- --------------------------------------------------------------------------------
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, 1999
OR
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 0-24649
REPUBLIC BANCORP, INC.
(Exact name of registrant as specified in its charter)
Kentucky 61-0862051
(State of other jurisdiction 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: 14,560,532 shares of Class A Common Stock and 2,147,274
shares of Class B Common Stock as of August 6, 1999.
The Exhibit index is on page 34. This filing contains 74 pages (including this
facing sheet).
<PAGE>
REPUBLIC BANCORP, INC.
FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements 3-17
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 18-31
Item 3. Quantitative and Qualitative Disclosures about Market Risk 31
PART II - OTHER INFORMATION
Item 2. Changes in Securities 32
Item 6. Exhibits and Reports on Form 8-K 32
Signatures 33
<PAGE>
PART I
ITEM 1
REPUBLIC BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED) (dollars in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
<S> <C> <C>
ASSETS:
Cash and due from banks $ 20,537 $ 37,446
Federal funds sold 1,200 2,500
Securities available for sale 199,884 186,936
Securities to be held to maturity 11,646 29,985
Mortgage loans held for sale 12,049 38,167
Loans, less allowance for loan losses of
$7,962 (1999) and $7,862 (1998) 944,045 870,031
Federal Home Loan Bank stock 14,530 14,036
Accrued interest receivable 9,076 8,825
Premises and equipment, net 17,226 15,870
Other assets 5,445 3,888
------------ -------------
TOTAL $ 1,235,638 $ 1,207,684
============ =============
LIABILITIES:
Deposits:
Non-interest bearing $ 88,947 $ 80,345
Interest bearing 691,255 666,802
Securities sold under agreements to repurchase and
other short-term borrowings 97,707 148,659
Other borrowed funds 239,509 190,222
Accrued interest payable 3,401 3,769
Guaranteed preferred beneficial interests in
Company's subordinated debentures 6,352 6,402
Other liabilities 7,425 7,643
------------ -------------
Total liabilities 1,134,596 1,103,842
------------ -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Class A and Class B Common stock, no par value 4,117 4,149
Additional paid-in capital 33,770 34,014
Retained earnings 69,360 65,469
Unearned Employee Stock Ownership Plan shares (3,760)
Net unrealized appreciation (depreciation) on securities
Available for sale, net of tax (2,445) 210
------------- -------------
Total stockholders' equity 101,042 103,842
------------- -------------
TOTAL $ 1,235,638 $ 1,207,684
============ =============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
REPUBLIC BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
(in thousands, except per share data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
INTEREST INCOME: 1999 1998 1999 1998
<S> <C> <C> <C> <C>
Loans, including fees $ 20,050 $ 19,097 $ 40,561 $ 38,220
Securities available for sale 2,894 2,086 5,601 3,811
Securities to be held to maturity:
Taxable 157 1,153 489 2,520
Non-taxable 25 28 48 56
FHLB dividends 256 196 506 384
Other 4 469 36 823
---------- --------- ---------- ---------
Total interest income 23,386 23,029 47,241 45,814
---------- --------- ---------- ---------
INTEREST EXPENSE:
Deposits 7,965 8,821 16,028 17,353
Short-term borrowings 1,138 1,167 2,383 2,383
Long-term debt 2,680 2,724 5,084 5,391
---------- --------- --------- ---------
Total interest expense 11,783 12,712 23,495 25,127
---------- --------- ---------- ---------
NET INTEREST INCOME 11,603 10,317 23,746 20,687
PROVISION FOR LOAN LOSSES 419 741 1,273 1,384
---------- --------- ---------- ---------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 11,184 9,576 22,473 19,303
---------- --------- ---------- ---------
NON-INTEREST INCOME:
Service charges on deposit accounts 913 850 1,761 1,603
Electronic refund check fees 197 81 1,058 378
Other service charges and fees 152 125 295 225
Loan servicing income 120 149 238 315
Net gain on sale of deposits 4,116
Net gain on sale of loans 658 1,143 2,055 2,152
Net gain on sale of securities 54 167 184 491
Other 245 558 416 705
---------- --------- ---------- ---------
Total non-interest income 2,339 3,073 6,007 9,985
---------- --------- ---------- ---------
NON-INTEREST EXPENSE:
Salaries and employee benefits 5,201 4,539 10,831 8,615
Occupancy and equipment 1,934 1,841 3,916 3,703
Communication and transportation 417 408 871 834
Marketing and development 358 407 691 712
Supplies 238 256 492 516
Other 1,164 1,144 2,400 2,289
---------- --------- ---------- ---------
Total non-interest expense 9,312 8,595 19,201 16,669
---------- --------- ---------- ---------
INCOME BEFORE INCOME TAXES 4,211 4,054 9,279 12,619
INCOME TAXES 1,443 1,452 3,147 4,493
---------- --------- ---------- ---------
NET INCOME $ 2,768 $ 2,602 $ 6,132 $ 8,126
========== ========= ========== =========
</TABLE>
(Continued)
<PAGE>
REPUBLIC BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME(UNAUDITED)(CONTINUED)
(in thousands, except per share data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
OTHER COMPREHENSIVE INCOME (LOSS),
NET OF TAX:
<S> <C> <C> <C> <C>
Change in unrealized gain (loss) on securities $ (1,781) $ 220 $ (2,534) $ 300
Reclassification of realized amount (36) (109) (121) (319)
---------- --------- ---------- --------
Net unrealized gain (loss) recognized in
comprehensive income (1,817) 111 (2,655) (19)
---------- --------- ---------- --------
COMPREHENSIVE INCOME $ 951 $ 2,713 $ 3,477 $ 8,107
========== ========= ========== ========
EARNINGS PER SHARE
Class A $ .17 $ .17 $ .36 $ .54
Class B $ .16 $ .17 $ .36 $ .54
EARNINGS PER SHARE ASSUMING DILUTION
Class A $ .16 $ .17 $ .35 $ .52
Class B $ .16 $ .17 $ .35 $ .52
</TABLE>
See accompanying notes to consolidated financial statements.
<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
Unearned Gain/
Empl. Stock (Loss)
Common Stock Additional Ownership on Available Total
Class A Class B Paid-In Retained Plan For Sale Stockholders'
Shares Shares Amount Capital Earnings Shares Securities Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1999 14,869 2,305 $ 4,149 $ 34,014 $ 65,469 $ 210 $ 103,842
Conversion of Class B to Class A 156 (156)
Dividend Declared
Common: Class A ($.0275 per share) (802) (802)
Class B ($.0250 per share) (109) (109)
Repurchase of Class A Common (142) (33) (280) (1,330) (1,643)
Conversion of Trust Preferred Securities
To Class A Common 5 1 49 50
Purchase of 300,000 shares under the
Employee Stock Ownership Plan (300) $(3,873) (3,873)
Commitment of 8,754 shares to be released under
the Employee Stock Ownership Plan 9 (13) 113 100
Net changes in unrealized gain/(loss)
on securities available for sale (2,655) (2,655)
Net Income 6,132 6,132
------ ----- ------- -------- ------- ------- -------- ---------
BALANCE, June 30, 1999 14,597 2,149 $ 4,117 $ 33,770 $69,360 $ (3,760) $ (2,445) $ 101,042
====== ===== ======= ======== ======= ======== ======== =========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
REPUBLIC BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1999 AND 1998 (in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 6,132 $ 8,126
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization of premises and equipment 1,876 1,674
Amortization and accretion of securities 235 127
FHLB stock dividends (494) (370)
Provision for loan losses 1,273 1,384
Net gain on sale of securities (184) (491)
Net gain on sale of loans (2,055) (2,152)
Net gain on sale of deposits (4,116)
Proceeds from sale of loans 145,014 137,905
Origination of mortgage loans held for sale (116,841) (137,369)
Employee Stock Ownership Plan expense 100
Changes in assets and liabilities:
Accrued interest receivable (251) (516)
Other assets 1,164 14
Accrued interest payable (368) 531
Other liabilities (206) (1,044)
----------- -----------
Net cash provided by operating activities 35,395 3,703
----------- -----------
INVESTING ACTIVITIES:
Purchases of securities available for sale (84,615) (127,669)
Purchases of Federal Home Loan Bank stock (2,467)
Proceeds from maturities of securities to be held to maturity 18,364 29,597
Proceeds from maturities and paydowns of securities available for sale 47,323 1,507
Proceeds from sales of securities available for sale 20,244 59,127
Net increase in loans (76,639) (35,682)
Purchases of premises and equipment (3,241) (4,054)
Disposal of premises and equipment 9 1,350
----------- -----------
Net cash used in investing activities (78,555) (78,291)
----------- -----------
FINANCING ACTIVITIES:
Net increase in deposits 33,055 79,635
Sale of deposits (61,564)
Net decrease in securities sold under agreement to
repurchase and other short-term borrowings (50,952) (8,640)
Payments on other borrowings (52,313) (62,285)
Proceeds from other borrowings 101,600 156,900
Proceeds from stock options exercised 59
Purchase of shares for Employee Stock Ownership Plan (3,873)
Repurchase of Class A Common Stock (1,643)
Cash dividends paid (923) (810)
----------- -----------
Net cash provided by financing activities 24,951 103,295
----------- -----------
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (18,209) 28,707
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 39,946 24,546
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 21,737 $ 53,253
=========== ===========
</TABLE>
<PAGE>
REPUBLIC BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)(CONTINUED)
SIX MONTHS ENDED JUNE 30, 1999 AND 1998 (in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
<S> <C> <C>
Interest $ 23,863 $ 24,597
=========== ===========
Income taxes $ 3,396 $ 6,272
=========== ===========
Transfers from loans to real estate
acquired in settlement of loans $ 1,352 $ 681
=========== ===========
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) and its subsidiary Republic Financial
Services Corporation (d.b.a. Refunds Now), 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, 1999 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1999. 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, 1998 and
Form 10-Q.for the quarter ended March 31, 1999.
New Accounting Pronouncements - In June 1998, the FASB issued SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities". This new
standard requires companies to record derivatives on the balance sheet as assets
or liabilities at fair value. Depending on the use of the derivative and whether
it qualifies for hedge accounting, gains or losses resulting from changes in the
values of those derivatives would either be recorded as a component of net
income or as a change in stockholders' equity. Republic is required to adopt
this new standard January 1, 2001. Management has not yet determined the impact
of this standard.
Reclassifications - Certain amounts have been reclassified in the 1998 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
<TABLE>
<CAPTION>
Securities Available For Sale:
June 30, 1999
(in thousands)
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
U.S. Treasury Securities and U.S.
Government Agencies $ 115,069 $ 29 $ (1,200) $ 113,898
Mortgage-backed securities 69,224 (1,750) 67,474
Corporate bonds 19,296 (784) 18,512
----------- --------- --------- -----------
Total securities available for sale $ 203,589 $ 29 $ (3,734) $ 199,884
=========== ========= ========= ===========
</TABLE>
<TABLE>
<CAPTION>
Securities To Be Held To Maturity:
June 30, 1999
(in thousands)
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
U.S. Treasury Securities and U.S.
Government Agencies $ 7,301 $ $ (63) $ 7,238
Obligations of state and political
subdivisions 3,906 119 4,025
Mortgage-backed securities 439 (32) 407
----------- --------- --------- -----------
Total securities to be held to maturity $ 11,646 $ 119 $ (95) $ 11,670
=========== ========= ========= ===========
</TABLE>
Securities having an amortized cost of $151 million and a fair value of $148
million at June 30, 1999, were pledged to secure public deposits, securities
sold under agreements to repurchase and for other purposes, as required or
permitted by law.
<PAGE>
3. LOANS
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
-----------------------------------------
(in thousands)
<S> <C> <C>
Residential real estate $ 578,309 $ 520,583
Commercial real estate 140,866 118,293
Real estate construction 58,357 47,396
Commercial 28,854 26,381
Consumer 47,211 56,728
Home equity 96,546 106,845
Other 3,217 3,146
----------- -----------
Total loans 953,360 879,372
Less:
Unearned interest income and unamortized
loan fees (1,353) (1,479)
Allowance for loan losses (7,962) (7,862)
----------- -----------
Loans, net $ 944,045 $ 870,031
=========== ===========
</TABLE>
The following table sets forth the changes in the allowance for loan losses:
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
1999 1998 1999 1998
(in thousands)
<S> <C> <C> <C> <C>
Balance, beginning of period $ 7,962 $ 8,234 $ 7,862 $ 8,176
Provision charged to income 419 741 1,273 1,384
Charge-offs (607) (879) (1,501) (1,581)
Recoveries 188 138 328 255
--------- --------- --------- ---------
Balance, end of period $ 7,962 $ 8,234 $ 7,962 $ 8,234
========= ========= ========= =========
</TABLE>
Information about Republic's investment in impaired loans is as follows:
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
----------------------------------------
(in thousands)
<S> <C> <C>
Gross impaired loans $ 1,092 $ 1,116
Less: Related allowance for loan losses 100 100
--------- --------
Net impaired loans with related allowances 992 1,016
Impaired loans with no related allowances
--------- --------
Total $ 992 $ 1,016
========= ========
Average impaired loans outstanding $ 1,092 $ 1,116
========= ========
</TABLE>
<PAGE>
4. DEPOSITS
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
-----------------------------------------
(in thousands)
<S> <C> <C>
Demand (NOW, Super NOW and Money Market) $ 202,893 $ 179,804
Savings 12,766 12,330
Money market certificates of deposit 45,197 35,139
Individual retirement accounts 26,241 23,353
Certificates of deposit, $100,000 and over 76,621 77,365
Other certificates of deposit 303,993 309,938
Brokered deposits 23,544 28,873
----------- -----------
Total interest bearing deposits 691,255 666,802
Total non-interest bearing deposits 88,947 80,345
----------- -----------
Total $ 780,202 $ 747,147
=========== ===========
</TABLE>
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>
June 30, 1999 December 31, 1998
-------------------------------------------
(in thousands)
<S> <C> <C>
Average outstanding balance $ 117,338 $ 115,280
Average interest rate 4.03% 4.21%
Maximum outstanding at month end $ 155,685 $ 148,659
End of period $ 97,707 $ 148,659
</TABLE>
<PAGE>
6. OTHER BORROWED FUNDS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
-------------------------------
(in thousands)
<S> <C> <C>
Federal Home Loan Bank convertible fixed rate advance (1) $ 50,000 $ 50,000
Federal Home Loan Bank overnight advances, with weighted average
interest rate of 6.0% at June 30, 1999 101,600 31,800
Federal Home Loan Bank variable interest rate advances, with
weighted average interest rate of 5.28% at June 30, 1999,
due through 1999 1,000 21,000
Federal Home Loan Bank fixed interest rate advances, with weighted
average interest rate of 5.80% at June 30, 1999, due through 2008 86,909 87,422
------------ ------------
Total $ 239,509 $ 190,222
============ ============
- -----------------------------
(1) Republic has entered into convertible fixed rate advances ranging from
5 to 10 years with the Federal Home Loan Bank (FHLB) totaling $50 million.
The advances are fixed from one to three years at rates varying from 4.26%
to 5.11%. At the end of the fixed term, the FHLB has the right to convert
the fixed rate advance on a quarterly basis to a variable rate advance tied
to the three-month LIBOR index. The advances can be prepaid at any
quarterly date without penalty, but may not be prepaid at any time during
the fixed rate term.
</TABLE>
The Federal Home Loan Bank advances are collateralized by a blanket pledge of
eligible real estate loans with an unpaid principal balance of greater than 150%
of the outstanding advances. Republic has sufficient collateral to borrow
approximately $57 million additional funds from the Federal Home Loan Bank.
Republic also has unsecured lines of credit totaling $40 million and secured
lines of $110 million available through various financial institutions.
Aggregate future principal payments on borrowed funds as of June 30, 1999 are as
follows:
<TABLE>
<CAPTION>
Year
(in thousands)
<S> <C>
1999 $ 103,127
2000 26,098
2001 284
2002
Thereafter 110,000
------------
Total $ 239,509
============
</TABLE>
<PAGE>
7. EARNINGS PER SHARE
A reconciliation of the combined Class A and Class B Common Stock numerators and
denominators of the earnings per share and earnings per share assuming dilution
computations is as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- ------------------------
1999 1998 1999 1998
(in thousands)
Earnings Per Share
<S> <C> <C> <C> <C>
Net Income available to common shares
outstanding $ 2,768 $ 2,602 $ 6,132 $ 8,126
========= ========= ========= ==========
Weighted average shares outstanding 16,764 14,959 16,849 14,959
========= ========= ========= ==========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- ------------------------
1999 1998 1999 1998
(in thousands)
Earnings Per Share Assuming Dilution
<S> <C> <C> <C> <C>
Net Income $ 2,768 $ 2,602 $ 6,132 $ 8,126
Add: Interest expense, net of tax benefit,
on assumed conversion of guaranteed
preferred beneficial interests in
Republic's subordinated debentures 86 88 172 175
--------- --------- --------- ----------
Net Income available to common
Shareholder assuming conversion $ 2,854 $ 2,690 $ 6,304 $ 8,301
========= ========= ========= ==========
Weighted average shares outstanding 16,764 14,959 16,849 14,959
Add dilutive effects of assumed
conversion and exercise:
Convertible guaranteed preferred
beneficial interest in Republic's
subordinated debentures 635 645 635 645
Stock options 526 269 544 270
--------- --------- --------- ----------
Weighted average shares and dilutive
potential shares outstanding 17,925 15,873 18,028 15,874
========= ========= ========= ==========
</TABLE>
The difference in earnings per share between the two classes of common
stock results solely from the dividend premium paid to Class A over Class B
Common Stock.
<PAGE>
8. EMPLOYEE STOCK OWNERSHIP PLAN
On January 29, 1999, Republic formed an Employee Stock Ownership Plan
(ESOP) for the benefit of its employees. The ESOP borrowed $3.9 million
from the Parent Company and directly and indirectly purchased 300,000
shares of Class A Common Stock from Republic's largest beneficial owner at
a market value of $12.91 per share. The purchase price, determined by an
independent pricing committee, was the average closing price for the thirty
trading days immediately prior to the transaction. Shares in the ESOP will
be allocated to eligible employees based on principal payments over the
term of the loan, which is ten years. Participants become fully vested in
allocated shares after five years of credited service and may receive their
distributions in the form of cash or stock. During the first six months of
1999, 8,754 shares of stock were committed to be released, resulting in
ESOP compensation expense of approximately $100,000. For the quarter ended
June 30, 1999, 5,284 shares were committed to be released resulting in ESOP
compensation expense of approximately $59,000 for the quarter. On June 30,
1999, none of the 300,000 shares in the plan had been allocated. The fair
value of the unallocated shares was $3.5 million.
The cost of shares issued to the employee stock ownership plan but not yet
allocated to participants is presented in the consolidated balance sheet as
a reduction of shareholders equity. Compensation expense is recorded based
on the market price of the shares as they are committed to be released for
allocation to participant accounts. The difference between market price and
the cost of shares committed to be released is recorded as an adjustment to
paid in capital. Dividends on allocated plan shares are recorded as a
reduction of retained earnings; dividends on unallocated plan shares are
reflected as a reduction of debt and accrued interest.
<PAGE>
9. SEGMENT INFORMATION
The reportable segments are determined by the products and services
offered, primarily distinguished between banking and mortgage banking
operations. Loans, investments, and deposits provide the revenues in the
banking operation, and servicing fees and loan sales provide the revenues
in mortgage banking. All operations are domestic.
The accounting policies used are the same as those described in the summary
of significant accounting policies. Income taxes are allocated and indirect
expenses are allocated on revenue. Transactions among segments are made at
fair value. Information reported internally for performance assessment
follows.
<TABLE>
<CAPTION>
Three Months Ended June 30, 1999
Mortgage Consolidated
Banking Banking Totals
(in thousands)
<S> <C> <C> <C>
Net interest income $ 11,518 $ 85 $ 11,603
Provision for loan loss 419 419
Net gain on sale of loans 658 658
Other revenues 1,681 1,681
Income tax expense 1,390 53 1,443
Segment profit 2,664 104 2,768
Segment assets 1,223,112 12,526 1,235,638
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended June 30, 1998
Mortgage Consolidated
Banking Banking Totals
(in thousands)
<S> <C> <C> <C>
Net interest income $ 10,247 $ 70 $ 10,317
Provision for loan loss 741 741
Net gain on sale of loans 1,143 1,143
Other revenues 1,930 1,930
Income tax expense 1,210 242 1,452
Segment profit 2,172 430 2,602
Segment assets 1,149,363 12,360 1,161,723
</TABLE>
<PAGE>
9. SEGMENT INFORMATION (Continued)
<TABLE>
<CAPTION>
Six Months Ended June 30, 1999
Mortgage Consolidated
Banking Banking Totals
(in thousands)
<S> <C> <C> <C>
Net interest income $ 23,566 $ 180 $ 23,746
Provision for loan loss 1,273 1,273
Net gain on sale of loans 2,055 2,055
Other revenues 3,952 3,952
Income tax expense 2,824 323 3,147
Segment profit 5,504 628 6,132
Segment assets 1,223,112 12,526 1,235,638
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 1998
Mortgage Consolidated
Banking Banking Totals
(in thousands)
<S> <C> <C> <C>
Net interest income $ 20,538 $ 149 $ 20,687
Provision for loan loss 1,384 1,384
Net gain on sale of loans 2,152 2,152
Other revenues 7,833 7,833
Income tax expense 4,056 437 4,493
Segment profit 7,350 776 8,126
Segment assets 1,149,363 12,360 1,161,723
</TABLE>
<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. Republic Bank & Trust Company (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 19 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
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), the Board of Governors of the Federal Reserve
System (and the Federal Reserve Bank of St. Louis) and the Kentucky Department
of Financial Institutions.
REPUBLIC HAS MADE, AND MAY CONTINUE TO MAKE, VARIOUS FORWARD-LOOKING STATEMENTS
WITH RESPECT TO CREDIT QUALITY (INCLUDING DELINQUENCY TRENDS AND THE ALLOWANCE
FOR LOAN LOSSES), CORPORATE OBJECTIVES AND OTHER FINANCIAL AND BUSINESS MATTERS.
WHEN USED IN THIS DISCUSSION THE WORDS "ANTICIPATE," "PROJECT," "EXPECT,"
"BELIEVE," AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING
STATEMENTS. REPUBLIC CAUTIONS THAT THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT
TO NUMEROUS ASSUMPTIONS, RISKS AND UNCERTAINTIES, ALL OF WHICH MAY CHANGE OVER
TIME. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM FORWARD-LOOKING STATEMENTS.
IN ADDITION TO FACTORS DISCLOSED BY REPUBLIC, THE FOLLOWING FACTORS, AMONG
OTHERS, COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM SUCH
FORWARD-LOOKING STATEMENTS: PRICING PRESSURES ON LOAN AND DEPOSIT PRODUCTS;
COMPETITION; CHANGES IN ECONOMIC CONDITIONS BOTH NATIONALLY AND IN THE BANK'S
MARKETS; THE EXTENT AND TIMING OF ACTIONS OF THE FEDERAL RESERVE BOARD;
CUSTOMERS' ACCEPTANCE OF THE BANK'S PRODUCTS AND SERVICES; AND THE EXTENT AND
TIMING OF LEGISLATIVE AND REGULATORY ACTIONS AND REFORMS.
OVERVIEW
Net income for the quarter ended June 30, 1999 was $2.8 million up from $2.6
million for the same period in 1998. The increase in earnings during the second
quarter of 1999 reflects consistent financial performance in many areas of the
Bank. During the second quarter Republic earnings benefited from increased
interest income, reduced cost of funds, as well as reduced provision for loan
losses.
<PAGE>
Net income for the six months ended June 30, 1999 was $6.1 million compared to
net income of $5.5 million for the same period in 1998, excluding the one-time
deposit sales. Despite the issuance of an additional 2 million shares as part of
Republic's public offering in July 1998, diluted earnings per share was $0.35
for the six months ended June 30, 1999, compared to $0.36 for the same period in
1998, excluding the one-time gain on sale of deposits.
The following table summarizes selected financial information regarding
Republic's financial performance.
<TABLE>
<CAPTION>
Table 1
Excluding One-Time Including One-Time
Deposit Sales Deposit Sales
Six Months Ended June 30, Six Months Ended June 30,
(in thousands, except per share data) 1999 1998 1999 1998
<S> <C> <C> <C> <C>
Gross Operating Profit $ 9,279 $ 8,503 $ 9,279 $ 12,619
Net Income 6,132 5,492 6,132 8,126
Basic Class A Common Earnings Per Share .36 .37 .36 .54
Diluted Class A Common Earnings Per Share .35 .36 .35 .52
</TABLE>
Republic's total assets at June 30, 1999 grew to approximately $1.24 billion
compared to $1.21 billion at December 31, 1998. Net loans increased $74 million
from December 31, 1998 to $944 million at June 30, 1999. The residential real
estate portfolio grew $58 million while the commercial real estate portfolio
increased $23 million. This growth was attributable to continued loan demand in
Republic's markets and the further development of Republic's commercial and
business banking services. While loan growth remained strong, the bank's level
of delinquent loans declined favorably to 1.65% at June 30, 1999, compared to
2.29% at December 31, 1998.
Funding for the growth in the loan portfolio was derived from retail deposits
and Federal Home Loan Bank advances. Retail deposits increased to $780 million
as of June 30, 1999 compared to $747 million at year-end 1998. The growth in
retail deposits was primarily in lower cost deposits such as demand and money
market accounts. FHLB advances increased from $190 million at December 31, 1998
to $240 million at June 30, 1999.
Republic is on schedule to open a loan production office in Clarksville,
Indiana, during the third quarter of 1999, the bank's first presence in the
Indiana community banking market. The company is also on schedule to add two new
full service banking centers in Prospect and Fern Creek in Louisville during the
third quarter of this year, bringing the total number of banking centers in
Kentucky's largest city to eleven. In order to further enhance growth,
management will continue to seek and remain receptive to new strategic
acquisition opportunities that will increase the bank's product offering
capabilities in its primary markets and elsewhere.
While Republic is expanding its locations, the bank also continues to expand its
product lines. On June 1, 1999, Republic successfully launched its Internet bank
and began offering products through the Internet at republicbank.com. The
Internet bank provides a full range of services to existing customers, while
expanding the Bank's potential client base by offering deposit and loan products
to customers outside its traditional service area. While in operation for a
limited time, management is encouraged by the preliminary results, which have
included new deposits totaling $4 million dollars with clients from 18 states as
of June 30, 1999. The bank also began offering, for the first time, a full range
of investment and trust services to its clients during the second quarter of
1999. Management is encouraged by the positive response to this exciting new
product initiative.
<PAGE>
DISPOSITION OF ASSETS
During 1997, Republic elected to focus its resources on its North Central and
Central Kentucky markets. Consistent with this focus, Republic sold its banking
centers in the Western Kentucky cities of Murray, Benton, Paducah, and Mayfield.
The Murray, Benton and Paducah sales were closed in the second half of 1997.
During the first quarter of 1998, Republic completed the sale of deposits and
fixed assets at the Mayfield banking center. Republic realized a pre-tax gain of
approximately $4.1 million from the Mayfield banking center sale. This sale was
comprised of approximately $66 million in deposits and certain other fixed
assets. Republic retained substantially all of its Western Kentucky banking
center loan portfolios in those transactions. The Mayfield transaction
represented the final Western Kentucky banking center sale.
REFUNDS NOW
During November 1998, a wholly owned subsidiary of the Bank acquired Refunds
Now, Inc. Republic exchanged 230,000 shares of Class B Common Stock for the
stock of Refunds Now, Inc. in a business combination accounted for as a pooling
of interest. Refunds Now is a rapid refund tax processing service for taxpayers
receiving both federal and state tax refunds through a nationwide network of tax
preparers. Refund anticipation loans ("RALs") are made to taxpayers filing
income tax returns electronically. The RALs are repaid by the taxpayer when the
taxpayer's refunds are electronically received by the Bank from governmental
taxing authorities. Refunds Now also provides electronic refund checks ("ERCs")
to taxpayers. After receiving refunds electronically from governmental taxing
authorities, checks are issued to taxpayers for the amount of their refund, less
fees. During the six months ended June 30, 1999, Refunds Now generated $943,000
in electronic tax refund loan fees and $1.1 million in electronic tax refund
check fees. Substantially all of the income realized by the Bank from the
activities of Refunds Now is recognized during the first quarter of the year.
RESULTS OF OPERATIONS
Net Interest Income. For the second quarter 1999, net interest income was $11.6
million, up $1.3 million over the $10.3 million attained during second quarter
1998. Overall, the net interest rate spread increased from 3.14% during second
quarter of 1998 to 3.35% in the comparable quarter of 1999. The Bank's net
interest margin increased from 3.76% in second quarter 1998 to 3.97% in second
quarter 1999. The increase in the net interest spread and margin occurred
because the yield on interest earning assets decreased 39 basis points while the
rate paid on liabilities decreased 60 basis points.. During the second quarter
1999, average interest-earning assets were $1.17 billion, an increase of $70
million over second quarter 1998. Total average interest bearing liabilities
increased from $969 million in the second quarter of 1998 to $1.01 billion in
the second quarter of 1999.
Net interest income for the six months ended June 30, 1999 was $23.7 million up
from $20.7 million attained in the same period during 1998. Republic's net
interest spread and margin increased 21 basis points and 25 basis points
respectively for the six months ended June 30, 1999 over the comparable period
in 1998. Net interest margin increased more than net interest spread because the
amount of interest-earning assets supported by non-interest bearing deposits,
other liabilities, and equity increased to 17.5% from 15.2% in 1998. Also
supporting Republic's increased net interest spread was $657,000 in additional
loan fees provided by Refunds Now and mortgage banking activities during the six
months ended June 30, 1999 over the comparable period in 1998
Tables 2 and 3 provide 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, 1999 and 1998.
<PAGE>
Table 2 - Average Balance Sheet Rates for Second Quarter, 1999 and 1998 (dollars
in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended June 30, 1999 Three Months Ended June 30, 1998
-------------------------------- --------------------------------
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 $ 132,022 $ 1,782 5.40% $ 176,055 $ 2,589 5.88%
State and Political Subdivision Securities 3,936 87 8.84% 4,215 84 7.97%
Other Investments 33,430 531 6.35% 10,891 196 7.24%
Mortgage-Backed Securities 62,261 932 5.99% 37,870 594 6.27%
Federal Funds Sold and Securities Purchased
Under Agreements to Resell 274 4 5.84% 34,026 469 5.51%
Total Loans and Fees 937,191 20,050 8.56% 835,330 19,097 9.14%
------- ------ ------- ------
Total Earning Assets 1,169,114 23,386 8.00% 1,098,387 23,029 8.39%
--------- ------ --------- ------
Less: Allowance for Loan Losses (7,962) (8,234)
Non-Earning Assets:
Cash and Due From Banks 19,977 17,882
Bank Premises and Equipment, Net 17,201 13,510
Other Assets 13,548 15,167
------ ------
Total Assets $ 1,211,878 $ 1,136,712
=========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Interest Bearing Liabilities:
Transaction Accounts $ 119,124 $ 803 2.70% $ 103,058 $ 839 3.26%
Money Market Accounts 133,760 1,468 4.39% 99,408 1,177 4.74%
Individual Retirement Accounts 25,691 340 5.29% 22,688 341 6.01%
Certificates of Deposit and Other
Time Deposits 411,692 5,354 5.20% 441,165 6,464 5.86%
Repurchase Agreements and Other
Borrowings 322,731 3,818 4.73% 302,644 3,891 5.14%
------- ----- ------- -----
Total Interest Bearing Liabilities 1,012,998 11,783 4.65% 968,963 12,712 5.25%
Non-Interest Bearing Liabilities:
Non-Interest Bearing Deposits 84,505 80,037
Other Liabilities 11,958 13,467
Stockholders' Equity 102,417 74,245
------- ------
Total Liabilities and Stockholders'
Equity $ 1,211,878 $ 1,136,712
=========== ===========
Net Interest Income $11,603 $10,317
======= =======
Net Interest Spread 3.35% 3.14%
==== ====
Net Interest Margin 3.97% 3.76%
==== ====
- --------------------------------------------------------------------------------
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 Six Months, 1999 and 1998 (dollars in
thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six months ended June 30, 1999 Six months ended June 30, 1998
------------------------------ ------------------------------
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 $ 135,229 $ 3,673 5.43% $ 166,680 $ 4,897 5.88%
State and Political Subdivision Securities 3,963 175 8.83% 4,239 176 8.30%
Other Investments 32,227 1,022 6.34% 10,531 384 7.31%
Mortgage-Backed Securities 59,526 1,774 5.96% 42,297 1,314 6.21%
Federal Funds Sold 1,567 36 4.59% 29,430 823 5.59%
Total Loans and Fees 929,747 40,561 8.73% 824,850 38,220 9.27%
------- ------ ------- ------
Total Earning Assets 1,162,259 47,241 8.13% 1,078,027 45,814 8.50%
Less: Allowance for Loan Losses (7,945) (8,227)
Non-Earning Assets:
Cash and Due From Banks 19,465 19,531
Bank Premises and Equipment, Net 16,823 13,155
Other Assets 13,207 13,795
------ ------
Total Assets $ 1,203,809 $ 1,116,281
=========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Interest Bearing Liabilities:
Transaction Accounts $ 115,885 $ 1,561 2.69% $ 98,705 $ 1,601 3.24%
Money Market Accounts 127,909 2,810 4.39% 89,426 2,163 4.84%
Individual Retirement Accounts 24,827 662 5.33% 22,713 680 5.99%
Certificates of Deposit and Other
Time Deposits 415,528 10,995 5.29% 439,753 12,909 5.87%
Repurchase Agreements and Other
Borrowings 316,224 7,467 4.72% 301,725 7,774 5.15%
------- ----- ------- -----
Total Interest Bearing Liabilities 1,000,373 23,495 4.70% 952,322 25,127 5.28%
Non-Interest Bearing Liabilities:
Non-Interest Bearing Deposits 88,627 76,370
Other Liabilities 11,713 14,887
Stockholders' Equity 103,096 72,702
------- ------
Total Liabilities and Stockholders'
Equity $ 1,203,809 $ 1,116,281
=========== ===========
Net Interest Income $23,746 $20,687
======== =======
Net Interest Spread 3.43% 3.22%
==== ====
Net Interest Margin 4.09% 3.84%
==== ====
- --------------------------------------------------------------------------------
For the purposes of these calculations, non-accruing loans are included in the
quarterly average loan amounts outstanding.
</TABLE>
<PAGE>
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 June 30, 1999 Six months ended June 30, 1999
Compared to Compared to
Three Months Ended June 30, 1998 Six months ended June 30, 1998
-------------------------------- ------------------------------
Increase/(Decrease) Increase/(Decrease)
due to due to
Total Net Total Net
Change Volume Rate Change Volume Rate
Interest Income (1):
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury and
Government Agency Securities $ (807) $ (648) $ (159) $(1,224) $ (924) $ (300)
State and Political
Subdivision Securities 3 (6) 9 (1) (11) 10
Other Investments 335 406 (71) 638 791 (153)
Mortgage-Backed Securities 338 383 (45) 460 535 (75)
Federal Funds Sold (465) (465) - (787) (779) (8)
Total Loans and Fees (2) 953 2,329 (1,376) 2,341 4,860 (2,519)
--- ----- ----- ----- ----- -----
Net Change in Interest Income 357 1,999 (1,642) 1,427 4,472 (3,045)
--- ----- ----- ----- ----- -----
Interest Expense:
Interest Bearing
Transaction Accounts (36) 131 (167) (40) 279 (319)
Money Market Accounts 291 407 (116) 647 931 (284)
Individual Retirement Accounts (1) 45 (46) (18) 63 (81)
Certificates of Deposit and
Other Time Deposits (1,110) (432) (678) (1,914) (711) (1,203)
Repurchase Agreements and
Other Borrowings (73) 258 (331) (307) 374 (681)
-- --- --- --- --- ---
Net Change in Interest Expense (929) 409 (1,338) (1,632) 936 (2,568)
--- --- ----- ----- --- -----
Increase in Net Interest Income $ 1,286 $1,590 $ (304) $ 3,059 $3,536 $ (477)
======= ====== ====== ======= ====== ======
- --------------------------------------------------------------------------------
(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 $1,422 and $765
for the periods ended June 30, 1999 and 1998, respectively.
</TABLE>
<PAGE>
Non-Interest Income. Non-interest income was $2.3 million during second quarter
1999, down from $3.1 million during second quarter of 1998. The decrease was
principally a result of a reduction in gains generated from sales of loans into
the secondary market.
Revenue from mortgage banking activities declined during the three-month period
ending June 30, 1999 as a result of reduced sales volume. The market's
interest-rate environment heavily influences secondary market residential loan
originations and, correspondingly, consumer-refinance activity. For the second
quarter of 1999, market interest rates were above second quarter 1998 levels,
which led to lower secondary market originations and sales volumes. As a result,
gains from sale of loans decreased to $658,000 for the three month period ended
June 30, 1999 compared to $1.1 million during the same period in 1998. Net gains
as a percentage of loans sold were 1.41% and 1.45% for the three-month periods
ending June 30, 1999 and 1998, respectively. Given the rise in interest rates,
management believes that the secondary market sales volume, comprised of fixed
rate products, will continue to decline from current levels. Management also
believes that this reduction in secondary market gains on sale of loans will be
partially offset by increased interest income from expected growth in the
adjustable rate mortgage loan portfolio.
Non-interest income decreased from $10.0 million for the six months ended June
30,1998 to $6.0 million for the comparable period in 1999. The decrease was
primarily due to the one-time gain of $4.1 million from the sale of Mayfield
banking center deposits during 1998. Excluding that one-time gain on sale of
deposits, non-interest income increased for the first six months of 1999. This
increase was primarily due to Refunds Now ERC fees, which generated $1.1 million
in fee income during 1999 compared to $400,000 recognized by the Bank during the
comparable 1998 period.
Non-Interest Expense. Total non-interest expense was $9.3 million in second
quarter 1999, compared to $8.6 million for second quarter 1998. Non-interest
expense increased from $16.7 million for the six months ended June 30, 1998 to
$19.2 million for the comparable period in 1999. The increases for both the
three and six months ended June 30, 1999 were primarily attributable to costs
associated with salaries, employee benefits and occupancy and equipment.
Salary and employee benefit expenses increased $700,000 for the second quarter
1999 over second quarter, 1998 and $2.2 million for the six months ended June
30, 1999 compared to June 30, 1998. Republic's overall staffing level increased
to 488 full-time equivalent employees ("FTE's") at June 30, 1999, compared to
412 FTE's at June 30, 1998. The increases in salaries and employee benefits were
attributable to several factors. Republic opened two new banking centers and
expanded its Elizabethtown, Kentucky banking center, while also expanding its
commercial lending, cash management and trust activities. Additional expense was
also recognized as a result of the formation of an Employee Stock Ownership Plan
("ESOP").
Occupancy and equipment expense increased to $1.9 million in second quarter
1999, compared to $1.8 million for second quarter 1998. For the six months ended
June 30, 1999 occupancy and equipment expense increased 6% over the comparable
period in 1998. The increase is largely attributable to the costs associated
with the opening of two additional banking centers and the expansion and
relocation of the Elizabethtown, Kentucky banking center. These expenses may
continue to increase in the near term as the Bank intends to open a minimum of
two additional locations in its existing markets as well as the new loan
production office in Southern Indiana. It is also anticipated that additional
expenses will be incurred for technology enhancements for deposit, lending and
customer support systems, including Internet banking. (See also "YEAR 2000"
discussion)
<PAGE>
COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 1999 AND DECEMBER 31, 1998
Securities available for sale. Securities available-for-sale consists primarily
of mortgage-backed securities, U.S. Treasury and U.S. Government Agencies and
Corporate bonds with a weighted average maturity of 3.4 years. Securities
available for sale increased from $187 million at December 31, 1998 to $200
million at June 30, 1999. Republic elected to invest funds from maturing
securities previously held to maturity into securities available for sale in
order to provide for more flexibility in administering the investment portfolio
under changing market conditions.
Securities to be held to maturity . Securities to-be-held-to-maturity decreased
from $30 million at December 31, 1998 to $12 million at June 30, 1999. The
decrease was due to management's decision to reinvest maturing securities into
securities available for sale. Securities to-be-held-to-maturity consists
primarily of U.S. Treasury and U.S government Agencies with a weighted average
maturity of .3 years.
Loans. Net loans increased $74 million to $944 million at June 30, 1999 compared
to $870 million at December 31, 1998. The increase in loans was primarily in the
secured real estate lending portfolio. The rise in residential real estate loan
volume was a result of continued consumer demand for Republic's portfolio
products. Republic also had healthy growth in its commercial real estate lending
portfolio as a result of the Bank's continued emphasis on the active pursuit of
lending opportunities within the Bank's markets. The rise in the real estate
construction portfolio was due to steady demand for new single family housing.
By design, Republic's consumer loans decreased from $57 million at December 31,
1998 to $47 million at June 30, 1999. The consumer loan portfolio consists of
both secured and unsecured loans. Republic's consumer portfolio also includes
the "All Purpose" and "Pre Approved" unsecured loan products. Republic is
currently not originating these unsecured products and has elected to allow the
remaining portfolios to paydown. These portfolios had $20 million outstanding at
December 31, 1998 compared to $13 million at June 30, 1999.
Republic's home equity portfolio decreased from $107 million at December 31,
1998 to $97 million at June 30, 1999. Following strong growth in this product
during 1998, Republic experienced decreased credit utilization by existing
customers and increased product competition from other area banks for the
consumer home equity loan business.
Allowance and Provision for Loan Losses. The provision for loan losses was
$419,000 in the second quarter, 1999, compared to $741,000 in the second quarter
of 1998. Overall net charge-offs decreased 43% during the second quarter of 1999
compared to the same period in 1998. The reduction in charge-offs was primarily
due to the continued moderation of charge-offs in the unsecured consumer loan
portfolio.
The provision for loan losses was $1.3 million for the six months ended June 30,
1999, compared to $1.4 million for the six months ended June 30, 1998.
Charge-offs of $200,000 related to tax refund loans are included in the total
charge-offs for the six months ended June 30, 1999. No charge-offs for these
loans were attributed to the Bank during the second quarter of 1999. Republic
expects charge-offs for tax refund loans originated in 1999 to be minimal during
the remainder of the year. Excluding charge-offs related to tax refund loans,
net charge-offs decreased by more than 26% during year-to-date 1999 compared to
the same period in 1998.
The allowance for loan losses increased slightly from $7.9 million at December
31, 1998 to $8.0 million at June 30, 1999. Management believes, based on
information presently available, that it has adequately provided for loan losses
at June 30, 1999. Management has considered the effect of increased commercial
lending on the allowance, and that effect has been largely offset by the Bank's
decreased exposure in its unsecured consumer portfolio.
<PAGE>
Table 5 below depicts the allowance activity by loan type for the three and six
months ended June 30, 1999 and 1998.
Table 5 - Summary of Loan Loss Experience
<TABLE>
<CAPTION>
Three Months Ended Six months ended
June 30, June 30,
----------------------- -----------------------
1999 1998 1999 1998
(in thousands)
<S> <C> <C> <C> <C>
Allowance for loan losses:
Balance-beginning of period $ 7,962 $ 8,234 $ 7,862 $ 8,176
Charge-offs:
Real Estate (135) (59) (315) (78)
Commercial (21) (28)
Consumer (451) (820) (958) (1,503)
Tax Refund Loans (200)
-------- --------- -------- -------
Total (607) (879) (1,501) (1,581)
-------- --------- -------- -------
Recoveries:
Real Estate 3 2 9 5
Commercial 4
Consumer 185 136 319 246
-------- --------- -------- -------
Total 188 138 328 255
-------- --------- -------- -------
Net charge-offs (419) (741) (1,173) (1,326)
Provision for loan losses 419 741 1,273 1,384
-------- --------- -------- -------
Allowance for loan losses:
Balance-end of period $ 7,962 $ 8,234 $ 7,962 $ 8,234
======== ========= ======== =======
</TABLE>
Deposits. Total deposits were $780 million at June 30, 1999 compared to $747
million at December 31, 1998. The increase in deposits was primarily in
Republic's lower cost transaction accounts. Non-interest bearing deposits have
increased by more than 10% since December 31, 1998. Republic's growth in
deposits was the result of management's ongoing emphasis on its commercial cash
management program and retail deposit gathering. Republic plans to continue its
deposit gathering initiatives by utilizing commissioned deposit originators and
offering competitive products in its existing markets, including its Internet
bank.
Securities sold under agreements to repurchase and other short-term borrowings.
Securities sold under agreements to repurchase and other short-term borrowings
decreased from $149 million at December 31, 1998 to $98 million at June 30,
1999. The decrease was primarily due to anticipated withdrawals of public fund
deposits.
Other borrowed funds. Other borrowed funds, which consist of FHLB advances,
increased from $190 million at December 31, 1998 to $240 million at June 30,
1999. The increase was primarily due to additional borrowings to fund loan
growth. Additional investment securities were also purchased to collateralize
deposits due to the bank's growth in commercial deposits.
Stockholders' equity. Total stockholders' equity decreased from $104 million at
December 31, 1998 to $101 million at June 30, 1999. The decrease is primarily
due to declines in the fair value of investment securities available for sale
and the formation of Republic's ESOP during January 1999. Under the terms of the
plan, the ESOP purchased 300,000 shares of Class A Common Stock that will be
allocated to Republic's employees over a ten-year period. (See discussion of
ESOP on page 15)
<PAGE>
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 or are deemed uncollectible. At June 30, 1999, Republic had $153,000 in
consumer loans 90 days or more past due compared to $256,000 at December 31,
1998.
The Bank's level of delinquent loans declined favorably to 1.65% at June 30,
1999, compared to 2.29% at December 31, 1998. Republic also had positive
declines in both its non-performing asset and loan categories. Table 6 provides
information related to non-performing assets and loans 90 days or more past due.
Table 6 - Non-Performing Loans
<TABLE>
<CAPTION>
June 30, December 31,
(dollars in thousands) 1999 1998
<S> <C> <C>
Loans on non-accrual status (1)(2) $ 2,498 $ 3,258
Loans past due 90 days or more 1,862 1,731
--------- ---------
Total non-performing loans 4,360 4,989
Other real estate owned 723 540
--------- ---------
Total non-performing assets $ 5,083 $ 5,529
========= =========
Percentage of non-performing loans to total loans .46% .57%
Percentage of non-performing assets to total loans .53% .63%
</TABLE>
(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.
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 may not be collected. Impaired loans consist of one
commercial real estate loan that decreased slightly from $1.1 million at
December 31, 1998 to $1.0 million at June 30, 1999.
<PAGE>
LIQUIDITY
Republic maintains sufficient liquidity in order to fund loan demand and routine
deposit withdrawal activity. Liquidity is managed by retaining sufficient liquid
assets in the form of investment securities and core deposits to meet demand.
Funding and cash flows can also be realized from the available for sale portion
of the securities portfolio and paydowns from the loan portfolio. Republic's
banking centers also provide access to their retail deposit markets.
Approximately $45 million of repurchase agreements and money markets are
attributable to three customer relationships at June 30, 1999. These funds are
short-term in nature and subject to immediate withdrawal by these entities.
Should these funds be removed, Republic has the ability to replenish these funds
through various funding sources noted below. Republic has established lines of
credit with other financial institutions, the FHLB and brokerage firms. While
Republic utilizes numerous funding sources in order to meet liquidity
requirements, FHLB borrowings remain a material component of management's
balance sheet strategy.
Republic's objectives include 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. Republic continues to experience steady loan demand, that
requires management to continue to monitor interest rate and liquidity risk and
implement appropriate funding and balance sheet strategies.
CAPITAL
Regulatory agencies measure capital adequacy within a framework that makes
capital requirements, in part, dependent on the individual risk profiles of
financial institutions. Republic's average capital to average assets ratio was
8.56% at June 30, 1999 compared to 7.58% at December 31, 1998. Republic
continues to exceed the regulatory requirements for Tier I, Tier I Leverage and
total risk-based capital. The Bank expects to maintain a capital position that
meets or exceeds the "well capitalized" requirements as defined by the FDIC.
Table 7 below indicates the capital ratios at June 30, 1999.
<TABLE>
<CAPTION>
Table 7 - Capital Ratios
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>
Total Risk Based Capital (to Risk Weighted Assets)
Consolidated $ 117,784 14.99% $ 62,847 8% $ 78,559 10%
Bank only $ 113,152 14.40% $ 62,845 8% $ 78,556 10%
Tier I Capital (to Risk Weighted Assets)
Consolidated $ 109,822 13.98% $ 31,424 4% $ 47,136 6%
Bank only $ 105,190 13.39% $ 31,422 4% $ 47,134 6%
Tier I Leverage Capital (to Average Assets)
Consolidated $109,822 9.06% $ 48,152 4% $ 60,190 5%
Bank only $ 105,190 8.68% $ 48,152 4% $ 60,190 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 June 30, 1999, the
Bank had $18 million of retained earnings that could be utilized for payment of
dividends if authorized by the Board of Directors.
<PAGE>
ASSET/LIABILITY MANAGEMENT AND MARKET RISK
Asset/liability management control is designed to ensure safety and soundness,
maintain liquidity and regulatory capital standards, and achieve acceptable net
interest income. Management considers interest rate risk to be Republic's most
significant market risk. Interest rate risk is the exposure to adverse changes
in the net interest income as a result of market fluctuations in interest rates.
Management regularly monitors interest rate risk in relation to prospective
market and business conditions. The Board of Directors sets policy guidelines
establishing maximum limits on the Bank's interest rate risk exposure.
Management monitors and adjusts exposure to interest rate fluctuations as
influenced by the Bank's loan and deposit portfolios.
Republic utilizes an earnings simulation model to analyze net interest income
sensitivity. Potential changes in market interest rates and their subsequent
effect on interest income are then evaluated. The model projects the effect of
instantaneous movements in interest rates of both 100 and 200 basis points.
Assumptions based on the historical behavior of Republic's deposit rates and
balances in relation to changes in interest rates are also incorporated into the
model. These assumptions are inherently uncertain and, as a result, the model
cannot precisely measure future net interest income or precisely predict the
impact of fluctuations in market interest rates on net interest income. Actual
results will differ from the model's simulated results due to timing, magnitude
and frequency of interest rate changes as well as changes in market conditions
and the application and timing of various management strategies.
Interest rate risk management focuses on maintaining acceptable net interest
income within Board approved policy limits. Republic's Asset/Liability
Management Committee monitors and manages interest rate risk to maintain an
acceptable level of change to net interest income resulting from market interest
rate changes. Republic's Board approved policy established for interest rate
risk is stated in terms of the range of permissible change in net interest
income given a 100 and 200 basis point immediate and sustained increase or
decrease in market interest rates.
Republic's interest sensitivity profile changed slightly from December 31, 1998
to June 30, 1999. Given a sustained 200 basis point downward shock to the yield
curve used in the simulation model, Republic's base net interest income would
decrease by an estimated 8.9% at June 30, 1999 compared to a decrease of 16.2%
at December 31, 1998. Given a 200 basis point increase in the yield curve
Republic's base net interest income would increase by an estimated 3.6% at June
30, 1999 compared to 11.0% at December 31, 1998.
The interest sensitivity profile of Republic at any point in time will be
effected by a number of factors. These factors include the mix of interest
sensitive assets and liabilities as well as their relative pricing schedules.
The table below is representative only and is not a precise measurement of the
effect of changing interest rates on Republic's interest income in the future.
