Republic Bank & Trust

LOUISVILLE, Ky.--(BUSINESS WIRE)-- Republic Bancorp, Inc. is pleased to report net income of $80.1 million for the first six months of 2011, representing a $27.1 million, or 51%, increase over the first six months of 2010. Return on average assets (“ROA”) and return on average equity (“ROE”) were both industry-strong at 4.40% and 37.48%, respectively, for the first six months of 2011. For the second quarter of 2011, Republic earned $8.7 million, a $266,000 increase over the second quarter of 2010. Diluted Earnings per Class A Common Share increased to $0.41 for the quarter. Return on average assets (“ROA”) and return on average equity (“ROE”) were both solid during the quarter at 1.08% and 7.77%, respectively.

Steve Trager, Republic’s President & CEO, said: “We completed another solid quarter with an increase in net income over the same quarter in 2010, a continued year-over-year improvement in credit quality, and a strong capital base that ranks Republic as one of the best-capitalized financial institutions in the country. As a result of our continued strong performance, we were able to give back, once again, to our shareholders as the Company announced an 8% increase to its quarterly cash dividend payable in July 2011. This marks the eleventh consecutive year we have raised payouts to our shareholders.

“In addition, the Company also continued to give back to the communities it serves. The Republic Bank Foundation (the “Foundation”), a private charitable foundation that recently received a second $5 million contribution from Republic Bank & Trust Company, donated $180,000 to the WHAS Crusade for Children (the “Crusade”), ensuring that the Crusade’s 2011 campaign exceeded 2010. Moreover, the Foundation announced the first winners of its inaugural scholarship program granted to 20 students from the Commonwealth to help them attend the University of Kentucky. We’ve always said what we make here stays here. This means investing in our communities even during uncertain economic times.”

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 second quarter and year-to-date 2011 financial performance compared to the same period in 2010:

Results of Operations for the Second quarter of 2011 Compared to the Second quarter of 2010

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

Net income from Core Banking increased from $4.0 million during the second quarter of 2010 to $7.4 million during the second quarter of 2011. Net income for the quarter benefited from a lower provision for loan losses as a result of a meaningful year-over-year improvement in the Company’s overall credit quality metrics. In addition, a sale of a portion of the Company’s investment securities bolstered the Core Bank’s non-interest income for the quarter.

Net interest income within the Core Bank was $26.5 million for the second quarter 2011, a decline of $409,000, or 1.5%, from the second quarter of 2010, but an increase of $1.2 million from the first quarter of 2011. The Core Bank’s industry-solid net interest margin of 3.50% for the second quarter of 2011 represented a 17 basis point increase from the first quarter of 2011 and a modest decline of 15 basis points from the second quarter of 2010. As a result of the low interest rate environment and a general lack of demand for portfolio adjustable rate mortgage (“ARM”) products, Republic has continued to seek earning asset opportunities with limited credit risk in order to strengthen the Company’s net interest income. In June, the Company settled on such an opportunity by purchasing $37.5 million of commercial real estate loans at a 13% discount to par. The weighted average maturity of these loans is just under seven years with an expected yield-to-maturity of over 8.0%. Funds to purchase these loans came from excess cash at the Federal Reserve Bank which was earning 0.25%. Although the marketplace for assets that possess an acceptable price point and an acceptable level of credit risk is limited in the view of Company management, Republic will likely continue with this asset acquisition strategy for the foreseeable future.

Within the Core Banking segment, Republic’s percentage of delinquent loans past due 30-days or more as a percentage of total loans at June 30, 2011 declined to 1.28%, a decrease of 44 basis points compared to June 30, 2010, while nonperforming loans as a percentage of total loans declined nearly 43 basis points from June 30, 2010 to 1.28%. In addition, the Core Bank’s annualized net charge-offs as a percentage of average loans was 0.17% for the second quarter of 2011 compared to 0.40% for the second quarter of 2010. This improvement in credit quality contributed to a $4.4 million decline in the Core Bank’s provision for loan losses for the second quarter of 2011 compared to the same period in 2010. “While many negative environmental factors remain, our top-down management approach to dealing with problem assets has continued to pay dividends, as our credit metrics remain among the very best in the industry. Our cautious optimism for the Core Bank’s credit quality continues to grow as our already solid credit metrics improve,” said Trager.

Core Banking non-interest income increased by $1.5 million, or 21%, during the second quarter of 2011 to $8.7 million. The Core Bank shortened the duration of its investment portfolio by selling approximately $133 million of its longer-lived securities, and due to favorable market conditions, recorded a pre-tax investment security gain of $1.9 million during the second quarter of 2011. The gain on sale of securities more than offset a decline of $247,000 in service charges on deposits and a $479,000 decline in mortgage banking income for the quarter.

Tax Refund Solutions (“TRS”)

TRS net income was $1.3 million for the second quarter of 2011, a decrease of $3.1 million from the same quarter in 2010. The decrease in TRS net income versus the second quarter of 2010 was primarily driven by a previously-disclosed non tax-deductible expense of $2.0 million, representing the amount of a Civil Money Penalty (“CMP”) proposed by the FDIC against the Company’s subsidiary, Republic Bank & Trust Company. Republic accrued the expense for the CMP despite its decision to vigorously contest the CMP in an upcoming hearing before an Administrative Law Judge (“ALJ”). This accrued expense will remain a liability of the Company until it receives a final ruling at the conclusion of the adjudicatory process. If the CMP were eliminated or reduced, the Company would record a corresponding credit to income at that time.

In addition to the effect of the CMP, TRS recorded a net credit of $2.0 million to its provision for loan losses during the second quarter of 2010 compared to a net credit of $1.0 million for the second quarter of 2011. The net credit in both periods resulted from better-than-previously-projected paydowns within the Company’s Refund Anticipation Loan (“RAL”) portfolio. The Company was able to estimate its 2011 TRS provision for loan losses with greater precision than its 2010 estimate, in part, because of the 66% strategic reduction in RAL dollar volume from 2010 to 2011.

“The second quarter of the year marks the completion of the tax season for our TRS segment. We are proud of the performance of our tax business during the first six months of 2011. As we work toward the next tax season, TRS will continue to focus its efforts on working with tax preparation offices that reflect Republic’s core values of work-product quality, knowledge and understanding of banking regulations, and the application of those regulations to the various bank products marketed through their offices. In the meantime, we seek to resolve our respectful disagreement with the FDIC through the ALJ process. Our hearing before the ALJ is currently set to begin on February 6, 2012,” said Trager.

CONCLUSION

“Though challenges remain ahead, we believe sound financial management, outstanding client service and unwavering dedication to the communities we serve will carry us through to a successful 2011. Our strong business model and hard work has allowed us to continually maximize both shareholder value and client satisfaction. We are confident that we can continue to do both for many years to come. As we always remind our clients, associates and valued shareholders: ‘We were here for you yesterday. We are here for you today. We will be here for you tomorrow^®,’” concluded Trager.

Republic Bancorp, Inc. (Republic) has 43 banking centers and is the parent company of Republic Bank & Trust Company and Republic Bank. Republic Bank & Trust Company has 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 $3.1 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 2010 Form 10-K filed with the Securities and Exchange Commission.

Republic Bancorp, Inc. Financial Information
Second Quarter 2011 Earnings Release

(all amounts other than per share amounts and number of employees and number of banking centers are expressed in thousands unless otherwise noted)

Republic Bancorp, Inc. Financial Information
Second Quarter 2011 Earnings Release (continued)

Segment Data:

The reportable segments are determined by the type of products and services offered, distinguished among 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 and six months ended June 30, 2011 and 2010 follows: