UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange as
of 1934 for the fiscal year ended December 31, 1997
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
Commission File Number: 33-77324
REPUBLIC BANCORP, INC.
(Exact name of registrant as specified in its charter)
Kentucky 61-0862051
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
601 West Market Street, Louisville, Kentucky 40202
-------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (502) 584-3600
Securities registered pursuant to Section 12(b)
of the Act:
Name of each exchange
Title of each class on which registered
None None
Securities registered pursuant to Section 12(g)
of the Act:
Name of each exchange
Title of each class on which registered
None None
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
As of March 24, 1998, the estimated market value of the shares of the Registrant's Class A Common Stock and Class B Common Stock held by non-affiliates of the Registrant was approximately $21,653,000 and $3,869,000, respectively, (based on a $9.76 and $9.76 book value per share, respectively).
As of March 24, 1998, Registrant had outstanding 6,270,531 shares of Class A Common Stock and 1,209,037 shares of Class B Common Stock.
This report consists of 70 consecutively numbered pages. An index to the exhibits to this report appears on page 64.
TABLE OF CONTENTS
Page
Item
PART I
1. Business............................................................. 3
2. Properties........................................................... 5
3. Legal Proceedings.................................................... 6
4. Submission of Matters to a Vote of Security Holders.................. 6
PART II
5. Market for the Registrant's Common Equity and Related
Stockholder Matters.................................................. 6
6. Selected Consolidated Financial Data................................. 8
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ 8
7a. Quantitative and Qualitative Disclosures about Market Risk.......... 25
8. Financial Statements and Supplementary Data.......................... 26
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure................................................. 54
PART III
10. Directors and Executive Officers of the Registrant................... 55
11. Executive Compensation............................................... 57
12. Security Ownership of Certain Beneficial Owners and Management....... 59
13. Certain Relationships and Related Transactions....................... 60
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K..... 62
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PART I
ITEM 1. BUSINESS
General Business Overview
Republic Bancorp, Inc. ("Republic"), headquartered in Louisville, Kentucky, is a unitary bank holding company for its banking subsidiary Republic Bank & Trust Company (the "Bank"). The Bank is a commercial banking and trust corporation organized and chartered under the laws of the Commonwealth of Kentucky. Republic was incorporated in Kentucky on January 2, 1974, and is a registered bank holding company under the Bank Holding Company (BHC) Act of 1956, as amended. Republic's principal business, through its wholly owned subsidiary, provides banking services to individuals and businesses located principally within the Commonwealth of Kentucky. These banking services are offered through the Bank's 17 banking centers located in 7 cities in Central Kentucky. The Bank's activities include the origination of loans and the collection of deposits from commercial enterprises and individual consumers. The primary regulator for Republic is the Board of Governors of the Federal Reserve System. The regulators for the Bank include both the Federal Deposit Insurance Corporation (FDIC) and the Commonwealth of Kentucky Department of Financial Institutions.
Description of Business
Republic primarily conducts business through its subsidiary, the Bank. The Bank's principal business activities include the acceptance of deposits for checking, savings and time deposit accounts and the origination of secured and unsecured loans. The Bank also engages in certain mortgage banking activities, and on a limited basis, provides trust services. The Bank's lending services include the origination of residential, commercial, business, and consumer loans. The Bank also provides tax refund anticipation services through a joint venture with a local vendor. Republic's operating revenues are derived primarily from interest and fees earned from the loan portfolio, and interest on investment securities. The Bank is not dependent upon a single customer, or a few customers, the loss of any one or more of which would have a material adverse effect on the statement of condition or results of operations. During 1997, Republic sold certain of its deposits, loans, and fixed assets (see Item 7 discussion on "Dispositions of Assets").
Republic operates banking centers in Kentucky's two largest metropolitan areas, Louisville and Lexington. The Bank's principal office and eight of its banking centers are located in Louisville. Republic operates three banking centers in Lexington. The remaining six banking centers are located in the communities of Owensboro, Elizabethtown, Frankfort (2), Shelbyville and Bowling Green.
Competition
The Bank actively competes with several local and regional commercial banks for deposits, loans and other banking related financial services. There is strong competition in the Bank's markets from other financial institutions as well as other "non-bank" companies which engage in similar activities. Some of the Bank's competitors are not subject to the degree of regulatory review and restrictions which apply to the Bank. In addition, the Bank must compete with much larger financial institutions which, while predominantly headquartered in other states, aggressively compete for market share in Kentucky. These competitors attempt to gain market share through their financial products mix, pricing strategies and banking center locations. Legislative developments related to interstate branching and banking in general, by providing large banking institutions easier access to a broader marketplace, are creating more pressure on smaller financial institutions to consolidate. The Bank also competes with insurance companies, savings banks, consumer finance companies, investment banking firms, brokerage houses, mutual fund managers, investment advisors and credit unions. Retail establishments compete for loans by offering credit cards and retail installment contracts for the purchase of goods and merchandise. It is anticipated that competition from both bank and "non-bank" entities will continue to grow in the near future.
Governmental Policy and Regulation
Republic and the Bank are subject to the policies of various regulatory authorities. In particular, bank holding companies and their subsidiaries are affected by the credit and monetary policies of the Federal Reserve Board and their activities are regulated under the Bank Holding Company Act. An important function of the Federal Reserve Board is to regulate the national supply of bank credit. Among the instruments of monetary policy used by the Federal Reserve Board to implement its objectives include changes in the discount rate on bank borrowings and changes in reserve requirements on bank deposits. These and other policies have a significant effect on the operating results of financial institutions. It is not possible to predict the nature or timing of future changes in monetary and fiscal policies, or the effect such policies may have on the Bank's future earnings. Republic and the Bank are subject to numerous federal and state laws and regulations affecting their business and also must undergo periodic examination by federal and state financial institution examiners. The earnings of the Bank, and therefore the earnings of Republic, are affected not only by the laws and regulations applicable to the banking business, but also by the policies and interpretations of regulatory authorities.
Business Segments
The Bank engages in traditional commercial banking activities which include commercial, business, and consumer lending, as well as, the offering of deposit products. It is also to a smaller degree engaged in tax refund anticipation lending, trust, insurance, item processing, and other related financial institution lines of business.
The Bank also conducts a mortgage banking operation as part of its core business activities. The primary function of the mortgage banking division is the origination, sale and servicing of single-family mortgage loans. These loans are originated by salaried employees and commissioned originators. The majority of loans are processed in accordance with secondary market underwriting guidelines. Typically, adjustable rate loans and other loans which do not precisely meet secondary market guidelines are held in the Bank's portfolio. Once closed, the secondary market loans are packaged into similar groups and sold principally to FNMA, FHLMC and other institutional investors. Generally, 30 year fixed rate loans in process are covered by forward commitments to these investors which limits the Bank's interest rate risk.
The Bank does not retain the servicing on the majority of its loans sold in the secondary market. Management's decision to retain or release servicing rights is largely dependent upon market conditions. When administering loans with the servicing retained by the Bank, the responsibility of collecting principal and interest payments, escrowing for taxes and insurance, and remitting payments to the secondary market investors remains with the Bank. A fee is received by the Bank for performing these standard servicing functions. It is the general policy of the Bank to sell its secondary market loans without recourse.
Employee Relations
As of December 31, 1997, the Bank had 446 employees of which 376 were full-time and 70 part-time. The Bank currently maintains an employee benefit program providing, among other benefits, a managed health care program, a 401(k) retirement plan and life insurance. The Bank provides a bonus program and an incentive stock option program for selected key employees. These employee benefits, as a whole, are considered by management to be generally competitive with employee benefits provided by other employers in Kentucky. The Bank believes its future success will depend, in part, on its ability to continue to attract and retain highly skilled retail, technical, and managerial personnel in order to maintain its quality delivery of banking services. None of the Bank's employees are subject to a collective bargaining agreement, and neither Republic nor the Bank has ever experienced a work stoppage. The Bank's employee relations are deemed by management to be satisfactory.
ITEM 2. PROPERTIES
Republic's executive offices and principal support and operational functions are located at 601 West Market Street in Louisville, Kentucky. All of Republic's banking centers are located in Kentucky. The location of the 17 banking centers, their respective approximate square footage and their form of occupancy is described in the following table:
Square Owned (O)/
Banking Centers Footage Leased (L)
Louisville
601 West Market Street, Louisville 43,000 L
2801 Bardstown Road, Louisville 5,000 L
661 South Hurstbourne Parkway, Louisville 21,000 L
4921 Brownsboro Road, Louisville 2,000 L
5320 Dixie Highway, Louisville 5,000 O
4655 Outer Loop, Louisville 3,000 L
9600 Brownsboro Road, Louisville 1,300 L
3950 Kresge Way, Louisville 300 L
Lexington
651 Perimeter Drive, Lexington 4,000 L
2401 Harrodsburg Road, Lexington 4,000 O
641 Euclid Avenue, Lexington 3,500 O
Frankfort
100 Highway 676, Frankfort 4,000 O
1001 Versailles Road, Frankfort 4,000 O
Bowling Green, 1700 Scottsville Road 4,000 O
Owensboro, 3500 Frederica Street 5,000 O
Elizabethtown , 502 West Dixie Avenue 4,000 O
Shelbyville, 1641 Midland Trail 5,000 O
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During 1997, the West Market Street, Bardstown Road, 9600 Brownsboro Road and South Hurstbourne Parkway locations, were leased from an affiliated person. (See details regarding these leases in Item 13, "Certain Relationships and Related Transactions").
Neither the location of any particular office nor the term of any lease is deemed material to the business of Republic or the Bank.
There are no known environmental issues of a negative nature affecting the owned or leased properties of Republic or the Bank.
ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of operations, Republic and the Bank are defendants in various legal proceedings. In the opinion of management, there is no proceeding pending or, to the knowledge of management, threatened in which an adverse decision could result in a material adverse change in the business or consolidated financial position of Republic or the Bank.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth quarter of 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The shares of Class A Common Stock are entitled to cash dividends equal to 110% of the dividend paid per share on the Class B Common Stock. Class A shares have one vote per share and Class B shares have ten votes per share. Class B stock may be converted, at the option of the holder, to Class A Common Stock on a share-for-share basis. The Class A Common Stock is not convertible into any other class of Republic's capital stock. Neither class of Republic's Common Stock has an established public trading market.
As of March 24, 1998, Republic had approximately 440 holders of the Class A Common Stock and 390 holders of the Class B Common Stock. During 1997 and 1996, Republic declared and paid the following quarterly cash dividends per share on its Common Stock:
1997
--------------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
Class A Common Stock $.055 $.055 $.055 $.055
Class B Common Stock $.050 $.050 $.050 $.050
1996
--------------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
Class A Common Stock $.055 $.055 $.055 $.055
Class B Common Stock $.050 $.050 $.050 $.050
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Republic's dividend paying policy takes into account a number of factors, based on available information. These factors include the performance of the Bank, its dividend paying ability and regulatory considerations. Republic presently anticipates that comparable cash dividends (adjusted for any stock splits or other similar transactions) will continue to be paid in the near term.
On December 31, 1997, Republic issued an aggregate of 199,250 shares of Class A Common Stock and 39,850 shares of Class B Common Stock. The shares were issued to certain holders of Series A Convertible Preferred Stock of Republic, who exercised their right to convert their preferred stock into shares of Class A Common Stock and Class B Common Stock. The conversion ratio was 5 shares of Class A Common Stock and 1 share of Class B Common Stock for each share of Series A Convertible Preferred Stock. A total of 39,850 shares of Series A Convertible Preferred Stock were converted into shares of Class A Common Stock and Class B Common Stock.
The exemption from registration relied on by Republic was Section 3(a)(9) of the Securities Act of 1933. The shares of Class A Common Stock and Class B Common Stock were issued upon conversion of (in exchange for) shares of Series A Convertible Preferred Stock by Republic with its existing security holders exclusively, and no commission or other remuneration was paid or given directly or indirectly for soliciting such conversion (and exchange).
During 1997, Republic also issued 1,170 shares of Class A Common Stock. The shares were issued to (a) holders of Class B Common Stock of Republic, who exercised the right to convert shares of Class B Common Stock into shares of Class A Common Stock. The Class B Common Stock is convertible into Class A Common Stock. The conversion ratio is 1 share of Class A Common Stock for each 1 share of Class B Common Stock.
The exemption from registration relied on by Republic was Section 3(a)(9) of the Securities Act of 1933. The shares of Class A Common Stock were issued upon conversion (in exchange for) shares of Class B Common Stock by Republic with its existing security holders exclusively, and no commission or other remuneration was paid or given directly or indirectly for soliciting such conversion (and exchange).
During 1997, Republic also issued 13,500 shares of Class A Common Stock and 500 shares of Class B Common Stock to certain key employees and/or directors upon the exercise of stock options which had been granted them under a compensatory stock option plan. The aggregate exercise price paid for the shares issued upon exercise of the options was $153,000.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth Republic's selected historical financial information from 1993 through 1997. This information should be read in conjunction with the Consolidated Financial Statements of Republic and the related Notes. Factors affecting the comparability of certain indicated periods are discussed in Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Year Ended December 31,
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(in thousands) 1997 1996 1995 1994 1993
INCOME STATEMENT DATA:
Interest Income $91,194 $81,986 $71,133 $47,375 $43,377
Interest Expense 50,856 43,855 37,720 22,513 21,119
Net Interest Income 40,338 38,131 33,413 24,862 22,258
Provision for Loan Losses 7,251 9,149 4,268 537 391
Non-Interest Income 18,930 7,097 7,520 6,997 8,154
Non-Interest Expense 32,880 31,409 24,505 22,216 22,199
Income Before Taxes 19,137 4,670 12,160 9,106 7,822
Net Income 12,259 2,727 7,788 6,170 5,864
BALANCE SHEET DATA:
Total Assets $1,054,950 $1,140,882 $891,347 $736,009 $646,697
Total Loans, Net of Unearned
Income and Allowance for Loan 794,939 759,424 668,193 571,950 516,414
Losses
Allowance for Loan Losses 8,176 6,241 3,695 1,827 1,627
Total Deposits 731,598 783,141 734,443 590,036 516,871
Repurchase Agreements and Other
Short-Term Borrowings 111,137 181,634 21,729 12,732 13,228
Other Borrowed Funds 124,405 106,974 68,063 77,060 67,721
Total Stockholders' Equity 68,386 59,019 58,502 47,045 40,669
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Republic reported strong earnings of $12.3 million in 1997, an increase from $2.7 million reported in 1996. Republic's return on average assets and return on average equity reflected significant improvement over 1996. Return on equity was up to 18.81% in 1997 . Additionally, Republic's return on assets was up to 1.12% in the same period. Earnings in 1997 were positively impacted by the sale of Republic's banking centers in Western Kentucky as well as the sale of Bankcard (See Discussion on "Disposition of Assets"). Excluding the gains received from these sales, Republic's 1997 net income would have been $5.2 million. During 1997, Republic maintained its quarterly dividend payments to shareholders of $.055 per share to Class A common shareholders and $.05 per share to Class B shareholders.
Assets declined slightly from year end 1996 to $1.1 billion at year end 1997. Loans increased $35 million in 1997 due to management's focus on its core business, residential lending. Republic's deposits decreased $52 million primarily as a result of Western Kentucky deposit sales. The increased earnings and premiums received from the sale of assets increased Republic's capital 15% to $68 million.
Year Ended December 31,
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1997 1996 1995 1994 1993
Net income ($000's) $12,259 $2,727 $7,788 $6,170 $5,864
Net income per Class A common $1.64 $.32 N/A N/A N/A
Net income per Class B common $1.62 $.30 N/A N/A N/A
Net income per common N/A N/A $1.03 $.86 $.84
Return on assets 1.12% .29% 0.95% 0.93% 0.92%
Return on equity 18.81% 4.57% 14.46% 13.71% 14.10%
Average Equity to Average Assets 5.97% 6.30% 6.56% 6.65% 5.95%
Dividend Payout Ratio 13% 68% 16% -- --
Cash Dividends Per Common Share:
Class A Common Share $.22 $0.22 -- -- --
Class B Common Share $.20 $0.20 -- -- --
Common Shares -- -- $.17 -- --
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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.
Disposition of Assets
During 1997, Republic elected to focus its resources on its North Central and Central Kentucky markets. Consistent with this new 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 1997. The Mayfield transaction was closed during 1st quarter, 1998. Republic sold approximately $180 million in deposits and approximately $3.7 million of fixed assets and retained substantially all of the $142 million loan portfolio associated with the Western Kentucky banking centers.
The sale transactions completed in 1997 were funded by Federal Home Loan Bank (FHLB) advances of approximately $96 million, and liquidation of investment securities and overnight fed funds of approximately $40 million. The sale was also funded in part by the further growth of the Bank's remaining retail deposit base totaling approximately $14 million. Republic realized pre-tax gains of approximately $7.5 million from the transactions closed during 1997 and approximately $4.1 million from the Mayfield sale, completed during 1st quarter, 1998.
