Republic Bancorp, Inc. Reports A 15% Increase In Year-to-Date Net Income With An 11% Increase In Second Quarter Net Income

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:
  Three Months Ended   %   Six Months Ended   %
(dollars in thousands, except per share data)   6/30/12       6/30/11   Change   6/30/12       6/30/11   Change
 
Pre-Tax Net Income $ 14,481 $ 14,110 3 % $ 142,187 $ 124,493 14 %
Net Income $ 9,578 $ 8,663 11 % $ 92,050 $ 80,075 15 %
Diluted Earnings per Class A Share $ 0.46 $ 0.41 12 % $ 4.38 $ 3.82 15 %
ROA 1.16 % 1.08 % 7 % 4.94 % 4.40 % 12 %
ROE 7.17 % 7.77 % -8 % 35.19 % 37.48 % -6 %

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.
  As of and for the:
Quarter Ending   Year Ending
       
 
 
Core Banking Credit Quality Ratios 6/30/12 3/31/2012 12/31/11 12/31/10 12/31/09
 
Non-performing loans / Total loans 0.93% 1.03% 1.02% 1.30% 1.90%
 
Non-performing assets / Total loans including OREO 1.66% 2.02% 1.49% 1.84% 2.11%
 
Delinquent loans / Total loans 0.74% 1.14% 1.07% 1.24% 1.98%
 
Net loan charge-offs / Average loans 0.28% 0.65% 0.24% 0.51% 0.34%
(Annualized as of 6/30/12 and 3/31/12)
                     

OREO = Other Real Estate Owned
                   

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.

Republic Bancorp, Inc. Financial Information

Second Quarter 2012 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)
     
Balance Sheet Data
June 30, 2012 Dec. 31, 2011 June 30, 2011
Assets:
Cash and cash equivalents $ 124,357 $ 362,971 $ 130,262
Investment securities 608,090 674,022 633,959
Loans held for sale 4,093 4,392 21,456
Loans 2,440,394 2,285,295 2,222,697
Allowance for loan losses (22,510 ) (24,063 ) (25,931 )
Federal Home Loan Bank stock, at cost 28,391 25,980 26,153
Premises and equipment, net 32,962 34,681 36,183
Goodwill 10,168 10,168 10,168
Other assets and accrued interest receivable   52,855     46,545     49,623  
Total assets $ 3,278,800   $ 3,419,991   $ 3,104,570  
 
Liabilities and Stockholders' Equity:
Deposits:
Non interest-bearing $ 513,136 $ 408,483 $ 380,970
Interest-bearing   1,392,155     1,325,495     1,409,691  
Total deposits 1,905,291 1,733,978 1,790,661
 
Deposits held for sale - - 35,383
Securities sold under agreements to repurchase and other short-term borrowings 194,412 230,231 218,227
Federal Home Loan Bank advances 538,555 934,630 519,799
Subordinated note 41,240 41,240 41,240
Other liabilities and accrued interest payable   59,589     27,545     53,517  
Total liabilities 2,739,087 2,967,624 2,658,827
 
Stockholders' equity   539,713     452,367     445,743  
Total liabilities and Stockholders' equity $ 3,278,800   $ 3,419,991   $ 3,104,570  
Average Balance Sheet Data      
Three Months Ended June 30, Six Months Ended June 30,
2012 2011 2012 2011
Assets:
Investment securities, including FHLB stock $ 680,134 $ 652,693 $ 685,230 $ 633,679
Federal funds sold and other interest-earning deposits 117,497 221,695 434,542 537,611
Loans and fees, including loans held for sale 2,406,180 2,192,819 2,422,756 2,245,854
Total earning assets 3,203,811 3,067,207 3,542,528 3,417,144
Total assets 3,302,987 3,208,936 3,727,091 3,640,771
 
Liabilities and Stockholders' Equity:
Non interest-bearing deposits $ 533,649 $ 409,391 $ 727,546 $ 606,906
Interest-bearing deposits 1,414,427 1,454,006 1,542,296 1,671,500
Securities sold under agreements to
repurchase and other short-term borrowings 250,515 274,074 260,919 295,957
Federal Home Loan Bank advances 479,064 527,669 580,291 544,886
Subordinated note 41,240 41,240 41,240 41,240
Total interest-bearing liabilities 2,185,246 2,296,989 2,424,746 2,553,583
Stockholders' equity 534,576 446,132 523,135 427,334

