 %
Non-performing assets to total loans (including OREO) 1.06 1.20 1.06 1.20
Non-performing assets to total assets 0.81 0.95 0.81 0.95
Allowance for loan losses to total loans 0.82 0.94 0.82 0.94
Allowance for loan losses to non-performing loans 109 127 109 127
Delinquent loans to total loans(5) 0.51 0.59 0.51 0.59
Net loan charge-offs to average loans (annualized) 0.16 0.33 0.20 0.35

 

 

Credit Quality Ratios - Acquired Banks:
 
Non-performing loans to total loans 2.35 % 2.29 % 2.35 % 2.29 %
Non-performing assets to total loans (including OREO) 11.07 11.54 11.07 11.54
Non-performing assets to total assets 11.07 8.73 11.07 8.73
Allowance for loan losses to total loans 2.59 0.15 2.59 0.15
Allowance and non-accretable yield to total GCLPR(4) 18.04 21.77 18.04 21.77
Allowance for loan losses to non-performing loans 110 7 110 7
Delinquent loans to total loans(5) 3.63 4.30 3.63 4.30

 
 
 

Republic Bancorp, Inc. Financial Information
Fourth Quarter 2013 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
Dec. 31, 2013   Sept. 30, 2013   June 30, 2013   March 31, 2013   Dec. 31, 2012
Assets:
Cash and cash equivalents $ 170,863 $ 141,585 $ 97,690 $ 207,451 $ 137,691
Investment securities 483,537 533,681 475,500 473,726 484,256
Mortgage loans held for sale, at fair value 3,506 9,803 24,174 20,726 10,614
Loans 2,589,792 2,553,435 2,618,029 2,598,642 2,650,197
Allowance for loan losses   (23,026 )   (23,492 )   (22,491 )   (23,563 )   (23,729 )
Loans, net 2,566,766 2,529,943 2,595,538 2,575,079 2,626,468
Federal Home Loan Bank stock, at cost 28,342 28,342 28,342 28,342 28,377
Premises and Equipment, net 32,908 32,626 32,629 33,535 33,197
Goodwill 10,168 10,168 10,168 10,168 10,168
OREO 17,102 15,247 15,248 18,689 26,203
BOLI 25,086 - - - -
Other assets and interest receivable   33,626     30,486     37,776     33,642     37,425  
Total assets $ 3,371,904   $ 3,331,881   $ 3,317,065   $ 3,401,358   $ 3,394,399  
 
Liabilities and Stockholders' Equity:
Deposits:
Non interest-bearing $ 488,642 $ 492,126 $ 487,787 $ 524,149 $ 479,046
Interest-bearing   1,502,215     1,527,659     1,483,260     1,547,647     1,503,882  
Total deposits 1,990,857 2,019,785 1,971,047 2,071,796 1,982,928
 

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

165,555 106,373 128,532 120,217 250,884
Federal Home Loan Bank advances 605,000 587,020 592,044 572,570 542,600
Subordinated note 41,240 41,240 41,240 41,240 41,240
Other liabilities and accrued interest payable   26,459     31,953     40,135     52,800     40,045  
Total liabilities 2,829,111 2,786,371 2,772,998 2,858,623 2,857,697
 
Stockholders' equity   542,793     545,510     544,067     542,735     536,702  
Total liabilities and Stockholders' equity $ 3,371,904   $ 3,331,881   $ 3,317,065   $ 3,401,358   $ 3,394,399  
 
 
 
Average Balance Sheet Data
Quarterly Comparison
Dec. 31, 2013 Sept. 30, 2013 June 30, 2013 March 31, 2013 Dec. 31, 2012
Assets:
Investment securities, including FHLB stock $ 559,146 $ 530,759 $ 511,225 $ 509,006 $ 564,272
Federal funds sold and other interest-earning cash 157,579 113,042 127,696 186,237 106,359
Loans and fees, including loans held for sale 2,550,770 2,576,606 2,590,643 2,582,932 2,650,267
Total earning assets 3,267,495 3,220,407 3,229,564 3,278,175 3,320,898
Total assets 3,398,055 3,339,596 3,355,109 3,449,641 3,448,191
 
