California Republic Bancorp Announces Issuance of $90 Million in Common Stock and Subordinated Debt and Third Quarter 2014 Record Results

  • Raised $64.8 million in common stock at 2.0x tangible book value
  • Raised $25.0 million in subordinated debentures at a coupon of 5.25%
  • Record prime auto loan originations of $328 million, a 75% quarterly increase
  • All time high total serviced portfolio of over $1.7 billion
  • Record assets of $983 million
  • Core deposit growth of $171 million, with 59% of total non-interest bearing
  • Record net income of $3.3 million
  • ROE of 18.7% and ROA of 1.4%, respectively for the quarter

IRVINE, Calif.--()--California Republic Bancorp (“CRB” or “Company”) (OTCBB: CRPB), a bank holding company for California Republic Bank (“Bank”), announced its third quarter results and the completion of the issuance of 2,398,242 shares of common stock at a price of $27.00 per share in a private placement offering, representing a multiple of 2.0 times tangible book value per share, prior to the issuance of the additional shares. In addition, the Company announced that the Bank has issued $25.0 million in subordinated debentures, at a coupon of 5.25% with an investment grade rating from Kroll Bond Rating Agency. The subordinated debentures will be included in the calculation of total risk-based capital for regulatory capital ratio calculations. On a pro-forma basis, the Company expects that its regulatory capital ratios at September 30, 2014 would have increased from 7.64% to 13.26% for its Tier 1 leverage ratio, and from 12.28% to 26.60% for its total risk based capital ratio, as a result of the total capital raised.

Equity and Subordinated Debt Offering

The equity raise and the subordinated debt offering were both oversubscribed. There were several anchor institutional investors that participated in the equity raise. Credit Suisse Securities (USA) LLC acted as sole placement agent for the institutional common stock issuance. Sandler O’Neill + Partners, L.P. acted as placement agent of the subordinated debentures. Keefe, Bruyette & Woods acted as Special Advisor in the transactions. Sheppard, Mullin, Richter & Hampton LLP acted as lead counsel, and Manatt, Phelps & Phillips, LLP acted as lead regulatory counsel.

“This equity and subordinated debt offering is a transformative event for our Company as we more than doubled our total regulatory capital. We are very pleased to have raised both common equity and subordinated debt at very attractive levels with great execution from our long term partners in this transaction. This will provide us with the capital needed to support the continued nationwide growth of our automobile lending platform, as well as the geographic expansion of our successful commercial banking business,” stated Jon Wilcox, Chief Executive Officer of California Republic Bancorp.

Net Income

The Company also announced record net income for the three months ended September 30, 2014 of $3.3 million, or $0.62 per basic common share, compared with a net loss of $0.8 million, or $(0.16) per basic common share for the same period a year earlier. For the nine months ended September 30, 2014, net income increased 356% to $9.5 million, or $1.80 per basic common share, compared with $2.1 million, $0.40 per basic common share, for the same period a year ago.

“We are very pleased to have achieved record net income and strong returns as we continue to grow our businesses through organic growth,” remarked John DeCero, President of California Republic Bancorp. “Most important, our record loan growth and the expansion of our businesses were achieved this quarter with our credit attributes remaining strong and consistent. We have deepened our existing, long-term relationships, and carefully built new ones with only 0.31% net chargeoffs in our owned prime auto loan portfolio this quarter, and no credit losses in our commercial banking portfolio since inception.”

Business Performance:

CRB announced that prime auto loan originations increased 75%, or $141 million, to $328 million for the third quarter of 2014 compared with $187 million for the third quarter a year ago. For the nine months ended September 30, 2014, prime auto loan originations increased 98%, or $420 million, to $848 million, compared with $429 million for the same nine month period a year earlier, as the Bank continues to build out new locations and increase its base of well-established auto dealerships. The Bank continues to maintain stable and consistent borrower credit attributes, demographics, and loan structure, reaffirming its commitment to not sacrifice credit quality for loan growth. With continued strong loan origination growth, CRB announced its total serviced loan portfolio increased 79% to $1.7 billion at September 30, 2014 compared with $931 million a year ago.

The Bank also successfully completed a prime automobile loan securitization in the second quarter of 2014 in which $275 million in notes backed by $275 million of the Bank’s automobile loans were sold in an underwritten public offering registered with the Securities and Exchange Commission. The Bank sold all remaining residual interest in the securitized receivables through a sale of the underlying ownership certificates of the securitization trust through a private placement transaction under Rule 144A to qualified institutional buyers. Furthermore, this securitization transaction was accounted for as a true sale, which included all future residual interests, therefore leaving no possibility for later adjustments affecting the financial position of the Bank. Credit Suisse Securities (USA) LLC acted as sole placement agent for the securitization transaction. CRB also retained the right to service the sold loans on which it is paid an annual servicing fee of 1.0% on the outstanding pool balance annually until the transaction is paid-off. Total auto loans serviced for others increased 207% to $1.1 billion at September 30, 2014 compared with $342 million a year earlier.

