UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2019

or

☐Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 0-24649

REPUBLIC BANCORP, INC.

(Exact name of registrant as specified in its charter)

Kentucky	61-0862051
(State of other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

601 West Market Street, Louisville, Kentucky	40202
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (502) 584-3600

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Class A Common	RBCAA	The Nasdaq Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  ☒ Yes   ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  ☒ Yes    ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☒	Non-accelerated filer ☐	Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  ☐ Yes  ☒ No

The number of shares outstanding of the registrant’s Class A Common Stock and Class B Common Stock, as of October 31, 2019,  was 18,742,999 and 2,207,626.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements.	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	69
Item 3.	Quantitative and Qualitative Disclosures about Market Risk.	112
Item 4.	Controls and Procedures.	112
PART II — OTHER INFORMATION
Item 1.	Legal Proceedings.	112
Item 1A.	Risk Factors.	112
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	113
Item 5.	Other Information	114
Item 6.	Exhibits.	114
	SIGNATURES	115

2

GLOSSARY OF ABBREVIATIONS AND ACRONYMS

The acronyms and terms identified in alphabetical order below are used throughout this Form 10-Q. You may find it helpful to refer to this page as you read this report.

Acronym or Term	Definition	Acronym or Term	Definition	Acronym or Term	Definition
ACH	Automated Clearing House	FDIA	Federal Deposit Insurance Act	PCI-1	PCI - Group 1
AFS	Available for Sale	FDIC	Federal Deposit Insurance Corporation	PCI-Sub	PCI - Substandard
Allowance	Allowance for Loan and Lease Losses	FFTR	Federal Funds Target Rate	Prime	TheWall Street Journal Prime Interest Rate
AOCI	Accumulated Other Comprehensive Income	FHLB	Federal Home Loan Bank	Provision	Provision for Loan and Lease Losses
APR	Annual Percentage Rate	FHLMC	Federal Home Loan Mortgage Corporation	PSU	Performance Stock Unit
ASC	Accounting Standards Codification	FICO	Fair Isaac Corporation	R&D	Research and Development
ASU	Accounting Standards Update	FNMA	Federal National Mortgage Association	RB&T / the Bank	Republic Bank & Trust Company
Basic EPS	Basic earnings per Class A Common Share	FRB	Federal Reserve Bank	RBCT	Republic Bancorp Capital Trust
BOLI	Bank Owned Life Insurance	FTE	Full Time Equivalent	RCS	Republic Credit Solutions
BPO	Brokered Price Opinion	FTP	Funds Transfer Pricing	Republic / the Company	Republic Bancorp, Inc.
C&D	Construction and Development	GAAP	Generally Accepted Accounting Principles in the United States	ROA	Return on Average Assets
C&I	Commercial and Industrial	HELOC	Home Equity Line of Credit	ROE	Return on Average Equity
CECL	Current Expected Credit Loss	HTM	Held to Maturity	RPG	Republic Processing Group
CMO	Collateralized Mortgage Obligation	IRS	Internal Revenue Service	RPS	Republic Payment Solutions
Core Bank	The Traditional Banking, Warehouse Lending, and Mortgage Banking reportable segments	LIBOR	London Interbank Offered Rate	RT	Refund Transfer
CRA	Community Reinvestment Act	Limestone	Limestone Bank	SEC	Securities and Exchange Commission
CRE	Commercial Real Estate	LPO	Loan Production Office	SSUAR	Securities Sold Under Agreements to Repurchase
Diluted EPS	Diluted earnings per Class A Common Share	LTV	Loan to Value	SVP	Senior Vice President
DTA	Deferred Tax Assets	MBS	Mortgage Backed Securities	TCJA	2017 Tax Cuts and Jobs Act
DTL	Deferred Tax Liabilities	MSRs	Mortgage Servicing Rights	TDR	Troubled Debt Restructuring
EA	Easy Advance	NA	Not Applicable	The Captive	Republic Insurance Services, Inc.
EBITDA	Earnings Before Interest, Taxes, Depreciation and Amortization	NM	Not Meaningful	TPS	Trust Preferred Securities
EFTA	Electronic Fund Transfers Act	OCI	Other Comprehensive Income	TRS	Tax Refund Solutions
ESPP	Employee Stock Purchase Plan	OREO	Other Real Estate Owned	TRUP	TPS Investment
EVP	Executive Vice President	OTTI	Other than Temporary Impairment	Warehouse	Warehouse Lending
FASB	Financial Accounting Standards Board	PCI	Purchased Credit Impaired

3

PART I — FINANCIAL INFORMATION

Item 1.  Financial Statements.

CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands)

	September 30,		December 31,
	2019		2018
ASSETS
Cash and cash equivalents	$	397,072	$	351,474
Available-for-sale debt securities		572,015		475,738
Held-to-maturity debt securities (fair value of $63,872 in 2019 and $64,858 in 2018)		63,315		65,227
Equity securities with readily determinable fair value		3,367		2,806
Mortgage loans held for sale, at fair value		32,739		8,971
Consumer loans held for sale, at the lower of cost or fair value		18,504		12,838
Loans held for sale in connection with sale of banking centers, at the lower of cost or fair value		130,770		—
Loans (loans carried at fair value of $1,187 in 2019 and $1,922 in  2018)		4,664,054		4,148,227
Allowance for loan and lease losses		(46,932)		(44,675)
Loans, net		4,617,122		4,103,552
Federal Home Loan Bank stock, at cost		32,242		32,067
Premises and equipment, net		45,264		43,126
Premises, held for sale		1,471		1,694
Right-of-use assets		36,051		—
Goodwill		16,300		16,300
Other real estate owned		119		160
Bank owned life insurance		66,037		64,883
Other assets and accrued interest receivable		71,259		61,568
TOTAL ASSETS	$	6,103,647	$	5,240,404
LIABILITIES
Deposits:
Noninterest-bearing	$	1,031,553	$	1,003,969
Interest-bearing		2,703,199		2,452,176
Deposits held for assumption in connection with sale of banking centers		142,384		—
Total deposits		3,877,136		3,456,145
Securities sold under agreements to repurchase and other short-term borrowings		167,949		182,990
Operating lease liabilities		37,391		—
Federal Home Loan Bank advances		1,170,000		810,000
Subordinated note		41,240		41,240
Other liabilities and accrued interest payable		65,484		60,095
Total liabilities		5,359,200		4,550,470
Commitments and contingent liabilities (Footnote 9)		—		—
STOCKHOLDERS’ EQUITY
Preferred stock, no par value		—		—
Class A Common Stock and Class B Common Stock, no par value		4,908		4,900
Additional paid in capital		141,904		141,018
Retained earnings		594,479		545,013
Accumulated other comprehensive income (loss)		3,156		(997)
Total stockholders’ equity		744,447		689,934
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	6,103,647	$	5,240,404

See accompanying footnotes to consolidated financial statements.

4

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except per share data)  

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
INTEREST INCOME:
Loans, including fees	$	62,896	$	56,296	$	199,935	$	179,867
Taxable investment securities		3,221		2,964		10,096		8,306
Federal Home Loan Bank stock and other		1,942		1,830		6,325		5,106
Total interest income		68,059		61,090		216,356		193,279
INTEREST EXPENSE:
Deposits		8,042		4,562		21,693		11,856
Securities sold under agreements to repurchase and other short-term borrowings		298		317		1,049		752
Federal Home Loan Bank advances		3,839		2,782		10,631		7,779
Subordinated note		394		396		1,252		1,110
Total interest expense		12,573		8,057		34,625		21,497
NET INTEREST INCOME		55,486		53,033		181,731		171,782
Provision for loan and lease losses		3,153		4,077		24,844		26,264
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES		52,333		48,956		156,887		145,518
NONINTEREST INCOME:
Service charges on deposit accounts		3,749		3,579		10,650		10,708
Net refund transfer fees		317		149		21,046		19,974
Mortgage banking income		3,064		1,360		7,019		3,696
Interchange fee income		3,031		2,757		9,045		8,315
Program fees		1,317		1,686		3,428		4,705
Increase in cash surrender value of bank owned life insurance		394		385		1,154		1,135
Net gains on other real estate owned		267		248		487		700
Other		672		1,301		2,524		4,073
Total noninterest income		12,811		11,465		55,353		53,306
NONINTEREST EXPENSE:
Salaries and employee benefits		24,822		22,846		75,184		69,446
Occupancy and equipment, net		6,571		6,279		19,627		18,891
Communication and transportation		1,017		1,047		3,249		3,670
Marketing and development		1,420		1,449		3,800		3,648
FDIC insurance expense		—		360		743		1,230
Bank franchise tax expense		935		710		4,366		4,088
Data processing		2,344		2,350		6,657		7,179
Interchange related expense		1,138		1,138		3,755		3,243
Supplies		292		314		1,358		998
Other real estate owned and other repossession expense		130		2		324		63
Legal and professional fees		1,026		935		2,756		2,706
Other		2,716		3,782		9,529		9,727
Total noninterest expense		42,411		41,212		131,348		124,889
INCOME  BEFORE INCOME TAX EXPENSE		22,733		19,209		80,892		73,935
INCOME TAX EXPENSE		4,325		1,798		14,961		13,389
NET INCOME	$	18,408	$	17,411	$	65,931	$	60,546
BASIC EARNINGS PER SHARE:
Class A Common Stock	$	0.88	$	0.84	$	3.17	$	2.92
Class B Common Stock		0.80		0.76		2.88		2.65
DILUTED EARNINGS PER SHARE:
Class A Common Stock	$	0.88	$	0.83	$	3.15	$	2.90
Class B Common Stock		0.80		0.76		2.87		2.64