Liabilities and Stockholders' Equity:
Non interest-bearing deposits $ 505,115 $ 488,386 $ 492,442 $ 570,619 $ 542,973
Interest-bearing deposits 1,518,221 1,513,330 1,515,878 1,511,906 1,505,108

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

190,568 139,293 149,237 202,924 220,279
Federal Home Loan Bank advances 580,537 592,735 588,712 552,080 570,147
Subordinated note 41,240 41,240 41,240 41,240 41,240
Total interest-bearing liabilities 2,330,566 2,286,598 2,295,067 2,308,150 2,336,774
Stockholders' equity 547,946 547,439 548,644 543,506 534,724

 
 
 

Republic Bancorp, Inc. Financial Information
Fourth Quarter 2013 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
Dec. 31, 2013   Sept. 30, 2013   June 30, 2013   March 31, 2013   Dec. 31, 2012
 
Total interest income(1) $ 32,039 $ 34,009 $ 34,119 $ 34,401 $ 35,930
Total interest expense   5,300   5,470   5,352   5,271     5,379
Net interest income 26,739 28,539 28,767 29,130 30,551
 
Provision for loan losses 503 2,200 905 (625 ) 1,324
 
Non interest income:
Service charges on deposit accounts 3,569 3,676 3,498 3,210 3,469
Net refund transfer fees 35 152 1,683 12,014 177
Mortgage banking income 778 1,026 2,180 3,274 2,856
Debit card interchange fee income 1,526 1,519 1,656 1,811 1,430
Bargain purchase gain - FCB - - - 1,324 712
Net gain on sales of OREO 457 403 1,034 277 35
Increase in cash surrender value of BOLI 86 - - - -
Other   671   763   732   615     659
Total non interest income   7,122   7,539   10,783   22,525     9,338
 
Non interest expenses:
Salaries and employee benefits 14,352 12,226 15,086 16,114 14,428
Occupancy and equipment, net 5,564 5,462 5,315 5,577 5,538
Communication and transportation 1,117 990 991 1,030 1,139
Marketing and development 786 785 880 902 759
FDIC insurance expense 448 419 402 413 395
Bank franchise tax expense 836 707 857 1,715 553
Data processing 891 934 792 716 863
Debit card processing expense 634 655 718 843 553
Supplies 357 228 218 354 366
OREO expense 1,115 497 945 889 1,049
Charitable contributions 316 225 227 236 231
Legal expense 1,516 1,343 1,338 430 583
Other   2,405   1,854   1,930   2,083     1,922
Total non interest expenses   30,337   26,325   29,699   31,302     28,379
 
Income before income tax expense 3,021 7,553 8,946 20,978 10,186
Income tax expense   1,676   2,950   2,827   7,622     3,565
 
Net income $ 1,345 $ 4,603 $ 6,119 $ 13,356   $ 6,621

 
 
 

Republic Bancorp, Inc. Financial Information
Fourth Quarter 2013 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
Dec. 31, 2013   Sept. 30, 2013   June 30, 2013   March 31, 2013   Dec. 31, 2012
Per Share Data:
 
Basic average shares outstanding 20,796 20,787 20,782 20,864 20,971
Diluted average shares outstanding 20,899 20,927 20,858 20,933 21,020
 
End of period shares outstanding:
Class A Common Stock 18,541 18,534 18,522 18,513 18,694
Class B Common Stock 2,260 2,260 2,260 2,264 2,271
 
Book value per share(2) $ 26.09 $ 26.23 $ 26.18 $ 26.12 $ 25.60
Tangible book value per share(2) 25.35 25.47 25.42 25.38 24.86
 
Earnings per share:
Basic earnings per Class A Common Stock $ 0.07 $ 0.22 $ 0.30 $ 0.64 $ 0.33
Basic earnings per Class B Common Stock 0.05 0.21 0.28 0.63 0.21
Diluted earnings per Class A Common Stock 0.07 0.22 0.30 0.64 0.33
Diluted earnings per Class B Common Stock 0.05 0.21 0.28 0.62 0.21
 
