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 first quarter net income of $13.8 million, a 15% increase over the first quarter of 2014, resulting in Diluted Earnings per Class A Common Share of $0.66. Return on average assets (“ROA”) and return on average equity (“ROE”) were 1.40% and 9.72%, respectively, for the first quarter of 2015.

Steve Trager, Republic’s Chairman and Chief Executive Officer, commented: “I am very pleased with our first quarter 2015 operating results as we continue to build upon the momentum that we created during the second half of 2014. Most notably, each of our four operating segments experienced growth in net income for the first quarter of 2015 compared to the first quarter of 2014. In addition, the growth in our total Company net income was primarily driven by an increase in top-line revenue; an indication that our overall operating performance continues to grow. While maintaining this momentum at the pace we have achieved thus far will not be easy for the rest of the year, our loan pipelines remain at solid levels and business prospects are strong, giving me great optimism for the remainder of 2015.”

The following table highlights Republic’s financial performance for the first quarter of 2015 compared to the same period in 2014:

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

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

Net income from Core Banking was $6.6 million for the first quarter of 2015, an increase of $1.2 million, or 22%, from the first quarter of 2014. The increase in quarterly net income at the Core Bank was largely driven by solid loan growth which contributed to a strong increase in net interest income. The Core Bank’s growth in net interest income was further complemented by a meaningful increase in mortgage banking income combined with limited growth in overhead costs for the quarter.

Net interest income at the Core Bank increased to $28.4 million during the first quarter of 2015, a $1.2 million, or 4%, increase over the first quarter of 2014. The Core Bank’s net interest margin was 3.14% during the first quarter of 2015 compared to 3.29% during the first quarter of 2014. As previously mentioned, net interest income benefitted from strong loan growth during the quarter as loans increased $115 million from year-end 2014. The growth in loans during the first quarter of 2015 combined with the strong loan growth during the second half of 2014 led to an increase in the Core Bank’s average loan balances of $462 million when comparing the first quarter of 2015 to the first quarter of 2014. The Core Bank’s Warehouse lines of credit and correspondent lending portfolios, in particular, contributed to the Core Bank’s strong growth in both period-end and average balances. A breakdown of the overall change in the Core Bank’s period-end and average loan balances by origination channel is presented in the table below:

Net interest income at the Core Bank for the first quarter of 2015 includes $598,000 of net interest income contributed from the Company’s 2012 FDIC-assisted transactions compared to $3.2 million contributed during the first quarter of 2014. While net interest income at the Core Bank continues to benefit from discount accretion on the loans it acquired in the Company’s 2012 FDIC-assisted transactions, this benefit continues to decline as the remaining loans from this transaction pay down or pay off. Accretion income from the 2012 FDIC-assisted transactions contributed 2 and 25 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 favorably low for the first quarter of 2015 as overall credit quality at the Core Bank is strong. Core Bank provision expense was $375,000 for the first quarter of 2015 compared to a net credit of $240,000 during the first quarter of 2014. Provision expense for the first quarter of 2015 primarily represented an increase in general loan loss reserves, driven by the previously mentioned strong growth in the Core Bank’s loan portfolio. The Core Bank’s overall credit metrics in both periods compares favorably to peer.

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

Non-interest income for the Core Bank was $6.8 million during the first quarter of 2015 compared to $5.6 million for the first quarter of 2014. The growth in non-interest income during the quarter was primarily driven by an $867,000 increase in mortgage banking income, as a decrease in long-term interest rates boosted demand for the Core Bank’s 15- and 30-year secondary market loan products. Altogether, the Core Bank originated $46 million of mortgage loans held for sale during the first quarter of 2015 compared to $14 million during the first quarter of 2014.

Core Bank non-interest expense increased $193,000, or 1%, from the first quarter of 2014 to $25.3 million during the same period in 2015. The Core Bank was able to moderate the increase in the non-interest expense category by limiting the growth in the largest component of non-interest expense, salaries and benefits expense. Overall, salaries and benefits expense increased $83,000 for the first quarter of 2015 compared to the first quarter of 2014, as 2015 salary increases were partially offset by a reduction in staff associated with the closing of five banking centers over the past fifteen months. In addition to the limited increase in staffing costs during the quarter, the Core Bank also experienced a $349,000 decrease in occupancy and benefits expense resulting from the previously discussed banking center closures and a new enterprise-wide phone system that has contributed savings to the Company’s overhead costs since its implementation during the fourth quarter of 2014.

Republic Processing Group (“RPG”) – The Tax Refund Solutions (“TRS”) division of RPG accounts for the majority of RPG’s annualized revenues. TRS derives substantially all of its revenues during the first and second quarters of the year and historically operates at a net loss during the second half of the year, as the Company prepares for the next tax season.

RPG’s first quarter 2015 net income was $7.2 million, an increase of $597,000, or 9%, over the same period in 2014. The higher profitability was primarily driven by higher Refund Transfer (“RT”) product volume, as RT volume increased 39% over the first quarter of 2014. The higher RT volume was driven by growth in retail store-front product demand resulting from an increase in the number of tax preparation offices served through existing contracts and new contracts between the Company and third party tax preparation companies.

Conclusion

“We are extremely proud of our ability to execute on our strategic growth initiatives over the past twelve months and the benefits the execution of those initiatives has contributed to the Company’s overall bottom line. In addition, with the mergers and acquisitions market heating up, we will continue our efforts to find an acquisition candidate that fits with our Company’s long-term growth plans. Overall, I couldn’t be more excited about where we stand as a company today and I am even more optimistic about our future growth prospects for 2015 and beyond,”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.

Republic Bank. It’s just easier here ^SM.

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 and the future growth in outstanding loan balance, as well as 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,” “appear,” “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 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.

Republic Bancorp, Inc. Financial Information
First Quarter 2015 Earnings Release (continued)

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 banking centers and business units), which are then aggregated if operating performance, products/services, and customers are similar.

As of March 31, 2015, the Company was divided into four distinct operating segments: Traditional Banking, Warehouse Lending (“Warehouse”), Mortgage Banking and Republic Processing Group (“RPG”). Management considers the first three segments to collectively constitute “Core Banking” activities. The RPG segment includes the Tax Refund Solutions (“TRS”) division, Republic Payment Solutions (“RPS”) and Republic Credit Solutions (“RCS”). TRS generates the majority of RPG’s income, with the relatively smaller divisions of RPG, RPS and RCS, considered immaterial for separate and independent segment reporting. All divisions of the RPG segment operate through the Bank.

The accounting policies used for Republic’s reportable segments are the same as those described in the summary of significant accounting policies in the Company’s 2014 Annual Report on Form 10-K. Segment performance is evaluated using operating income. Goodwill is not allocated. Income taxes are generally allocated based on income before income tax expense unless specific segment allocations can be reasonably made. Transactions among reportable segments are made at carrying value.

Republic Bancorp, Inc. Financial Information
First Quarter 2015 Earnings Release (continued)

(1) – The amount of loan fee income included in total interest income was $1.8 million and $3.1 million for the quarters ended March 31, 2015 and 2014.

The amount of loan fee income included in total interest income per quarter was as follows: $1.8 million (quarter ended March 31, 2015), $2.2 million (quarter ended December 31, 2014), $1.8 million (quarter ended September 30, 2014), $2.3 million (quarter ended June 30, 2014); and $3.1 million (quarter ended March 31, 2014).

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