Republic Bank & Trust

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

Republic Bancorp, Inc. (“Republic” or the “Company”) is pleased to report fourth quarter net income of $10.0 million, a $2.6 million, or 35%, increase from the same period in 2015, resulting in Diluted Earnings per Class A Common Share of $0.48. Fiscal year 2016 net income was $45.9 million, a $10.7 million, or 31%, increase from fiscal year 2015, resulting in a return on average assets (“ROA”) and a return on average equity (“ROE”) of 1.02% and 7.68%, respectively, for 2016.

Steve Trager, Republic’s Chairman and Chief Executive Officer, commented: “We are very proud of our solid fourth quarter and the overall strong year we put together in 2016. We made meaningful progress toward many of our long-term goals during the year, including: (1) expanding our footprint in the Tampa-St. Pete market through a strategic acquisition; (2) launching a digital-only banking platform during the fourth quarter; (3) growing the contribution from our non-traditional business lines at the Republic Processing Group (“RPG”); and (4) further improving our ROA, ROE and our Efficiency Ratio. We are also very pleased that over the past year the market has recognized our strong performance and our future prospects as reflected by the 50% increase in our stock price during 2016. While strategic decisions for our Company will always be based on the long-term interests of our shareholders, and not the day-to-day fluctuations in our stock price, we are appreciative of the market’s recognition of the hard work by our 900+ associates and the strong results and future opportunities they have created.”

The following tables highlight Republic’s financial performance for the fourth quarters and years ended December 31, 2016 and 2015:

Results of Operations for the Fourth Quarter of 2016 Compared to the Fourth Quarter of 2015

Core Bank⁽¹⁾– Net income from Core Banking was $9.9 million for the fourth quarter of 2016, an increase of $1.4 million, or 17%, over the fourth quarter of 2015. Strong growth in net interest income drove the Bank’s performance for the quarter, which was also further enhanced by continued favorably-low loan loss provisions.

Net interest income at the Core Bank increased to $37.6 million during the fourth quarter of 2016, a $6.8 million, or 22%, increase over the fourth quarter of 2015. The increase in net interest income was primarily the result of a $518 million, or 16%, year-over-year increase in the Core Bank’s quarterly average loans from the fourth quarter of 2015 to the fourth quarter of 2016. The strong growth in average loans outstanding was further supplemented by an increase of 25 basis points in the Core Bank’s net interest margin over the fourth quarter of 2015.

The overall change in the Core Bank’s net interest income, as well as, average and period-end loan balances by origination channel is presented below:

The following factors were the primary drivers of the changes in the Core Bank’s average loan balances and net interest income by origination channel for the fourth quarter of 2016 as compared to the fourth quarter of 2015:

• The Core Bank’s Traditional Network experienced solid overall loan growth, with particularly strong growth in the quarterly average balance from the fourth quarter of 2015 to the fourth quarter of 2016 in the following portfolios: $74 million in Commercial Real Estate; $44 million in Indirect Auto; $37 million in Home Equity Lines of Credit (“HELOCs”); and $19 million in Construction & Development. Growth in the commercial-related categories was primarily driven by the Core Bank’s Commercial and Corporate Banking Department, which grew its balances nearly $100 million during its second full year of operation. Year-over-year growth in HELOCs was driven primarily by a successful first-year-introductory-rate promotion, while growth in Indirect Auto loans was driven by re-introduction of the product in late 2015.
• Within the Warehouse segment, net interest income grew 81% from the fourth quarter of 2015, as client usage of the Bank’s Warehouse lines of credit increased from 50% for the fourth quarter of 2015 to 57% for the fourth quarter of 2016. In addition, the Bank also increased its committed Warehouse lines of credit from $670 million at December 31, 2015 to $1.0 billion at December 31, 2016. As a result of these factors, average outstanding Warehouse line-of-credit balances for the fourth quarter of 2016 were $590 million, a $270 million increase from a strong fourth quarter in 2015. The yield for Warehouse lines of credit during the fourth quarter of 2016 increased four basis points from the same period in 2015.

• The fourth quarter of 2016 represented the second full quarter of earnings impact from the Company’s May 2016 Cornerstone acquisition. As expected, the acquired Cornerstone franchise provided a solid contribution to the Company’s overall earnings for the fourth quarter of 2016, with $2.1 million of net interest income for the quarter driven by average loans of $200 million.

