<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
COMMISSION FILE NUMBER 0-27652
REPUBLIC BANCSHARES, INC.
(Exact Name of Registrant As Specified In Its Charter)
FLORIDA 59-1463900
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
111 2nd Avenue N.E., St. Petersburg, FL 33701
(Address of Principal Office) (Zip Code)
(813) 823-7300
(Registrant's Telephone Number, Including Area Code)
- --------------------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report
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
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
<TABLE>
<S> <C>
Common stock, par value $2.00 per share 6,689,252 shares outstanding at October 31, 1997
- --------------------------------------- ------------------------------------------------
</TABLE>
<PAGE> 2
REPUBLIC BANCSHARES, INC.
INDEX
PART I. FINANCIAL INFORMATION (all financial information for prior periods
has been restated for the merger with F.F.O. Financial Group, Inc.)
<TABLE>
<CAPTION>
ITEM 1. FINANCIAL STATEMENTS PAGE
-----
<S> <C> <C>
Consolidated Balance Sheets - September 30, 1997 (unaudited)
and December 31, 1996.............................................................................1
Consolidated Statements of Operations -
Three month and nine month periods
ended September 30, 1997 and 1996 (all unaudited).................................................2
Consolidated Statements of Stockholders' Equity -
Year ended December 31, 1996 and
nine months ended September 30, 1997 (unaudited)..................................................3
Consolidated Statements of Cash Flows -
Three month and nine month periods
ended September 30, 1997 and 1996 (all unaudited).................................................4
Notes to Consolidated Financial Statements (unaudited).............................................5
Selected Quarterly Financial and Other Data.......................................................16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS............................................................................18
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.....................................................................................25
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K......................................................................25
SIGNATURES.......................................................................................................26
</TABLE>
<PAGE> 3
REPUBLIC BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS - SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
($ IN THOUSANDS, EXCEPT PAR VALUES)
<TABLE>
<CAPTION>
SEPTEMBER 30, December 31,
1997 1996
------------- ------------
ASSETS (UNAUDITED)
- ------
<S> <C> <C>
Cash and due from banks $ 44,017 $ 34,109
Interest bearing deposits in banks 3,906 11,783
Federal funds sold 62,000 8,000
Investment securities:
Available for sale 21,072 74,397
Trading - 4,032
Mortgage-backed securities:
Available for sale 75,827 62,037
Trading - 5,548
Held to maturity - 15,343
FHLB stock 8,267 7,209
Loans held for sale 94,896 47,052
Loans, net of allowance for loan losses (Notes 4 and 5) 1,086,311 901,576
Premises and equipment, net 32,186 25,039
Other real estate owned acquired through foreclosure, net 7,848 8,162
Accrued interest receivable 8,739 7,160
Goodwill and premium on deposits 4,872 527
Other assets 19,411 12,383
---------- ----------
Total assets $1,469,352 $1,224,357
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits-
Noninterest-bearing checking $ 81,985 $ 64,363
Interest checking 116,660 87,639
Money market 36,822 32,665
Savings 280,513 303,932
Time deposits 773,120 626,308
----------- ----------
Total deposits 1,289,100 1,114,907
Securities sold under agreements to repurchase 24,803 15,372
FHLB advances 25,000 7,000
Subordinated debt (6% rate, matures December 1, 2011) 6,000 6,000
Other liabilities 8,106 6,479
----------- ----------
Total liabilities 1,353,009 1,149,758
----------- ----------
Company-obligated mandatority redeemable capital
securities of subsidiary trust 28,750 -
Minority interest in F.F.O. Financial Group, Inc. - 6,421
Stockholders' equity:
Perpetual preferred convertible stock ($20.00 par, 100,000 shares authorized,
75,000 shares issued and outstanding. Liquidation preference $6,660
at September 30, 1997 and December 31, 1996.) 1,500 1,500
Common stock ($2.00 par, 20,000,000 shares authorized, 6,689,252 and
5,854,414 shares issued and outstanding at September 30, 1997 and
December 31, 1996, respectively) 13,378 11,708
Capital surplus 45,019 34,225
Retained earnings 26,954 20,847
Net unrealized gain (losses) on available-for-sale securities,
net of tax effect 742 (102)
----------- ------------
Total stockholders' equity 87,593 68,178
----------- ------------
Total liabilities and stockholders' equity $ 1,469,352 $ 1,224,357
=========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
1
<PAGE> 4
REPUBLIC BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
For the Three Months Ended Sept. 30, For the Nine Months Ended Sept. 30,
------------------------------------ -----------------------------------
1997 1996 1997 1996
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 26,834 $ 19,488 $ 70,320 $ 57,305
Interest on investment securities 551 481 1,863 1,618
Interest on mortgage-backed securities 1,246 1,346 4,096 4,083
Interest on federal funds sold 661 584 1,870 1,167
Interest on other investments 173 166 538 555
---------- --------- ---------- ---------
Total interest income 29,465 22,065 78,687 64,728
---------- --------- ---------- ---------
INTEREST EXPENSE:
Interest on deposits 13,572 11,120 37,729 32,496
Interest on FHLB advances 757 17 884 349
Interest on subordinated debt 113 - 328 -
Interest on other borrowings 280 142 745 265
---------- --------- ---------- ---------
Total interest expense 14,722 11,279 39,686 33,110
---------- --------- ---------- ---------
Net interest income 14,743 10,786 39,001 31,618
PROVISION FOR LOAN LOSSES 495 457 2,134 1,507
----------- --------- ---------- ---------
Net interest income after
provision for loan losses 14,248 10,329 36,867 30,111
---------- --------- ---------- ---------
NONINTEREST INCOME:
Income from mortgage banking activities 6,338 340 7,879 -
Gain on sale of loans 42 16 1,622 390
Service charges on deposit accounts 923 697 2,462 2,057
Loan fee income 393 343 1,167 993
Gains on sale of securities, net 329 (18) 477 (340)
Gain on sale of ORE held for investment - 1,207 - 1,207
Other operating income 1,090 256 1,921 1,041
----------- --------- ---------- ---------
Total noninterest income 9,115 2,841 15,528 5,348
---------- --------- ---------- ---------
NONINTEREST EXPENSES:
General and administrative ("G&A") expenses 16,114 9,174 38,765 26,235
Merger expenses 1,031 - 1,087 -
SAIF Special Assessment - 4,005 - 4,005
Provision for losses on ORE 120 1,041 410 1,491
ORE expense, other 90 (63) 170 (416)
Amortization of goodwill & deposit premium 57 123 305 368
----------- --------- ---------- ---------
Total noninterest expenses 17,412 14,280 40,737 31,683
----------- --------- ---------- ---------
Income (loss) before income taxes and minority
interest 5,951 (1,110) 11,658 3,776
Income tax provision (benefit) 2,217 (451) 4,395 1,384
Minority interest in income of subsidiary trust (284) - (284) -
Minority interest reduction from FFO (259) (144) (674) (38)
----------- --------- ---------- ---------
NET INCOME $ 3,191 $ (515) $ 6,305 $ 2,354
=========== ========= ========== =========
PER SHARE DATA:
Net income per common and
common equivalent share $ .47 $ (.08) $ .94 $ .36