Republic Bancorp, Inc. Financial Information

Second Quarter 2012 Earnings Release (continued)
     
Income Statement Data
Three Months Ended June 30, Six Months Ended June 30,
2012   2011   2012 2011
 
Total interest income (1) $ 33,814 $ 34,459 $ 113,401 $ 127,082
Total interest expense   5,502     7,630     11,869   16,282
 
Net interest income 28,312 26,829 101,532 110,800
 
Provision for loan losses 466 (439 ) 11,636 17,643
 
Non interest income:
Service charges on deposit accounts 3,286 3,736 6,589 7,160
Electronic refund check fees 6,147 6,584 77,896 87,646
Mortgage banking income 1,963 924 3,317 1,740
Debit card interchange fee income 1,441 1,493 2,997 2,977
Bargain purchase gain (96 ) - 27,803 -
Net gain on sales, calls and impairment of securities - 1,907 56 1,628
Other   1,345     724     2,237   1,529
Total non interest income   14,086     15,368     120,895   102,680
 
Non interest expenses:
Salaries and employee benefits 14,313 13,250 31,284 30,489
Occupancy and equipment, net 5,144 5,001 11,218 11,298
Communication and transportation 961 878 3,622 3,387
Marketing and development 904 868 1,842 1,772
FDIC insurance expense 291 1,165 721 2,800
Bank franchise tax expense 703 714 2,634 2,279
Data processing 1,195 817 2,416 1,565
Debit card interchange expense 660 601 1,261 1,124
Supplies 529 314 1,478 1,208
Other real estate owned expense 555 378 1,160 859
Charitable contributions 200 234 2,878 5,532
Legal expense 527 979 895 2,339
FDIC civil money penalty - 2,000 - 2,000
FHLB advance prepayment penalty - - 2,436 -
Other   1,469     1,327     4,759   4,692
Total non interest expenses   27,451     28,526     68,604   71,344
 
Income before income tax expense 14,481 14,110 142,187 124,493
Income tax expense   4,903     5,447     50,137   44,418
 
Net income $ 9,578   $ 8,663   $ 92,050 $ 80,075

Republic Bancorp, Inc. Financial Information

Second Quarter 2012 Earnings Release (continued)
       
As of and for the As of and for the
Three Months Ended June 30, Six Months Ended June 30,
2012 2011 2012 2011
Per Share Data:
Basic average shares outstanding 20,958 20,936 20,957 20,937
Diluted average shares outstanding 21,017 20,994 21,034 20,992
 
End of period shares outstanding:
Class A Common Stock 18,658 18,635 18,658 18,635
Class B Common Stock 2,299 2,300 2,299 2,300
 
Book value per share $ 25.75 $ 21.29 $ 25.75 $ 21.29
Tangible book value per share (2) 25.01 20.46 25.01 20.46
 
Earnings per share:
Basic earnings per Class A Common Stock 0.46 0.42 4.40 3.83
Basic earnings per Class B Common Stock 0.44 0.40 4.37 3.80
Diluted earnings per Class A Common Stock 0.46 0.41 4.38 3.82
Diluted earnings per Class B Common Stock 0.44 0.40 4.35 3.79
 
Cash dividends declared per share:
Class A Common Stock 0.165 0.154 0.319 0.297
Class B Common Stock 0.150 0.140 0.290 0.270
 
Performance Ratios:
Return on average assets 1.16% 1.08% 4.94% 4.40%
Return on average equity 7.17 7.77 35.19 37.48
Efficiency ratio (3) 65 71 31 33
Yield on average interest-earning assets 4.22 4.49 6.40 7.44
Cost of interest-bearing liabilities 1.01 1.33 0.98 1.28
Net interest spread 3.21 3.16 5.42 6.16
Net interest margin - Total Company 3.53 3.50 5.73 6.48
Net interest margin - Traditional Banking 3.57 3.50 3.58 3.42
 
Asset Quality Ratios:
Loans on non-accrual status $ 22,578 $ 28,499 $ 22,578 $ 28,499
Loans past due 90 days or more and still on accrual - - - -
Total non-performing loans 22,578 28,499 22,578 28,499
Other real estate owned 18,345 12,012 18,345 12,012
Total non-performing assets 40,923 40,511 40,923 40,511
 
