Republic Bancorp 8-K Results of Operations and Financial Condition

   

 NEWS

www.republicbancorp.com Nasdaq: RBNC

FOR FURTHER INFORMATION:
Thomas F. Menacher	Kristine D. Brenner
Exec.V.P., Treasurer & CFO	Director of Investor Relations
tmenacher@republicbancorp.com	kbrenner@republicbancorp.com
(989) 725-7337	(989) 725-7337

REPUBLIC BANCORP REPORTS

SECOND QUARTER RESULTS

————————————

Second Quarter Highlights Include:

·   Earnings per share of $.22

·   Return on equity of 16.08%

·   Total assets of $6.3 billion

·   Annualized portfolio loan growth of 7%

·   Efficiency ratio of 43.38%, well below peer

ANN ARBOR, Michigan—July 19, 2006—Republic Bancorp Inc., (Nasdaq: RBNC), today announced net income for the quarter ended June 30, 2006 of $16,396,000, compared to net income of $17,475,000 earned in the second quarter of 2005. Diluted earnings per share were $.22 for the quarter, compared to $.23 in the second quarter of 2005. Net income generated returns of 1.05% on average assets and 16.08% on average shareholders’ equity for the quarter ended June 30, 2006.

Net income for the six months ended June 30, 2006 was $32,813,000, compared to net income of $34,782,000 earned for the same period in 2005. For the six month period ending June 30, 2006, diluted earnings per share were $.44, compared to $.45 earned in 2005. Annualized returns on average assets and average shareholders’ equity for the first six months of 2006 were 1.06% and 16.04%, respectively.

“We are pleased to report another quarter of solid performance for the Company,” commented Dana M. Cluckey, President and Chief Executive Officer. “Total assets continue to grow, driven by annualized portfolio loan growth of 7%. Also, our variable cost structure and tight control over expenses is reflected in the 6% decrease in noninterest expense compared to the prior year, resulting in an efficiency ratio of 43%,” added Mr. Cluckey.

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Results for the second quarter of 2006 reflect growth in the commercial and residential loan portfolio. The Commercial banking division had commercial loan closings of $122 million and SBA loan closings of $12 million during the quarter. The Company’s commercial loan portfolio grew $25 million, or 6% annualized, during the second quarter of 2006.

Also, during the second quarter of 2006, the Mortgage banking division originated $292 million of single family residential mortgages, an increase of 30% over the first quarter of 2006. The mortgage loan pipeline of applications in process was $300 million at June 30, 2006, down $20 million from March 31, 2006. The Company’s residential real estate mortgage loan portfolio increased $59 million from March 31, 2006, an annualized growth rate of 10%.

The Retail banking division had consumer loan closings, primarily home equity lines of credit and term loans, of $80 million during the second quarter of 2006, an increase of 23% over the first quarter of 2006. Retail deposits increased $21 million, or 1%, during the quarter ended June 30, 2006.

Income Statement

Net interest income decreased $1.2 million, or 3%, for the second quarter of 2006 compared to the first quarter of 2006. The decrease was primarily the result of a 2% increase in average earning assets for the quarter ended June 30, 2006 being offset by a decline in the net interest margin. For the quarter ended June 30, 2006, the Company’s net interest margin was 2.54%, a decrease of 13 basis points from the quarter ended March 31, 2006.

Total noninterest income, excluding mortgage banking income, was $5.8 million for the quarter ended June 30, 2006, up 6% from the first quarter of 2006. The increase was primarily due to an 11% increase in service charges. Mortgage banking income for the quarter ended June 30, 2006 was $2.2 million, an increase of 19% from the first quarter of 2006 due primarily to a 9% increase in mortgage loan sales compared to the first quarter of 2006.

Total noninterest expense decreased $895,000, or 4%, for the quarter ended June 30, 2006 compared to the first quarter of 2006. The decrease was primarily a result of a decline of $914,000 in salaries and employee benefits.