=========== ========= ========== =========
Weighted average common and common
equivalent shares outstanding 6,852,689 6,622,493 6,738,318 6,626,102
=========== ========= ========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
2
<PAGE> 5
REPUBLIC BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
($ IN THOUSANDS)
<TABLE>
<CAPTION>
Perpetual Preferred Net Unrealized
Convertible Stock Common Stock Gains (Losses)
------------------ ------------- on Available
Shares Shares Capital Retained for Sale
Issued Amount Issued Amount Surplus Earnings Securities Total
------ ------ ------ ------ ------- -------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 75,000 $ 1,500 5,862,752 $ 11,725 $ 34,274 $ 16,232 $ 102 $ 63,833
Net income for the twelve
months ended December 31,
1996 - - - - - 4,879 - 4,879
Net unrealized losses on
available-for-sale securities - - - - - - (204) (204)
Net change in minority interest - - (8,338) (17) (49) - - (66)
Dividends on preferred
stock - - - - - (264) - (264)
-------- ----------- ----------- ----------- ----------- ---------- --------- ---------
BALANCE, DECEMBER 31, 1996 75,000 $ 1,500 5,854,414 $ 11,708 $ 34,225 $ 20,847 $ (102) $ 68,178
Net income for the nine
months ended September 30,
1997 - - - - - 6,305 - 6,305
Net unrealized gains on
available-for-sale securities - - - - - - 845 845
Exercise of stock options - - 7,340 15 76 - - 91
Net change in minority interest - - (2,537) (5) (487) - - (494)
Issuance of common stock
in merger transaction - - 830,035 1,660 11,205 - - 12,865
Dividends on preferred
stock - - - - - (198) - (198)
-------- ----------- ----------- ----------- ----------- ---------- --------- ---------
BALANCE, SEPTEMBER 30, 1997 75,000 $ 1,500 6,689,252 $ 13,378 $ 45,019 $ 26,954 $ 742 $ 87,593
======== =========== =========== =========== =========== ========== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements
3
<PAGE> 6
REPUBLIC BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
--------------------------------- ----------------------------------
Sept. 30, 1997 Sept. 30, 1996 Sept. 30, 1997 Sept. 30, 1996
OPERATING ACTIVITIES: (unaudited) (unaudited) (unaudited) (unaudited)
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Net income (loss) $ 2,777 $ (515) $ 6,305 $ 2,354
Reconciliation of net income to net cash
provided by (used in):
Net (loss) income from minority interest
in FFO merger - (144) - 38
Provision for losses on loans and ORE 692 1,498 2,621 2,998
Depreciation and amortization, net 676 30 1,456 234
Amortization of premium and accretion
of fair value (494) 96 (275) 394
Loss (gain) on sale of investment securities 2,521 2,614 (476) 7,778
(Gain) loss on sale of loans (14,057) (1,243) (9,351) 12,623
(Gain) loss on sale of ORE 13 (1,222) (115) (1,574)
Capitalization of mortgage servicing (972) (1,634) (2,456) (1,214)
Net increase (decrease) in deferred tax benefit 617 (504) (1,993) (860)
Gain on disposal of premises & equipment 11 - 12 -
Net decrease (increase) in other assets 264 3,037 (5,678) 3,558
Net (decrease) increase in other liabilities (36,168) 3,224 702 3,886
-------- ----------- --------- -----------
Net cash provided (used in) by
operating activities (44,120) 5,237 (9,248) 30,215
-------- ----------- --------- -----------
INVESTING ACTIVITIES:
Proceeds from excess of deposit liabilities
assumed over assets acquired, net of cash acquired - - 7,223 -
Reduction of minority interest in FFO (6,421) - (6,421) -
Proceeds from sales & maturities of:
Investment securities held to maturity - - - 7,000
Investment securities available for sale 50,058 19,340 156,263 76,365
Purchase of securities available for sale - (19,199) (53,059) (50,956)
Purchase of securities held to maturity - (1,545) - (1,545)
Principal repayment on mtg. backed securities - 3,545 1,904 7,959
Purchase of FHLB stock 1 - (250) (1,290)
Net increase in loans (128,882) (42,199) (212,047) (100,451)
Purchase of premises and equipment (3,939) (704) (8,408) (1,429)
Proceeds from sale of ORE 2,553 4,982 5,907 7,423
Disposals in ORE (net) - 202 - 125
--------- ----------- --------- -----------
Net cash (used in) investing activities (86,630) (35,780) (108,888) (56,799)
--------- ----------- --------- -----------
FINANCING ACTIVITIES:
Net increase in deposits 128,191 21,306 105,722 57,957
Proceeds from FHLB Advances, net 12,000 1,000 18,000 (11,000)
Minority interest in Trust subsidiary 28,750 - 28,750 -
Repayment of FHLB Advances - (30,000) - (156,000)
Net increase (decrease) in repurchase
agreements 4,800 (1,504) 9,430 7,577
Proceeds from issuance of common stock 12,400 - 12,463 -
Dividends on perpetual preferred stock (66) (66) (198) (198)
--------- ----------- --------- -----------
Net cash provided by financing activities 186,075 18,736 174,167 54,336
---------- ----------- --------- -----------
Net increase (decrease) in cash and
cash equivalents 55,325 (11,807) 56,031 27,752
Cash and cash equivalents, beginning
of period 54,598 84,414 53,892 44,855
--------- ----------- --------- -----------
Cash and cash equivalents, end of period $ 109,923 $ 72,607 $ 109,923 $ 72,607
========= =========== ========= ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for-
Interest $ 23,620 $ 11,276 $ 48,673 $ 33,523
Income taxes - 3,657 4,144 5,672
</TABLE>
The accompanying notes are an integral part of these consolidated statements
4
<PAGE> 7
REPUBLIC BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation and Organization
Republic Bancshares, Inc. (the "Company") is a bank holding company organized in
March 1996 under the laws of the State of Florida and is the holding company for
Republic Bank (the "Bank"). The Bank is a state-chartered, federally-insured
commercial bank organized in 1972 and provides a full range of retail and
commercial banking products and related financial services. The Company and the
Bank are headquartered in St. Petersburg, Florida. Commercial banking activities
of the Bank include attracting checking, savings and time deposits from the
public and general business customers and using these deposits to originate
loans. The Bank also operates a mortgage banking division which originates
mortgage loans secured by first and second liens on residential properties for
sale in the secondary market.
The accounting and reporting policies of the Company and the Bank are in
conformity with generally accepted accounting principles and prevailing
practices within the financial services industry. The preparation of financial
statements in conformity with generally accepted accounting principles requires
that management make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Such estimates are subject to change in
the future as additional information becomes available or previously existing
circumstances are modified.
These consolidated financial statements should be read in conjunction with the
financial statements and the notes thereto included in the Company's Annual
Report for the year ended December 31, 1996, filed with the Securities and
Exchange Commission ("SEC") on Form 10-K. The results of the nine months and six
months ended Septemberd 30, 1997, are not necessarily indicative of the results
to be expected for the fiscal year ending December 31, 1997.
Recent Accounting Developments
5
<PAGE> 8
Sales of Financial Assets
The Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Accounting Standard ("SFAS") No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities," which was
effective for the fiscal year beginning January 1, 1997. SFAS No. 125 provides
standards for distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings. The impact of the adoption of SFAS No.