Also during 1997, Republic decided to change its strategy toward credit card lending. Republic sold its $17 million credit card portfolio and its merchant processing assets. Further, Republic sold its $6 million, 50% interest in a joint venture credit card arrangement to its joint venture partner. Collectively, these assets sales resulted in a pre-tax gain of $3.7 million. The portfolio sale to the joint venture partner contains a limited recourse provision in the event losses on the portfolio exceed certain defined loss rates. The gain on sale of the portfolio was recorded net of an accrual for the estimated liability under the provision.
As part of the sale of its credit card portfolio, Republic retained the right to become an agent bank for another financial institution. As part of this agreement, Republic will continue to be able to offer credit cards in its name. While Republic will not own the receivables, it will receive an origination fee for all approved applications.
RESULTS OF OPERATIONS
Net Interest Income
The principal source of Republic's revenue is net interest income. Net interest income is the difference between interest income on interest-earning assets such as loans and securities and the interest expense on liabilities used to fund those assets, such as interest-bearing deposits and borrowings. Net interest income is impacted by both changes in the amount and composition of interest-earning assets and interest-bearing liabilities and the level of interest rates. The change in net interest income is typically measured by net interest spread and net interest margin. Net interest spread is the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities. Net interest margin is determined by dividing net interest income by average interest-earning assets.
Table 1 provides detailed information as to average balances, interest income/expense, and rates by major balance sheet category for fiscal years 1995 through 1997. Table 2 provides an analysis of the changes in net interest income attributable to changes in rates and changes in volume of interest-earning assets and interest-bearing liabilities.
Table 1 - Average Balances Sheets and Rates - for December 31, 1997, 1996 and
1995 (dollars in thousands)
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1997 1996 1995
------------------------------- ------------------------------- -----------------------------------
ASSETS Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
Earning Assets:
U.S. Treasury and U.S.
Government Agency $209,599 $12,473 5.95% $147,376 $9,040 6.13% $115,897 $7,469 6.44%
Securities
State and Political
Subdivision Securities 4,447 381 8.57% 4,557 390 8.56% 4,689 407 8.68%
Other Investments 6,952 497 7.15% 5,303 414 7.79% 5,055 342 6.77%
Mortgage-Backed Securities 4,415 263 5.96% 705 36 5.11% 796 40 5.03%
Federal Funds Sold 12,452 691 5.55% 23,847 1,275 5.35% 26,144 1,537 5.88%
Total Loans and Fees 809,700 76,889 9.50% 724,669 70,831 9.77% 632,775 61,338 9.69%
------- ------ ------- ------ ------- ------
Total Earning Assets 1,047,565 91,194 8.71% 906,457 81,986 9.04% 785,356 71,133 9.06%
--------- ------ ------- ------ ------- ------
Less: Allowance for Loan
Losses (6,278) (6,196) (2,795)
Non-Earning Assets:
Cash and Due From Banks 20,338 20,830 16,597
Bank Premises and
Equipment, Net 16,793 14,391 11,284
Other Assets 13,198 10,974 11,195
------ ------ ------
Total Assets $1,091,616 $946,456 $821,637
========== ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest Bearing
Liabilities:
Transaction Accounts $124,062 $4,250 3.43% $149,383 $5,163 3.46% $144,105 $5,122 3.55%
Money Market Accounts 47,036 2,329 4.95% 35,557 1,622 4.56% 18,999 892 4.69%
Individual Retirement 35,641 2,090 5.86% 34,956 2,156 6.17% 31,089 1,949 6.27%
Accounts
Certificates of Deposits
and Other Time Deposits 512,260 30,271 5.91% 450,759 27,143 6.02% 413,428 24,549 5.94%
Repurchase Agreements and
Other Borrowings 226,400 11,916 5.26% 148,026 7,771 5.25% 91,952 5,208 5.66%
------- ------ ------- ----- ------ -----
Total Interest Bearing
Liabilities 945,399 50,856 5.38% 818,681 43,855 5.36% 699,573 37,720 5.39%
Non-Interest Bearing
Liabilities:
Non-Interest Bearing 68,184 57,041 54,540
Deposits
Other Liabilities 12,875 11,090 13,657
Stockholders' Equity 65,158 59,644 53,867
------ ------ ------
Total Liabilities and
Stockholders' Equity $1,091,616 $946,456 $821,637
========== ======== ========
Net Interest Income $40,338 $38,131 $33,413
======= ======= =======
Net Interest Spread 3.33% 3.68% 3.67%
===== ===== =====
Net Interest Margin 3.85% 4.21% 4.25%
===== ===== =====
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Calculations include non-accruing loans in the average loan amounts outstanding.
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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 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 2 - Volume/Rate Variance Analysis (in thousands)
Year Ended December 31, 1997 Year Ended December 31, 1996
compared to compared to
Year Ended December 31, 1996 Year Ended December 31, 1995
INCREASE/(DECREASE) INCREASE/(DECREASE)
due to due to
Total Net Total Net
Change Volume Rate Change Volume Rate
-------------- ----------- ----------- -------------- ------------- --------------
Interest Income (1):
U.S. Treasury and Government
Agency Securities $3,433 $3,817 ($384) $1,571 $2,029 ($458)
State and Political
Subdivision Securities (9) (10) 1 (17) (11) (6)
Other Investments 83 127 (44) 71 17 54
Mortgage-Backed Securities 227 189 38 (4) (5) 1
Federal Funds Sold (584) (609) 25 (261) (135) (126)
Total Loans and Fees (2) 6,058 8,311 (2,253) 9,493 8,908 585
----- ----- ------- ----- ----- ---
Net Change in Interest 9,208 11,825 (2,617) 10,853 10,803 50
----- ------ ------- ------ ------ --
Income
Interest Expense:
Interest Bearing Transaction
Accounts (913) (875) (38) 41 188 (147)
Money Market Accounts 707 524 183 730 777 (47)
Individual Retirement Accounts (66) 42 (108) 207 242 (35)
Certificates of Deposit and
Other Time Deposits 3,128 3,703 (575) 2,594 2,217 377
Repurchase Agreements and
Other Borrowings 4,145 4,114 31 2,563 3,176 (613)
----- ----- -- ----- ----- -----
Net Change in Interest Expense 7,001 7,508 (507) 6,135 6,600 (465)
----- ----- ----- ----- ----- -----
Increase in Net Interest $2,207 $4,317 $(2,110) $4,718 $4,203 $515
====== ====== ======== ====== ====== ====
Income
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(1) Interest for loans on non-accrual status has been excluded from Interest
Income.
(2) The amount of fees in interest on loans was $837, $520, and $139 for the
years ended December 31, 1997, 1996, and 1995, respectively.
Net interest income increased 5% in 1997, following a 14% increase in 1996. The increase in 1997 is attributable to Republic's loan growth, particularly residential and home equity lending. The increase in 1996 was due to substantial growth in the unsecured consumer loan portfolio which also favorably impacted the Bank's spread.
Average interest-earning assets increased 15.6% in 1997, compared to a 15.4% increase in 1996. The 1997 and 1996 growth resulted from increased loan volume (see "Loan Portfolio" for discussion on increase in loan volume) supported by an increase in investment securities.
During 1997, average interest-bearing liabilities grew $126.7 million to $945.4 million, an increase of 15% over 1996. Certificates of deposit remained flat due to the loss of deposits associated with the sale of the Western Kentucky banking centers. Republic's growth was primarily funded by an increase in other borrowings, (see discussion on ("Other Borrowed Funds"). In 1996, average interest-bearing liabilities grew 17% over 1995. The increase of $119.1 million was primarily in certificates of deposit, other time deposits and overnight repurchase agreements.
Republic's net interest margin was 3.85% in 1997, 4.21% in 1996 and 4.25% in 1995. The reduction in net interest margin and net interest spread in 1997 compared to 1996 is attributable to a decline in the overall yield on interest earning assets of 33 basis points while Republic's cost of funds increased by 2 basis points. The decline in rate on interest earning assets resulted from a change in the overall loan portfolio mix. The reduction in the unsecured loan portfolio was largely replaced by increased growth in Republic's traditional secured residential lending products. These residential lending products have lower yields and reduced credit risk compared to the Bank's unsecured lending products.
Republic's net interest margin has declined from 1995 and 1996. Republic anticipates that this trend may continue in 1998. The net interest margin may be negatively impacted by the current interest rate environment and changes in loan mix due to the higher yielding unsecured consumer lending being replaced by lower yielding home equity loans. Approximately $116 million of Republic's other borrowings from the FHLB are adjustable rate advances and are subject to changes in market interest rates. Increased rates may negatively impact Republic borrowing costs as these wholesale funds comprise a significant portion of interest bearing liabilities.
Non-Interest Income
Table 3 illustrates Republic's primary sources of non-interest income. Non-interest income increased 167% to $19.0 million in 1997, compared to $7.1 million in 1996 and $7.5 million in 1995.
Table 3 - Analysis of Non-Interest Income
Percent
Year Ended December 31, Increase (Decrease)
-------------------------------------- -----------------------------
(dollars in thousands) 1997 1996 1995 1997/96 1996/95
---- ---- ---- ------- -------
Service charges on deposit accounts $3,284 $2,642 $1,974 24.3% 33.8%
Other service charges and fees 661 445 1,434 48.5% (69.0%)
Bank card services 457 1,010 1,263 (54.8%) (20.0%)
Net gain on sale of deposits 7,527
Net gain on sale of bank card 3,660
Net gain on sale of securities 81
Net gain on sale of loans 1,852 1,212 1,083 52.8% 11.9%
Loan servicing income 734 829 895 (11.5%) (7.4%)
Other 674 959 871 (29.7%) 10.1%
--- --- ---
Total $18,930 $7,097 $7,520 166.7% (5.6%)
======= ====== ======
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The large increase in Non-Interest Income is principally due to the one time gains realized from the sale of deposits at the Bank's Western Kentucky banking centers and the gain realized from the sale of the Bankcard portfolio. The Bank also realized a modest net gain on the sale of securities of $81,000 during 1997. Bank card service fees declined during 1997 as a result of the sale. Service charges on deposit accounts increased during 1997 as a result of an increase in the number of transaction accounts. Management also restructured its fee schedule and further reduced its previous level of fee waivers. The 1996 increase in service charges on deposit accounts was primarily attributable to overall growth in the number of the Bank's transaction accounts. Other service charges and fees, having shown a strong decline during 1996 from 1995 levels, experienced an increase of $216,000 in 1997. The decline in 1996 was a result of decreased credit life insurance commissions earned as Republic slowed its unsecured consumer loan originations, a practice which continued into 1997. Other non-interest income decreased moderately to $674,000 in 1997 compared to $959,000 in 1996.
Revenue from mortgage banking activities from 1995 through 1997 has been positively influenced by increases in origination and sales volume and the sale of most loans with servicing released. Proceeds from sales of loans were $124 million, $104 million, and $87 million in 1997, 1996, and 1995, respectively. Secondary market residential loan originations are heavily influenced by interest rates, which were primarily responsible for the increased volume. Net gains from sales of loans closely tracks loan origination volume. Net gains as a percentage of loans sold were 1.49%, 1.16%, and 1.25% in 1997, 1996, and 1995, respectively. Management made a change from selling loans with servicing retained to servicing released in 1995 to offset downward market pressure on loan sale pricing. The sale of a significant number of loans with servicing released, coupled with normal loan paydowns and payoffs, has resulted in a decline in the size of the loan servicing portfolio and a corresponding decline in loan servicing income. As of December 31, 1997, Republic was servicing $263 million in mortgage loans for other investors compared to $297 million in 1996.
Non-Interest Expense
As shown in Table 4, total non-interest expense increased by 4.7% to $32.9 million in 1997, compared to $31.4 million in 1996 and $24.5 million in 1995. The costs associated with Republic's addition of 5 new banking centers in 1996 and continued technology enhancements during 1997 resulted in increased non-interest expense during 1997. While Republic anticipates receiving the benefit from reduced non-interest expense at the Western Kentucky banking centers, this benefit was not fully realized throughout 1997 due to the timing of those transactions. Republic anticipates that non-interest expense will be negatively impacted by the implementation of management's year 2000 readiness program (see "Year 2000" discusion).
Non-interest expense levels are often measured using a non-interest expense ratio (non-interest expense divided by the sum of net interest income and non-interest income). Excluding its one-time gains, Republic's non-interest expense ratio was 68% in 1997 compared to 69% (64% exclusive of one-time SAIF Assessment) in 1996 and 60% in 1995.
Table 4 - Analysis of Non-Interest Expense
Percent
Year Ended December 31, Increase/(Decrease)
------------------------------------------ ----------------------------
(dollars in thousands) 1997 1996 1995 1997/96 1996/95
Salaries and employee benefits $15,444 $13,236 $11,334 16.7% 16.8%
Occupancy and equipment 8,562 6,623 5,346 29.3% 23.9%
Communication and transportation 1,796 1,548 1,407 16.0% 10.0%
Marketing and development 1,299 1,620 1,308 (19.8%) 23.9%
FDIC Insurance 107 3,277 1,245 (96.7%) 163.2%
Supplies 1,013 973 883 4.1% 10.2%
Litigation recovery (738)
Other 4,659 4,132 3,720 12.8% 11.1%
----- ----- -----
Total $32,880 $31,409 $24,505 4.7% 28.2%
======= ======= =======
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Salary and employee benefits expense increased approximately 16.7% and 16.8% in 1997 and 1996, respectively. The increase was primarily due to additional data processing and mortgage origination staffing requirements as well as other additional operational support personnel and annual merit increases. Overall Republic staffing levels at year-end 1997 were 418 full-time equivalent employees (FTE's) compared to 419 FTE's in 1996 and 361 FTE's in 1995. Overall FTE's remained constant at year-end 1997 compared to year-end 1996 as several of the Western Kentucky positions were reallocated to other retail and operational areas of the Bank.
Occupancy and equipment expenses rose 29.3% in 1997 and 23.9% in 1996. The 1996 increases were primarily due to depreciation and equipment maintenance expenses associated with new enhancements to loan and customer support systems. The $1.9 million increase in 1997 also reflects a full year of operating expenses associated with the addition of five new banking centers opened in 1996. Republic anticipates that it will open additional locations in 1998 which will result in increased non-interest expense in 1998 over 1997.
Communication and transportation expenses increased 16.0% in 1997 and 10.0% in 1996. Republic incurred additional costs for telecommunication enhancements which are associated with Republic's platform, call center and computer networks. Republic expects that these costs will continue for 1998.
Marketing and development expense decreased 19.3% in 1997, following a 23.9% increase in 1996. The increases in 1996 primarily resulted from advertising and promotional expenditures incurred for Republic's unsecured consumer loan products and deposit gathering initiatives. Marketing expenses can fluctuate from period to period based upon the timing and scope of various management initiatives.
Insurance expense decreased $3.2 million from 1996 to 1997. This decrease is principally a result of the federally mandated one-time assessment on the Bank's Savings Association Insurance Fund (SAIF) deposits in the amount of $2.3 million during 1996. The 1996 federal legislation which mandated the one-time assessment provided for a future ongoing reduction in the FDIC's insurance rate premiums on SAIF insured deposits. Republic benefited from this one time charge as it resulted in a reduction of the FDIC's overall insurance rate premium charges during 1997. While subject to changes in its regulatory environment, Republic does not anticipate any significant near term changes in the rate charged by the FDIC on insured deposits.
Republic expensed $738,000 in 1993 as a result of an adverse legal verdict. The legal verdict was subsequently overturned in 1995 by a federal appellate court. This previously expensed judgment reversal had a favorable impact on total non-interest expense in 1995. All other operating expenses during 1997, 1996 and 1995 experienced minor increases.
Republic was contractually required to reimburse the FDIC for tax benefits received resulting from tax deductions for losses on loans and other real estate owned (OREO) acquired through the acquisition of two failed institutions. In the third quarter of 1995, Republic was notified by the FDIC that, under its interpretation of the agreements, Republic may be obligated to remit additional payments related to prior years. Republic disputed this interpretation by the FDIC and final settlement of this matter was reached with the FDIC during the second quarter of 1997. The terms of the settlement had no significant impact on the financial position and results of operation of Republic and provided for a release by the FDIC of any further obligations of Republic under the agreements.
FINANCIAL CONDITION
Loan Portfolio
Republic continued to experience overall loan growth throughout its markets in 1997. Total loans increased 5% to $805 million at December 31, 1997, compared to $768 million at December 31, 1996. This growth was accomplished after taking into account Republic's sale of its $23 million credit card portfolio. The increase in loans was led by residential real estate and home equity lending which combined increased $57 million from December 31, 1996. The rise in real estate loan volume was a result of a continuing favorable interest rate environment and sustained customer demand for residential financing throughout the Bank's markets. Republic also
experienced a 47% increase in home equity lending as a result of the product's competitive features and continuing consumer demand. The Home Equity product features include elimination of up-front closing costs and an attractive six month fixed introductory interest rate. After the introductory period, the loans subsequently convert to an adjustable rate product.
