Republic Bank & Trust

LOUISVILLE, Ky.--(BUSINESS WIRE)-- Republic Bancorp, Inc.(NASDAQ: RBCAA), headquartered in Louisville, Kentucky, is the holding company for Republic Bank & Trust Company (the “Bank”).

Republic Bancorp, Inc. (“Republic” or the “Company”) is pleased to report third quarter net income of $5.6 million, an 8% increase over the third quarter of 2014, resulting in Diluted Earnings per Class A Common Share of $0.27. Year-to-date net income was $27.7 million, a $4.2 million, or 18%, increase from the same period in 2014, resulting in return on average assets (“ROA”) and return on average equity (“ROE”) of 0.94% and 6.45% for the first nine months of 2015.

Steve Trager, Republic’s Chairman and Chief Executive Officer, commented: “We continue to be proud of our growth in earnings. Producing such positive results continues to be challenging in today’s environment, as interest rates remain near historical lows, and the ability for banks to grow and earn positive margins on their products remains difficult. We have been able to overcome these headwinds and produce solid product growth in 2015 through our existing banking center footprint and our correspondent and warehouse lending channels.”

Trager further commented, “For quite some time, we have made it well known of our desire to make prudent bank acquisitions in one of our existing markets or a nearby synergistic market. I am pleased to say that on October 7, 2015, we were able to take a big step in achieving that goal with the announcement of our pending acquisition of Cornerstone Community Bank located in St. Petersburg, Florida. We are optimistic that we can close this acquisition during the first quarter of 2016 once all of the customary closing conditions have been completed. While I am extremely excited about this acquisition and what it means to the future of our Florida operations and our Company overall, I do not see it as the completion of a journey, but instead the beginning of one.”

The following table highlights Republic’s financial performance for the third quarter and first nine months of 2015 compared to the same periods in 2014:

Results of Operations for the Third Quarter of 2015 Compared to the Third Quarter of 2014

Traditional Banking, Warehouse Lending (“Warehouse”) and Mortgage Banking (collectively “Core Bank” or “Core Banking”)

Net income from Core Banking was $7.1 million for the third quarter of 2015, an increase of $679,000, or 11%, from the third quarter of 2014. As with the previous quarters of 2015, the increase in net income for the third quarter of 2015 at the Core Bank continued to be driven primarily by higher net interest income resulting from solid loan growth. The Core Bank’s growth in net interest income was further complemented by a solid increase in the Bank’s debit and credit card-related interchange fee income combined with a continued modest provision for loan and lease losses.

Net interest income at the Core Bank increased to $31.0 million during the third quarter of 2015, a $2.6 million, or 9%, increase over the third quarter of 2014. Net interest income for the third quarter of 2015 benefitted from robust year-over-year loan growth. This growth over the previous twelve months led to an increase in the Core Bank’s average loan balances of $434 million, or 16%, when comparing the third quarter of 2015 to the third quarter of 2014. The growth in average loan balances more than offset the negative impact to the Core Bank’s net interest income resulting from a decrease of 11 basis points to its net interest margin from the third quarter of 2014 to the third quarter of 2015.

The overall change in the Core Bank’s period-end and average loan balances by origination channel is presented below:

Within the Warehouse Lending channel, net interest income was particularly strong compared to the third quarter of 2014, as Warehouse lines of credit usage continued to be high among the Core Bank’s clients during the quarter. The Core Bank’s Warehouse balances at September 30, 2015 were $74 million higher than balances on December 31, 2014 and $121 million above balances on September 30, 2014.

Net interest income at the Core Bank for the third quarter of 2015 includes $1.1 million of net interest income contributed from the Company’s 2012 FDIC-assisted transactions compared to $1.5 million contributed during the third quarter of 2014. Accretion income from the 2012 FDIC-assisted transactions contributed seven and nine basis points to the Core Bank’s net interest margin during these two periods.