125 upon the results of operations of the Company was not material.
Earnings Per Share
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share". SFAS No.
128 simplifies the standards for computing and presenting earnings per share
("EPS") previously found in APB Opinion No. 15, Earnings Per Share, and makes
them comparable to international EPS standards. SFAS No. 128 is effective for
periods ending after December 15, 1997, and requires restatement of all prior
period EPS data. It replaces the presentation of primary EPS with a presentation
of basic EPS. It also requires dual presentation of basic and diluted EPS on the
face of the income statement for all entities with complex capital structures
and requires a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS computation.
6
<PAGE> 9
Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. Diluted EPS is computed similarly to fully
diluted EPS pursuant to APB Opinion 15. Management does not believe the adoption
of SFAS 128 will have a material effect on reported earnings per share.
Reporting Comprehensive Income
In June 1997, SFAS No. 130, "Reporting Comprehensive Income", was adopted. SFAS
No. 130 establishes standards for reporting and display of comprehensive income
which includes those revenues, expenses, gains, and losses of a normal,
recurring nature as-well-as items which are non-recurring, unusual and
infrequent. A specific reporting format is not required, provided the financial
statements show the amount of total comprehensive income for the period. Those
items which are non-recurring in nature are required to be shown in the
financial statements with appropriate footnote disclosure and the aggregate
balance of such items must be shown separately from retained earnings and
additional paid-in-capital in the equity section of the balance sheet. SFAS No.
130 is effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods is required.
Disclosures About Business Segments
In June 1997, the FASB adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information." SFAS No. 131 establishes standards for the
way the Company reports information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial reports. SFAS No. 131 is effective for periods
beginning after December 15, 1997. Management believes its commercial banking
and mortgage banking activities constitute operating segments which will require
disclosure about their respective assets, revenues, profit or loss and other
operating data.
7
<PAGE> 10
2. BUSINESS COMBINATIONS
Firstate Financial, F.A.
On April 18, 1997, the Company acquired Firstate Financial, F.A. ("Firstate"), a
thrift institution headquartered in Orlando, Florida, for a cash purchase of
$5.5 million. At April 18, 1997, Firstate had total assets of $72.1 million,
total deposits of $68.1 million and operated a branch in each of Orange and
Seminole Counties. The acquisition was accounted for using purchase accounting
rules which do not require prior period restatement. The amount of goodwill
recorded was $130,000. Accordingly, the consolidated results of operations only
reflect activity subsequent to the acquisition data.
F.F.O. Financial Group, Inc.
On September 19, 1997, F.F.O. Financial Group, Inc. ("FFO"), St. Cloud, Florida,
the parent company for First Federal Savings and Loan Association of Osceola
County ("First Federal"), was merged into the Company in a stock transaction
(the "FFO Merger"). William R. Hough, one of the Company's Controlling
Stockholders, also owned a majority interest in FFO.
The FFO Merger was accounted for as a corporate reorganization in which the
majority stockholder's interest in FFO was combined at historical cost in a
manner similar to a pooling of interests while the minority interest in FFO was
combined using purchase accounting rules. The excess of the purchase price of
the minority interest over the market value was first assigned to individual
assets and liabilities with the remaining $4.5 million considered unidentifiable
goodwill, which will be amortized over 10 years.
The pooling of interests method of accounting, which is used to account for the
majority interest in the FFO merger, requires the restatement of financial
results for all prior periods presented. The Company's previously
8
<PAGE> 11
reported components of consolidated income and the amounts reflected in the
accompanying consolidated statements of income for the three and nine months
ended September 30, 1996, are as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, 1996 September 30, 1996
------------------ ------------------
<S> <C> <C>
Net Interest Income:
As previously reported:
Republic Bancshares, Inc. $ 8,270 $ 24,320
F.F.O. Financial Group, Inc 2,516 7,298
--------- ---------
Combined as restated $ 10,786 $ 31,618
========= =========
Net Income (Loss):
As previously reported:
Republic Bancshares, Inc. $ (202) $ 2,272
F.F.O. Financial Group, Inc. (457) 121
Minority interest reduction 144 (39)
--------- ----------
Combined as restated $ (515) $ 2,354
========= =========
</TABLE>
3. RECENT DEVELOPMENTS
RBI Capital Trust I ("RBI Capital")
RBI Capital is a wholly-owned subsidiary of the Company which was formed on May
29, 1997, to issue Cumulative Trust Preferred Securities (the "Preferred
Security or Securities") to the public. The Preferred Securities, issued through
an underwritten public offering on July 28, 1997, were sold at their $10 par
value. RBI Capital issued 2,875,000 shares of the Preferred Securities bearing
an interest rate of 9.10% for net proceeds of $27.4 million, after deducting
underwriting commissions and other costs. RBI Capital invested the proceeds in
junior subordinated debt of the Company which also had an interest rate of
9.10%. The Company used the proceeds from the junior subordinated debt to
increase the equity capital of the Bank. Interest on the junior subordinated
debentures and distributions on the Preferred Securities are payable quarterly
in arrears, with the first payment having been paid on September 30, 1997.
Distribution on the Preferred Securities are cumulative and based upon the
liquidation value of $10 per Preferred Security. The Company has the right, at
any time, so long as no event of default has occurred and is continuing, to
defer payments of interest on the Junior Subordinated Debentures for a period
not exceeding 20 consecutive quarters; provided, that such deferral may not
extend beyond the stated maturity of the Junior Subordinated Debentures. The
Preferred Securities are subject to mandatory redemption, in whole or in part,
upon repayment of the Junior Subordinated Debentures at maturity
9
<PAGE> 12
or their earlier redemption. The Company has the right to redeem the Junior
Subordinated Debentures in whole (but not in part) within 180 days following
certain events whether occurring before or after June 30, 2002, and therefore
cause a mandatory redemption of the Preferred Securities. The exercise of such
right is subject to the Company having received regulatory approval to do so if
then required under applicable capital guidelines or regulatory policies. In
addition to the above right, the Company has the right, at any time, to shorten
the maturity of the Junior Subordinated Debentures to a date not earlier than
June 30, 2002. Exercise of this right is also subject to the Company having
received regulatory approval to do so if then required under applicable capital
guidelines or regulatory policies.
10
<PAGE> 13
4. LOANS AND LOANS HELD FOR SALE:
Loans at September 30, 1997, and December 31, 1996, are summarized as follows
(in thousands):
<TABLE>
<CAPTION>
Sept. 30, December 31,
1997 1996
------------ ----------
<S> <C> <C>
Real estate mortgage loans:
One-to-four family residential $ 653,466 $ 502,797
Retail home equity loans 31,444 13,704
Multifamily residential 80,779 90,745
Commercial real estate 245,726 224,715
Construction/land development 35,710 31,382
Commercial loans 31,390 37,626
Consumer loans 27,597 18,060
Other loans 616 1,294
------------ ----------
Total gross portfolio loans 1,106,728 920,323
Less-allowance for loan losses 20,417 18,747
------------ ----------
Total loans held for portfolio 1,086,311 901,576
Loans held for sale 94,896 47,052
------------ ----------
Total loans $ 1,181,207 $ 948,628
============ ==========
</TABLE>
As of September 30, 1997, loans available for sale were comprised of $68.2
million of one-to-four family residential mortgages and $26.7 million of high
loan-to-value mortgages secured by junior liens on residential properties. The
weighted average interest rate was 9.58%. At December 31, 1996, loans available
for sale were comprised of $42.5 million of one-to-four family residential
mortgages and $4.6 million of high loan-to-value mortgages secured by junior
loans on residential properties. Mortgage loans serviced for others as of
September 30, 1997, and December 31, 1996, amounted to $212.8 million and $224.3
million, respectively.