See accompanying footnotes to consolidated financial statements.

5

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME  (UNAUDITED)

(in thousands)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Net income	$	18,408	$	17,411	$	65,931	$	60,546
OTHER COMPREHENSIVE INCOME
Change in fair value of derivatives used for cash flow hedges		(3)		54		(218)		330
Reclassification amount for net derivative losses realized in income		(2)		1		(34)		36
Change in unrealized (loss) gain on AFS debt securities		86		(467)		5,759		(3,130)
Adjustment for adoption of ASU 2016-01		—		—		—		(428)
Change in unrealized gain on AFS debt security for which a portion of OTTI has been recognized in earnings		(24)		(2)		(58)		(19)
Total other comprehensive income (loss) before income tax		57		(414)		5,449		(3,211)
Tax effect		(163)		88		(1,296)		676
Total other comprehensive income (loss), net of tax		(106)		(326)		4,153		(2,535)
COMPREHENSIVE INCOME	$	18,302	$	17,085	$	70,084	$	58,011

See accompanying footnotes to consolidated financial statements.

6

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

	Three Months Ended September 30, 2019
	Common Stock								Accumulated
	Class A	Class B			Additional				Other		Total
	Shares	Shares			Paid In		Retained		Comprehensive		Stockholders’
(in thousands)	Outstanding	Outstanding	Amount		Capital		Earnings		Income (Loss)		Equity
Balance, July 1, 2019	18,740	2,208	$	4,907	$	141,525	$	581,734	$	3,262	$	731,428
Net income	—	—		—		—		18,408		—		18,408
Net change in accumulated other comprehensive income	—	—		—		—		—		(106)		(106)
Dividends declared on Common Stock:
Class A Shares ($0.264 per share)	—	—		—		—		(4,961)		—		(4,961)
Class B Shares ($0.240 per share)	—	—		—		—		(530)		—		(530)
Stock options exercised, net of shares withheld	3	—		1		(73)		—		—		(72)
Conversion of Class B to Class A Common Shares	—	—		—		—		—		—		—
Repurchase of Class A Common Stock	(4)	—		(1)		(28)		(172)		—		(201)
Net change in notes receivable on Class A Common Stock	—	—		—		(46)		—		—		(46)
Deferred compensation - Class A Common Stock:
Directors	—	—		—		49		—		—		49
Designated key employees	—	—		—		76		—		—		76
Employee stock purchase plan - Class A Common Stock	3	—		—		137		—		—		137
Stock-based awards - Class A Common Stock:
Performance stock units	—	—		—		—		—		—		—
Restricted stock	2	—		1		184		—		—		185
Stock options	—	—		—		80		—		—		80
Balance, September 30, 2019	18,744	2,208	$	4,908	$	141,904	$	594,479	$	3,156	$	744,447

	Three Months Ended September 30, 2018
	Common Stock								Accumulated
	Class A	Class B			Additional				Other		Total
	Shares	Shares			Paid In		Retained		Comprehensive		Stockholders’
(in thousands)	Outstanding	Outstanding	Amount		Capital		Earnings		Income		Equity
Balance, July 1, 2018	18,677	2,215	$	4,903	$	140,114	$	520,784	$	(1,793)	$	664,008
Net income	—	—		—		—		17,411		—		17,411
Net change in accumulated other comprehensive income	—	—		—		—		—		(326)