Today MarketGrader is highlighting this small Kentucky-based bank, which has excellent financials and a pristine record, on Barrons.com. Republic Bancorp (NASDAQ:RBCAA) is not only the highest graded bank in all of MarketGrader but the highest graded company in the entire Financial sector and the eighth-ranked stock among our entire coverage universe.
The company has 43 banking centers in Kentucky, Indiana, Florida and Ohio and over $3.6 billion in assets. Its market capitalization is only $385 million. Its trailing 12 month revenue, at the end of the first quarter, was $314 million with $91.5 million in net income. Its first quarter results were remarkable, with revenue increasing 22% year-over-year to $180 million and net income jumping by 60%. The bank has beaten the consensus estimate of the two analysts that follow it by an average of 21% in the last six quarters.
The stock trades at 4.7 times trailing 12 month earnings per share, virtually the same ratio when compared to its full fiscal year estimates (forward P/E). And following today's across-the-board market drop, at its closing price of $20.17, the stock can be bought for less than the $20.50 in tangible equity per share. Buyers at this price will essentially get the bank's dividend and its future earnings stream for free.
Republic Bancorp's grades are very strong not only across our Growth and Value indicators but also according to our Profitability and Cash Flow measures, which explains its overall remarkable grade of 90. The stock's Sentiment, by the way, is also positive, with a score of 7.7 out of 10. From a profitability standpoint, the bank's net interest margin is the equivalent of 8.9% of its interest earning assets, compared to 3.6% on average for all public banks followed by MarketGrader and based on trailing 12 month results the bank's return on equity was 21% while it returned 2.8% on assets that averaged $3.3 billion in the last four quarters. The average ROA of all banks in our system was 0.3% during the same period.
Republic Bancorp's capital position couldn't be stronger. It reported Tier 1 (core) Capital of 23.9% last quarter compared to the bank average of 12.7%. Its non-performing assets fell in the last year to 9% of tangible equity from 12.4% a year ago. Again, for comparison purposes, non-performing assets for all banks followed by MarketGrader average 73% of tangible equity plus loss reserves, underscoring the difficulties banks are having working through the bad assets they piled onto their balance sheets during the recent free credit mania. RBCAA today has $0.70 in loss reserves for every dollar in non-performing assets, as solid as a bank gets. Underlying all of this, the bank's stockholder's equity is very clean, with intangible assets representing only 2.3% of common equity.
To top it all off, the bank increased its dividend, as it usually does, at the end of 2010, and it now pays $0.15 per share, yielding almost 3% at today's stock price. Two things are remarkable and worth mentioning about its dividend: first, dividends paid in the last 12 months accounted only for 7.5% of cash flow and 12.7% of after-tax earnings, giving it plenty of room to increase it, although given management's apparently conservative style, large special dividends are unlikely. And second, the bank never had to cut its dividend during the financial crisis like so many others did. Banks looking for acquisition targets with a decent presence in the south could do worse than look at RBCAA.
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