5. ALLOWANCES FOR LOSSES:
Allowance for Loan Losses:
The allowance for loan losses provides for risks of losses inherent in the
credit extension process. Losses are charged to the allowance for loan losses
and recoveries are credited to the allowance. The Company's allowance is an
amount that management believes will be adequate to absorb possible 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
11
<PAGE> 14
portfolio quality, review of specific problem loans, and current economic
conditions that may affect the borrower's ability to pay. The evaluations are
periodically reviewed and adjustments are recorded in the period in which
changes become known.
As part of the risk assessment for purchased loans, management has allocated a
portion of the discount on such loan purchases to the allowance for loan losses
in amounts consistent with the Company's loan loss policy guidelines. Amounts
added to the allowance for loan losses resulting from discount allocation are
available to absorb potential losses only for those purchased loans and are not
available for losses from other loan portfolios. To the extent that losses in
certain pools or portfolios of loans exceed the allowance for loan losses and
any remaining unamortized loan discount allocated to such pool or portfolio, or
available as a general allowance, the Company would have to recognize a loss to
the extent of such shortfall in the then current period. During the nine months
of 1997, management sold $7.2 million of loans previously purchased and
transferred $773,000 of the amount originally allocated to the allowance for
purchased loans into the allocation for originated loans. After this transfer
was completed and, taking into consideration loan loss provisions, charge-offs
and recoveries for the nine months of 1997, as of September 30, 1997, the
allowance for loan losses was comprised of (i) $13.5 million allocated to
originated loans (including loans combined from the FFO merger and loans
acquired through the Firstate acquisition), (ii) $1.0 million allocated to loans
acquired from CrossLand Savings, FSB in December 1993, (iii) $3.4 million
allocated to a pool of loans purchased in March 1995 (the "March 1995
Purchase"), (iv) $1.2 million allocated to a pool of loans purchased in July
1997 (the "July 1997 Purchase") and, (v) $1.3 million allocated to the other
pools of purchased loans. Additionally, as of September 30, 1997, the balance of
unaccreted loan discount available to absorb losses on pools or portfolios of
purchased loans exceeding amounts transferred to the allowance amounted to $4.8
million. Loans on which interest was not being accrued totaled $21.9 million and
$24.3 million at September 30, 1997, and December 31, 1996, respectively. Loans
past due 90 days or more and still accruing interest at September 30, 1997, and
December 31, 1996, totaled $422,000 and $113,000, respectively. Changes in the
allowance for loan losses were as follows (in thousands):
12
<PAGE> 15
<TABLE>
<CAPTION>
For the Nine Months Ended Sept. 30,
1997 1996
---- ----
<S> <C> <C>
Balance, beginning of period $ 18,747 $ 20,048
Provision for loan losses 2,134 1,507
Allowance for loan losses on purchased loans transferred
from discount (includes amounts taken to income on loans sold) 39 (29)
Allowances from acquisitions 131 -
Loans charged off (932) (1,888)
Recoveries of loans charged off 298 220
---------- ----------
Balance, end of period $ 20,417 $ 19,858
========== ==========
</TABLE>
Allowance for Losses on Other Real Estate ("ORE"):
The Company recognizes any estimated potential decline in the value of ORE
between appraisal dates through periodic additions to the allowance for losses
on ORE. Writedowns charged against this allowance are taken if the related real
estate is sold at a loss. For the nine months ended September 30, 1997, the
Company recorded a provision expense for losses on ORE of $410,000.
The largest piece included in the ORE balance is a tract of land carried at $2.7
million acquired through foreclosure in 1988 that has partially been developed
as a shopping center site. Federal law and regulations require the Company to
dispose of this tract by December 17, 1997 unless an extension of time is
granted. In the second quarter of 1997, the Company sold approximately
two-thirds of its second-largest ORE property, a parcel of undeveloped land in
Pasco County. As a result, the balance of this property carried on the Company's
books has declined from $1.1 million at December 31, 1996, to $597,000 as of
September 30, 1997. Management believes the carrying value of the unsold
remainder of the parcel approximates the amount which could be realized upon
final sale.
6. SUBORDINATED DEBT:
On December 27, 1996, the Company issued $6 million in convertible subordinated
debentures (the "Debentures") at a fixed rate of 6.00%, interest payable
semi-annually with a maturity of December 1, 2011. Under the terms of the
indenture dated December 18, 1996, the Company has the right to redeem, without
payment of a premium, all or any of the Debentures if the closing price of the
Company's common stock equals or exceeds 130% of the
13
<PAGE> 16
conversion price for not less than 20 consecutive trading days. The conversion
price, as defined by the indenture, is $17.78514 which, when multiplied by 130%,
equals a price of $23.21 per share.
On September 9, 1997, the closing price of the common stock was $23.75 and
remained above that price for the requisite number of consecutive trading days.
The Company, therefore, has exercised its option to redeem all of the
outstanding debentures at no premium. Holders have the option of converting
Debentures into Company common stock before the redemption date of December 1,
1997, which is also the next interest payment date.
