The $2 million non-tax deductible accrual would cover a civil monelty penalty proposed by the Federal Deposit Insurance Corp. against company's subsidiary, Republic Bank & Trust. The FDIC alleges the bank engaged in unsound banking practices by operating a refund anticipation loan program after the Internal Revenue Service stopped providing the debt indicator, which shows if a RAL application has obligations that might be withheld from a 1040 refund. Republic is contesting the claim and a hearing is set before an administrative law judge on February 6.

 

On the other side, the company recorded a net credit of $2 million to its provision for loan losses during the second quarter, compared to a $1 million credit a year earlier. The credits reflect better than projected losses on RALs, in part because it cut the amount it loaned by two thirds from 2010 to 2011.