Republic Bank & Trust

LOUISVILLE, Ky.--(BUSINESS WIRE)-- Republic Bancorp, Inc. is pleased to report net income of $64.8 million for the year ended December 31, 2010, a $22.6 million, or 54%, increase over the same period in 2009. Diluted Earnings per Class A Common Share increased 53% for the year ended December 31, 2010 to $3.10. For the fourth quarter of 2010, the Company achieved net income of $4.4 million, a $574,000 increase over the fourth quarter of 2009. Diluted Earnings per Class A Common Share increased to $0.21 for the quarter. “With a solid fourth quarter, we completed the most successful year in our Company’s history in 2010. With a $95 million increase in our capital base over the previous 24 months, we are well-positioned entering 2011 to gain market share and profitably grow the Company, despite the on-going uncertainty in the economy,” commented Steve Trager, Republic’s President and Chief Executive Officer.

Republic Bancorp, Inc.(“Republic” or the “Company”) (NASDAQ: RBCAA), headquartered in Louisville, Kentucky, is the holding company for Republic Bank & Trust Company and Republic Bank.

The following chart highlights Republic’s fourth quarter and year ended December 31, 2010 financial performance compared to the same periods in 2009:

Year in Review

The year 2010 was a tremendous success for Republic in many regards. Above and beyond strong earnings for the year, the Company also achieved many other successes while positioning itself well for the future. Following are a few brief highlights from 2010:

Improved Credit Quality – Credit quality has always been a primary focus of Republic. In response to the national economic slowdown, management concentrated additional attention on improving credit metrics through investments in people and systems during the last three years. As a result, nonperforming and delinquent loans have decreased significantly from peak levels reached at the end of 2009 as listed below:

National Recognition – Four times during the year, Republic was recognized by a national publication as one of the best performing banks in the United States.

• February 2010 - Sandler O'Neil & Partners released its annual rankings of the top 150 financial institutions in Bank Director Magazine and ranked Republic as #5 based on total assets, profitability, capital adequacy and asset quality.
• May 2010 - the American Bankers Association'sBanking Journal ranked Republic as #9 based on 2009 Return on Average Total Equity (ROAE).
• August 2010 - Republic was ranked as #7 in the American Banker’s ranking of the nation’s most efficient bank holding companies.
• September 2010 - With a 5-year dividend growth rate of nearly 14% and a 12-month trailing dividend yield of 2.9%, Republic was recognized as a top dividend paying Company by the popular financial website, The Motley Fool.

Core Deposit Growth – In 2010 Republic increased the total balances of its low cost core deposit account base by $106 million. Despite rates at historic lows, the Company was able to attract these low cost deposit accounts with attractive technology offerings such as business on-site deposit and business on-line banking in combination with superior customer service and the safety and soundness of a strong performing institution.

Increased Cash Dividends – Despite the on-going turmoil in the financial services industry during the year, Republic once again increased its cash dividend by 8% in the second quarter of 2010 thanks to its strong earnings and strong capital position. This represents the 11th consecutive year that the Company has increased its quarterly cash dividend.

Technology Enhancements – Republic invested significant dollars during 2010 into new technology enhancements, which will pay dividends in the future through enhanced customer service and greater overall efficiencies for the Company. These enhancements include:

• A New Core Operating System – After nearly two years of planning and testing, the Company converted to its new core system over the Memorial Day weekend of 2010. The new “core” provides the Company with better technology integration, real time data reporting to clients across all service applications and the ability to economically scale in the future.
• Mobile Banking – In November, the Company introduced both Republic Bank Mobile Banking and a free iPhone® application to its client base. With Republic Bank Mobile Banking, clients can access their real-time account balances, view transaction history, transfer funds between accounts and initiate bill payments. In addition, they can find the closest Republic banking center or ATM with the Locations feature.
• Branch Capture – The Company adopted “branch capture” in approximately 50% of its banking center network during 2010 and expects to complete deployment of this functionality to all banking centers by the end of the first quarter of 2011. Branch capture allows the Company to transmit images of customer transactions to its data center for nightly processing. The ability to transmit images allows the Company to dramatically reduce its courier costs, improve business continuity capabilities, and further enhance customer services by eliminating cut-off times prior to closing at its banking centers.

