<PAGE>
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1996
OR
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 33-77324
REPUBLIC BANCORP, INC.
(Exact name of registrant as specified in its charter)
Kentucky 61-0862051
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) 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
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.
X Yes __ No
The number of shares outstanding of the issuer's class of common stock as of the
latest practicable date: 6,051,261 shares of Class A Common Stock and 1,170,207
shares of Class B Common Stock as of August 12, 1996.
The Exhibit index is on page 28. This filing contains 30 pages (including this
facing sheet).
- --------------------------------------------------------------------------------
<PAGE>
REPUBLIC BANCORP, INC.
FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements .............................................. 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................. 15
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K .................................. 26
Signatures
<PAGE>
PART I
ITEM 1
REPUBLIC BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS(UNAUDITED)(dollars in thousands)
JUNE 30, DECEMBER 31,
1996 1995
ASSETS:
Cash and cash equivalents:
Cash and due from banks $ 26,548 $ 30,988
Federal funds sold 32,325 44,325
-------- ---------
Total cash and cash equivalents 58,873 75,313
Securities to be held to maturity - fair values:
$133,134 (1996) and $114,749 (1995) 134,404 114,654
Loans, less allowance for loan losses of
$6,241 (1996) and $3,695 (1995) 706,460 668,193
Mortgage loans held for sale 6,057 5,988
Federal Home Loan Bank stock 5,359 5,176
Accrued interest receivable 8,020 7,244
Premises and equipment, net 13,765 12,015
Other assets 2,273 2,764
-------- --------
TOTAL $ 935,211 $ 891,347
========= ==========
LIABILITIES:
Deposits:
Non-interest bearing $66,832 $63,304
Interest bearing 680,088 671,139
Securities sold under agreements to repurchase
and other short-term borrowings 50,209 21,729
Other borrowed funds 70,340 68,063
Accrued interest payable 4,301 4,314
Other liabilities 3,685 4,296
--------- ---------
Total Liabilities 875,455 832,845
--------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, no par value; authorized, 100,000 shares; Series A 8.5%
noncumulative convertible, 50,000 shares issued and
outstanding (liquidation preference $5,000) 5,000 5,000
Class A Common stock, no par value
Class B Common stock, no par value 3,491 3,491
Additional paid-in capital 6,817 6,817
Retained earnings 44,448 43,194
-------- -------
Total stockholders' equity 59,756 58,502
--------- --------
TOTAL $ 935,211 $ 891,347
========= =========
See notes to consolidated financial statements.
<PAGE>
REPUBLIC BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME(UNAUDITED)(in thousands,except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
INTEREST INCOME: 1996 1995 1996 1995
Loans, including fees $17,526 $14,965 $34,631 $28,633
Investment securities and
mortgage-backed securities:
Taxable 1,933 2,074 3,918 3,688
Non-taxable 32 33 64 65
FHLB dividends 101 83 193 162
Other 247 448 641 711
------- ------- ------- -------
Total interest income 19,839 17,603 39,447 33,259
------- ------- ------- -------
INTEREST EXPENSE:
Deposits 8,580 8,060 17,414 14,435
Short-term borrowings 658 254 1,145 508
Long-term debt 982 1,151 1,965 2,345
------- ------ ------- --------
Total interest expense 10,220 9,465 20,524 17,288
------- ------ ------- --------
NET INTEREST INCOME 9,619 8,138 18,923 15,971
PROVISION FOR LOAN LOSSES 3,703 1,503 5,634 1,940
------- ------ ------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 5,916 6,635 13,289 14,031
------- ----- ------ --------
NON-INTEREST INCOME:
Service charges on deposit accounts 584 469 1,094 906
Other service charges and fees 276 337 668 657
Bank card services 287 308 631 615
Net gain on sale of loans 356 199 722 366
Loan servicing income 206 224 416 450
Other 83 999 749 1,268
------- ------- ------ ------
Total non-interest income 1,792 2,536 4,280 4,262
------- ------- ------ ------
NON-INTEREST EXPENSE:
Salaries and employee benefits 2,992 2,639 6,398 5,248
Occupancy and equipment 1,586 1,319 3,031 2,555
Communication and transportation 398 337 730 658
Marketing and development 415 309 755 571
Insurance 296 321 496 651
Supplies 242 187 454 455
Other 1,114 889 1,974 1,800
----- ------ ------- -------
Total non-interest expense 7,043 6,001 13,838 11,938
--------- ------ ------- -------
INCOME BEFORE INCOME TAXES 665 3,170 3,731 6,355
INCOME TAXES 339 1,117 1,482 2,220
------- ------ ------ -------
NET INCOME $ 326 $ 2,053 $ 2,249 $ 4,135
======= ======= ====== =======
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE $ .03 $ .26 $ .27 $ .53
======= ======= ======= =======
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
REPUBLIC BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common
Preferred Stock Additional Total
Stock Class A Class B Paid-in Retained Stockholders
Shares Amount Shares Amount Shares Amount Capital Earnings Equity
BALANCE January 1, 1996 50,000 $5,000 1,203,578 $3,491 $6,817 $43,194 $58,502
Stock Dividend 6,017,890 $ 0
Dividend Declared
Preferred ($2.125 per share) (213) (213)
Common: Class A ($.055 per share) (664) (664)
Class B ($.050 per share) (118) (118)
Net Income 2,249 2,249
BALANCE June 30, 1996 50,000 $5,000 6,017,890 $ 0 1,203,578 $3,491 $6,817 $44,448 $59,756
====== ====== ========= ==== ========= ====== ====== ======= =======
See notes to consolidated financial statements.
</TABLE>
<PAGE>
REPUBLIC BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1996 AND 1995(in thousands)
- -------------------------------------------------------------------------
1996 1995
OPERATING ACTIVITIES:
Net income $2,249 $4,135
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Depreciation and amortization of
premises and equipment 1,542 1,117
Amortization and accretion of investment
securities (143) (238)
FHLB stock dividends (183) (159)
Provision for loan losses 5,634 1,940
Net gain on sale of loans (722) (366)
Proceeds from sale of loans 76,426 23,513
Origination of mortgage loans held for sale (75,773) (29,308)
Changes in assets and liabilities:
Accrued interest receivable (776) (1,297)
Other assets 491 (1,054)
Accrued interest payable (13) 401
Other liabilities (701) 495
-------- --------
Net cash provided by (used in)
operating activities 8,031 (821)
INVESTING ACTIVITIES:
Purchases of securities to be held to maturity (117,602) (76,072)
Proceeds from maturities of securities 97,995 52,413
Net increase in loans (43,901) (57,710)
Proceeds from sales of real estate acquired in
settlement of loans 219
Net purchases of premises and equipment (3,292) (773)
-------- -----
Net cash used in investing activities (66,800) (81,923)
-------- --------
FINANCING ACTIVITIES:
Net increase (decrease) in deposits 12,477 85,351
Net increase in securities sold under agreements
to repurchase and other short-term borrowings 28,480 12,054
Payments on other borrowings (21,723) (18,230)
Proceeds from other borrowings 24,000
Purchase and retirement of common stock (75)
Sale of common stock 126
Sale of preferred stock 5,000
Cash dividends paid (905) (750)
-------- --------
Net cash provided by financing activities 42,329 83,476
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (16,440) 732
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 75,313 38,533
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 58,873 $ 39,265
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 20,537 $ 16,887
======== =========
Income taxes $ 2,432 $ 2,059
======== ==========
See notes to consolidated financial statements.
