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Feb 19, 2014

California Republic Bancorp Announces Fourth Quarter and Full Year 2013 Results

  • Record Assets of $858 Million
  • Record Deposits of $789 Million
  • Record Prime Auto Loan Originations of $597 Million
  • All Time High Total Serviced Portfolio of over $1.0 Billion
  • The Creation of CRB Auto, Inc., a Newly Formed Separate Corporate Subsidiary of the Bank.

IRVINE, Calif.–(BUSINESS WIRE)–California Republic Bancorp (“CRB” or “Company”) (OTCBB: CRPB),  a bank holding company for California Republic Bank (“Bank”), announced its unaudited results for the fourth quarter of 2013, reporting record assets, deposits and loan originations.  Assets grew to a record $858 million, with total deposits increasing $259 million to $789 million and noninterest bearing demand deposits rising 59% or $150 million, ending the year at $402 million. CRB also announced another milestone, reporting its intention to move its CRB Auto operations from a division of the Bank into a newly created, separate wholly owned subsidiary of the Bank called “CRB Auto, Inc.”  The subsidiary will be run by Scott Raymer and Dave Prescher, the division’s current Co‐Presidents and longtime auto finance veterans.  CRB has stated that it plans to utilize this legal subsidiary to eventually conduct all of its auto loan activities. “We are very pleased with the tremendous growth and the platform for future growth that we have achieved in 2013 both in our commercial banking and auto lending groups,” stated Jon Wilcox, Chief Executive Officer of California Republic Bancorp.  “At CRB, we have built two high quality and distinctive businesses.  The first is a commercial bank catering to a growing and active investor class in California, producing primarily low-cost deposits and quality loans.  The second is a multi-state, high yielding prime indirect auto asset generator.  Moving these two businesses into separate legal entities demonstrates our commitment to auto finance as more than just a product line, and provides additional flexibility for future opportunities.” John DeCero, President of CRB added, “In a continuing low interest rate environment, the industry has been challenged to deploy their deposits into appropriate interest rate risk-adjusted assets.  Therefore, today a low cost deposit franchise is only one side of the equation.  We believe we have built the other side of this equation by creating a predictable, risk-adjusted, and scalable asset generator to complement this core deposit franchise.  We believe the auto finance platform provides a higher-yielding, shorter duration asset which will provide us the ability to control our own destiny, regardless of the interest rate environment.” 2013 Business Performance: Total assets increased $265 million, or 45%, to $858 million at December 31, 2013 compared to the prior year ending 2012.  The year-over-year growth in total assets reflects continued strong deposit growth of $259 million, or a 49% increase, to $789 million at December 31, 2013 compared with the same time a year earlier.  Noninterest bearing demand deposit accounts grew $150 million, or 59%, to $402 million at December 31, 2013 compared to the same period a year ago.  Noninterest bearing demand deposit accounts represent over 51% of total deposits at year end.  “The level of our core deposit growth over the past six years has been outstanding, and we believe that we are now well positioned at these current deposit levels to sufficiently fund our projected loan growth over the next 12 months,” stated CEO Jon Wilcox. Total loans outstanding at December 31, 2013 increased to $491 million, representing a $93.7 million or 24% increase over the prior year.  Commercial banking loans represent 71% of total loans outstanding at the end of 2013. Auto loan originations increased $323 million, or 118%, to $597 million for the year, as the Bank continues to build out new locations and increase its base of well-established auto dealerships, while continuing to deepen and expand existing relationships.  Even with the significant origination growth in auto loans, the Bank has maintained stable and consistent borrower credit attributes, demographics, and loan structure, affirming its commitment to not sacrifice credit quality for growth. The Bank successfully completed two prime auto asset-backed securitizations in 2013, fulfilling its primary objective to utilize the most efficient, non-capital dilutive mechanism available to grow the auto loan platform.   The Bank sold $239 million in auto loans in a private securitization that closed in June 2013.  Then in November 2013, the Bank sold $250 million of prime auto loans in its first-ever public auto asset-backed securitization.  This public transaction received the Bank’s first AAA rating from DBRS Rating Services.  Furthermore, these securitizations were accounted for as true sales and included all future residuals, therefore leaving no possibility for later adjustments affecting the financial position of the Bank.  