Total Company Credit Quality Ratios:
Non-performing loans to total loans 0.93% 1.28% 0.93% 1.28%
Non-performing assets to total loans (including OREO) 1.66 1.81 1.66 1.81
Non-performing assets to total assets 1.25 1.30 1.25 1.30
Allowance for loan losses to total loans 0.92 1.17 0.92 1.17
Allowance for loan losses to non-performing loans 100 91 100 91
Delinquent loans to total loans (4) 0.74 1.28 0.74 1.28
Net loan charge-offs to average loans (annualized) 0.28 0.51 1.09 1.32
 
Traditional Banking Credit Quality Ratios:
Non-performing loans to total loans 0.93 1.28 0.93 1.28
Non-performing assets to total loans (including OREO) 1.66 1.81 1.66 1.81
Non-performing assets to total assets 1.26 1.31 1.26 1.31
Allowance for loan losses to total loans 0.92 1.17 0.92 1.17
Allowance for loan losses to non-performing loans 100 91 100 91
Delinquent loans to total loans (4) 0.74 1.28 0.74 1.28
Net loan charge-offs to average loans (annualized) 0.28 0.17 0.46 0.19
 
Other Information:
End of period full-time equivalent employees 749 733 749 733
Number of banking centers 43 43 43 43

Republic Bancorp, Inc. Financial Information

Second Quarter 2012 Earnings Release (continued)
         
Balance Sheet Data
Quarterly Comparison
June 30, 2012 March 31, 2012 Dec. 31, 2011 Sept. 30, 2011 June 30, 2011
Assets:
Cash and cash equivalents $ 124,357 $ 186,504 $ 362,971 $ 75,573 $ 130,262
Investment securities 608,090 630,298 674,022 702,142 633,959
Mortgage loans held for sale 4,093 4,459 4,392 4,721 7,167
Loans held for sale - 17,003 - - 14,289
Loans 2,440,394 2,394,787 2,285,295 2,219,916 2,222,697
Allowance for loan losses (22,510 ) (23,732 ) (24,063 ) (23,945 ) (25,931 )
Federal Home Loan Bank stock, at cost 28,391 28,439 25,980 26,153 26,153
Premises and Equipment, net 32,962 34,321 34,681 34,044 36,183
Goodwill 10,168 10,168 10,168 10,168 10,168
Other assets and interest receivable   52,855     62,587     46,545     46,369     49,623  
Total assets $ 3,278,800   $ 3,344,834   $ 3,419,991   $ 3,095,141   $ 3,104,570  
 
Liabilities and Stockholders' Equity:
Deposits:
Non interest-bearing $ 513,136 $ 595,498 $ 408,483 $ 385,511 $ 380,970
Interest-bearing   1,392,155     1,453,301     1,325,495     1,416,887     1,409,691  
Total deposits 1,905,291 2,048,799 1,733,978 1,802,398 1,790,661
 
Deposits held for sale - - - - 35,383

Securities sold under agreements to repurchase and other short-term borrowings
194,412 225,719 230,231 227,504 218,227
Federal Home Loan Bank advances 538,555 413,593 934,630 524,731 519,799
Subordinated note 41,240 41,240 41,240 41,240 41,240
Other liabilities and accrued interest payable   59,589     81,990     27,545     46,197     53,517  
Total liabilities 2,739,087 2,811,341 2,967,624 2,642,070 2,658,827
 
Stockholders' equity   539,713     533,493     452,367     453,071     445,743  
Total liabilities and Stockholders' equity $ 3,278,800   $ 3,344,834   $ 3,419,991   $ 3,095,141   $ 3,104,570  
 
 
 
Average Balance Sheet Data
Quarterly Comparison
June 30, 2012 March 31, 2012 Dec. 31, 2011 Sept. 30, 2011 June 30, 2011
Assets:
Investment securities, including FHLB stock $ 680,134 $ 690,328 $ 735,336 $ 711,050 $ 652,693
Federal funds sold and other interest-earning deposits 117,497 590,863 126,045 68,108 221,695
Loans and fees, including loans held for sale 2,406,180 2,439,331 2,255,757 2,237,559 2,192,819
Total earning assets 3,203,811 3,720,522 3,117,138 3,016,717 3,067,207
Total assets 3,302,987 4,153,256 3,246,296 3,147,230 3,208,936
 