14
<PAGE> 17
[This page intentionally left blank]
15
<PAGE> 18
SELECTED QUARTERLY FINANCIAL AND OTHER DATA
EIGHT CONSECUTIVE QUARTERS (UNAUDITED)
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Quarters Ending
----------------------------------------------------------
Sept. 1997 June 1997 March 1997 Dec. 1996
------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
OPERATING DATA:
Interest income $ 29,464 $ 25,344 $ 23,878 $ 24,216
Interest expense 14,721 12,821 12,142 11,839
----------- ---------- ---------- ----------
Net interest income 14,743 12,523 11,736 12,377
Loan loss provision 495 501 1,138 1,075
----------- ---------- ---------- ----------
Net interest income after loan loss provision 14,248 12,022 10,598 11,302
Noninterest income 9,115 2,708 3,703 2,604
General and administrative ("G&A") expenses 16,114 12,168 10,482 10,594
Other noninterest expense 1,298 360 314 (1,331)
----------- ---------- ---------- ----------
Net income (loss) before income taxes & minority interest 5,951 2,202 3,505 4,643
Income tax provision (benefit) 2,217 863 1,315 1,651
----------- ---------- ---------- ----------
Net income before minority interest 3,734 1,339 2,190 2,992
Minority interest (net of tax) (543) (227) (188) (467)
----------- ---------- ---------- ----------
Net income (loss) $ 3,191 $ 1,112 $ 2,002 $ 2,525
=========== ========== ========== ==========
PER SHARE DATA (FULLY DILUTED, NET OF TAX EFFECT):
Core net income(1) $ .58 $ .17 $ .33 $ .40
Adjustments to core net income (.11) .01 (.03) (.02)
----------- ---------- ---------- ----------
Net income $ .47 $ .18 $ .30 $ .38
=========== ========== ========== ==========
Weighted average shares outstanding 6,852,689 6,694,862 6,649,995 6,661,140
BALANCE SHEET DATA (AT PERIOD-END):
Total assets $ 1,469,352 $1,321,573 $1,231,456 $1,224,357
Investment & mortgage backed securities 96,982 140,899 134,781 161,357
Loans held for sale 94,896 72,487 44,774 47,052
Portfolio loans, net of unearned income 1,106,728 995,864 928,973 920,323
Allowance for loan losses 20,417 19,328 19,088 18,747
Deposits 1,289,100 1,165,042 1,118,710 1,114,907
Stockholders' equity 87,593 71,254 69,694 68,178
Book value per share $ 11.78 $ $ $
SELECTED FINANCIAL RATIOS:
Return on average assets .89 % .35% .66 % .84 %
Return on average equity 17.53 6.33 11.76 14.95
Net interest spread 4.03 3.52 3.52 4.12
Net interest margin 4.41 4.10 4.10 4.40
G&A expense to average assets(2) 4.55 3.81 3.42 3.55
G&A efficiency ratio(2) 67.54 79.89 67.89 70.72
Non-accrual loans to portfolio loans 1.91 1.89 2.16 2.09
Nonperforming assets to total assets 2.05 2.08 2.36 2.26
Allowance for loan loss to portfolio loans
Total 1.78 1.94 2.05 2.04
Originated portfolio 1.68 1.79 1.92 1.80
March 1995 Purchase 11.16 11.30 9.74 10.92
CrossLand portfolio 1.29 1.20 1.20 1.14
Other purchased portfolios 1.06 1.16 1.14 1.21
Allowance for loan loss to non-performing loans
Total 91.64 97.32 94.62 96.93
Originated portfolio 83.75 90.96 84.74 74.00
March 1995 Purchase 504.89 441.82 551.88 488.78
CrossLand portfolio 81.30 106.60 104.82 126.12
Other purchased portfolios 58.62 46.67 45.60 89.80
OTHER DATA (AT PERIOD-END):
Number of branch banking offices 45 45 43 42
Number of full-time equivalent employees 958 856 802 785
</TABLE>
- --------------------------
(1) Core net income excludes the effect of the non-recurring, unusual or
infrequent items. This is not a measurement under generally accepted
accounting principles and is included for analysis purposes only.
(2) Excludes the SAIF Special Assessment and merger costs.
16
<PAGE> 19
SELECTED QUARTERLY FINANCIAL AND OTHER DATA
EIGHT CONSECUTIVE QUARTERS (UNAUDITED)
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Quarters Ending
------------------------------------------
Sept. 1996 June 1996 March 1996 Dec. 1995
---------- ---------- ---------- ---------
OPERATING DATA:
<S> <C> <C> <C> <C>
Interest income $ 22,065 $ 21,335 $ 21,328 $ 20,976
Interest expense 11,279 10,764 11,067 10,806
---------- ---------- ---------- ----------
Net interest income 10,786 10,571 10,261 10,170
Loan loss provision 457 450 600 127
---------- ---------- ---------- ----------
Net interest income after loan loss provision 10,329 10,121 9,661 9,743
Noninterest income 2,841 1,523 956 1,417
G&A expenses 9,174 8,743 8,289 8,626
Other noninterest expense 5,106 5 773 77
---------- ---------- ---------- ----------
Net income before income taxes & minority interest (1,110) 2,896 1,991 2,457
Income tax provision (benefit) (451) 1,104 732 723
---------- ---------- ---------- ----------
Net income before minority interest (659) 1,792 1,259 1,734
Minority interest (net of tax) (144) (165) (17) (149)
---------- ---------- ---------- ----------
Net income $ (515) $ 1,627 $ 1,242 $ 1,585
========== ========== ========== ==========
PER SHARE DATA (FULLY DILUTED, NET OF TAX EFFECT):
Core net income(1) $ .30 $ .28 $ .22 $ .26
Adjustments to core net income (.38) (.03) (.03) (.01)
---------- ---------- ---------- ----------
Net income $ (.08) $ .25 $ .19 $ .25
========== ========== ========== ==========
Weighted average shares outstanding 6,622,493 6,626,102 6,626,564 6,262,211
BALANCE SHEET DATA (AT PERIOD-END):
Total assets $1,163,506 $1,142,060 $1,108,047 $1,103,480
Investment & mortgage backed securities 113,446 116,045 130,689 155,345
Loans held for sale 32,444 30,293 17,477 27,476
Portfolio loans, net of unearned income 905,599 867,326 849,188 831,033
Allowance for loan losses 19,858 19,829 19,956 20,048
Deposits 1,049,998 1,028,692 1,010,804 992,041
Stockholder's equity 65,804 66,241 64,542 63,833
Book value per share 9.96
SELECTED FINANCIAL RATIOS:
Return on average assets (.18)% .58% .45% .63%
Return on average equity (3.09) 9.96 7.76 11.39
Net interest spread 3.50 3.46 3.44 3.69
Net interest margin 3.65 3.56 3.34 3.96
G&A expense to average assets(2) 3.18 3.12 3.00 3.20
G&A efficiency ratio(2) 67.32 72.29 73.90 74.45
Non-accrual loans to total loans 2.26 2.13 2.16 1.95
Nonperforming assets to total assets 2.78 2.73 2.89 2.78
Allowance for loan loss to portfolio loans
Total 2.19 2.29 2.35 2.41
Originated portfolio 1.82 1.94 2.01 2.02
March 1995 Purchase 14.55 14.50 14.60 15.25
CrossLand portfolio 1.10 1.07 1.17 1.04
Other purchased portfolios 1.14 1.15 1.11 1.16
Allowance for loan loss to non-performing loans
Total 90.42 99.41 108.34 110.73
Originated portfolio 65.76 90.06 96.95 106.51
March 1995 Purchase 689.66 552.18 778.75 647.83
CrossLand portfolio 81.80 53.22 63.46 41.77
Other purchased portfolios 59.97 39.79 40.39 41.84
OTHER DATA (AT PERIOD-END):
Number of branch offices 42 42 42 42
Number of full-time equivalent employees 749 692 594 573
</TABLE>
- ---------------------
(1) Excludes the effect of the non-recurring, unusual or infrequent items.
(2) Excludes the SAIF Special Assessment and merger costs.
17
<PAGE> 20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
COMPARISON OF BALANCE SHEETS AT SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
Overview
Total assets were $1.5 billion at September 30, 1997, and $1.2 billion at
December 31, 1996, an increase of $245 million or 20.0%. During April 1997, the
Company consummated its acquisition of Firstate Financial, F.A., which accounted
for a $69.5 million or 7.66% increase. Additionally, in July 1997, the company
purchased $75.0 million of residential loans from the FDIC (the "July 1997
Purchase") and on July 31st, the company completed a $28.8 million offering of
trust preferred stock through its subsidiary, RBI Capital Trust I.