<PAGE>
Table 8 - Interest Rate Sensitivity
<TABLE>
<CAPTION>
June 30, 1999
Decrease in Rates Increase in Rates
200 100 100 200
Basis Points Basis Points Base Basis Points Basis Points
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Projected interest income
Loans $ 70,442 $ 75,620 $ 80,742 $ 85,200 $ 89,344
Investments 12,336 12,767 13,231 13,602 13,964
Short-term investments 188 271 362 450 534
----------- ---------- ---------- ----------- ---------
Total interest income $ 82,966 $ 88,658 $ 94,335 $ 99,252 $ 103,842
Projected interest expense
Deposits $ 27,955 $ 29,614 $ 31,291 $ 33,030 $ 34,992
Other borrowings 13,247 15,222 17,196 19,298 21,335
----------- ---------- ---------- ----------- ---------
Total interest expense 41,202 44,836 48,487 52,328 56,327
Net interest income $ 41,764 $ 43,822 $ 45,848 $ 46,924 $ 47,515
Change from base $ (4,084) $ (2,026) $ 1,076 $ 1,667
% Change from base (8.91)% (4.42)% 2.35% 3.64%
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998
Decrease in Rates Increase in Rates
200 100 100 200
Basis Points Basis Points Base Basis Points Basis Points
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Projected interest income
Loans $ 63,043 $ 68,835 $ 75,394 $ 81,537 $ 86,959
Investments 11,111 12,011 13,060 13,583 14,102
Short-term investments 240 354 493 635 773
----------- ---------- ---------- ----------- ---------
Total interest income $ 74,394 $ 81,200 $ 88,947 $ 95,755 $ 101,834
Projected interest expense
Deposits $ 27,287 $ 29,197 $ 31,126 $ 33,111 $ 35,446
Other borrowings 12,368 14,366 16,364 18,361 20,359
----------- ---------- ---------- ----------- ---------
Total interest expense 39,655 43,563 47,490 51,472 55,805
Net interest income $ 34,739 $ 37,637 $ 41,457 $ 44,283 $ 46,029
Change from base $ (6,718) $ (3,820) $ 2,826 $ 4,572
% Change from base (16.20)% (9.21)% 6.82% 11.03%
</TABLE>
<PAGE>
YEAR 2000
Management has assessed the operational and financial implications of its year
2000 needs and developed a plan to ensure that data processing systems can
properly handle the century change. Management has determined that if a business
interruption as a result of the year 2000 issue occurred, that such an
interruption could be material to the Bank's overall financial performance. The
primary task required to prevent a potential business interruption was the
installation of the most current software releases for major mainframe
applications developed by Republic's third party software application providers.
Mainframe software upgrades and modifications for major applications have been
installed and placed into production. Year 2000 Script Testing has been
conducted for mission-critical internal core processing systems for each of the
thirteen test dates identified by the FFIEC. The Bank's personal computer
network continues to be reviewed and upgraded. Minor software upgrades and
modifications have also been required for certain other data processing
applications.
Republic has identified selected employees whose primary function is year 2000
compliance. The loss of these employees could have a material adverse effect on
the implementation of Republic's year 2000 plan. Republic initiated a year 2000
employee retention program, that to date has been highly successful. The program
was designed to encourage and promote the retention of information system
employees.
Year 2000 remediation has resulted in some delay in other data processing
projects, none of which are deemed material to the Bank's financial performance.
Management believes its current state of year 2000 readiness is satisfactory and
in accordance with general industry and regulatory standards and
recommendations. Management has contacted its major suppliers and customers and
inquired about the status of their year 2000 readiness, with no material
problems being noted. At this time, the Bank believes that its software
providers have been able to adequately address the Bank's needs for year 2000
software functionality. However, Republic must also rely on the year 2000
readiness of additional third parties, not only its hardware and software
providers, but other third parties such as public utilities and governmental
units that provide important ongoing services to the Bank. Management has
therefore developed a bank-wide contingency plan in the event of unforeseen
circumstances in accordance with regulatory agency recommendations.
In carrying out its overall year 2000 plan, Republic will incur certain
operational expenses and may replace some existing software that has not been
fully amortized. Most of the expenditures associated with software application
upgrades represent capitalizable costs that would have been incurred in the
normal course of business. The operating expenses are being expensed as
incurred, and the unamortized cost of software replaced, if any, will be charged
off when the applicable software is removed from service. Republic has incurred
costs of approximately $700,000 attributable to year 2000 remediation and
anticipates total costs and charges to be in an approximate range of $1.2 to
$1.6 million. The majority of the remaining costs to be incurred are related to
the year 2000 employee retention program that are anticipated to be paid in
2001. Actual expenses could vary from management's estimates if unforeseen
circumstances were to arise.
NEW ACCOUNTING PRONOUNCEMENTS
See discussion in Note 1 to financial statements for a discussion of recent
accounting pronouncements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The information for this item is incorporated by reference to the Asset
/Liability Management and Market Risks section of Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations.
<PAGE>
PART II - OTHER INFORMATION
Item 2. Changes in securities
During the second quarter of 1999, Republic issued 55,000 shares of Class A
Common Stock upon conversion of shares of Class B Common Stock by shareholders
of Republic in accordance with the share-for-share conversion provision option
of the Class B Common Stock. The exemption from registration of the newly issued
Class A Common Stock relied upon was Section (3)(a)(9) of the Securities Act of
1933.
Item 6. Exhibits and Reports on Form 8-K
The exhibits required by Item 601 of Regulation S-K are attached to and
listed in the Exhibit Index on page 34.
<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: August 13, 1999 /s/ Steven E. Trager
------------------------- ----------------------------
Steven E. Trager
Chief Executive Officer
Principal Financial Officer:
Date: August 13, 1999 /s/ Mark A. Vogt
-------------------------- ----------------------------
Mark A. Vogt
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Incorporated
Exhibit Description By Reference To
<S> <C> <C>
10.17 Lease between Republic Bank & Trust Filed as Exhibit 10.17 on page
Company and Jaytee Properties, dated 35 of this Form 10-Q for the
February 1, 1999, as amended, relating period ended June 30, 1999
to 661 South Hurstbourne Parkway,
Louisville
10.18 Lease between Republic Bank & Trust Filed as Exhibit 10.18 on page
Company and Jaytee Properties, dated 36 of this Form 10-Q for the
August 1, 1999, relating to 9600 period ended June 30, 1999
Brownsboro Road, Louisville
10.19 Lease between Republic Bank & Trust Filed as Exhibit 10.19 on page
Company and Jaytee Properties, dated 56 of this Form 10-Q for the
May 1, 1999, relating to 610 Eastern period ended June 30, 1999
Boulevard, Clarksville, Indiana
11 Statement Regarding Computation of Filed as Exhibit 11 on page
Per Share Earnings 73 of this Form 10-Q for the
period ended June 30, 1999
27 Financial Data Schedule Filed as Exhibit 27 on page
74 of this Form 10-Q for the
period endedJune 30, 1999
</TABLE>
Fifth Amendment to Lease
This Amendment to Lease dated this 1st day of February, 1999 shall amend the
terms of a lease dated February 3, 1993 ("Lease") by and between Jaytee
Properties ("Landlord") and Republic Bank & Trust Company ("Tenant") and any
other amendments to such lease.
Landlord and Tenant agree that the following terms of the Lease shall be amended
to reduce the Bank's square footage by 3,000 square feet. The Bank's rent shall
be reduced accordingly and Jaytee Properties shall reimburse the Bank in the
amount of $14,313 for that portion of rent paid since September 1, 1998.
ARTICLE I. PREMISES
SECTION 1. Tenant leases from Landlord and Landlord leases to Tenant the
following additional premises (hereinafter called the "Premises"):
Being 23,509 square feet of office space located on the lower level,
first floor and second floor in the Republic Bank Building (hereinafter
called "the Building") located at Hurstbourne Parkway and Stone Creek
Parkway in Jefferson County, Kentucky.
ARTICLE II. TERM
The Term of this lease shall be to 6/31/03.
ARTICLE III. RENT AND OPERATING EXPENSES
SECTION 1. Tenant shall pay to Landlord, at Landlord's office in the Building or
at such place as Landlord may from time to time designate, as monthly rental for
the Premises, $27,940.
JAYTEE PROPERTIES
By:/s/ Steve Trager
--------------------------
REPUBLIC BANK & TRUST COMPANY
By:/s/ Bill Petteer
--------------------------
REPUBLIC BANK & TRUST COMPANY
LOUISVILLE, KENTUCKY
INDEX TO LEASE
Article Page
I. Premises 1
II. Term 2
III. Rent 2
IV. Use 2
V. Possession 3
VI. Services to be Provided 3
VII. Maintenance and Repair; Alterations 3
VIII. Access 4
IX. Damage or Destruction 4
X. Indemnity 5
XI. Remedies 6
XII. Insurance 6
XIII. Liens 8
XIV. Assignment; Subletting; Mortgaging 8
XV. Estoppel Certificate 9
XVI. Taxes 9
XVII. Priority of Lease 10
<PAGE>
INDEX TO LEASE
Article Page
XVII. Fixtures and Personal Property; 11
Surrender
XIX. Hold over Tenancy 11
XX. Waiver of Subrogation 12
XXI. Notices 12
XXII. Rights Reserved by Landlord 12
XXIII. Condemnation 12
XXIV. Miscellaneous Provisions 13
<PAGE>
OFFICE LEASE
THIS LEASE, dated this 1st day of August, 1999, is between Jaytee
Properties, a Kentucky general partnership, hereinafter referred to as
"Landlord" and Republic Bank & Trust Company, hereinafter referred to as the
"Tenant". As parties hereto, Landlord and Tenant agree:
ARTICLE I. PREMISES
SECTION 1. Tenant leases from Landlord and Landlord leases to Tenant
the following described premises (hereinafter called the "Premises"):
Being approximately 8,941 square feet of rentable space
located on the first floor and 1,887 square feet located on
the lower level in the Republic Bank Building (hereinafter
called "the Building") located at 9600 Brownsboro Road in
Jefferson County, Kentucky, to include 4 drive through lanes
and accompanying underground.
SECTION 2. The Premises shall be provided in "as is" condition with the
exception of the base construction to be performed by Landlord as described in
Exhibit A attached hereto. Any remodeling construction and/or redecorating
within the Premises shall be performed to the complete and absolute satisfaction
of Landlord. The Landlord's written approval shall be obtained by Tenant prior
to commencement of any and all improvements and the construction of improvements
shall be supervised and approved by Landlord on a continuous basis.
SECTION 3. This lease confers no rights with respect to the Building
other than tenancy of the Premises and the non-exclusive license to use, during
such tenancy, the following facilities provided by Landlord: (i) toilet
facilities on the floor which the Premises are located (and such other toilet
facilities located elsewhere in the Building as may be designated by Landlord
for the general use of tenants); and (ii) the public entrances to, and main
floor lobby in, the Building; (iii) the passenger elevators serving the
Building; (iv) the areas adjacent to the Building dedicated from time to time
for parking purposes by Landlord for the parking of motor vehicles; (v) the
roadways and passageways adjacent to the Building for passage by motor vehicle
and on foot, as said roadways and passageways may respectively be dedicated by
Landlord; and (vi) a predominant portion of the signage available with the
building, including an exclusive time and temperature street sign as well as
exclusive signage on the east and west sides of the building.
<PAGE>
ARTICLE II. TERM
Landlord leases the Premises to Tenant, and Tenant hires and takes the
Premises from Landlord, for a term of five (5) Lease Years commencing 30 days
from Landlord's delivery of the Premises to the Tenant for construction of
Tenants improvements, (the "Lease Commencement Date") and expiring at midnight
on the last day of the sixtieth month thereafter unless sooner terminated
pursuant to the terms hereof. "Lease Year" shall mean a year period beginning on
the first day of a month, which is the first calendar month of the term of the
Lease and ending on the day before the anniversary of the first day of such
year.
ARTICLE III. RENT
SECTION 1. Tenant shall pay to Landlord, at Landlord's office in the
Building or at such place as Landlord may from time to time designate, as rental
for the Premises, the sum of Thirteen thousand four hundred ninety-four and
00/100 ($13,494.00) per month (the "Rent"). Rent shall be payable in advance on
the first day of each calendar month during the first five Lease Years beginning
on the Lease Commencement Date.
SECTION 2. In the event that the Rent, or any other sum payable by
Tenant to Landlord under this lease, shall not be received (paid) within ten
(10) days of the due date thereof, Landlord may, at its option, add a monthly
service charge, at a rate which shall be the greater of $25.00 or 1% for each
month or fraction thereof from such rent due date during which such Rent or
other sum remains unpaid. Further, in the event that any check which has been
remitted to Landlord by Tenant for payment of the Rent, or any other sum payable
under this Lease, shall not be honored upon its presentation for payment, then
the monthly service charge shall be similarly imposed on said amount from the
due date until paid. Acceptance by the Landlord for such service charge shall
not be deemed to be a waiver by Landlord of any default nor shall it restrict
the remedies otherwise available to Landlord hereunder.
ARTICLE IV. USE
The Premises are to be used only for the purpose of conducting therein
the operation of a banking and related financial services provider and for no
other business or purpose without the prior written consent of Landlord. Tenant
shall not do or permit to be done in or about the Premises anything which is
illegal or unlawful; or which is of a hazardous or dangerous nature; or which
will increase the rate(s) of insurance upon the Building. Tenant shall (and
shall cause its employees to) observe the rules and regulations set forth in
Exhibit B attached hereto and made a part hereof, as the same may be amended by
Landlord from time to time, and Tenant shall comply with all governmental laws
and ordinances and all regulations applicable to the use and occupancy of the
Building.
<PAGE>
ARTICLE V. POSSESSION
If Landlord permits Tenant to enter into possession of the Premises
prior to the Lease Commencement Date, all of the terms and conditions of this
Lease shall apply during such prior period. Tenant's taking of possession of the
Premises represents Tenant's conclusion that the Premises are in good and
tenantable condition and acceptable for Tenant's use thereof as provided in this
Lease.
ARTICLE VI. SERVICES TO BE PROVIDED
Landlord shall furnish reasonable amounts of heat, air conditioning,
water and elevator service (collectively "Services") to the Premises during the
times and in the manner that Landlord determines appropriate for the furnishing
of such services in the Building, all such services being subject to energy
availability or Energy Consumption Regulations which may be hereafter
promulgated. It is expressly agreed that should any local, state or federal
governmental body, agency or public utility restrict or reduce the amount of
fuel or energy which may be utilized to provide the utilities and services as
specified above, then such restriction or reduction, and the reduction in
utilities and services which may result therefrom, shall in no way create or
constitute a default on the part of the Landlord, and there shall be no
reduction or abatement in the Rent or any other sum payable by Tenant
thereunder. Further, Landlord shall not be liable for any injury, damage,
inconvenience, or otherwise which may arise or result should the furnishing of
any such services by interrupted or prevented by fire, accident, strike, riot,
act of God, the making of necessary repairs or improvements, or any other cause
beyond the reasonable control or prevention of Landlord, nor, subject only to
the provisions of Article X of this Lease, shall the Rent payable by Tenant
hereunder abate.
ARTICLE VII. MAINTENANCE AND REPAIR; ALTERATIONS
SECTION 1. Landlord shall keep and maintain the roof, foundations,
floor slab, and all structural walls (including windows and plate glass),
gutters and downspouts of the Premises in good order and repair. Landlord shall
keep or cause to be kept in good repair all common areas of the Building and
appurtenant areas, including lighting systems; drainage systems; mechanical,
plumbing, and electrical systems; heat and air conditioning units; ductwork,
lines, pipes, and conduits serving the Premises; and parking areas and
driveways. Any maintenance, repairs or replacements to any of the foregoing made
necessary by any acts or omissions of the Tenant, its agents or employees, shall
be paid for by Tenant and Tenant shall reimburse Landlord on demand for the cost
of repairing any damage to the Premises or the Building caused by Tenant or its
agents or employees. In the event, after reasonable notice to Landlord, Landlord
fails to make any repairs as hereinbefore provided, then Tenant shall have the
right to make these repairs and deduct the cost thereof from any future rental
payments.
<PAGE>
SECTION 2. All maintenance, repairs, or replacements relating to the
premises that are not the obligation of Landlord as set forth in Section 1
above, shall be the obligation of Tenant and shall be made by Tenant at Tenant's
sole cost and expense. Tenant shall maintain, at its expense, the interior of
the Premises in good repair and in a clean and attractive condition. Tenant's
obligation to maintain, repair and replace includes, but is not limited to, all
the interior of the Premises. In the event Tenant fails to comply with the
requirements of this Section, Landlord may effect such maintenance and repair
and the cost thereof, with interest at the rate of 8.5% per annum, shall be
payable immediately to Landlord as additional rent. In the event the applicable
Statute of the Commonwealth of Kentucky at any time shall allow for a higher
rate of interest under an instrument in writing, then such higher rate shall
apply and be payable. If Tenant is a corporation, then the interest rate to be
so payable hereunder shall be at the rate of 12% per annum.
SECTION 3. Tenant shall not make any alterations, additions or
improvements to the Premises without first obtaining Landlord's prior written
consent. In connection with any such request for Landlord's consent to such
alterations, additions or improvements to the Premises, Landlord may retain the
services of an architect and/or engineer; and the reasonable costs for the
services of such architect and/or engineer shall be reimbursed to Landlord by
Tenant. Landlord may make any repairs for the preservation, safety or
improvement of the Premises or the Building. All alterations, and improvements
made by Tenant shall become the property of Landlord upon making thereof and
shall be surrendered to landlord upon the expiration of this Lease.