Cash dividends declared per share:
Class A Common Stock $ 0.176 $ 0.176 $ 0.176 $ 0.165 $ 1.265
Class B Common Stock 0.160 0.160 0.160 0.150 1.150
 
Performance Ratios:
 
Return on average assets 0.16 % 0.55 % 0.73 % 1.55 % 0.77 %
Return on average equity 0.98 3.36 4.46 9.83 4.95
Efficiency ratio(4) 90 73 75 61 71
Yield on average interest-earning assets 3.92 4.22 4.23 4.20 4.33
Cost of interest-bearing liabilities 0.91 0.96 0.93 0.91 0.92
Net interest spread 3.01 3.26 3.30 3.29 3.41
Net interest margin - Total Company 3.27 3.54 3.56 3.55 3.68
Net interest margin - Traditional Bank 3.27 3.54 3.57 3.60 3.69
 
Other Information:
 
End of period full-time equivalent employees 736 796 791 797 797
Number of banking centers 45 45 44 44 44

 
 
 

Republic Bancorp, Inc. Financial Information
Fourth Quarter 2013 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
Dec. 31, 2013   Sept. 30, 2013   June 30, 2013   March 31, 2013   Dec. 31, 2012
Credit Quality Asset Balances - Total Company:
Loans on non-accrual status $ 19,104 $ 18,407 $ 21,922 $ 18,161 $ 18,506
Loans past due 90-days-or-more and still on accrual   1,974     1,839     2,159     2,752     3,173  
Total non-performing loans 21,078 20,246 24,081 20,913 21,679
OREO   17,102     15,247     15,248     18,689     26,203  
Total non-performing assets $ 38,180   $ 35,493   $ 39,329   $ 39,602   $ 47,882  
Total delinquent loans $ 16,223 $ 15,087 $ 16,197 $ 19,813 $ 20,844
 
Credit Quality Asset Balances - Acquired Banks:
Loans on non-accrual status $ 290 $ 39 $ 21 $ 24 $ -
Loans past due 90-days-or-more and still on accrual   1,974     1,839     2,159     2,752     3,173  
Total non-performing loans 2,264 1,878 2,180 2,776 3,173
OREO   9,463     5,503     6,113     10,346     14,498  
Total non-performing assets $ 11,727   $ 7,381   $ 8,293   $ 13,122   $ 17,671  
Total delinquent loans $ 3,504 $ 2,921 $ 3,466 $ 3,846 $ 5,967
 
Credit Quality Ratios - Total Company:
Non-performing loans to total loans 0.81 % 0.79 % 0.92 % 0.80 % 0.82 %
Non-performing assets to total loans (including OREO) 1.46 1.38 1.49 1.51 1.79
Non-performing assets to total assets 1.13 1.07 1.19 1.16 1.41
Allowance for loan losses to total loans 0.89 0.92 0.86 0.91 0.90
Allowance and non-accretable yield to total GCLPR(4) 1.61 1.82 1.96 2.12 2.34
Allowance for loan losses to non-performing loans 109 116 93 113 109
Delinquent loans to total loans(5) 0.63 0.59 0.62 0.76 0.79
Net loan charge-offs to average loans (annualized) 0.15 0.19 0.31 (0.07 ) 0.26
 
Credit Quality Ratios - Core Bank:
Non-performing loans to total loans 0.81 % 0.79 % 0.92 % 0.80 % 0.82 %
Non-performing assets to total loans (including OREO) 1.46 1.38 1.49 1.51 1.79
Non-performing assets to total assets 1.13 1.07 1.19 1.16 1.41
Allowance for loan losses to total loans 0.89 0.92 0.86 0.91 0.90
Allowance and non-accretable yield to total GCLPR(4) 1.61 1.82 1.96 2.12 2.34
Allowance for loan losses to non-performing loans 109 116 93 113 109
Delinquent loans to total loans(5) 0.63 0.59 0.62 0.76 0.79
Net loan charge-offs to average loans (annualized) 0.16 0.19 0.33 0.02 0.31
 
