Republic Bancorp has taken $2 million charge for a penalty it may have to pay because of its refund loan business. That meant the company's Tax Refund Solutions business had net income of $1.3 million for the second quarter ended June 30, a sharp drop from $3.1 million in last year's corresponding period.
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.
Last modified on Sunday, 02 June 2013