Republic's commercial real estate loan portfolio increased by 29% to $76 million at December 31, 1997. Republic's increased commercial real estate demand has risen principally from the Bank's existing customer base. As a result of this increased demand, Republic has allocated additional resources to the commercial lending function. In conjunction with its commercial real estate lending, emphasis has also been placed on acquiring the associated deposit relationships from these customers.
Republic's consumer loans decreased during 1997 to $189 million. The consumer loan portfolio consists of both secured (Home equity, Auto,etc...) and unsecured loans. Approximately 20% of loans in the consumer portfolio are unsecured, including loans originated under both the "All Purpose" and "Pre-Approved" loan programs. Republic's "All Purpose Loans", with total outstandings of $13 million at December 31, 1997 and $22 million at December 31, 1996, are originated through Republic's banking centers. This product has an average loan amount of $7,000 and an annual average percentage rate of 16.98% with a standard maximum maturity of five years. "Pre-Approved Loans", with total outstandings of $25 million at December 31, 1997 and $33 million at December 31, 1996, were delivered through direct mail, targeting customers both in and outside of Republic's traditional markets. During 1997, Republic did not make any new direct mail solicitations for this product. The "Pre-Approved Loan" product has an average loan amount of $6,000 and an average annual percentage rate of 13.96% with a standard maximum maturity of five years. Republic is not currently marketing these two loan products and plans to continue to allow its unsecured loan portfolio to reduce in the near term.
Republic does not expect loan growth to continue at its current levels as a result of declining market interest rates and the sale of the Western Kentucky banking centers. Republic's loan portfolio is comprised primarily of adjustable rate single family loans which are subject to refinancing pressures in a declining interest rate environment. Also, Republic anticipates that the $142 million loan portfolio retained from the Western Kentucky deposit sales will be subject to a higher level of prepayments than its overall loan portfolio in general. Republic will continue to provide service to these customers through its centralized loan operations, but these customers may elect to refinance with other local institutions. Republic is not able to predict the rate at which the loan portfolio will pre-pay.
Table 5 - Loans by Type
(in thousands) As of December 31,
----------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
Real Estate:
Residential $480,874 $457,204 $371,846 $346,649 $316,824
Construction 37,940 32,130 31,230 21,919 24,316
Commercial 76,306 59,086 75,648 76,725 45,044
Commercial 21,552 25,115 21,042 18,542 45,522
Consumer 188,573 194,546 175,979 114,993 59,740
------- ------- ------- ------- ------
Total Loans $805,245 $768,081 $675,745 $578,828 $491,446
======== ======== ======== ======== ========
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The mortgage banking operation manages originations and secondary market sales of residential loans. This operation primarily sells fixed rate originations in the secondary market without recourse. During 1997, Republic sold $124 million of residential mortgage loans into the secondary market compared to $104 million in 1996. At the end of 1997, Republic was servicing $263 million in mortgage loans for other investors compared to $297 million in 1996 and $87 million in 1995. The decline in the mortgage banking servicing portfolio from 1996 to 1997 resulted from management's election to sell a majority of its originations on a servicing released basis combined with regular loan principal paydowns.
The table below illustrates Republic's fixed rate maturities and repricing frequency for the loan portfolio:
Table 6 - Selected Loan Distribution
As of December 31, 1997
----------------------------------------------------------------------------------
One Over One Through Over
Year Five Years Five
(in thousands) Total or Less Years
Fixed Rate Maturities $178,471 $44,668 $83,732 $50,071
Variable Rate Repricing
Frequency 626,774 463,161 162,703 910
------- ------- ------- -------
Total $805,245 $507,829 $246,435 $50,981
======== ======== ======== =======
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Provision and Allowance for Loan Losses
The allowance for loan losses is regularly evaluated by management and maintained at a level believed to be adequate to absorb future loan losses in the Bank's portfolios. The adequacy of the allowance is evaluated regularly and periodic provisions are made as needed. The amount of the provision for loan losses necessary to maintain an adequate allowance is based upon an assessment of current economic conditions, analysis of periodic internal loan reviews, delinquency trends and ratios, changes in the mixture and levels of the various categories of loans, historical charge-offs, recoveries, and other information. Management believes that the allowance for loan losses at December 31, 1997 was adequate. Although management believes it uses the best information available to make allowance provisions, future adjustments which could be material may be necessary if management's assumptions differ from the loan portfolio's actual future performance.
The allowance for loan losses increased $1.9 million from December 31, 1996 to $8.2 million at December 31, 1997. The increase is primarily attributable to an increase in commercial real estate and home equity lending which generally present greater credit risk than 1-4 family residential loans, as well as continued charge-off experience and losses in the unsecured consumer loan portfolio. Republic's allowance for loan losses to total loan ratio increased from .81% at December 31, 1996, to 1.02% at December 31, 1997.
Net charge-offs were $5.3 million during 1997 compared to $6.6 million and $2.4 million for 1996 and 1995, respectively. Republic's unsecured consumer loan portfolio accounted for 83% of total charge-offs for the year ended December 31, 1997. The charge-offs in the unsecured loan portfolio were comprised of $1.8 million in the "All Purpose" program compared to $2.4 million during 1996 and $2.3 million in the "Pre-Approved" program compared to $2.1 million during 1996 (see description of programs under "Loan Portfolio"). Beginning in 1996 and continuing through 1997, management significantly reduced the volume of new originations under the "All Purpose" loan program. Republic did not undertake any new "Pre-Approved" loan offerings during 1997. Republic also experienced charge-offs in its Bankcard portfolio of $844,000 for the year ended December 31, 1997, compared to $1.6 million for the comparable period in 1996.
Table 7 - Summary of Loan Loss Experience
Year Ended December 31,
-----------------------------------------------------------
(dollars in thousands) 1997 1996 1995 1994 1993
Allowance for loan losses:
Balance-beginning of year $6,241 $3,695 $1,827 $1,627 $1,622
Charge-offs:
Real Estate (358) (242) (313) (83) (176)
Commercial (43) (22) (107) (14) (47)
Consumer (5,458) (6,865) (2,069) (362) (251)
------- ------- ------- ----- -----
Total (5,859) (7,129) (2,489) (459) (474)
------- ------- ------- ----- -----
Recoveries:
Real Estate 23 290 22 19
Commercial 25 29
Consumer 520 236 42 93 69
--- --- -- -- --
Total 543 526 89 122 88
--- --- -- --- --
Net charge-offs (5,316) (6,603) (2,400) (337) (386)
Provision for loan losses 7,251 9,149 4,268 537 391
----- ----- ----- --- ---
Allowance for loan losses:
Balance-end of year $8,176 $6,241 $3,695 $1,827 $1,627
====== ====== ====== ====== ======
Ratios:
Percentage of allowance for loan losses to
total loans 1.02% .81% .55% .32% .33%
Net loans charged off to average loans
outstanding for the period .66% .91% .38% .06% .08%
Allowance for loan losses to non-performing loans 114% 78% 168% 97% 61%
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The following table is management's allocation of the allowance for loan losses by loan type. Allowance funding and allocation is based on management's assessment of economic conditions, past loss experience, loan volume, past due history and other factors. Since these factors are subject to change, the allocation is not necessarily predictive of future portfolio performance. Management has accounted for the increase in charge-offs during 1996 and 1997 compared to previous years in the unsecured consumer loan portfolio by increasing the allowance for unsecured consumer loans.
Table 8 - Management's Allocation of the Allowance for Loan Losses
As of December 31,
----------------------------------------------------------------------------------------------------
(dollars in
thousands) 1997 1996 1995 1994 1993
Percent Percent Percent Percent Percent
of Loans of Loans of Loans of Loans of Loans
Allowance to Total Allowance to Total Allowance to Total Allowance to Total Allowance to Total
Loans Loans Loans Loans Loans
Real Estate $3,590 73.9% $1,771 71.4% $957 70.9% $1,091 76.9% $953 78.6%
Commercial 46 2.7% 46 3.3% 34 3.1% 157 3.2% 315 9.3%
Consumer 4,530 23.4% 4,424 25.3% 2,704 26.0% 579 19.9% 359 12.1%
----- ----- ----- --- ---
Total $ 8,176 100% $6,241 100% $3,695 100% $1,827 100% $1,627 100%
======= ====== ====== ====== ======
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Asset Quality
Loans (including impaired loans under SFAS 114 but 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 and charged off prior to reaching 120 days past due. At December 31, 1997, Republic had $497,000 in consumer loans 90 days or more past due compared to $278,000 at December 31, 1996.
Table 9 provides information related to non-performing assets and loans 90 days or more past-due. Accruing loans contractually past due 90 days or more decreased slightly from $5.0 million at December 31, 1996, to $4.5 million at December 31, 1997. These loans are primarily secured 1-4 family residential loans. Should the underlying collateral be determined to be insufficient to satisfy the obligation, the loan is classified and the Bank's allowance is increased accordingly. Historically, Republic's security in residential loans has been adequate and has acted to limit the Bank's exposure to loss. Loans in non-accrual status decreased marginally from $3.1 million to $2.7 from December 31, 1996, to December 31, 1997.
Republic defines impaired loans to be those commercial real estate and other commercial loans greater than $499,999 that management has classified as doubtful (collection of all amounts due is highly questionable or improbable) or loss (all or a portion of the loan has been written off or a specific allowance for loss has been provided). Republic's policy is to charge off all or that portion of its investment in an impaired loan upon a determination it is probable the full amount will not be collected. Impaired loans remained constant from December 31, 1996 to December 31, 1997 at $1.6 million. Impaired loans consists of one secured commercial, real estate loan.
Table 9 - Non-Performing Assets
As of December 31,
-----------------------------------------------------------------
(dollars in thousands) 1997 1996 1995 1994 1993
Loans on non-accrual status (1)(2) $2,676 $3,055 $742 $1,285 $2,230
Loans past due 90 days or more 4,459 4,955 1,463 606 421
----- ----- ----- --- ---
Total non-performing loans 7,135 8,010 2,205 1,891 2,651
Other real estate owned 22 104 552 791 1,023
-- --- --- --- -----
Total non-performing assets 7,167 $8,114 $2,757 $2,682 $3,674
===== ====== ====== ====== ======
Percentage of non-performing loans to total loans .89% 1.04% .33% .33% .51%
Percentage of non-performing assets to total loans .89% 1.06% .41% .46% .75%
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(1) Loans on non-accrual status are exclusive of impaired loans as such loans
remain on accrual status. See note 4 to the Consolidated Financial Statements
for additional discussion on impaired loans.
(2) The interest income earned and received on non-accrual loans was not
material.
Investment Securities
The investment portfolio consists of U.S. Treasury and U.S. Government Agency Obligations and mortgage-backed securities. The mortgage-backed securities (MBS's) securities consist of 15 year fixed and 7.5 year balloon mortgage securities, underwritten to and guaranteed by the government-sponsored agencies of FNMA.
Securities, including those classified as held to maturity and available for sale, decreased from $282 million at December 31, 1996, to $192 million at December 31, 1997. The investment portfolio decreased as funds were used to replace the sold Western Kentucky deposits and fund continued loan growth.
In order to maximize the oversight of the Bank's investment portfolio, the Bank hired a chief investment officer during the second quarter of 1997. Management also made certain modifications to its existing investment policy. The policy changes will permit management to take advantage of market changes and permit investments in additional MBS's and collateralized mortgage obligations. The policy changes will also permit management to extend maturities beyond prior limits.
Table 10 - Investment Securities Available For Sale
As of December 31, 1997
----------------------------------------------------------------
Average Weighted
Carrying Maturity in Average Yield
(dollars in thousands) Value Fair Value Years
U.S. Treasury and U.S. Government Agencies:
Over one through five years $44,559 $44,559 1.5 5.83%
Mortgage Backed Securities:
Over five through ten years 34,158 34,158 6.6 6.30%
Over ten years 15,109 15,109 14.2 6.48%
------ ------
Total 49,267 49,267 8.9 6.35%
------ ------
Total Investment Securities $93,826 $93,826
======= =======
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Table 11 - Investment Securities Held to Maturity
As of December 31, 1997
----------------------------------------------------------------
Average Weighted
Carrying Maturity in Average Yield
(dollars in thousands) Value Fair Value Years
U.S. Treasury and U.S. Government Agencies:
Within one year $52,786 $52,775 .6 5.99%
Over one through five years 30,269 30,212 1.7 6.07%
Over five through ten years 10,638 10,557 5.39 6.22%
Over ten years -- -- -- --
------- ------- ------ -----
Total 93,693 93,544 1.49 6.04%
------ ------
Obligations of states and political subdivision:
Within one year
Over one through five years 781 816 2.8 9.10%
Over five through ten years 800 929 7.6 11.03%
Over ten years 2,689 2,702 18.1 9.86%
----- -----
Total 4,270 4,447 13.4 8.77%
Mortgage-backed securities 583 549 28.9 6.15%
--- ---
Total Investment Securities $98,546 $98,540
======= =======
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Deposits
Total deposits decreased from $783 million at December 31, 1996, to $732 million at December 31, 1997 as a result of the sale of $108 million of deposits in Western Kentucky. If Republic would have retained its Western Kentucky banking centers, total deposits would have increased $64 million based on the level of deposits at those banking centers at the time of sale. Management continues to seek retail and commercial deposits through new products and initiatives. As part of Republic's strategy to further reduce its cost of funds, Money market deposits were increased by 67% over year end 1996 to $69 million. The increase was primarily in new funds resulting from the Bank's marketing programs designed to attract large balance money market customers. The certificate of deposit portfolio decreased by $20 million as a result of the sale of $79 million of certificates of deposits in Western Kentucky. If Republic had retained its Western Kentucky banking centers, certificates of deposit would have increased $59 million.
Republic does not have a large liability dependency ratio as evidenced by the comparatively low level of deposit customers with deposits larger than $100,000. The ratio of those deposits to average earning assets was 6.0% at the end of 1997 and 6.7% at the end of 1996. Table 12 provides a maturity distribution of time deposits $100,000 and over.
Table 12 - Maturity of Time Deposits $100,000 and over
(in thousands) As of December 31, 1997
-----------------------
Three months or less $5,685
Over three months through six months 11,661
Over six months through twelve months 24,511
Over twelve months 21,188
------
Total $63,045
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Republic's $48 million in brokered deposits remained steady during 1997. Republic did not solicit or add any additional brokered deposits during 1997. The brokered deposits have stated rates ranging from 5.35% to 6.15%. and original contractual maturities ranging from 3 to 5 years. Table 13 provides a maturity distribution of brokered deposits, which are excluded from the maturity schedule in Table 12:
Table 13 - Maturity of Brokered deposits
(in thousands) As of December 31, 1997
-----------------------
1998 $18,470
1999 12,581
2000 16,602
------
Total $47,653
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Short-Term Borrowings
Short-term borrowings consist of short term excess funds from correspondent banks, repurchase agreements and overnight liabilities to deposit customers arising from Republic's cash management program. During 1997, short-term borrowings decreased from $182 million at December 31, 1996, to $111 million at December 31, 1997. Approximately $92 million of the December 31, 1996 balance represented short-term funds received from a local governmental organization. As anticipated, substantially all of these funds received from that governmental organization were withdrawn by March 31, 1997.
Other Borrowed Funds
Other borrowed funds increased from $107 million to $124 million at December 31, 1997. Republic increased its borrowings from the FHLB from $84 million to $124 million at December 31, 1997. During the first quarter of 1998 Republic borrowed an additional $60 million from the FHLB to fund the sale of deposits in Mayfield. These additional advances from the FHLB were used to replace deposits associated with the sale of the Western Kentucky banking centers. Republic's management expects to continue to utilize FHLB borrowings as a source of funds in addition to its utilization of retail deposits. Republic presently has the capacity to increase its borrowings from the FHLB up to $295 million. Additional FHLB borrowings above current levels will be evaluated by management, with consideration given to the growth of the Bank's loan portfolio, liquidity needs, cost of retail deposits, market conditions, and other factors.
Liquidity
Republic maintains sufficient liquidity in order to fund loan demand and deposit withdrawals. Liquidity is managed by retaining sufficient liquid assets in the form of investment securities and core deposits to meet demand. Substantial funding and cash flows can also be realized from the investment portfolio and paydowns within the loan portfolio. Republic's banking centers also provide access to the retail deposit market. Republic has also established lines of credit with other financial institutions, the FHLB and brokerage firms. While Republic utilizes numerous funding sources in order to meet its liquidity requirements, FHLB borrowings remain a material component of management's balance sheet strategies.
Capital
To further enhance Republic's capital position, management has utilized alternative capital sources. During the first quarter of 1997, Republic issued $6.4 million in 8.5% Trust Preferred Securities through a newly formed subsidiary, Republic Capital Trust. The effective cost of these securities is 5.5%. The interest paid on these securities is deductible to Republic. Each preferred security, par value $100, can be converted to five shares of Republic Class A Common Stock. Holders of the Trust Preferred Securities are entitled to the payments made on Republic's subordinated convertible debentures issued to that subsidiary which have a thirty year maturity with a right of redemption at par after five years, subject to certain restrictions.
