<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 MARCH 31, 1998
[ ] 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:
Common stock, 7,049,552 shares outstanding
par value $2.00 per share at March 31, 1998
<PAGE> 2
REPUBLIC BANCSHARES, INC.
INDEX
PART I. FINANCIAL INFORMATION (all financial information for prior periods
has been restated for the merger with F.F.O. Financial Group, Inc.)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets - March 31, 1998 (unaudited)
and December 31, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Consolidated Statements of Operations -
Three month periods
ended March 31, 1998 and 1997 (all unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Stockholders' Equity -
Year ended December 31, 1997 and
Three months ended March 31, 1998 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Cash Flows -
Three month periods
ended March 31, 1998 and 1997 (all unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Notes to Consolidated Financial Statements (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . 5
Selected Quarterly Financial and Other Data (unaudited) . . . . . . . . . . . . . . . . . . . . . . . 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
<PAGE> 3
REPUBLIC BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS - MARCH 31, 1998 AND DECEMBER 31, 1997
($ IN THOUSANDS, EXCEPT PAR VALUES)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
- ------
Cash and due from banks $ 36,713 $ 45,998
Interest bearing deposits in banks 2,164 671
Federal funds sold 105,000 33,000
Investment securities:
Available for sale 34,114 16,080
Trading - -
Mortgage-backed securities:
Available for sale 25,597 55,467
Trading 39,630 36,189
Held to maturity - -
FHLB stock 13,000 8,148
Loans held for sale 311,749 151,404
Loans, net of allowance for loan losses (Notes 3 and 4) 1,137,694 1,128,955
Premises and equipment, net 34,948 34,168
Other real estate owned acquired through foreclosure, net 6,950 6,997
Accrued interest receivable 10,288 9,611
Goodwill and premium on deposits 4,679 4,855
Investment in unconsolidated subsidiary 10,817 -
Other assets 67,800 20,862
----------- -----------
Total assets $ 1,841,143 $ 1,552,405
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Deposits-
Noninterest-bearing checking $ 96,311 $ 93,843
Interest checking 134,109 137,240
Money market 33,170 30,389
Savings 311,036 291,604
Time deposits 843,929 808,236
----------- -----------
Total deposits 1,418,555 1,361,312
Securities sold under agreements to repurchase 24,640 19,654
FHLB advances 260,000 35,000
Other liabilities 10,917 12,158
----------- -----------
Total liabilities 1,714,112 1,428,124
----------- -----------
Company-obligated mandatorily redeemable preferred
securities of subsidiary trust solely holding junior
subordinated debentures of the Company 28,750 28,750
----------- -----------
Stockholders' equity:
Perpetual preferred convertible stock ($20.00 par, 100,000 shares authorized,
75,000 shares issued and outstanding. Liquidation preference $6,660
at March 31, 1998 and December 31, 1997.) 1,500 1,500
Common stock ($2.00 par, 20,000,000 shares authorized, 7,049,552 and
7,035,886 shares issued and outstanding at March 31, 1998 and
December 31, 1997, respectively) 14,099 14,072
Capital surplus 50,457 50,322
Retained earnings 32,159 29,155
Net unrealized gain on available-for-sale securities, net of tax effect 66 482
----------- -----------
Total stockholders' equity 98,281 95,531
----------- -----------
Total liabilities and stockholders' equity $ 1,841,143 $ 1,552,405
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
1
<PAGE> 4
REPUBLIC BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
------------------------------------
1998 1997
------------ ----------
(unaudited)
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 31,204 $ 21,097
Interest on investment securities 433 583
Interest on mortgage-backed securities 625 1,290
Interest on trading securities 910 -
Interest on federal funds sold 423 731
Interest on other investments 183 176
----------- -----------
Total interest income 33,778 23,877
----------- -----------
INTEREST EXPENSE:
Interest on deposits 14,913 11,825
Interest on FHLB advances 1,900 10
Interest on subordinated debt - 108
Interest on other borrowings 302 199
----------- -----------
Total interest expense 17,115 12,142
----------- -----------
Net interest income 16,663 11,735
PROVISION FOR LOAN LOSSES 493 1,138
----------- -----------
Net interest income after
provision for possible loan losses 16,170 10,597
----------- -----------
NONINTEREST INCOME:
Income from mortgage banking activities 9,985 898
Gain on sale of portfolio loans, net - 1,326
Service charges on deposit accounts 799 745
Loan fee income 680 331
Gain (loss) on sale of securities, net 222 (96)
Other operating income 843 499
----------- -----------
Total noninterest income 12,529 3,703
NONINTEREST EXPENSES:
General and administrative ("G&A") expenses 22,923 10,482
Merger expenses 9 -
Provision for losses on ORE (80) 170
Other ORE expense, net 22 21