<PAGE>
REPUBLIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. BASIS OF PRESENTATION (AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES)
Basis of Presentation - The consolidated financial statements include the
accounts of Republic Bancorp, Inc. and its wholly-owned subsidiaries;
Republic Mortgage Company, Republic Insurance Agency, Inc. and Republic Bank
& Trust Company (Bank), collectively "Republic". All significant
intercompany balances and transactions have been eliminated in consolidation.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-month and six-month periods
ending June 30, 1996, are not necessarily indicative of the results that may be
expected for the year ended December 31, 1996. For further information, refer to
the consolidated financial statements and footnotes thereto included in
Republic's annual report on Form 10-K for the year ended December 31, 1995.
Mortgage Servicing Rights - On January 1, 1996, Republic adopted Statement of
Financial Accounting Standards No. 122, Accounting for Mortgage Servicing Rights
(SFAS No. 122) which requires an enterprise with mortgage banking activities to
recognize the right to service mortgage loans for others as a separate asset,
however those rights were acquired. Under previous accounting guidance, a
separate asset was recognized for purchased, but not originated, mortgage
servicing rights. Under SFAS No. 122, the total cost of mortgage loans
originated with the intent to sell is allocated between the servicing right and
the loan without the servicing right based on their relative fair values at the
date of origination. The capitalized cost of servicing rights are amortized in
proportion to, and over the period of, the estimated net servicing income. The
mortgage servicing asset is periodically evaluated for impairment by stratifying
by predominant risk characteristics.
Since adoption of this Statement, loans sold in the secondary market have been
primarily servicing released. Accordingly, adoption of SFAS No. 122 has had no
material impact on Republic's financial position or results of operations.
Earnings Per Share - Earnings per common and common equivalent share is based
upon the weighted average of common and common equivalent shares outstanding
during the year. Primary and fully diluted earnings per share are approximately
the same. The number of common and common equivalent shares utilized in the per
share computations was 7,596,443 and 7,566,252 for the three months ended June
30, 1996 and 1995, respectively, and 7,591,107 and 7,478,394 for the six months
ended June 30, 1996 and 1995, respectively.
2. STOCKHOLDERS EQUITY AND STOCK DIVIDEND
At December 31, 1995, common stock authorized consisted of 2,000,000 shares of
no par stock, of which 1,203,578 shares were issued and outstanding. On January
8, 1996 the stockholders approved an amendment to Republic's Articles of
Incorporation to authorize 15,000,000 shares of Class A Common Stock, no par
value and 2,000,000 shares of Class B Common Stock, no par value.
On February 16, 1996, the Board of Directors declared a stock dividend of five
shares of Class A Common Stock for each share of Class B Common Stock owned by
stockholders of record on February 20, 1996 payable on February 29, 1996. The
stock dividend has been treated as a stock split and all share and earnings per
share amounts have been retroactively restated to give effect to the stock
split.
The Class A shares are entitled to cash dividends equal to 110% of the dividend
paid per share on the Class B Common Stock. Class A shares have one vote per
share and Class B shares have ten votes per share. Class B stock may be
converted, at the option of the holder, to Class A stock on a share-for-share
basis. The Class A Common Stock is not convertible into any other class of
Republic's capital stock.
3. RECLASSIFICATIONS
Certain amounts have been reclassified in the 1995 financial statements to
conform with the current period classifications. The reclassifications have no
effect on net income or stockholders' equity as previously reported.
<TABLE>
<CAPTION>
4. SECURITIES TO BE HELD TO MATURITY
June 30, 1996
(in thousands)
<S> <C> <C> <C> <C>
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
U.S. Treasury Securities and
U.S. Government Agencies $129,231 $248 $(1,655) $127,824
Obligations of state and political subdivisions 4,468 187 (3) 4,652
Mortgage-backed securities 705 (47) 658
Total securities to be held to maturity $134,404 $435 $(1,705) $133,134
======== ==== ======== ========
</TABLE>
Securities to be held to maturity having an amortized cost of $125 million and a
fair value of $124 million at June 30, 1996, were pledged to secure public
deposits, securities sold under agreements to repurchase and for other purposes,
as required or permitted by law.
<TABLE>
<CAPTION>
December 31, 1995
(in thousands)
<S> <C> <C> <C> <C>
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
U.S. Treasury Securities and
U.S. Government Agencies $109,282 $777 $ (823) $109,236
Obligations of state and political subdivisions 4,629 176 (1) 4,804
Mortgage-backed securities 743 (34) 709
-------- ---- -------- --------
Total securities to be held to maturity $114,654 $953 $ (858) $114,749
======== ==== ======== ========
</TABLE>
<TABLE>
<CAPTION>
5. LOANS
June 30, 1996 December 31, 1995
(in thousands)
<S> <C> <C>
Residential real estate $407,195 $371,846
Commercial real estate 67,463 75,648
Real estate construction 32,870 31,230
Commercial 23,589 21,042
Consumer 105,560 98,730
Home equity 50,454 48,244
Bank card 24,393 25,581
Other 3,730 3,424
-------- --------
Total loans 715,254 675,745
-------- --------
Less:
Unearned interest income and
unamortized loan fees 2,553 3,857
Allowance for loan losses 6,241 3,695
-------- --------
Loans, net $706,460 $668,193
======== ========
</TABLE>
<TABLE>
<CAPTION>
The following table sets forth the changes in the allowance for loan losses:
Three Months Ended, Six Months Ended,
June 30 June 30
<S> <C> <C> <C> <C>
1996 1995 1996 1995
(in thousands)
Balance, beginning of period $4,261 $2,187 $3,695 $1,827
Provision charged to income 3,703 1,503 5,634 1,940
Charge-offs (1,761) (655) (3,161) (740)
Recoveries 38 17 73 25
------- ------ ------- ------
Balance, end of period $6,241 $3,052 $6,241 $3,052
======= ====== ======= =======
</TABLE>
<TABLE>
<CAPTION>
Information about Republic's investment in impaired loans is as follows:
June 30, 1996 December 31, 1995
(in thousands)
<S> <C> <C>
Gross impaired loans $1,592 $4,064
Less: Related allowances for loan losses 100 589
------ ------
Net impaired loans with related allowances 1,492 3,475
Impaired loans with no related allowances 0 87
------ ------
Total $1,492 $3,562
====== ======
Average impaired loans outstanding $1,592 $3,432
====== ======
</TABLE>
<TABLE>
<CAPTION>
6. INTEREST BEARING DEPOSITS
June 30, 1996 December 31, 1995
<S> <C> <C>
NOW and Super NOW $84,976 $76,972
Money market 31,934 26,772
Savings 15,239 15,395
Money market certificates of deposit 66,068 58,599
Individual retirement accounts 35,085 34,275
Certificates of deposit, $100,000 and over 54,181 55,708
Other certificates of deposit 344,505 355,344
Brokered deposits 48,100 48,074
-------- --------
Total interest bearing deposits $680,088 $671,139
</TABLE>
7. SHORT-TERM BORROWINGS
Short-term borrowings consist of repurchase agreements and overnight liabilities
to deposit customers arising from a cash management program offered by Republic.