The Core Bank’s provision for loan and lease losses remained modest for the third quarter of 2015, as overall credit quality remained strong and the Core Bank’s credit metrics continued to compare favorably to peer. Core Bank provision expense was $1.1 million for the third quarter of 2015, a favorable decrease of $442,000 compared to the third quarter of 2014. Provision expense for the third quarters of 2015 and 2014 primarily represented an increase in general loan loss reserves, driven by the previously mentioned strong growth in the Core Bank’s loan portfolio.

The table below illustrates the Core Bank’s well-regarded credit quality ratios for 2015 quarter ends and the previous three calendar year ends:

Non-interest income for the Core Bank was $7.2 million during the third quarter of 2015 compared to $6.4 million for the third quarter of 2014. Improvements of $750,000 and $459,000 in net loss on other real estate owned (“OREO”) and interchange fee income, respectively, were partially offset by a $169,000 decrease in service charges on deposits. The improvement in net loss on OREO was driven by a $513,000 reduction in mark-to-market OREO writedowns from the same period in 2014. The increase in interchange fee income was primarily driven by increases in both credit and debit card sales volume of 30% and 5%, respectively. Such sales growth was further complemented by a greater mix of commercial credit and signature debit transactions, which generally generate higher margins than consumer related transactions.

Core Bank non-interest expense increased $2.8 million, or 12%, from the third quarter of 2014 to $25.9 million during the same period in 2015. Comparability of non-interest expense between the two quarters was meaningfully impacted by adjustments to the Core Bank’s incentive compensation accruals, which were made during both periods to bring accrual balances in line with projected payouts for the year. As a result of these adjustments, net incentive compensation expense was $834,000 for the third quarter of 2015 compared to a net credit of $577,000 for the third quarter of 2014.

Excluding the impact of these incentive compensation adjustments, non-interest expense increased $1.4 million, or 6%, for the third quarter of 2015 as compared to the third quarter of 2014. A large portion of the increase in non-interest expense for the quarter, excluding incentive compensation adjustments, was in the salaries and benefits category as the Core Bank increased its full-time equivalent employees (“FTEs”) from 681 at September 30, 2014 to 712 at September 30, 2015. The increased staffing was generally spread throughout the Core Bank in order to meet current loan demand and execute the Company’s overall long-term growth objectives.

Conclusion

“As we move into the final quarter of 2015, we have positive momentum on several fronts. In addition to our recently announced acquisition, we are excited about the traction we have in our non-traditional small dollar loan program as we have another pilot set to launch in the fourth quarter of 2015. We are also in the preliminary stages of developing plans to expand the reach of our Traditional Bank via enhanced mobile capabilities. If implemented, our mobile banking initiative would give us the ability to market products and services to clients in all 50 states beginning in late 2016. In the meantime, we will continue to review and enhance our strategic plan, as we seek to heighten our overall organic performance and meet our goals of managing risk and maximizing our shareholders’ returns commensurate with the highest performing banks in the Nation,”concluded Trager.

Republic Bancorp, Inc. (the “Company”) is the parent company of Republic Bank & Trust Company (the “Bank”).The Bank currently has 40 banking centers: 32 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; two banking centers in Florida – Port Richey and Temple Terrace; two banking centers in Tennessee – Cool Springs (Franklin) and Green Hills (Nashville); and one banking center in Blue Ash (Cincinnati), Ohio. The Bank offers internet banking at www.republicbank.com. The Company has $4.0 billion in assets and is headquartered in Louisville, Kentucky. The Company’s Class A Common Stock is listed under the symbol “RBCAA” on the NASDAQ Global Select Market.

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Forward-Looking Statements

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.The forward-looking statements in the preceding paragraphs are based on our current expectations and assumptions regarding our business, the future impact to our balance sheet and income statement resulting from changes in interest rates, the ability to develop products and strategies in order to meet the Company’s long-term strategic goals, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you therefore against relying on any of these forward-looking statements. 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 the actual timing, magnitude and frequency of interest rate changes, as well as the actual changes in market conditions and the application and timing of various management strategies as compared to those projected in our interest rate model. Additionally, actual results could differ materially from the interest rate model if interest rates do not move equally across all points on the yield curve and based upon other 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 Annual Report on Form 10-K for the period ended December 31, 2014.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.