California Republic Bancorp Announces Second Quarter 2015 Results

IRVINE, Calif.--(BUSINESS WIRE)--

California Republic Bancorp ("CRB" or "Company") CRPB, a bank holding company for California Republic Bank ("Bank"), announced net income for the three months ended June 30, 2015 of $3.3 million, or $0.43 per basic common share, compared with net income of $3.3 million, or $0.62 per basic common share, for the same period a year earlier. For the six months ended June 30, 2015, net income was $6.8 million, or $0.88 per basic common share, compared with $6.2 million, or $1.18 per basic common share, for the same period a year ago. Return on average equity was 9.19% and 9.62% for the three and six months ended June 30, 2015 compared with 19.62% and 19.77% for the same respective periods a year ago. During the fourth quarter of 2014, CRB raised $64.8 million in common equity at 2.0 times tangible book value per share. Even though the issuance of common equity was immediately accretive to existing shareholders, it is initially dilutive to EPS and ROE. The Company expects the dilutive effect of this capital raise to decline as it continues to deploy the additional capital.

"We are pleased to have achieved strong and consistent financial performance in the 2^nd quarter. We continue to leverage the new capital we raised in the fourth quarter of 2014 by expanding auto finance into new states, as well as building deeper relationships with existing customers," stated Jon Wilcox, Chief Executive Officer of California Republic Bancorp. "We've experienced net interest margin compression during the year, consistent with our peers in the financial sector, given the current low interest rate environment. We expect to continue to experience net interest margin compression throughout the remainder of 2015."

John DeCero, President of California Republic Bancorp, commented, "We are pleased with our record loan and deposit growth this quarter and continue to gain significant market share in the auto finance sector. We were ranked as the 17^th largest bank auto lender in the nation in the last quarter, a noteworthy achievement in just four years since inception of CRB Auto. Credit performance also remains very strong with our continued record of no loan losses in our commercial portfolio, and just 0.19% and 0.33% of credit losses in our owned auto portfolio for the three and six months ended June 30, 2015, respectively."

Business Performance:

Total commercial loans grew $334 million, or 85%, to $725 million at June 30, 2015 compared with a year earlier. Total commercial commitments, including commercial loans funded, grew 15%, or $131 million, to $1.0 billion at June 30, 2015 compared with $896 million for the same period a year ago.

Prime auto loan originations were $493 million for the quarter, an increase of 69%, or $201 million, compared with $291 million for the same quarter a year ago. For the six months ended June 30, 2015, prime auto loan originations were $910 million, an increase of 75%, or $390 million, compared with $520 million for the same period a year earlier.

The Bank continues to maintain stable and consistent borrower credit attributes, demographics, and loan structure, reaffirming its commitment not to sacrifice credit quality for loan growth. With continued strong loan origination growth, CRB's total managed loan portfolio increased 93%, or $1.3 billion, to $2.8 billion at June 30, 2015 compared with $1.4 billion a year earlier.

Driven by quality commercial banking relationships, noninterest bearing deposits grew $269 million, or 52%, to $784 million at June 30, 2015 compared with $516 million a year earlier. Total deposits grew $353 million, or 41%, to $1.2 billion at June 30, 2015 compared with $867 million a year ago. Noninterest bearing deposits represent 64% of total deposits at June 30, 2015.

The Bank successfully completed a prime automobile loan securitization in the second quarter of 2015 in which $390 million in notes backed by the Bank's automobile loans were sold in an underwritten public offering registered with the Securities and Exchange Commission. As a result, total auto loans serviced for others increased 100% to $1.7 billion at June 30, 2015 compared with $865 million a year earlier.

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 until the transaction is paid-off.

Total on-balance sheet assets increased 56%, or $535 million, to $1.5 billion at June 30, 2015 compared with $948 million for the same period a year earlier. The year-over-year growth in total assets includes a $483 million increase, or 84%, in total gross loans held for investment and for sale, due to growth in commercial and automobile loan originations and the timing of the Company's auto loan securitization activities; and a $173 million increase in short-duration, investment securities to $294 million, as the Company continues to put to use its excess liquidity compared with the same period a year ago.