The Core Bank’s credit quality metrics remained favorable, as indicated by the table below:

Noninterest income for the Core Bank was $7.8 million during the fourth quarter of 2016 compared to $7.3 million for the fourth quarter of 2015. Impacting the Core Bank’s noninterest income comparisons between the fourth quarters of 2016 and 2015 were the following:

• Interchange fees increased $122,000 primarily due to the following factors:
  • The Company experienced a 7% year-over-year growth in checking accounts, which helped to drive an 11% increase in the Company’s active debit cards and a 12% increase in total purchase activity.
  • Credit card interchange income benefited from a 10% increase in purchase volume.

• Mortgage banking income increased $118,000 from the fourth quarter of 2015, as secondary market originations increased over the fourth quarter of 2015. The additional revenue from the higher volume during the quarter was partially offset by a decrease in the Company’s margin on its loans originated for sale, as a significant fourth quarter increase in long-term interest rates negatively impacted overall pricing.

Core Bank noninterest expenses increased $4.6 million, or 19%, from the fourth quarter of 2015 to the same period in 2016. Comparability of noninterest expense between the two quarters was 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 a net credit of $393,000 for the fourth quarter of 2016 compared to a net credit of $998,000 for the fourth quarter of 2015. Excluding the impact of the change in incentive compensation expense, noninterest expense increased $4.0 million, or 15%, for the fourth quarter of 2016, as compared to the fourth quarter of 2015 and was primarily driven by the following:

• Salaries and benefits expense, excluding incentive compensation adjustments, increased $2.6 million, primarily due to an increase of 143 full-time-equivalent (“FTE”) employees from December 31, 2015 to December 31, 2016. Thirty-six of these additions were directly attributable to the Company’s Cornerstone acquisition. The remaining increase was driven by additional staffing needed to implement the Company’s strategic initiatives.
• Occupancy and equipment expense increased $505,000 from the fourth quarter of 2015 to $5.4 million. Approximately $207,000 of this increase was directly attributable the facilities acquired in the Cornerstone acquisition. The remaining increase primarily reflects recent renovations to the Core Bank’s premises and equipment in the previous 12 months, which drove a 12% increase in depreciation expense.

RPG

The overall profitability of the RPG segment has historically been driven by its largest division, Tax Refund Solutions (“TRS”). 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. During the second half of 2015, the Company began to more meaningfully grow the Republic Credit Solutions (“RCS”) small-dollar loan division of RPG. As a result of strong growth in profitability within the RCS division, the overall profitability of the RPG segment has continued to improve during 2016.

During the fourth quarter of 2016, RPG recorded net income of $61,000 compared to a net loss of $1.1 million during the fourth quarter of 2015. Within the RCS division of RPG, RCS contributed net income of $1.6 million during the fourth quarter of 2016 compared to net income of $231,000 during the fourth quarter of 2015. The increased profitability within the RCS division resulted primarily from continued strong performance of its line-of-credit product and from the recognition of $1.2 million of income related to a first-year volume guarantee from the program sponsor for its installment credit product.

Regarding the overall operations of the division, RCS experienced an $86 million increase in small-dollar loans originated for sale over the same quarter as 2015, generating a strong increase in fee income. Furthermore, the balance for the RCS loans retained on balance sheet by the Company increased from $7 million at December 31, 2015 to $32 million at December 31, 2016, contributing to a solid increase in net interest income for the quarter.

Conclusion

“The year 2016 proved to be an exciting one at Republic, and we look forward to 2017 with guarded optimism. We are extremely proud of what we accomplished during 2016 and remain committed to creating future success within appropriate risk parameters.

While we are less optimistic about the availability of accretive acquisitions during the coming year, our team will continue to evaluate opportunities, both whole-bank and non-bank, that may arise and present the best overall synergies for Republic. In the meantime, we will continue to focus our resources inward, as we remain dedicated to growing and enhancing our current strategic initiatives, including our pilot programs at RPG, our dealer floorplan lending, our mortgage banking operations and our new digital banking platform, MemoryBank, to name a few. In order to achieve our strategic objectives, we recognize that Republic must be a great place to work for our associates, a great place to bank for our clients and a solid long-term investment for our shareholders,” concluded Steve Trager.

Republic Bancorp, Inc. (the “Company”) is the parent company of Republic Bank & Trust Company (the “Bank”).The Bank currently has 44 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; six banking centers in five Florida communities – Largo, Port Richey, St. Petersburg, Seminole, Temple Terrace; two banking centers in Tennessee – Cool Springs (Franklin) and Green Hills (Nashville); and one banking center in Norwood (Cincinnati), Ohio. The Bank offers internet banking at www.republicbank.com. The Bank also offers separately-branded, nation-wide digital banking at www.mymemorybank.com. The Company has $4.8 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.^®

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. Actual results could differ materially based upon 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, 2015.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.