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 September 30, 1997
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 of other jurisdiction or (I.R.S. Employer Identification No.)
incorporation or organization)
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 and 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: 6,058,781 shares of Class A Common Stock and 1,168,687
shares of Class B Common Stock as of November 13, 1997.
The Exhibit index is on page 24. This filing contains 26 pages (including this
facing sheet).
<PAGE>
REPUBLIC BANCORP, INC.
FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements 3-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-22
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 22
Signatures 23
<PAGE>
PART I
ITEM 1
REPUBLIC BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)(Dollars In Thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
<S> <C> <C>
ASSETS:
Cash and cash equivalents:
Cash and due from banks $ 18,923 $ 40,021
Federal funds sold 16,900 16,650
---------- ----------
Total cash and cash equivalents 35,823 56,671
Securities available for sale 98,428 107,937
Securities to be held to maturity 108,590 173,918
Loans, less allowance for loan losses of
$6,281 (1997) and $6,241 (1996) 801,369 759,424
Mortgage loans held for sale 14,758 7,624
Federal Home Loan Bank stock 7,083 5,548
Accrued interest receivable 9,367 9,685
Premises and equipment, net 16,037 17,509
Other assets 3,960 2,566
---------- ----------
TOTAL $ 1,095,415 $ 1,140,882
========== ==========
LIABILITIES:
Deposits:
Non-interest bearing $ 64,839 $ 66,969
Interest bearing 701,451 716,172
Securities sold under agreements to
repurchase and other short-term borrowings 101,422 181,634
Other borrowed funds 136,831 106,974
Accrued interest payable 7,166 5,643
Guaranteed preferred beneficial interests
in Company's subordinated debentures 6,452
Other liabilities 9,581 4,471
---------- ----------
Total liabilities 1,027,742 1,081,863
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 3,494 3,491
Additional paid-in capital 6,885 6,817
Retained earnings 52,365 43,930
Net unrealized depreciation on securities available
for sale, net of tax (71) (219)
---------- ----------
Total stockholders' equity 67,673 59,019
---------- ----------
TOTAL $ 1,095,415 $ 1,140,882
========== ==========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
REPUBLIC BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
<S> <C> <C> <C> <C>
INTEREST INCOME: 1997 1996 1997 1996
Loans, including fees $ 19,351 $ 17,749 $ 57,723 $ 52,650
Securities available for sale 1,513 4,417
Securities to be held to maturity:
Taxable 1,735 2,389 5,668 6,307
Non-taxable 31 32 94 96
FHLB dividends 135 90 362 283
Other 146 438 499 1,079
-------- -------- -------- --------
Total interest income 22,911 20,698 68,763 60,415
INTEREST EXPENSE:
Deposits 9,866 9,333 29,678 26,747
Short-term borrowings 1,095 865 3,435 2,010
Long-term debt 1,751 1,099 5,204 3,064
-------- -------- -------- --------
Total interest expense 12,712 11,297 38,317 31,821
NET INTEREST INCOME 10,199 9,401 30,446 28,594
PROVISION FOR LOAN LOSSES 1,136 1,625 3,850 7,259
------- -------- -------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 9,063 7,776 26,596 21,335
NON-INTEREST INCOME:
Service charges on deposit accounts 839 759 2,440 1,853
Bank card services 180 508 811
Loan servicing income 181 206 556 622
Net gain on sale of deposits 3,900 3,900
Net gain on sale of bank card 3,410
Net gain on sale of loans 529 240 1,073 962
Net gain on sale of securities 74 90
Other 269 148 1,068 1,295
------- ------- ------- -------
Total non-interest income 5,792 1,533 13,045 5,543
------- ------- ------- -------
NON-INTEREST EXPENSE:
Salaries and employee benefits 3,890 3,384 11,681 9,782
Occupancy and equipment 1,888 1,688 5,856 4,719
Communication and transportation 453 415 1,358 1,145
Marketing and development 267 374 979 1,129
FDIC deposit insurance 2,533 53 3,029
Supplies 250 246 757 700
Other 1,154 1,033 3,504 3,007
------- ------- ------- -------
Total non-interest expense 7,902 9,673 24,188 23,511
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 6,953 (364) 15,453 3,367
INCOME TAXES (2,561) 9 (5,525) (1,473)
------- ------- ------- -------
NET INCOME $ 4,392 $ (355) $ 9,928 $ 1,894
======= ======= ======= =======
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE $ .58 $ (.06) $ 1.30 $ .22
====== ======= ======= =======
See notes to consolidated financial statements.
