Building and Protecting Wealth in Communities

PROPOSAL FOUR : SHAREHOLDER PROPOSAL, SHORT TERM BANK PRODUCTS

 A single shareholder, The Community Reinvestment Association of North Carolina, PO Box 1929 , Durham , NC 27701 , holder of 150 shares of Common Stock, has advised us that it intends to present the following resolution, worded by them, for consideration at the Annual Meeting:

WHEREAS:  

Republic Bancorp, Inc. (“Republic”) provides short-term consumer loans, including deferred deposit transactions (“DDTs”), commonly known as “payday loans;” tax refund anticipation loans (“RALs”); and electronic refund checks (“ERCs”);  

We believe that there is an appropriate role for short-term consumer loans, including DDTs, RALs and ERCs, in the marketplace when such lending is done responsibly;  

The Federal Deposit Insurance Corporation (“FDIC”) describes “predatory lenders” as those lenders that target borrowers “who have low incomes or credit problems or who are elderly by deceiving them about loan terms or giving them loans they cannot afford to repay;” 

We believe that Republic provides short-term consumer loans that are predatory under the FDIC’s definition because, in our opinion, Republic charges unreasonable interest rates via high fees for extremely short terms, and encourages multiple loan renewals;  

In our opinion, such repeated renewals put borrowers in a “debt trap,” where they have difficulty paying the principal owed due to the accumulation of exorbitant fees and interest;  

We believe that providing predatory short-term consumer loans hurts not only consumers and low-wealth communities but also Republic shareholders;  

In our opinion, Republic’s partnerships with third-party marketing and servicing providers to make predatory short-term consumer loans that would violate applicable state usury and consumer-protection laws if such loans were made directly by such third-party providers result in what, we believe, to be a substantial risk of litigation and regulatory action that could significantly impair Republic’s financial condition;  

As Republic described in its Form 10-Q for the quarterly period ended June 30, 2004 (the “Form 10-Q”), various consumer groups have questioned the fairness of short-term consumer loans and have accused this industry of charging excessive rates of interest via fixed fees and of engaging in predatory lending practices;  

Republic noted in the Form 10-Q that pressure from consumer groups on Republic and its regulators could cause Republic to cease providing RALs and ERCs at any time; and  

Republic expressed concerns in the Form 10-Q about the litigation and regulatory risks arising from its DDT business.  Republic noted that private litigation could result from its DDT program.  Further, Republic explained that the FDIC or others could impose additional limits on, or even prohibit banks from engaging altogether in, DDTs.  Finally, Republic stated that its ability to engage profitably in the DDT business could be negatively impacted by the requirements of applicable laws, regulations, or guidelines.  

RESOLVED:

Shareholders request that the Board of Directors implement a policy mandating that Republic does not, directly or indirectly, engage in any transactions with consumers that involve DDTs, RALs or ERCs, including through partnerships with third-party providers.