Total assets increased 23%, or $184 million, to $983 million at September 30, 2014 compared with the same period a year earlier. The year-over-year growth in total assets includes a $26 million increase, or 4.5%, in total gross loans due to growth in commercial and automobile loan originations, and the timing of the Company’s auto loan securitization activities; and a $159 million increase in cash and investment securities to $352 million, as the Company continues to generate excess liquidity compared with the same period a year ago. Growth in assets was supported by a $171 million increase, or 23%, in total deposits to $904 million at September 30, 2014, compared with the same period a year earlier. Noninterest bearing demand deposit accounts grew $124 million, or 30%, to $536 million at September 30, 2014 compared with the same period a year ago. Noninterest bearing demand deposit accounts now represent over 59% of total deposits.

Financial Performance:

Net interest income grew 52%, or $3.7 million to $10.9 million for the three months ended September 30, 2014 compared with $7.2 million for the same period a year ago. For the nine months ended September 30, 2014, net interest income grew 39%, or $8.2 million to $29.4 million compared with $21.1 million for the same period a year earlier. Net interest margins improved 39 basis points to 4.59% for the nine months ended September 30, 2014 compared with 4.20% for the same period a year earlier.

Noninterest income grew $7.0 million, to $8.0 million for the three months ended September 30, 2014, compared with $1.0 million for the same period a year earlier as the Company did not complete an automobile loan securitization transaction in the third quarter of 2013. For the nine months ended September 30, 2014, noninterest income grew 236%, or $15.6 million, to $22.2 million, compared with $6.6 million for the same period a year ago. For the nine months ended September 30, 2014, noninterest income was positively impacted by a $480 million increase, or 197%, in auto loans securitized and sold, and a $709 million increase, or 207%, in auto loans serviced for others.

Noninterest expense increased $4.7 million, or 53%, to $13.6 million for the third quarter of 2014 compared with $8.9 million the same period a year ago. For the nine months ended September 30, 2014, noninterest expense increased $11.5 million, or 49%, to $34.8 million, compared with $23.2 million for the same period a year ago. The year-over-year increase in noninterest expense is the result of the Company continuing to make significant investments in its auto lending platform to support its nationwide expansion. Return on average equity was 18.7% and return on average assets was 1.4% for the third quarter of 2014 compared with (5.7%) and (0.54%), respectively, for the same period a year earlier. For the nine months ended September 30, 2014, return on average equity was 19.0% and return on average assets was 1.5%, compared with 4.9% and 0.4%, respectively, for the same period a year earlier.

Asset Quality:

California Republic Bank continued to report strong credit quality metrics through the three and nine months ended September 30, 2014, with no nonperforming or charged-off loans since inception within the commercial bank portfolio, and a net annualized charge-off rate for its owned auto loan portfolio of 0.45% for the third quarter of 2014 compared with 0.42% for the same period a year ago. For the nine months ended September 30, 2014 the net annualized charge-off rate was 0.31%, compared with 0.35% for the same period a year ago for its owned auto loan portfolio.

Regulatory Capital:

The Bank’s regulatory capital ratios exceeded those required to be considered a “well capitalized” institution for regulatory purposes. The tier 1 leverage ratio for the Bank was 7.6%, the tier 1 risk based capital ratio was 11.4%, and the total risk based capital ratio was 12.2% at September 30, 2014, all in excess of the “well capitalized” minimums of 5%, 6% and 10%, respectively.

About California Republic Bancorp:

California Republic Bancorp is the holding company for California Republic Bank and CRB Auto, Inc. California Republic Bank is a full-service commercial bank providing loans, deposit and cash management services to individuals, businesses, and investors. The Bank offers its clients direct access to decision makers, unparalleled responsiveness, seasoned Relationship Managers and state-of-the-art technology. The Bank has four branches and one loan production office serving Southern California, located in Newport Beach, Beverly Hills, Irvine, Westlake Village and San Diego. The Bank also owns and operates an indirect auto finance business and a separate wholly owned subsidiary, CRB Auto, Inc. which purchases auto contracts from both franchised and select independent automobile dealerships throughout California, Arizona, Texas, Nevada, Kansas, Missouri, and Iowa.

For more information, contact Jon Wilcox, CEO, or John DeCero, President at 949-270-9719. You can also visit the Company’s website at www.crbnk.com.