Amortization of premium on deposits 159 123
----------- -----------
Total noninterest expenses 23,033 10,796
----------- -----------
Income before income taxes 5,666 3,504
Income tax provision (2,175) (1,315)
Minority interest in income from subsidiary trust (net of tax) (420) -
Minority interest in FFO (net of tax) - (188)
----------- -----------
NET INCOME $ 3,071 $ 2,001
=========== ===========
PER SHARE DATA:
Net income per common share and common
equivalent share - diluted $ .39 $ .30
=========== ===========
Weighted average common and common
equivalent shares outstanding - diluted 7,968,984 6,987,074
=========== ===========
Net income per common share - basic $ .44 $ .34
=========== ===========
Weighted average common shares outstanding - basic 7,043,024 5,854,414
=========== ===========
</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, 1997 AND
THE THREE MONTHS ENDED MARCH 31, 1998 (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, 1996 75,000 $ 1,500 5,854,414 $11,708 $ 34,225 $ 20,847 $ (102) $ 68,178
Net income for the twelve
months ended December 31,
1997 - - - - - 8,571 - 8,571
Net unrealized gains on
available-for-sale securities
net of tax effect - - - - - - 584 584
Exercise of stock options - - 21,300 43 197 - - 240
Net change in minority interest - - (2,537) (5) (487) - - (492)
Issuance of common stock
in merger transaction - - 826,709 1,654 11,211 - - 12,865
Conversion of subordinated
debentures - - 336,000 672 5,176 - - 5,848
Dividends on preferred
stock - - - - - (263) - (263)
------ ------- --------- ------- -------- -------- ------ --------
BALANCE, DECEMBER 31, 1997 75,000 $ 1,500 7,035,886 $14,072 $ 50,322 $ 29,155 $ 482 $ 95,531
Net income for the three
months ended March 31,
1998 - - - - - 3,071 - 3,071
Net unrealized loss on
available-for-sale securities,
net of tax - - - - - - (416) (416)
Exercise of stock options - - 13,666 27 135 - - 162
Dividends on preferred
stock - - - - - (67) - (67)
------ ------- --------- ------- -------- -------- ------ --------
BALANCE, MARCH 31, 1998 75,000 $ 1,500 7,049,552 $14,099 $ 50,457 $ 32,159 $ 66 $ 98,281
====== ======= ========= ======= ======== ======== ====== ========
</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 March 31,
--------------------------------
1998 1997
---- ----
(unaudited) (unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 3,071 $ 2,001
Reconciliation of net income to net cash provided by (used in):
Provision for losses on loans and ORE 614 1,308
Depreciation and amortization, net 1,090 (125)
Amortization of premium and accretion of fair value 901 289
(Gain) loss on sale of loans (9,985) (2,224)
(Gain) on sale of investment securities (638) (42)
(Gain) loss on sale of ORE (7) (108)
Capitalization of mortgage servicing 543 (839)
Net increase in deferred tax benefit 1,676 (897)
Gain on disposal of premises & equipment (2) (1)
Net (increase) decrease in other assets (3.709) 596
Net increase (decrease) in other liabilities (1,241) 2,145
--------- --------
Net cash provided by (used in) operating activities (7,687) 2,103
--------- --------
INVESTING ACTIVITIES:
Proceeds from sales & maturities of:
Mortgage-backed securities available for sale 28,468 -
Investment securities available for sale - 68,447
Purchase of securities available for sale (20,137) (39,803)
Purchase of mortgage-backed securities in trading portfolio - (3,589)
Principal repayment on mortgage backed securities 3,023 1,225
Purchase of FHLB stock (4,852) (251)
Net increase in loans (210,283) (5,948)
Investment in unconsolidated subsidiaries (10,817) -
Purchase of premises and equipment, net (1,512) (777)
Proceeds from sale of ORE 1,064 844
(Investments) disposals in other real estate owned (net) (555) 21
--------- --------
Net cash provided by (used in) investing activities (215,601) 20,169
--------- --------
FINANCING ACTIVITIES:
Net increase (decrease) in deposits 57,415 637
Net increase (decrease) in repurchase agreements 4,986 787
Reduction of minority interest in FFO - 224
Proceeds from FHLB Advances, net 225,000 2,000
Proceeds from issuance of common stock 162 -
Dividends on perpetual preferred stock (67) (66)
--------- --------
Net cash provided by (used in) financing activities 287,496 3,582
--------- --------
Net increase (decrease) in cash and
cash equivalents 64,208 25,854
Cash and cash equivalents, beginning of period 79,669 53,892
--------- --------
Cash and cash equivalents, end of period $ 143,877 $ 79,746
========= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for-
Interest $ 28,162 $ 11,819
Income taxes 1,921 531
</TABLE>
The accompanying notes are an integral part of these consolidated statements
4
<PAGE> 7
REPUBLIC BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation and Organization
In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the financial
position of the Company as of March 31, 1998 and December 31, 1997, and the
results of operations and cash flows, for the three month periods ended March
31, 1998 and 1997. 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.