ARTICLE VIII. ACCESS
Landlord and its agents shall have the right to enter into and upon the
Premises at all reasonable times with reasonable notice for the purpose of
inspecting, cleaning, repairing, altering or improving the Premises or the
Building with the exception of an emergency situation. Landlord shall have the
right to show the Premises to prospective tenants during the ninety (90) day
period prior to the expiration of the term of this Lease and shall have the
right at all reasonable times to show the Premises to prospective purchasers of
and lenders upon the Building. Any damage or loss caused to the Premises and/or
to the Tenant by any use of or access to the Premises by Landlord shall be
repaired by Landlord at Landlord's expense.
ARTICLE IX. DAMAGE OR DESTRUCTION
SECTION 1. If the Premises is damaged or destroyed, in whole or in
substantial part, and Section 2 does not apply, then Landlord may elect to
terminate this Lease as of the date of the damage or destruction by notice given
to Tenant in writing not more than twenty (20) days following the date of damage
<PAGE>
or destruction. If Landlord does not elect to terminate, Landlord shall, at
Landlord's expense, proceed to restore the property to substantially the same
form, condition and quality as prior to the damage or destruction. If Landlord
elects to rebuild and repair, Landlord shall proceed as soon as reasonably
possible and thereafter shall proceed without interruption and be completed
within one hundred-eighty (180) days after notice has been given of Landlord's
intent to rebuild and repair, except for work stoppages on account of labor
disputes and matters not under the control of the Landlord. During such period
of repair or restoration, the Rent shall be abated in the same proportion as the
untenantable portion of the Premises bears to the entire Premises identified in
Section 1 of Article I of the Lease.
SECTION 2. If the Premises is damaged or destroyed, (i) to the extent
that more than fifty percent (50%) of the Building is damaged or destroyed, or
(ii) to the extent that more than fifty percent (50%) of the Premises is damaged
or destroyed, then in such event, Tenant may elect to terminate this Lease as of
the date of the damage or destruction by notice given to Landlord in writing not
more than twenty (20) days following the date of damage or destruction.
SECTION 3. Notwithstanding anything contained in this Article to the
contrary, Landlord shall not be required to repair, replace, restore, or rebuild
any property which Tenant shall be entitled to remove from the Premises under
the provisions of this Lease; it being agreed that Tenant shall bear the entire
risk of loss, damage or destruction of such property while it is in the
Building.
SECTION 4. If either party elects to terminate the Lease, Tenant shall
be entitled to reimbursement for any prepaid rent or other amounts paid by
Tenant and attributable to the unused term of the Lease.
ARTICLE X. INDEMNITY
Tenant shall indemnify and hold Landlord harmless from all loss,
damage, liability or expense resulting from an injury to or death of any person
or any loss of or damage to any property caused by or resulting from any act or
omission of Tenant or any officer, agent, employee, guest, invitee or visitor of
Tenant in or about the Premises or the Building, but the foregoing provision
shall not be construed to make Tenant responsible for injuries to third parties
caused by the negligence of Landlord or any agent or employee of landlord. The
Landlord shall remain responsible for any injury to, or death of any person or
any loss of or damage to property sustained by any person whatsoever which may
be caused by the Building or any equipment or appurtenances thereto or thereof
being or becoming defective or out of repair. Landlord shall be and remain
liable for the negligent acts or omissions of Landlord, its agents and
employees.
<PAGE>
ARTICLE XI. REMEDIES
SECTION 1. If at any time Tenant shall (a) fail to remedy any default
in the payment of any sum due under this Lease for ten (10) days after notice;
(b) fail to remedy any default with respect to any other of these provisions,
covenants or conditions of this Lease to be kept or performed by Tenant, within
thirty (30) days after notice (or, in the event the default is of such a nature
that it cannot be remedied within said thirty (30) day period, then such
additional time as may be necessary for Tenant to cure such default, within the
thirty (30) day period and thereafter diligently prosecutes the same to
completion); or (c) vacate or abandon the Premises, or fail to conduct its
business therein, for a period of five (5) consecutive business days, and then
fail to reoccupy and reestablish the conduct of business in the Premises within
ten (10) days following the date of written notice from Landlord of such
failure; then Landlord shall have all such rights and remedies as are provided
by law in respect of such default, including, at Landlord's election, the right
to terminate this Lease, and all Tenant's rights hereunder shall be terminated.
The liability of Tenant for the Rent, and other payments provided for
herein shall not be extinguished for the balance of this Lease, and Tenant shall
make good to Landlord any deficiency arising from such reletting of the
Premises, plus the costs and expenses of renovating, altering and reletting the
Premises, and including attorneys' fees or brokers' fees incident to Landlord's
reentry or reletting. Tenant shall pay any such deficiency each month, as the
amount thereof is ascertained by Landlord, or, at Landlord's option, Landlord
may recover, in addition to any other sums, the amount at the time of judgement
by which the unpaid Rent, and other payments for the balance of the term, after
judgement, exceeds the amount thereof which Tenant proves could be reasonably
avoided, discounted at the rate of 7%. In reletting the Premises, Landlord may
grant rent concessions and Tenant shall not be credited therefor. Nothing herein
shall be deemed to affect the right of Landlord to recover for indemnification
under Article X herein arising prior to the termination of this Lease.
SECTION 2. Landlord shall in no event be in default in the performance
of any of its obligations in this Lease contained unless and until Landlord
shall have failed to perform such obligation within thirty (30) days, or such
additional time as is reasonably required to correct any such default after
notice by Tenant to Landlord properly specifying wherein Landlord has failed of
perform any such obligation.
ARTICLE XII. INSURANCE
SECTION 1. Tenant covenants and agrees that from and after the date of
delivery of the Premises from Landlord to Tenant and at all times during
possession thereof, Tenant will procure and maintain in full force and effect,
at its sole cost and expense, the following types of insurance, in the minimum
amounts specified below:
<PAGE>
A. Public Liability and Property Damage. Personal injury
liability, bodily injury liability and property damage
insurance in a single limit of not less than One Million
Dollars ($1,000,000), of which insurance shall insure the
performance by Tenant of the indemnity agreement as to
liability for injury to or death of persons and injury or
damage to property as provided in Article X hereof. All of
such insurance shall be primary and noncontributing with any
insurance which may be carried by Landlord. The adequacy of
the coverage afforded by said liability and property damage
insurance shall be subject to review by Landlord from time to
time, and Landlord retains the right to increase or decrease
said limits at such times.
B. Tenant Improvements. Insurance covering all of the lease-hold
improvements, (excepting only the structural components of the
Building and demising partitions), and Tenant's trade fixtures,
and personal property from time to time in and/or upon the Premises,
in an amount of not less than the full replacement cost thereof
without deduction for depreciation, providing protection against
any peril included within the classification "Fire and Extended
Coverage", together with insurance against sprinkler damage,
vandalism and malicious mischief. Any policy proceeds shall be
used for the repair or replacement of the property damaged or
destroyed unless this Lease shall cease and terminate under the
applicable provisions herein. If the Premises shall not be repaired
or restored following damage or destruction in accordance with
other provisions herein, Landlord shall received from such insurance
proceeds and amount equal to the replacement cost of the Tenant's
leasehold improvements.
C. Business Interruption. Business interruption insurance with
sufficient coverage to provide for payment of rent and other
fixed costs during any interruption of Tenant's business by
reason of fire or other similar cause.
SECTION 2. All policies shall be for the mutual and joint benefit and
protection of Landlord and Tenant, with Landlord being named as an additional
insured. Certificates of such policies shall be delivered to Landlord within ten
(10) days after delivery of possession of the Premises to Tenant and thereafter
within thirty (30) days prior to the expiration of the term of each such policy.
All public liability and property damage policies shall contain a provision that
Landlord, although named as an insured, shall nevertheless be entitled to
recovery under said policies for any loss occasioned to it, its servants,
agents, and employees by reason of the acts, omissions and/or negligence of
Tenant. As often as any such policy shall expire or terminate, renewal or
additional policies shall be procured and maintained by Tenant in like manner
and to like extent. All policies of insurance must contain a provision that the
company writing said policy will give to Landlord thirty (30) days' notice, in
writing, in advance of any cancellation or lapse, or the effective date of any
reduction in the amounts of insurance. All public liability, property damage and
<PAGE>
other casualty policies shall be written as primary policies, not contributing
with and not in excess of coverage which Landlord may carry. Landlord may, from
time to time, request Tenant to provide Landlord with a certified copy of all
insurance coverage carried by Tenant.
SECTION 3. Tenant agrees to pay to Landlord forthwith upon demand the
amount of any increase in premiums for insurance against loss by fire that may
be charged during the term of this Lease on the amount of insurance maintained
in force by Landlord on the Building, of which the Premises are a part,
resulting from Tenant doing any act in or about said Premises which does so
increase the insurance rates, whether or not Landlord shall have consented to
such act on the part of Tenant. If Tenant installs upon the Premises any
electrical equipment which constitutes an overload on the electrical lines of
the Premises, Tenant shall at its own expense make whatever changes are
necessary to comply with the requirements of the insurance underwriters any
governmental authority having jurisdiction thereover, but nothing herein
contained shall be deemed to constitute Landlord's consent to such overloading.
ARTICLE XIII. LIENS
Tenant shall keep the Premises free and clear of, and shall indemnify
Landlord against all mechanics' liens and other liens on account of work done
for or materials , supplies and equipment furnished to Tenant by persons
claiming under it for maintenance, repairs and alterations. Tenant shall
reimburse Landlord for all costs and attorneys' fees incurred by Landlord in
investigating, defending or clearing such lien to be cleared within thirty (30)
days of filing of same unless Tenant shall have provided security acceptable to
landlord against any loss to Landlord on account thereof. As a condition to
Landlord's consent pursuant to Article VII, Landlord may require Tenant to
provide Landlord with reasonable payment and performance bonds of those persons
contracted by Tenant to perform work on or in the Premises that could be the
subject of such a lien in order to protect the Premises, the Landlord, and any
mortgagee from and against liens of mechanics and materialmen performing work in
or providing services and equipment to the Premises.
ARTICLE XIV. ASSIGNMENT; SUBLETTING; MORTGAGING
SECTION 1. Tenant shall not voluntarily, involuntarily or by operation
of law assign, transfer, mortgage or otherwise encumber all or any part of
Tenant's interest in this Lease, or sublet the Premises or any part thereof,
without first obtaining in each and every instance Landlord's prior written
consent. Subject to the foregoing, Tenant shall not assign, transfer or sublet
the Premises, or any part thereof, at a rent to Assignee, Transferee or
<PAGE>
Sublessee, greater than $20 per square foot. Any transfer of this Lease by
merger, consolidation, or liquidation, or any change in the ownership of, or
power to vote the majority of its outstanding voting stock resulting in a change
in ownership of more than 50% of the total issued and outstanding shares of
Tenant shall constitute an assignment for the purposes of the paragraph. If
consent is once given by Landlord to any such assignment or subletting, such
consent shall not operate as a waiver of the necessity for obtaining Landlord's
consent to any subsequent assignment or subletting. Any legal costs incurred by
Landlord related to such assignment or subletting shall be paid by Tenant to
Landlord upon demand. Tenant shall provide Landlord with executed copies of any
Assignment. Transfer or Sublease Agreement entered into as provided herein.
ARTICLE XV. ESTOPPEL CERTIFICATE
Tenant shall at any time and from time to time execute, acknowledge and
deliver to Landlord a statement in writing certifying: (a) that this Lease is
unmodified and in full force and effect (or if there has been any modification
hereof that the same is in full force and effect as modified and stating the
nature of the modification or modifications); (b) that to the best of its
knowledge Landlord is not in default under this Lease (or if any such default
exists the specific nature and extent thereof); and (c) the date to which rent
and other charges have been paid in advance, if any.
ARTICLE XVI. TAXES
SECTION 1. Tenant shall pay before delinquency any and all taxes and
assessments, and license, sales, business, occupation or other taxes, fees or
charges levied, assessed or imposed upon its business operations in the
Premises.
SECTION 2. Tenant shall pay before delinquency any and all taxes and
assessments levied, assessed or imposed upon its trade fixtures, leasehold
improvements, merchandise and other personal property in, on, or upon the
Premises.
SECTION 3. In the event any taxes, fees or charges referred to in the
preceding Section 1 and/or Section 2 shall be assessed, levied or imposed upon
or in connection with the business or property of Landlord, such assessment,
taxes, fees or charges shall be paid by Tenant to Landlord promptly upon
Landlord's request for such payment.
SECTION 4. Landlord shall pay before delinquency any and all costs and
expenses of every kind and nature for real estate ad valorem taxes, and/or fees,
<PAGE>
assessments, charges or payments in lieu thereof, to the Commonwealth of
Kentucky, and/or any political subdivision thereof, including, without
limitation, Jefferson County, and/or any city, municipality, agency or special
district, the Jefferson County School Board, Louisville Water Company, and/or
the Louisville and Jefferson County Metropolitan Sewer District, whether general
or special assessments, including, but not limited to, sewer rents, rates and
charges; drainage fees; water charges; taxes based upon the receipt of rent; and
any other federal, state or local government charge, general, special, ordinary
or extra--ordinary (but not including income or franchise taxes or any other
taxes imposed upon or measured by Landlord's net income or profits, unless the
same is imposed in lieu of real estate taxes), which may now or hereafter be
levied or assessed against the Building or the land on which the Building and
appurtenant parking areas and driveways are located. If at any time during the
term of this Lease the method of taxation then prevailing shall be altered so
that any new tax, assessment, levy, imposition or charge shall be imposed upon
Landlord in place or partly in place of any such taxes and shall be measured by
or be based in whole or in part upon the Building or the rents or other income
therefrom, then all such new taxes, assessments, levies, imposition or charge
shall be imposed upon Landlord in place or partly in place of any such taxes and
shall be measured by or be based in whole or in part upon the Building or the
rents or other income therefrom, then all such new taxes, assessments, levies,
impositions or charges or part thereof, to the extent that they are measured or
based, shall be included in the definition of Landlord's costs and expenses
within the meaning of this subparagraph. Tenant shall only be directly
responsible for taxes, if any, on its personal property and on the value of its
special leasehold improvements exclusive of standard building improvements.
ARTICLE XVII. PRIORITY OF LEASE
This Lease shall, unless Landlord otherwise elects, be subordinate to
any and all mortgages and other security instruments now existing, or which may
hereafter be made covering the Building and/or the real property underlying the
same or any portion or portions thereof, and for the full amount of all advances
made or to be made thereunder (without regard to the time or character of such
advances), together with interest thereon, and subject of all the terms and
provisions thereof and to any renewals, extensions, modifications and
consolidations thereof; and Tenant covenants within ten days of demand to make,
execute, acknowledge and deliver upon request any and all documents or
instruments demanded by Landlord which are or may be necessary or proper for
more fully and certainly assuring the subordination of this Lease to any such
mortgages or other security instruments, provided, however, that any person or
persons purchasing or otherwise acquiring any interest at any sale and/or other
proceedings under such mortgages or other security instruments may elect to
continue this Lease in full force and effect in the same manner, and with like
effect, as if such person or persons had been named as Landlord herein, and in
the event of such election, this Lease shall continue in full force and effect
as aforesaid, and Tenant hereby shall continue in full force and effect as
aforesaid, and Tenant hereby attorns and agrees to attorn to such person or
persons. Tenant hereby irrevocably appoints Landlord the attorney-in-fact of
Tenant, to execute and deliver any document provided for herein, for and in the
name of Tenant.
<PAGE>
ARTICLE XVIII. FIXTURES AND PERSONAL PROPERTY; SURRENDER
SECTION 1. Upon the termination of this Lease, Tenant shall surrender
to Landlord the Premises (including, without limitation, all non-moveable
leasehold improvements) in good condition and repair reasonable wear, tear and
damage by casualty not caused by Tenant or its agents or employees excepted. All
improvements, additions, and fixtures made or installed from time-to-time by
Landlord to, in, upon, or about the Premises, including, but not limited to, all
lighting fixtures, shall be the property of Landlord and upon any such
termination, shall be surrendered to Landlord by Tenant without any injury,
damage or disturbance thereto or payment thereof.
SECTION 2. All fixtures, furniture, movable partitions, machinery,
equipment and other personal property installed or placed in said Premises at
the cost of or by Tenant shall at all times remain, be considered and treated as
the personal property of Tenant and in no sense part of the real estate, and
Tenant shall have the right at any time during the term of this Lease and any
extension thereof, or within a period of ten (10) days after any termination
hereof to remove the same or any part thereof from said Premises, provided,
however, that upon the removal of any such personal property, Tenant agrees to
restore the area from which the same has been removed to substantially the same
condition as it was prior to the installation thereof and to the extent
necessary to keep Premises in a leasable and usable condition for future
tenants. If Tenant fails to remove any such personal property, Landlord may at
Landlord's option retain all or any of such property and title thereto shall
thereupon vest in Landlord, Landlord may remove from the Premises and dispose of
in any manner all or any of such property, in which latter event Tenant shall,
upon demand, pay to Landlord the actual expense of such removal and disposition,
and the cost of repair of any and all damage to the Premises resulting from or
caused by such removal.