Investment and Mortgage-Backed Securities
Investment and mortgage-backed securities, consisting of U.S. Treasury and
federal agency securities, were $96.9 million at September 30, 1997, compared to
$161.4 million at December 31, 1996, a decrease of $64.5 million. The Company
has recorded all its investment and mortgage-backed securities as of September
30, 1997 as "available for sale" at their period-end market value. During the
first nine months of 1997 management permitted the amount in this category to
decline by allowing maturities and sales to exceed purchases. The Company
recorded $477,000 in net gains on the sales of $59.6 million in investments and
mortgage-backed securities of which $30.7 million were obtained through the
Firstate acquisition. Federal funds sold, all on an overnight basis, increased
by $54.0 million from $8.0 million at the prior year-end to $62.0 million at
September 30, 1997.
Loans
Total loans held for portfolio increased $186.4 million from $920.3 million at
the prior year-end to $1.1 billion at September 30, 1997. One-to-four family
residential loans increased by $150.7 million primarily as a result of the $75.0
million July 1997 Purchase and $56.8 million from the Firstate acquisition.
Commercial real estate and multifamily residential loans increased $11.0 million
to $326.5 million and consumer loans increased $9.5 million, while commercial
(business) loans declined $6.2 million.
Allowance for Loan Losses
The allowance for loan losses amounted to $20.4 million at September 30, 1997
(1.84% of portfolio loans) compared to $18.7 million at December 31, 1996. At
September 30, 1997, the allowance for loan losses included $13.5 million
allocated to loans originated by the Company, $3.4 million allocated to the
largest loan purchase made in March 1995 (the "March 1995 Purchase"), $1.0
million allocated to loans purchased from CrossLand, $1.2 million allocated to
the July 1997 Purchase, and $1.3 million allocated to other loan purchases. For
a discussion of discounts on purchased loans and the use of amounts allocated to
the allowance for loan losses, see the notes to the consolidated financial
statements. Other activity to the allowance in 1997 included provisions for loan
losses of $2.1 million (based generally on the growth in the loan portfolio),
loan charge-offs (net of recoveries) of $634,000, $39,000 re-allocated from loan
discounts to the allowance and $131,000 in allowances obtained through the
Firstate acquisition. The net charge-off amount for the period included $162,000
assessed against the allowance for loan losses on loans allocated to the March
1995 Purchase as properties securing certain nonperforming loans in that
purchase were acquired through foreclosure and recorded at their fair value.
18
<PAGE> 21
Nonperforming Assets
Nonperforming assets amounted to $30.1 million or 2.05% of total assets at
September 30, 1997, as compared to $27.7 million or 2.26% of total assets at
December 31, 1996. Nonperforming loans totaled $22.3 million at the end of the
third quarter, an increase of $2.9 milliom from the prior year-end total of
$19.3million. This increase was primarily the result of a $3.3 million increase
in 1-4 residential nonperforming loans which were purchased from the FDIC in
July. This was partially offset by a $759,000 reduction in commercial real
estate and commercial business loans. Other real estate decreased by $314,000
from $8.2 million at the end of the prior year to $7.8 million at the end of
the third quarter. This improvement was primarily the result of the sale of
$3.6 million of ORE properties, at an aggregate net gain of $109,000, which
exceeded foreclosures on properties, the majority of which were securing
residential loans which had been purchased at substantial discounts from their
face value.
Deposits
Total deposits were $1.3 billion at September 30, 1997, compared to $1.1 billion
at the prior year-end, an increase of $174.2 million. Excluding the Firstate
acquisition which comprised $49.9 million in deposits, total deposits would have
increased by $124.3 million, which included an $85.0 million increase in
certificates of deposit as the Company maintained a more competitive rate
strategy during the first nine months of the year. Retail checking balances
increased by $23.3 million and passbook savings accounts offered to
higher-balance customers at a premium rate of 4.88% increased by $3.7 million
while regular savings accounts declined by $27.2 million.
Stockholders' Equity
Stockholders' equity was $87.6 million at September 30, 1997, or 5.96% of total
assets compared to $68.2 million or 5.57% of total assets at December 31, 1996.
At September 30, 1997, the Bank's Tier 1 ("Leverage") Capital ratio was 7.85%,
its Tier 1 Risk-Based Capital ratio was 12.10%, and its Total Risk-Based Capital
ratio was 13.08%, all in excess of minimum FDIC guidelines for an institution to
be considered a "well-capitalized" bank. The Company's Tier 1 ("Leverage")
ratio, Tier 1 Risk-Based Capital ratio and total Risk-Based Capital ratio was
7.32%, 11.27% and 13.24%, respectively. Although the Companys' financial
information has been restated for prior periods using the applicable accounting
treatment for business combinations, no recalculation of prior period capital
ratios is made under regulatory guidelines.
COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30,
1997 AND 1996
Overview
Net income for the quarter ended September 30, 1997, was $3.2 million or $.47
per share, compared with a net loss of $515,000, or $.08 per share, for the
third quarter of 1996. Return on average assets for the third quarter of 1997
was .89%, while return on average equity was 17.53%. Results for the third
quarter of 1997 includes gains on sale of high loan-to-value home equity loans,
a portion of which was deferred from sale in the second quarter of 1997. In
September 1997, the Company recognized, as part of its noninterest income, $6.3
million of pretax income from mortgage banking activities, comprised of gains on
sale of loans net of certain direct costs of production.
19
<PAGE> 22
Analysis of Net Interest Income (see table on page 21)
Net interest income for the third quarter of 1997 was $14.7 million compared
with $10.8 million for the same period last year. This $4.0 million or 36.7%
increase was the result of $1.4 million from an improved net interest spread and
$2.5 million in additional income from balance sheet growth. Interest income was
$29.5 million for 1997, an increase of $7.4 million over the same period in 1996
while interest expense increased by $3.4 million. Average asset yield increased
66 basis points from 8.12% for the third quarter of 1996 to 8.78% for 1997. The
average cost of interest-bearing liabilities increased 32 basis points from
4.43% to 4.75%. As a result, net interest spread increased 34 basis points from
3.69% for 1996 to 4.03% for 1997 and net interest margin, which includes the
benefit of noninterest bearing funds, increased 46 basis points from 3.96% for
1996 to 4.42% for 1997.
Noninterest Income
Noninterest income for the third quarter of 1997 was $9.1 million compared with
$2.8 million for the same period of 1996, an increase of $6.3 million. This
increase was primarily the result of net gains on mortgage banking activities,
consisting of gains on sale of loans and recognition of the value of originated
mortgage servicing rights ("OMSR's") net of direct costs of production, which
increased $6.0 million. Service fees on deposit accounts increased $226,000 and
gains on sale of securities increased $347,000. Additionally, fee income from
the Company's new Generations Gold program increased by $77,000, a 110.0%
increase compared with the same period last year. Included in other income
during the quarter is a $757,000 gain on the sale of stock in a data processing
cooperative.