While effectively deposit equivalents, such arrangements are in the form of
repurchase agreements. The repurchase agreements are treated as financings;
accordingly, the securities involved with the agreements are recorded as assets
and are held by a safekeeping agent and the obligations to repurchase the
securities are reflected as liabilities. Balances as of and for the six months
ended June 30, 1996:
(dollars in thousands)
Average outstanding balance $55,303
Average interest rate 4.41%
Maximum outstanding at month end $85,980
<PAGE>
8. SEGMENT INFORMATION
Republic's operations include two reportable segments: banking and mortgage
banking. The banking segment is engaged in making loans, investing in securities
and collecting deposits. The mortgage banking segment originates residential
mortgage loans for resale in the secondary mortgage market and services loans
for the Bank and others.
Intersegment interest income and expense represent interest on loans and
advances from the banking segment to the mortgage banking segment computed at
New York prime, and advances from Republic to the Bank.
<TABLE>
<CAPTION>
Three months ended June 30, 1996
(in thousands)
Mortgage Republic
Bank Banking Bancorp Eliminations Consolidated
<S> <C> <C> <C> <C>
Interest income:
Unaffiliated customers $19,602 $ 190 47 $ 19,839
Intersegment 187 $ (187)
-------- ------- ------ ------- --------
Total interest income 19,789 190 47 (187) 19,839
-------- ------- ------ ------- --------
Interest expense:
Unaffiliated customers 10,179 41 10,220
Intersegment 47 140 (187)
-------- ------- ------ -------
Total interest expense 10,226 140 41 (187) 10,220
-------- ------- ------ ------- --------
Net interest income 9,563 50 6 9,619
Provision for loan losses 3,703 3,703
Non-interest income 1,270 522 1,792
Non-interest expense 6,725 318 7,043
-------- ------- ------ --------
Income before income taxes$ 405 $ 254 $ 6 $ 665
======== ======= ====== ========
Identifiable assets $927,527 $ 6,925 $ 759 $935,211
======== ======= ====== ========
Depreciation and amortization
of premises and equipment $ 656 $ 22 $ 678
===== ======= ========
Capital expenditures $ 2,251 $ 6 $ 2,257
======== ======= ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Three months ended June 30, 1995
(in thousands)
Mortgage Republic
Bank Banking BancorpEliminationsConsolidated
<S> <C> <C> <C> <C>
Interest income:
Unaffiliated customers $ 17,401 $ 155 $ 47 $ 17,603
Intersegment 177 $ (177)
-------- ------- ------ ------- --------
Total interest income 17,578 155 47 (177) 17,603
-------- ------- ------ ------- --------
Interest expense:
Unaffiliated customers 9,411 54 9,465
Intersegment 47 130 (177)
-------- ------- ------ -------
Total interest expense 9,458 130 54 (177) 9,465
-------- ------- ------ ------- --------
Net interest income 8,120 25 (7) 8,138
Provision for loan losses 1,503 1,503
Non-interest income 2,077 459 2,536
Non-interest expense 5,738 257 6 6,001
-------- ------- ------ --------
Income (loss) before
income taxes $ 2,956 $ 227 $ (13) $ 3,170
======== ======= ====== ========
Identifiable assets $816,847 $ 7,205 $ 439 $824,491
======== ======= ====== ========
Depreciation and amortization
of premises and equipment $ 521 $ 32 $ 553
===== ======= ========
Capital expenditures $ 514 $ 2 $ 516
======== ======= ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Six months ended June 30, 1996
(in thousands)
Mortgage Republic
Bank Banking Bancorp Eliminations Consolidated
<S> <C> <C> <C> <C>
Interest income:
Unaffiliated customers $ 39,009 $ 341 $ 97 $ 39,447
Intersegment 357 $ (357)
-------- ------- ------ ------- --------
Total interest income 39,366 341 97 (357) 39,447
-------- ------- ------ ------- --------
Interest expense:
Unaffiliated customers 20,442 82 20,524
Intersegment 97 260 (357)
-------- ------- ------ -------
Total interest expense 20,539 260 82 (357) 20,524
-------- ------- ------ ------- --------
Net interest income 18,827 81 15 18,923
Provision for loan losses 5,634 5,634
Non-interest income 3,249 1,031 4,280
Non-interest expense 13,210 588 40 13,838
-------- ------- ------ --------
Income (loss) before
income taxes $ 3,232 $ 524 $ (25) $ 3,731
======== ======= ====== ========
Identifiable assets $927,527 $ 6,925 $ 759 $935,211
======== ======= ====== ========
Depreciation and amortization
of premises and equipment $ 1,497 $ 45 $ 1,542
===== ====== ========
Capital expenditures $ 4,288 $ 14 $ 4,302
======== ======= ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Six months ended June 30, 1995
(in thousands)
Mortgage Republic
Bank Banking Bancorp Eliminations Consolidated
<S> <C> <C> <C> <C>
Interest income:
Unaffiliated customers $ 32,903 $ 289 $ 67 $ 33,259
Intersegment 305 $ (305)
-------- ------- ------ ------- --------
Total interest income 33,208 289 67 (305) 33,259
-------- ------- ------ ------- --------
Interest expense:
Unaffiliated customers 17,171 117 17,288
Intersegment 67 238 $ (305)
-------- ------- ------ -------
Total interest expense 17,238 238 117 (305) 17,288
-------- ------- ------ ------- --------
Net interest income 15,970 51 (50) 15,971
Provision for loan losses 1,940 1,940
Non-interest income 3,437 825 4,262
Non-interest expense 11,399 533 6 11,938
-------- ------- ------ --------
Income (loss) before
income taxes $ 6,068 $ 343 $ (56) $ 6,355
======== ======= ====== ========
Identifiable assets $816,847 $ 7,205 $ 439 $824,491
======== ======= ====== ========
Depreciation and amortization
of premises and equipment $ 1,052 $ 65 $ 1,117
==== ====== ========
Capital expenditures $ 771 $ 2 $ 773
======= ====== ========
</TABLE>
<PAGE>
PART I
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
GENERAL
Republic, headquartered in Louisville, Kentucky, was incorporated on January 2,
1974. The Bank is a commercial banking and trust corporation organized and
chartered under the laws of the Commonwealth of Kentucky. The Bank is also
headquartered in Louisville, Kentucky and provides banking services through