The Company’s efficiency ratio for the quarter ended June 30, 2006 was 43.38%, which compares very favorably to peer group.

Asset Quality and Capital

Net charge-offs to total average loans were 8 basis points for the quarter ended June 30, 2006 and remain substantially below the Company’s peer group. Total non-performing assets increased 7% from March 31, 2006, due to an increase in non-accrual commercial loans.

During the quarter ended June 30, 2006, 265,000 shares were repurchased under the Company’s 2005 Stock Repurchase Program at an average price of $11.45. The 2005 and 2006 Stock Repurchase Programs have 2,348,152 shares available for repurchase at June 30, 2006.

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The Company’s capital ratios continue to be well in excess of the requirements for a well-capitalized bank. At June 30, 2006, the Company’s Total risk-based capital ratio was 12.03% and the Tier 1 leverage ratio was 7.52%.

Announced Merger with Citizens Banking Corporation

On June 27, 2006, Citizens Banking Corporation (NASDAQ symbol CBCF) and Republic Bancorp announced that they have agreed to merge Republic into Citizens to create the new Citizens Republic Bancorp in a transaction valued at approximately $1.048 billion in stock and cash. The transaction is projected to close in the fourth quarter of 2006, subject to regulatory and shareholder approvals. Based on March 31, 2006 information, Citizens Republic Bancorp will have $13.9 billion in assets, $8.6 billion in deposits, $2.6 billion in trust assets under administration, and 275 branches and loan production offices in five Midwest states.

About the Company

Republic Bancorp Inc., with $6.3 billion in assets, is the third largest bank holding company headquartered in Michigan and the 80^th largest bank holding company in the country. Its subsidiary, Republic Bank, serves customers in Michigan, Ohio and Indiana with 91 retail, commercial and mortgage banking offices and 90 ATMs. Republic has consistently been the #1 Small Business Administration bank lender based in Michigan and one of the Midwest’s top retail mortgage lenders. Republic was named the 17^th Best Company to Work For by FORTUNE magazine (marking the 6^th year on FORTUNE’s “100 Best Companies to Work For” list) and named to Working Mother magazine’s list of “100 Best Companies for Working Mothers” for the fifth year in a row.

Information about Republic Bancorp Inc.’s financial results and its products and services, including on-line banking and mortgage applications can be accessed at www.republicbancorp.com.

Cash Dividend

The Company currently pays an annual cash dividend of $.44 per share, which represents an annual yield of approximately 3.5% based on the Company’s current stock price.

Safe Harbor Statement

As with any statements other than those reflecting historical facts, forward-looking statements contained in this announcement involve risk, and, as such, future financial performance may differ from current expectations due to a variety of marketplace factors. These factors include, without limitation, those disclosed in Republic Bancorp’s most recent filings on Form 10-K and Form 10-Q with the Securities and Exchange Commission.

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REPUBLIC BANCORP INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