On December 31, 1997, Republic redeemed its $ 5 million outstanding Series A Convertible Preferred stock. At the option of the shareholder, each security was either convertible to 5 shares of Class A Common Stock and 1 share of Class B Common Stock, or redeemable in cash for the initial offering price of $100 per share plus a 20% premium. As a result of this redemption approximately 80% of the outstanding securities were converted to common stock. The remaining securities were redeemed for cash. The $1.2 million payout to those shareholders included the 20% premium of $203,000 which was charged to retained earnings.
Regulatory agencies measure capital adequacy within a framework that makes capital requirements, in part, dependent on the individual risk profiles of financial institutions. Republic improved its capital position during 1997 due to the increased retained earnings achieved during the period. As a result of the improved capital position, Republic's capital to average assets ratio increased to 6.26% at December 31, 1997 compared to 6.24% at year end 1996. Republic continues to exceed the standard regulatory requirements for Tier I risk based, Tier I leverage and total risked based capital. The Bank intends to maintain a capital position that meets or exceeds the "well capitalized" requirements as defined by the FDIC. (See Item 8 Note 14 to Financials for detailed capital calculations and ratios).
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 Bank's Board of Directors sets policy guidelines establishing maximum limits on the Bank's interest rate risk exposure. Republic's management monitors and adjusts exposure to interest rate fluctuations as influenced by the Bank's loan and deposit portfolios.
Republic uses an earnings simulation model to analyze net interest income sensitivity. Potential changes in market interest rates and their subsequent effect on interest income is 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 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 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 change in net interest income given a 100 and 200 basis point immediate and sustained increase or decrease in market interest rates. The current limits approved by the Board are plus or minus 8% for a 100 basis point change and plus or minus 12% for a 200 basis point movement.
The following table illustrates Republic's estimated annualized earnings sensitivity profile as of December 31, 1997:
Table 14 - Interest Rate Sensitvity
Decrease in Rates Increase in Rates
200 100 BASE 100 200
Basis Points Basis Points Basis Points Basis Points
Projected Interest Income
Loans $ (65,254) $ (70,528) $ 75,721 $ 80,555 $ 85,190
Investments (11,061) (11,655) 12,337 12,692 13,045
Short-Term Investments (39) (69) 109 148 182
---- ---- --- --- ---
Total Interest Income $ (76,354) $ (82,252) $ 88,167 $ 93,395 $ 98,417
Projected Interest Expense
Deposits (32,209) (33,735) 35,261 36,844 38,877
Other Borrowings (7,418) (9,584) 11,750 13,916 16,081
Short-Term Borrowings (95) (117) 136 157 179
---- ----- --- --- ---
Total Interest Expense (39,722) (43,436) 47,147 50,917 55,137
Net Interest Income $ (36,632) $ (38,816) $ 41,020 $ 42,478 $ 43,280
Change From Base $ (4,388) $ (2,204) $ 1,459 $ 2,260
% Change From Base (10.70%) (5.37)% 3.56% 5.51%
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Given an immediate, sustained 100 basis point upward shock to the yield curve used in the simulation model, it is estimated net interest income would increase by 3.56% compared to an increase of 5.51% given a 200 basis point increase. A 100 basis point immediate, sustained downward shock to the yield curve would decrease net interest income by an estimated 5.37% compared to a decrease of 10.70% given a 200 basis point decrease. These potential changes in net interest income are within the policy guidelines established by Republic's Board of Directors.
These interest rate 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 repricing schedules. Therefore, the forgoing table may not be a precise measurement of the effect of changing interest rates on Republic in the future.
New Accounting Pronouncements
See discussion in Item 8 Note 1 to financial statements.
Year 2000
Republic has implemented plans to address the Year 2000 issue. The issue arises
from the fact that many existing computer programs use only two digits to
identify a year in the computer's date field. These programs were designed
without having considered the impact of the upcoming change in the century. If
not corrected, computer applications could fail or create inaccurate results by
or at the Year 2000. The Bank must not only evaluate, install and test for its
own Year 2000 readiness, it must also coordinate with other entities with which
it routinely interacts such as suppliers, creditors, borrowers, customers,
regulators and other financial service organizations.
Republic has determined that the Year 2000 issue may be material to its business, operations and suppliers. Customer readiness is not deemed by management to be material to the Bank's overall financial performance. The Year 2000 issue principally involves the installation of selected software releases which meet Year 2000 functional requirements. Many of these installations would have been scheduled for completion by the Year 2000 in the normal course of business. The performance of the Bank's software suppliers will be essential for the Bank's successful implementation of its Year 2000 objectives.
The Bank has completed the Year 2000 assessment stage and has actively entered into the remediation phase. The Bank has initiated an implementation plan providing for Y2K readiness by the end of 1998, with the year of 1999 available for testing and the performance of any required corrective actions. The Bank projects that the cost of the remediation will be in a range of $1.2 million to $1.8 million. Management anticipates that the majority of this expense will be capitalized over a 3 year period as these costs would be capitalized in the normal course of business. These expenses are expected to impact Republic's non-intest expenses in a range of approximately $400,000 to $600,000 for 1998. These expenses could vary from management's estimates if the scope of the Bank's Year 2000 remediation exceeds management's projections
Suppliers and any large computer dependent loan affected customers either have or will be contacted by the Bank in order to evaluate their response capabilities and readiness for Year 2000. At this time, the Bank has no reason to believe that its software providers will not be able to adequately address the Bank's needs for Year 2000 software functionality.
ITEM 7a. 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 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index of Financial Statements
REPORT OF INDEPENDENT AUDITORS 27-28
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of December 31, 1997 and 1996 29
Consolidated Statements of Income for the years ended
December 31, 1997, 1996 and 1995 30-31
Consolidated Statements of Stockholders' Equity
for the years ended December 31, 1997, 1996, and 1995 32
Consolidated Statements of Cash Flows
for the years ended December 31, 1997, 1996 and 1995 33-34
Notes to Consolidated Financial Statements 35-53
|
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
of Republic Bancorp, Inc.
We have audited the accompanying consolidated balance sheets of Republic Bancorp, Inc. and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of income, stockholders' equity and cash flows for the years then ended. These financial statements are the responsibility of Republic's management. Our responsibility is to express an opinion on these financial statements based on our audits. The consolidated statements of income, stockholders' equity, and cash flows of Republic Bancorp, Inc. and subsidiaries for the year ended December 31, 1995 were audited by other auditors whose report dated March 1, 1996 expressed an unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Republic Bancorp, Inc. and subsidiaries as of December 31, 1997 and 1996, and the results of their operations and their cash flows for the years then ended, in conformity with generally accepted accounting principles.
Crowe, Chizek and Company LLP
Louisville, Kentucky
January 30, 1998
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
of Republic Bancorp, Inc.
We have audited the consolidated statements of income, stockholders' equity and cash flows of Republic Bancorp, Inc. and subsidiaries (the Company) for the year ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the results of operations and cash flows of Republic Bancorp, Inc. and subsidiaries for the year ended December 31, 1995, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
March 1, 1996
Louisville, Kentucky
REPUBLIC BANCORP, INC. AND SUBSIDIARIES
1997 1996
ASSETS:
Cash and cash equivalents:
Cash and due from banks $ 24,546 $ 40,021
Federal funds sold 16,650
------------ ------------
Total cash and cash equivalents 24,546 56,671
Securities available for sale 93,826 107,937
Securities to be held to maturity 98,546 173,918
Mortgage loans held for sale 9,970 7,624
Loans, less allowance for loan losses
of $8,176 (1997) and $6,241 (1996) 794,939 759,424
Federal Home Loan Bank stock 8,124 5,548
Accrued interest receivable 8,803 9,685
Premises and equipment, net 12,774 17,509
Other assets 3,422 2,566
------------ ------------
TOTAL $ 1,054,950 $ 1,140,882
============ ============
LIABILITIES:
Deposits:
Non-interest bearing $ 65,913 $ 66,969
Interest bearing 665,685 716,172
Securities sold under agreements to repurchase
and other short-term borrowings 111,137 181,634
Other borrowed funds 124,405 106,974
Accrued interest payable 6,233 5,643
Guaranteed preferred beneficial interests in
Republic's subordinated debentures 6,452
Other liabilities 6,739 4,471
------------ ------------
Total liabilities 986,564 1,081,863
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, no par value, 100,000 shares authorized, Series A 8.5%
noncumulative convertible, 50,000 shares issued and outstanding
(liquidation
preference $5,000) - 5,000
Class A common stock, no par value, 15,000,000 shares
authorized, 6,265,531 shares (1997) and 6,051,611 shares (1996) issued
and outstanding; Class B common stock, no par value, 2,000,000 shares
authorized, 1,209,037 shares (1997) and 1,169,857
shares (1996) issued and outstanding 3,613 3,491
Additional paid-in capital 10,833 6,817
Retained earnings 53,994 43,930
Net unrealized depreciation on securities available
for sale, net of tax (54) (219)
------------ ------------
Total Stockholders' equity 68,386 59,019
------------ ------------
TOTAL $ 1,054,950 $ 1,140,882
============ ============
See accompanying notes to consolidated financial statements.
|
1997 1996 1995
INTEREST INCOME:
Loans, including fees $ 76,889 $ 70,831 $ 61,338
Securities:
Taxable 12,997 9,375 7,781
Non-taxable 123 127 139
FHLB dividends 494 378 338
Other 691 1,275 1,537
------------- ------------ ------------
Total interest income 91,194 81,986 71,133
------------- ------------ ------------
INTEREST EXPENSE:
Deposits 38,940 36,084 32,512
Securities sold under agreements to
repurchase and short-term borrowings 4,533 3,481 975
Other borrowed funds 7,383 4,290 4,233
------------- ------------ ------------
Total interest expense 50,856 43,855 37,720
------------- ------------ ------------
NET INTEREST INCOME 40,338 38,131 33,413
PROVISION FOR LOAN LOSSES 7,251 9,149 4,268
------------- ------------ ------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 33,087 28,982 29,145
------------- ------------ ------------
NON-INTEREST INCOME:
Service charges on deposit accounts 3,284 2,642 1,974
Other service charges and fees 661 445 1,434
Bank card services 457 1,010 1,263
Net gain on sale of deposits 7,527
Net gain on sale of bank card 3,660
Net gain on sale of mortgage loans 1,852 1,212 1,083
Net gain on sale of securities 81
Loan servicing income 734 829 895
Other 674 959 871
------------- ------------ ------------
Total non-interest income 18,930 7,097 7,520
------------- ------------ ------------
NON-INTEREST EXPENSE:
Salaries and employee benefits 15,444 13,236 11,334
Occupancy and equipment 8,562 6,623 5,346
Communication and transportation 1,796 1,548 1,407
Marketing and development 1,299 1,620 1,308
FDIC Deposit Insurance 107 3,277 1,245
Supplies 1,013 973 883
Litigation recovery (738)
Other 4,659 4,132 3,720
------------- ------------ ------------
Total non-interest expense 32,880 31,409 24,505
------------- ------------ ------------
INCOME BEFORE INCOME TAXES 19,137 4,670 12,160
INCOME TAXES 6,878 1,943 4,372
------------- ------------ ------------
NET INCOME $ 12,259 $ 2,727 $ 7,788
============= ============ ============
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REPUBLIC BANCORP, INC. AND SUBSIDIARIES
EARNINGS PER SHARE
Class A $ 1.64 $ .32
Class B $ 1.62 $ .30
Common Stock $ 1.03
EARNINGS PER SHARE ASSUMING DILUTION
Class A $ 1.58 $ .32
Class B $ 1.56 $ .30
Common Stock $ 1.02
See accompanying notes to consolidated financial statements.
|
Net Unrealized
Common Stock Additional Depreciation on Total
Preferred Stock Class A Class B Paid-In Retained Available for Stockholders'
Shares Amount Shares Shares Shares Amount Capital Earnings Sale Securities Equity
BALANCE, January 1, 1995 7,174 $3,467 $ 6,609 $ 36,969 $ 47,045
Sale of preferred stock 50 $ 5,000 5,000
Exercise of common stock options 54 27 279 306
Purchases and retirements of common stock (6) (3) (71) (74)
Dividends declared:
Preferred ($7.28 per share) (364) (364)
Common ($.17 per share) (1,199) (1,199)
Net income 7,788 7,788
------- ------- ------ ------ ------- -------- --------
BALANCE, December 31, 1995 50 5,000 7,222 3,491 6,817 43,194 58,502
Stock split 6,018 1,204 (7,222)
Conversions of Class B common to Class A common 34 (34)
Dividends declared:
Preferred ($8.50 per share) (425) (425)
Common: Class A($. 22 per share) (1,330) (1,330)
Class B($. 20 per share) (236) (236)
Net changes in unrealized depreciation on securities
available for sale, net of tax $ (219) (219)
Net income 2,727 2,727
------- ------- ------- ------ ------ ------ ------- -------- ----------- --------
BALANCE, December 31, 1996 50 5,000 6,052 1,170 3,491 6,817 43,930 (219) 59,019
Exercise of common stock options 14 7 146 153
Redemption of preferred stock (10) (1,015) (203) (1,218)
Conversion of preferred stock into
common stock (40) (3,985) 199 40 115 3,870
Conversions of Class B common to Class A common 1 (1)
Dividends declared:
Preferred ($8.50 per share) (425) (425)
Common: Class A($ .22 per share) (1,335) (1,335)
Class B($ .20 per share) (232) (232)
Net changes in unrealized depreciation on securities
available for sale, net of tax 165 165
Net income 12,259 12,259
------- ------- ------- ------ ------ ------ ------- -------- ---------- --------
BALANCE, December 31, 1997 6,266 1,209 $3,613 $10,833 $ 53,994 $ (54) $ 68,386
======= ======= ======= ====== ====== ====== ======= ======== ========== ========
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REPUBLIC BANCORP, INC. AND SUBSIDIARIES
1997 1996 1995
OPERATING ACTIVITIES:
Net income $ 12,259 $ 2,727 $ 7,788
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization of premises and equipment 4,683 3,179 2,353
Amortization and accretion of securities 606 (124) (370)
FHLB stock dividends (456) (372) (331)
Provision for loan losses 7,251 9,149 4,268
Net gain on sale of deposits (7,527)
Net gain on sale of bank card (3,660)
Net gain on sale of mortgage loans (1,852) (1,212) (1,083)
Net gain on sale of securities (81)
Proceeds from sale of loans held for sale 123,909 104,115 86,808
Origination of mortgage loans held for sale (124,403) (104,539) (91,407)
Changes in assets and liabilities:
Accrued interest receivable 882 (2,441) (1,968)
Other assets 17 415 960
Accrued interest payable 590 1,329 755
Other liabilities 2,268 83 (1,281)
------------- ------------ ------------
Net cash provided by operating activities 14,486 12,309 6,492
INVESTING ACTIVITIES:
Purchases of securities available for sale (69,355) (108,350)
Purchases of securities to be held to maturity (11,189) (215,655) (100,039)
Purchases of FHLB stock (2,120)
Proceeds from maturities of securities to be held to maturity 86,746 156,596 86,460
Proceeds from sales of securities available for sale 83,006
Proceeds from sale of bank card 26,590
Net increase in loans (66,654) (100,484) (101,313)
Purchases of premises and equipment (3,364) (8,673) (2,922)
Proceeds from sales of premises and equipment 3,416
------------- ------------ ------------
Net cash provided by (used in) investing activities 47,076 (276,566) (117,814)
FINANCING ACTIVITIES:
Net increase in deposits 63,593 48,698 144,407
Sale of deposits (107,609)
Net increase (decrease) in securities sold under agree-
ments to repurchase and other short-term borrowings (70,497) 159,905 8,997
Payments on other borrowed funds (296,819) (77,089) (19,997)
Proceeds from other borrowed funds 314,250 116,000 11,000
Purchases and retirements of common stock (74)
Sale of preferred stock 5,000
Proceeds from issuance of guaranteed preferred beneficial
interests in Republic's subordinated debentures 6,452
Proceeds from common stock options exercised 153 306
Redemption of preferred stock (1,218)
Cash dividends paid (1,992) (1,899) (1,563)
------------- ------------ ------------
Net cash provided by (used in) financing activities (93,687) 245,615 148,076
------------- ------------ ------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (32,125) (18,642) 36,754
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 56,671 75,313 38,559
------------- ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 24,546 $ 56,671 $ 75,313
============= ============ ============
|
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 50,266 $ 42,526 $ 36,965
Income taxes $ 6,095 $ 2,902 $ 3,920
Transfers from loans to real estate
acquired in settlement of loans $ 958 $ 104 $ 802
Conversion of preferred stock to
common stock $ 3,985 $ $
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Business - The consolidated financial statements include the accounts of Republic Bancorp, Inc. (Parent Company) and its wholly-owned subsidiaries; Republic Bank & Trust Company (Bank), Republic Capital Trust, Republic Mortgage Company and Republic Insurance Agency, Inc. (collectively Republic). All significant intercompany balances and transactions have been eliminated.