ARTICLE XIX. HOLD OVER TENANCY
If Tenant shall, without execution of a new Lease or written extension,
and with consent of Landlord, hold over after the expiration of the terms of
this Lease, such tenancy shall be a month-to-month tenancy, which may be
terminated as provided by law. During such tenancy, Tenant shall pay to Landlord
the greater of (a) the rental rate then being quoted by Landlord for comparable
space in the Building; or (b) the Rent pursuant to Article III. During such
tenancy, Tenant shall be bound by all of the terms, covenants, and conditions as
herein specified, as far as applicable; provided, however that if Tenant fails
to surrender the Premises upon the termination of this Lease, in addition to any
other liabilities to Landlord arising therefrom Tenant shall indemnify and hold
Landlord harmless from loss or liability resulting from such failure, including
any claims made by any succeeding Tenant founded on such failure.
<PAGE>
ARTICLE XX. WAIVER OF SUBROGATION
Landlord and Tenant each releases and relieves the other and on behalf
of its insurer(s) waives its entire right of recovery against the other for loss
or damage arising out of or incident to the perils of fire, explosion, or any
other perils generally described in the "extended coverage" insurance
endorsements used in Louisville which occur in, on or about the Building and/or
the Premises, whether due to the negligence of such other party, its agents or
employees, or otherwise.
ARTICLE XXI. NOTICES
Wherever in this Lease it shall be required or permitted that notice,
approval, advice, consent or demand be given or served by either party to this
Lease to or on the other, such notice or demand shall be given or served and
shall not be deemed to have been duly given or served unless in writing and
forwarded by certified or registered mail, addressed as follows:
To Landlord: Jaytee Properties
Republic Corporate Center
Louisville, Kentucky 40202-2700
Attention: Mr. Bernard Trager
To Tenant: At the Premises
Either party may change such address by written notice by certified or
registered mail to the other.
ARTICLE XXII. RIGHTS RESERVED BY LANDLORD
SECTION 1. Landlord shall have the sole and exclusive right to
designate (and from time to time, in its discretion, re-designate) the name,
address, number and/or designation of the Building.
ARTICLE XXIII. CONDEMNATION
In the event that during the term of this Lease the Premises as
identified in Article I, Section 1 hereof, or any part thereof, or the use or
possession thereof, is taken in condemnation proceedings or by any right of
eminent domain or for any public or quasi-public use, this Lease and the term
hereby granted shall terminate and expire on the date when possession shall be
taken by the condemnor, and rent and all other charges payable hereunder shall
be apportioned and paid in full up to that date and all prepaid unearned rent
<PAGE>
and all other charges payable and paid in full up to that date and all prepaid
unearned rent and all other charges payable hereunder shall forthwith be repaid
by Landlord to Tenant, and Tenant shall not be liable to Landlord for rent or
any other charges payable hereunder, damage, or otherwise, for, or by reason of
any matter or thing occurring thereafter. Tenant hereby waives any and all
rights in, or to any condemnation awards. In the event that during the term of
this Lease a material amount of the parking area or a material amount of the use
or possession thereof is taken in condemnation proceedings or by any right of
eminent domain or for any public or quasi-public use and no alternative parking
is provided, the term of this Lease shall at the option of Tenant cease and
terminate from the date of title vesting in such proceeding.
ARTICLE XXIV. MISCELLANEOUS PROVISIONS
SECTION 1. The term "Landlord" as used in this Lease, so far as
covenants or obligations on the part of Landlord are concerned, shall be limited
to mean and include only the owner or co-owners, at the time in question, of the
Premises, and in the event of any transfer or transfers of the title to the
Premises, Landlord herein named (and in case of any subsequent transfers or
conveyances, the then grantor) shall be automatically freed and relieved from
and after the date of such transfer or conveyance of all liability as respects
the performance or any covenants or obligations on the part of Landlord
contained in this Lease thereafter to be performed.
SECTION 2. The captions of Articles of this Lease are for convenience
only and shall not be considered or referred to in resolving questions of
interpretation or construction.
SECTION 3. The terms "Landlord and Tenant", wherever used herein shall
be applicable to one or more persons, as the case may be, and the singular shall
include the plural, and the neuter shall include the masculine and feminine, and
if there be more than one, the obligations hereof shall be joint and several.
SECTION 4. The word "person" and the word "persons" wherever used in
this Lease shall both include individuals, partnerships, firms, associations,
and corporations of any other form of business entity.
SECTION 5. The various rights, options, elections, powers, and remedies
contained in this Lease shall be construed as cumulative and no one of them
shall be exclusive of any of the others, or of any other legal or equitable
remedy which either party might otherwise have in the event of breach or default
in the terms thereof, and the exercise of one right or remedy by such party
shall not impair its right to any other right or remedy until all obligations
upon the other party have been fully performed.
SECTION 6. Time is of essence with respect to the performance of each
of the covenants and agreements under this Lease.
<PAGE>
SECTION 7. Each and all of the provisions of this Lease shall be
binding upon and inure to the benefit of the parties hereto and, except as set
forth in Section 1 of this Article and as otherwise specifically provided
elsewhere in this Lease, their respective heirs, executors, administrators,
successors, and assigns, subject at all times, nevertheless, to all agreements
and restrictions contained elsewhere in this Lease with respect to the
assignment, transfer, encumbering or sub-letting of all or any part of Tenant's
interest in this Lease.
SECTION 8. This Lease shall be interpreted in accordance with the law
of the Commonwealth of Kentucky.
SECTION 9. No waiver of any default by Tenant hereunder shall be
implied from any omission by Landlord to take any action on account of such
default if such default persists or is repeated, and no express waiver shall
affect any default other than the default specified in the express waiver, and
that only for the time and to the extent therein stated. The acceptance by
Landlord of rent with knowledge of the breach of any of the covenants of this
Lease by Tenant shall not be deemed a waiver of any such breach. One or more
waivers of any breach of any covenant, term or condition of this Lease shall not
be construed as a waiver of any subsequent breach of the same covenants, term of
condition. The consent or approval by Landlord to or of any act by Tenant
requiring Landlord's consent or approval shall not be deemed to waive or render
unnecessary Landlord's consent or approval to or of any subsequent similar acts
by Tenant.
SECTION 10. If Tenant shall default in the performance of any covenant
on its part to be performed by virtue of any provisions of this Lease, Landlord
may, after any notice and the expiration of any period with respect thereto as
required pursuant to the applicable provisions of this Lease, perform the same
for the account of Tenant. If Landlord, at any time, is compelled to pay or
elects to pay any sum of money or do any acts which would require the payment of
any sum of money by reason of the failure of Tenant, after any notice and the
expiration of any period with respect thereto, as required pursuant to the
applicable provisions of the Lease, to comply with any provisions of this Lease,
the sum or sums so paid by Landlord with all interest, costs and damages, shall
be deemed to be additional rental hereunder and shall be due from Tenant to
Landlord on the first day of the month following the incurring of such
respective expenses, except as otherwise herein specifically provided.
SECTION 11. If Tenant or Landlord shall bring any action for any relief
against the other, declaratory or otherwise, arising out of this Lease,
including any suit by Landlord for the recovery of rent, additional rent or
other payments hereunder or possession of the Premises, the losing party shall
pay the prevailing party a reasonable sum for attorneys' fees in such suit, at
trial and on appeal, and such attorneys' fees shall be deemed to have accrued on
the commencement of such action.
SECTION 12. This Lease contains all covenants and agreements between
Landlord and Tenant relating in any manner to the rental, use and occupancy of
the Premises and Tenant's licensed use of the Building and other matters set
forth in this Lease. No prior agreement or understanding pertaining to the same
shall be valid or of any force or effect, and the covenants and agreements of
this Lease cannot be altered, changed, modified or added to except in writing
signed by Landlord and Tenant. No representation, inducement, understanding or
anything of any nature whatsoever made, stated or represented on Landlord's
behalf, either orally or in writing (except this Lease) has induced Tenant to
enter into this Lease.
<PAGE>
SECTION 13. Any provision or provisions of this Lease which shall prove
to be invalid, void or illegal shall in no way affect, impair or invalidate any
other provision hereof, and the remaining provisions hereof shall nevertheless
remain in full force and effect.
SECTION 14. Except with respect to those conditions, covenants and
agreements of this Lease which by their nature could only be applicable after
the commencement of, during or throughout the term of this Lease, all of the
other conditions, covenants and agreements of this Lease shall be deemed to be
effective as of the date of execution of this Lease.
SECTION 15. Landlord and Tenant each represents that neither is
responsible for any real estate brokerage fee, and shall indemnify each other
against loss, cost, liability, or expense incurred by either as a result of any
claim asserted by any such broker, finder or other person on the basis on any
arrangements or agreements made or alleged to have been made by or on behalf of
either Landlord or Tenant, as the case may be.
IN WITNESS WHEREOF, the parties have caused this Lease to be duly executed and
delivered as of the day and year first above written.
ATTEST: JAYTEE PROPERTIES
BY: /s/ M A Ringswald BY:/s/ Steve Trager
--------------------------- -------------------------------
ATTEST:
REPUBLIC BANK & TRUST COMPANY
/s/ Bill Petter
- ---------------------------
Bill Petter, E.V.P.
<PAGE>
EXHIBIT A
Landlord shall provide to following base construction for the Premises:
1. Concrete Floor
2. Equipped bathrooms with exterior doors.
3. No interior demising walls.
4. Sprinkler heads.
Electrical specifications provided by Landlord:
1. 200 amp service.
2. RJ 21 telephone outlet.
3. Connection to standard HVAC.
All additional work to be provided by Tenant and approved and supervised by
Landlord prior to installation.
<PAGE>
EXHIBIT B
RULES AND REGULATIONS
1. No advertisement, sign, lettering, notice or device shall be placed in
or upon the Premises or the Building, including any windows, walls and
exterior doors, except such as may be approved in writing by Landlord.
2. Lettering upon the doors as required by Tenant shall be made by the
sign company designated by Landlord, but the cost shall be paid by
Tenant. The directories of the Building will be provided exclusively
for the display of the name and location of Tenant and its designated
representative only, and Landlord reserves the right to exclude any
other names therefrom.
3. No additional locks shall be placed upon any doors of the Premises, and
Tenant agrees not to have any duplicate keys made without the consent
of Landlord. If more than two keys for any door lock are desired, such
additional keys shall be paid for by Tenant. Upon termination of this
Lease, Tenant shall surrender all keys.
4. No furniture, freight, supplies not carried by hand or equipment of any
kind shall be brought into or removed from the Building without the
consent of Landlord. Landlord shall have the right to limit the weight
and size and to designate the position of all safes and other heavy
property brought into the Building. Such furniture, freight, equipment,
safes and other heavy property shall be moved in or out of the Building
only at the times and in the manner permitted by Landlord. Landlord
will not be responsible for loss of or damage to any of the items above
referred to, and all damage done to the Premises or the Building by
moving or maintaining any of such items shall be repaired at the
expense of Tenant. Any merchandise not capable of being carried by hand
shall utilize hand trucks equipped with rubber tires and rubber side
guards.
5. The entrances, corridors, stairways and elevators shall not be
obstructed by Tenant, or used for any other purpose than ingress or
egress to and from Premises. Tenant shall not bring into or keep any
animal within the Building, or any bicycle or other type of vehicle.
6. Tenant shall not disturb other occupants of the Building by making an
undue or unseemly noise, or otherwise. Tenant shall not, without
Landlord's prior written consent, install or operate in or on Premises
any machine or machinery causing noise or vibration perceptible outside
the Premises, electric heater, stove or machinery or any kind or carry
on any mechanical business thereon, or keep or use thereon oils,
burning fluids, camphene, kerosene, naphtha, gasoline, or other
coustible materials. No explosives shall be brought into the Building.
<PAGE>
7. Tenant shall not mark, drive nails, screw or drill into woodwork or
plaster, paint or in any way deface the Building or any part thereof,
or the Premises or any part thereof, or fixtures therein. The expense
of remedying any breakage, damage or stoppage resulting from a
violation of this rule shall be borne by Tenant.
8. If Tenant installs upon the Premises any electrical equipment which
constitutes an overload on the electrical line serving the Premises or
the Building, Tenant shall make all necessary changes to reduce such
overload, or at the option of Landlord, eliminate such equipment as
Landlord deems necessary to reduce the electrical capacity required to
serve the Premises.
9. Canvassing, soliciting, and peddling in the Building is prohibited and
Tenant shall cooperate to prevent such activity.
10. The requirements of Tenant will be attended to only upon application at
the Landlord's office in the Building. Building employees shall not
perform any work or do anything outside of the regular duties, except
on issuance of special instructions from the office of the Building. If
the Building employees are made available for the assistance of Tenant,
Landlord shall be paid for their services by Tenant at reasonable
hourly rates. No Building employee will admit any person (Tenant or
otherwise) to any office without specific instructions from the office
of the Building.
11. Landlord reserves the right to close and keep locked all entrance and
exit doors of the Building on Sundays, legal holidays, and between the
hours of 9:00 p.m. of any day and 7:00 a.m. of the following day, and
during such further hours as Landlord may deem advisable for the
adequate protection of the Building and the property of the tenants.
Tenant shall have 24-hour access to the Premises.
EASTERN BOULEVARD PROPERTY
CLARKSVILLE, INDIANA
INDEX TO LEASE
Article Page
I. Premises 1
II. Term 2
III. Rent and Operating Expenses 2
IV. Use 2
V. Possession 3
VI. Services to be Provided 3
VII. Maintenance and Repair; Alterations 3
VIII. Access 4
IX. Damage or Destruction 4
X. Indemnity 5
XI. Insolvency, Etc. 5
XII. Remedies 6
XIII. Insurance 6
XIV. Liens 8
XV. Assignment; Subletting; Mortgaging 8
XVI. Estoppel Certificate 9
XVII. Taxes 9
XVIII. Priority of Lease 10
<PAGE>
INDEX TO LEASE
Article Page
XIX. Fixtures and Personal Property; 10
Surrender
XX. Hold over Tenancy 11
XXI. Waiver of Subrogation 11
XXII. Notices 12
XXIII. Rights Reserved by Landlord 12
XXIV. Condemnation 12
XXV. Miscellaneous Provisions 13
<PAGE>
OFFICE LEASE
THIS LEASE, dated this 1st day of May, 1999, is between
Jaytee Properties Limited Partnership, hereinafter referred to as
"Landlord," and Republic Bank & Trust Company, hereinafter referred to
as the "Tenant". As parties hereto, and in consideration of the mutual
covenants herein contained, Landlord and Tenant agree as follows:
ARTICLE I. PREMISES
SECTION 1. Tenant leases from Landlord and Landlord leases to
Tenant the following described premises (hereinafter called the
"Premises"):
Commonly known as 610 Eastern Boulevard, Clarksville, Indiana
47130, as more particularly described on Exhibit A attached
hereto and made a part hereof, together with all improvements
thereon, and any sign permanently affixed thereto.
SECTION 2. The Premises shall be provided in "as is"
condition. Tenant acknowledges he has examined the Premises, knows the
condition of the Premises, and accepts the Premises in the condition as
currently existing. Any remodeling construction and/or redecorating
within the Premises shall be performed to the complete and absolute
satisfaction of Landlord. The Landlord's written approval shall be
obtained by Tenant prior to commencement of any and all improvements
and the construction of improvements shall be supervised and approved
by Landlord on a continuous basis.
SECTION 3. This lease confers no rights with respect to the
Building other than tenancy of the Premises and the non-exclusive
license to use the Building, during such tenancy.
ARTICLE II. TERM
Landlord leases the Premises to Tenant, and Tenant hires and
takes the Premises from Landlord, for a one year term commencing on the
first day of April 1999, or, upon actual possession no later than sixty
days from Landlord's delivery of the Premises to the Tenant for
construction of Tenant's improvements, whichever occurs later (the
"Lease Commencement Date") and expiring at midnight on the last day of
the twelfth month thereafter unless sooner terminated pursuant to the
terms hereof. "Lease Year" shall mean a year period beginning on the
first day of a month, which is the first calendar month of the term of
the Lease and ending on the day before the anniversary of the first day
of such year.
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ARTICLE III. RENT
SECTION 1. Tenant shall pay to Landlord, at Landlord's office
in the Building or at such place as Landlord may from time to time
designate, as rental for the Premises, the sum of Four thousand dollars
and no cents($ 4,000.00) per month (the "Rent"). Rent shall be payable
in advance on the first day of each calendar month during the Lease
term.
SECTION 2. In the event that the Rent, or any other sum
payable by Tenant to Landlord under this lease, shall not be received
(paid) within ten (10) days of the due date thereof, Landlord may, at
its option, add a monthly service charge, at a rate which shall be the
greater of $ 25.00 or 1% for each month or fraction thereof from such
rent due date during which such Rent or other sum remains unpaid.
Further, in the event that any check which has been remitted to
Landlord by Tenant for payment of the Rent, or any other sum payable
under this Lease, shall not be honored upon its presentation for
payment, then the monthly service charge shall be similarly imposed on
said amount from the due date until paid. Acceptance by the Landlord
for such service charge shall not be deemed to be a waiver by Landlord
of any default nor shall it restrict the remedies otherwise available
to Landlord hereunder.
ARTICLE IV. USE
The Premises are to be used only for the purpose of conducting
the operation of a Bank and any and all related services and for no
other business or purpose without the prior written consent of
Landlord. Tenant shall not do or permit to be done in or about the
Premises anything which is illegal or unlawful; or which is of a
hazardous or dangerous nature; or which will increase the rate(s) of
insurance upon the Building. Tenant shall comply with all governmental
laws and ordinances and all regulations applicable to the use and
occupancy of the Building.
