Republic Bank & Trust

LOUISVILLE, Ky.--(BUSINESS WIRE)-- Republic Bancorp, Inc. (“Republic” or the “Company”),is pleased to report net income of $92.1 million for the first six months of 2012, representing a $12.0 million, or 15%, increase over the first six months of 2011. Diluted Earnings per Class A Common Share increased to $4.38 for the first six months of 2012, while return on average assets (“ROA”) and return on average equity (“ROE”) during the same period were both industry-strong at 4.94% and 35.19%, respectively.

For the second quarter of 2012, Republic earned net income of $9.6 million, a $915,000, or 11%, increase over the second quarter of 2011. Diluted Earnings per Class A Common Share increased to $0.46 for the quarter. ROA and ROE were both solid during the quarter at 1.16% and 7.17%, respectively. As a result of Republic’s continued strong performance, the Company announced a 7% increase to its regular quarterly cash dividend payable in July. This represents the 12^th consecutive year Republic has raised dividend payouts to its shareholders.

Steve Trager, Republic’s President and CEO, commented: “We are pleased with the second quarter results as we continue to experience solid organic loan growth while maintaining our conservative lending standards and strong capital base. Also, during the second quarter, we made great progress in integrating our recent acquisition of the loans and deposits of Tennessee Commerce Bank (“TCB”) and look forward to growing our customer base in the Nashville, Tennessee market. Not only was the TCB acquisition an immediate positive impact to our strong capital base the day we acquired it, it has also allowed the Company to gain valuable experience and knowledge that we look forward to utilizing in future acquisitions.”

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

The following chart highlights Republic’s second quarter and year-to-date 2012 financial performance compared to the same period in 2011:

Results of Operations for the Second Quarter of 2012 Compared to the Second Quarter of 2011

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

Net income from Core Banking decreased slightly from $7.4 million during the second quarter of 2011 to $7.2 million during the second quarter of 2012. The decrease in Core Bank earnings was primarily the result of the pre-conversion operational costs associated with the TCB acquisition during the second quarter of 2012 and a $1.9 million security gain that the Company recorded during the second quarter of 2011. The Core Bank’s operations achieved positive results during the second quarter of 2012 from increased net interest income driven by solid year-over-year loan growth.

Net interest income within the Core Bank rose to $28.1 million for the second quarter of 2012, a solid increase of $1.7 million, or 6%, over the second quarter of 2011. The increase in net interest income for the quarter was attributable primarily to year-over-year growth in loans of $218 million. Included in the year-over-year growth in loans was $39 million in loans outstanding as of June 30, 2012 that were acquired as part of the TCB acquisition in January 2012. In addition, Republic’s existing franchise grew loans by $179 million since June 30, 2011 with $89 million of that growth attributable to the Company’s mortgage warehouse lending division. As a result, the Core Bank’s net interest margin remained healthy at 3.57% for the second quarter of 2012, compared to 3.50% for the second quarter of 2011.

The Core Bank’s provision for loan losses was slightly higher during the second quarter of 2012, increasing from $585,000 during the second quarter of 2011 to $831,000. Conversely, the Company’s delinquent loans to total loans and non-performing loans to total loans ratios were positively reduced to their lowest levels since 2007. The Core Bank’s overall credit metrics continue to be strong and place it among the highest performers in the banking industry.

The table below illustrates the Core Bank’s continuing solid credit quality ratios for the most recent quarter-ends and the previous three calendar year-ends.

Non-interest income for the Core Bank was $7.9 million for the second quarter of 2012 compared to $8.7 million for the second quarter of 2011. As previously noted, the Core Bank recorded a $1.9 million security gain during the second quarter of 2011, as the Company repositioned a portion of its investment portfolio into securities with a shorter duration than those sold. Partially offsetting the prior year’s security gain was an increase in mortgage banking income during the second quarter of 2012. Overall, mortgage banking income increased from $924,000 during the second quarter of 2011 to $2.0 million during the second quarter of 2012, as application volume for long-term fixed rate mortgages increased from $78 million during the second quarter of 2011 to $143 million during the second quarter of 2012.