Republic operates 17 banking centers primarily in the retail banking industry and conducts its operations predominately in metropolitan Louisville and in Central Kentucky. Republic's consolidated results of operations are dependent upon net interest income, which is the difference between the interest income on interest-earning assets and the interest expense on interest-bearing liabilities. Principal interest-earning assets are securities and commercial, real estate mortgage and consumer loans. Interest-bearing liabilities consist of interest-bearing deposit accounts and short-term and long-term borrowings.
Other sources of income include fees charged to customers for a variety of banking services such as credit cards, transaction deposit accounts, and trust services. Republic also generates revenue from its mortgage banking activities including the origination and sale of loans in the secondary market and servicing loans for others.
Republic's operating expenses consist primarily of salaries and employee benefits, occupancy and equipment expenses, communications and transportation costs and other general and administrative expenses. Republic's results of operations are significantly affected by general economic and competitive conditions, particularly changes in market interest rates, government policies and actions of regulatory agencies.
Securities - Securities to be held to maturity are those which Republic has the positive intent and ability to hold to maturity and are reported at cost, adjusted for premiums and discounts that are recognized in interest income using the interest method over the period to maturity.
Securities available for sale consist of securities not classified as trading securities nor as held to maturity securities. Unrealized holding gains and losses, net of tax, on securities available for sale are reported as a separate component of shareholders' equity until realized. Gains and losses on the sale of available for sale securities are determined using the specific-identification method. Premiums and discounts are recognized in interest income using the interest method over the period to maturity.
Declines in the fair value of individual securities below their cost that are other than temporary result in write-downs of the individual securities to their fair value. The related write-downs are included in earnings as realized losses.
Federal Home Loan Bank stock is not considered a marketable equity security under Statement of Financial Accounting Standards (SFAS) No. 115 "Accounting for Certain Investments in Debt and Equity Securities" and, therefore, is carried at cost.
Mortgage Banking Activities - Mortgage loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or market value. Republic controls its interest rate risk with respect to mortgage loans held for sale and loan commitments expected to close by entering into option agreements to sell loans. The aggregate market value of mortgage loans held for sale considers the sales prices of such agreements. Republic also provides currently for any losses on uncovered commitments to lend or sell.
On January 1, 1996, Republic adopted SFAS No. 122, "Accounting for Mortgage Servicing Rights" which requires an enterprise with mortgage banking activities to recognize the right to service mortgage loans for others as a separate asset, however those rights were acquired. Under previous accounting guidance, a separate asset was recognized for purchased, but not originated, mortgage servicing rights. Under SFAS No. 122, the total cost of mortgage loans originated with the intent to sell is allocated between the servicing right and the loan without the servicing right based on their relative fair values at the date of origination. The capitalized cost of servicing rights are amortized in proportion to, and over the period of, the estimated net servicing income. The mortgage servicing asset is periodically evaluated for impairment.
Since adoption of this Statement, loans sold in the secondary market have been primarily servicing released. Accordingly, adoption of SFAS No. 122 has had no material impact on Republic's financial position or results of operations.
Loans - Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding principal adjusted for any charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans.
Interest on loans is computed on the principal balance outstanding. Loan origination fees and certain direct loan origination costs relating to successful loan origination efforts are deferred and recognized over the lives of the related loans as an adjustment to yield.
Generally, the accrual of interest on loans, including impaired loans, is discontinued when it is determined that the collection of interest or principal is doubtful, or when a default of interest or principal has existed for 90 days or more, unless such loan is well secured and in the process of collection. Interest received on non-accrual loans generally is either applied against principal or reported as interest income, according to management's judgment as to the collectibility of principal. When loans are placed on non-accrual status, all unpaid accrued interest is reversed. Such 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 generally are not placed on non-accrual status but are reviewed periodically and charged off when deemed uncollectible.
Republic recognizes interest income on an impaired loan when earned, unless the loan is on non-accrual status, in which case interest income is recognized when received.
Allowance for Loan Losses - The allowance for loan losses is an amount that management believes will be adequate to absorb losses on existing loans that may become uncollectible, based on evaluations of the collectibility of loans and prior loan loss experience. The evaluations take into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans, and current economic conditions that may affect the borrowers' ability to pay. Although management believes it uses the best information available to make determinations with respect to Republic's allowance for loan losses, future adjustments, which could be material, may be necessary if original assumptions differ from actual performance.
A loan is defined as "impaired" when it is probable that a creditor will be unable to collect all principal and interest due according to the contractual terms of the loan agreement. Republic has defined its population of impaired loans to be those commercial real estate and commercial loans $500,000 or greater that management has classified as doubtful (collection of all amounts due under the terms of the loan 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 determination that it is probable the amount will not be collected.
Impairment of smaller balance, homogeneous loans (commercial real estate and commercial loans less than $500,000, residential real estate, consumer, home equity, and credit card loans) is measured on an aggregate basis giving consideration to historical charge-off experience of the related portfolios.
Premises and Equipment - Premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed over the estimated useful lives of the related assets on the straight-line method. Estimated lives are 25 to 31 1/2 years for buildings and improvements, 3 to 5 years for furniture, fixtures and equipment and 3 to 9 years for leasehold improvements.
Long Lived Assets - Effective January 1, 1996, Republic adopted SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets", which requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The effect of adopting this standard is considered to be a component of other operating expense and was not significant.
Loan Servicing - Loan servicing income is recorded as principal payments are collected and includes servicing fees from investors and certain charges collected from borrowers, such as late payment fees. Costs of loan servicing are charged to expense as incurred.
Stock Option Plans - On January 1, 1996, Republic adopted SFAS No. 123, "Accounting for Stock Based Compensation." This Statement establishes a fair value based method of accounting for stock options and similar equity instruments such as warrants. Companies may either adopt the fair value method of accounting introduced in SFAS No. 123 or continue to apply the intrinsic value method required under prior accounting methods. Under the intrinsic value method, because the exercise price of Republic's employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. Companies which do not elect to use the fair value method must make pro forma disclosures of net income and earnings per share as if the fair value method provided for in SFAS No. 123 had been adopted. Management has elected to continue the intrinsic value method and has provided the pro forma disclosures.
Income Taxes - Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.
Earnings per Share - Earnings per share and earnings per share assuming dilution are computed under a new accounting standard effective in the quarter ended December 31, 1997. All prior amounts have been restated to be comparable. Earnings per share is based on income less preferred stock dividends divided by the weighted average number of shares outstanding during the period. Earnings per share assuming dilution shows the effect of additional common shares issuable under stock options, convertible preferred stock and guaranteed preferred beneficial interests in Republic's subordinated debentures. All per share amounts have been restated to reflect the stock splits occurring during the periods presented.
Use of Estimates - Financial statements prepared in conformity with generally accepted accounting principles require management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates.
Current Accounting Issues - In June 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 130, "Reporting Comprehensive Income". This standard requires that certain items be reported in a separate statement of comprehensive income, be included as a separate, additional component of the statement of income, or be added to the statement of stockholders' equity. Such items include foreign currency translation, accounting for futures contracts, accounting for defined benefit pension plans, and accounting for certain investments in debt and equity securities. If a company has no items of comprehensive income in any periods reported a statement of comprehensive income is not required. The periodic change in net appreciation or depreciation on securities available for sale reported in Republic's Balance Sheet is an element of comprehensive income under this standard. This standard is effective for Republic in 1998. Management has not yet determined the manner of presentation to be used to comply with this standard.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information". This standard changes the way public companies report information about operating segments in annual financial statements and requires that those companies report selected information about operating segments in interim financial reports. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. Operating segments are parts of a company for which separate information is available which is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in evaluating performance. Required disclosures for operating segments include total segment revenues, total segment profit or loss, and total segment assets. The standard also requires disclosures regarding revenues derived from products and services (or similar groups of products or services), countries in which the company derives revenue or holds assets, and about major customers, regardless of whether this information is used in operating decision making. Republic is required to adopt the disclosure requirements in its 1998 annual report, and in interim periods in 1999. The 1999 interim period disclosures are required to include comparable 1998 information.
2. RESTRICTIONS ON CASH AND DUE FROM BANKS
Republic is required by the Federal Reserve Bank to maintain average reserve balances. Cash and due from banks in the consolidated balance sheet includes $1.7 million of reserve balances at December 31, 1997.
3. SECURITIES
Securities available for sale:
December 31, 1997
(in thousands)
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
U.S. Treasury securities and U.S.
government agencies $ 44,586 $ 6 $ (33) $ 44,559
Mortgage-backed securities 49,322 28 (83) 49,267
----------- ----------- ----------- -----------
Total securities available for sale $ 93,908 $ 34 $ (116) $ 93,826
=========== =========== =========== ===========
|
December 31, 1996
(in thousands)
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
U.S. Treasury securities and U.S.
government agencies $ 108,269 $ $ (332) $ 107,937
=========== =========== =========== ===========
|
Securities to be held to maturity:
December 31, 1997
(in thousands)
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
U.S. Treasury securities and U.S.
government agencies $ 93,693 $ 229 $ (378) $ 93,544
Obligations of state and political
subdivisions 4,270 177 4,447
Mortgage-backed securities 583 (34) 549
----------- ----------- ----------- -----------
Total securities to be held to maturity $ 98,546 $ 406 $ (412) $ 98,540
=========== =========== =========== ===========
|
December 31, 1996
(in thousands)
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
U.S. Treasury securities and U.S.
government agencies $ 168,797 $ 452 $ (800) $ 168,449
Obligations of state and political
subdivisions 4,458 167 (1) 4,624
Mortgage-backed securities 663 (41) 622
----------- ----------- ----------- -----------
Total securities to be held to maturity $ 173,918 $ 619 $ (842) $ 173,695
=========== =========== =========== ===========
|
Securities having an amortized cost of $168.6 million and $263.5 million and fair value of $168.1 million and $262.9 million at December 31, 1997 and 1996, respectively, were pledged to secure public deposits, securities sold under agreements to repurchase and for other purposes, as required or permitted by law.
The amortized cost and fair value of securities, by contractual maturity, are as follows:
December 31, 1997
(in thousands)
Securities to be Securities
held to maturity available for sale
Amortized Amortized
Cost Fair Value Cost Fair Value
Due in one year or less $ 52,787 $ 52,776
Due after one year through
five years 31,049 31,028 $ 44,586 $ 44,559
Due after five through ten years 11,438 11,486 34,220 34,159
Due after ten years 3,272 3,250 15,102 15,108
------------ ------------- ------------ ------------
Total $ 98,546 $ 98,540 $ 93,908 $ 93,826
============ ============= ============ ============
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4. LOANS
December 31,
1997 1996
(in thousands)
Residential real estate $ 480,874 $ 457,204
Commercial real estate 76,306 59,086
Real estate construction 37,940 32,130
Commercial 21,552 25,115
Consumer 81,967 96,138
Home equity 102,512 69,572
Bank card 24,527
Other 4,094 4,309
------------ ------------
Total loans 805,245 768,081
Less:
Unearned interest income
and unamortized loan fees 2,130 2,416
Allowance for loan losses 8,176 6,241
------------ ------------
Loans, net $ 794,939 $ 759,424
============ ============
|
Substantially all loans are to borrowers in Republic's primary market areas. Republic's policy is to make residential real estate loans that generally do not exceed 80% of appraised value of the underlying property for conventional loans, and to require borrowers to purchase private mortgage insurance where the borrower's down payment is less than 20%. Republic generally also requires collateral on commercial real estate loans, commercial loans and home equity loans. All bank card loans and approximately $38.4 million and $55.0 million of consumer loans at December 31, 1997 and 1996, respectively, are on an unsecured basis.
During 1997, Republic sold the bank card loans. A gain of $3.7 million was recognized on these sales and includes $500,000 of gain recognized on the sale of the associated merchant processing.
Republic monitors its exposure to credit risk by performing ongoing credit evaluations of the borrowers' financial condition and maintains an allowance for potential credit losses. Activity in the allowance for loan losses is summarized as follows:
December 31,
1997 1996 1995
(in thousands)
Balance, beginning of year $ 6,241 $ 3,695 $ 1,827
Provision for loan losses charged to income 7,251 9,149 4,268
Charge-offs (5,859) (7,129) (2,489)
Recoveries 543 526 89
------------ ------------ ------------
Balance, end of year $ 8,176 $ 6,241 $ 3,695
============ ============ ============
|
The level of charge offs in 1997 and 1996 exceeded losses incurred in prior periods and were directly related to two unsecured credit programs initiated in 1995. The net charge offs related to loans arising under these programs were $4.2 million and $4.8 million in 1997 and 1996, and accounted for 71% and 73% of net charge offs in each of those years. Originations of loans under these programs were significantly reduced in 1997 and 1996, and such originations were underwritten to more restrictive standards than in 1995.
Information about Republic's investment in impaired loans is as follows:
As of and for the Year Ended
December 31,
1997 1996 1995
(in thousands)
Gross impaired loans which have allowances $ 1,640 $ 1,638 $ 4,064
Less: related allowances for loan losses 240 240 589
------------ ------------ ------------
Net impaired loans with related allowances 1,400 1,398 3,475
Impaired loans with no related allowances 0 0 87
------------ ------------ ------------
Total $ 1,400 $ 1,398 $ 3,562
============ ============ ============
Average impaired loans outstanding $ 1,639 $ 1,638 $ 3,432
============ ============ ============
Interest income recognized $ 93 $ 110 $ 358
============ ============ ============
Interest income received $ 93 $ 110 $ 337
============ ============ ============
|
Loans made to executive officers and directors of Republic and their related interests in the ordinary course of business, subject to substantially the same credit policies as other loans and current in their terms, are as follows:
Balance, Balance,
Beginning New End
Period of Period Loans Repayments of Period
(in thousands)
Year ended December 31, 1997 $ 5,688 $ 7,301 $ 8,327 $ 4,662
============ ============ ============ ============
|
5. LOAN SERVICING
Republic was servicing loans for others (primarily FHLMC) totaling $263 million and $297 million at December 31, 1997 and 1996, respectively. Servicing loans for others generally consists of collecting mortgage payments, maintaining escrow accounts, disbursing payments to investors and processing foreclosures. In connection with these loans serviced for others, Republic held borrowers' escrow balances of $.5 million and $.6 million at December 31, 1997 and 1996, respectively.
6. ACCRUED INTEREST RECEIVABLE
December 31,
1997 1996
(in thousands)
Investment Securities $ 2,845 $ 4,331
Loans 5,958 5,354
------------ ------------
$ 8,803 $ 9,685
============ ============
|
7. PREMISES AND EQUIPMENT
December 31,
1997 1996
(in thousands)
Land $ 1,007 $ 1,699
Office buildings and improvements 6,991 8,718
Furniture, fixtures and equipment 17,735 18,608
Leasehold improvements 869 869
------------ ------------
Total premises and equipment 26,602 29,894
Less accumulated depreciation and amortization 13,828 12,385
------------ ------------
Net premises and equipment $ 12,774 $ 17,509
============ ============
|
8. INTEREST BEARING DEPOSITS
December 31,
1997 1996
(in thousands)
Demand (interest bearing):
NOW and Super NOW $ 50,049 $ 75,040
Money market 68,821 41,140
Savings 12,165 14,840
Money market certificates of deposit 41,307 63,423
Individual retirement accounts 30,167 35,845
Certificates of deposit, $100,000 and over 63,045 60,890
Other certificates of deposit 352,478 374,864
Brokered deposits 47,653 50,130
------------ ------------
Total interest bearing deposits $ 665,685 $ 716,172
============ ============
|
At December 31, 1997, the scheduled maturities of time deposits are as follows:
Weighted
Average Rate
Less than 1 year $ 301,532 5.95%
Over 1 year through 3 years 187,580 5.56%
Over 3 years through 5 years 4,231 5.67%
------------
$ 493,343
============
|
9. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND OTHER SHORT TERM BORROWINGS
These borrowings consist of short term excess funds from correspondent banks, 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.
December 31,
1997 1996
(in thousands)
Average outstanding balance during the year $ 100,291 $ 74,531
Average interest rate during the year 4.57% 4.74%
Maximum month end balance during the year $ 111,137 $ 182,485
|
Approximately $92 million of the December 31, 1996 balance represents funds received from a local governmental organization. Substantially, all of these amounts were returned during the first quarter of 1997.
All securities underlying the agreements were under Republic's control.
10. OTHER BORROWED FUNDS
December 31,
1997 1996
(in thousands)
Subordinated debentures bearing interest
from 9.75% to 10.0% $ 188
Note payable to a financial institution
bearing interest at 7.75% 1,450
Federal Reserve Discount Borrowings bearing
interest at 5.00% due 1/9/97 21,000
Federal Home Loan Bank variable interest rate advances, with
weighted average interest rate of 5.90% at December 31, 1997,
due through 1999 $ 116,000 65,000
Federal Home Loan Bank variable interest rate advances, with
weighted average interest rate of 5.55% at December 31 1997,
due through 2001 8,405 19,336
------------ ------------
$ 124,405 $ 106,974
============ ============
|
The parent company has available through a financial institution a line of credit in the amount of $6.5 million and has pledged 51% of the Bank's outstanding common stock as collateral for this line of credit.