California Republic Bancorp’s Board of Directors includes:

Inside Directors: Jon Wilcox, CEO and John DeCero, President.

Outside Directors: Robert Barth, Chairman of the Board of California Republic Bank and CEO of Black Equities Group Ltd.; John Bendheim, President of Bendheim Enterprises, Inc.; Marc Brutten, Entrepreneur and CEO of Westcore Holdings; Bob Din, CEO of En Pointe Technologies; John Hagestad, Managing Partner of SARES-REGIS Group; Warren S. Orlando, Chairman, 1st United Bancorp Inc.; and J. Scott Watt, President and CEO of the Watt Group of Companies.

For information regarding the purchase or sale of California Republic Bancorp’s stock, contact Douglas Deubel, Raymond James at 1-888-734-0540.

Forward-looking Statements

Certain matters discussed in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and are subject to the safe harbors created by the act. These forward-looking statements refer to California Republic’s current expectations regarding future operating results, and growth in loans, deposits, and assets. These forward-looking statements are subject to certain risks and uncertainties that could cause the actual results, performance or achievements to differ materially from those expressed, suggested or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to (1) the impact of changes in interest rates, a decline in economic conditions and increased competition by financial service providers on California Republic’s results of operations; (2) California Republic’s ability to continue its internal growth rate; (3) California Republic’s ability to build net interest spread; (4) the quality of California Republic’s earning assets; (5) changes in the level of non-performing assets and charge-offs; (6) the effect of changes in laws and regulations with which California Republic must comply; (7) changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory authorities and accounting requirements; (8) acts of war or terrorism or natural disasters; (9) the timely development of new banking products and services; (10) the success of products and services, such as the indirect auto loan business; (11) technological changes; (12) cyber-security threats, including loss of system functionality or theft or loss of data; (13) the ability to increase market share and control expenses; (14) the ability to successfully operate CRB Auto, Inc. as a separate subsidiary of the Bank; and (15) California Republic’s success at managing the risks involved in the foregoing items.

California Republic does not undertake, and specifically disclaims any obligation to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements except as required by law.

 
California Republic Bancorp and Subsidiaries
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars and shares in thousands)
 
      Three Months Ended       Nine Months Ended
9/30/2014       9/30/2013 9/30/2014       9/30/2013
Interest income
Loans $ 10,798 $ 7,547 $ 29,741 $ 22,414
Other   651   215     1,249   462
TOTAL INTEREST INCOME 11,449 7,762 30,990 22,876
 
Interest expense
Deposits 507 580 1,590 1,726
Other   15   -     10   2
TOTAL INTEREST EXPENSE   522   580     1,599   1,728
Net interest income 10,927 7,182 29,391 21,148
Provision for loan losses 313 688 1,132 740
NET INTEREST INCOME AFTER        
PROVISION FOR LOAN LOSSES 10,614 6,494 28,259 20,408
Noninterest income
Gain on sale of loans 5,465 (10 ) 15,964 4,335
Loan servicing fees 2,432 1,002 6,007 2,051
Other   90   46     226   224
TOTAL NONINTEREST INCOME 7,988 1,038 22,196 6,610
Noninterest expense
Salaries and employee benefits 9,414 5,039 25,013 13,319
Other   4,148   3,834     9,739   9,929
TOTAL NONINTEREST EXPENSE   13,562   8,873     34,752   23,248
INCOME BEFORE INCOME TAXES 5,040 (1,341 ) 15,703 3,770
Income tax expense   1,753   (527 )   6,175   1,679
NET INCOME $ 3,287 $ (814 ) $ 9,527 $ 2,091
 
Earnings per common share:
Basic $ 0.62 $ (0.16 ) $ 1.80 $ 0.40
 
Weighted average number of common shares
Basic 5,318 5,212 5,292 5,212
 
 
California Republic Bancorp and Subsidiaries
UNAUDITED CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
 
      9/30/2014       6/30/2014       9/30/2013
ASSETS
Cash and cash equivalents $ 238,492 $ 233,483 $ 189,475
Investment securities 113,350 121,239 3,777
Commercial loans 393,676 391,169 351,817
Auto loans   221,338     187,636     236,750  
Gross loans 615,015 578,805 588,567
Allowance for loan and lease losses   (5,057 )   (5,047 )   (5,464 )
Net loans 609,958 573,758 583,103
Premises and equipment, net 5,753 3,269 2,947
FHLB stock and other investments 6,705 3,470 3,404
Other assets   8,994     12,441     16,435  
TOTAL ASSETS $ 983,252   $ 947,660     799,140  
 