Credit Quality Ratios - Core Bank Excluding Acquired Banks:
Non-performing loans to total loans 0.75 % 0.75 % 0.87 % 0.73 % 0.74 %
Non-performing assets to total loans (including OREO) 1.06 1.14 1.23 1.07 1.20
Non-performing assets to total assets 0.81 0.87 0.97 1.81 0.95
Allowance for loan losses to total loans 0.82 0.87 0.85 0.94 0.94
Allowance for loan losses to non-performing loans 109 115 98 129 127
Delinquent loans to total loans(5) 0.51 0.50 0.51 0.64 0.59
Net loan charge-offs to average loans (annualized) 0.16 0.25 0.35 0.02 0.33
 

Credit Quality Ratios - Acquired Banks:

Non-performing loans to total loans 2.35 % 1.77 % 1.95 % 2.26 % 2.29 %
Non-performing assets to total loans (including OREO) 11.07 6.61 7.04 9.85 11.54
Non-performing assets to total assets 11.07 6.57 7.04 8.87 8.73
Allowance for loan losses to total loans 2.59 2.15 0.95 0.17 0.15
Allowance and non-accretable yield to total GCLPR(4) 18.04 19.32 21.34 20.60 21.77
Allowance for loan losses to non-performing loans 110 122 49 8 7
Delinquent loans to total loans(5) 3.63 2.75 3.10 3.13 4.30
 
 
 

Republic Bancorp, Inc. Financial Information
Fourth Quarter 2013 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 subsidiary banks), which are then aggregated if operating performance, products/services, and customers are similar.

As of December 31, 2013, 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 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 RB&T, RPG facilitates the receipt and payment of federal and state tax refund products under the TRS division. Through RB, the RPS division is an issuing bank offering general purpose reloadable prepaid debit cards through third party program managers. Through RB&T and RB, the RCS division is piloting short-term consumer credit products.

For the projected near-term, as these programs are being established, the operating results of these divisions are expected to be immaterial to the Company's overall results of operations and will be reported as part of the RPG business operating segment. The RPS and RCS divisions will not be reported as separate business operating segments 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, while servicing fees and loan sales provide the majority of revenue from Mortgage Banking operations. Prior to 2013, Refund Anticipation Loan ("RAL") fees and net Refund Transfer ("RT") fees provided the majority of the revenue for RPG. In 2013, net RT fees have provided, and are expected to continue to provide the majority of revenues for RPG, as the Company no longer offers RALs. 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 most recent Annual Report on Form 10-K. 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 months and years ended December 31, 2013 and 2012 follows:

 
 
 

Republic Bancorp, Inc. Financial Information
Fourth Quarter 2013 Earnings Release (continued)

 
 
  Three Months Ended December 31, 2013
(dollars in thousands)  

Traditional

Banking

 

Mortgage

Banking

 

Republic

Processing Group

  Total Company
     
Net interest income $ 26,599 $ 83 $ 57 $ 26,739
 
Provision for loan losses 552 - (49 ) 503
 
Net refund transfer fees - - 35 35
Mortgage banking income - 778 - 778
Other non interest income   6,197       29     83       6,309  
Total non interest income 6,197 807 118 7,122
 
Total non interest expenses   25,202       881     4,254       30,337  
 
Income before income tax expense 7,042 9 (4,030 ) 3,021
Income tax expense   1,969       4     (297 )     1,676  
Net income $ 5,073     $ 5   $ (3,733 )   $ 1,345  
 

Segment end of period assets

$ 3,354,850 $ 9,307 $ 7,747 $ 3,371,904
 
Net interest margin 3.27 % NM NM 3.27 %
 
 

 

Three Months Ended December 31, 2012
(dollars in thousands)  

Traditional

Banking

 

Mortgage

Banking

 