	June 30, 2006			March 31, 2006			Dec. 31, 2005			June 30, 2005
	(Unaudited)			(Unaudited)						(Unaudited)
ASSETS
Cash and cash equivalents	$	64,019		$	47,505		$	52,527		$	55,575
Mortgage loans held for sale		56,127			24,600			38,259			143,589
Securities available for sale		902,926			926,912			861,623			835,285
Securities held to maturity (at cost)		215,230			222,213			227,262			252,527
Loans, net of unearned income		4,829,488			4,746,970			4,628,258			4,533,129
Less allowance for loan losses		(43,124	)		(42,342	)		(42,122	)		(41,871	)
Net loans		4,786,364			4,704,628			4,586,136			4,491,258
Federal Home Loan Bank stock (at cost)		80,437			80,529			80,525			80,514
Premises and equipment		26,605			26,887			26,586			25,687
Bank owned life insurance		118,491			117,509			116,519			114,414
Other assets		96,391			92,887			92,329			76,379
Total assets	$	6,346,590		$	6,243,670		$	6,081,766		$	6,075,228
LIABILITIES
Noninterest-bearing deposits	$	294,663		$	277,791		$	284,932		$	308,730
Interest-bearing deposits:
NOW accounts		180,375			185,461			187,190			196,221
Savings and money market accounts		830,175			859,322			932,048			988,449
Retail certificates of deposit		1,191,906			1,153,593			1,102,188			1,013,567
Wholesale deposits		564,328			607,808			636,585			528,119
Total interest-bearing deposits		2,766,784			2,806,184			2,858,011			2,726,356
Total deposits		3,061,447			3,083,975			3,142,943			3,035,086
Federal funds purchased and other short-term borrowings		643,823			718,153			709,300			719,775
Short-term FHLB advances		500,000			375,000			218,000			362,500
Long-term FHLB advances and security repurchase agreements		1,621,467			1,547,071			1,489,432			1,434,934
Accrued expenses and other liabilities		62,669			62,984			67,632			63,826
Long-term debt		50,000			50,000			50,000			50,000
Total liabilities		5,939,406			5,837,183			5,677,307			5,666,121
SHAREHOLDERS’ EQUITY
Preferred stock, $25 stated value: $2.25 cumulative
and convertible; 5,000,000 shares authorized,
none issued and outstanding		-			-			-			-
Common stock, $5 par value; 100,000,000 shares
authorized; 74,451,000, 74,684,000, 74,976,000, and 76,126,000 issued and outstanding, respectively		372,257			373,422			374,882			346,026
Capital surplus		33,777			34,841			36,721			41,233
Retained earnings		19,519			11,307			3,114			23,024
Accumulated other comprehensive loss		(18,369	)		(13,083	)		(10,258	)		(1,176	)
Total shareholders’ equity		407,184			406,487			404,459			409,107
Total liabilities and shareholders’ equity	$	6,346,590		$	6,243,670		$	6,081,766		$	6,075,228

 Page 5

REPUBLIC BANCORP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share data)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2006		2005		2006		2005
Interest Income
Interest and fees on loans	$	78,205	$	67,457	$	152,364	$	131,921
Interest on securities and FHLB stock dividends		14,410		13,280		28,650		24,657
Total interest income		92,615		80,737		181,014		156,578
Interest Expense
Deposits		22,800		16,667		44,162		31,855
Short-term borrowings		14,099		8,325		25,569		13,945
Long-term FHLB advances and security repurchase agreements		17,180		15,919		32,984		31,549
Long-term debt		1,075		1,075		2,150		2,150
Total interest expense		55,154		41,986		104,865		79,499
Net interest income		37,461		38,751		76,149		77,079
Provision for loan losses		1,750		1,400		3,150		2,900
Net interest income after provision for loan losses		35,711		37,351		72,999		74,179
Noninterest Income
Service charges		3,315		3,008		6,308		5,689
Mortgage banking income		2,184		3,232		4,019		9,057
Gain on sale of securities		6		292		68		727
Gain on sale of SBA loans		269		561		817		953
Income from bank owned life insurance		981		1,080		1,960		2,093
Other noninterest income		1,204		713		2,066		1,405
Total noninterest income		7,959		8,886		15,238		19,924
Noninterest Expense
Salaries and employee benefits		11,406		12,350		23,726		25,766
Occupancy expense of premises		2,433		2,495		5,124		5,196
Equipment expense		1,419		1,599		2,853		3,223
Other noninterest expense		4,819		4,815		9,346		9,946
Total noninterest expense		20,077		21,259		41,049		44,131
Income before income taxes		23,593		24,978		47,188		49,972
Provision for income taxes		7,197		7,503		14,375		15,190
Net income	$	16,396	$	17,475	$	32,813	$	34,782
Basic earnings per share	$	.22	$	.23	$	.44	$	.45
Diluted earnings per share	$	.22	$	.23	$	.44	$	.45

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REPUBLIC BANCORP INC.