The Bank recorded cash gains of $8.4 million from these securitizations in 2013.  CRB also retained the right to service the sold loans on which it is paid a 1.0% servicing fee on the outstanding pool balance annually until the transaction is paid-off. All three auto asset-backed securitizations that the Bank has completed to date have outperformed credit loss expectations, which resulted in credit rating upgrades by both Moody’s and DBRS.  At year end the Bank surpassed $1.0 billion in total serviced loans including its commercial banking portfolio.   Total outstanding securitized auto loans were $548 million, and auto loans on balance sheet were $143 million at December 31, 2013. 2013 Financial Performance: Net interest income grew $2.1 million, or 35%, to $8.3 million for the fourth quarter of 2013 compared with $6.1 million for the fourth quarter a year ago.  For the year ended December 31, 2013, net interest income grew $6.2 million, or 27%, to $29.4 million compared with $23.2 million for all of 2012.  The increase in net interest income was primarily the result of strong auto loan origination growth in 2013. For the fourth quarter of 2013, noninterest income decreased $987 thousand, or 15%, to $5.5 million.  For the twelve months ending December 31, 2013, noninterest income increased $5.2 million, or 75%, to $12.2 million compared to the same period a year earlier.  The significant increase in noninterest income for the year is the result of CRB selling auto loans through non-recourse auto asset-backed securitizations and the corresponding residual interests in securitization transactions during 2013, as well as an increase in auto servicing income as the portfolio of auto loans serviced for others increased throughout the year. Noninterest expense increased $3.5 million, or 53%, to $10.1 million for the fourth quarter of 2013 compared with the same period a year ago.  For the twelve months end December 31, 2013, noninterest expense increased $14.1 million, or 73%, to $33.3 million as compared with the same period a year earlier.  The year-over-year increase in noninterest expense for both the fourth quarter and for the year is the result of the Company continuing to make significant investments in its auto lending platform to support its nationwide expansion. For the fourth quarter, the Company reported pre-tax income of $4.6 million compared with pre-tax income of $7.6 million for 2012.  The decrease in pre-tax income was primarily the result of higher noninterest expense as the Company continues to make significant investments in its auto lending platform to support its nationwide expansion.  Net income for the fourth quarter of 2013 was $2.6 million, or $0.50 per basic common share, compared with $5.2 million, or $1.00 per basic common share, for the same period a year ago and was negatively impacted by a net loss carry forward utilized in 2012, which was no longer available in 2013.  For the fourth quarter of 2013, return on average equity was 17.2% and return on average assets was 1.3%. The Company reported full year pre-tax income of $8.4 million compared with pre-tax income of $10.1 million for 2012.  The year-over-year decrease in pre-tax income was the result, as stated above, of higher noninterest expense as the Company continues to make significant investments in its auto lending platform to support its nationwide expansion in its new corporate subsidiary, CRB Auto, Inc. Net income for the year ended December 31, 2013 was $4.7 million, or $0.91 per basic common share, compared with $7.7 million, or $1.49 per basic common share, for all of 2012, a $3.0 million decrease resulting from additional income tax expense of $1.3 million in 2013 due to a net loss carry forward in 2012, which was no longer available in 2013.  For all of 2013, return on average equity was 8.1% and return on average assets was 0.7%. Asset Quality: California Republic Bank continued to report strong credit quality metrics through the fourth quarter of 2013, 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 0.21% for the fourth quarter of 2013 and 0.32% for all of 2013.  The net annualized charge-off rate on auto loan serviced for others was 0.56% for all of 2013. 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 7.5%, the tier 1 risk based capital ratio was 11.9%, and the total risk based capital ratio was 12.8%, 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 full-service branches serving Southern California located in Newport Beach, Beverly Hills, Irvine, and Westlake Village. 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 independent automobile dealerships throughout California, Arizona, Texas, Nevada, 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 Michael Natzic of Crowell, Weedon & Co. at 800-288-2811.   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.

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