seventeen banking centers throughout Kentucky. The Bank's activities include the
acceptance of deposits for checking, savings and time deposit accounts, making
secured and unsecured loans, investing in securities, rental of safe deposit
boxes and trust services. The Bank's lending services include the making of real
estate, commercial, consumer and Bankcard loans and its operating revenues are
derived primarily from interest and fees on domestic real estate, commercial and
consumer loans, and from interest on securities of the United States Government
and Agencies, states, and municipalities. Regulators for Republic include the
Federal Deposit Insurance Corporation (FDIC), Federal Reserve Bank and the
Kentucky Department of Financial Institutions. In assets, the Bank is the sixth
largest FDIC-insured bank in Louisville, Kentucky and the ninth largest
FDIC-insured commercial bank in Kentucky.
COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 1996
AND DECEMBER 31, 1995
Overview. Republic's total assets were $935.2 million at June 30, 1996, compared
to $891.3 million at December 31, 1995, an increase of 5%. The growth was
primarily attributable to increased market loan demand.
Cash and cash equivalents. The cash and cash equivalents decreased from $75.3
million at December 31, 1995 to $58.9 million at June 30, 1996. Cash and due
from banks decreased $4.4 million, while federal funds sold decreased $12
million. These decreases resulted from increased loan demand and management's
deployment of funds into the investment portfolio.
Securities to be held to maturity. Securities increased from $114.7 million at
December 31, 1995, to $134.4 million at June 30, 1996. The investment portfolio
consists primarily of U. S. Treasury and U.S. Government Agencies with a range
of maturities, none of which exceed ten years. Republic maintains a conservative
interest rate risk strategy in that 85% of the portfolio matures within 5 years.
Funds provided by maturing securities throughout the six month period ended June
30, 1996 were primarily used to purchase replacement securities. No investment
securities were sold prior to maturity through June 30, 1996.
<PAGE>
Loans. Net loans increased $38.3 million to $706.5 million at June 30, 1996,
compared to $668.2 million at December 31, 1995. The increase in net loans was
led by residential lending which has increased 10% since December 31, 1995.
Residential real estate loans increased due to Republic's marketing activities
and sustained customer demand. In recent periods, Republic has experienced
strong overall loan growth throughout its markets. If current economic trends
remain stable, Republic anticipates continued loan growth.
Republic's unsecured consumer loan portfolio ("All Purpose", "Pre-Approved", and
Bankcard) increased marginally from $88.3 million at December 31, 1995 to $91.9
million at June 30, 1996. Republic's "All Purpose" loans, with total
outstandings of $27.2 million at June 30, 1996, are originated through
Republic's retail operating units. This product has an average loan amount of
$8,000 and an average annual percentage rate of 17.73% with a standard maximum
maturity of 5 years. "Pre-Approved" loans, with total outstandings of $40.3
million at June 30, 1996, are delivered through direct mail, targeting customers
both in and outside of Republic's traditional Kentucky markets. The
"Pre-Approved" product has an average loan amount of $7,800 and an average
annual percentage rate of 14.25% with a standard maximum maturity of 5 years.
Republic's Bankcard program, with total outstandings of $24.4 million at June
30, 1996, has an average loan amount of $2,518 and an average annual percentage
rate of 13.21%.
Allowance and Provision for Loan Losses. The allowance for loan losses increased
from $3.7 million at December 31, 1995 to $6.2 million at June 30, 1996. The
increase is primarily attributable to the unsecured consumer loan portfolio. The
additions to the allowance have increased Republic's allowance for loans losses
to total loan ratio to .87% at June 30, 1996 up from .55% at December 31, 1995.
The provision for loan losses was $3.7 million in second quarter, 1996, compared
to $1.5 million in second quarter 1995. Net charge-offs increased $1.1 million
during second quarter 1996 over second quarter 1995. Republic's unsecured
consumer loan portfolio accounted for 88% of total charge-offs in the second
quarter of 1996.
Similarly, the provision for loan losses was $5.6 million for the six months
ended June 30, 1996, compared to $1.9 million for the six months ended June 30,
1995. Net charge-offs increased $2.4 million during six months ended June 30,
1996 over the comparable period in 1995. Republic's unsecured consumer loan
portfolio accounted for 91% of total charge-offs in the first half of 1996. The
charge-offs in the unsecured portfolio were principally comprised of $1.3
million in the "All-Purpose" program and $819,000 in the "Pre-Approved" program.
As a result of increasing charge-offs, management has limited the growth of the
unsecured consumer loan portfolio by tightening the underwriting standards for
the "All-Purpose" program and reducing the number of direct mail offers for the
"Pre-Approved" loan program. These actions are expected to increase the average
quality of these loan programs and gradually reduce the rate of charge-offs.
Republic also experienced charge-offs in its Bank card program of $670,000 for
the six months ended June 30, 1996, compared to $294,000 for the comparable
period in 1995. Management anticipates that the current level of charge-offs in
the unsecured consumer loan portfolio may continue at or near its current level,
but believes, based on information presently available, that it has adequately
provided for these losses as of June 30, 1996. Future adjustments, which could
be material, may be necessary if actual performance differs from management's
estimates. Table 1 below depicts the allowance activity by loan type for the
three months and six months ended June 30, 1996 and 1995.