Republic Bank Foundation Established – In March, Republic created the Republic Bank Foundation with a $5 million initial contribution. The Republic Bank Foundation was created to ensure the on-going legacy of giving that Republic has displayed throughout its 30-year history.

Better Business Bureau (“BBB”) Award – In April, Republic Bank received the BBB’s highest ranking of A+. The recent rating demonstrates Republic Bank’s strong commitment to quality for its clients. The Bank’s dedicated and hard working associates are focused on providing clients the best financial services available. Being a local bank, Republic remains accountable to its clients who are aware that decision makers can be reached to address any opportunity or problem.

Republic Bank We Care – In September, the Company held its annual Republic Bank We CARE Awards in Louisville and Lexington, during which the Company honored 15 companies for their volunteerism and community service. The Award was created to publicly congratulate companies who stress the four elements contained in the CARE name itself – Community, Activity, Recognition, and Enterprise.

Tax Refund Solutions (“TRS”) – TRS completed a record year in 2010 generating net income of $44.2 million as it processed over $10 billion in tax refunds for 2.8 million clients across the United States.

Results of Operations for the Fourth Quarter of 2010 Compared to the Fourth Quarter of 2009

Traditional Banking and Mortgage Banking (collectively “Core Banking”)

Net income from Core Banking was $7.1 million for the fourth quarter of 2010, a $1.8 million increase compared to the fourth quarter of 2009. Net income for the quarter was positively impacted by a reduction in provision for loan losses and lower overhead expenses, which helped to offset the expected decrease in net interest income. As with previous quarters, the Company remained conservative in its lending and investment strategies focusing on asset quality, while continuing its concentration on core deposit growth.

Although net interest income declined by 7% for the fourth quarter of 2010 compared to the fourth quarter of 2009, Republic’s Core Banking net interest margin remained solid at 3.40% for the quarter. “As with most financial institutions across the United States, net interest income continued to be negatively impacted by historically low long-term interest rates combined with soft consumer demand for adjustable rate mortgage products held within the Company’s portfolio. We believe 2011 will also be a challenging year to grow net interest income, as rates are likely to remain low by historical standards,” further commented Trager.

Core Banking non-interest income declined by $951,000, or 11%, during the fourth quarter of 2010 to $7.3 million. The decline was led by an $892,000 decrease in service charges on deposits of which approximately $585,000 resulted from the discontinuation of the Company’s Currency Connection product. Mortgage Banking income remained solid for the quarter, as the Company originated $84 million in fixed rate 1-4 family real estate loans sold into the secondary market.

Core Banking non-interest expenses declined $970,000, or 4%, for the fourth quarter of 2010 to $20.9 million. The primary driver of the decline in overhead expenses for the quarter was a decrease in third party costs associated with the Company’s debit card product and a reduction in FDIC insurance expense. The decrease in debit card costs was the direct result of a contract with a new third party provider, which substantially reduced, among other things, usage fees incurred by the Company for its debit card customer base. Non-interest expense for the quarter also benefited from a decrease in incentive compensation accruals. For the fourth quarter of 2010, the Company recorded a credit to its incentive compensation accruals of $2.2 million compared to a credit of $1.8 million for the fourth quarter of 2009.

Core Banking provision for loan losses for the fourth quarter of 2010 was $2.1 million, a $4.4 million decline from the fourth quarter of 2009. The Company continued to experience a favorable decline in non-performing loans, which decreased $15 million from December 31, 2009 and $8 million from September 30, 2010 to $28 million at December 31, 2010. The Traditional Bank’s delinquency ratio improved 74 basis points from the previous year-end and 45 basis points from September 30, 2010 to 1.24% at December 31, 2010. Overall, the Company’s allowance for loan losses to total loans was 1.06% as of December 31, 2010 compared to 1.01% at December 31, 2009. “The Company once again reported credit quality measures that placed it among the top performing financial institutions within its peer group. We are optimistic that we can continue in 2011 to capitalize on the marked improvements we have experienced in our credit quality metrics during the last six months,” further commented Trager.