The Core Bank’s non-interest expenses increased $887,000, or 4%, for the second quarter of 2012 to $24.5 million. Included in non-interest expenses for the second quarter of 2012 were overhead expenses of $2.3 million related to the TCB acquisition. After the TCB core system conversion to Republic’s core systems on July 13, 2012, the on-going TCB-related overhead expenses are expected to be greatly reduced or further offset by additional revenue payments from the FDIC, as Republic continues to service a large number of TCB loans that were retained by the FDIC in the transaction.

Republic Processing Group

The Company has combined its previous business segment Tax Refund Solutions (“TRS”) with its relatively new prepaid card division, Republic Payment Solutions (“RPS”). Collectively, this combination is designated as the Republic Processing Group (“RPG”) for the Company’s business segment reporting. RPS is preparing to expand its client base into general purpose reloadable prepaid debit and payroll cards. This program is expected to serve as a source of fee income and low-cost deposits for the Company.

RPG, primarily through the TRS division, recorded net income of $2.4 million for the second quarter of 2012 compared to $1.3 million for the second quarter of 2011. The quarter-over-quarter increase in net income was primarily the result of a $2.0 million Civil Money Penalty (“CMP”) assessed by the FDIC during the second quarter of 2011. The CMP was later reduced to $900,000 during the fourth quarter of 2011, as part of Republic’s final settlement with the FDIC.

Additionally, RPG recorded a net credit of $365,000 to its provision for loan losses during the second quarter of 2012 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 estimated loss rate on RALs decreased from 1.49% of total RALs originated as of June 30, 2011 to 1.39% of total RALs originated as of June 30, 2012. The current year tax season represents the last season that RB&T will originate RALS. RB&T will continue to offer ERC/ERD products in the future.

TCB

During the first quarter of 2012, the Company recorded an initial bargain purchase gain of $27.9 million as a result of the TCB acquisition. The bargain purchase gain was realized because the overall price paid by RB&T was substantially less than the fair value of the TCB assets acquired and liabilities assumed in the transaction. During the second quarter of 2012 the Bank posted adjustments to the acquired assets for its FDIC-assisted acquisition in the determination of Day One fair values and recorded a slight decrease to the bargain purchase gain of $96,000, as additional information relative to the Acquisition Date fair values became available.

The bargain purchase gain originally recorded during the first quarter of 2012 was determined via a fair value calculation for all of the assets acquired and liabilities assumed in the transaction as of January 27, 2012 (the “Acquisition Date”). These fair value estimates are considered preliminary as of the Acquisition Date, and are subject to change for up to one year after the closing date of the acquisition, as additional information relative to Acquisition Date fair values becomes available. Generally, the decrease in the Company’s bargain purchase gain was the result of adjustments made to the projected cash flows of the acquired assets and liabilities. Overall, the contractual amount of the loans purchased reduced from $79 million as of March 31, 2012 to $52 million as of June 30, 2012. The carrying value of the loans purchased in the TCB transaction was $56 million as of March 31, 2012 compared to $39 million as of June 30, 2012.

Conclusion

“While I am very pleased with our results during the first half of 2012, I am even more optimistic about the potential for the future. Our industry strong credit quality and capital ratios have placed us in a position to take advantage of the many opportunities that may arise over the next few years. In particular, we remain steadfast in our desire to find additional TCB-like opportunities that provide immediate up-side potential to the Company’s shareholders. In addition, the opportunities in our existing markets continue to be favorable for a locally-based bank with a strong community-minded culture. All of us at Republic are very happy about where we are but even more excited about where we are going. As always, my pride in the past, my delight for the present and my optimism for the future allows me to once again say: “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 (RB&T) and Republic Bank. RB&T has 34 banking centers in 12 Kentucky communities - Covington, Crestwood, Elizabethtown, Florence, Frankfort, Georgetown, Independence, Lexington, Louisville, Owensboro, Shelbyville and Shepherdsville, three banking centers in southern Indiana – Floyds Knobs, Jeffersonville and New Albany and one banking center in Franklin (Nashville), Tennessee. Republic Bank has banking centers in Hudson, Palm Harbor, Port Richey and Temple Terrace, Florida as well as Blue Ash (Cincinnati), Ohio. Nationally, Republic Processing Group (“RPG”) facilitates the payment of federal and state tax refund products and offers prepaid cards. RPG is comprised of two distinct divisions: Tax Refund Solutions and Republic Payment Solutions. Republic offers internet banking at www.republicbank.com. Republic has $3.3 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. ^®