Liabilities and Stockholders' Equity:
Non interest-bearing deposits $ 533,649 $ 922,628 $ 430,705 $ 396,568 $ 409,391
Interest-bearing deposits 1,414,427 1,670,167 1,379,159 1,444,577 1,454,006

Securities sold under agreements to repurchase and other short-term borrowings
250,515 271,322 275,085 249,002 274,074
Federal Home Loan Bank advances 479,064 681,518 625,047 517,739 527,669
Subordinated note 41,240 41,240 41,240 41,240 41,240
Total interest-bearing liabilities 2,185,246 2,664,247 2,320,531 2,252,558 2,296,989
Stockholders' equity 534,576 511,694 454,343 449,177 446,132

Republic Bancorp, Inc. Financial Information

Second Quarter 2012 Earnings Release (continued)
         
Income Statement Data
Three Months Ended
June 30, 2012 March 31, 2012 Dec. 31, 2011 Sept. 30, 2011 June 30, 2011
 
Total interest income (5) $ 33,814 $ 79,587 $ 33,607 $ 34,426 $ 34,459
Total interest expense   5,502     6,367   6,710     7,263     7,630  
Net interest income 28,312 73,220 26,897 27,163 26,829
 
Provision for loan losses 466 11,170 463 (140 ) (439 )
 
Non interest income:
Service charges on deposit accounts 3,286 3,303 3,524 3,421 3,736
Electronic refund check fees 6,147 71,749 124 425 6,584
Mortgage banking income 1,963 1,354 807 1,352 924
Debit card interchange fee income 1,441 1,556 1,399 1,415 1,493
Bargain purchase gain (96 ) 27,899 - - -
Gain on sale of banking center - - - 2,856 -
Net gain on sales, calls and impairment
of securities - 56 77 301 1,907
Other   1,345     892   537     706     724  
Total non interest income   14,086     106,809   6,468     10,476     15,368  
 
Non interest expenses:
Salaries and employee benefits 14,313 16,971 11,332 13,145 13,250
Occupancy and equipment, net 5,144 6,074 5,277 5,138 5,001
Communication and transportation 961 2,661 1,227 1,081 878
Marketing and development 904 938 729 736 868
FDIC insurance expense 291 430 707 918 1,165
Bank franchise tax expense 703 1,931 653 713 714
Data processing 1,195 1,221 855 787 817
Debit card interchange expense 660 601 549 566 601
Supplies 529 949 736 409 314
Other real estate owned expense 555 605 889 608 378
Charitable contributions 200 2,678 223 178 234
Legal expense 527 368 846 784 979
FDIC civil money penalty - - (1,100 ) - 2,000
FHLB advance prepayment penalty - 2,436 - - -
Other   1,469     3,290   1,616     1,375     1,327  
Total non interest expenses   27,451     41,153   24,539     26,438     28,526  
 
Income before income tax expense 14,481 127,706 8,363 11,341 14,110
Income tax expense   4,903     45,234   2,159     3,471     5,447  
 
Net income $ 9,578   $ 82,472 $ 6,204   $ 7,870   $ 8,663  

Republic Bancorp, Inc. Financial Information

Second Quarter 2012 Earnings Release (continued)
       
As of and for the Three Months Ended
June 30, 2012   March 31, 2012 Dec. 31, 2011 Sept. 30, 2011 June 30, 2011
Per Share Data:
Basic average shares outstanding 20,958 20,956 20,954 20,953 20,936
Diluted average shares outstanding 21,017 21,055 20,996 20,994 20,994
 
End of period shares outstanding:
Class A Common Stock 18,658 18,662 18,652 18,655 18,635
Class B Common Stock 2,299 2,299 2,300 2,300 2,300
 
Book value per share $ 25.75 $ 25.45 $ 21.59 $ 21.62 $ 21.29
Tangible book value per share (2) 25.01 24.69 20.81 20.81 20.46
 
Earnings per share:
Basic earnings per Class A Common Stock 0.46 3.94 0.30 0.38 0.42
Basic earnings per Class B Common Stock 0.44 3.92 0.28 0.36 0.40
Diluted earnings per Class A Common Stock 0.46 3.92 0.30 0.38 0.41
Diluted earnings per Class B Common Stock 0.44 3.90 0.28 0.36 0.40
 
Cash dividends declared per share:
Class A Common Stock 0.165 0.154 0.154 0.154 0.154
Class B Common Stock 0.150 0.140 0.140 0.140 0.140
 