<TABLE>
<CAPTION>
Table 1 - Summary of Loan Loss Experience
Three Months Ended Six Months Ended
June 30, June 30,
<S> <C> <C> <C> <C>
(in thousands) 1996 1995 1996 1995
Allowance For Loan Losses
Balance Beginning of
Period $4,261 $2,187 $3,695 $1,827
Charge-offs:
Real Estate 128 293 140 313
Commercial 6 0 13 5
Consumer 1,627 362 3,008 422
------ ------ ------ ------
Total (1,761) (655) (3,161) (740)
------- ------ ------- ------
Recoveries:
Real Estate 2 2
Commercial
Consumer 37 17 72 25
------ ------ ------ ------
Total 39 17 74 25
------ ------ ------ ------
Net charge-offs: (1,722) (638) (3,087) (715)
Provision For Loan Losses 3,703 1,503 5,634 1,940
------ ------ ------ ------
Allowance For Loan Losses
End of Period $6,241 $3,052 $6,241 $3,052
====== ====== ====== ======
</TABLE>
Premises and Equipment, net. Premises and equipment increased from $12.1 million
at December 31, 1995 to $13.8 million at June 30, 1996. The increase resulted
from the addition of a new banking center and technology enhancements. The
technology enhancements included expansion of the Bank's personal computer
network, platform automation and telecommunication system improvements.
Deposits. Total deposits increased to $746.9 million at June 30, 1996, compared
to $734.4 million at December 31, 1995. This increase was primarily due to a
rise in core deposits resulting from deposit gathering activities designed to
attract new funds. Republic plans to continue its deposit gathering initiatives
while working to maximize retention of maturing rate-sensitive deposits through
aggressive pricing strategies and new products.
Securities Sold Under Agreements to Repurchase and Other Short Term Borrowings.
Short term borrowings increased from $21.7 million at December 31, 1995 to $50.2
million at June 30, 1996. The change was primarily due to increased funds
provided by public sector enterprises and other new funding relationships.
Management intends to develop additional public sector relationships to increase
short term borrowings in the near term.
RESULTS OF OPERATIONS
Overview. For the three months ended June 30, 1996, Republic's net income was
$326,000, or $.03 per share compared to $2.1 million, or $.26 per share, for the
second quarter of 1995. Earnings for the second quarter 1996 produced an
annualized return on average assets of .14% and a return on average
stockholders' equity of 2.22%, compared to returns of 1.0% and 15.05%,
respectively, for the comparable period in 1995. For the six months ended June
30, 1996, net income was $2.2 million compared to $4.1 million for the same
period in 1995. The decline in earnings was attributable to increased provisions
to the Bank's loan loss reserve prompted by a rise in charge-offs in the
unsecured consumer loan portfolio.
Net Interest Income. For second quarter, 1996, net interest income was $9.6
million, up 19% over the $8.1 million attained during second quarter, 1995. This
increase was primarily attributable to Republic's continued loan growth,
particularly residential real estate loans. During second quarter, 1996, average
interest-earning assets were $863.3 million, an increase of $80.8 million over
second quarter 1995. The yield on average interest-earning assets increased from
9.00% during second quarter of 1995 to 9.19% during second quarter of 1996.
Total average interest bearing liabilities increased from $696.4 million in the
second quarter of 1995 to $776.3 in the second quarter of 1996. The cost of
average interest-bearing liabilities decreased from 5.44% during second quarter
of 1995 to 5.27% in the second quarter of 1996, as higher cost deposits matured.
Overall, the net interest rate spread increased from 3.56% during second quarter
of 1995, to 3.93% in the comparable quarter of 1996. The Bank's net interest
margin increased from 4.16% in second quarter, 1995 to 4.46% in second quarter,
1996.
Net interest income for the six months ended June 30, 1996 was $18.9 million, up
$2.9 million from $16.0 million during the six months ended June 30, 1995. When
comparing the respective six month periods, average earning assets grew by
$105.1 million in 1996 and average interest bearing liabilities increased $97.4
million. The rise in net interest income in 1996 is primarily due to the
increase of the Bank's loan portfolio.
The Bank's exposure to changes in interest rates is managed by maintaining a
balance between interest-earning assets and interest-bearing liabilities which
are expected to mature or are sensitive to interest rate changes. At June 30,
1996, the Bank's exposure to changes in interest rates reflected a negative one
year gap of $819,000 compared to a positive one year gap of $12.3 million at
December 31, 1995. The change in the one year gap was attributable to the
placement of the federal funds into longer term investments and the increase of
short term borrowings. Management does not deem the change to be significant.
Tables 2 and 3 on page 19 and 20 provides detailed information as to average
balance, interest income/expense, and rates by major balance sheet category for
the three and six months ended June 30, 1996 and 1995.
<PAGE>
<TABLE>
<CAPTION>
Table 2 - Average Balance Sheet and Average Rates - for Second Quarter, 1996 and
1995 (in thousands)
- ----------------------------------------------------------------------------------------------------
Three Months Ended June 30, 1996 Three Months Ended June 30, 1995
------------------------------- -------------------------------
ASSETS Average Average Average Average
Balance Interest Rate (4) Balance Interest Rate (4)
------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Earning Assets:
US Treasury and US
Government Agency Securities $119,469 $1,856 6.21% $121,761 $1,996 6.56%
State and Political
Subdivision Securities 4,590 98 8.54% 4,751 100 8.42%
Other Investment Securities 5,345 103 7.71% 4,999 83 6.64%
Mortgage-Backed Securities 716 9 5.03% 811 10 4.93%
Federal Funds Sold 19,012 247 5.20% 29,734 449 6.04%
Total Loans and Fees (1) 714,190 17,526 9.82% 620,478 14,965 9.65%
------- ------ ----- ------- ------ -----
Total Earning Assets 863,322 19,839 9.19% 782,534 17,603 9.00%
Less: Allowance
for Loan Losses (4,678) (2,517)
Non-Earning
Assets:
Cash and Due From
Banks 20,656 14,869
Bank Premises and
Equipment, Net 13,526 12,232
Other Assets 9,206 10,680
--------- ----------
Total Assets $902,032 $817,798
========= ==========
LIABILITIES AND STOCK-
HOLDERS' EQUITY:
Interest Bearing Liabilities
Transaction Accounts $151,982 $1,307 3.44% $141,571 $1,309 3.70%
Money Market Accounts 33,852 364 4.30% 18,137 210 4.63%
Individual Retirement
Accounts 34,695 536 6.18% 31,477 497 6.32%
Certificates of Deposits and
