Business Wire | Jul 17, 2020 08:00AM EDT

Republic Bancorp, Inc. Reports Second Quarter Net Income of $15.8 Million

Jul. 17, 2020

LOUISVILLE, Ky.--(BUSINESS WIRE)--Jul. 17, 2020--Republic Bancorp, Inc.(NASDAQ: RBCAA), headquartered in Louisville, Kentucky, is the holding company of Republic Bank & Trust Company (the "Bank").

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Republic Bancorp, Inc. ("Republic" or the "Company") reported solid second quarter net income of $15.8 million resulting in Diluted Earnings per Class A Common Share ("Diluted EPS") of $0.76. Year-to-date ("YTD") net income for the first six months of 2020 was $42.5 million resulting in return on average assets ("ROA") and return on average equity ("ROE") of 1.45% and 10.79%. Net income for the second quarter and first six months of 2020 was negatively impacted by estimated Provisions for Expected Credit Loss Expense ("Provision") directly related to the on-going COVID-19 pandemic.

Steve Trager, Chairman & CEO of Republic commented, "With 2020 halfway over, I think we can all say that it will go down as one of the most unforgettable years in our lifetimes. As the CEO of a publicly traded company, I am proud of our operating performance during these challenging times, and I believe our financial results speak for themselves. In addition, I am also extremely proud of our organizational response to the COVID-19 pandemic. We were able to support our client base at an elite level while also protecting our associates and the communities we serve during a very scary time. I cannot stress enough how incredible the efforts were, and continue to be, from all of our associates in this endeavor, with nearly 80% of our workforce working from home through much of the pandemic. With the world slowly returning to normal business operations, we reopened our banking centers to foot traffic on June 4th, and on June 15th began bringing back up to 25% of our back-office support staff. Our "return-to-work" team continues to refine its plan to bring all of our associates back to the office over an extended period of time, provided we can do so in a safe-and-sound manner."

Trager continued, "Just as important at this time, all of us at Republic are heartbroken by recent events that led to the current protests and demands for change. Our Executive Team has spent many hours listening - first to our Black and African-American associates, and then to the leaders and change-makers from the community. This reinforced our belief that corporate America, first and foremost, must step up to ensure economic equality for all. Initially, we have plans to develop a community loan fund, which will be designed to help small businesses in need within economically challenged areas of the communities we serve. We recognize these are small first steps on a very long journey to racial equity and justice, but we are committed to long-standing efforts that will positively impact the Black and African-American community."

The following table highlights Republic's financial performance for the three and six months ended June 30, 2020 and 2019:





Total Company Financial Performance Highlights

Three Months Ended Jun. Six Months Ended Jun. 30, 30,

(dollarsinthousands, 2020 2019 $ Change % 2020 2019 $ Change % except per Change Changesharedata)



IncomeBefore $ 19,597 $ 21,183 $ (1,586) (7) % $ 53,175 $ 58,159 $ (4,984) (9) % Income TaxExpense*

Net Income 15,804 18,007 (2,203) (12) 42,501 47,523 (5,022) (11) *

DilutedEarningsper Class 0.76 0.86 (0.10) (12) 2.04 2.28 (0.24) (11) A CommonShare

Return onAverage 1.04 % 1.31 % NA (21) 1.45 % 1.73 % NA (16) Assets

Return onAverage 7.93 9.88 NA (20) 10.79 13.24 NA (19) Equity



* Results by reportable segment provided near the end of this earnings release. NA - Not applicable

Results of Operations for the Second Quarter of 2020 Compared to the Second Quarter of 2019

Core Bank(1)

Net income from Core Banking was $13.2 million for the second quarter of 2020, a 2% increase from the second quarter of 2019, while pretax net income from Core Banking for the second quarter of 2020 was even more favorable with a 12% increase over the second quarter of 2019. The comparability of second quarter net income for the Core Bank was negatively impacted by the benefit of certain infrequent income tax items recorded during the second quarter of 2019. Particularly strong revenues from the Core Bank's Mortgage Banking and Warehouse Lending ("Warehouse") segments, along with income from the origination of $526 million in Paycheck Protection Program ("PPP") loans, drove the Core Bank's second quarter earnings in 2020. Partially offsetting these increases was additional Provision, as management continues to update the estimated impact of the COVID-19 pandemic to the Core Bank's loan portfolio.

Net Interest Income - Core Bank net interest income was $45.5 million for the second quarter of 2020, a 1% decrease from the same period in 2019. Industry-wide net interest margin compression was the primary driver of the slight decrease and was partially offset by the benefit to net interest income of robust loan growth in the Warehouse segment and solid loan growth within the Traditional Banking segment, particularly within the PPP portfolio. Overall, average Core Bank loans grew $434 million, or 10%, from the second quarter of 2019. Usage rates on the Core Bank's Warehouse lines rose from 57% during the second quarter of 2019 to 68% during the second quarter of 2020, driving average Warehouse balances from $635 million to a robust $807 million during these same time periods. The Core Bank's Traditional Banking segment loan averages grew $232 million over the second quarter of 2019, driven by $526 million in PPP loans originated during the second quarter of 2020. The Bank earns an annual coupon of 1% plus lender fees for each PPP origination.

Consistent with a 225 basis point drop in the Federal Funds Target Rate over the past 12 months, the Core Bank's net interest spread and net interest margin compressed 26 basis points and 39 basis points, respectively, from the second quarter of 2019 to the same period in 2020. The Core Bank's net interest spread, the weighted average rate earned on its interest-earning assets less the weighted average cost paid on its interest-bearing liabilities, contracted primarily because the Core Bank's liabilities had less room to reprice downward than its asset counterparts. The Core Bank's net interest margin contracted 13 basis points more than the contraction in its net interest spread due to the reduction in benefit it realizes from its noninterest-bearing funding sources.

The following tables present by reportable segment the overall changes in the Core Bank's net interest income, net interest margin, as well as average and period-end loan balances:





Net Interest Income Net Interest Margin

(dollars in Three Months Ended Three Months Ended thousands) Jun. 30, Jun. 30,

Reportable 2020 2019 Change 2020 2019 Change Segment



Traditional $ 39,035 $ 41,877 $ (2,842) 3.26 % 3.75 % (0.49) % Banking*

Warehouse 6,063 3,957 2,106 3.01 2.49 0.52 Lending

Mortgage 419 170 249 NM NM NM Banking*

Core Bank $ 45,517 $ 46,004 $ (487) 3.23 3.62 (0.39)







Average Loan Balances Period-End Loan Balances

(dollars in Three Months Ended Jun. Jun. 30, thousands) 30,

Reportable 2020 2019 $ Change % 2020 2019 $ Change % Segment Change Change



Traditional $ 3,883,753 $ 3,651,630 $ 232,123 6 % $ 3,935,823 $ 3,699,576 $ 236,247 6 % Banking*

Warehouse 806,771 634,688 172,083 27 1,029,779 737,794 291,985 40 Lending

Mortgage 42,290 12,153 30,137 248 40,028 13,883 26,145 188 Banking*

Core Bank $ 4,732,814 $ 4,298,471 $ 434,343 10 $ 5,005,630 $ 4,451,253 $ 554,377 12



*Includes loans held for sale NM - Not meaningful

Provision for Expected Credit Loss Expense - The Core Bank's Provision increased to $3.5 million for the second quarter of 2020 from $1.8 million for the same period in 2019. The Provision for the second quarter of 2020 primarily reflected $4.6 million of Provision related to the potential impact of the COVID-19 pandemic to the Core Bank's loan portfolio partially offset by a reduction of $1.5 million in reserves due to a $112 million decrease in non-PPP Traditional Bank loans during the second quarter of 2020. The Provision for the second quarter of 2019 included a $1.2 million estimated specific loan loss reserve for one commercial-related client that defaulted during the period.