LIABILITIES
Deposits:
Noninterest bearing $ 535,984 $ 515,811 411,905
Interest bearing   368,359     351,420     321,646  

Total deposits

904,342 867,231 733,551
Other borrowings 0
Other liabilities   7,098     11,801     7,124  
TOTAL LIABILITIES 911,440 879,032 740,675
 
SHAREHOLDERS' EQUITY
Common stock 53,050 53,050 51,992
Paid in capital 4,506 4,281 3,751
Retained earnings 14,712 11,425 2,722
Accumulated other comprehensive income   (457 )   (128 )   0  
TOTAL SHAREHOLDERS' EQUITY   71,811     68,628     58,466  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 983,252   $ 947,660   $ 799,140  
 
 
California Republic Bancorp and Subsidiaries
UNAUDITED CONSOLIDATED AVERAGE BALANCES AND ANNUALIZED YIELDS
(Dollars in thousands)
 
      Nine Months Ended
9/30/2014       9/30/2013
Average             Average            
  Balance Income Rate Balance Income Rate
ASSETS
Cash $ 185,687 $ 350 0.25 % $ 186,474 $ 330 0.24 %
Investment securities 48,197 746 2.07 % 525 3 0.76 %
Commercial loans 371,594 14,816 5.33 % 314,564 13,248 5.63 %
Auto loans   247,481   14,925 8.06 %   167,756   9,166 7.31 %
Total loans 619,075 29,741 6.42 % 482,321 22,414 6.21 %
Other interest earning assets   3,919   153 5.21 %   3,156   129 5.46 %
Total interest earning assets 856,878 30,990 4.84 % 672,476 22,876 4.55 %
Other assets   7,434   11,256
Total Assets $ 864,312 $ 683,732
 
LIABILITIES & EQUITY
Interest bearing transaction accts $ 352,592 $ 1,575 0.60 % $ 310,121 $ 1,708 0.74 %
Time certificate of deposits   4,538   15 0.44 %   3,214   18 0.75 %
Total Interest Bearing Deposits 357,130 1,590 0.60 % 313,335 1,726 0.74 %
Other borrowings   9,621   10 0.13 %   56   2 4.81 %
Total interest bearing liabilities 366,752 1,599 0.58 % 313,391 1,728 0.74 %
Non-interest bearing demand accts   425,702       309,992    
Total funding 792,453 1,599 0.27 % 623,382 1,728 0.37 %
Other liabilities 4,865 2,882
Shareholders' equity   66,993   57,468
Total liabilities & shareholders' equity $ 864,312   $ 683,732  
Net interest spread 4.25 % 3.81 %
       

Net interest income / margin

$ 29,391 4.59 % $ 21,148 4.20 %
 
 
California Republic Bancorp and Subsidiaries
UNAUDITED SELECTED FINANCIAL DATA
(Dollars in thousands)
            At and For
Three Months Ended Nine Months Ended
9/30/2014       9/30/2013 9/30/2014       9/30/2013
LOANS:
Auto Loans:
Purchases $ 328,372 $ 187,345 $ 848,386 $ 428,569
Sales (275,004 ) 0 (723,478 ) (243,036 )
Principal reductions   (19,666 )   (13,310 )   (47,278 )   (38,867 )
Auto loans owned $ 221,338   $ 236,750   221,338 236,750
Auto loans serviced for others   1,051,781     342,334  
Total auto loans serviced $ 1,273,120 $ 579,084
-
Commercial bank loans   393,676     351,817  
Total managed loans $ 1,666,796   $ 930,901  
 
PERFORMANCE RATIOS:
Return on average equity 18.68 % -5.69 % 19.01 % 4.86 %
Return on average assets 1.38 % -0.54 % 1.47 % 0.41 %
Book value per share $ 13.50 $ 11.22
 
ASSET QUALITY RATIOS:
30 day plus delinquent loans (1) 0.24 % 0.11 %
Nonperforming loans to total loans (1) 0.04 % 0.01 %
Allowance for loan losses to total loans 0.82 % 0.93 %
Net chargeoffs on commercial banking loans (2) - - - -
Net chargeoffs on auto loans owned 0.45 % 0.42 % 0.31 % 0.35 %
 
(1) No commercial loans are delinquent or nonperforming
(2) No life-to-date net chargeoffs on commercial banking loans
 
CAPITAL RATIOS
Bank:
Tier 1 leverage capital ratio 7.56 % 7.60 %
Tier 1 risk-based capital ratio 11.35 % 9.59 %
Total risk-based capital ratio 12.18 % 10.52 %

Contacts

California Republic Bancorp
John DeCero, President
949-270-9797

Contacts

California Republic Bancorp
John DeCero, President
949-270-9797