Other Time Deposits 425,682 6,373 5.99% 407,622 6,044 5.93%
Repurchase Agreements and
Other Borrowings 130,092 1,640 5.04% 97,618 1,405 5.76%
------- ----- ----- ------ ----- ------
Total Interest Bearing
Liabilities 776,303 10,220 5.27% 696,425 9,465 5.44%
Non-Interest Bearing
Liabilities:
Non-Interest Bearing
Deposits 59,379 53,796
Other Liabilities 7,633 13,025
Stockholders'
Equity 58,717 54,552
--------- ----------
Total Liabilities and Stock-
holders' Equity $902,032 $817,798
========= ==========
Net Interest
Income $9,619 $8,138
=========== ===========
Net Interest
Spread (2) 3.93% 3.56%
========= ========
Net Interest
Margin (3) 4.46% 4.16%
========= ========
- --------------------------------------------------------------------------------
For purposes of these calculations, non-accruing loans are included in the
quarterly average loan amounts outstanding. (1) The amount of fees included in
interest on loans was $37,000 and $67,000 for the three months ended June 30,
1996 and 1995, respectively. (2) Net interest spread represents the difference
between the average yield on average interest-earning assets and the average
cost of average interest-bearing liabilities. (3) Net interest margin represents
net interest income divided by average interest-earning assets. (4) For purposes
of calculating these figures, all interest income and interest costs are
annualized.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Table 3 - Average Balance Sheet and Average Rates - for Six Months, 1996 and 1995
- --------------------------------------------------------------------------------------------------------------------
Six Months Ended June 30, 1996 Six Months Ended June 30, 1995
-------------------------------------------- ---------------------------------------------
ASSETS Average Average Average Average
Balance Interest Rate (4) Balance Interest Rate (4)
------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Earning Assets:
US Treasury and US
Government Agency Securities $120,340 $3,762 6.25% $113,836 $3,531 6.20%
State and Political
Subdivision Securities 4,613 197 8.54% 4,735 200 8.45%
Other Investment Securities 5,304 197 7.43% 4,984 164 6.58%
Mortgage-Backed Securities 725 19 5.24% 822 20 4.87%
Federal Funds Sold 24,033 641 5.33% 23,889 711 5.95%
Total Loans and Fees (1) 703,422 34,631 9.85% 605,036 28,633 9.46%
-------- ------ ----- ------- ------- -----
Total Earning Assets 858,437 39,447 9.19% 753,302 33,259 8.83%
Less: Allowance
for Loan Losses (4,258) (2,181)
Non-Earning
Assets:
Cash and Due From
Banks 19,669 15,657
Bank Premises and
Equipment, Net 13,082 12,216
Other Assets 10,183 9,921
------- -------
Total Assets $897,113 $788,915
======= =========
LIABILITIES AND STOCK-
HOLDERS' EQUITY:
Interest Bearing Liabilities
Transaction Accounts $149,830 $2,610 3.48% $148,525 $2,549 3.43%
Money Market Accounts 32,565 697 4.28% 14,920 334 4.48%
Individual Retirement
Accounts 34,467 1,075 6.24% 28,680 874 6.09%
Certificates of Deposits and
Other Time Deposits 432,197 13,032 6.03% 380,064 10,678 5.62%
Repurchase Agreements and
Other Borrowings 120,669 3,110 5.15% 100,169 2,853 5.70%
--------- ------- ------ --------- ------- -----
Total Interest Bearing
Liabilities 769,728 20,524 5.33% 672,358 17,288 5.14%
Non-Interest Bearing
Liabilities:
Non-Interest Bearing
Deposits 58,549 52,336
Other Liabilities 9,326 12,157
Stockholders'
Equity 59,510 52,064
-------- ------
Total Liabilities and
Stockholders' Equity $897,113 $788,915
======== =========
Net Interest
Income $18,923 $15,971
======= ========
Net Interest
Spread (2) 3.86% 3.69%
====== =====
Net Interest
Margin (3) 4.41% 4.24%
====== =====
- --------------------------------------------------------------------------------
For purposes of these calculations, non-accruing loans are included in the
quarterly average loan amounts outstanding. (1) The amount of fees included in
interest on loans was $47,000 and $102,000 for the six months ended June 30,
1996 and 1995, respectively. (2) Net interest spread represents the difference
between the average yield on average interest-earning assets and the average
cost of average interest-bearing liabilities. (3) Net interest margin represents
net interest income divided by average interest-earning assets. (4) For purposes
of calculating these figures, all interest income and interest costs are
annualized.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
20
Table 4 - Volume/Rate Variance Analysis (in thousands)
- ------------------------------------
The following table presents the extent to which changes in interest rates and
changes in the volume of interest-earning assets and interest-bearing
liabilities have affected Republic's interest income and interest expense during
the periods indicated. Information is provided in each category with respect to
(i) changes attributable to changes in volume (changes in volume multiplied by
prior rate), (ii) changes attributable to changes in rate (changes in rate
multiplied by prior volume), and (iii) the net change. The changes attributable
to the combined impact of volume and rate have been allocated proportionately to
the changes due to volume and the changes due to rate.
Three Months Ended June 30, 1996 Six Months Ended June 30, 1996
Compared to Three Months Ended June 30, 1995 Compared to Six Months Ended June 30, 1995
------------------------------------------- -------------------------------------------
Increase/(Decrease) Increase/(Decrease)
Due To Due To
Total Net Total Net
<S> <C> <C> <C> <C> <C> <C>
Interest Income (1):
US Treasury and
Government Agency Securities ($140) ($38) ($102) $231 $202 $29
State and Political
Subdivision Securities (2) (3) 1 (3) (5) 2
Other Investment Securities 20 6 14 33 11 22
Mortgage-Backed Securities (1) (2) 1 (1) (2) 1
Federal Funds Sold (202) (162) (40) (70) 4 (74)
Total Loans and Fees 2,561 2,260 301 5,998 4,656 1,342
------ ------ ---- ------ ------ -----
Net Change in Interest Income 2,236 2,061 175 6,188 4,866 1,322
------ ------ ---- ------ ------ -----
Interest Expense:
Interest Bearing
Transaction Accounts (2) 96 (98) 61 22 39
Money Market Accounts 154 182 (28) 363 395 (32)
Individual Retirement Accounts 39 51 (12) 201 176 25
Certificates of Deposit and
Other Time Deposits 329 268 61 2,354 1,465 889
Repurchase Agreements and
Other Borrowings 235 467 (232) 257 584 (327)
---- ---- ----- ---- ---- -----
Net Change in Interest Expense 755 1,064 (309) 3,236 2,642 594
---- ------ ----- ------ ------ ---
Increase in
Net Interest Income $1,481 $997 $484 $2,952 $2,224 $728
======= ===== ===== ======= ======= ====
(1) Interest income for loans on non-accrual status have been eliminated from
revenues.