Forward-Looking Statements

This release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, future acquisitions, current expectations and assumptions regarding its business, the economy and other future conditions. Forward-looking statements can be identified by the use of the words “expect,” “anticipate,” “believe,” “intend,” “could” and “should,” and other words of similar meaning. These forward-looking statements express management’s current expectations or forecasts of future events and, by their nature, are subject to risks and uncertainties and there are a number of factors that could cause actual results to differ materially from those in such statements.

Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual results may differ materially from those contemplated by the forward-looking statements. The Company cautions you therefore against relying on any of these forward-looking statements, which speak only as of the date on which they are made. They are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include factors disclosed from time to time in the Company’s filings with the U.S. Securities and Exchange Commission, including those factors set forth as “Risk Factors” in the Company’s Form 10-K for the year ended December 31, 2011. The Company undertakes no obligation to update any forward-looking statements. These forward-looking statements are made only as of the date of this release, and the Company undertakes no obligation to release revisions to these forward-looking statements to reflect events or conditions after the date of this release.

Segment Data:

Reportable segments are determined by the type of products and services offered and 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.

As of June 30, 2012, the Company was divided into three distinct segments: Traditional Banking, Mortgage Banking and Republic Processing Group (“RPG”).

Nationally, through Republic Bank & Trust Company or Republic Bank, RPG facilitates the receipt and payment of federal and state tax refund products or offers various types of prepaid cards. RPG is comprised of two distinct divisions: Tax Refund Solutions (“TRS”) and Republic Payment Solutions (“RPS”). RPS is preparing to offer general purpose reloadable (“GPR”) prepaid debit, payroll, gift and incentive cards. This program will serve as a source of fee income and low-cost deposits. For the projected near term as the program is established, the operating results of the RPS division are expected to be immaterial to the Company’s overall results of operations and will therefore not be reported as a separate business segment until such time, if any, that it becomes material.

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.

The accounting policies used for Republic’s reportable segments are the same as those described in the summary of significant accounting policies. Segment performance is evaluated using operating income. Goodwill is not allocated. Income taxes which are not segment specific are allocated based on income before income tax expense. Transactions among reportable segments are made at fair value.

Segment information for the three and six months ended June 30, 2012 and 2011 follows:

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(1) – The amount of loan fee income included in total interest income was $1.3 million and $1.1 million for the quarters ended June 30, 2012 and 2011. The amount of loan fee income included in total interest income was $47.3 million and $60.4 million for the six months ended June 30, 2012 and 2011.

(2) – The following table provides a reconciliation of total stockholders’ equity in accordance with GAAP to tangible stockholders’ equity in accordance with applicable regulatory requirements. The Company provides the tangible common equity ratio, in addition to those defined by banking regulators, because of its widespread use by investors as a means to evaluate capital adequacy.

(3) – Equals total non-interest expense divided by the sum of net interest income and non interest income. The ratio excludes net gain (loss) on sales, calls and impairment of investment securities.

(4) – Equals total loans exceeding 30 days past due divided by total loans.

(5) – The amount of loan fee income included in total interest income per quarter was as follows: $1.3 million (quarter ended June 30, 2012), $46.0 million (quarter ended March 31, 2012), $788,000 (quarter ended December 31, 2011), $1.1 million (quarter ended September 30, 2011) and $1.1 million (quarter ended June 30, 2011).

NM – Not meaningful

Republic Bancorp, Inc.
Kevin Sipes, 502-560-8628
Executive Vice President and Chief Financial Officer

Source: Republic Bancorp, Inc.