As of June 30, 2020, the Traditional Banking segment maintained $793 million in loans under deferral and forbearance agreements due to COVID-19 hardship. These deferral and forbearance agreements were generally under three-month terms but could be further extended based on underlying borrower circumstances. The following table presents the balances of loans in COVID-19 related deferral or forbearance, the balance of PPP loans, and the remainder of the Traditional Bank's loan portfolio by loan class as of June 30, 2020:



Total

June 30, COVID-192020 Hardship PPP Loans Other Loans Traditional (dollars in (1) Bankingthousands)



Traditional Banking:

Residential real estate:

Owner $ 51,570 $ - $ 833,755 $ 885,325 occupied

Nonowner 58,754 - 195,946 254,700 occupied

Commercial 491,314 - 830,976 1,322,290 real estate

Commercial & 141,720 511,065 251,942 904,727 industrial

Construction& land 28,927 - 128,327 157,254 development

Leasefinancing 2,443 - 9,421 11,864 receivables

Home equity 13,776 - 251,490 265,266

Consumer 4,678 - 129,719 134,397

TotalTraditional $ 793,182 $ 511,065 $ 2,631,576 $ 3,935,823 Banking

Percent ofTotal 20 % 13 % 67 % 100 % TraditionalBanking



(1)Loans under deferral or forbearance agreements due to COVID-19 hardship. Agreements are generally under three-month terms.

Noninterest Income - Core Bank noninterest income was $14.5 million during the second quarter of 2020, a $4.2 million, or 41%, increase from the solid $10.3 million achieved during the second quarter of 2019. Items significantly impacting noninterest income for the quarter included the following:

* Mortgage Banking income increased $6.0 million, resulting from a $137 million increase in secondary market loans originated from period to period combined with a $59 million increase in the Bank's pipeline of secondary market loans from June 30, 2019 to June 30, 2020. The increase in volume is a proud accomplishment, as our Mortgage Banking associates accommodated this high demand in a predominantly digital and virtual environment, while maintaining industry-strong closing times.

* Offsetting the increase in Mortgage Banking income were decreases in Service Charges on Deposits of $1.1 million and Interchange Income of $444,000. These decreases largely reflect a change in consumer savings and spending patterns during the pandemic-driven economic restrictions. At this time, the Company is uncertain if and for how long these current patterns will continue.

Noninterest Expense - Core Bank noninterest expense increased 1% when comparing the second quarter of 2020 to the same period in 2019. Items significantly impacting noninterest expense for the quarter included the following:

* Salaries and benefits expense increased $894,000, or 4%, substantially driven by higher Mortgage Banking commissions.

* Data Processing expense increased $483,000, or 22%, driven by the Company's increased investment in Software-as-a-Service applications since June 30, 2019.

* Offsetting the above were decreases in Marketing and Development, Interchange, and Travel and Entertainment expenses, with each of these expenses driven downward as a direct result of pandemic-related influences.

Republic Processing Group(2)

Republic Processing Group ("RPG") reported net income of $2.6 million for the second quarter of 2020 compared to $5.1 million for the same period in 2019, with a $3.5 million decrease in net income at RPG's Tax Refund Solutions ("TRS") segment partially offset by a $1.0 million increase in net income at its Republic Credit Solutions ("RCS") segment.

Tax Refund Solutions

Related to TRS, an increase in estimated Provision for its Easy Advance ("EA") loans drove the negative swing in net income for the quarter. Overall, the TRS Provision increased from a net charge of $392,000 during the second quarter of 2019 to a net charge of $4.4 million during the second quarter of 2020. With the second quarter EA paydowns, the percent of unpaid EA's to total EA's originated dropped to 5.05% at June 30, 2020. This compares to 3.45% at June 30, 2019, a difference of 160 basis points. By comparison, the unpaid EA percentage was 6.77% at March 31, 2020, compared to 5.84% at March 31, 2019, representing a difference of 93 basis points.

The higher net charges to the Provision during the second quarter of 2020 and the higher unpaid EA balances as a percentage of EA originations as of June 30, 2020, resulted from repayment rates from the U.S. Treasury that significantly lagged those during the second quarter of 2019. Management believes the significant decline in repayment rates from the U.S. Treasury during the second quarter of 2020 was directly related to the impact of the current COVID-19 pandemic and the ability of the IRS to facilitate payment processing for certain types of tax returns that require further taxpayer communication and verification. While management is optimistic that EA loss rates could still finish more in-line with those from the prior years, management is uncertain if or when this turnaround could occur. As a result, the Company completely charged-off all remaining unpaid EA's as of June 30, 2020, in-line with its customary June 30th charge-off policy for EA loans. Any EA payments received after June 30, 2020 will be credited as a direct recovery to the Provision in the period it is received.

In addition to an increase in EA related Provision, a $716,000, or 20%, decrease in net Refund Transfer ("RT") revenues during the second quarter of 2020 compared to the second quarter of 2019 also negatively impacted TRS's quarter-to-quarter comparison. RT's processed decreased 8% and revenue per RT decreased 1% from 2019 to 2020. As with the lag in payments from the U.S. Treasury related to EA's, management believes the COVID-19 pandemic also negatively impacted 2020 RT volume, particularly within the second quarter of 2020.

Republic Credit Solutions

Net income at RCS increased from $4.1 million during the second quarter of 2019 to $5.1 million for the second quarter of 2020. The increase in RCS's net income primarily reflected a release of $3.2 million in RCS's reserves as a result of a $7 million decrease in outstanding balances for its line-of-credit product during the second quarter of 2020. Provision expense for RCS's line-of-credit product swung from a net charge of $2.2 million during the second quarter of 2019 to a net credit of $1.5 million for second quarter of 2020. RCS provides for losses on this line-of-credit product at approximately 49% of outstanding balances, while earning approximately 90% of its total revenue (interest income and noninterest income) from this product. The $3.7 million reduction in RCS's Provision for the quarter was partially offset by a $2.0 million reduction in RCS's revenues resulting from the decrease in outstanding loan balances.

Republic Bancorp, Inc. (the "Company") is the parent company of Republic Bank & Trust Company (the "Bank"). The Bank currently has 42 full-service banking centers and two loan production offices throughout five states: 28 banking centers in 8 Kentucky communities - Covington, Crestview Hills, Florence, Georgetown, Lexington, Louisville, Shelbyville, and Shepherdsville; three banking centers in southern Indiana - Floyds Knobs, Jeffersonville, and New Albany; seven banking centers in six Florida communities (Tampa MSA) - Largo, New Port Richey, St. Petersburg, Seminole, Tampa, and Temple Terrace, and one loan production office in Oldsmar; two banking centers in two Tennessee communities (Nashville MSA) - Cool Springs and Green Hills, and one loan production office in Brentwood; and two banking centers in two Ohio communities (Cincinnati MSA) - Norwood and West Chester. 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 $6.5 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. (r)

Forward-Looking StatementsThis 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 yield curve, the ability to develop products and strategies in order to meet the Company's long-term strategic goals, the economy, and other future conditions, including, but not limited to, the impact of the COVID-19 pandemic. 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 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, 2019 and quarterly report on Form 10-Q for the period ended March 31, 2020. The Company undertakes no obligation to update any forward-looking statements, except as required by applicable law.

Republic Bancorp, Inc. Financial Information

Second Quarter 2020 Earnings Release

(all amounts other than per share amounts, number of employees, and number ofbanking centers are expressed in thousands unless otherwise noted)



Balance Sheet Data

Jun. 30, Dec. 31, Jun. 30, 2020 2019 2019

Assets:

Cash and cash equivalents $ 560,195 $ 385,303 $ 473,779

Investment securities, net of 545,607 537,074 447,512 allowance for credit losses (3)

Loans held for sale 52,992 31,468 63,949

Loans held for sale upon branch - - 131,881 divestiture

Loans 5,065,092 4,433,151 4,390,533

Allowance for credit losses (3) (55,097) (43,351) (45,983)

Loans, net 5,009,995 4,389,800 4,344,550

Federal Home Loan Bank stock, at 25,629 30,831 32,242 cost

Premises and equipment, net 42,753 46,196 44,199

Right-of-use assets 34,450 35,206 37,450

Goodwill 16,300 16,300 16,300

Other real estate owned ("OREO") 2,194 113 1,095

Bank owned life insurance ("BOLI") 67,217 66,433 65,642

Other assets and accrued interest 103,243 81,595 64,535 receivable

Total assets $ 6,460,575 $ 5,620,319 $ 5,723,134



Liabilities and Stockholders' Equity:

Deposits:

Noninterest-bearing $ 1,821,400 $ 1,033,379 $ 1,003,793

Interest-bearing 3,196,685 2,752,629 2,557,127

Deposits held for assumption upon - - 152,954 branch divestiture

Total deposits 5,018,085 3,786,008 3,713,874



Securities sold under agreements torepurchase and other short-term 177,397 167,617 226,002 borrowings

Operating lease liabilities 35,571 36,530 38,852

Federal Reserve Paycheck Protection 169,209 - - Program Liquidity Facility

Federal Home Loan Bank advances 137,500 750,000 915,000

Subordinated note 41,240 41,240 41,240

Other liabilities and accrued 85,954 74,680 56,738 interest payable

Total liabilities 5,664,956 4,856,075 4,991,706



Stockholders' equity 795,619 764,244 731,428

Total liabilities and stockholders' $ 6,460,575 $ 5,620,319 $ 5,723,134 equity



Average Balance Sheet Data

Three Months Ended Jun. Six Months Ended Jun. 30, 30,

2020 2019 2020 2019

Assets:

Federal funds soldand other $ 299,760 $ 297,205 $ 253,548 $ 293,587 interest-earningdeposits

Investmentsecurities, including 605,776 514,366 562,751 538,923 FHLB stock

Loans, including 4,867,622 4,424,905 4,680,380 4,341,254 loans held for sale

Totalinterest-earning 5,773,158 5,236,476 5,496,679 5,173,764 assets

Total assets 6,094,421 5,480,525 5,860,683 5,478,609



Liabilities and Stockholders' Equity:

Noninterest-bearingdeposits, including $ 1,697,603 $ 1,098,817 $ 1,473,314 $ 1,178,198 those held forassumption

Interest-bearingdeposits, including 2,880,988 2,588,836 2,868,160 2,609,188 those held forassumption

Securities sold underagreements to

repurchase and other 176,541 220,189 192,755 225,864 short-term borrowings

Federal ReservePaycheck Protection 122,769 - 61,384 - Program LiquidityFacility

Federal Home Loan 263,296 710,879 317,307 611,695 Bank advances

Subordinated note 41,240 41,240 41,240 41,240

Totalinterest-bearing 3,484,834 3,561,144 3,480,846 3,487,987 liabilities

Stockholders' equity 797,227 728,723 788,064 717,838

Republic Bancorp, Inc. Financial Information

Second Quarter 2020 Earnings Release (continued)

(all amounts other than per share amounts, number of employees, and number ofbanking centers are expressed in thousands unless otherwise noted)



Income Statement Data

Three Months Ended Six Months Ended Jun. Jun. 30, 30,

2020 2019 2020 2019



Total interest income (4) $ 57,091 $ 65,664 $ 138,250 $ 148,297

Total interest expense 4,886 11,718 13,307 22,052

Net interest income 52,205 53,946 124,943 126,245



Provision for expected credit 6,534 4,460 29,294 21,691 loss expense (3)



Noninterest income:

Service charges on deposit 2,451 3,598 5,587 6,901 accounts

Net refund transfer fees 2,913 3,629 18,736 20,729

Mortgage banking income 8,398 2,416 13,193 3,955

Interchange fee income 2,808 3,257 5,360 6,014

Program fees 1,138 1,037 3,762 2,111

Increase in cash surrender 395 377 784 759 value of BOLI

Net gains on OREO 1 90 4 220

Other 647 721 1,894 1,853

Total noninterest income 18,751 15,125 49,320 42,542



Noninterest expense:

Salaries and employee benefits 26,324 25,286 52,946 50,362

Occupancy and equipment, net 6,715 6,472 13,561 13,056

Communication and 1,353 1,071 2,642 2,232 transportation

Marketing and development 1,018 1,278 1,851 2,380

FDIC insurance expense 299 295 299 743

Bank franchise tax expense 914 935 3,420 3,431

Data processing 2,753 2,217 5,292 4,313

Interchange related expense 1,173 1,302 2,249 2,617

Supplies 539 582 991 1,066

Other real estate owned and 21 148 39 194 other repossession expense

Legal and professional fees 1,025 844 2,262 1,730

Other 2,691 2,998 6,242 6,813

Total noninterest expense 44,825 43,428 91,794 88,937



Income before income tax 19,597 21,183 53,175 58,159 expense

Income tax expense 3,793 3,176 10,674 10,636

Net income $ 15,804 $ 18,007 $ 42,501 $ 47,523

Republic Bancorp, Inc. Financial InformationSecond Quarter 2020 Earnings Release (continued)(all amounts other than per share amounts, number of employees, and number ofbanking centers are expressed in thousands unless otherwise noted)



Selected Data and Ratios



Three Months Ended Jun. Six Months Ended Jun. 30, 30,

2020 2019 2020 2019

Per Share Data:



Basic weighted average 21,016 21,016 21,035 20,997 shares outstanding

Diluted weighted average 21,041 21,138 21,077 21,125 shares outstanding



Period-end shares outstanding:

Class A Common Stock 18,708 18,740 18,708 18,740

Class B Common Stock 2,200 2,208 2,200 2,208



Book value per share (5) $ 38.05 $ 34.92 $ 38.05 $ 34.92

Tangible book value per 36.93 33.87 36.93 33.87 share (5)



Earnings per share ("EPS"):

Basic EPS - Class A Common $ 0.76 $ 0.86 $ 2.04 $ 2.29 Stock

Basic EPS - Class B Common 0.69 0.79 1.86 2.08 Stock

Diluted EPS - Class A 0.76 0.86 2.04 2.28 Common Stock

Diluted EPS - Class B 0.69 0.78 1.85 2.07 Common Stock



Cash dividends declared per Common share:

Class A Common Stock $ 0.286 $ 0.264 $ 0.572 $ 0.528

Class B Common Stock 0.260 0.240 0.520 0.480



Performance Ratios:



Return on average assets 1.04 % 1.31 % 1.45 % 1.73 %

Return on average equity 7.93 9.88 10.79 13.24

Efficiency ratio (6) 63 63 53 53

Yield on average 3.96 5.02 5.03 5.73 interest-earning assets (4)

Cost of averageinterest-bearing 0.56 1.32 0.76 1.26 liabilities

Cost of average deposits 0.32 0.75 0.46 0.72 (7)

Net interest spread (4) 3.40 3.70 4.27 4.47

Net interest margin - Total 3.62 4.12 4.55 4.88 Company (4)

Net interest margin - Core 3.23 3.62 3.43 3.69 Bank (1)



Other Information:



End of period FTEs (8) - 1,094 1,089 1,094 1,089 Total Company

End of period FTEs - Core 1,001 1,012 1,001 1,012 Bank

Number of full-service 42 45 42 45 banking centers

Republic Bancorp, Inc. Financial Information

Second Quarter 2020 Earnings Release (continued)

(all amounts other than per share amounts, number of employees, and number ofbanking centers are expressed in thousands unless otherwise noted)



Credit Quality Data and As of and for the As of and for theRatios

Three Months Ended Jun. Six Months Ended Jun. 30, 30,

2020 2019 2020 2019

Credit Quality Asset Balances:



Nonperforming Assets - Total Company:

Loans on nonaccrual status $ 19,884 $ 19,238 $ 19,884 $ 19,238

Loans past due90-days-or-more and still 535 166 535 166 on accrual

Total nonperforming loans 20,419 19,404 20,419 19,404

OREO 2,194 1,095 2,194 1,095

Total nonperforming assets $ 22,613 $ 20,499 $ 22,613 $ 20,499



Nonperforming Assets - Core Bank (1):

Loans on nonaccrual status $ 19,884 $ 19,238 $ 19,884 $ 19,238

Loans past due90-days-or-more and still - - - - on accrual

Total nonperforming loans 19,884 19,238 19,884 19,238

OREO 2,194 1,095 2,194 1,095

Total nonperforming assets $ 22,078 $ 20,333 $ 22,078 $ 20,333



Delinquent loans:

Delinquent loans - Core $ 7,862 $ 12,524 $ 7,862 $ 12,524 Bank

Delinquent loans - RPG (2) 6,184 6,802 6,184 6,802

Total delinquent loans - $ 14,046 $ 19,326 $ 14,046 $ 19,326 Total Company





Credit Quality Ratios - Total Company:



Nonperforming loans to 0.40 % 0.44 % 0.40 % 0.44 %total loans

Nonperforming assets tototal loans (including 0.45 0.47 0.45 0.47 OREO)

Nonperforming assets to 0.35 0.36 0.35 0.36 total assets

Allowance for credit losses 1.09 1.05 1.09 1.05 to total loans

Allowance for credit losses 270 237 270 237 to nonperforming loans

Delinquent loans to total 0.28 0.44 0.28 0.44 loans (9)

Net charge-offs to average 1.80 1.49 1.03 0.94 loans (annualized)



Credit Quality Ratios - Core Bank:



Nonperforming loans to 0.40 % 0.45 % 0.40 % 0.45 %total loans

Nonperforming assets tototal loans (including 0.44 0.47 0.44 0.47 OREO)

Nonperforming assets to 0.36 0.37 0.36 0.37 total assets

Allowance for credit losses 0.92 0.77 0.92 0.77 to total loans

Allowance for credit losses 230 171 230 171 to nonperforming loans

Delinquent loans to total 0.16 0.29 0.16 0.29 loans

Net charge-offs to average 0.04 0.04 0.01 0.04 loans (annualized)

Republic Bancorp, Inc. Financial InformationSecond Quarter 2020 Earnings Release (continued)

(all amounts other than per share amounts, number of employees, and number ofbanking centers are expressed in thousands unless otherwise noted)



Balance Sheet Data

Quarterly Comparison

Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30, 2020 2020 2019 2019 2019

Assets:

Cash and cash $ 560,195 $ 316,263 $ 385,303 $ 397,072 $ 473,779 equivalents

Investmentsecurities, net of 545,607 608,330 537,074 638,697 447,512 allowance forcredit losses (3)

Loans held for sale 52,992 54,904 31,468 51,243 63,949

Loans held for saleupon branch - - - 130,770 131,881 divestiture

Loans 5,065,092 4,515,599 4,433,151 4,664,054 4,390,533

Allowance for (55,097) (70,431) (43,351) (46,932) (45,983) credit losses (3)

Loans, net 5,009,995 4,445,168 4,389,800 4,617,122 4,344,550

Federal Home Loan 25,629 38,900 30,831 32,242 32,242 Bank stock, at cost

Premises and 42,753 44,215 46,196 46,735 44,199 equipment, net

Right-of-use assets 34,450 34,349 35,206 36,051 37,450

Goodwill 16,300 16,300 16,300 16,300 16,300

Other real estate 2,194 85 113 119 1,095 owned

Bank owned life 67,217 66,822 66,433 66,037 65,642 insurance

Other assets andaccrued interest 103,243 96,697 81,595 71,259 64,535 receivable

Total assets $ 6,460,575 $ 5,722,033 $ 5,620,319 $ 6,103,647 $ 5,723,134



Liabilities andStockholders' Equity:

Deposits:

Noninterest-bearing $ 1,821,400 $ 1,300,891 $ 1,033,379 $ 1,031,553 $ 1,003,793

Interest-bearing 3,196,685 2,770,566 2,752,629 2,703,199 2,557,127

Deposits held forassumption upon - - - 142,384 152,954 branch divestiture

Total deposits 5,018,085 4,071,457 3,786,008 3,877,136 3,713,874



Securities soldunder agreements torepurchase and 177,397 126,080 167,617 167,949 226,002 other short-termborrowings

Operating lease 35,571 35,537 36,530 37,391 38,852 liabilities

Federal ReservePaycheck Protection 169,209 - - - - Program LiquidityFacility

Federal Home Loan 137,500 572,500 750,000 1,170,000 915,000 Bank advances

Subordinated note 41,240 41,240 41,240 41,240 41,240

Other liabilitiesand accrued 85,954 91,173 74,680 65,484 56,738 interest payable

Total liabilities 5,664,956 4,937,987 4,856,075 5,359,200 4,991,706



Stockholders' 795,619 784,046 764,244 744,447 731,428 equity

Total liabilitiesand stockholders' $ 6,460,575 $ 5,722,033 $ 5,620,319 $ 6,103,647 $ 5,723,134 equity



Average Balance Sheet Data

Quarterly Comparison

Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30, 2020 2020 2019 2019 2019

Assets:

Federal funds soldand other $ 299,760 $ 207,335 $ 152,286 $ 302,156 $ 297,205 interest-earningdeposits

Investmentsecurities, 605,776 519,726 632,559 547,281 514,366 including FHLBstock

Loans, including 4,867,622 4,493,137 4,588,538 4,606,139 4,424,905 loans held for sale

Totalinterest-earning 5,773,158 5,220,198 5,373,383 5,455,576 5,236,476 assets

Total assets 6,094,421 5,626,946 5,638,498 5,711,636 5,480,525



Liabilities andStockholders' Equity:

Noninterest-bearingdeposits, including $ 1,697,603 $ 1,249,025 $ 1,062,010 $ 1,065,904 $ 1,098,817 those held forassumption

Interest-bearingdeposits, including 2,880,988 2,855,332 2,966,993 2,833,632 2,588,836 those held forassumption

Securities sold under agreements to

repurchase andother short-term 176,541 208,969 248,558 246,889 220,189 borrowings

Federal ReservePaycheck Protection 122,769 - - - - Program LiquidityFacility

Federal Home Loan 263,296 371,319 469,130 690,457 710,879 Bank advances

Subordinated note 41,240 41,240 41,240 41,240 41,240

Totalinterest-bearing 3,484,834 3,476,860 3,725,921 3,812,218 3,561,144 liabilities

Stockholders' 797,227 778,900 758,740 742,176 728,723 equity

Republic Bancorp, Inc. Financial InformationSecond Quarter 2020 Earnings Release (continued)(all amounts other than per share amounts, number of employees, and number ofbanking centers are expressed in thousands unless otherwise noted)



Income Statement Data

Three Months Ended

Jun. 30, Mar. Dec. Sep. 30, Jun. 30, 2020 31, 31, 2019 2019 2020 2019



Total interest $ 57,091 $ 81,159 $ 64,527 $ 68,059 $ 65,664 income (4)

Total interest 4,886 8,421 10,132 12,573 11,718 expense

Net interest income 52,205 72,738 54,395 55,486 53,946



Provision forexpected credit loss 6,534 22,760 914 3,153 4,460 expense (3)



Noninterest income:

Service charges on 2,451 3,136 3,547 3,749 3,598 deposit accounts

Net refund transfer 2,913 15,823 112 317 3,629 fees

Mortgage banking 8,398 4,795 2,480 3,064 2,416 income

Interchange fee 2,808 2,552 2,814 3,031 3,257 income

Program fees 1,138 2,624 1,284 1,317 1,037

Increase in cashsurrender value of 395 389 397 394 377 BOLI

Net gains on OREO 1 3 53 267 90

Net gain (loss) on - - 7,948 (119) - branch divestiture

Other 647 1,247 1,020 791 721

Total noninterest 18,751 30,569 19,655 12,811 15,125 income



Noninterest expense:

Salaries and 26,324 26,622 23,997 24,822 25,286 employee benefits

Occupancy and 6,715 6,846 6,497 6,571 6,472 equipment, net

Communication and 1,353 1,289 1,198 1,017 1,071 transportation

Marketing and 1,018 833 1,223 1,420 1,278 development

FDIC insurance 299 - - - 295 expense

Bank franchise tax 914 2,506 927 935 935 expense

Data processing 2,753 2,539 2,532 2,344 2,217

Interchange related 1,173 1,076 1,115 1,138 1,302 expense

Supplies 539 452 335 292 582

OREO expense 21 18 2 130 148

Legal and 1,025 1,237 601 1,026 844 professional fees

Other 2,691 3,551 2,408 2,716 2,998

Total noninterest 44,825 46,969 40,835 42,411 43,428 expense



Income before income 19,597 33,578 32,301 22,733 21,183 tax expense

Income tax expense 3,793 6,881 6,533 4,325 3,176

Net income $ 15,804 $ 26,697 $ 25,768 $ 18,408 $ 18,007





Republic Bancorp, Inc. Financial InformationSecond Quarter 2020 Earnings Release (continued)(all amounts other than per share amounts, number of employees, and number ofbanking centers are expressed in thousands unless otherwise noted)



Selected Data and Ratios

As of and for the Three Months Ended

Jun. Mar. Dec. Sep. Jun. 30, 31, 31, 30, 30, 2020 2020 2019 2019 2019

Per Share Data:



Basic weightedaverage shares 21,016 21,035 21,036 21,036 21,016 outstanding

Diluted weightedaverage shares 21,041 21,094 21,133 21,137 21,138 outstanding



Period-end shares outstanding:

Class A Common 18,708 18,687 18,737 18,744 18,740 Stock

Class B Common 2,200 2,200 2,206 2,208 2,208 Stock



Book value per $ 38.05 $ 37.54 $ 36.49 $ 35.54 $ 34.92 share (5)

Tangible book value 36.93 36.45 35.41 34.47 33.87 per share (5)



Earnings per share ("EPS"):

Basic EPS - Class A $ 0.76 $ 1.29 $ 1.23 $ 0.88 $ 0.86 Common Stock

Basic EPS - Class B 0.69 1.17 1.13 0.80 0.79 Common Stock

Diluted EPS - Class 0.76 1.28 1.23 0.88 0.86 A Common Stock

Diluted EPS - Class 0.69 1.16 1.12 0.80 0.78 B Common Stock



Cash dividendsdeclared per Common share:

Class A Common $ 0.286 $ 0.286 $ 0.264 $ 0.264 $ 0.264 Stock

Class B Common 0.260 0.260 0.240 0.240 0.240 Stock



Performance Ratios:



Return on average 1.04 % 1.90 % 1.83 % 1.29 % 1.31 % assets

Return on average 7.93 13.71 13.58 9.92 9.88 equity

Efficiency ratio 63 45 62 62 63 (6)

Yield on averageinterest-earning 3.96 6.22 4.80 4.99 5.02 assets (4)

Cost of averageinterest-bearing 0.56 0.97 1.09 1.32 1.32 liabilities

Cost of average 0.32 0.61 0.74 0.82 0.75 deposits (7)