</TABLE>
Non-Interest Income. Non-interest income was $1.8 million during second quarter
1996, down from $2.5 million during second quarter of 1995. Non-interest income
remained constant at $4.3 million for the six months ended 1996 and 1995.
Service charges on deposit accounts rose 25% in second quarter 1996 over second
quarter 1995, while also having increased 21% for the six months ended 1996 due
to increased fees. Net gain on sale of loans increased $157,000 in second
quarter, 1996, over second quarter, 1995, and also increased 97% for the six
months ended 1996 over 1995 due to increased secondary market mortgage loan
volume. The decrease in other non-interest income during second quarter 1996 and
the six month period ended 1996 resulted from a one time gain of $738,000 for
the reversal of a previously expensed legal matter during the second quarter of
1995.
Non-Interest Expense. Total non-interest expense was $7.0 million in second
quarter 1996, compared to $6.0 million for second quarter 1995, an increase of
17%. Non-interest expense increased 16% from $11.9 million for the six months
ended June 30, 1995, compared to $13.8 million for the comparable period in
1996. Non-interest expense levels are often measured using a non-interest
interest expense ratio (non-interest expense divided by the sum of net income
and non-interest income). Republic's non-interest expense ratio increased from
56% for the second quarter 1995, to 62% for second quarter 1996. Management
anticipates that this ratio will continue to increase in the near term due to
growth and expansion.
Salary and employee benefits expense increased 13% for the second quarter, 1996
over second quarter, 1995, and 22% for the six months ended June 30, 1996 due to
staff additions and annual merit increases. Republic's staffing level rose to
401 full-time equivalent employees (FTE's) at June 30, 1996, compared to 343
FTE's at June 30, 1995. The increase in staffing was primarily attributable to
future staffing needs prompted by the Bank's expansion plans during the
remainder of 1996. Also, staffing in operational areas was increased to support
sustained strong loan demand.
Occupancy and equipment expense increased 20% in second quarter, 1996, over
second quarter 1995. This expense increased from $2.6 million for the six months
ended June 30, 1995 to $3.0 for the comparable period in 1996. The increase was
primarily due to depreciation expenses associated with new technology
enhancements for lending and customer support systems. The increase is also due
to an additional banking center location which was opened during the first
quarter of 1996. Management intends to continue its expansion plans by adding 4
additional banking centers during 1996, subject to regulatory approval.
Management anticipates that Republic's expansion plans and continued technology
enhancements will result in an increased occupancy and equipment expense level
during the remainder of 1996.
Insurance expense decreased $25,000 from second quarter, 1995, to second quarter
1996. The decrease resulted from a lowering of federal deposit insurance
premiums on deposits insured by the Bank Insurance Fund (BIF). Approximately 45%
of Republic's deposits are insured by BIF. The remaining 55% are insured by the
Savings Association Insurance Fund (SAIF) of the FDIC resulting from the merger
of Republic Savings Bank, F.S.B. with the Bank in 1994. The SAIF deposits are
currently assessed at 23 cents per $100 of deposits. However, Congress has been
considering a special, one-time assessment on SAIF deposits and a subsequent
merger of the SAIF and BIF funds. If enacted, this legislation could result in a
material one-time pre-tax charge. The amount of such charge, if any, cannot be
determined at this time. Republic is required to reimburse the FDIC for tax
benefits received resulting from tax deductions for losses on loans and other
real estate owned (OREO) acquired through the acquisition of a failed
institution. Republic has remitted amounts it has determined to be due under the
terms of the agreement. Republic is involved in discussions with the FDIC
concerning interpretations of certain provisions of the agreement and may be
required to remit additional payments related to prior years. Management intends
to vigorously contest any request by the FDIC for additional payments. While
Republic does not believe the outcome will have a material impact on its future
results of operations, the ultimate resolution of this matter is unknown. There
have been no new developments with respect to this matter during the period.
Other non-interest expense increased $225,000 during the second quarter, 1996
over second quarter, 1995, and 10% for the six months ended June 30, 1996 over
the comparable period in 1995. The increase is attributable to legal fees
associated with collection efforts on charged off consumer loans, increased
state taxes on deposits and professional fees.
ASSET QUALITY
Loans, including impaired loans under SFAS 114 and excluding consumer loans, are
placed on non-accrual status when they become past due 90 days or more as to
principal or interest, unless they are adequately secured and in the process of
collection. When loans are placed on non-accrual status, all unpaid accrued
interest is reversed. These loans remain on non-accrual status until the
borrower demonstrates the ability to remain current or the loan is deemed
uncollectible and is charged off. Consumer loans are not placed on non-accrual
status but are reviewed periodically and charged off when deemed uncollectible.
At June 30, 1996, Republic had $383,000 in consumer loans 90 days or more past
due compared to $361,000 at December 31, 1995.
Table 5 provides information related to non-performing assets and loans 90 days
or more past-due. Accruing loans contractually past due 90 days or more
increased from $1.5 million at December 31, 1995 to $3.8 million at June 30,
1996. This rise is attributable to loans secured by commercial real estate.
Management anticipates that commercial real estate loans 90 days or more past
due will return to prior levels in the near term. While loans past due 90 days
or more increased, total non-performing assets increased moderately due to the
successful disposition of OREO.
<PAGE>
<TABLE>
<CAPTION>
Table 5 - Non-Performing Assets
June 30, December 31,
1996(1) 1995(1)
(dollars in thousands)
<S> <C> <C>
Loans on non-accrual status (2) $928 $ 742
Loans past due 90 days or more 3,759 1,463
------ ------
Total non-performing loans 4,687 2,205
Other real estate owned 0 552
------ ------
Total non-performing assets $4,687 $2,757
====== ======
Percentage of non-performing loans to total .66% .33%
loans
.50% .41%
Percentage of non-performing assets to total
loans
(1) The table is exclusive of impaired loans which remained on accrual status as
of June 30, 1996. (2) Interest income that would have been earned and received
on non-accrual loans was not material.
</TABLE>
Republic defines impaired loans to be those commercial real estate and
commercial loans greater than $499,999 that management has classified as
doubtful (collection of all amounts due is highly questionable or improbable) or
loss (all or a portion of the loan has been written off or a specific allowance
for loss has been provided). Republic's policy is to charge off all or that
portion of its investment in an impaired loan upon a determination it is
probable the full amount will not be collected. Impaired loans decreased from
$3.6 million at December 31, 1995 to $1.6 million at June 30, 1996.