The following table reflects the components of noninterest income for the three
months ended September 30, 1997, and 1996 (in thousands):
<TABLE>
<CAPTION>
For the Three Months
Ended September 30,
-----------------------------------------------------
Increase
1997 1996 (Decrease)
--------- --------- ---------
<S> <C> <C> <C>
Income from mortgage banking operations $ 6,338 $ 340 $ 5,998
Service charges on deposit accounts 923 697 226
Loan fee income 393 343 50
Merchant charge card processing fees 63 13 50
Gains on sales of loans, net 42 16 26
Gain on sale of securities, net 329 (18) 347
Generations Gold fee income 147 70 77
Gain on sale of ORE held for investment - 1,207 (1,207)
Other income 880 173 707
-------- -------- --------
Total noninterest income $ 9,115 $ 2,841 $ 6,274
======== ======== ========
</TABLE>
20
<PAGE> 23
The following table summarizes the average yields earned on interest-earning
assets and the average rates paid on interest-bearing liabilities for the three
months ended September 30, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
Three Months Ended September 30,
---------------------------------------------------------------------------
1997 1996
----------------------------------- ----------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Summary of Average Rates
Interest earning assets:
Loans, net $1,167,800 $ 26,834 9.16% $ 909,763 $ 19,488 8.50%
Investment securities 35,363 551 6.18 29,900 481 6.40
Mortgage backed securities 78,185 1,246 6.38 84,475 1,346 6.35
Interest bearing deposits in banks 3,249 22 2.72 1,251 32 10.25
FHLB stock 8,326 151 7.20 7,344 134 7.26
Federal funds sold 43,811 661 5.91 44,788 584 5.10
---------- -------- ----------- ----------
Total interest-earning assets 1,336,734 29,465 8.78 1,077,521 22,065 8.12
Non interest-earning assets 79,144 59,241
---------- -----------
Total assets $1,425,878 $ 1,136,762
========== ===========
Interest-bearing liabilities:
Interest checking $ 108,141 $ 118 .43 $ 102,701 298 1.15
Savings 56,627 263 1.84 78,325 291 1.48
Passbook Gold 216,846 2,683 4.91 182,523 2,201 4.80
Money market 33,958 159 1.85 38,008 205 2.14
Time deposits 732,666 10,349 5.60 598,031 8,126 5.41
FHLB advances 53,446 757 5.62 1,413 17 4.79
Other borrowings 27,206 383 5.73 10,636 141 4.97
---------- -------- ----------- ----------
Total interest-bearing liabilities 1,228,890 14,722 4.75 1,011,637 11,279 4.43
-------- ----------
Non interest-bearing liabilities 115,824 54,349
Stockholders' equity 71,164 70,776
---------- -----------
Total liabilities and equity $1,415,878 $1,136,762
========== ==========
Net interest income/net interest spread $ 14,743 4.03% $ 10,786 3.69%
======== ==== ========= ====
Net interest margin 4.42% 3.96%
==== ====
</TABLE>
<TABLE>
<CAPTION>
Increase (Decrease) Due to (1)
-------------------------------
Changes in Net Interest Income Volume Rate Total
- ------------------------------ ---------- ---------- ---------
<S> <C> <C> <C>
Interest earning assets:
Loans, net $ 5,762 $ 1,584 $ 7,346
Investment securities 87 (17) 70
Mortgage backed securities (107) 7 (100)
Interest bearing deposits in banks 26 (36) (10)
FHLB stock 18 (1) 17
Federal funds sold (13) 90 77
---------- ---------- ---------
Total change in interest income 5,773 1,627 7,400
Interest-bearing liabilities:
Interest checking 15 (195) (180)
Savings (90) 62 (28)
Passbook Gold 430 52 482
Money market (20) (26) (46)
Time deposits 1,918 305 2,223
FHLB advances 737 3 740
Other borrowings 245 7 252
---------- ---------- ---------
Total change in interest expense 3,223 210 3,443
---------- ---------- ---------
Increase (decrease) in net interest income $ 2,540 $ 1,417 $ 3,957
========== ========== =========
- --------------
</TABLE>
21
<PAGE> 24
Noninterest Expense
General and administrative ("G & A") expenses for the third quarter of 1997 were
$16.1 million compared with $9.2 million in 1996, an increase of $6.9 million.
Total noninterest expenses, which include G & A expense, were $17.4 million for
the third quarter of 1997 compared with $14.3 million for the same period last
year, an increase of $3.1 million. Increases occurred in substantially all areas
of expense primarily as a result of the costs associated with increased loan
production capabilities, and to a lesser degree, the Firstate acquisition.
The following table reflects the components of noninterest expense for the three
months ended September 30, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
For the three Months
Ended September 30,
Increase
1997 1996 (Decrease)
------ ------ ----------
<S> <C> <C> <C>
Salaries and benefits $ 7,417 $ 4,553 $ 2,864
Net occupancy expense 2,103 1,706 397
Advertising 1,820 209 1,611
Data processing fees 792 523 269
FDIC and state assessments 149 497 (348)
Telephone expense 378 237 141
Legal & professional 487 422 65
Postage and supplies 1,632 214 1,418
Other operating expense 1,336 813 523
------- ------- -------
Total G & A expenses 16,114 9,174 6,940
Merger expenses 1,031 - 1,031
SAIF special assessment - 4,005 (4,005)
Provision for losses on ORE 120 1,041 (921)
ORE expense, net of ORE income 90 (63) 153
Amortization of premium on deposits 57 123 (66)
------- ------- -------
Total noninterest expense $17,412 $14,280 $ 3,132
======= ======= =======
</TABLE>
COMPARISON OF RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1997 AND 1996
Overview
Net income for the nine months ended September 30, 1997, was $6.3 million, or
$.94 per share, compared with $2.4 million, or $.36 per share, for the same
period in 1996. Return on average assets for the first nine months of 1997 was
.65% compared with .28% for the same period of 1996, while return on average
equity was 11.94% compared with 4.81%.
Analysis of Net Interest Income (see table on page 23)
Net interest income for the first nine months of 1997 was $39.0 million compared
with $31.6 million for 1996. This $7.4 million or 23.4% increase was the result
of $6.4 million in additional income from balance sheet growth and $1.0 million
from an increased net interest spread. Interest income was $78.7 million for
1997, an increase of $14.0 million over 1996. During the same period interest
expense increased by $6.6 million from $33.1 million for 1996 to $39.7 million
for 1997. Average asset yield increased 32 basis points from 8.24% for 1996 to
8.56% for 1997 and average earning assets increased $171.3 million. During this
same period the average cost of interest-bearing liabilities increased 40 basis
points from 4.45% to 4.85%. While net interest spread remained fairly level, the
net interest margin, which includes the benefit of noninterest bearing funds,
increased from 4.02% for 1996 to 4.21% for 1997.