Financial Performance:

Net interest income grew 55%, or $5.2 million, to $14.7 million for the three months ended June 30, 2015 compared with $9.4 million for the same period a year ago. For the six months ended June 30, 2015, net interest income grew 49%, or $9.1 million, to $27.5 million compared with $18.5 million for the same period a year earlier. Net interest margins narrowed 23 basis points to 4.29% for the three months ended June 30, 2015 compared with 4.52% for the same period a year earlier. For the six months ended June 30, 2015, net interest margins narrowed 21 basis points to 4.33% compared with 4.54% for the same period a year ago. Net interest margins have declined primarily due to a continued low interest rate environment and the short duration of the assets held by the Company.

Noninterest income grew $1.5 million, or 19%, to $9.5 million for the three months ended June 30, 2015 compared with $7.9 million for the same period a year earlier as the Company completed a $390 million automobile loan securitization transaction in the first quarter of 2015 compared with $225 million in the same period a year ago. For the six months ended June 30, 2015, noninterest income grew 40%, or $5.7 million, to $19.9 million compared with $14.2 million for the same period a year earlier as the Company completed $740 million in automobile loan securitization transactions compared with $448 million for the same period a year ago. Noninterest income was also positively impacted by an $865 million, or 100%, increase in auto loans serviced for others at June 30, 2015.

Noninterest expense increased $6.3 million, or 56%, to $17.3 million for the second quarter of 2015 compared with $11.1 million for the same period a year ago. For the six months ended June 30, 2015, noninterest expense increased $13.0 million, or 61%, to $34.2 million compared with $21.2 million for the same period a year earlier. The year-over-year increase in noninterest expense is the result of the Company continuing to make significant investments in its auto lending and commercial banking platforms to support its strategic expansion.

Asset Quality:

California Republic Bank continued to report strong credit quality with no nonperforming or charged-off loans in the commercial loan portfolio since the Company's inception, and a net annualized charge-off rate for its owned auto loan portfolio of 0.19% for the second quarter of 2015 compared with 0.23% for the same period a year ago. For the six months ended June 30, 2015, the net annualized charge-off rate was 0.33% compared with 0.24% for the same period a year earlier. The year to date increase in auto loan charge-offs was expected, and is the result of the normal aging curve of auto loans held for credit risk retention requirements for securitization transactions.

Regulatory Capital:

The Bank's and Bancorp's regulatory capital ratios exceeded those required to be considered a "well capitalized" institution for regulatory purposes. At June 30, 2015, common equity tier 1 capital ratio for the Bank and Bancorp was 13.23% and 13.68, respectively; tier 1 capital ratio was 13.23% and 13.68%, respectively; total capital ratio was 16.28% and 16.73%, respectively; and the leverage ratio for the Bank and Bancorp was 10.12% and 10.47%, 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, investors and family offices. The Bank offers its clients direct access to decision makers, unparalleled responsiveness, seasoned Relationship Managers and state-of-the-art technology. The Bank has five branch offices serving Southern California, located in Newport Beach, Beverly Hills, Irvine, Westlake Village and San Diego. The Bank also operates CRB Auto, a division of the bank, which is a relationship based, indirect auto lender, which purchases auto contracts from both franchised and select independent automobile dealerships throughout 10 States—Arizona, California, Illinois, Iowa, Kansas, Missouri, Nevada, Oklahoma, Texas and Washington.

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 Din Cloud; John Hagestad, Managing Partner of SARES-REGIS Group; Warren S. Orlando, First Senior Vice President Valley Nation Bank; 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; and (14) 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				Six Months Ended
			6/30/2015		6/30/2014		6/30/2015		6/30/2014
Interest income
	Loans, including fees		$	14,054	$	9,530	$	26,720	$	18,943
	Investment securities			980	$	167	$	1,790	$	246
	Other			499		239		718		358
		TOTAL INTEREST INCOME		15,533		9,936		29,228		19,547

Interest expense
	Deposits			498		506		954		1,082
	Other borrowings			381		-		742		-
		TOTAL INTEREST EXPENSE		879		506		1,696		1,082
Net interest income				14,654		9,430		27,532		18,465
Provision for loan losses				1,435		800		2,138		819
	NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES			13,219		8,630		25,394		17,646
Noninterest income
	Gain on sale of loans			5,429		5,851		12,123		10,498
	Loan servicing fees			3,948		2,001		7,656		3,575
	Other			74		61		156		135
		TOTAL NONINTEREST INCOME		9,451		7,913		19,935		14,208
Noninterest expense
	Salaries and employee benefits			12,595		8,283		25,402		15,584
	Other			4,736		2,792		8,766		5,606
		TOTAL NONINTEREST EXPENSE		17,331		11,076		34,168		21,191
INCOME BEFORE INCOME TAXES				5,339		5,467		11,161		10,663
Income tax expense				1,996		2,195		4,354		4,422
NET INCOME			$	3,343	$	3,272	$	6,807	$	6,241