Tax Refund Solutions (“TRS”)

TRS, which derives substantially all of its revenues during the first and second quarters of the year, historically operates at a net loss during the third and fourth quarters of the year, as the Company prepares for the upcoming tax season. TRS’ net loss was $2.7 million for the fourth quarter of 2010 compared to a net loss of $1.4 million for the same period in 2009.

As in the prior year, the Company will once again utilize its traditional funding sources to fund its first quarter 2011 Refund Anticipation Loan (“RAL”) volume. In order to ensure that the funding is in place, Republic began borrowing during the fourth quarter of 2010, primarily in the form of brokered deposits. As a result, the Company incurred funding costs for the first quarter 2011 program in the 2010 calendar year. Overall, TRS contributed negative net interest income of $70,000 for the fourth quarter of 2010 compared to negative net interest income of $173,000 for the fourth quarter of 2009. The improvement from the fourth quarter of 2009 was due to the current low interest rate environment.

In December, Republic released information for its upcoming first quarter 2011 tax season. Republic expects the upcoming 2011 tax season to include a projected 50% or more reduction in the dollar volume of RALs originated by the Company as a result of a reduction in its maximum RAL amount to $1,500. In addition, the Company expects to shift a material percentage of its product offerings to Jackson Hewitt offices during 2011, while working with an equal or slightly lower number of total overall tax preparation offices than TRS worked with in 2010. Management believes net income within the TRS segment will increase during 2011, if the Company can achieve its projected product volumes and provision for loan loss estimates.

CONCLUSION

“Despite continued uncertainty in the economy and significant regulatory and legislative reform impacting the banking industry, Republic turned in another record financial performance in 2010. Our focus on credit quality and capital strength has increased shareholder value, while at the same time positioning Republic for future growth as we remain well positioned to handle the many opportunities and challenges of 2011 and beyond. As always, our slogan remains true and will continue to do so for many years to come. We were here for you yesterday. We are here for you today. We will be here for you tomorrow,^®”concluded Steve Trager.

Republic Bancorp, Inc. (Republic) has 43 banking centers and is the parent company of Republic Bank & Trust Company with 35 banking centers in 13 Kentucky communities - Bowling Green, Covington, Crestwood, Elizabethtown, Florence, Frankfort, Georgetown, Independence, Lexington, Louisville, Owensboro, Shelbyville and Shepherdsville and three banking centers in southern Indiana – Floyds Knobs, Jeffersonville and New Albany. Republic Bank has banking centers in Hudson, Palm Harbor, Port Richey and Temple Terrace, Florida as well as Cincinnati, Ohio. Republic operates Tax Refund Solutions, a nationwide tax refund loan and check provider. Republic offers internet banking at www.republicbank.com. Republic has $3.6 billion in assets and $1 billion in trust assets under custody and management. Republic is headquartered in Louisville, Kentucky and Republic's Class A Common Stock is listed under the symbol “RBCAA” on the NASDAQ Global Select Market.

We were here for you yesterday. We are here for you today. We will be here for you tomorrow.^®

Statements in this press release relating to Republic’s plans, objectives, or future performance are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations. Republic's actual strategies and results in future periods may differ materially from those currently expected due to various risks and uncertainties, including those discussed in Republic’s 2009 Form 10-K and subsequent 10-Qs filed with the Securities and Exchange Commission.

Republic Bancorp, Inc. Financial Information
Fourth Quarter 2010 Earnings Release (continued)

Segment Data:

The reportable segments are determined by the type of products and services offered, distinguished between Traditional Banking, Mortgage Banking and Tax Refund Solutions (“TRS”). They are also distinguished by the level of information provided to the chief operating decision maker, who uses such information to review performance of various components of the business (such as branches and subsidiary banks), which are then aggregated if operating performance, products/services, and customers are similar. Loans, investments and deposits provide the majority of the net revenue from Traditional Banking operations; servicing fees and loan sales provide the majority of revenue from Mortgage Banking operations; RAL fees and ERC/ERD fees provide the majority of the revenue from TRS. All Company operations are domestic. Segment information for the three months and years ended December 31, 2010 and 2009 follows: