Another Tax Preparer Severs Ties with Republic of Kentucky

Jackson Hewitt Technology Services is the latest tax preparer to end its partnership with Republic Bancorp, following the bank's decision to no longer offer refund-anticipation loans.

On Tuesday, the $3.3 billion-asset company in Louisville, Ky., announced that it received a termination notice from Jackson Hewitt. Republic provided electronic refund check and deposit products to Jackson Hewitt customers, along with refund-anticipation loans. While Republic is continuing to offer the check and deposit products, Jackson Hewitt said the agreement hinged on the company's the ability to make the loans in the 2013 and 2014 tax seasons.

In December, Republic consented to regulators' demands to stop offering the controversial loan product after the 2012 tax season, ending an 18-month battle with regulators.

Last month, Republic (RBCAA) received a similar termination notice from JTH Holding (TAX), the parent of Liberty Tax Service and at the time analysts said they were concerned about the Jackson Hewitt relationship http://www.americanbanker.com/issues/177_169/republic-bancorp-parts-ways-with-tax-servicing-partner-1052281-1.html. The most recent termination carries a heavier punch; 40% of Republic's process group's gross revenue comes from Jackson Hewitt. Liberty contributes 20%, while the remainder is made up of smaller tax preparers.

The processing group accounted for 55% of Republic's $222.4 million in revenue for the first six months of the year. The tax business makes nearly all of its money in the first six months of the year because of tax season.

"Termination of this contract will have a material adverse impact to the company's results of operations in 2013 and beyond," Republic said in a filing with the Securities and Exchange Commission filing Tuesday.

With both terminations, Republic is exploring its legal options, either through mediation or litigation. Meanwhile, the company is looking for other ways to replace the income it stands to lose from its tax business. It has made two acquisitions of failed banks so far this year and has said it is pursuing more.