</TABLE>
<PAGE>
REPUBLIC BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) (in
thousands, except for per share data)
<TABLE>
<CAPTION>
Net Unrealized
Depreciation
Common Stock Additional on Available Total
Preferred Stock Class A Class B Paid-In Retained or Sale Stockholders'
Shares Amount Shares Shares Amount Capital Earnings Securities Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1997 50 $ 5,000 6,052 1,170 $ 3,491 $ 6,817 $ 43,930 ($ 219) $ 59,019
Sale of common stock upon
exercise of stock options 6 3 68 71
Dividend Declared
Preferred ($6.375 per share) (320) (320)
Common: Class A ($.165 per share) (999) (999)
Class B ($.15 per share) (174) (174)
Net changes in unrealized depreciation
on securities available for sale 148 148
Net Income 9,928 9,928
---- ------ ----- ----- ------ ------ ------- ----- --------
BALANCE, September 30, 1997 50 $ 5,000 6,058 1,170 $ 3,494 $ 6,885 $ 52,365 ($ 71) $ 67,673
==== ====== ===== ===== ====== ====== ======= ===== ========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
REPUBLIC BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (in thousands)
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 9,928 $ 1,894
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization of premises and equipment 3,029 2,382
Amortization and accretion of securities 488 (147)
FHLB stock dividends (362) (276)
Provision for loan losses 3,850 7,259
Net gain on sale of securities (90)
Net gain on sale of loans (1,073) (962)
Net gain on sale of Bank card (3,410)
Net gain on sale of deposits (3,900)
Proceeds from sale of loans 77,675 87,380
Origination of mortgage loans held for sale (83,736) (84,664)
Changes in assets and liabilities:
Accrued interest receivable 318 (487)
Other assets (623) (269)
Accrued interest payable 1,523 761
Other liabilities 5,110 2,888
-------- --------
Net cash provided by (used in) operating activities 8,727 15,759
-------- --------
INVESTING ACTIVITIES:
Purchases of securities available for sale (14,993)
Purchases of securities to be held to maturity (11,189) (161,218)
Purchases of Federal Home Loan Bank Stock (1,173)
Proceeds from maturities of securities to be held to maturity 76,638 117,018
Proceeds from sales of securities available for sale 24,208
Proceeds from sale of Bank card 26,340
Net increase in loans (69,573) (72,875)
Purchases of premises and equipment (2,723) (5,773)
Disposal of premises and equipment 1,166 145
-------- -------
Net cash provided by (used in) investing activities 28,701 (122,703)
-------- -------
FINANCING ACTIVITIES:
Net increase in deposits 32,962 5,237
Sale of deposits (45,913)
Net increase (decrease) in securities sold under agreement to
repurchase and other short-term borrowings (80,212) 53,793
Payments on other borrowings (195,393) (31,198)
Proceeds from other borrowings 225,250 40,000
Proceeds from issuance of guaranteed preferred beneficial
interests in Company's subordinated debentures 6,452
Proceeds from stock options exercised 71
Cash dividends paid (1,493) (1,402)
-------- -------
Net cash used in financing activities (58,276) 66,430
-------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS (20,848) (40,514)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 56,671 75,313
-------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 35,823 $ 34,799
======== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 36,794 $ 31,060
======== ========
Income taxes $ 3,514 $ 2,902
======== ========
See notes to consolidated financial statements.
</TABLE>
<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., Republic Capital Trust, 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 nine-month periods
ending September 30, 1997 are not necessarily indicative of the results that may
be expected for the year ended December 31, 1997. 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, 1996.
New Accounting Pronouncements - In June 1997, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 130,
Reporting Comprehensive Income. This standard requires that certain items
currently reported as direct changes in separate components of stockholders'
equity be reported in a separate statement of comprehensive income or be
included as a separate, additional component of the statement of income. Such
items include foreign currency translation, accounting for futures contracts,
accounting for defined benefit pension plans, and accounting for certain
investments in debt and equity securities. If a company has no items of
comprehensive income in any periods reported a statement of comprehensive income
is not required. The periodic change in net appreciation or depreciation on
securities available for sale reported in Republic's Balance Sheet is an element
of comprehensive income under this standard. This standard is effective for
Republic in 1998. Management has not yet determined the manner of presentation
to be used to comply with this standard.
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information. This standard changes the way public
companies report information about operating segments in annual financial
statements and requires that those companies report selected information about
operating segments in interim financial reports. It also establishes standards
for related disclosures about products and services, geographic areas, and major
customers. Operating segments are parts of a company for which separate
information is available which is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in evaluating
performance. Required disclosures for operating segments include total segment
revenues, total segment profit or loss, and total segment assets. The standard
also requires disclosures regarding revenues derived from products and services
(or similar groups of products or services), countries in which the company
derives revenue or holds assets, and about major customers, regardless of
whether this information is used in operating decision making. Certain
additional descriptive information to help the financial statement reader
understand how the information was developed and how it compares to total
amounts reflected in the company's financial statements are also required.
Republic is required to adopt the disclosure requirements in its 1998 annual
report, and in interim periods in 1999. The 1999 interim period disclosures are
required to include comparable 1998 information.
Earnings Per Share - Earnings per common and common equivalent share is based
upon the weighted average 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 approximately 7,397,000 and 7,352,000 for the three
months ended September 30, 1997 and 1996, respectively, and 7,395,000 and
7,319,000 for the nine months ended September 30, 1997 and 1996, respectively.
Reclassifications - Certain amounts have been reclassified in the 1996 financial
statements to conform with the current period classifications. The
reclassifications have no effect on net income or stockholders' equity as
previously reported.
<PAGE>
2. SECURITIES
Available For Sale Securities:
<TABLE>
<CAPTION>
September 30, 1997
(in thousands)
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C>
U.S. Treasury Securities and U.S.
Government Agencies $ 98,535 ($ 107) $ 98,428
======== ====== ========
</TABLE>
Securities To Be Held To Maturity:
<TABLE>
<CAPTION>
September 30, 1997
(in thousands)
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
U.S. Treasury Securities and U.S.
Government Agencies $ 106,192 $ 340 ($ 400) $ 106,132
Obligations of state and political
subdivisions 1,795 155 1,950
Mortgage-backed securities 603 (39) 564
-------- ----- ---- --------
Total securities to be held to maturity $ 108,590 $ 495 ($ 439) $ 108,646
======== ===== ==== ========
</TABLE>
Securities having an amortized cost of $167.4 million and a fair value of $167.3
million at September 30, 1997, were pledged to secure public deposits,
securities sold under agreements to repurchase and for other purposes, as
required or permitted by law.