ARTICLE V. POSSESSION
If Landlord permits Tenant to enter into possession of the
Premises prior to the Lease Commencement Date, all of the terms and
conditions of this Lease shall apply during such prior period. Tenant's
taking of possession of the Premises is an acknowledgement that the
Premises are in good and tenantable condition and acceptable for
Tenant's use thereof as provided in this Lease. Barring any natural
disaster or other act of God, if Landlord is unable to deliver
possession of the premises by April 1, 1999, then in such event, Tenant
shall have the option for a period of sixty (60) days thereafter to
terminate the lease upon written notice to Landlord. In the event
Tenant exercises such option to cancel the Lease, neither party shall
have any liability to the other.
ARTICLE VI. SERVICES TO BE PROVIDED
SECTION 1. Landlord shall furnish reasonable amounts of heat,
air conditioning, water, elevator service and janitor service
(collectively "Services") to the Premises during the times and in the
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manner that Landlord determines appropriate for the furnishing of such
services in the Building, all such services being subject to energy
availability or Energy Consumption Regulations which may be hereafter
promulgated. It is expressly agreed that should any local, state or
federal governmental body, agency or public utility restrict or reduce
the amount of fuel or energy which may be utilized to provide the
utilities and services as specified above, then such restriction or
reduction, and the reduction in utilities and services which may result
therefrom, shall in no way create or constitute a default on the part
of the Landlord, and there shall be no reduction or abatement in the
Rent or any other sum payable by Tenant thereunder. Further, Landlord
shall not be liable for any injury, damage, inconvenience, or otherwise
which may arise or result should the furnishing of any such services by
interrupted or prevented by fire, accident, strike, riot, act of God,
the making of necessary repairs or improvements, or any other cause
beyond the reasonable control or prevention of Landlord, nor, subject
only to the provisions of Article X of this Lease, shall the Rent
payable by Tenant hereunder abate.
SECTION 2. Payment for all utilities used upon or in
connection with the Premises shall be make by Tenant.
ARTICLE VII. MAINTENANCE AND REPAIR; ALTERATIONS
SECTION 1. Landlord shall keep and maintain the roof,
foundations, floor slab, and all structural walls (including windows
and plate glass), gutters and downspouts of the Premises in good order
and repair. Landlord shall keep or cause to be kept in good repair all
common areas of the Building and appurtenant areas, including lighting
systems; drainage systems; mechanical, plumbing, and electrical
systems; heat and air conditioning units; ductwork, lines, pipes, and
conduits serving the Premises; and parking areas and driveways. Any
maintenance, repairs or replacements to any of the foregoing made
necessary by any acts or omissions of the Tenant, its agents or
employees, shall be paid for by Tenant and Tenant shall reimburse
Landlord on demand for the cost of repairing any damage to the Premises
or the Building caused by Tenant or its agents or employees. In the
event, after reasonable notice to Landlord, Landlord fails to make any
repairs as herein before provided, then Tenant shall have the right to
make these repairs and deduct the cost thereof from any future rental
payments.
SECTION 2. All maintenance, repairs, or replacements relating
to the premises that are not the obligation of Landlord as set forth in
Section 1 above shall be the obligation of Tenant and shall be made by
Tenant at Tenant's sole cost and expense. Tenant shall maintain, at its
expense, the interior of the Premises in good repair and in a clean and
attractive condition. Tenant's obligation to maintain, repair and
replace includes, but is not limited to, all the interior of the
Premises. In the event Tenant fails to comply with the requirements of
this Section, Landlord may effect such maintenance and repair and the
cost thereof, with interest at the rate of 10.0% per annum, which shall
be payable immediately to Landlord as additional rent. In the event the
applicable Statutes of the State of Indiana at any time shall allow for
a higher rate of interest under an instrument in writing, then such
higher rate shall apply and be payable.
<PAGE>
SECTION 3. Tenant shall not make any alterations, additions or
improvements to the Premises without first obtaining Landlord's prior
written consent. In connection with any such request for Landlord's
consent to such alterations, additions or improvements to the Premises,
Landlord may retain the services of an architect and/or engineer; and
the reasonable costs for the services of such architect and/or engineer
shall be reimbursed to Landlord by Tenant. Landlord may make any
repairs for the preservation, safety or improvement of the Premises or
the Building. All alterations, and improvements made by Tenant shall be
paid for by Tenant and shall become the property of Landlord and shall
be surrendered to landlord upon the expiration of this Lease.
ARTICLE VIII. ACCESS
Landlord and its agents shall have the right to enter into and
upon the Premises at all reasonable times with reasonable notice for
the purpose of inspecting, cleaning, repairing, altering or improving
the Premises or the Building with the exception of an emergency
situation. Landlord shall have the right to show the Premises to
prospective tenants, prospective purchasers and lenders upon the
Building at all reasonable times. Any damage or loss caused to the
Premises and/or to the Tenant by any use of or access to the Premises
by Landlord shall be repaired by Landlord at Landlord's expense.
ARTICLE IX. DAMAGE OR DESTRUCTION
SECTION 1. If the Premises are damaged or destroyed, in whole
or in substantial part, and SECTION 2 does not apply, then Landlord may
elect to terminate this Lease as of the date of the damage or
destruction by notice given to Tenant in writing not more than twenty
(20) days following the date of damage or destruction. If Landlord does
not elect to terminate, Landlord shall, at Landlord's expense, proceed
to restore the property to substantially the same form, condition and
quality as prior to the damage or destruction. If Landlord elects to
rebuild and repair, Landlord shall proceed as soon as reasonably
possible and thereafter shall proceed without interruption and be
completed within one hundred-eighty (180) days after notice has been
given of Landlord's intent to rebuild and repair, except for work
stoppages on account of labor disputes and matters not under the
control of the Landlord. During such period of repair or restoration,
the Rent shall be abated in the same proportion as the untenantable
portion of the Premises bears to the entire Premises identified in
SECTION 1 of ARTICLE I of the Lease.
SECTION 2. If the Premises is damaged or destroyed, (i) to the
extent that more than fifty percent (50%) of the Building is damaged or
destroyed, or (ii) to the extent that more than fifty percent (50%) of
the Premises is damaged or destroyed, then in such event, Tenant may
elect to terminate this Lease as of the date of the damage or
destruction by notice given to Landlord in writing not more than twenty
(20) days following the date of damage or destruction.
<PAGE>
SECTION 3. Notwithstanding anything contained in this Article
to the contrary, Landlord shall not be required to repair, replace,
restore, or rebuild any property which Tenant shall be entitled to
remove from the Premises under the provisions of this Lease; it being
agreed that Tenant shall bear the entire risk of loss, damage or
destruction of such property while it is in the Building.
SECTION 4. If either party elects to terminate the Lease,
Tenant shall be entitled to reimbursement for any prepaid rent or other
amounts paid by Tenant and attributable to the unused term of the
Lease.
ARTICLE X. INDEMNITY
Tenant shall indemnify and hold Landlord harmless from all
loss, damage, liability or expense resulting from an injury to or death
of any person or any loss of or damage to any property caused by or
resulting from any act or omission of Tenant or any officer, agent,
employee, guest, invitee or visitor of Tenant in or about the Premises
or the Building, but the foregoing provision shall not be construed to
make Tenant responsible for injuries to third parties caused by the
negligence of Landlord or any agent or employee of landlord. The
Landlord shall remain responsible for any injury to, or death of any
person or any loss of or damage to property sustained by any person
whatsoever which may be caused by the Building or any equipment or
appurtenances thereto or thereof being or becoming defective or out of
repair. Landlord shall be and remain liable for the negligent acts or
omissions of Landlord, its agents and employees.
ARTICLE XI. INSOLVENCY
If leasehold interest of Tenant be levied upon under execution
or be attached, or if any voluntary or involuntary petition or similar
pleading relating to bankruptcy shall be filed by or against Tenant or
a majority of Tenant's shareholders, or if any voluntary proceedings in
any court shall be instituted by or against Tenant or the majority of
its shareholders to declare Tenant or the majority of its shareholders
insolvent or unable to pay their debts, or if Tenant makes an
assignment for the benefit of creditors, or if a receiver is appointed
for any property of Tenant, which filing, proceeding, assignment or
appointment is not dismissed or cancelled within sixty days after the
institution of same, or if Tenant shall default in payment of any;
other debt or then in such event Landlord may if Landlord so elects and
with; or without notice of such election and with or without any demand
whatsoever terminate this lease upon notice to Tenant, and upon such
termination all rights of Tenant hereunder shall cease and Tenant shall
surrender possession and vacate the Premises immediately.
ARTICLE XII. REMEDIES
SECTION 1. If at any time Tenant shall (a) fail to remedy any
default in the payment of any sum due under this Lease for ten (10)
days after notice; (b) fail to remedy any default with respect to any
<PAGE>
other of these provisions, covenants or conditions of this Lease to be
kept or performed by Tenant, within thirty (30) days after notice (or,
in the event the default is of such a nature that it cannot be remedied
within said thirty (30) day period, then such additional time as may be
necessary for Tenant to cure such default, within the thirty (30) day
period and thereafter diligently prosecutes the same to completion); or
(c) vacate or abandon the Premises, or fail to conduct its business
therein, for a period of five (5) consecutive business days, and then
fail to reoccupy and reestablish the conduct of business in the
Premises within ten (10) days following the date of written notice from
Landlord of such failure; then Landlord shall have all such rights and
remedies as are provided by law in respect of such default, including,
at Landlord's election, the right to terminate this Lease, and all
Tenant's rights hereunder shall be terminated.
The liability of Tenant for the Rent, and other payments
provided for herein shall not be extinguished for the balance of this
Lease, and Tenant shall make good to Landlord any deficiency arising
from such reletting of the Premises, plus the costs and expenses of
renovating, altering and reletting the Premises, and including
attorneys' fees or brokers' fees incident to Landlord's reentry or
reletting. Tenant shall pay any such deficiency each month, as the
amount thereof is ascertained by Landlord, or, at Landlord's option,
Landlord may recover, in addition to any other sums, the amount at the
time of judgement by which the unpaid Rent, and other payments for the
balance of the term, after judgement, exceeds the amount thereof which
Tenant proves could be reasonably avoided, discounted at the rate of
7%. In reletting the Premises, Landlord may grant rent concessions and
Tenant shall not be credited therefor. Nothing herein shall be deemed
to affect the right of Landlord to recover for indemnification under
Article X herein arising prior to the termination of this Lease.
SECTION 2. Landlord shall in no event be in default in the
performance of any of its obligations in this Lease contained unless
and until Landlord shall have failed to perform such obligation within
thirty (30) days, or such additional time as is reasonably required to
correct any such default after notice by Tenant to Landlord properly
specifying wherein Landlord has failed of perform any such obligation.
ARTICLE XIII. INSURANCE
SECTION 1. Tenant covenants and agrees that from and after the
date of delivery of the Premises from Landlord to Tenant and at all
times during possession thereof, Tenant will procure and maintain in
full force and effect, at its sole cost and expense, the following
types of insurance, in the minimum amounts specified below:
A. Public Liability and Property Damage. Personal injury
liability, bodily injury liability and property damage
insurance in a single limit of not less than One Million
Dollars ($1,000,000), of which insurance shall insure the
performance by Tenant of the indemnity agreement as to
liability for injury to or death of persons and injury or
damage to property as provided in Article X hereof. All of
such insurance shall be primary and noncontributing with any
insurance that may be carried by Landlord. The adequacy of the
coverage afforded by said liability and property damage
insurance shall be subject to review by Landlord from time to
time, and Landlord retains the right to increase or decrease
said limits at such times.
<PAGE>
B. Tenant Improvements. Insurance covering all of the lease-hold
improvements, (excepting only the structural components of
the Building and demising partitions), and Tenant's trade
fixtures, and personal property from time to time in and/or
upon the Premises, in an amount of not less than the full
replacement cost thereof without deduction for depreciation,
providing protection against any peril included within the
classification "Fire and Extended Coverage", together with
insurance against sprinkler damage, vandalism and malicious
mischief. Any policy proceeds shall be used for the repair or
replacement of the property damaged or destroyed unless
this Lease shall cease and terminate under the applicable
provisions herein. If the Premises shall not be repaired
or restored following damage or destruction in accordance
with other provisions herein, Landlord shall received from
such insurance proceeds and amount equal to the replacement
cost of the Tenant's leasehold improvements.
C. Business Interruption. Business interruption insurance with
sufficient coverage to provide for payment of rent and other
fixed costs during any interruption of Tenant's business by
reason of fire or other similar cause.
SECTION 2. All policies shall be for the mutual and joint
benefit and protection of Landlord and Tenant, with Landlord being
named as an additional insured. Certificates of such policies shall be
delivered to Landlord within ten (10) days after delivery of possession
of the Premises to Tenant and thereafter within thirty (30) days prior
to the expiration of the term of each such policy. All public liability
and property damage policies shall contain a provision that Landlord,
although named as an insured, shall nevertheless be entitled to
recovery under said policies for any loss occasioned to it, its
servants, agents, and employees by reason of the acts, omissions and/or
negligence of Tenant. As often as any such policy shall expire or
terminate, renewal or additional policies shall be procured and
maintained by Tenant in like manner and to like extent. All policies of
insurance must contain a provision that the company writing said policy
will give to Landlord thirty (30) days' notice, in writing, in advance
of any cancellation or lapse, or the effective date of any reduction in
the amounts of insurance. All public liability, property damage and
other casualty policies shall be written as primary policies, not
contributing with and not in excess of coverage which Landlord may
carry. Landlord may, from time to time, request Tenant to provide
Landlord with a certified copy of all insurance coverage carried by
Tenant.
SECTION 3. Tenant agrees to pay to Landlord forthwith upon
demand the amount of any increase in premiums for insurance against
loss by fire that may be charged during the term of this Lease on the
amount of insurance maintained in force by Landlord on the Building, of
which the Premises are a part, resulting from Tenant doing any act in
or about said Premises which does so increase the insurance rates,
whether or not Landlord shall have consented to such act on the part of
Tenant. If Tenant installs upon the Premises any electrical equipment
which constitutes an overload on the electrical lines of the Premises,
<PAGE>
Tenant shall at its own expense make whatever changes are necessary to
comply with the requirements of the insurance underwriters any
governmental authority having jurisdiction thereover, but nothing
herein contained shall be deemed to constitute Landlord's consent to
such overloading.
ARTICLE XIV. LIENS
Tenant shall keep the Premises free and clear of, and shall
indemnify Landlord against all mechanics' liens and other liens on
account of work done for or materials, supplies and equipment furnished
to Tenant by persons claiming under it for maintenance, repairs and
alterations. Tenant shall reimburse Landlord for all costs and
attorneys' fees incurred by Landlord in investigating, defending or
clearing such lien to be cleared within thirty (30) days of filing of
same unless Tenant shall have provided security acceptable to landlord
against any loss to Landlord on account thereof. As a condition to
Landlord's consent pursuant to Article VII, Landlord may require Tenant
to provide Landlord with reasonable payment and performance bonds of
those persons contracted by Tenant to perform work on or in the
Premises that could be the subject of such a lien in order to protect
the Premises, the Landlord, and any mortgagee from and against liens of
mechanics and materialmen performing work in or providing services and
equipment to the Premises.
ARTICLE XV. ASSIGNMENT; SUBLETTING; MORTGAGING
SECTION 1. Tenant shall not voluntarily, involuntarily or by
operation of law assign, transfer, mortgage or otherwise encumber all
or any part of Tenant's interest in this Lease, or sublet the Premises
or any part thereof, without first obtaining in each and every instance
Landlord's prior written consent. Subject to the foregoing, Tenant
shall not assign, transfer or sublet the Premises, or any part thereof,
at a rent to Assignee, Transferee or Sublessee, greater than $19 per
square foot. Any transfer of this Lease by merger, consolidation, or
liquidation, or any change in the ownership of, or power to vote the
majority of its outstanding voting stock resulting in a change in
ownership of more than 50% of the total issued and outstanding shares
of Tenant shall constitute an assignment for the purposes of the
paragraph. If consent is once given by Landlord to any such assignment
or subletting, such consent shall not operate as a waiver of the
necessity for obtaining Landlord's consent to any subsequent assignment
or subletting. Any legal costs incurred by Landlord related to such
assignment or subletting shall be paid by Tenant to Landlord upon
demand. Tenant shall provide Landlord with executed copies of any
Assignment. Transfer or Sublease Agreement entered into as provided
herein.
ARTICLE XVI. ESTOPPEL CERTIFICATE
Tenant shall at any time and from time to time execute,
acknowledge and deliver to Landlord a statement in writing certifying:
(a) that this Lease is unmodified and in full force and effect (or if
there has been any modification hereof that the same is in full force
and effect as modified and stating the nature of the modification or
modifications); (b) that to the best of its knowledge Landlord is not
in default under this Lease (or if any such default exists the specific
nature and extent thereof); and (c) the date to which rent and other
charges have been paid in advance, if any.
<PAGE>
ARTICLE XVII. TAXES
SECTION 1. Tenant shall pay before delinquency any and all
taxes and assessments, and license, sales, business, occupation or
other taxes, fees or charges levied, assessed or imposed upon its
business operations in the Premises.
SECTION 2. Tenant shall pay before delinquency any and all
taxes and assessments levied, assessed or imposed upon its trade
fixtures, leasehold improvements, merchandise and other personal
property in, on, or upon the Premises.
SECTION 3. In the event any taxes, fees or charges referred to
in the preceding Section 1 and/or Section 2 shall be assessed, levied
or imposed upon or in connection with the business or property of
Landlord, such assessment, taxes, fees or charges shall be paid by
Tenant to Landlord promptly upon Landlord's request for such payment.