Earnings per common share
	Basic		$	0.43	$	0.62	$	0.88	$	1.18

Weighted average number of common shares
	Basic			7,737		5,316		7,729		5,279


California Republic Bancorp and Subsidiaries
UNAUDITED CONSOLIDATED BALANCE SHEET
(Dollars in thousands)

				6/30/2015			6/30/2014
ASSETS
	Cash and cash equivalents			$	101,192		$	234,525
	Investment securities available for sale				294,062			121,239
	Auto loans held for sale				232,687			98,011
	Auto loans held for investment				103,927			89,624
	Commercial loans held for investment				724,719			391,170
		Gross loans held for investment			828,646			480,794
	Allowance for loan and lease losses				(7,484	)		(5,047	)
			Loans held for investment, net		821,163			475,747
	Premises and equipment, net				7,558			3,269
	FHLB stock and other investments				11,440			3,573
	Other assets				14,525			11,296
			TOTAL ASSETS	$	1,482,627		$	947,660

LIABILITIES
	Deposits:
	Noninterest bearing			$	784,385		$	515,811
	Interest bearing				436,254			351,420
		Total deposits			1,220,639			867,231
	Other borrowings				75,000			-
	Subordinated debentures				25,000			-
	Other liabilities				16,805			11,801
		TOTAL LIABILITIES			1,337,444			879,032

SHAREHOLDERS' EQUITY
	Common stock				117,307			53,050
	Paid in capital				5,564			4,281
	Retained earnings				23,971			11,425
	Accumulated other comprehensive income				(1,660	)		(128	)
		TOTAL SHAREHOLDERS' EQUITY			145,183			68,628
			TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	1,482,627		$	947,660


California Republic Bancorp and Subsidiaries
UNAUDITED CONSOLIDATED AVERAGE BALANCES AND ANNUALIZED YIELDS
(Dollars in thousands)

				Three Months Ended
				6/30/2015						6/30/2014
				Average						Average
				Balance		Income		Rate		Balance		Income		Rate
ASSETS
	Cash			$	78,385	$	53	0.27	%	$	215,190	$	135	0.25	%
	Investment securities				269,445		980	1.46	%		22,223		167	3.01	%
	Commercial loans				631,182		7,257	4.61	%		372,436		4,842	5.21	%
	Auto loans				379,238		6,797	7.19	%		223,352		4,688	8.42	%
		Total loans			1,010,419		14,054	5.58	%		595,788		9,530	6.42	%
	Other interest earning assets				10,718		446	16.69	%		3,425		104	12.21	%
		Total interest earning assets			1,368,967		15,533	4.55	%		836,626		9,936	4.76	%
	Other assets				29,553						6,868
		Total Assets		$	1,398,521					$	843,494

LIABILITIES & EQUITY
	Interest bearing transaction accts			$	419,056	$	493	0.47	%	$	333,216	$	499	0.60	%
	Time certificate of deposits				3,217		4	0.53	%		4,197		7	0.67	%
		Total Interest Bearing Deposits			422,273		498	0.47	%		337,413		506	0.60	%
	Other borrowings				108,471		47	0.17	%		-		-	0.00	%
	Subordinated debentures				25,000		335	5.37	%		-		-	0.00	%
		Total interest bearing liabilities			555,744		879	0.63	%		337,413		506	0.60	%
	Non-interest bearing demand accts				669,353						432,015
			Total funding		1,225,097		879	0.29	%		769,428		506	0.26	%
	Other liabilities				27,563						7,192
	Shareholders' equity				145,861						66,875
		Total liabilities & shareholders' equity		$	1,398,521					$	843,494
			Net interest spread					3.92	%					4.16	%

			Net interest income / margin			$	14,654	4.29	%			$	9,430	4.52	%


California Republic Bancorp and Subsidiaries
UNAUDITED CONSOLIDATED AVERAGE BALANCES AND ANNUALIZED YIELDS
(Dollars in thousands)