22
<PAGE> 25
The following table summarizes the average yields earned on interest-earning
assets and the average rates paid on interest-bearing liabilities for the nine
months ended September 30, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
Nine Months Ended September 30,
---------------------------------------------------------------------------
1997 1996
---------------------------------- --------------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Summary of Average Rates
Interest earning assets:
Loans, net $1,040,864 $ 70,320 8.97% $ 885,591 $ 57,305 8.64%
Investment securities 40,535 1,864 6.15 37,489 1,618 5.77
Mortgage backed securities 84,524 4,096 6.46 87,511 4,083 6.23
Interest bearing deposits in banks 4,058 110 3.63 3,032 197 7.80
FHLB stock 7,811 427 7.31 6,967 378 7.25
Federal funds sold 43,201 1,870 5.71 29,129 1,167 5.35
---------- ---------- ----------- ----------
Total interest-earning assets 1,220,993 78,687 8.56 1,049,719 64,728 8.24
Non interest-earning assets 68,263 63,160
---------- -----------
Total assets $1,289,256 $ 1,112,879
========== ===========
Interest-bearing liabilities:
Interest checking $ 95,204 $ 730 1.02 $ 117,809 938 1.06
Savings 37,551 801 2.86 61,634 946 2.05
Passbook gold 220,121 8,040 4.88 120,116 4,165 4.63
Money market 33,005 490 1.98 38,751 632 2.18
Time deposits 659,627 27,668 5.61 634,782 25,815 5.43
FHLB advances 23,352 884 5.06 13,076 349 3.55
Other borrowings 25,159 1,073 5.71 7,176 365 4.95
---------- ---------- ----------- ----------
Total interest-bearing liabilities 1,094,019 39,686 4.85 993,344 33,110 4.45
Non interest-bearing liabilities 126,814 49,526
Stockholders' equity 68,423 70,009
---------- -----------
Total liabilities and equity $1,289,256 $ 1,112,879
========== ===========
Net interest income/net interest spread $ 39,001 3.71% $ 31,618 3.78%
========== ==== ========== ====
Net interest margin 4.21% 4.02%
==== ====
</TABLE>
<TABLE>
<CAPTION>
Increase (Decrease) Due to(1)
-----------------------------
Changes in Net Interest Income Volume Rate Total
- ------------------------------ ------ ---- -----
<S> <C> <C> <C>
Interest earning assets:
Loans, net $ 10,673 $ 2,342 $ 13,015
Investment securities 133 113 246
Mortgage backed securities (146) 159 13
Interest bearing deposits in banks 47 (114) (67)
FHLB stock 46 3 49
Federal funds sold 616 87 703
--------- --------- ---------
Total change in interest income 11,369 2,590 13,959
Interest-bearing liabilities:
Interest checking (174) (34) (208)
Savings (445) 300 (145)
Passbook gold 3,637 238 3,875
Money market (90) (52) (142)
Time deposits 972 881 1,853
FHLB advances 347 188 535
Other borrowings 794 14 808
--------- --------- ---------
Total change in interest expense 5,041 1,535 6,576
--------- --------- ---------
Increase (decrease) in net interest income $ 6,328 $ 1,055 $ 7,383
========= ========= =========
- --------------
</TABLE>
23
<PAGE> 26
Noninterest Income
Noninterest income for the first nine months of 1997 was $15.5 million compared
to $5.3 million for the same period of 1996, an increase of $10.2 million. This
increase is primarily the result of higher income from mortgage banking
activities which increased $7.9 million and gains on the sale of portfolio loans
of $1.2 million. Additional increases were in service fees on deposit accounts
of $405,000, gains on sale of securities of $817,000, gain on redemption of FIS
stock of $757,000, and Generations Gold fee income of $227,000.
The following table reflects the components of noninterest income for the nine
months ended September 30, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
--------------------------------------------
Increase
1997 1996 (Decrease)
------ ------ ----------
<S> <C> <C> <C>
Income from mortgage banking operations $ 7,879 $ - $ 7,879
Service charges on deposit accounts 2,462 2,057 405
Loan fee income 1,167 993 174
Merchant charge card processing fees 189 61 128
Gains on sales of loans, net 1,622 390 1,232
Gain on sale of securities, net 477 (340) 817
Generations Gold fee income 348 121 227
Gain on sale of ORE held-for-investment - 1,207 (1,207)
Other income 1,384 859 525
-------- -------- --------
Total noninterest income $ 15,528 $ 5,348 $ 10,180
======== ======== ========
</TABLE>
Noninterest Expense
Total noninterest expenses for the first nine months of 1997 were $40.7 million
compared to $31.7 million for the same period last year, an increase of $9.0
million. G & A expenses for 1997, included in the noninterest expense total,
were $38.8 million compared to $26.2 million an increase of $12.5 million. The
increase was the result of increased costs from an overall expansion of the
Company's loan production capabilities and, to a lesser degree, the Firstate
acquisition.
The following table reflects the components of noninterest expense for the nine
months ended September 30, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
--------------------------------------------------
Increase
1997 1996 (Decrease)
-------- -------- ---------
<S> <C> <C> <C>
Salaries and benefits $ 18,467 $ 13,235 $ 5,232
Net occupancy expense 5,833 4,685 1,148
Advertising 2,805 646 2,159
FDIC and state assessments 628 1,383 (755)
Data processing fees 2,031 1,476 555
Telephone expense 1,047 638 409
Legal and professional 1,221 598 623
Postage and supplies 2,983 1,126 1,857
Other operating expense 3,750 2,448 1,302
-------- -------- --------
Total G & A expenses 38,765 26,235 12,530
Merger expenses 1,087 - 1,087
SAIF special assessment - 4,005 (4,005)
Provision for losses on ORE 410 1,491 (1,087)
ORE expense, net of ORE income 170 (416) 586
Amortization of premium on deposits 305 368 (63)
-------- -------- --------
Total noninterest expense $ 40,737 $ 31,683 $ 9,054
======== ======== ========
</TABLE>
24
<PAGE> 27
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is party to various legal proceedings in the ordinary
course of its business. Based on information presently available,
management does not believe that the ultimate outcome in such
proceedings, in the aggregate, would have a material adverse effect
on the Company's financial position or results of operation.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
27.0 Financial Data Schedule (for SEC use only).
b. Reports on Form 8-K
There were no reports on Form 8-K filed during the three months
ended September 30, 1997.
25
<PAGE> 28
Pursuant to the requirements of Section 13 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 BANCSHARES, INC.
Date: 11/14/97 By: /s/ John W. Sapanski
---------- -------------------------------------
John W. Sapanski
Chairman and Chief Executive Officer
(principal executive officer)
Date: 11/14/97 By: /s/ William R. Falzone
---------- -------------------------------------
William R. Falzone
Treasurer (principal financial and
accounting officer)
26
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATION
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 44,017
<INT-BEARING-DEPOSITS> 3,906
<FED-FUNDS-SOLD> 62,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 96,899
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 1,201,624
<ALLOWANCE> 20,417
<TOTAL-ASSETS> 1,469,352
<DEPOSITS> 1,289,100
<SHORT-TERM> 55,803
<LIABILITIES-OTHER> 5,378
<LONG-TERM> 0
28,750
1,500
<COMMON> 13,378
<OTHER-SE> 72,715
<TOTAL-LIABILITIES-AND-EQUITY> 1,469,352
<INTEREST-LOAN> 70,320
<INTEREST-INVEST> 8,367
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 78,687
<INTEREST-DEPOSIT> 37,729
<INTEREST-EXPENSE> 39,686
<INTEREST-INCOME-NET> 39,001
<LOAN-LOSSES> 2,134
<SECURITIES-GAINS> 477
<EXPENSE-OTHER> 40,737
<INCOME-PRETAX> 10,700
<INCOME-PRE-EXTRAORDINARY> 10,700
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,305
<EPS-PRIMARY> .94
<EPS-DILUTED> .91
<YIELD-ACTUAL> 856
<LOANS-NON> 21,858
<LOANS-PAST> 422
<LOANS-TROUBLED> 2,152
<LOANS-PROBLEM> 200
<ALLOWANCE-OPEN> 18,747
<CHARGE-OFFS> 932
<RECOVERIES> 298
<ALLOWANCE-CLOSE> 20,417
<ALLOWANCE-DOMESTIC> 20,417
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 20,417
</TABLE>