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 available collateral to borrow an additional $171 million from the Federal Home Loan Bank. Republic also has unsecured lines of credit totaling $16.7 million and secured lines of credit of $104.7 available through various financial institutions.
Aggregate future principal payments on borrowed funds as of December 31, 1997 are as follows:
Year (in thousands)
1998 $ 3,068
1999 120,044
2000 1,103
2001 190
-------------
$ 124,405
=============
|
11. GUARANTEED PREFERRED BENEFICIAL INTERESTS
In February 1997, Republic Capital Trust (RCT), a trust subsidiary of Republic Bancorp, Inc., completed the private placement of 64,520 shares of cumulative trust preferred securities (Preferred Securities) with a liquidation preference of $100 per security. Each security can be converted into five shares of Class A Common Stock at the option of the holder. The proceeds of the offering were loaned to Republic Bancorp, Inc. in exchange for subordinated debentures with terms that are similar to the Preferred Securities. Distributions on the securities are payable quarterly at the annual rate of 8.5% of the liquidation preference and are included in interest expense in the consolidated financial statements. Republic undertook the issuance of these securities to enhance its regulatory capital position. The Bank intends to utilize the capital for general business purposes and to support the Bank's future opportunities for growth. These securities are considered as Tier I capital under current regulatory guidelines.
The Preferred Securities are subject to mandatory redemption, in whole or in part, upon repayment of the subordinated debentures at maturity or their earlier redemption at the liquidation preference. The subordinated debentures are redeemable prior to the maturity date of April 1, 2027 at the option of Republic on or after April 1, 2002, or upon the occurrence of specific events, defined within the trust indenture. Republic has the option to defer distributions on the subordinated debentures from time to time for a period not to exceed 20 consecutive quarters.
12. INCOME TAXES
Income tax expense is summarized as follows:
Year Ended December 31,
1997 1996 1995
(in thousands)
Income tax expense consisted of:
Current $ 7,587 $ 2,560 $ 4,443
Deferred expense (benefit) (709) (617) (71)
------------ ------------ ------------
Total $ 6,878 $ 1,943 $ 4,372
============ ============ ============
|
The provision for income taxes differs from the amount computed at the statutory rate as follows:
Years Ended
December 31,
1997 1996 1995
Federal statutory rate 35.0% 34.0% 34.0%
======== ======= =======
Increase (decrease) resulting from:
Tax-exempt interest income (0.3) (1.4) (0.7)
Net operating loss carryforward (1.8)
Acquisition intangibles 6.5
Other 1.2 2.5 4.4
-------- ------- -------
Effective rate 35.9% 41.6% 35.9%
======== ======= =======
|
The tax effects of temporary differences that give rise to the deferred tax assets and deferred tax liabilities are as follows:
December 31,
1997 1996
(in thousands)
Deferred tax assets:
Depreciation $ 448 $ 232
Loan fees 168 186
Allowance for loan losses 1,860 1,040
FAS 115 valuation reserve 28 113
------------ ------------
Total deferred tax assets 2,504 1,571
------------ ------------
Deferred tax liabilities:
FHLB dividends 662 488
Other 209 74
------------ ------------
Total deferred tax liabilities 871 562
------------ ------------
Net deferred tax asset, included in other assets $ 1,633 $ 1,009
============ ============
|
13. EARNINGS PER SHARE
A reconciliation of the combined Class A and B Common Stock numerators and denominators of the earnings per share and earnings per share assuming dilution computations is as follows:
Years Ended
December 31,
1997 1996 1995
Earnings Per Share
Net Income $ 12,259 $ 2,727 $ 7,788
Less: Dividends declared on preferred stock (425) (425) (364)
------------ ------------- ------------
Net Income available to common shares
outstanding $ 11,834 $ 2,302 $ 7,424
============ ============ ============
Weighted average shares outstanding 7,225 7,222 7,202
============ ============ ============
|
Years Ended
December 31,
1997 1996 1995
Earnings Per Share Assuming Dilution
Net Income $ 12,259 $ 2,727 $ 7,788
Less: Dividends declared on preferred stock (425) (364)
Add: Interest expense, net of tax benefit,
on assumed conversion of guaranteed
preferred beneficial interests in
Republic's subordinated debentures 320
Net Income available to common shareholder
assuming conversion $ 12,579 $ 2,302 $ 7,424
============ ============ ============
Weighted average shares outstanding 7,225 7,222 7,202
Add dilutive effects of assumed
conversion and exercise:
Convertible preferred stock 300
Convertible guaranteed preferred
beneficial interest in Republic's
subordinated debentures 282
Stock options 160 99 63
------------ ------------ ------------
Weighted average shares and dilutive
potential shares outstanding 7,967 7,321 7,265
============ ============ ============
|
The difference in earnings per share between the two classes of common stock result solely from the dividend premium paid to Class A over Class B Common Stock.
The 50,000 shares of preferred stock were not considered converted to 300,000 and 250,000 shares of common stock for 1996 and 1995 in computing earnings per share assuming dilution because the impact of their conversion was antidilutive. Incentive stock options for 31,000 shares of common stock granted during 1995 were not considered in computing earnings per share assuming dilution for 1995 because they were antidilutive.
14. STOCKHOLDERS' EQUITY
Common Stock - At December 31, 1995, there were 1,203,578 shares of no par common stock issued and outstanding. On January 8, 1996 the stockholders approved an amendment to Republic's Articles of Incorporation to authorize 15,000,000 shares of Class A Common Stock, no par value and 2,000,000 shares of Class B Common Stock, no par value.
On February 16, 1996, the Board of Directors declared a stock dividend of five shares of Class A Common Stock and one share of Class B Common Stock in exchange for each share of Common Stock owned by stockholders of record on February 20, 1996 payable on February 29, 1996. The stock dividend has been treated as a stock split and all share and earnings per share amounts have been retroactively restated.
The Class A shares are entitled to cash dividends equal to 110% of the dividend paid per share on the Class B Common Stock. Class A shares have one vote per share and Class B shares have ten votes per share. Class B stock may be converted, at the option of the holder, to Class A stock on a share-for-share basis. The Class A Common Stock is not convertible into any other class of Republic's capital stock.
Preferred Stock - On December 31, 1997, Republic redeemed the $5 million outstanding Series A Convertible Preferred stock. At the option of shareholder, each security was either convertible to 5 shares of Class A Common Stock and 1 share of Class B Common Stock, or redeemable in cash for the initial offering price of $100 per share plus a 20% premium.
Dividend Limitations - Banking regulations limit the amount of dividends that may be paid to the Parent Company 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 current year's net profits, as defined, combined with the retained net profits of the preceding two years, less any dividends declared during those periods. At December 31, 1997, the Bank had $14 million of retained earnings available for such purposes.
Regulatory Capital Requirements - The Parent Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on Republic's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Parent Company and the Bank must meet specific capital guidelines that involve quantitative measures of the bank's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the Parent Company and the Bank to maintain minimum amounts and ratios (set forth in the table below) of Total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). Management believes, as of December 31, 1997, that the Parent Company and the Bank meet all capital adequacy requirements to which it is subject.
The most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Bank must maintain minimum Total Risk-Based, Tier I Risk-Based, and Tier I Leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Bank's category.
Minimum
Minimum Requirement
Requirement To Be Well
For Capital Capitalized Under
Adequacy Prompt Corrective
Actual Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
(dollars in thousands)
As of December 31, 1997
Total Risk Based Capital (to Risk Weighted Assets)
Consolidated $ 83,069 11.73% $ 56,672 8% $ 70,841 10%
Bank only $ 83,149 11.74% $ 56,670 8% $ 70,837 10%
Tier I Capital (to Risk Weighted Assets)
Consolidated $ 74,893 10.57% $ 28,336 4% $ 42,504 6%
Bank only $ 74,973 10.58% $ 28,335 4% $ 42,502 6%
Tier I Leverage Capital (to Average Assets)
Consolidated $ 74,893 6.99% $ 42,866 4% $ 53,583 5%
Bank only $ 74,973 7.00% $ 42,865 4% $ 53,581 5%
As of December 31, 1996
Total Risk Based Capital (to Risk Weighted Assets)
Consolidated $ 65,449 10.10% $ 51,818 8% $ 64,773 10%
Bank only $ 66,590 10.31% $ 51,687 8% $ 64,609 10%
Tier I Capital (to Risk Weighted Assets)
Consolidated $ 59,208 9.14% $ 25,909 4% $ 38,864 6%
Bank only $ 60,349 9.34% $ 25,843 4% $ 38,765 6%
Tier I Leverage Capital (to Average Assets)
Consolidated $ 59,208 5.76% $ 41,097 4% $ 51,372 5%
Bank only $ 60,349 5.87% $ 41,097 4% $ 51,372 5%
|
15. STOCK OPTION PLAN
Under a stock option plan, certain key employees and directors are granted options to purchase shares of Republic's common stock at fair value at the date of the grant. Options granted become fully exercisable at the end of two to six years of continued employment and must be exercised within one year.
A summary of Republic's stock option activity, and related information for the years ended December 31 follows:
1997 1996
-------------------------------------------- -------------------------------------------
Options Weighted- Options Weighted- Options Weighted- Options Weighted-
Class A Average Class B Average Class A Average Class B Average
Shares Exercise Shares Exercise Shares Exercise Shares Exercise
Price Price Price Price
Outstanding
beginning of year 468,500 $ 10.31 34,000 $ 7.45 228,000 $ 7.72
Stock Split 190,000 $ 7.72 (190,000) $ 7.72
Granted 113,500 $ 11.99 311,500 $ 11.94
Exercised (13,500) $ 11.07 (500) $ 7.22
Forfeited (72,000) $ 10.08 (5,000) $ 6.56 (33,000) $ 10.76 (4,000) $ 10.00
--------- -------- ------ --------
Outstanding
year end 496,500 $ 10.71 28,500 $ 7.61 468,500 $ 10.31 34,000 $ 7.45
========= ======== ======= ========
Exercisable
(vested) end
of year --- --- --- ---
|
1995
Options Weighted-
Common Average
Stock Exercise
Price
Outstanding
beginning of year 42,000 $ 3.76
Granted 228,000 $ 7.72
Exercised (42,000) $ 3.76
-------
Outstanding
year end 228,000 $ 7.72
=======
Exercisable
(vested) end
of year ---
|
As discussed in Note 14, on February 29, 1996, common stock was split into five shares of Class A Common Stock and one share of Class B Common Stock for every share of common stock owned by stockholders of record on February 20, 1996.
Exercise prices for options outstanding as of December 31, 1997 ranged from $6.56 to $12.00. The weighted average remaining contractual life of those options is 4.43 years.
Pro forma information regarding net income and earnings per share is required by SFAS No. 123, and has been determined as if Republic had accounted for its employee stock options under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model. The weighted average assumptions for options granted during the year and the resulting estimated weighted average fair values per share used in computing pro forma disclosures are as follows:
December 31,
1997 1996 1995
Assumptions:
Risk-free interest rate 6.25% 6.29% 7.37%
Expected dividend yield 1.84% 1.84% 2.95%
Expected life (years) 5.78 6.00 5.66
Expected common stock
market price volatility .13 .13 .13
Estimated fair value per share $ 2.76 $ 2.80 $ 1.62
|
For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period on an accelerated basis. Republic's pro forma information follows (in thousands except for earnings per share information);
December 31,
1997 1996 1995
Pro forma net income $ 12,058 $ 2,574 $ 7,727
Pro forma earnings per share
Class A $ 1.61 $ .30
Class B $ 1.59 $ .28
Common Stock $ 1.02
Pro forma earnings per share
assuming dilution
Class A $ 1.57 $ .30
Class B $ 1.55 $ .28
Common Stock $ 1.02
|
Future pro forma net income will be negatively impacted should Republic choose to grant additional options.
16. EMPLOYEE BENEFIT PLAN
Republic maintains a 401(k) plan for full-time employees who have been employed for 1,000 hours in a plan year and have reached the age of 21. Participants in the plan may elect to contribute from 1% to 15% of their annual compensation. Republic matches 50% of participant contributions up to 5% of each participant's annual compensation. Republic's contribution may increase if certain operating ratios are achieved. Republic's matching contributions were $313,000, $284,000, and $240,000 for the years ended December 31, 1997, 1996 and 1995, respectively.
17. NON-INTEREST INCOME AND EXPENSE
Republic had previously recorded in 1993 non-interest expense of $738,000 due to an adverse legal verdict. The legal verdict was subsequently overturned by the federal appellate court. As a result, $738,000 was recorded as litigation cost recovery in non-interest expense during 1995.
18. LEASES AND TRANSACTIONS WITH AFFILIATES
Republic leases office facilities from an affiliated company owned by
Republic's Chairman and Chief Executive Officer under operating leases.
Rent expense for the years ended December 31, 1997, 1996 and 1995 under
these leases was $1,064,000, $1,054,000, and $951,000 respectively. Total
rent expense on all operating leases was $1,533,000, $1,343,000, and
$1,200,000 for the years ended December 31, 1997, 1996 and 1995,
respectively. The total minimum lease commitments under noncancelable
operating leases are as follows:
December 31, 1997
Year Affiliate Other Total
(in thousands)
1998 $ 1,181,500 $ 316,000 $ 1,497,500
1999 1,146,400 310,100 1,456,500
2000 1,131,400 235,700 1,367,100
2001 853,700 120,300 974,000
Thereafter 447,600 696,700 1,144,300
------------ ------------ ------------
$ 4,760,600 $ 1,678,800 $ 6,439,400
============ ============ ============
|
Republic made payments to companies owned by directors of the Bank for the construction of branches totaling $245,000, $711,000, and $11,000 for the years ended December 31, 1997, 1996 and 1995, respectively.
19. SALE OF DEPOSITS AND BANKING CENTERS
During 1997, Republic entered into agreements to sell deposits totaling $180 million and fixed assets of $3.7 million associated with its Western Kentucky banking centers. Loans originated by these banking centers, substantially all of which have been retained, total approximately $155 million.
Sales of 4 of the 5 banking centers were finalized during 1997, resulting in a pretax gain of $7.5 million. The sale of the remaining banking center was finalized during January 1998 for a pretax gain of $4.1 million. Federal Home Loan Bank advances of $36 million and $60 million were used, in part, to fund the 1997 and 1998 sales.
20. SAIF ASSESSMENT
In November 1994, Republic completed a merger with its affiliated savings association, Republic Savings Bancorp, Inc. Subsequent to the merger, a portion of Republic's deposits continue to be insured by the Savings Association Insurance Fund (the SAIF). A bill was passed on September 30, 1996, which included a provision to replenish the SAIF through a special assessment. The one-time assessment was imposed on SAIF assessable deposits held at March 31, 1995. Republic's assessment of approximately $2.3 million is included in FDIC deposit insurance expense in the accompanying consolidated statements of income.
21. OFF-BALANCE SHEET RISKS, COMMITMENTS AND CONTINGENT LIABILITIES
Republic is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments primarily include commitments to extend credit and standby letters of credit. The contract or notional amounts of these instruments reflect the extent of involvement Republic has in particular classes of financial instruments. Creditworthiness for all instruments is evaluated on a case-by-case basis in accordance with Republic's credit policies. Collateral, if deemed necessary, is based on management's credit evaluation of the counterparty and may include business assets of commercial borrowers as well as personal property and real estate of individual borrowers or guarantors.
Republic extends binding commitments to prospective customers. Such commitments assure the borrower of financing for a specified period of time at a specified rate. The risk to Republic under such loan commitments is limited by the terms of the contract. For example, Republic may not be obligated to advance funds if the customer's financial condition deteriorates or if the customer fails to meet specific covenants. An approved, but undrawn, loan commitment represents a potential credit risk once the funds are advanced to the customer, a liquidity risk since the customer may demand immediate cash that would require a funding source, and an interest rate risk since interest
rates may rise above the rate committed to the customer. Republic's current liquidity position continues to meet its need for funds. In addition, since a portion of these loan commitments normally expire unused, the total amount of outstanding commitments at any point in time will not require a funding source. As of December 31, 1997, Republic had outstanding loan commitments totaling $106.9 million which includes unused home equity lines of credit totaling $84.0 million. These commitments are substantially all at variable rates.
At December 31, 1997, Republic's mortgage banking activities included commitments to extend credit, primarily representing fixed rate mortgage loans, totaling $31 million. Of commitments to originate loans, borrowers with commitments totaling $7.5 million have elected to wait until closing to lock the rate on the loan. Republic has also entered into forward commitments to deliver loans into the secondary market of $16.7 million at December 31, 1997.
Standby letters of credit are conditional commitments issued by Republic to guarantee the performance of a customer to a third party. The terms and risk of loss involved in issuing standby letters of credit are similar to those involved in issuing loan commitments and extending credit. Commitments outstanding under standby letters of credit totaled $1.9 million for both December 31, 1997 and 1996.
22. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value amounts have been determined by Republic using
available market information and appropriate valuation methodologies.
However, considerable judgment is necessarily required to interpret market
data to develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts Republic
could realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect on
the estimated fair value amounts.