SUMMARY OF SELECTED FINANCIAL DATA

(In thousands, except operating data)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2006			2005			2006			2005
Operating Data (in millions):
Residential mortgage loan closings:
Fixed rate	$	218		$	246		$	375		$	449
Adjustable rate		74			163			142			305
Total residential mortgage loan closings	$	292		$	409		$	517		$	754
Conventional loans	$	135		$	217		$	248		$	411
Government loans		24			35			44			65
Construction loans		45			57			64			91
Jumbo and other loans		88			100			161			187
Total residential mortgage loan closings	$	292		$	409		$	517		$	754
Refinances (percent of total)		31	%		33	%		37	%		39	%
Mortgage loan sales	$	86		$	174		$	165		$	475
Commercial loan closings:
Commercial loans	$	122		$	194		$	243		$	300
SBA loans		12			15			23			24
Total commercial loan closings	$	134		$	209		$	266		$	324
Consumer loan closings:	$	80		$	137		$	145		$	212
Performance Ratios (annualized for the quarter):
Return on average assets		1.05	%		1.16	%		1.06	%		1.17	%
Return on average equity		16.08	%		17.00	%		16.04	%		16.88	%
Net interest margin		2.54	%		2.73	%		2.60	%		2.76	%
Efficiency ratio (1)		43.38	%		44.01	%		44.12	%		45.00	%
Per Common Share Data:
Average common shares outstanding - diluted		75,116			77,578			75,333			77,948
Cash dividends declared	$	.11		$	.10		$	.22		$	.20
Book value	$	5.47		$	5.37		$	5.47		$	5.37
Tangible book value	$	5.42		$	5.31		$	5.42		$	5.31

	June 30,			Mar. 31,			Dec. 31,			June 30,
	2006			2006			2005			2005
Capital Ratios:
Shareholders’ equity to assets		6.42	%		6.51	%		6.65	%		6.73	%
Tier 1 risk-based capital		10.98	%		11.12	%		11.24	%		11.38	%
Total risk-based capital		12.03	%		12.18	%		12.32	%		12.50	%
Tier 1 leverage		7.52	%		7.58	%		7.57	%		7.57	%

⁽¹⁾ Includes total noninterest expense, divided by total revenue (FTE), excluding gain on sale of securities.

Page 7

REPUBLIC BANCORP INC.

SUMMARY OF SELECTED FINANCIAL DATA

(Dollars in thousands)

	Three Months Ended								Three Months Ended
	June 30, 2006								June 30, 2005
	Average					Average			Average					Average
	Balance			Interest		Rate			Balance			Interest		Rate
Average Assets:
Short-term investments	$	1,068		$	14		5.39	%	$	782		$	4		2.04	%
Mortgage loans held for sale		34,536			576		6.68			78,096			1,158		5.93
Securities available for sale:
Taxable		697,322			8,821		5.06			634,758			7,337		4.62
Tax-exempt		219,290			2,884		5.28			225,589			3,078		5.47
Securities held to maturity		219,298			2,508		4.57			257,529			2,970		4.61
Portfolio loans:
Commercial loans		1,767,998			32,735		7.32			1,613,861			26,113		6.40
Residential real estate mortgage loans		2,294,472			31,483		5.49			2,172,126			28,459		5.24
Installment loans		721,242			13,411		7.46			747,193			11,727		6.30
Total loans, net of unearned income		4,783,712			77,629		6.46			4,533,180			66,299		5.83
FHLB stock		80,461			1,054		5.25			80,709			855		4.25
Total interest-earning assets		6,035,687			93,486		6.17			5,810,643			81,701		5.61
Allowance for loan losses		(42,853	)							(41,986	)
Cash and due from banks		44,591								46,963
Other assets		235,782								210,222
Total assets	$	6,273,207							$	6,025,842