3. LOANS
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
(in thousands)
<S> <C> <C>
Residential real estate $ 483,796 $ 457,204
Commercial real estate 76,863 59,086
Real estate construction 37,578 32,130
Commercial 22,453 25,115
Consumer 88,229 96,138
Home equity 96,655 69,572
Bank card 279 24,527
Other 4,003 4,309
--------- ---------
Total loans 809,856 768,081
Less:
Unearned interest income and
unamortized loan fees 2,206 2,416
Allowance for loan losses 6,281 6,241
--------- ---------
Loans, net $ 801,369 $ 759,424
========= =========
</TABLE>
<PAGE>
The following table sets forth the changes in the allowance for loan losses:
<TABLE>
<CAPTION>
Three months ended Sept. 30, Nine months ended Sept. 30,
1997 1996 1997 1996
(in thousands)
<S> <C> <C> <C> <C>
Balance, beginning of period $ 6,281 $ 6,241 $ 6,241 $ 3,695
Provision charged to income 1,136 1,625 3,850 7,259
Charge-offs (1,279) (1,995) (4,244) (5,156)
Recoveries 143 370 434 443
------ ------ ------ ------
Balance, end of period $ 6,281 $ 6,241 $ 6,281 $ 6,241
====== ====== ====== ======
</TABLE>
Information about Republic's investment in impaired loans is as follows:
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
(in thousands)
<S> <C> <C>
Gross impaired loans $ 1,638 $ 1,638
Less: Related allowance for loan losses 240 240
------ ------
Net impaired loans with related allowances 1,398 1,398
Impaired loans with no related allowances 0 0
------ ------
Total $ 1,398 $ 1,398
====== ======
Average impaired loans outstanding $ 1,638 $ 1,638
====== ======
</TABLE>
4. INTEREST BEARING DEPOSITS
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
(in thousands)
<S> <C> <C>
Demand (NOW, Super NOW and Money Market) $ 106,183 $ 116,180
Savings 13,520 14,840
Money market certificates of deposit 49,211 63,423
Individual retirement accounts 33,729 35,845
Certificates of deposit, $100,000 and over 65,154 60,890
Other certificates of deposit 385,899 374,864
Brokered deposits 47,755 50,130
-------- ---------
Total interest bearing deposits $ 701,451 $ 716,172
======== =========
</TABLE>
<PAGE>
5. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND OTHER 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.
<TABLE>
<CAPTION>
Sept. 30, 1997 December 31, 1996 Sept.30, 1996
(dollars in thousands)
<S> <C> <C> <C>
Average outstanding balance $ 99,252 $ 74,531 $ 61,272
Average interest rate 4.58% 4.74% 4.37%
Maximum outstanding at month end $ 106,546 $ 182,485 $ 102,515
End of period $ 101,422 $ 181,634 $ 75,522
</TABLE>
6. GUARANTEED PREFERRED BENEFICIAL INTERESTS
In February 1997, Republic Capital Trust (RCT), a trust subsidiary of Republic
Bancorp, Inc., completed the private placement of shares of cumulative trust
preferred securities ("Preferred Securities") with a liquidation preference of
$100 per security. Each security can be converted into five shares of Class A
Common Stock at the option of the holder. The proceeds of the offering were
loaned to Republic Bancorp, Inc. in exchange for subordinated debentures with
terms that are similar to the Preferred Securities. Distributions on the
securities are payable quarterly at the annual rate of 8.5% of the liquidation
preference and are included in interest expense in the consolidated financial
statements. Republic undertook the issuance of these securities to enhance its
regulatory capital position. The Bank intends to utilize the capital for general
business purposes and to support the Bank's future opportunities for growth.
These securities are considered as Tier I capital under current regulatory
guidelines.
The Preferred Securities are subject to mandatory redemption, in whole or in
part, upon repayment of the subordinated debentures at maturity or their earlier
redemption at the liquidation preference. The subordinated debentures are
redeemable prior to the maturity date of April 1, 2027 at the option of Republic
on or after April 1, 2002, or upon the occurrence of specific events, defined
within the trust indenture. Republic has the option to defer distributions on
the subordinated debentures from time to time for a period not to exceed 20
consecutive quarters.
<PAGE>
PART 1
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Republic Bancorp, Inc., 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 17 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, and investing in securities and trust
services. The Bank's lending services include the origination of real estate,
commercial and consumer loans. 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.
BANKING CENTER SALES
During 1997, Republic elected to focus its resources on its North Central and
Central Kentucky markets. Republic believes that these markets will provide
greater opportunities for future growth and profitability. Management intends to
continue to open new retail banking centers in these markets. As a result of
this decision, management aggressively pursued opportunities to sell certain
fixed assets and deposits of its Western Kentucky banking centers, with the
exception of Owensboro. Republic's Western Kentucky assets contracted for sale
include banking centers in the cities of Murray, Benton, Paducah, and Mayfield.
These banking centers are comprised of approximately $180 million in deposits.
Republic will retain substantially all of the loan portfolio associated with
these banking centers in the amount of approximately $155 million. Management
has funded the closed transactions with additional deposits at its existing
banking centers, liquidation of available for sale investment securities and
additional advances from the Federal Home Loan Bank (FHLB).
On April 1, 1997, Republic entered into an agreement to sell its Murray banking
center to United Commonwealth Bank, FSB. The transaction included the sale of
real estate located in Murray, Kentucky, certain fixed assets, and a transfer of
certain deposit liabilities totaling approximately $18 million. The transaction
was closed on July 30, 1997 and Republic recognized a pre-tax gain of
approximately $1.7 million.
On July 21, 1997, Republic entered into an agreement to sell its Benton banking
center to The Peoples First National Bank and Trust Company of Paducah. The
transaction included the sale of real estate located in Benton, Kentucky,
certain fixed assets, and a transfer of certain deposit liabilities totaling
approximately $31 million. The transaction was closed on September 23, 1997 and
Republic recognized a pre-tax gain of approximately $2.2 million.
On July 18, 1997, Republic entered into an agreement to sell its Paducah banking
centers to The Paducah Bank and Trust Company. The transaction included the sale
and lease of real estate located in Paducah, Kentucky, certain fixed assets, and
a transfer of certain deposit liabilities totaling approximately $65 million.
The transaction was closed on November 7, 1997 and Republic recognized a pre-tax
gain of approximately $3.6 million. The sale was funded by maturing investment
securities and overnight fed funds. Republic also increased its borrowings from
the FHLB by $36 in order to fund the remaining portion of the sale.