Republic

Processing Group

  Total Company
 
Net interest income $ 30,425 $ 117 $ 9 $ 30,551
 
Provision for loan losses 1,662 - (338 ) 1,324
 
Net refund transfer fees - - 177 177
Mortgage banking income - 2,856 - 2,856
Bargain purchase gain - FCB 712 - - 712
Other non interest income   5,569       12     12       5,593  
Total non interest income 6,281 2,868 189 9,338
 
Total non interest expenses   23,628       914     3,837       28,379  
 
Income before income tax expense 11,416 2,071 (3,301 ) 10,186
Income tax expense   4,028       724     (1,187 )     3,565  
Net income $ 7,388     $ 1,347   $ (2,114 )   $ 6,621  
 
Segment end of period assets $ 3,371,934 $ 15,752 $ 6,713 $ 3,394,399
 
Net interest margin 3.69 % NM NM 3.68 %

 
 
 

Republic Bancorp, Inc. Financial Information
Fourth Quarter 2013 Earnings Release (continued)

 
 
  Year Ended December 31, 2013
(dollars in thousands)  

Traditional
Banking

 

Mortgage
Banking

 

Republic

Processing Group

  Total Company
     
Net interest income $ 112,556 $ 471 $ 148 $ 113,175
 
Provision for loan losses 3,828 - (845 ) 2,983
 

Net refund transfer fees

- - 13,884 13,884
Mortgage banking income - 7,258 - 7,258

Net gain on sales, calls and impairment of securities

- - - -
Bargain purchase gain - FCB 1,324 - - 1,324
Other non interest income   24,497       131     875       25,503  
Total non interest income 25,821 7,389 14,759 47,969
 
Total non interest expenses   98,064       3,418     16,181       117,663  
 
Income before income tax expense 36,485 4,442 (429 ) 40,498
Income tax expense   12,557       1,555     963       15,075  
Net income $ 23,928     $ 2,887   $ (1,392 )   $ 25,423  
 
Segment end of period assets $ 3,354,850 $ 9,307 $ 7,747 $ 3,371,904
 
Net interest margin 3.51 % NM NM 3.48 %
 
 
Year Ended December 31, 2012
(dollars in thousands)  

Traditional

Banking

 

Mortgage

Banking

 

Republic

Processing Group

  Total Company
 
Net interest income $ 114,831 $ 400 $ 45,424 $ 160,655
 
Provision for loan losses 8,167 - 6,876 15,043
 

Net refund transfer fees

- - 78,304 78,304
Mortgage banking income - 8,447 - 8,447

Net gain on sales, calls and impairment of securities

56 - - 56
Bargain purchase gain - TCB 27,614 - - 27,614
Bargain purchase gain - FCB 27,824 - - 27,824
Other non interest income   22,574       39     220       22,833  
Total non interest income 78,068 8,486 78,524 165,078
 
Total non interest expenses   100,380       3,842     22,523       126,745  
 
Income before income tax expense 84,352 5,044 94,549 183,945
Income tax expense   29,178       1,765     33,663       64,606  
Net income $ 55,174     $ 3,279   $ 60,886     $ 119,339  
 
Segment end of period assets $ 3,371,934 $ 15,752 $ 6,713 $ 3,394,399
 
Net interest margin 3.64 % NM NM 4.82 %
 
 
 

Republic Bancorp, Inc. Financial Information
Fourth Quarter 2013 Earnings Release (continued)

(1) - The amount of loan fee income included in total interest income was $2.1 million and $2.4 million for the quarters ended December 31, 2013 and 2012. The amount of loan fee income included in total interest income was $10.9 million and $50.8 million for the years ended December 31, 2013 and 2012.

The amount of loan fee income included in total interest income per quarter was as follows: $2.1 million (quarter ended December 31, 2013), $3.3 million (quarter ended September 30, 2013), $3.0 million (quarter ended June 30, 2013), $2.6 million (quarter ended March 31, 2013), and $2.4 million (quarter ended December 31, 2012).