SECTION 4. Tenant shall pay before delinquency any and all
costs and expenses of every kind and nature for real estate ad valorem
taxes, and/or fees, assessments, charges or payments in lieu thereof,
to the State of Indiana, and/or any political subdivision thereof, and
any city, municipality, agency or special district, whether general or
special assessments, including, but not limited to, sewer rents, rates
and charges; drainage fees; water charges; taxes based upon the receipt
of rent; and any other federal, state or local government charge,
general, special, ordinary or extra--ordinary (but not including income
or franchise taxes or any other taxes imposed upon or measured by
Landlord's net income or profits, unless the same is imposed in lieu of
real estate taxes), which may now or hereafter be levied or assessed
against the Building or the land on which the Building and appurtenant
parking areas and driveways are located. If at any time during the term
of this Lease the method of taxation then prevailing shall be altered
so that any new tax, assessment, levy, imposition or charge shall be
imposed upon Landlord in place or partly in place of any such taxes and
shall be measured by or be based in whole or in part upon the Building
or the rents or other income therefrom, then all such new taxes,
assessments, levies, imposition or charge shall be imposed upon Tenant
and shall be included in the definition of Tenant's costs and expenses
within the meaning of this subparagraph. Tenant shall also be directly
responsible for taxes, if any, on its personal property and on the
value of its special leasehold improvements exclusive of standard
building improvements.
ARTICLE XVIII. PRIORITY OF LEASE
This Lease shall, unless Landlord otherwise elects, be
subordinate to any and all mortgages and other security instruments now
existing, or which may hereafter be made covering the Building and/or
the real property underlying the same or any portion or portions
thereof, and for the full amount of all advances made or to be made
thereunder (without regard to the time or character of such advances),
<PAGE>
together with interest thereon, and subject of all the terms and
provisions thereof and to any renewals, extensions, modifications and
consolidations thereof; and Tenant covenants within ten days of demand
to make, execute, acknowledge and deliver upon request any and all
documents or instruments demanded by Landlord which are or may be
necessary or proper for more fully and certainly assuring the
subordination of this Lease to any such mortgages or other security
instruments, provided, however, that any person or persons purchasing
or otherwise acquiring any interest at any sale and/or other
proceedings under such mortgages or other security instruments may
elect to continue this Lease in full force and effect in the same
manner, and with like effect, as if such person or persons had been
named as Landlord herein, and in the event of such election, this Lease
shall continue in full force and effect as aforesaid, and Tenant hereby
shall continue in full force and effect as aforesaid, and Tenant hereby
attorns and agrees to attorn to such person or persons. Tenant hereby
irrevocably appoints Landlord the attorney-in-fact of Tenant, to
execute and deliver any document provided for herein, for and in the
name of Tenant.
ARTICLE IX. FIXTURES AND PERSONAL PROPERTY; SURRENDER
SECTION 1. Upon the termination of this Lease, Tenant shall
surrender to Landlord the Premises (including, without limitation, all
non-moveable leasehold improvements) in good condition and repair
reasonable wear, tear and damage by casualty not caused by Tenant or
its agents or employees excepted. All improvements, additions, and
fixtures made or installed from time-to-time by Landlord to, in, upon,
or about the Premises, including, but not limited to, all lighting
fixtures, shall be the property of Landlord and upon any such
termination, shall be surrendered to Landlord by Tenant without any
injury, damage or disturbance thereto or payment thereof.
SECTION 2. All fixtures, furniture, movable partitions,
machinery, equipment and other personal property installed or placed in
said Premises at the cost of or by Tenant shall at all times remain, be
considered and treated as the personal property of Tenant and in no
sense part of the real estate, and Tenant shall have the right at any
time during the term of this Lease and any extension thereof, or within
a period of ten (10) days after any termination hereof to remove the
same or any part thereof from said Premises, provided, however, that
upon the removal of any such personal property, Tenant agrees to
restore the area from which the same has been removed to substantially
the same condition as it was prior to the installation thereof and to
the extent necessary to keep Premises in a leasable and usable
condition for future tenants. If Tenant fails to remove any such
personal property, Landlord may at Landlord's option retain all or any
of such property and title thereto shall thereupon vest in Landlord,
Landlord may remove from the Premises and dispose of in any manner all
or any of such property, in which latter event Tenant shall, upon
demand, pay to Landlord the actual expense of such removal and
disposition, and the cost of repair of any and all damage to the
Premises resulting from or caused by such removal.
<PAGE>
ARTICLE XX. HOLD OVER TENANCY
If Tenant shall, without execution of a new Lease or written
extension, and with consent of Landlord, hold over after the expiration
of the terms of this Lease, such tenancy shall be a month-to-month
tenancy, which may be terminated as provided by law. During such
tenancy, Tenant shall pay to Landlord the greater of (a) the rental
rate then being quoted by Landlord for comparable space in the
Building; or (b) the Rent pursuant to Article III. During such tenancy,
Tenant shall be bound by all of the terms, covenants, and conditions as
herein specified, as far as applicable; provided, however that if
Tenant fails to surrender the Premises upon the termination of this
Lease, in addition to any other liabilities to Landlord arising
therefrom Tenant shall indemnify and hold Landlord harmless from loss
or liability resulting from such failure, including any claims made by
any succeeding Tenant founded on such failure.
ARTICLE XXI. WAIVER OF SUBROGATION
Landlord and Tenant each releases and relieves the other and
on behalf of its insurer(s) waives its entire right of recovery against
the other for loss or damage arising out of or incident to the perils
of fire, explosion, or any other perils generally described in the
"extended coverage" insurance endorsements used in Louisville which
occur in, on or about the Building and/or the Premises, whether due to
the negligence of such other party, its agents or employees or
otherwise.
ARTICLE XXII. NOTICES
Wherever in this Lease it shall be required or permitted that
notice, approval, advice, consent or demand be given or served by
either party to this Lease to or on the other, such notice or demand
shall be given or served and shall not be deemed to have been duly
given or served unless in writing and forwarded by certified or
registered mail, addressed as follows:
To Landlord: Jaytee Properties Limited Partnership
Republic Corporate Center
Louisville, Kentucky 40202-2700
Attention: Mr. Steve Trager
To Tenant: Republic Bank & Trust Company
601 W. Market Street
Louisville, Kentucky 40202-2700
Attention: Mr. Bill Petter
Either party may change such address by written notice by
certified or registered mail to the other.
<PAGE>
ARTICLE XXIII. RIGHTS RESERVED BY LANDLORD
SECTION 1. Landlord shall have the sole and exclusive right to
designate (and from time to time, in its discretion, re-designate) the
name, address, number and/or designation of the Building.
ARTICLE XXIV. CONDEMNATION
In the event that during the term of this Lease the Premises
as identified in Article I, Section 1 hereof, or any part thereof, or
the use or possession thereof, is taken in condemnation proceedings or
by any right of eminent domain or for any public or quasi-public use,
this Lease and the term hereby granted shall terminate and expire on
the date when possession shall be taken by the condemnor, and rent and
all other charges payable hereunder shall be apportioned and paid in
full up to that date and all prepaid unearned rent and all other
charges payable and paid in full up to that date and all prepaid
unearned rent and all other charges payable hereunder shall forthwith
be repaid by Landlord to Tenant, and Tenant shall not be liable to
Landlord for rent or any other charges payable hereunder, damage, or
otherwise, for, or by reason of any matter or thing occurring
thereafter. Tenant hereby waives any and all rights in, or to any
condemnation awards. In the event that during the term of this Lease a
material amount of the parking area or a material amount of the use or
possession thereof is taken in condemnation proceedings or by any right
of eminent domain or for any public or quasi-public use and no
alternative parking is provided, the term of this Lease shall at the
option of Tenant cease and terminate from the date of title vesting in
such proceeding.
ARTICLE XXV. MISCELLANEOUS PROVISIONS
SECTION 1. The term "Landlord" as used in this Lease, so far
as covenants or obligations on the part of Landlord are concerned,
shall be limited to mean and include only the owner or co-owners, at
the time in question, of the Premises, and in the event of any transfer
or transfers of the title to the Premises, Landlord herein named (and
in case of any subsequent transfers or conveyances, the then grantor)
shall be automatically freed and relieved from and after the date of
such transfer or conveyance of all liability as respects the
performance or any covenants or obligations on the part of Landlord
contained in this Lease thereafter to be performed.
SECTION 2. The captions of Articles of this Lease are for
convenience only and shall not be considered or referred to in
resolving questions of interpretation or construction.
SECTION 3. The terms "Landlord and Tenant", wherever used
herein shall be applicable to one or more persons, as the case may be,
and the singular shall include the plural, and the neuter shall include
the masculine and feminine, and if there be more than one, the
obligations hereof shall be joint and several.
<PAGE>
SECTION 4. The word "person" and the word "persons" wherever
used in this Lease shall both include individuals, partnerships, firms,
associations, and corporations of any other form of business entity.
SECTION 5. The various rights, options, elections, powers, and
remedies contained in this Lease shall be construed as cumulative and
no one of them shall be exclusive of any of the others, or of any other
legal or equitable remedy which either party might otherwise have in
the event of breach or default in the terms thereof, and the exercise
of one right or remedy by such party shall not impair its right to any
other right or remedy until all obligations upon the other party have
been fully performed.
SECTION 6. Time is of essence with respect to the performance
of each of the covenants and agreements under this Lease.
SECTION 7. Each and all of the provisions of this Lease shall
be binding upon and inure to the benefit of the parties hereto and,
except as set forth in Section 1 of this Article and as otherwise
specifically provided elsewhere in this Lease, their respective heirs,
executors, administrators, successors, and assigns, subject at all
times, nevertheless, to all agreements and restrictions contained
elsewhere in this Lease with respect to the assignment, transfer,
encumbering or sub-letting of all or any part of Tenant's interest in
this Lease.
SECTION 8. This Lease shall be interpreted in accordance with
the law of the Commonwealth of Kentucky.
SECTION 9. No waiver of any default by Tenant hereunder shall
be implied from any omission by Landlord to take any action on account
of such default if such default persists or is repeated, and no express
waiver shall affect any default other than the default specified in the
express waiver, and that only for the time and to the extent therein
stated. The acceptance by Landlord of rent with knowledge of the breach
of any of the covenants of this Lease by Tenant shall not be deemed a
waiver of any such breach. One or more waivers of any breach of any
covenant, term or condition of this Lease shall not be construed as a
waiver of any subsequent breach of the same covenants, term of
condition. The consent or approval by Landlord to or of any act by
Tenant requiring Landlord's consent or approval shall not be deemed to
waive or render unnecessary Landlord's consent or approval to or of any
subsequent similar acts by Tenant.
SECTION 10. If Tenant shall default in the performance of any
covenant on its part to be performed by virtue of any provisions of
this Lease, Landlord may, after any notice and the expiration of any
period with respect thereto as required pursuant to the applicable
provisions of this Lease, perform the same for the account of Tenant.
If Landlord, at any time, is compelled to pay or elects to pay any sum
of money or do any acts which would require the payment of any sum of
money by reason of the failure of Tenant, after any notice and the
expiration of any period with respect thereto, as required pursuant to
the applicable provisions of the Lease, to comply with any provisions
of this Lease, the sum or sums so paid by Landlord with all interest,
<PAGE>
costs and damages, shall be deemed to be additional rental hereunder
and shall be due from Tenant to Landlord on the first day of the month
following the incurring of such respective expenses, except as
otherwise herein specifically provided.
SECTION 11. If Tenant or Landlord shall bring any action for
any relief against the other, declaratory or otherwise, arising out of
this Lease, including any suit by Landlord for the recovery of rent,
additional rent or other payments hereunder or possession of the
Premises, the losing party shall pay the prevailing party a reasonable
sum for attorneys' fees in such suit, at trial and on appeal, and such
attorneys' fees shall be deemed to have accrued on the commencement of
such action.
SECTION 12. This Lease contains all covenants and agreements
between Landlord and Tenant relating in any manner to the rental, use
and occupancy of the Premises and Tenant's licensed use of the Building
and other matters set forth in this Lease. No prior agreement or
understanding pertaining to the same shall be valid or of any force or
effect, and the covenants and agreements of this Lease cannot be
altered, changed, modified or added to except in writing signed by
Landlord and Tenant. No representation, inducement, understanding or
anything of any nature whatsoever made, stated or represented on
Landlord's behalf, either orally or in writing (except this Lease) has
induced Tenant to enter into this Lease.
SECTION 13. Any provision or provisions of this Lease, which
shall prove to be invalid, void or illegal shall in no way affect,
impair or invalidate any other provision hereof, and the remaining
provisions hereof, shall nevertheless remain in full force and effect.
SECTION 14. Except with respect to those conditions, covenants
and agreements of this Lease which by their nature could only be
applicable after the commencement of, during or throughout the term of
this Lease, all of the other conditions, covenants and agreements of
this Lease shall be deemed to be effective as of the date of execution
of this Lease.
SECTION 15. Landlord and Tenant each represents and warrants
to the other that it has not engaged any broker, finder or other person
who would be entitled to any commission or fee in respect of the
negotiation, execution or delivery of this Lease, and shall indemnify
each other against loss, cost, liability, or expense incurred by either
as a result of any claim asserted by any such broker, finder or other
person on the basis on any arrangements or agreements made or alleged
to have been made by or on behalf of either Landlord or Tenant, as the
case may be, in breach of the foregoing warranty.
SECTION 16. Any and all consents and approvals of Landlord
required by or referred to in the Lease shall not be unreasonably
withheld.
SECTION 17. Tenant shall provide Landlord with certified
copies of its quarterly call reports along with copies of Republic
Bancorp's annual audited consolidated financial statements.
<PAGE>
SECTION 18. Tenant shall have the exclusive right to erect an
independent sign on Premises.
SECTION 19. Notwithstanding any other provisions contained in
this lease, in the event the Tenant is closed or taken over by the
banking authority of the State of Kentucky, or other bank supervisory
authority, the Landlord may terminate the lease only with the
concurrence of such banking authority or other bank supervisory
authority, and any such authority shall in any event have the election
either to continue or to terminate the lease: provided, that in the
event this lease is terminated, the maximum claim of Landlord for
damages or indemnity for injury resulting from the rejection or
abandonment of the unexpired term of the lease shall in no event be in
an amount exceeding the rent reserved by the lease, without
acceleration, for the year next succeeding the date of the surrender of
the premises to the Landlord, or the date of re-entry of the Lessor,
whichever first occurs, whether before or after the closing of the
bank, plus an amount equal to the unpaid rent accrued without
acceleration up to such date.
SECTION 20. Tenant shall have a five-year option to renew this
lease for additional one year periods at a rent adjustment in
accordance with an agreement between the parties. Tenant shall notify
Landlord of Tenant's intent to exercise such option within 90 days of
the expiration of the preceding term.
IN WITNESS WHEREOF, the parties have caused this Lease to be
duly executed and delivered as of the day and year first above written.
JAYTEE PROPERTIES LIMITED PARTNERSHIP
/s/ Steve Trager
------------------------------------
By:Steve Trager
REPUBLIC BANK & TRUST COMPANY
BY: Bill Petter
---------------------------------
Statement Regarding Computation of Per Share Earnings
See Item 1, Note 7 "Earnings Per Share" for calculations.
<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>
<MULTIPLIER> 1
<CURRENCY> US Dollars
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> JUN-30-1999 JUN-30-1998
<EXCHANGE-RATE> 1 1
<CASH> 20,537 23,253
<INT-BEARING-DEPOSITS> 0 0
<FED-FUNDS-SOLD> 1,200 30,000
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 199,884 161,047
<INVESTMENTS-CARRYING> 11,646 69,099
<INVESTMENTS-MARKET> 11,670 69,176
<LOANS> 944,045 828,556
<ALLOWANCE> 7,962 8,234
<TOTAL-ASSETS> 1,235,638 1,161,723
<DEPOSITS> 780,202 745,553
<SHORT-TERM> 97,707 102,497
<LIABILITIES-OTHER> 17,178 18,911
<LONG-TERM> 239,509 219,020
0 0
0 0
<COMMON> 4,117 3,615
<OTHER-SE> 96,925 72,127
<TOTAL-LIABILITIES-AND-EQUITY> 1,235,638 1,161,723
<INTEREST-LOAN> 40,561 38,220
<INTEREST-INVEST> 6,644 6,771
<INTEREST-OTHER> 36 823
<INTEREST-TOTAL> 47,241 45,814
<INTEREST-DEPOSIT> 16,028 17,353
<INTEREST-EXPENSE> 23,495 25,127
<INTEREST-INCOME-NET> 23,746 20,687
<LOAN-LOSSES> 1,273 1,384
<SECURITIES-GAINS> 184 491
<EXPENSE-OTHER> 2,400 2,155
<INCOME-PRETAX> 9,279 12,619
<INCOME-PRE-EXTRAORDINARY> 6,132 8,126
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 6,132 8,126
<EPS-BASIC> .36 .54
<EPS-DILUTED> .35 .52
<YIELD-ACTUAL> 4.09 3.84
<LOANS-NON> 2,498 2,785
<LOANS-PAST> 1,862 4,553
<LOANS-TROUBLED> 1,092 1,640
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 7,862 8,176
<CHARGE-OFFS> 1,501 1,581
<RECOVERIES> 328 255
<ALLOWANCE-CLOSE> 7,962 8,234
<ALLOWANCE-DOMESTIC> 7,962 8,234
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