Performance Ratios:
Return on average assets 1.16% 7.94% 0.76% 1.00% 1.08%
Return on average equity 7.17 64.47 5.46 7.01 7.77
Efficiency ratio (3) 65 23 74 71 71
Yield on average interest-earning assets 4.22 8.56 4.31 4.56 4.49
Cost of interest-bearing liabilities 1.01 0.96 1.16 1.29 1.33
Net interest spread 3.21 7.60 3.15 3.27 3.16
Net interest margin - Total Company 3.53 7.87 3.45 3.60 3.50
Net interest margin - Traditional Banking 3.57 3.58 3.56 3.61 3.50
 
Asset Quality Data:
Loans on non-accrual status $ 22,578 $ 24,710 $ 23,306 $ 23,822 $ 28,499
Loans past due 90 days or more and still on accrual - - - - -
Total non-performing loans 22,578 24,710 23,306 23,822 28,499
Other real estate owned 18,345 24,149 10,956 11,185 12,012
Total non-performing assets 40,923 48,859 34,262 35,007 40,511
 
Total Company Credit Quality Ratios:
Non-performing loans to total loans 0.93% 1.03% 1.02% 1.07% 1.28%
Non-performing assets to total loans (including OREO) 1.66 2.02 1.49 1.57 1.81
Non-performing assets to total assets 1.25 1.46 1.00 1.13 1.30
Allowance for loan losses to total loans 0.92 0.99 1.05 1.08 1.17
Allowance for loan losses to non-performing loans 100 96 103 101 91
Delinquent loans to total loans (4) 0.74 1.14 1.07 0.90 1.28
Net loan charge-offs to average loans (annualized) 0.28 1.89 0.06 0.33 0.51
 
Traditional Banking Credit Quality Ratios:
Non-performing loans to total loans 0.93 1.03 1.02 1.07 1.28
Non-performing assets to total loans (including OREO) 1.66 2.02 1.49 1.57 1.81
Non-performing assets to total assets 1.26 1.51 1.10 1.14 1.31
Allowance for loan losses to total loans 0.92 0.98 1.05 1.08 1.17
Allowance for loan losses to non-performing loans 100 95 103 101 91
Delinquent loans to total loans (4) 0.74 1.14 1.07 0.90 1.28
Net loan charge-offs to average loans (annualized) 0.28 0.65 0.15 0.45 0.17
 
Other Information:
End of period full-time equivalent employees 749 723 710 705 733
Number of banking centers 43 43 42 42 43

Republic Bancorp, Inc. Financial Information

Second Quarter 2012 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 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:

Republic Bancorp, Inc. Financial Information

Second Quarter 2012 Earnings Release (continued)
 
  Three Months Ended June 30, 2012
(dollars in thousands) Traditional Banking   Mortgage Banking   Republic Processing Group   Total Company
 
Net interest income $ 28,090 $ 53 $ 169 $ 28,312
 
Provision for loan losses 831 - (365 ) 466
 
Electronic refund check fees - - 6,147 6,147
Mortgage banking income - 1,963 - 1,963
Bargain purchase gain (96 ) - - (96 )
Other non interest income   6,036     11   25     6,072  
Total non interest income 5,940 1,974 6,172 14,086
 
Total non interest expenses   23,590     923   2,938     27,451  
 
Gross operating profit 9,609 1,104 3,768 14,481
Income tax expense   3,129     386   1,388     4,903  
Net income $ 6,480   $ 718 $ 2,380   $ 9,578  
 
Segment end of period assets $ 3,248,453 $ 9,847 $ 20,500 $ 3,278,800
 
Net interest margin 3.57 % NM NM 3.53 %
 
Three Months Ended June 30, 2011
(dollars in thousands) Traditional Banking Mortgage Banking Republic Processing Group Total Company
 
Net interest income $ 26,393 $ 69 $ 367 $ 26,829
 
Provision for loan losses 585 - (1,024 ) (439 )
 
Electronic refund check fees - - 6,584 6,584
Mortgage banking income - 924 - 924

 

Net gain on sales, calls and impairment of securities
1,907 - - 1,907
Other non interest income   5,893     23   37     5,953  
Total non interest income 7,800 947 6,621 15,368
 