Republic has also entered into a contract to sell its Mayfield banking center to
First Federal Savings Bank of Leitchfield. The transaction will include the sale
of real estate located in Mayfield, Kentucky, certain fixed assets, and a
transfer of certain deposit liabilities totaling approximately $65 million. The
Mayfield transaction is contingent upon regulatory approval and is expected to
close during the first quarter of 1998. Management anticipates that Republic
will realize a gain of approximately $2.0 to $4.0 million on this transaction.
Such gain will be dependent upon the attributes and the amount of the
liabilities assumed by the purchasers at closing.
<PAGE>
COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 1997 AND
DECEMBER 31, 1996
Republic's total assets decreased slightly in 1997 from $1.14 billion at
December 31, 1996 to $1.10 billion at September 30, 1997. The decrease resulted
from an anticipated withdrawal of short-term deposits of $87 million from one
public entity during the first quarter of 1997. While total assets decreased,
Republic continues to experience steady overall loan demand.
CASH AND CASH EQUIVALENTS. Cash and cash equivalents decreased from $57 million
at December 31, 1996 to $36 million at September 30, 1997. Cash and due from
banks decreased $21 million, while federal funds remained flat at $16.9 million.
The overall decrease principally resulted from the expected withdrawal of
short-term public deposits and sustained loan demand.
INVESTMENT SECURITIES. The investment portfolio consists primarily of U.S.
Treasury and U.S. Government Agencies with a weighted average maturity of 1.6
years. Securities available for sale decreased from $108 million at December 31,
1996 to $98 million at September 30, 1997. The decrease resulted from the sale
of securities in the amount of $24.2 million. These securities were sold for a
modest gain.
Securities to be held to maturity decreased from $174 million at December 31,
1996 to $109 million at September 30, 1997. Funds provided by maturing
securities were primarily used to fund the anticipated public deposit
withdrawals during the first quarter of 1997, deposits sold in the Bank's
Western Kentucky market, and sustained loan demand.
During the second quarter of 1997, a new managerial position, chief investment
officer, was created. Management also made certain modifications to its existing
investment policy. The policy changes will permit management to take advantage
of market changes and permit investments in additional mortgage-backed
securities and collateralized mortgage obligations. The policy changes will also
permit management to extend maturities.
LOANS. Net loans increased $42 million to $801 million at September 30, 1997
compared to $759 million at December 31, 1996. The increase in loans was led by
home equity lending which increased $27 million since December 31, 1996.
Republic experienced 7% growth in its home equity loan portfolio from December
31, 1996 to September 30, 1997. The growth of Republic's home equity loan
portfolio was primarily due to product enhancements including elimination of
up-front closing costs and a six month introductory interest rate. The rise in
residential and commercial real estate loan volume was a result of a continued
favorable rate environment and Republic's expanded market presence resulting
from the opening of five new banking centers during 1996.
The overall increase in loans was partially offset by the sale of Republic's
Bank card loan portfolio and Republic's portion of a credit card joint venture.
During the second quarter of 1997, Republic sold its $17 million Bank card
portfolio realizing a pre-tax gain of $2.6 million. Republic also sold its 50%
participation interest in a credit card joint venture totaling $7 million for a
pre-tax gain of $340,000. Under the terms of the sale, Republic will continue to
offer credit cards in its name and receive fees based on new originations.
Republic's consumer loans, excluding Bank card loans, decreased slightly from
$96 million at December 31, 1996 to $88 million at September 30, 1997.
Approximately 51% of loans in the consumer portfolio, excluding Bank card loans,
are unsecured. Republic's unsecured consumer portfolio includes the "All
Purpose" and "Pre Approved" loan programs. Republic's "All Purpose" loans, with
total outstandings of $15 million at September 30, 1997 and $22 million at
December 31 1996, are originated through Republic's banking centers. This
product has an average loan amount of $7,000 and an average percentage rate of
17.59% with a standard maximum maturity of five years. "Pre Approved" loans
decreased from $33 million at December 31, 1996 to $29 million at September 30,
1997. "Pre Approved" loans are delivered through direct mail, targeting
customers both in and outside of Republic's traditional markets. The "Pre
Approved" loan product has an average loan amount of $6,200 and an average
annual percentage rate of 13.89% with a standard maximum maturity of five years.
Management plans to continue to allow the "All Purpose" and "Pre Approved"
portfolios to reduce in the near term.
<PAGE>
ALLOWANCE AND PROVISION FOR LOAN LOSSES. The allowance for loan losses remained
constant at $6.3 million from December 31, 1996 to September 30, 1997.
Republic's allowance to total loan ratio was .78% at September 30, 1997 compared
to .81% at December 31, 1996. This reduction is a result of the overall growth
in the loan portfolio, primarily in residential and home equity lending. During
this same period the Bank's higher risk unsecured lending portfolio decreased by
$8.0 million.
The provision for loan losses was $1.1 million in the third quarter, 1997,
compared to $1.6 million in the third quarter of 1996. Net charge-offs decreased
$700,000 from third quarter 1996 to third quarter 1997. Republic's unsecured
consumer loan portfolio accounted for 88% of total charge-offs in the third
quarter of 1997.
The provision for loan losses was $3.9 million for the nine months ended
September 30, 1997, compared to $7.3 million for the nine months ended September
30, 1996. Net charge-offs decreased slightly from year-to-date 1996 to
year-to-date 1997. The decrease in the provision during 1997 also resulted from
management's decision to increase the overall reserve for loan losses in 1996.
Republic's unsecured consumer loan portfolio accounted for 86% of total
charge-offs during year-to-date 1997 and 91% for year-to-date 1996. The
charge-offs in the unsecured consumer loan portfolio during 1997 were
principally comprised of $1.3 million in the "All Purpose" program and $1.6
million in the "Pre Approved" program (See description of programs under
"Loans"). As a result of the level of charge-offs in the unsecured programs,
management is not currently expanding these programs. Republic also experienced
a reduction in charge-offs in its Bank card portfolio during the current year.
Charge-offs were $680,000 year-to-date 1997 compared to $1.1 million for the
same period in 1996. Management believes, based on information presently
available, that it has adequately provided for loan losses at September 30,
1997.