Average Liabilities and Shareholders’ Equity:
Interest-bearing demand deposits	$	181,350	$	313	0.69	%	$	199,899	$	231	0.46	%
Savings and money market accounts		829,701		4,583	2.22			988,919		3,967	1.60
Retail certificates of deposit		1,179,905		11,497	3.91			986,261		7,900	3.21
Wholesale deposits		543,375		6,407	4.73			555,416		4,569	3.29
Total interest-bearing deposits		2,734,331		22,800	3.34			2,730,495		16,667	2.45
Short-term borrowings		1,168,438		14,099	4.77			1,076,191		8,325	3.06
Long-term FHLB advances and security repurchase agreements		1,596,644		17,180	4.26			1,429,282		15,919	4.41
Long-term debt		50,000		1,075	8.60			50,000		1,075	8.60
Total interest-bearing liabilities		5,549,413		55,154	3.96			5,285,968		41,986	3.16
Noninterest-bearing deposits		272,105						286,356
Other liabilities		43,865						42,342
Total liabilities		5,865,383						5,614,666
Shareholders’ equity		407,824						411,176
Total liabilities and shareholders’ equity	$	6,273,207					$	6,025,842
Net interest income/rate spread (FTE)			$	38,332	2.21	%			$	39,715	2.45	%
FTE adjustment			$	871					$	964
Impact of noninterest- bearing sources of funds					0.33	%					0.28	%
Net interest margin (FTE)					2.54	%					2.73	%

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REPUBLIC BANCORP INC.

SUMMARY OF SELECTED FINANCIAL DATA

(Dollars in thousands)

	Six Months Ended								Six Months Ended
	June 30, 2006								June 30, 2005
	Average					Average			Average					Average
	Balance			Interest		Rate			Balance			Interest		Rate
Average Assets:
Short-term investments	$	950		$	22		4.99	%	$	1,421		$	13		1.77	%
Mortgage loans held for sale		30,362			967		6.37			95,767			2,820		5.89
Securities available for sale:
Taxable		693,318			17,292		4.99			582,619			13,318		4.55
Tax-exempt		218,131			5,761		5.33			212,788			5,779		5.48
Securities held to maturity		222,203			5,207		4.69			246,181			5,661		4.60
Portfolio loans:
Commercial loans		1,748,938			63,715		7.25			1,600,064			50,583		6.29
Residential real estate mortgage loans		2,256,270			61,329		5.44			2,146,300			55,965		5.21
Installment loans		725,698			26,353		7.32			741,881			22,553		6.13
Total loans, net of unearned income		4,730,906			151,397		6.39			4,488,245			129,101		5.75
FHLB stock		80,493			2,098		5.26			80,710			1,681		4.20
Total interest-earning assets		5,976,363			182,744		6.11			5,707,731			158,373		5.55
Allowance for loan losses		(42,706	)							(41,875	)
Cash and due from banks		43,990								49,046
Other assets		232,789								208,535
Total assets	$	6,210,436							$	5,923,437

Average Liabilities and Shareholders’ Equity:
Interest-bearing demand deposits	$	181,895	$	593	0.66	%	$	200,189	$	452	0.46	%
Savings and money market accounts		854,252		8,991	2.12			1,030,271		8,097	1.57
Retail certificates of deposit		1,158,052		21,677	3.77			950,572		14,908	3.16
Wholesale deposits		575,519		12,901	4.52			554,209		8,398	3.03
Total interest-bearing deposits		2,769,718		44,162	3.22			2,735,241		31,855	2.35
Short-term borrowings		1,117,662		25,569	4.55			985,279		13,945	2.81
Long-term FHLB advances and security repurchase agreements		1,550,038		32,984	4.23			1,420,863		31,549	4.42
Long-term debt		50,000		2,150	8.60			50,000		2,150	8.60
Total interest-bearing liabilities		5,487,418		104,865	3.82			5,191,383		79,499	3.06
Noninterest-bearing deposits		268,381						278,231
Other liabilities		45,575						41,710
Total liabilities		5,801,374						5,511,324
Shareholders’ equity		409,062						412,113
Total liabilities and shareholders’ equity	$	6,210,436					$	5,923,437
Net interest income/rate spread (FTE)			$	77,879	2.29	%			$	78,874	2.49	%
FTE adjustment			$	1,730					$	1,795
Impact of noninterest- bearing sources of funds					0.31	%					0.27	%
Net interest margin (FTE)					2.60	%					2.76	%

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REPUBLIC BANCORP INC.