Total non interest expenses   22,679     947   4,900     28,526  
 
Gross operating profit (loss) 10,929 69 3,112 14,110
Income tax expense (benefit)   3,612     24   1,811     5,447  
Net income (loss) $ 7,317   $ 45 $ 1,301   $ 8,663  
 
Segment end of period assets $ 3,067,290 $ 14,695 $ 22,585 $ 3,104,570
 
Net interest margin 3.50 % NM NM 3.50 %

Republic Bancorp, Inc. Financial Information

Second Quarter 2012 Earnings Release (continued)
   
Six Months Ended June 30, 2012
(dollars in thousands) Traditional Banking   Mortgage Banking   Republic Processing Group Total Company
 
Net interest income $ 55,962 $ 173 $ 45,397 $ 101,532
 
Provision for loan losses 3,962 - 7,674 11,636
 
Electronic refund check fees - - 77,896 77,896
Mortgage banking income - 3,317 - 3,317

Net gain on sales, calls and impairment of securities
56 - - 56
Bargain purchase gain 27,803 - - 27,803
Other non interest income   11,618     16     189   11,823  
Total non interest income 39,477 3,333 78,085 120,895
 
Total non interest expenses   50,634     2,077     15,893   68,604  
 
Gross operating profit 40,843 1,429 99,915 142,187
Income tax expense   14,005     500     35,632   50,137  
Net income $ 26,838   $ 929   $ 64,283 $ 92,050  
 
Segment end of period assets $ 3,248,453 $ 9,847 $ 20,500 $ 3,278,800
 
Net interest margin 3.58 % NM NM 5.73 %
 
Six Months Ended June 30, 2011
(dollars in thousands) Traditional Banking Mortgage Banking Republic Processing Group Total Company
 
Net interest income $ 51,521 $ 191 $ 59,088 $ 110,800
 
Provision for loan losses 4,907 - 12,736 17,643
 
Electronic refund check fees - - 87,646 87,646
Mortgage banking income - 1,740 - 1,740

Net gain on sales, calls and impairment of securities
1,628 - - 1,628
Other non interest income   11,296     25     345   11,666  
Total non interest income 12,924 1,765 87,991 102,680
 
Total non interest expenses   45,775     2,050     23,519   71,344  
 
Gross operating profit (loss) 13,763 (94 ) 110,824 124,493
Income tax expense (benefit)   3,970     (33 )   40,481   44,418  
Net income (loss) $ 9,793   $ (61 ) $ 70,343 $ 80,075  

Segment end of period assets

$

3,067,290

$

14,695

$

22,585

$

3,104,570

Net interest margin

3.42

%

NM

NM

6.48

%

Republic Bancorp, Inc. Financial Information

Second Quarter 2012 Earnings Release (continued)

_____________________________________

(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.
    Quarterly Comparison

(in thousands, except per share data)
June 30, 2012   March 31, 2012   Dec. 31, 2011     Sept. 30, 2011   June 30, 2011
Total stockholders' equity (a) $ 539,713 $ 533,493 $ 452,367 $ 453,071 $ 445,743
Less: Goodwill 10,168 10,168 10,168 10,168 10,168
Less: Core deposit intangible 104 113 58 73 87
Less: Mortgage servicing rights   5,351     5,606     6,087     6,688     7,169  

Tangible stockholders' equity (c)
$ 524,090   $ 517,606   $ 436,054   $ 436,142   $ 428,319  
 
Total assets (b) $ 3,278,800 $ 3,344,834 $ 3,419,991 $ 3,095,141 $ 3,104,570
Less: Goodwill 10,168 10,168 10,168 10,168 10,168
Less: Core deposit intangible 104 113 58 73 87
Less: Mortgage servicing rights   5,351     5,606     6,087     6,688     7,169  
Tangible assets (d) $ 3,263,177   $ 3,328,947   $ 3,403,678   $ 3,078,212   $ 3,087,146  
 
Total stockholders' equity to total assets (a/b) 16.46 % 15.95 % 13.23 % 14.64 % 14.36 %
Tangible stockholders' equity to tangible assets (c/d) 16.06 % 15.55 % 12.81 % 14.17 % 13.87 %
 
Number of shares outstanding (e)   20,957     20,961     20,952     20,955     20,935  
 
Book value per share (a/e) $ 25.75 $ 25.45 $ 21.59 $ 21.62 $ 21.29
Tangible book value per share (c/e) 25.01 24.69 20.81 20.81 20.46

(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

Copyright Business Wire 2010

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