<PAGE>
Table 1 below depicts the allowance activity by loan type for the three and nine
months ended September 30, 1997 and 1996.
Table 1 - Summary of Loan Loss Experience
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
(in thousands)
<S> <C> <C> <C> <C>
Allowance for loan losses:
Balance-beginning of period $ 6,281 $ 6,241 $ 6,241 $ 3,695
Charge-offs:
Real Estate 108 14 272 154
Commercial 1 43 14
Consumer 1,171 1,980 3,929 4,988
------ ------ ------ ------
Total 1,279 1,995 4,244 5,156
------ ------ ------ ------
Recoveries:
Real Estate 14 288 32 290
Commercial
Consumer 129 82 402 153
------ ------ ------ ------
Total 143 370 434 443
------ ------ ------ ------
Net charge-offs 1,136 1,625 3,810 4,713
Provision for loan losses 1,136 1,625 3,850 7,259
------ ------ ------ ------
Allowance for loan losses:
Balance-end of period $ 6,281 $ 6,241 $ 6,281 $ 6,241
------ ------ ------ ------
</TABLE>
DEPOSITS. Total deposits decreased to $701 million at September 30, 1997
compared to $716 million at December 31, 1996. The decrease was primarily due to
the sale of deposits at Republic's Murray and Benton banking centers. Republic
plans to continue its deposit gathering initiatives by utilizing aggressive
pricing strategies and offering competitive products in its existing markets.
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND OTHER SHORT TERM BORROWINGS.
Short term borrowings decreased from $182 million at December 31, 1996 to $102
million at September 30, 1997. The decline in borrowings was primarily due to
the removal of short-term public deposits by a local government organization.
Management anticipated the withdrawal of these short-term public deposits during
the first quarter of 1997. The transaction was funded with maturing investment
securities, proceeds from the sale of available for sale securities, and cash on
hand.
OTHER BORROWED FUNDS. Other borrowed funds, which consists primarily of FHLB
advances, increased from $107 million at December 31, 1996 to $137 million at
September 30, 1997 and to $162 million at November 10, 1997. The increase was
primarily due to additional variable rate advances from the FHLB to fund the
sale of deposits in Western Kentucky. Management anticipates that Republic may
enter into additional borrowing arrangements with the FHLB to fund the remaining
Western Kentucky banking center sale.
GUARANTEED PREFERRED BENEFICIAL INTERESTS IN COMPANY'S SUBORDINATED DEBENTURES.
During February of 1997, Republic issued $6 million of Trust Preferred
securities through a newly formed subsidiary, Republic Capital Trust. (See Note
6 to financial statements).
<PAGE>
RESULTS OF OPERATIONS
Overview. For the three months ended September 30, 1997, Republic reported net
income of $4.4 million, or $.58 per share, for the third quarter of 1997
compared to $(355,000), or $(.06) per share, for the third quarter of 1996. For
the nine months ended September 30, 1997, net income was $9.9 million compared
to $1.9 million for the same period in 1996. Earnings for the year to date 1997
produced an annualized return on average assets (ROA) of 1.10% and a return on
average stockholders' equity (ROE) of 19.19%, compared to returns of (.14)% and
(2.37)%, respectively, for the comparable period in 1996. Excluding the one-time
gains during 1997 for the sale of deposits and sale of bank card loans,
Republic's ROA and ROE would have been .63% and 10.94%, respectively. The
substantial increase in earnings during 1997 is primarily due to the sale of
both the Murray and Benton deposits, sale of Bank Card division, and an increase
in core earnings. The sales produced pre-tax gains of approximately $3.9 million
and $3.4 million, respectively.
Net Interest Income. For the third quarter 1997, net interest income was $10.1
million, up 7% over the $9.4 million attained during third quarter 1996. This
increase was primarily attributable to Republic's continued loan growth,
particularly home equity and residential real estate loans. Overall, the net
interest rate spread decreased from 3.56% during third quarter of 1996 to 3.35%
in the comparable quarter of 1997. The Bank's net interest margin decreased from
4.08% in third quarter 1996 to 3.87% in third quarter 1997. The decrease in the
net interest spread and margin occurred because the yield on interest earning
assets decreased 38 basis points while the rate paid on liabilities only
decreased 8 basis points. During the third quarter 1997, average
interest-earning assets were $1.1 billion, an increase of $132 million over
third quarter 1996. The yield on average interest-earning assets decreased from
8.98% during third quarter of 1996 to 8.69% during third quarter of 1997. Total
average interest bearing liabilities increased from $833 million in the third
quarter of 1996 to $952 million in the third quarter of 1997. The decline in
spread and margin occurred as the reduction in Republic's higher yielding
unsecured consumer portfolio was replaced with lower yielding secured home
equity and real estate loans. Total average interest bearing liabilities
increased from $833 million in third quarter of 1996 to $952 million in the
third quarter of 1997. The cost of average interest-bearing liabilities
decreased from 5.42% during third quarter of 1996 to 5.34% in the third quarter
of 1997.
Net interest income for the nine months ended September 30, 1997 was $30.4
million, up $1.8 million from $28.6 million during the nine months ended
September 30, 1996. When comparing the respective nine month periods, average
earning assets grew by $172 million in 1997 and average interest bearing
liabilities increased $162 million. The rise in net interest income in 1997 is
primarily due to the increase of the Bank's loan portfolio.
Tables 2 and 3 on pages 16 and 17 provide detailed information as to average
balance, interest income/expense, and rates by major balance sheet category for
the three and nine months ended September 30, 1997 and 1996.