				Six Months Ended
				6/30/2015						6/30/2014
				Average						Average
				Balance		Income		Rate		Balance		Income		Rate
ASSETS
	Cash			$	102,011	$	133	0.26	%	$	210,765	$	260	0.25	%
	Investment securities				227,093		1,790	1.59	%		12,790		246	3.88	%
	Commercial loans				588,675		13,571	4.65	%		362,098		9,650	5.37	%
	Auto loans				353,599		13,149	7.50	%		230,591		9,293	8.13	%
		Total loans			942,274		26,720	5.72	%		592,690		18,943	6.45	%
	Other interest earning assets				10,316		585	11.43	%		3,364		98	5.89	%
		Total interest earning assets			1,281,693		29,228	4.60	%		819,608		19,547	4.81	%
	Other assets				29,018						4,297
		Total Assets		$	1,310,711					$	823,905

LIABILITIES & EQUITY
	Interest bearing transaction accts			$	405,401	$	945	0.47	%	$	344,248	$	1,067	0.63	%
	Time certificate of deposits				3,216		9	0.55	%		4,538		15	0.67	%
		Total Interest Bearing Deposits			408,617		954	0.47	%		348,786		1,082	0.63	%
	Other borrowings				82,634		70	0.17	%		-		-	0.00	%
	Subordinated debentures				25,000		672	5.42	%		-		-	0.00	%
		Total interest bearing liabilities			516,251		1,696	0.66	%		348,786		1,082	0.63	%
	Non-interest bearing demand accts				626,850						331,974
			Total funding		1,143,100		1,696	0.30	%		680,760		1,082	0.32	%
	Other liabilities				24,913						4,243
	Shareholders' equity				142,697						58,086
		Total liabilities & shareholders' equity		$	1,310,711					$	743,089
			Net interest spread					3.94	%					4.18	%

			Net interest income / margin			$	27,532	4.33	%			$	18,465	4.54	%


California Republic Bancorp and Subsidiaries
UNAUDITED SELECTED FINANCIAL DATA
(Dollars in thousands)

										At and For
				Three Months Ended						Six Months Ended
				6/30/2015			6/30/2014			6/30/2015			6/30/2014
LOANS:
	Auto Loans:
		Beginning balance		$	262,109		$	136,512		$	216,876		$	143,708
		Purchases			492,591			291,213			909,894			520,014
		Sales			(390,000	)		(225,096	)		(740,001	)		(448,474	)
		Principal reductions			(28,086	)		(14,993	)		(50,155	)		(27,612	)
			Auto loans owned	$	336,614		$	187,636			336,614			187,636
		Auto loans serviced for others									1,730,193			865,314
	Total auto loans serviced									$	2,066,807		$	1,052,950
														-
		Commercial bank loans									724,719			391,169
	Total managed loans									$	2,791,526		$	1,444,119

		New commercial commitments		$	153,003		$	48,439		$	245,463		$	63,738
		Outstanding commercial commitments								$	1,026,289		$	895,628

PERFORMANCE RATIOS:
	Return on average equity				9.19	%		19.62	%		9.62	%		19.77	%
	Return on average assets				0.96	%		1.56	%		1.05	%		1.53	%
	Book value per share									$	18.70		$	12.91

ASSET QUALITY RATIOS:
	30 day plus delinquent loans ⁽¹⁾										0.18	%		0.19	%
	Nonperforming loans to total loans ⁽¹⁾										0.03	%		0.02	%
	Allowance for loan losses to total loans HTM⁽²⁾										1.26	%		1.05	%
	Net chargeoffs on commercial banking loans ⁽³⁾				-			-			-			-
	Net chargeoffs on auto loans owned				0.19	%		0.23	%		0.33	%		0.24	%

	⁽¹⁾ No commercial loans are delinquent or nonperforming
	⁽²⁾ Excludes $127.9 million of auto loans held for sale
	⁽³⁾ No life-to-date net chargeoffs on commercial banking loans

CAPITAL RATIOS
	Bancorp:
		Common equity tier 1 capital ratio									13.68	%		11.20	%
		Tier 1 capital ratio									13.68	%		11.20	%
		Total capital ratio									16.73	%		12.06	%
		Leverage ratio									10.47	%		8.10	%

	Bank:
		Common equity tier 1 capital ratio									13.23	%		11.08	%
		Tier 1 capital ratio									13.23	%		11.08	%
		Total capital ratio									16.28	%		11.93	%
		Leverage ratio									10.12	%		8.01	%

View source version on businesswire.com: http://www.businesswire.com/news/home/20150730005464/en/

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

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