December 31, 1997 December 31, 1996
----------------------------- ----------------------
(in thousands)
Carrying Fair Carrying Fair
Amount Value Amount Value
Assets:
Cash and cash equivalents $ 24,546 $ 24,546 $ 56,671 $ 56,671
Securities available for sale 93,826 93,826 107,937 107,937
Securities to be held to maturity 98,546 98,540 173,918 173,695
Mortgage loans held for sale 9,970 10,070 7,624 7,700
Loans 794,939 796,577 759,424 761,915
Federal Home Loan Bank stock 8,124 8,124 5,548 5,548
Liabilities:
Deposits:
Certificate of deposit and individual
retirement accounts $ 493,343 $ 495,776 $ 521,729 $ 521,333
Non interest-bearing accounts 65,913 65,913 66,969 66,969
Transaction accounts 172,342 172,608 194,443 196,578
Securities sold under agreements to
repurchase and other short-term
borrowings 111,137 111,134 181,634 181,428
Other borrowed funds 124,405 124,403 106,974 107,134
Guaranteed preferred beneficial interests
in Republic's subordinated debentures 6,452 6,452
|
Cash and Cash Equivalents - The carrying amount is a reasonable estimate of fair value.
Securities Available for Sale, Securities to be Held to Maturity and Federal Home Loan Bank Stock - Fair value equals quoted market price, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. For Federal Home Loan Bank stock, the carrying amount is a reasonable estimate of fair value.
Loans - The fair value is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.
Mortgage Loans Held for Sale - Estimated fair value is defined as the current quoted secondary market price for such loans without regard to Republic's other commitments to make and sell loans.
Deposits - The fair value of demand deposits, savings accounts and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities.
Securities Sold Under Agreements to Repurchase and Other Short-Term Borrowings - The carrying amount is a reasonable estimate of fair value.
Guaranteed Preferred Beneficial Interests - The fair value is estimated based on the estimated present value of future cash flows using the current rates at which similar financings with the same remaining maturities could be obtained.
Other Borrowed Funds - The fair value is estimated based on the estimated present value of future cash outflows using the current rates at which similar loans with the same remaining maturities could be obtained.
Commitments to Extend Credit - The fair value of commitments to extend credit is based upon the difference between the interest rate at which Republic is committed to make the loans and the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities, adjusted for the estimated volume of loan commitments actually expected to close. The fair value of such commitments is not material.
Commitments to Sell Loans - The fair value of commitments to sell loans is based upon the difference between the interest rates at which Republic is committed to sell the loans and the current quoted secondary market price for similar loans. The fair value of such commitments is not material.
The fair value estimates presented herein are based on pertinent information available to management as of December 31, 1997 and 1996. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date and, therefore, current estimates of fair value may differ significantly from the amounts presented herein.
23. PARENT COMPANY CONDENSED FINANCIAL INFORMATION
BALANCE SHEETS
December 31,
(in thousands)
1997 1996
Assets:
Cash and cash equivalents $ 596 $ 551
Due from subsidiaries 2,220 542
Investment in subsidiaries 75,271 60,181
Repurchase agreements 851
Other 20 21
------------- ------------
Total assets $ 78,107 $ 62,146
============= ============
Liabilities:
Long-term debt $ 6,752 $ 1,638
Other 2,969 1,489
------------- ------------
Total liabilities 9,721 3,127
------------- ------------
Stockholders' equity:
Preferred stock 5,000
Common stock 3,613 3,491
Additional paid-in capital 10,833 6,817
Retained earnings 53,994 43,930
Net unrealized depreciation on
securities available for sale, net of tax (54) (219)
------------- ------------
Total stockholders' equity 68,386 59,019
------------- ------------
Total $ 78,107 $ 62,146
============= ============
|
STATEMENTS OF INCOME
Years Ended
December 31,
(in thousands)
1997 1996 1995
Income:
Dividends from subsidiary $ 4,446 $ 2,400 $ 2,000
Interest 38 115 160
------------ ------------- ------------
Total income 4,484 2,515 2,160
------------ ------------- ------------
Expenses:
Interest expense 590 166 218
Other expense 67 42 16
------------ ------------- ------------
Total expenses 657 208 234
------------ ------------- ------------
Income before income taxes 3,827 2,307 1,926
Income tax benefit 283 33 26
------------ ------------- ------------
Income before equity in undistributed
net income of subsidiaries 4,110 2,340 1,952
Equity in undistributed net income of subsidiaries 8,149 387 5,836
------------ ------------- ------------
Net income $ 12,259 $ 2,727 $ 7,788
============ ============= ============
|
STATEMENTS OF CASH FLOWS
Years Ended
December 31,
(in thousands)
1997 1996 1995
Operating activities:
Net income $ 12,259 $ 2,727 $ 7,788
Adjustments to reconcile net income to net
cash provided by operating activities:
Undistributed net income of subsidiaries (8,149) (387) (5,836)
Change in due from subsidiary (1,678) (35) (220)
Change in other assets (38) (63) 1
Change in other liabilities 1,480 (15) 850
------------ ------------- ------------
Net cash provided by operating activities 3,874 2,227 2,583
------------ ------------- ------------
Investment activities:
Purchases of repurchase agreements (55,292)
Purchase of common stock of subsidiary bank (6,775) (3,999)
Proceeds from maturities of repurchase agreements 889 3,999 50,507
------------ ------------- ------------
Net cash used in investing activities (5,886) (4,785)
------------ ------------- ------------
Financing activities:
Sale of preferred stock 5,000
Dividends paid (1,992) (1,899) (1,563)
Sale of common stock and stock options exercised 153 306
Purchase and retirement of common stock (74)
Proceeds from issuance of long-term debt 6,752
Payments on long-term debt (1,638) (350) (987)
Retirement of preferred stock (1,218)
------------ ------------- ------------
Net cash provided by (used in) financing activities 2,057 (2,249) 2,682
------------ ------------- ------------
Net increase (decrease) in cash and cash equivalents 45 (22) 480
Cash and cash equivalents, beginning of year 551 573 93
------------ ------------- ------------
Cash and cash equivalents, end of year $ 596 $ 551 $ 573
============ ============= ============
|
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Deloitte & Touche LLP were the principal accountants for Republic Bancorp, Inc. from 1983 through 1995. As reported on Form 8-K filed with the Securities and Exchange Commission on May 31, 1996, Deloitte & Touche LLP were dismissed as the principal accountants and Crowe, Chizek and Company LLP were engaged as the principal accountants.
The audit reports of Deloitte & Touche LLP on the consolidated financial statements of Republic Bancorp, Inc. as of and for the year ended December 31, 1995 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles.
The audit reports of Crowe, Chizek and Company LLP on the consolidated financial statements as of and for the years ended December 31, 1997 and 1996 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles.
There have been no disagreements with any of the independent accountants.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following directors of Republic were elected at the most recent annual meeting of shareholders held on January 12, 1998. All information is presented as of January 12, 1998. All directors of Republic were elected to a one year term. The table also includes, as designated, Republic's executive officers.
DIRECTORS & EXECUTIVE OFFICERS OF REPUBLIC
Name, Age and Principal Occupation During the Past Five Years Director Class of Number Percent
Since Common
Stock
BERNARD M. TRAGER, 70, has served as Chairman of Republic since 1982 A 3,848,493(1) 61.42%
1982. From 1994 to 1997 he also served as CEO of Republic. B 772,929 (2) 63.93%
STEVEN E. TRAGER, 38, began serving as President and CEO of Republic 1988 A 3,277,198 52.31%
in 1997. From 1994 to 1997 he served as President & Secretary. From B (3) 36.79%
1993 to 1994 he served as Vice Chairman, General Counsel & 444,839 (4)
Secretary. In 1990, he was promoted from Vice President, General
Counsel & Secretary to Senior Vice President, General Counsel &
Secretary.
A. SCOTT TRAGER, 46, has served as Vice Chairman of Republic since 1990 A 50,605(5) .81%
1994 and has served as President of the Bank since 1984. B 10,121(6) .84%
E. WILLIAM PETTER, JR., 48, began serving as Vice Chairman & Chief 1995 A 36,500 .58%
Operating Officer of Republic during 1997. From 1995 to 1997 he B 7,300 .60%
served as Vice Chairman & Chief Financial Officer. He served as
Executive Vice President and Chief Financial Officer of the Bank
since 1993. From 1990 to 1993 he served as Senior Vice President and
Chief Financial Officer of the Bank.
R. WAYNE STRATTON, 51, is a partner in the CPA firm of Jones, Nale & 1995 A 4,250 .07%
Mattingly PLC since 1974. B 850 .07%
LARRY M. HAYES, 50, is president of Midwest Construction Company, 1995 A 11,735 .19%
Inc., Lexington, Kentucky since 1989. Mr. Hayes is Vice Chairman of B 2,347 .19%
the Board of Directors of Louisville Gardens, Inc.; a member of the
Board of Trustees of St. Catherine College and the Greater Louisville
Economic Development Partnership.
A. WALLACE GRAFTON, JR., 60, is a partner at Wyatt, Tarrant & Combs 1998 A 25,970 .41%
law firm. He also serves as a member of the University of Louisville B 5,194 .43%
Board of Overseers.
SAMUEL G. SWOPE, 71, is the Chairman of Swope AutoCenter. He also 1998 A 14,235 .23%
serves on the University of Louisville Board of Overseers. B 2,847 .24%
D. HARRY JONES, 68, is an Executive Vice President of Jones Plastic 1995 A 14,235 .23%
and Engineering Corporation since 1961. He serves as Trustee for the B 2,847 .24%
University of Louisville; Chairman of the Board of Trustees of
Suburban Hospital; and a member of the Kentucky Personnel Board.
R. MICHAEL MARKS, 53, has served as Executive Vice President of the A 26,000 .41%
Lexington Region since 1992. B 5,200 .43%
All Executive Officers and Directors as a A 4,047,023 64.59%
Group (10 persons) B 812,635 67.21%
|
1) Includes 3,262,198 shares in the name of Jaytee Properties Limited Partnership of which Mr. Bernard M. Trager is a general partner and Mrs. Jean S. Trager, his wife, is a limited partner.
2) Includes 441,839 shares in the name of Jaytee Properties Limited Partnership of which Mr. Bernard M. Trager is a general partner and Mrs. Jean S. Trager, his wife, is a limited partner, and 58,727 shares in the name of Jean S. Trager.
3) Includes 3,262,198 shares in the name of Jaytee Properties Limited Partnership of which Mr. Steven E. Trager is a general partner and Mr. Trager's two minor children are limited partners.
4) Includes 441,839 shares in the name of Jaytee Properties Limited Partnership of which Mr. Steven E. Trager is a general partner and Mr. Trager's two minor children are limited partners.
None of the directors listed above hold any directorships in companies with a class of securities registered pursuant to Section 12 of the Securities Exchange Act or subject to the requirements of Section 15(d) of such Act or any company registered as an investment company under the Investment Company Act of 1940, as amended.
FAMILY RELATIONSHIPS
Relationship between any director or
Name of Director/Executive Officer executive officer of Republic
Bernard M. Trager Father of Steven E. Trager
Uncle of A. Scott Trager
Steven E. Trager Son of Bernard M. Trager
Cousin of A. Scott Trager
A. Scott Trager Nephew of Bernard M. Trager
Cousin of Steven E. Trager
|
ITEM 11. EXECUTIVE COMPENSATION
The following table contains the compensation of the named executive officers for Republic for years ended December 31, 1997, 1996, and 1995.
Summary Compensation Table
Annual Compensation Long Term Compensation Awards
Bonus Securities All Other
Name & Principal Position Year Salary (1) Underlying Options Compensation
Bernard M. Trager, Chairman 1997 $220,000 $170,000 --- $62,141(2)
1996 220,000 90,000 --- 61,216(3)
1995 220,000 100,000 --- 60,856(4)
Steven E. Trager, President, CEO 1997 $160,000 $80,000 --- $14,648(2)
1996 160,000 --- --- 6,825(3)
1995 160,000 100,000 30,000 (5) 6,921(4)
L. Lee Kinsolving, Jr., Vice 1997 $160,000 $80,000 --- $14,043(2)
Chairman & Director (7) 1996 160,000 --- --- 6,825(3)
1995 160,000 100,000 30,000 (5) 6,825(4)
A. Scott Trager, Vice Chairman & 1997 $160,000 $80,000 --- $15,148(2)
Director 1996 160,000 --- --- 6,825(3)
1995 160,000 100,000 30,000 (5) 6,825(4)
E. William Petter, Jr., Vice 1997 $160,000 $80,000 --- $9,160(2)
Chairman & Director 1996 160,000 --- --- 6,825(3)
1995 160,000 100,000 30,000 (5) 7,134(4)
R. Michael Marks, Executive Vice 1997 $98,800 $40,000 --- $9,674(2)
President 1996 95,000 25,000 --- 9,504(3)
1995 88,500 25,000 24,000 (6) 8,894(4)
|
(1) Represents incentive bonuses awarded after year-end for achievement of corporate, individual and organizational objectives in fiscal years 1997, 1996 and 1995.
(2) Includes matching contributions to 401(k) Retirement Plan, ($6,000 for Bernard M. Trager, $6,000 for Steven E. Trager, $4,000 for L. Lee Kinsolving, Jr., $6,000 for A. Scott Trager, $6,000 for E. William Petter, Jr., and $4,651 for R. Michael Marks), amount paid on split dollar life insurance policy ($45,665 for Bernard M. Trager), life and disability insurance policies ($3,490 for Bernard M. Trager and $3,160 each for Steven E. Trager, L. Lee Kinsolving, Jr., A. Scott Trager, E. William Petter, Jr., and R. Michael Marks) and amounts paid for membership dues ($6,986 for Bernard M. Trager, $5,488 for Steven E. Trager, $6,883 for L. Lee Kinsolving, Jr., $5,988 for A. Scott Trager, and $2,200 for R. Michael Marks).
(3) Includes matching contributions to 401(k) Retirement Plan, ($5,625 for Bernard M. Trager, $5,625 for Steven E. Trager, $5,625 for L. Lee Kinsolving, Jr., $5,625 for A. Scott Trager, and $5,625 for E. William Petter, Jr.), amount paid on split dollar life insurance policy ($54,031 for Bernard M. Trager) and on life insurance policies ($1,560 for each of Bernard M. Trager, Steven E. Trager, L. Lee Kinsolving, Jr., A. Scott Trager, and E. William Petter, Jr.).
(4) Includes matching contributions to 401(k) Retirement Plan, ($5,625 for Bernard M. Trager, $5,721 for Steven E. Trager, $5,625 for L. Lee Kinsolving, Jr., $5,625 for A. Scott Trager, and $5,934 for E. William Petter, Jr.), amount paid on split dollar life insurance policy ($54,031 for Bernard M. Trager) and on life insurance policies ($1,200 for each of Bernard M. Trager, Steven E. Trager, L. Lee Kinsolving, Jr., A. Scott Trager, and E. William Petter, Jr.).
(5) Includes 25,000 options for Class A Common Stock and 5,000 options for Class B Common Stock.
(6) Includes 20,000 options for Class A Common Stock and 4,000 options for Class B Common Stock.
(7) Mr. Kinsolving retired as an executive officer of Republic in November 1997.
Stock Options
During 1997, no stock options were granted to executive officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
Class of Shares Number of Securities
Common Acquired Value Underlying Unexercised Value of Unexercised
Name Stock on Realized Options at December 31, 1997 In-the-Money Options at
Exercise December 31, 1997
Exercisable Unexercisable Exercisable Unexercisable
(#) (#) (#) (#)(1)
Bernard M. Trager A 0 -- 0 0
B 0 -- 0 0
Steven E. Trager A 2,500 $4,980 0 22,500 0 $43,650
B 500 $1,150 0 4,500 0 $8,730
A. Scott Trager A 0 25,000 0 $65,000
B 0 5,000 0 $13,000
E. William Petter, A 0 25,000 0 $65,000
Jr. B 0 5,000 0 $13,000
R. Michael Marks. A 0 20,000 0 $52,000
B 0 4,000 0 $10,400
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(1) Value is based on closing book value per share on December 31, 1997 minus the exercise price. Republic's common stock has no established public trading market. Therefore, amounts were computed based on book value per share.
Compensation Committee Interlocks and Insider Participation
Certain directors and executive officers, including certain members of the Human Resources and Compensation Committee of the Bank were customers of and had transactions with Republic during 1996. The members of the committee are Karen W. Bearden, Gordon C. Duke, D. Harry Jones, and Charles L. Weisberg, and this committee sets the compensation for the Bank's executive officers. Transactions which involved loans or commitments by the Bank were made in the ordinary course of business and on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and did not involve more than normal risk of collectibility or present other unfavorable features. The Bank's Human Resources and Compensation Committee considers recommendations of the Chairman and CEO regarding executive compensation as part of the committee's deliberations.