Table 2 - Average Balance Sheet Rates for Third Quarter, 1997 and 1996 (dollars
in thousands)
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Sept. 30, 1997 Three MonthsEnded Sept. 30, 1996
Average Average Average Average
ASSETS Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C>
Earning Assets:
U.S. Treasury and U.S. Government
Agency Securities $ 213,569 $ 3,177 5.95% $ 150,513 $ 2,316 6.15%
State and Political Subdivision
Securities 4,424 95 8.59% 4,513 97 8.60%
Other Investments 7,053 135 7.66% 5,444 90 6.69%
Mortgage-Backed Securities 617 7 4.54% 696 8 4.60%
Federal Funds Sold 10,405 146 5.61% 32,809 438 5.34%
Total Loans and Fees 817,992 19,351 9.46% 728,228 17,749 9.75%
--------- ------ ------- ------
Total Earning Assets 1,054,060 22,911 8.69% 922,203 20,698 8.98%
Less: Allowance for Loan Losses (6,281) (6,241)
Non-Earning Assets:
Cash and Due From Banks 19,198 21,525
Bank Premises and Equipment, Net 17,127 14,562
Other Assets 15,304 11,211
--------- -------
Total Assets $ 1,099,408 $ 963,260
========= =======
LIABILITIES AND STOCKHOLDERS'
EQUITY
Interest Bearing Liabilities:
Transaction Accounts $ 121,577 $ 1,030 3.39% $ 147,144 $ 1,390 3.78%
Money Market Accounts 49,231 632 5.13% 36,556 439 4.80%
Individual Retirement Accounts 37,206 548 5.89% 35,351 543 6.14%
Certificates of Deposit and Other
Time Deposits 529,369 7,656 5.79% 464,602 6,961 5.99%
Repurchase Agreements and Other
Borrowings 214,698 2,846 5.30% 149,621 1,964 5.25%
--------- ------ ------- ------
Total Interest Bearing Liabilities 952,081 12,712 5.34% 833,274 11,297 5.42%
Non-Interest Bearing Liabilities:
Non-Interest Bearing Deposits 67,539 59,891
Other Liabilities 13,362 10,426
Stockholders' Equity 66,426 59,669
--------- -------
Total Liabilities and Stockholders'
Equity $ 1,099,408 $ 963,260
========= =======
Net Interest Income $ 10,199 $ 9,401
======= ======
Net Interest Spread 3.35% 3.56%
==== ====
Net Interest Margin 3.87% 4.08%
==== ====
For the purposes of these calculations, non-accruing loans are included in the
quarterly average loan amounts outstanding.
</TABLE>
<PAGE>
Table 3 - Average Balance Sheet Rates for Nine Months, 1997 and 1996 (dollars in
thousands)
<TABLE>
<CAPTION>
Nine Months Ended Sept. 30, 1997 Nine Months Ended Sept. 30, 1996
Average Average Average Average
ASSETS Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C>
Earning Assets:
U.S. Treasury and U.S. Government
Agency Securities $ 221,220 $ 9,867 5.95% $ 130,472 $ 6,082 6.22%
State and Political Subdivision
Securities 4,496 288 8.54% 4,580 293 8.53%
Other Investments 6,869 362 7.03% 5,351 283 7.05%
Mortgage-Backed Securities 638 24 5.02% 715 28 5.22%
Federal Funds Sold 11,976 499 5.56% 26,980 1,079 5.33%
Total Loans and Fees 806,953 57,723 9.54% 711,753 52,650 9.86%
--------- ------ ------- ------
Total Earning Assets 1,052,152 68,763 8.71% 879,851 60,415 9.16%
Less: Allowance for Loan Losses (6,274) (4,924)
Non-Earning Assets:
Cash and Due From Banks 21,423 20,292
Bank Premises and Equipment, Net 17,579 13,637
Other Assets 13,453 10,470
--------- -------
Total Assets $ 1,098,333 $ 919,326
========= =======
LIABILITIES AND STOCKHOLDERS'
EQUITY
Interest Bearing Liabilities:
Transaction Accounts $ 130,520 $ 3,364 3.44% $ 148,927 $ 3,941 3.53%
Money Market Accounts 43,536 1,589 4.87% 33,905 1,136 4.47%
Individual Retirement Accounts 36,986 1,626 5.86% 34,764 1,618 6.21%
Certificates of Deposit and Other
Time Deposits 523,677 23,099 5.88% 443,078 20,052 6.03%
Repurchase Agreements and Other
Borrowings 219,815 8,639 5.24% 131,446 5,074 5.15%
-------- ------- ------- ------
Total Interest Bearing Liabilities 954,534 38,317 5.35% 792,120 31,821 5.36%
Non-Interest Bearing Liabilities:
Non-Interest Bearing Deposits 68,935 59,082
Other Liabilities 11,767 8,513
Stockholders' Equity 63,097 59,611
Total Liabilities and Stockholders' --------- --------
Equity $ 1,098,333 $ 919,326
========= ========
Net Interest Income $ 30,446 $ 28,594
======= =======
Net Interest Spread 3.36% 3.80%
==== ====
Net Interest Margin 3.86% 4.33%
==== ====
</TABLE>
<PAGE>
For the purposes of these calculations, non-accruing loans are included in the
quarterly average loan amounts outstanding.
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 old 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.
Table 4 - Volume/Rate Variance Analysis (in thousands)
<TABLE>
<CAPTION>
Three Months Ended Sept. 30, 1997 Nine Months Ended Sept. 30, 1997
Compared to Compared to
Three Months Ended Sept. 30, 1996 Nine Months Ended Sept. 30, 1996
Increase/(Decrease) Increase/(Decrease)
due to due to
Total Net Total Net
Change Volume Rate Change Volume Rate
<S> <C> <C> <C> <C> <C> <C>
Interest Income (1):
U.S. Treasury and
Government Agency Securities $ 861 $ 970 ($ 109) $ 3,785 $ 4,227 ($ 442)
State and Political
Subdivision Securities (2) (2) 0 (5) (5) 0
Other Investments 45 27 18 79 82 (3)
Mortgage-Backed Securities (1) (1) 0 (4) (3) (1)
Federal Funds Sold (292) (299) 7 (580) (600) 20
Total Loans and Fees (2) 1,602 2,188 (586) 5,073 7,042 (1,969)
----- ----- ----- ----- ----- -----
Net Change in Interest Income 2,213 2,883 (670) 8,348 10,743 (2,395)
Interest Expense:
Interest Bearing
Transaction Accounts (360) (242) (118) (577) (487) (90)
Money Market Accounts 193 152 41 453 323 130
Individual Retirement Accounts 5 28 (23) 8 103 (95)
Certificates of Deposit and
Other Time Deposits 695 970 (275) 3,047 3,648 (601)
Repurchase Agreements and
Other Borrowings 882 854 28 3,565 3,411 154
----- ----- --- ----- ----- ---
Net Change in Interest Expense 1,415 1,762 (347) 6,496 6,998 (502)
----- ----- --- ----- ----- -----
Increase in Net Interest Income $ 798 $1,121 ($ 323) $ 1,852 $ 3,745 ($1,893)
===== ===== === ===== ===== =====
(1) Interest income for loans on non-accrual status have been included in
Interest Income.