Net interest spread 3.40 5.25 3.71 3.67 3.70 (4)

Net interest margin 3.62 5.57 4.05 4.07 4.12 - Total Company (4)

Net interest margin 3.23 3.65 3.56 3.56 3.62 - Core Bank (1)



Other Information:



End of period FTEs 1,094 1,077 1,080 1,093 1,089 (8) - Total Company

End of period FTEs 1,001 994 997 1,013 1,012 - Core Bank

Number offull-service 42 42 41 45 45 banking centers

Republic Bancorp, Inc. Financial Information

Second Quarter 2020 Earnings Release (continued)

(all amounts other than per share amounts, number of employees, and number ofbanking centers are expressed in thousands unless otherwise noted)



Credit Quality Data and Ratios

As of and for the Three Months Ended

Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30, 2020 2020 2019 2019 2019

Credit Quality Asset Balances:



NonperformingAssets - Total Company:

Loans onnonaccrual $ 19,884 $ 20,358 $ 23,332 $ 20,574 $ 19,238 status

Loans past due90-days-or-more 535 495 157 175 166and still onaccrual

Totalnonperforming 20,419 20,853 23,489 20,749 19,404 loans

OREO 2,194 85 113 119 1,095

Totalnonperforming $ 22,613 $ 20,938 $ 23,602 $ 20,868 $ 20,499assets



NonperformingAssets - Core Bank (1):

Loans onnonaccrual $ 19,884 $ 20,358 $ 23,332 $ 20,574 $ 19,238 status

Loans past due90-days-or-more - - - - -and still onaccrual

Totalnonperforming 19,884 20,358 23,332 20,574 19,238 loans

OREO 2,194 85 113 119 1,095

Totalnonperforming $ 22,078 $ 20,443 $ 23,445 $ 20,693 $ 20,333assets



Delinquent Loans:

Delinquentloans - Core $ 7,862 $ 11,863 $ 13,042 $ 13,496 $ 12,524 Bank

Delinquentloans - RPG (2) 6,184 30,764 7,762 6,876 6,802(10)

Totaldelinquent $ 14,046 $ 42,627 $ 20,804 $ 20,372 $ 19,326loans - TotalCompany





Credit QualityRatios - Total Company:



Nonperformingloans to total 0.40 % 0.46 % 0.53 % 0.44 % 0.44 %loans

Nonperformingassets to totalloans 0.45 0.46 0.53 0.45 0.47 (includingOREO)

Nonperformingassets to total 0.35 0.37 0.42 0.34 0.36 assets

Allowance forcredit losses 1.09 1.56 0.98 1.01 1.05 to total loans

Allowance forcredit lossesto 270 338 185 226 237 nonperformingloans

Delinquentloans to total 0.28 0.94 0.47 0.44 0.44 loans (9) (10)

Net charge-offsto average 1.80 0.19 0.39 0.68 1.49 loans(annualized)



Credit QualityRatios - Core Bank:



Nonperformingloans to total 0.40 % 0.46 % 0.54 % 0.45 % 0.45 %loans

Nonperformingassets to totalloans 0.44 0.47 0.54 0.45 0.47 (includingOREO)

Nonperformingassets to total 0.36 0.38 0.43 0.35 0.37 assets

Allowance forcredit losses 0.92 0.97 0.70 0.73 0.77 to total loans

Allowance forcredit lossesto 230 210 129 163 171 nonperformingloans

Delinquentloans to total 0.16 0.27 0.30 0.30 0.29 loans

Net(recoveries)charge-offs to 0.04 (0.03) 0.19 0.15 0.04 average loans(annualized)

Republic Bancorp, Inc. Financial Information Second Quarter 2020 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 clients are similar.

As of June 30, 2020, the Company was divided into five reportable segments: Traditional Banking, Warehouse Lending ("Warehouse"), Mortgage Banking, Tax Refund Solutions ("TRS"), and Republic Credit Solutions ("RCS"). Management considers the first three segments to collectively constitute "Core Bank" or "Core Bankingoperations, while the last two segments collectively constitute Republic Processing Group ("RPG") operations. MemoryBank(r), the Company's national branchless banking platform is part of the Traditional Banking segment.

The nature of segment operations and the primary drivers of net revenues by reportable segment are provided below:



Reportable PrimarySegment: Nature of Operations: Drivers of Net Revenue:



Core Banking:



Provides traditional banking products to clients Loans,Traditional in its market footprint primarily via its network investments,Banking of banking centers and to clients outside of its and market footprint primarily via its digital deposits. delivery channels.



MortgageWarehouse Provides short-term, revolving credit facilities warehouseLending to mortgage bankers across the United States. lines of credit.



Primarily originates, sells and services Loan salesMortgage long-term, single-family, first-lien residential andBanking real estate loans primarily to clients in the servicing. Bank's market footprint.



RepublicProcessing Group:



TRS offers tax-related credit products and facilitates the receipt and payment of federal and Loans,Tax Refund state tax refunds through Refund Transfer refundSolutions products. The RPS division of TRS offers transfers, general-purpose reloadable cards. TRS and RPS and prepaid products are primarily provided to clients outside cards. of the Bank's market footprint.



Offers consumer credit products. RCS products areRepublic primarily provided to clients outside of the Unsecured,Credit Bank's market footprint, with a substantial consumerSolutions portion of RCS clients considered subprime or loans. near-prime borrowers.

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 2019 Annual Report on Form 10-K. Republic evaluates segment performance using operating income. The Company allocates goodwill to the Traditional Banking segment. Republic generally allocates income taxes based on income before income tax expense unless reasonable and specific segment allocations can be made. The Company makes transactions among reportable segments at carrying value.

Republic Bancorp, Inc. Financial Information

Second Quarter 2020 Earnings Release (continued)



Segment information for the three and six months ended June 30, 2020 and 2019follows:



Three Months Ended June 30, 2020

Core Banking Republic Processing Group ("RPG")

Total Tax Republic

Traditional Warehouse Mortgage Core Refund Credit Total Total

(dollars in thousands) Banking Lending Banking Banking Solutions Solutions RPG Company



Net interest income $ 39,035 $ 6,063 $ 419 $ 45,517 $ 1,081 $ 5,607 $ 6,688 $ 52,205



Provision for expected 3,080 449 - 3,529 4,448 (1,443) 3,005 6,534 credit loss expense



Net refund transfer fees - - - - 2,913 - 2,913 2,913

Mortgage banking income - - 8,398 8,398 - - - 8,398

Program fees - - - - 618 520 1,138 1,138

Other noninterest income 6,126 17 8 6,151 151 - 151 6,302

Total noninterest income 6,126 17 8,406 14,549 3,682 520 4,202 18,751



Total noninterest expense 36,688 811 2,689 40,188 3,734 903 4,637 44,825



Income before income tax 5,393 4,820 6,136 16,349 (3,419) 6,667 3,248 19,597 expense