LIQUIDITY
Asset/liability management strategies are designed to ensure safety and
soundness, maintain liquidity and regulatory capital standards and achieve an
optimal net interest margin. Management monitors interest rate and liquidity
risk in relation to prospective market and business conditions and implements
appropriate funding and balance sheet strategies. These strategies are designed
to maintain liquidity within the Bank's policy guidelines.
In order to maintain an acceptable liquidity position, Republic has established
access to additional sources of funding. Substantial resources can be realized
from the investment portfolio, of which $43.6 million matures or is putable
within one year. These maturing securities can be utilized to provide additional
liquidity as needed. Republic's operating centers also provide access to a
retail deposit market. In addition, Republic has established lines of credit
with various financial institutions which can provide additional funds for
liquidity if needed.
<PAGE>
CAPITAL
During the second quarter of 1996 Republic purchased 3,286 shares of the Bank's
common stock for $4.0 million. This infusion of capital increased the Bank's
Tier 1 leverage ratio from 6.7% at December 31, 1995 to 6.8% at June 30, 1996.
The Bank intends to maintain a capital position that meets the regulatory
definition, as defined by the FDIC, of a "well capitalized" institution. Table 6
below indicates the Bank's capital at June 30, 1996.
<PAGE>
<TABLE>
<CAPTION>
Table 6 - Bank Capital Ratios
As of June 30, 1996
Tier I Tier I Total
(dollars in thousands) Risk Based Leverage Risk Based
Capital Ratio Capital Ratio Capital Ratio
<S> <C> <C> <C>
Bank Stockholders' Equity $61,045 $61,045 $61,045
General Valuation Allowance 6,241
Less: Goodwill and
Core Deposit Intangibles (9) (9) (9)
------- ------- ------
Computed Regulatory Capital $61,036 $61,036 $67,277
======= ======= =======
Computed Ratio 10.6% 6.8% 11.7%
FDIC "Well Capitalized" Ratio 6.0% 5.0% 10.0%
FDIC Minimum Capital Requirements 4.0% 3.0% 8.0%
Kentucky banking regulations limit the amount of dividends that may be paid to
Republic by the Bank without prior approval of the Bank's regulatory agency.
Under these regulations, the amount of dividends that may be paid in any
calendar year is limited to the Bank's current year's net income, as defined in
the regulations, combined with the retained net income of the preceding two
years, less any dividends declared during those periods. At June 30, 1996, the
Bank had $8.7 million of retained earnings available for payment of dividends.
</TABLE>
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
A. The exhibits required by Item 601 of Regulation S-K are attached
to and listed in the Exhibit Index on page 28.
B. A Form 8-K dated May 31, 1996 was filed relating to "Item 4. Changes in
Registrant's Certifying Accountant." The Form 8-K disclosed that Republic has
engaged Crowe Chizek and Company, LLP as its principal accountants.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Republic Bancorp, Inc.
(Registrant)
Principal Executive Officer:Bernard M. Trager
Date:8/14/96 /s/ Bernard M. Trager
Chairman and Chief Executive Officer
rincipal Financial Officer:E. William Petter, Jr.
Date:8/14/96 /S/ E. William Petter, Jr.
Executive Vice President,
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit Description Page
11 Statement Regarding Computation of Per Share 29
Earnings
27 Financial Data Schedule 30
<PAGE>
<TABLE>
<CAPTION>
Exhibit 11.
Statement Regarding Computation of Per Share Earnings
in thousands, except per share amounts (unaudited)
Three Months SixMonths
Ended June 30, Ended June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Primary earnings per common share:
Weighted average common shares outstanding 7,221 7,182 7,221 7,182
Common stock equivalents due to dilutive
effect of stock options 75 84 70 84
Common stock equivalents due to dilutive
effect of Convertible Preferred Stock 300 300 300 210
------ ------ ------ -------
Average shares and equivalents outstanding 7,596 7,566 7,591 7,476
Net income $ 326 $2,053 $2,249 $4,135
Less preferred stock dividends 106 106 213 152
------ ------ ------ ------
Income available for common stock 220 1,947 2,036 3,983
Primary net income per share $ .03 $ .26 $ .27 $ .53
====== ====== ====== ======
Fully-diluted earnings per common share:
Weighted average common shares outstanding 7,221 7,182 7,221 7,182
Common stock equivalents due to dilutive
effect of stock options 75 84 70 84
Common stock equivalents due to dilutive
effect of Convertible Preferred Stock 300 300 300 210
------ ------ ------ ------
Average shares and equivalents outstanding 7,596 7,566 7,591 7,476
Net income $326 $2,053 $2,249 $4,135
Less preferred stock dividends 106 106 213 152
------ ------ ------ ------
Income available for common stock 220 1,947 2,036 3,983
Fully-diluted net income per share $ .03 $ .26 $ .27 $ .53
====== ====== ====== ======
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet, the consolidated statement of income and bank
records and is qualified in its entirety by reference to such report on Form
10-Q.
dollars in thousands, except earnings per share figures
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> apr-01-1996
<PERIOD-END> jun-30-1996
<CASH> 26,548
<INT-BEARING-DEPOSITS> 92
<FED-FUNDS-SOLD> 32,325
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 134,404
<INVESTMENTS-MARKET> 133,134
<LOANS> 712,517
<ALLOWANCE> 6,241
<TOTAL-ASSETS> 935,211
<DEPOSITS> 746,920
<SHORT-TERM> 50,209
<LIABILITIES-OTHER> 3,685
<LONG-TERM> 70,340
0
5,000
<COMMON> 3,491
<OTHER-SE> 51,265
<TOTAL-LIABILITIES-AND-EQUITY> 935,211
<INTEREST-LOAN> 34,631
<INTEREST-INVEST> 4,175
<INTEREST-OTHER> 641
<INTEREST-TOTAL> 39,447
<INTEREST-DEPOSIT> 17,414
<INTEREST-EXPENSE> 20,524
<INTEREST-INCOME-NET> 18,923
<LOAN-LOSSES> 5,634
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,974
<INCOME-PRETAX> 3,731
<INCOME-PRE-EXTRAORDINARY> 2,249
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,249
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
<YIELD-ACTUAL> 4.46
<LOANS-NON> 928
<LOANS-PAST> 3,795
<LOANS-TROUBLED> 2,858
<LOANS-PROBLEM> 3,625
<ALLOWANCE-OPEN> 4,261
<CHARGE-OFFS> 3,161
<RECOVERIES> 74
<ALLOWANCE-CLOSE> 6,241
<ALLOWANCE-DOMESTIC> 6,241
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 5,946
</TABLE>