(2) The amount of fees in interest on loans was approximately $640,000 and
$419,000 for the years ended September 30, 1997 and 1996, respectively.
</TABLE>
<PAGE>
NON-INTEREST INCOME. Non-interest income was $5.8 million during third quarter
1997, up from $1.5 million during third quarter of 1996. The significant
increase in revenue during the third quarter 1997 was primarily due to the sale
of Murray and Benton banking center deposits in Western Kentucky which totaled
$4.0 million. Also during the third quarter of 1997, Republic realized $74,000
in gains from sales of securities. The security sales are the result of the
Bank's implementation of its recently revised investment policy. Future gains on
sales of securities, if any, are dependent upon market conditions and other
factors.
Non-interest income increased from $5.5 million for the nine months ended
September 30, 1996 compared to $13.0 million for the comparable period in 1997.
The increase was primarily due to the one-time gains from the sale of the Bank's
credit card portfolio and the sale of certain Western Kentucky banking center
deposits. Service charges on deposit accounts also rose 32% in year to date 1997
over the comparable period in 1996. Republic has increased its number of
transaction accounts and improved collection activities, resulting in increased
fee income.
Income from mortgage banking, a component of non-interest income, includes
proceeds from the sale of loans in the secondary market and servicing income.
Gain on sale of loans increased $289,000 in third quarter 1997 from third
quarter 1996. Republic's net gain on sale of loans increased due to increased
sales volume arising from favorable interest rates and additions to loan
originations staff. Loan servicing income declined slightly for the nine months
ended 1997 and 1996. The decrease was attributable to a decline in the servicing
portfolio due to normal payoff activity and the sale of loans on the secondary
market with servicing released.
NON-INTEREST EXPENSe. Total non-interest expense was $7.9 million in third
quarter 1997, compared to $9.7 million for third quarter 1996. Non-interest
expense increased from $23.5 million for the nine months ended September 30,
1996, to $24.2 million for the comparable period in 1997. The increase for the
nine months ended September 30, 1997 was primarily attributable to costs
associated with Republic's start up units in the fourth quarter of 1996 and
first quarter 1997. Excluding the one-time SAIF Assessment in 1996 and the
one-time gains in 1997, Republic's non-interest expense ratio (non-interest
expense divided by the sum of net interest income and non-interest expense) was
constant at 65% in the third quarter 1997 and 1996.
Salary and employee benefit expense increased 17% for the third quarter 1997
over third quarter, 1996, and 20% for the nine months ended September 30, 1997
due to staff additions and annual merit increases. Republic's staffing level
rose to 427 full-time equivalent employees (FTE's) at September 30, 1997,
compared to 414 FTE's at September 30, 1996. The increase in staffing was
prompted by the Bank's expansion activities during 1996 as well as additional
staffing in operational areas needed to support increased lending activities.
Occupancy and equipment expense increased from $1.7 million in third quarter
1996 to $1.9 million for the comparable period in 1997. The increase was
primarily due to depreciation expenses associated with the opening of five
additional banking centers during 1996. The increase was also due to technology
enhancements for deposit, lending and customer support systems.
During the third quarter of 1996 Republic paid a one-time assessment on the
Bank's SAIF deposits in the amount of $2.3 million. The legislation which
mandated the one-time SAIF assessment provided for a reduction in the FDIC's
insurance rate premiums on SAIF insured deposits.
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 they reach 120 days
past due and are deemed uncollectible. At September 30, 1997, Republic had
$617,000 in consumer loans 90 days or more past due compared to $357,000 at
December 31, 1996.
<PAGE>
Table 5 provides information related to non-performing assets and loans 90 days
or more past-due. Total non-performing assets increased slightly from December
31, 1996 to September 30, 1997.
TABLE 5 - NON-PERFORMING LOANS
<TABLE>
<CAPTION>
September 30, December 31,
(dollars in thousands) 1997 (1) 1996 (1)
<S> <C> <C> <C>
Loans on non-accrual status (2) $ 2,676 $ 3,055
Loans past due 90 days or more 4,172 3,714
----- -----
Total non-performing loans 6,848 6,769
Other real estate owned 186 104
----- -----
Total non-performing assets $ 7,034 $ 6,873
===== =====
Percentage of non-performing loans to
total loans .85% .88%
=== ===
Percentage of non-performing assets
to total loans .87% .89%
=== ===
(1) The table is exclusive of impaired loans which remained on accrual status.
(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 remained constant
from December 31, 1996 to September 30, 1997 at $1.6 million.
LIQUIDITY
Republic's objectives include providing consistent earnings, and preserving an
adequate liquidity position. Asset/liability management control is designed to
ensure safety and soundness, maintain liquidity and regulatory capital
standards, and achieve an acceptable net interest margin. While Republic
continues to experience steady loan demand, management continues to monitor
interest rate and liquidity risk and implement appropriate funding and balance
sheet strategies. If loan growth continues at its present level management
intends to obtain additional funds through its traditional retail markets or
through borrowing agreements with the Federal Home Loan Bank or other financial
institutions.