Income tax expense 729 1,085 1,288 3,102 (853) 1,544 691 3,793

Net income $ 4,664 $ 3,735 $ 4,848 $ 13,247 $ (2,566) $ 5,123 $ 2,557 $ 15,804



Period-end assets $ 4,967,759 $ 1,028,400 $ 54,518 $ 6,050,677 $ 306,583 $ 103,315 $ 409,898 $ 6,460,575



Net interest margin 3.26 % 3.01 % NM 3.23 % NM NM NM 3.62 %



Net-revenue concentration* 63 % 9 % 12 % 84 % 7 % 9 % 16 % 100 %



Three Months Ended June 30, 2019

Core Banking Republic Processing Group ("RPG")

Total Tax Republic

Traditional Warehouse Mortgage Core Refund Credit Total Total

(dollars in thousands) Banking Lending Banking Banking Solutions Solutions RPG Company



Net interest income $ 41,877 $ 3,957 $ 170 $ 46,004 $ 710 $ 7,232 $ 7,942 $ 53,946



Provision for expected 1,427 417 - 1,844 392 2,224 2,616 4,460 credit loss expense



Net refund transfer fees - - - - 3,629 - 3,629 3,629

Mortgage banking income - - 2,416 2,416 - - - 2,416

Program fees - - - - 50 987 1,037 1,037

Other noninterest income 7,853 13 56 7,922 89 32 121 8,043

Total noninterest income 7,853 13 2,472 10,338 3,768 1,019 4,787 15,125



Total noninterest expense 37,764 792 1,354 39,910 2,849 669 3,518 43,428



Income before income tax 10,539 2,761 1,288 14,588 1,237 5,358 6,595 21,183 expense

Income tax expense 744 621 270 1,635 288 1,253 1,541 3,176

Net income $ 9,795 $ 2,140 $ 1,018 $ 12,953 $ 949 $ 4,105 $ 5,054 $ 18,007



Period-end assets $ 4,805,449 $ 738,300 $ 20,568 $ 5,564,317 $ 36,834 $ 121,983 $ 158,817 $ 5,723,134



Net interest margin 3.75 % 2.49 % NM 3.62 % NM NM NM 4.12 %



Net-revenue concentration* 72 % 6 % 4 % 82 % 6 % 12 % 18 % 100 %

*Net revenues represent total net interest income plus noninterest income. Net-revenue concentration equals segment-level net revenue divided by total Company net revenue.



Six Months Ended June 30, 2020

Core Banking Republic Processing Group ("RPG")

Total Tax Republic

Traditional Warehouse Mortgage Core Refund Credit Total Total

(dollars in thousands) Banking Lending Banking Banking Solutions Solutions RPG Company



Net interest income $ 79,656 $ 10,370 $ 632 $ 90,658 $ 21,606 $ 12,679 $ 34,285 $ 124,943



Provision for expected 8,669 781 - 9,450 19,581 263 19,844 29,294 credit loss expense



Net refund transfer fees - - - - 18,736 - 18,736 18,736

Mortgage banking income - - 13,193 13,193 - - - 13,193

Program fees - - - - 930 2,832 3,762 3,762

Other noninterest income 13,361 28 32 13,421 208 - 208 13,629

Total noninterest income 13,361 28 13,225 26,614 19,874 2,832 22,706 49,320



Total noninterest expense 73,335 1,614 4,685 79,634 10,363 1,797 12,160 91,794



Income before income tax 11,013 8,003 9,172 28,188 11,536 13,451 24,987 53,175 expense

Income tax expense 1,189 1,801 1,926 4,916 2,644 3,114 5,758 10,674

Net income $ 9,824 $ 6,202 $ 7,246 $ 23,272 $ 8,892 $ 10,337 $ 19,229 $ 42,501



Period-end assets $ 4,967,759 $ 1,028,400 $ 54,518 $ 6,050,677 $ 306,583 $ 103,315 $ 409,898 $ 6,460,575



Net interest margin 3.52 % 2.86 % NM 3.43 % NM NM NM 4.55 %



Net-revenue concentration* 53 % 6 % 8 % 67 % 24 % 9 % 33 % 100 %



Six Months Ended June 30, 2019

Core Banking Republic Processing Group ("RPG")

Total Tax Republic

Traditional Warehouse Mortgage Core Refund Credit Total Total

(dollars in thousands) Banking Lending Banking Banking Solutions Solutions RPG Company



Net interest income $ 83,224 $ 6,852 $ 272 $ 90,348 $ 21,148 $ 14,749 $ 35,897 $ 126,245



Provision for expected 1,616 642 - 2,258 13,826 5,607 19,433 21,691 credit loss expense



Net refund transfer fees - - - - 20,729 - 20,729 20,729

Mortgage banking income - - 3,955 3,955 - - - 3,955

Program fees - - - - 196 1,915 2,111 2,111

Other noninterest income 14,749 23 96 14,868 220 659 879 15,747

Total noninterest income 14,749 23 4,051 18,823 21,145 2,574 23,719 42,542



Total noninterest expense 73,314 1,550 2,674 77,538 9,963 1,436 11,399 88,937



Income before income tax 23,043 4,683 1,649 29,375 18,504 10,280 28,784 58,159 expense

Income tax expense 2,509 1,054 346 3,909 4,318 2,409 6,727 10,636

Net income $ 20,534 $ 3,629 $ 1,303 $ 25,466 $ 14,186 $ 7,871 $ 22,057 $ 47,523



Period-end assets $ 4,805,449 $ 738,300 $ 20,568 $ 5,564,317 $ 36,834 $ 121,983 $ 158,817 $ 5,723,134



Net interest margin 3.81 % 2.63 % NM 3.69 % NM NM NM 4.88 %



Net-revenue concentration* 58 % 4 % 3 % 65 % 25 % 10 % 35 % 100 %

*Net revenues represent total net interest income plus noninterest income. Net-revenue concentration equals segment-level net revenue divided by total Company net revenue.

Republic Bancorp, Inc. Financial Information

Second Quarter 2020 Earnings Release (continued)



(1) "Core Bank" or "Core Banking" operations consist of the Traditional Banking, Warehouse Lending, and Mortgage Banking segments.



(2) Republic Processing Group operations consist of the Tax Refund Solutions and Republic Credit Solutions segments.



Effective January 1, 2020, the Company adopted Accounting Standards Codification ("ASC") 326 Financial Instruments - Credit Losses, which replaces the pre-January 1, 2020 "probable-incurred" method for calculating the Company's Allowance for Credit Losses ("ACL") with the current expected credit loss ("CECL") method. CECL is applicable to financial assets(3) measured at amortized cost, including loan and lease receivables and held-to-maturity debt securities. CECL also applies to certain off-balance sheet credit exposures. In addition to CECL, ASC 326 made changes to the accounting for Available-for-Sale ("AFS") debt securities. One such change is to require credit losses to be presented as an allowance rather than as a write-down on AFS debt securities that the Company does not intend or will likely not be compelled to sell.