Death Benefit Agreement
The Bank entered into a Death Benefit Agreement with Bernard M. Trager which became effective September 10, 1996. This agreement provides for the payment of three years compensation to the estate of Bernard M. Trager in the event of death while a full-time employee of the Bank. In the event of a change in control the Agreement terminates.
Change in Control Arrangements
Republic entered into Officer Compensation Continuation Agreements with each of Steven E. Trager, A. Scott Trager, L. Lee Kinsolving, Jr., and E. William Petter, Jr., which became effective January 12, 1995. These Agreements provide for the payment of the executive officer's base salary and continuation of such executive officer's other employment benefits for up to a period of two years in the event of a change in control of Republic. In addition, any stock options or other similar rights will become immediately exercisable upon a change in control which results in termination. For purposes of these Agreements, a change in control includes a substantial reduction in the voting power of the stock held by the Trager family. Mr. Kinsolving's Agreement terminated upon his retirement.
Compensation of Directors
As of December 31, 1997, no directors were paid for their services rendered to Republic. During 1997, certain directors of Republic received fees from the Bank for services rendered as Bank directors as follows:
R. Wayne Stratton $10,900 Larry M. Hayes (1) $9,525 A. Wallace Grafton, Jr. $9,150 Samuel G. Swope $8,150 D. Harry Jones $8,400 |
(1) See also Item 13 "Other Transactions"
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial ownership of Republic's Class A Common Stock and Class B Common Stock as of March 24, 1998 held by each person who is known by Republic to own beneficially more than five percent (5%) of such class. Except as otherwise indicated, no person named in the table shares voting or investment power with respect to his or her beneficially owned shares.
5% Stockholders Shares Beneficially Owned
Class of Common Stock Number Percent
Bernard M. Trager A 3,848,493 (1) 61.42%
601 West Market Street B 772,929 (2) 63.93%
Louisville, Kentucky 40202
Steven E. Trager A 3,277,198 (3) 52.31%
601 West Market Street B 444,839 (4) 36.79%
Louisville, Kentucky 40202
Jaytee Properties Limited Partnership A 3,262,198 (3) 52.07%
7413 Cedar Bluff Court B 441,839 (4) 36.54%
Prospect, Kentucky 40059
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1) Includes 3,262,198 shares in the name of Jaytee Properties Limited Partnership of which Mr. Bernard M. Trager is a general partner and Mrs. Jean S. Trager, his wife, is a limited partner.
2) Includes 441,839 shares in the name of Jaytee Properties Limited Partnership of which Mr. Bernard M. Trager is a general partner and Mrs. Jean S. Trager, his wife, is a limited partner, and 58,727 shares owned by Mrs. Jean S. Trager.
3) Includes 3,262,198 shares in the name of Jaytee Properties Limited Partnership of which Mr. Steven E. Trager is a general partner and Mr. Trager's two minor children are limited partners.
4) Includes 441,839 shares in the name of Jaytee Properties Limited Partnership of which Mr. Steven E. Trager is a general partner and Mr. Trager's two minor children are limited partners.
5) Jaytee Properties is a limited partnership of which Mr. Bernard Trager and Mr. Steve Trager are general partners. As general partners, Mr. Bernard Trager and Mr. Steve Trager share voting and investment power over the shares held by the partnership.
The following table provides information about the units of Jaytee Properties Limited Partnership owned by directors and officers of Republic:
Percent
Name No. of Units of Outstanding
Bernard Trager 1,312,351(a) 65.62%
Steve Trager 360,564(b) 18.03%
Scott Trager 2,020 0.10%
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a) Includes 639,121 units held by Bernard Trager's wife.
b) Includes 271,080 units held in a revocable trust and 89,484 shares held
for the benefit of Mr. Steve Trager's minor children.
See Item 10, "Directors and Executive Officers of the Registrant", with respect to security ownership by Republic's directors and executive officers, which is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Leasing Arrangements - Republic leases space in three buildings, as well as land owned by Bernard M. Trager, Chairman of Republic, and Jean Trager, his wife. The buildings include Republic Corporate Center, which serves as both a downtown banking center and administrative headquarters, as well as the Hurstbourne Parkway and Bardstown Road banking centers. The leased land is located on U.S. Highway 22 where Republic currently has a temporary banking center. Altogether, the Bank leases approximately 70,500 square feet and pays approximately $99,600 per month with lease terms expiring through June 30, 2003.
Each of the above transactions were obtained on terms comparable to those which could have been obtained from an unaffiliated party.
Transactions With Directors - The law firm of Wyatt, Tarrant & Combs provides legal services to Republic. A. Wallace Grafton, Jr., a director of the Bank and Republic , is a partner in Wyatt, Tarrant & Combs. Fees paid to Wyatt, Tarrant & Combs totaled $30,801 in 1997.
During 1997, the Bank paid $245,424 to Midwest Construction Company, Inc. for banking center construction. Larry Hayes, a director of the Bank and Republic is President of Midwest Construction Company, Inc.
Other Transactions - Steven E. Trager, a director and executive officer, and Shelley Kusman, a more than five percent shareholder of Republic, and Jean Trager, Bernard M. Trager's wife, are directors of Bankers Insurance Agency, Inc., a title insurance agency which provides title insurance coverage to customers of Republic. These services resulted in commissions to Bankers Insurance Agency of $496,000 in 1997. The majority owner of Bankers Insurance Agency is Shelley Kusman. Minority shareholders in Bankers Insurance Agency include Steven E. Trager, Jean Trager, and the grandchildren of Bernard M. Trager; Michael Kusman, Andrew Kusman, Brett Kusman, Kevin Trager and Emily Trager. Steven E. Trager and Shelley Kusman are children of Bernard M. Trager.
Indebtedness of Management - Federal banking laws require that all loans or extensions of credit by the Bank to its executive officers and directors be made on substantially the same terms, including interest rate and collateral, as those prevailing at the time for comparable transactions with the general public and must not involve more than the normal risk of repayment or present other unfavorable features. In addition, loans made to Bank directors must be approved in advance by a majority of the disinterested members of the Board of Directors.
The Bank has made loans to executive officers, holders of ten percent (10%) or more of the shares of any class of its common stock and affiliates and directors in the ordinary course of business, on substantially the same terms, including interest rate and collateral, as those prevailing at the time for comparable transactions with other persons and do not involve more than the normal risk of collectibility or present other unfavorable features. As of December 31, 1997, directors and executive officers of Republic had loans outstanding of $4.7 million. All such loans are in the ordinary course of business and do not have favorable terms nor involve more than the normal risk of collectibility or present unfavorable features as compared to comparable transactions with the general public.
PART IV
ITEM 14.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORT ON FORM 8-K
(a) The following documents are filed as a part of this Report:
1. Financial Statements: The Consolidated Financial Statements
of Republic Bancorp, Inc. and Report of Independent Auditors Page(s)
have been included as Item 8 - Part II of this filing and
consist of the following:
Report of Independent Auditors 27-28
Consolidated Balance Sheet - December 31, 1997 and 1996 29
Consolidated Statements of Income - Years Ended December 31,
1997, 1996, and 1995 30-31
Consolidated Statements of Stockholders' Equity - Years
Ended December 31, 1997, 1996, and 1995 32
Consolidated Statements of Cash Flows - Years Ended December
31, 1997, 1996, and 1995 33-34
Notes to Consolidated Financial Statements 35-36
2. Financial Statement Schedules: Schedules not listed above have
been omitted because they are not applicable or are not
required or the information required to be set forth therein is
included in the Consolidated Financial Statements or Notes
thereto.
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(b) Reports on Form 8-K: Republic Bancorp, Inc. fourth quarter, 1997.
During the fourth quarter of 1997, Republic Bancorp, Inc. filed a report on Form 8-K, dated November 7, 1997, to report, under Item 2 of that form, the disposition of certain assets and deposits of its branch offices in Murray, Benton and Paducah, Kentucky, and the pending sale of certain assets and deposits of its branch office in Mayfield, Kentucky, and to report, under Item 7, the filing as exhibits of the purchase and assumption agreements Republic had entered into in connection with the transactions, and that the filing of pro forma financial statements at that time was impracticable.
During the first quarter of 1998, Republic filed an amendment to the report on Form 8-K, dated November 7, 1997, to report, under Item 2 of that form, the Murray, Benton, Paducah, and Mayfield, Kentucky, branch sale transactions and to file, under Item 7 of that form, pro forma financial statements reflecting the sale transactions.
(c) Exhibits: The list of exhibits in the Index To Exhibits appearing on page 64 is incorporated herein by reference.
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.
By: /s/ Steven E. Trager
--------------------
Steven E. Trager
Chief Executive Officer
By: /s/ Mark A. Vogt
--------------------
Mark A. Vogt
Chief Financial Officer
Dated: March 31, 1998
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By /s/ Bernard M. Trager Chairman and Director
--------------------------
Bernard M. Trager
Date: March 31, 1998
By /s/ E. William Petter, Jr. Chief Operating Officer, Vice
-------------------------- Chairman and Director
E. William Petter, Jr.
Date: March 31, 1998
By /s/ Steven E. Trager Chief Executive Officer and Director
--------------------------
Steven E. Trager
Date: March 31, 1998
By /s/ A. Scott Trager Executive Vice President, Vice
-------------------------- Chairman and Director
A. Scott Trager
Date: March 31, 1998
By /s/ A. Wallace Grafton, Jr. Director
--------------------------
A. Wallace Grafton, Jr.
Date: March 31, 1998
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EXHIBIT INDEX
Incorporated
Numbers Description By Reference To
2.1 Agreement to Purchase Assets and Incorporated by reference to
Assume Liabilities dated April 1, 1997 Exhibit 2.1 on Form 8-K as of
by and between United Commonwealth November 7, 1997 and filed by
Bank, FSB and Republic Bank & Republic with the Commission.
Trust Company (Previously Filed)
2.2 Purchase and Assumption Agreement Incorporated by reference to
dated July 18, 1997 between The Exhibit 2.2 on Form 8-K as of
Paducah Bank & Trust Company and November 7, 1997 and filed by
Republic Bank & Trust Company Republic with the Commission.
(Previously Filed)
2.3 Purchase and Assumption Agreement Incorporated by reference to
dated July 21, 1997 between Peoples Exhibit 2.3 on Form 8-K as of
First National Bank & Trust Company November 7, 1997 and filed by
and Republic Bank & Trust Company Republic with the Commission.
(Previously Filed)
2.4 Purchase and Assumption Agreement Incorporated by reference to
dated September 12, 1997 between Exhibit 2.4 on Form 8-K as of
First Federal Savings Bank of November 7, 1997 and filed by
Leitchfield and Republic Bank & Republic with the Commission.
Trust Company (Previously Filed)
3(i) Articles of Incorporation Articles of Incorporation, as
amended, of Republic are
incorporated by reference
to Exhibit 3(i) of Form 10-K
for the year ended December
31, 1995.
3(ii) Bylaws Bylaws of Republic are
incorporated by reference to
Exhibit of the Registrant
Statement on Form S-4 (File
No. 33-77324) filed by
Republic with the Commission.
4.1 Provisions of Articles of See Articles of Incorporation,
Incorporation of Republic as amended, of Republic
Defining Republic incorporated as Exhibit 3(i)
the Rights of Security Holders herein.
4.2 Agreement Pursuant to Item 601 Filed as Exhibit 4.2 on page
(b)(iii) of Regulation S-K filed as 66 of this Form 10-K for the
Exhibit 4.2 herein. year ended December 31, 1997.
10.1* Officer Compensation Continuation Incorporated by reference to
Agreement with Steven E. Trager, Exhibit 10.1 on Form 10-K for
dated January 12, 1995 the year ended December 31,
1995 and filed by Republic
with the Commission.
10.2* Stock Option Plan Agreement with Incorporated by reference to
Steven E. Trager, dated January Exhibit 10.2 on Form 10-K for
12, 1996 the year ended December 31,
1995 and filed by Republic
with the Commission.
10.3* Officer Compensation Continuation Incorporated by reference to
Agreement with L. Lee Kinsolving, Jr., Exhibit 10.3 on Form 10-K for
dated January 12, 1995 the year ended December 31,
1995 and filed by Republic
|
with the Commission.
10.4* Stock Option Plan Agreement with L. Incorporated by reference to
Lee Kinsolving, Jr. dated January Exhibit 10.4 on Form 10-K for
12, 1996 the year ended December 31,
1995 and filed by Republic
with the Commission.
10.5* Officer Compensation Continuation Incorporated by reference to
Agreement with A. Scott Trager, Exhibit 10.5 on Form 10-K for
dated January 12, 1995 the year ended December 31,
1995 and filed by Republic
with the Commission.
10.6* Stock Option Plan Agreement with Incorporated by reference to
A. Scott Trager dated January 12, 1996 Exhibit 10.6 on Form 10-K for
the year ended December 31,
1995 and filed by Republic
with the Commission.
10.7* Officer Compensation Continuation Incorporated by reference to
Agreement with E. William Petter, Exhibit 10.7 on Form 10-K for
Jr., dated January 12, 1995 the year ended December 31,
1995 and filed by Republic
with the Commission.
10.8* Stock Option Plan Agreement with Incorporated by reference to
E. William Petter, Jr., dated January Exhibit 10.8 on Form 10-K for
12, 1996 the year ended December 31,
1995 and filed by Republic
with the Commission.
10.9* Death Benefit Agreement with Incorporated by reference to
Bernard M. Trager dated September Exhibit 10.9 on Form 10-K for
10, 1996 the year ended December 31,
1996 and filed by Republic
with the Commission.
11 Statement regarding Compensation Filed as Exhibit 11 on page
of Per Share Earnings on page 67 of this Form 10-K
for the year ended December
31, 1997.
21 Subsidiaries of the registrant Filed as Exhibit 21 on page 68
of this Form 10-K for the year
ended December 31, 1997.
27 Financial Data Schedule Filed as Exhibit 27 on page 69
|
EXHIBIT 4.2
Agreement Pursuant to Item 601(b)(4)(iii)
of Regulation S-K
The registrant hereby agrees to furnish to the Securities and Exchange Commission upon request a copy of any instrument relating to long-term debt of the registrant and its subsidiaries that at any time is not filed in reliance on Item 601(b)(4)(iii)(A) of Regulation S-K.
Date: March 27, 1997
REPUBLIC BANCORP, INC.
By: /s/ E. William Petter, Jr.
Title: Executive Vice President &
Chief Operating Officer
|
Exhibit 11.
Statement Regarding Computation of Per Share Earnings
See Item 8 Note 13 "Earnings Per Share" for calculations.
EXHIBIT 21
Subsidiaries of Republic Bancorp, Inc.*
Name of Subsidiary State in Which Organized
Republic Bank & Trust Company Kentucky
Republic Capital Trust Delaware
|
*Certain subsidiaries are not listed since, considered in the aggregate as a single subsidiary, they would not constitute a significant subsidiary at
December 31, 1997.
| ARTICLE 9 |
| 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-K. dollars in thousands, except for earnings per share figures |
| PERIOD TYPE | 12 MOS |
| FISCAL YEAR END | DEC 31 1997 |
| PERIOD START | JAN 01 1997 |
| PERIOD END | DEC 31 1997 |
| CASH | 24,546 |
| INT BEARING DEPOSITS | 0 |
| FED FUNDS SOLD | 0 |
| TRADING ASSETS | 0 |
| INVESTMENTS HELD FOR SALE | 93,826 |
| INVESTMENTS CARRYING | 98,546 |
| INVESTMENTS MARKET | 98,540 |
| LOANS | 794,939 |
| ALLOWANCE | 8,176 |
| TOTAL ASSETS | 1,054,950 |
| DEPOSITS | 731,598 |
| SHORT TERM | 111,137 |
| LIABILITIES OTHER | 6,739 |
| LONG TERM | 124,405 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 3,613 |
| OTHER SE | 64,773 |
| TOTAL LIABILITIES AND EQUITY | 1,054,950 |
| INTEREST LOAN | 76,889 |
| INTEREST INVEST | 13,614 |
| INTEREST OTHER | 691 |
| INTEREST TOTAL | 91,194 |
| INTEREST DEPOSIT | 38,940 |
| INTEREST EXPENSE | 50,856 |
| INTEREST INCOME NET | 40,338 |
| LOAN LOSSES | 7,251 |
| SECURITIES GAINS | 81 |
| EXPENSE OTHER | 32,880 |
| INCOME PRETAX | 19,137 |
| INCOME PRE EXTRAORDINARY | 12,259 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 12,259 |
| EPS PRIMARY | 1.62 |
| EPS DILUTED | 1.56 |
| YIELD ACTUAL | 3.85 |
| LOANS NON | 2,676 |
| LOANS PAST | 20,164 |
| LOANS TROUBLED | 1,809 |
| LOANS PROBLEM | 3,645 |
| ALLOWANCE OPEN | 6,241 |
| CHARGE OFFS | 5,859 |
| RECOVERIES | 543 |
| ALLOWANCE CLOSE | 8,176 |
| ALLOWANCE DOMESTIC | 8,176 |
| ALLOWANCE FOREIGN | 0 |
| ALLOWANCE UNALLOCATED | 0 |