Republic has access to sources of additional liquidity if needed. Funding can be
realized from the investment portfolio, of which $39 million matures or is
putable within one year. Republic also has access to $98 million of investment
securities which have been designated as "Available for Sale".
<PAGE>
CAPITAL
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 capital ratios at September 30, 1997.
Table 6 - Capital Ratios
<TABLE>
<CAPTION>
Minimum
Requirement
Minimum To Be Well
Requirement Capitalized
For Capital Under Prompt
Adequacy Corrective
Actual Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
As of September 30, 1997
Total Risk Based Capital (to Risk Weighted Assets)
Consolidated $ 80,477 11.77% $ 54,688 8% $ 68,360 10%
Bank only $ 79,690 11.66% $ 54,687 8% $ 68,358 10%
Tier I Capital (to Risk Weighted Assets)
Consolidated $ 74,196 10.85% $ 27,344 4% $ 41,016 6%
Bank only $ 73,409 10.74% $ 27,343 4% $ 41,015 6%
Tier I Leverage Capital (to Average Assets)
Consolidated $ 74,196 6.75% $ 43,976 4% $ 54,970 5%
Bank only $ 73,409 6.68% $ 43,975 4% $ 54,969 5%
</TABLE>
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 September 30, 1997,
the Bank had $12.6 million of retained earnings available for payment of
dividends.
YEAR 2000
Management has assessed the operational and financial implications of the year
2000 and developed a written plan of action. The primary effort required is
the installation of the most current software releases for major applications
processed by Republic's third party data processor, although software upgrades
and modifications will also be required for certain other applications. Most of
the expenditures associated with these software upgrades represent costs that
would have been incurred in the normal course of business and, accordingly, will
be capitalized. However, certain upgrades will take place sooner than otherwise
planned. In carrying out its year 2000 plan, Republic will also incur certain
operational expenses and may replace software which has not been fully
amortized. The operating expenses will be expensed as incurred, and the
unamortized cost of software replaced, if any, will be charged off when the
software is removed from service. Management cannot yet readily estimate the
amount of such costs and charges.
NEW ACCOUNTING PRONOUNCEMENT
See discussion in Note 1 to financial statements.
<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 26.
B. No reports on Form 8-K have been filed during the quarter for which the
report is filed.
<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:
Date: 11/14/97 /S/ Bernard M. Trager
------------ ------------------------------------
Bernard M. Trager
Chairman and Chief Executive Officer
Principal Financial Officer:
Date: 11/14/97 /S/ Mark A. Vogt
------------ ------------------------------------
Mark A. Vogt
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit Description Page
11 Statement Regarding Computation of Per Share Earnings 25
27 Financial Data Schedule 26
<PAGE>
Exhibit 11.
Statement Regarding Computation of Per Share Earnings in thousands, except per
share amounts (unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept 30, Sept 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Primary earnings per common share:
Weighted average common shares outstanding 7,225 7,222 7,223 7,222
Common stock equivalents due to dilutive
effect of stock options 172 130 172 97
----- ----- ----- -----
Average shares and equivalents outstanding 7,397 7,352 7,395 7,319
Net income $ 4,392 ($ 355) $ 9,928 $ 1,894
Less preferred stock dividends 106 106 319 319
----- ----- ----- -----
Income available for common stock 4,286 (461) 9,609 1,575
Primary net income per share $ .58 ($ .06) $ 1.30 $ .22
===== ===== ====== =====
Fully-diluted earnings per common share:
Weighted average common shares outstanding 7,225 7,222 7,223 7,222
Common stock equivalents due to dilutive
effect of stock options 172 172 172 136
Common stock equivalents due to dilutive effect
of convertible preferred stock 300 300 300 300
Common stock equivalents due to dilutive effect
of guaranteed preferred beneficial interests
in Company's subordinated debentures 323 278
----- ----- ----- -----
Average shares and equivalents outstanding 8,020 7,694 7,973 7,658
Net income $ 4,392 ($ 355) $ 9,928 $ 1,894
Add interest expense on guaranteed beneficial
interests in Company's subordinated
debentures, net of tax 89 231
----- ----- ----- -----
Income available for common stock 4,481 (355) 10,159 1,894
Fully-diluted net income per share $ .56 ($ .06) $ 1.27 $ .21
===== ===== ===== ====
</TABLE>
<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.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 18,923
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 16,900
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 98,428
<INVESTMENTS-CARRYING> 108,590
<INVESTMENTS-MARKET> 108,646
<LOANS> 801,369
<ALLOWANCE> 6,281
<TOTAL-ASSETS> 1,095,415
<DEPOSITS> 766,290
<SHORT-TERM> 101,422
<LIABILITIES-OTHER> 9,581
<LONG-TERM> 136,831
0
5,000
<COMMON> 3,494
<OTHER-SE> 59,179
<TOTAL-LIABILITIES-AND-EQUITY> 1,095,415
<INTEREST-LOAN> 57,723
<INTEREST-INVEST> 10,541
<INTEREST-OTHER> 499
<INTEREST-TOTAL> 68,763
<INTEREST-DEPOSIT> 29,678
<INTEREST-EXPENSE> 38,317
<INTEREST-INCOME-NET> 30,446
<LOAN-LOSSES> 3,850
<SECURITIES-GAINS> 90
<EXPENSE-OTHER> 3,504
<INCOME-PRETAX> 15,453
<INCOME-PRE-EXTRAORDINARY> 15,453
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,928
<EPS-PRIMARY> 1.30
<EPS-DILUTED> 1.27
<YIELD-ACTUAL> 3.86
<LOANS-NON> 2,676
<LOANS-PAST> 4,172
<LOANS-TROUBLED> 1,809
<LOANS-PROBLEM> 2,712
<ALLOWANCE-OPEN> 6,241
<CHARGE-OFFS> 4,244
<RECOVERIES> 434
<ALLOWANCE-CLOSE> 6,281
<ALLOWANCE-DOMESTIC> 6,281
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