SUMMARY OF SELECTED FINANCIAL DATA

(Dollars in thousands)

	June 30,		March 31,		Dec. 31,		June 30,
	2006		2006		2005		2005
Portfolio Loan Summary:
Commercial loans:
Commercial and industrial	$	28,554	$	27,639	$	28,314	$	29,753
Commercial real estate mortgage		1,751,263		1,726,789		1,669,556		1,612,718
Total commercial loans		1,779,817		1,754,428		1,697,870		1,642,471
Residential real estate mortgages		2,326,491		2,267,385		2,193,128		2,137,046
Installment loans:
Home equity lines of credit		353,912		371,955		390,373		444,871
Home equity term loans		195,320		179,578		170,352		136,522
Other consumer loans		173,948		173,624		176,535		172,219
Total installment loans		723,180		725,157		737,260		753,612
Total portfolio loans	$	4,829,488	$	4,746,970	$	4,628,258	$	4,533,129

Non-Performing Assets:
Non-accrual loans:
Commercial	$	34,355	$	26,395	$	27,344	$	14,550
Residential real estate mortgage		19,273		21,484		19,026		12,202
Installment		2,059		1,758		2,413		1,100
Total non-accrual loans		55,687		49,637		48,783		27,852
Other real estate owned:
Commercial		4,598		6,287		8,575		4,441
Residential real estate mortgage		5,592		4,856		3,029		3,399
Installment		861		1,449		712		1,077
Total other real estate owned		11,051		12,592		12,316		8,917
Total non-performing assets	$	66,738	$	62,229	$	61,099	$	36,769

Allowance for Loan Losses (for the quarter):
Balance at beginning of period	$	42,342	$	42,122	$	41,946	$	41,855
Loans charged off:
Commercial		411		626		1,387		907
Residential real estate mortgage		390		535		340		719
Installment		351		559		294		270
Total charge-offs		1,152		1,720		2,021		1,896
Recoveries:
Commercial		51		333		334		242
Residential real estate mortgage		1		47		135		17
Installment		132		160		228		253
Total recoveries		184		540		697		512
Net charge-offs		968		1,180		1,324		1,384
Provision charged to expense		1,750		1,400		1,500		1,400
Balance at end of period	$	43,124	$	42,342	$	42,122	$	41,871

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REPUBLIC BANCORP INC.

SUMMARY OF SELECTED FINANCIAL DATA

(Dollars in thousands)

	June 30,			March 31,			Dec. 31,			June 30,
	2006			2006			2005			2005
Asset Quality Ratios:
Non-performing assets to loans and
other real estate owned		1.38	%		1.31	%		1.32	%		.81	%
Non-performing assets to total assets		1.05	%		1.00	%		1.00	%		.61	%
Allowance for loan losses
to non-performing loans		77.44	%		85.30	%		86.35	%		150.33	%
Allowance for loan losses to loans		.89	%		.89	%		.91	%		.92	%
Allowance for loan losses to loans (excluding
residential real estate mortgages)		1.72	%		1.71	%		1.73	%		1.75	%
Net charge-offs to average loans: (1)
Commercial loans		.08	%		.07	%		.25	%		.16	%
Residential real estate mortgage loans		.07	%		.09	%		.04	%		.13	%
Installment loans		.12	%		.22	%		.03	%		.01	%
Total loans		.08	%		.10	%		.11	%		.12	%

⁽¹⁾ Quarter-to-date, annualized.