LOUISVILLE, Ky. (October 18, 2013) – Republic Bancorp Inc. reported net income of $4.6 million for the third quarter of 2013 resulting in Diluted Earnings per Class A Common Share of $0.22. Return on average assets (“ROA”) and return on average equity (“ROE”) were 0.55 percent and 3.36 percent, respectively, for the quarter.
Net income for the first nine months of 2013 was $24.1 million, with Diluted Earnings per Class A Common share of $1.16. ROA and ROE for the first nine months of 2013 were 0.95 percent and 5.87 percent, respectively.
On Oct. 8, Republic filed a Form 8K announcing that it was withdrawing its applications to the Office of the Comptroller of the Currency to merge and consolidate its Republic Bank & Trust and Republic Bank charters into one national bank charter and to acquire certain assets and assume all of the deposits of H&R Block Bank. As a result of RB&T withdrawing its application with the OCC, H&R Block Bank terminated the agreement.
Steve Trager, chairman/CEO of Republic, made the following comment in regards to that announcement:
“We are disappointed that we were not able to consummate a relationship with an industry leader and quality provider like H&R Block. We remain one of the most significant and long-lasting financial institutions in the tax industry, given our great history in the business over the last 20 years. We continue to be well positioned to pursue opportunities as we have been recognized as one of the best capitalized, top performing and most community minded banks in the country.
“I am very proud that 22 community and industry leaders submitted public letters of support to the Office of the Comptroller of Currency as it relates to our acquisition of H&R Block Bank, including: the Mayor of Louisville; the presidents of the universities of Louisville and Kentucky; the president of the Louisville Urban League; the attorney general of Kentucky; the executive director of the Louisville Asset Building Coalition; the president of the Metro United Way; the president/CEO of the WHAS Crusade for Children; the president of the Federal Home Loan Bank of Cincinnati; the CEO of Habitat For Humanity; the executive director of Community Action of Southern Indiana; and the chief business officer of Girl Scouts of Kentuckiana, among many others.
Republic will strive to continue to serve our customers and communities the right way as we look for opportunities to serve more people in more places,” Steve Trager concluded.
Republic Bancorp Inc. (NASDAQ: RBCAA), headquartered in Louisville, is the holding company for RB&T and RB (collectively the “Bank”).
Comparability between the third quarter and first nine months of 2013 and the third quarter and first nine months of 2012 are challenging due to the large bargain purchase gains earned by Republic related to RB&T’s two FDIC-assisted acquisitions in 2012. As a result, Republic’s third quarter and year-to-date 2013 financial performance are reported in accordance with Generally Accepted Accounting Principles (“GAAP”) and excluding its bargain purchase gains, a non-GAAP basis. A reconciliation of these GAAP and non-GAAP figures are included as part of this filing as well.
2012 acquisition affects core banking income
Net income from core banking was $6.5 million for the third quarter of 2013, a decrease of $15.4 million from the third quarter of 2012, which contained a $27.1 million pre-tax bargain purchase gain resulting from RB&Ts FDIC-assisted acquisition in Minnesota.
Net interest income within the core bank for the third quarter of 2013 was $28.5 million compared to $28.6 million for the third quarter of 2012. The core bank’s net interest margin for the third quarter of 2013 was 3.55 percent compared to 3.54 percent for the third quarter of 2012. The core bank’s net interest income continued to benefit from RB&T’s 2012 FDIC-assisted acquisitions in Tennessee and Minnesota, which contributed $3.4 million of net interest income for the third quarter of 2013 compared to $1.2 million for the third quarter of 2012.
Overall, RB&T’s 2012 FDIC-assisted acquisitions added approximately 30 basis points to the core bank’s net interest margin for the third quarter of 2013. The increase in net interest income resulting from RB&T’s 2012 FDIC-assisted acquisitions was partially offset by a decline in net interest income within the bank’s historical footprint, as strong cash in-flows during the previous 12 months from the Bank’s existing loan portfolio were redeployed into lower yielding portfolio products. Management believes that maintaining current net interest income and net interest margin levels will remain a challenge for the company, as well as the banking industry as a whole.
The core bank’s provision for loan losses was $2.3 million for the third quarter of 2013 reflecting a $286,000 decrease from the third quarter of 2012. Approximately $1.2 million of the core bank’s provision expense for the third quarter of 2013 was related to its Minnesota and Tennessee loan portfolios. The majority of this provision represented yield-related adjustments, as the projected future cash flows of a few larger acquired loans were expected to extend beyond management’s initial day-one expectations. These yield related provisions from the Tennessee and Minnesota acquired loans will be accreted into interest income on loans over the revised expected lives of the applicable loans. At September 30, 2013, the contractual value of the Minnesota and Tennessee purchased loan portfolios totaled $134 million with a carrying value of $106 million.
The core bank’s overall credit quality ratios remained solid at the end of the third quarter. The core bank’s non-performing loans to total loans ratio was 0.79 percent at the end of the quarter while its delinquent loans to total loans ratio was 0.59 percent, both ratios comparing favorably to the bank’s peers.