(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) Dec. 31, 2013   Sept. 30, 2013   June 30, 2013   March 31, 2013   Dec. 31, 2012
Total stockholders' equity (a) $ 542,793 $ 545,510 $ 544,067 $ 542,735 $ 536,702
Less: Goodwill 10,168 10,168 10,168 10,168 10,168
Less: Core deposit intangible - 289 388 454 510
Less: Mortgage servicing rights   5,409     5,482     5,305     4,858     4,777  

Tangible stockholders' equity (c)

$ 527,216   $ 529,571   $ 528,206   $ 527,255   $ 521,247  
 
Total assets (b) $ 3,371,904 $ 3,331,881 $ 3,317,065 $ 3,401,358 $ 3,394,399
Less: Goodwill 10,168 10,168 10,168 10,168 10,168
Less: Core deposit intangible - 289 388 454 510
Less: Mortgage servicing rights   5,409     5,482     5,305     4,858     4,777  
Tangible assets (d) $ 3,356,327   $ 3,315,942   $ 3,301,204   $ 3,385,878   $ 3,378,944  
 
Total stockholders' equity to total assets (a/b) 16.10 % 16.37 % 16.40 % 15.96 % 15.81 %
Tangible stockholders' equity to tangible assets (c/d) 15.71 % 15.97 % 16.00 % 15.57 % 15.43 %
 
Number of shares outstanding (e)   20,801     20,794     20,782     20,777     20,965  
 
Book value per share (a/e) $ 26.09 $ 26.23 $ 26.18 $ 26.12 $ 25.60
Tangible book value per share (c/e) 25.35 25.47 25.42 25.38 24.86
 

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

(4) - The following tables reflect the calculation of the allowance for loan losses plus non-accretable yield on purchased credit impaired loans as a percentage of total gross contractual loan principal receivable ("GCLPR"). While this ratio is not considered in accordance with U.S. GAAP, it provides additional insight regarding the Bank's ability to absorb impairment of contractual loan principal receivable.

  Quarterly Comparison - Total Company
(dollars in thousands) Dec. 31, 2013   Sept. 30, 2013   June 30, 2013   March 31, 2013   Dec. 31, 2012
Allowance for loan losses $ 23,026 $ 23,492 $ 22,491 $ 23,563 $ 23,729
Non-accretable yield   19,078     23,522     29,478     32,339     39,264  
Total (f) $ 42,104   $ 47,014   $ 51,969   $ 55,902   $ 62,993  
 
Total loans $ 2,589,792 $ 2,553,435 $ 2,618,029 $ 2,598,642 $ 2,650,197
Non-accretable yield 19,078 23,522 29,478 32,339 39,264
Accretable yield   4,050     3,796     1,986     2,742     3,465  
Total GCLPR (g) $ 2,612,920   $ 2,580,753   $ 2,649,493   $ 2,633,723   $ 2,692,926  
 

Allowance and non-accretable yield to total GCLPR (f/g)

1.61 % 1.82 % 1.96 % 2.12 % 2.34 %
 
  Quarterly Comparison - Acquired Banks
(dollars in thousands) Dec. 31, 2013   Sept. 30, 2013   June 30, 2013   March 31, 2013   Dec. 31, 2012
Allowance for loan losses $ 2,497 $ 2,283 $ 1,063 $ 214 $ 214
Non-accretable yield   19,078     23,522     29,478     32,339     39,264  
Total (h) $ 21,575   $ 25,805   $ 30,541   $ 32,553   $ 39,478  
 
Total loans $ 96,462 $ 106,220 $ 111,629 $ 122,921 $ 138,616
Non-accretable yield 19,078 23,522 29,478 32,339 39,264
Accretable yield   4,050     3,796     1,986     2,742     3,465  
Total GCLPR (i) $ 119,590   $ 133,538   $ 143,093   $ 158,002   $ 181,345  
 

Allowance and non-accretable yield to total GCLPR (h/i)

18.04 % 19.32 % 21.34 % 20.60 % 21.77 %
 

(5) - 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