When measuring an ACL, CECL primarily differs from the probable-incurred method by: a) incorporating a lower "expected" threshold for loss recognition versus a higher "probable" threshold; b) requiring life-of-loan considerations; and c) requiring reasonable and supportable forecasts. The Company's CECL method is a "static-pool" method that analyzes historical closed pools of loans over their expected lives to attain a loss rate, which is then adjusted for current conditions and reasonable and supportable forecasts prior to being applied to the current balance of the analyzed pools. Due to its reasonably strong correlation to the Company's historical net loan losses, the Company has chosen to use the national unemployment rate as its primary forecasting tool.

In accord with the adoption of ASC 326 and CECL, the Company recorded on January 1, 2020 a $6.7 million, or 16%, increase in the ACL for its loans and leases, a $51,000 ACL for its investment debt securities, and an approximate $456,000 ACL for its off-balance sheet exposures. This adoption also reduced the Company's retained earnings on a tax-effected basis, with no impact on 2020 earnings. The adoption date increase in ACL for the Company's loans and leases primarily reflects additional ACL for longer duration loan portfolios, such as the Company's residential real estate and consumer loan portfolios. No additional segmentation of the Bank's loan portfolios was deemed necessary upon adoption.



The amount of loan fee income can meaningfully impact total interest income, loan yields, net interest margin, and net interest spread. The(4) amount of loan fee income included in total interest income was $7.8 million and $8.4 million for the quarters ended June 30, 2020 and 2019. The amount of loan fee income included in total interest income was $36.2 million and $37.0 million for the six months ended June 30, 2020 and 2019.



The amount of loan fee income included in total interest income per quarter was as follows: $7.8 million (quarter ended June 30, 2020); $28.5 million (quarter ended March 31, 2020); $8.5 million (quarter ended December 31, 2019); $9.1 million (quarter ended September 30, 2019); and $8.4 million (quarter ended June 30, 2019).



Interest income for Easy Advances ("EA's") is composed entirely of loan fees. The loan fees disclosed above included EA fees of $19.5 million and $19.1 million for the six months ended June 30, 2020 and 2019. EA's are only offered during the first two months of each year.





The following table provides a reconciliation of total stockholders' equity in accordance with GAAP to tangible stockholders' equity in accordance with(5) applicable regulatory requirements, a non-GAAP disclosure. The Company provides the tangible book value per share, a non-GAAP measure, in addition to those defined by banking regulators, because of its widespread use by investors as a means to evaluate capital adequacy.



Quarterly Comparison

(dollars inthousands, Jun. 30, 2020 Mar. 31, 2020 Dec. 31, Sep. 30, Jun. 30, except per 2019 2019 2019share data)



Totalstockholders' $ 795,619 $ 784,046 $ 764,244 $ 744,447 $ 731,428 equity - GAAP(a)

Less: 16,300 16,300 16,300 16,300 16,300 Goodwill

Less:Mortgage 6,711 5,994 5,888 5,483 5,158 servicingrights

Less: Coredeposit 377 423 469 516 562 intangible

Tangiblestockholders' $ 772,231 $ 761,329 $ 741,587 $ 722,148 $ 709,408 equity -Non-GAAP (c)



Total assets $ 6,460,575 $ 5,722,033 $ 5,620,319 $ 6,103,647 $ 5,723,134 - GAAP (b)

Less: 16,300 16,300 16,300 16,300 16,300 Goodwill

Less:Mortgage 6,711 5,994 5,888 5,483 5,158 servicingrights

Less: Coredeposit 377 423 469 516 562 intangible

Tangibleassets - $ 6,437,187 $ 5,699,316 $ 5,597,662 $ 6,081,348 $ 5,701,114 Non-GAAP (d)



Totalstockholders'equity to 12.31 % 13.70 % 13.60 % 12.20 % 12.78 %total assets- GAAP (a/b)

Tangiblestockholders'equity totangible 12.00 % 13.36 % 13.25 % 11.87 % 12.44 %assets -Non-GAAP (c/d)



Number ofshares 20,908 20,887 20,943 20,948 20,948 outstanding(e)



Book valueper share - $ 38.05 $ 37.54 $ 36.49 $ 35.54 $ 34.92 GAAP (a/e)

Tangible bookvalue pershare - 36.93 36.45 35.41 34.47 33.87 Non-GAAP (c/e)

The efficiency ratio, a non-GAAP measure with no GAAP comparable, equals total noninterest expense divided by the sum of net interest income and(6) noninterest income. The ratio excludes net gains (losses) on sales, calls, and impairment of investment securities and the Company's net gain from its November 2019 branch divestiture.



Three Months Ended Six Months Ended Jun. Jun. 30, 30,

(dollars in thousands) 2020 2019 2020 2019



Net interest income $ 52,205 $ 53,946 $ 124,943 $ 126,245

Noninterest income 18,751 15,125 49,320 42,542

Less: Net gain (loss) onsales, calls, and impairment 16 33 16 33 of debt and equity securities

Total adjusted revenue - $ 70,956 $ 69,071 $ 174,247 $ 168,754 Non-GAAP (a)



Noninterest expense (b) $ 44,825 $ 43,428 $ 91,794 $ 88,937



Efficiency Ratio - Non-GAAP 63 % 63 % 53 % 53 %(b/a)



Three Months Ended

(dollars in Jun. 30, Mar. Dec. Sep. 30, Jun. 30,thousands) 2020 31, 31, 2019 2019 2020* 2019



Net interest income $ 52,205 $ 72,738 $ 54,395 $ 55,486 $ 53,946

Noninterest income 18,751 30,569 19,655 12,811 15,125

Less: Net gain on - - 7,948 (119) - branch divestiture

Less: Net gain (loss)on sales, calls, and 16 40 (12) 19 33 impairment of debtand equity securities

Total adjustedrevenue - Non-GAAP $ 70,940 $ 103,267 $ 66,114 $ 68,397 $ 69,038 (a)



Noninterest expense $ 44,825 $ 46,969 $ 40,835 $ 42,411 $ 43,428 (b)



Efficiency Ratio - 63 % 45 % 62 % 62 % 63 %Non-GAAP (b/a)

*The Company's efficiency ratio for the first quarter of each year traditionally benefits from seasonal revenues from its TRS segment.

(7) The cost of average deposits ratio equals annualized total interest expense on deposits divided by total average interest-bearing deposits plus total average noninterest-bearing deposits.



(8) FTEs - Full-time-equivalent employees.



(9) The delinquent loans to total loans ratio equals loans 30-days-or-more past due divided by total loans. Depending on loan class, loan delinquency is determined by the number of days or the number of payments past due.



Delinquent loans for the RPG segment included $23 million of EA's at March(10) 31, 2020. EA's are only offered during the first two months of each year. EA's do not have a contractual due date but are eligible for delinquency consideration three weeks after the taxpayer-customer's tax return is submitted to the applicable tax authority. All unpaid EA's are charged-off by the end of the second quarter of each year.

NM - Not meaningful

NA - Not applicable

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CONTACT: Kevin Sipes Executive Vice President & Chief Financial Officer (502) 560-8628