The consolidated financial statements of Republic Bancshares, Inc. (the
Company) include the accounts of the Company, RBI Capital Trust I ("RBI"), and
Republic Bank (the "Bank") and the Bank's wholly-owned subsidiaries, Republic
Insurance Agency, Inc., RBREO, Inc., Tampa Bay Equities, Inc., and VQH
Development, Inc. The consolidated financial statements have been restated for
the acquisition of FFO Financial Group, Inc., as discussed below. All
significant intercompany accounts and transactions have been eliminated. The
Company's primary source of income is from its banking subsidiary which
operates 46 branches throughout west central Florida. The Bank's primary source
of revenue is derived from net interest income on loans and investments and
income from mortgage banking activities.
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, 1997, filed with the Securities and
Exchange Commission ("SEC") on Form 10-K. The results for the three months
ended March 31, 1998, are not necessarily indicative of the results to be
expected for the fiscal year ending December 31, 1998.
Recent Accounting Developments
Reporting Comprehensive Income
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income,"
which was effective for the Company's fiscal year beginning January 1, 1998.
SFAS 130 establishes standards for reporting and display of comprehensive
income, its components and accumulated balances in a financial statement.
Comprehensive income is defined to include those revenues, expenses, gains and
losses of a normal, recurring nature, as well as items which are nonrecurring,
unusual and infrequent. The reconciliation of the Company's net income to
comprehensive income, as defined in SFAS 130, for the three months ended March
31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------------
1998 1997
----------- ------------
<S> <C> <C>
Net Income $ 3,071 $ 2,001
Unrealized gains on securities:
Unrealized holding gains, net of tax effect, during period (416) 584
Less reclassification adjustment for gains realized in net income (222) 96
------------ -----------
Net unrealized gains (638) 680
------------ -----------
Comprehensive income $ 2,433 $ 2,681
============ ===========
</TABLE>
5
<PAGE> 8
Disclosures About Business Segments
Also in June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information," which was effective for the Company's
fiscal year beginning January 1, 1998. 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 statements. The Company's commercial
banking and mortgage banking activities constitute operating segments for which
the Company has provided additional disclosure regarding their respective
assets, revenues, profit or loss and other operating data.
Accounting for Costs of Computer Software for Internal Use
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 provides
guidance for capitalizing and expensing the costs of somputer software
developed or obtained for internal use. SOP 98-1 is effective for financial
statements for fiscal years beginning after December 15, 1998. Management
believes the effect of adopting SOP 98-1 would not have a material impact on
the accompanying unconsolidated financial statements.
2. BUSINESS COMBINATIONS
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
controlling 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 Company
issued 1,668,370 shares of common stock to the controlling interest and 826,709
shares of common stock to the minority interest.
The pooling of interests method of accounting, which is used to account for the
controlling interest in the FFO merger, requires the restatement of financial
results for all prior periods presented. The Company's previously reported
components of consolidated income and the amounts reflected in the accompanying
consolidated statements of operations for the three months ended March 31, 1997
and March 31, 1996, are as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------
1997 1996
---------- ---------
<S> <C> <C>
Net Interest Income:
As previously reported:
Republic Bancshares, Inc. $ 9,101 $ 7,935
F.F.O. Financial Group, Inc. 2,634 2,326
---------- ---------
Combined as restated $ 11,735 $ 9,661
========== =========
Net Income:
As previously reported:
Republic Bancshares, Inc. $ 1,603 $ 1,205
F.F.O. Financial Group, Inc. 586 54
Minority interest increase (decrease) (188) (17)
---------- ---------
Combined as restated $ 2,001 $ 1,242
========== =========
</TABLE>
6
<PAGE> 9
3. LOANS AND LOANS HELD FOR SALE:
Loans at March 31, 1998, and December 31, 1997, are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------ ------
<S> <C> <C>
Real estate mortgage loans:
One-to-four family residential $ 640,616 $ 666,525
Multifamily residential 88,344 83,302
Commercial real estate 274,206 265,153
Construction/land development 61,108 50,203
Home equity loans 28,119 21,314
Commercial loans 39,965 36,264
Consumer loans 25,610 26,527
Other loans 283 442
----------- ----------
Total gross portfolio loans 1,158,251 1,149,731
Less-allowance for loan losses (20,557) (20,776)
----------- ----------
Total loans held for portfolio 1,137,694 1,128,955
Residential loans held for sale 311,749 151,404
----------- ---------
Total loans $ 1,447,491 $1,280,359
=========== ==========
</TABLE>
Mortgage loans serviced for others as of March 31, 1998 and December 31, 1997
were $482 million and $370 million, respectively. Loans on which interest was
not being accrued totaled approximately $25.9 million and $25 million,
respectively. Loans past due 90 days or more and still accruing interest at
March 31, 1998 and December 31, 1997 totaled approximately $2.2 million and
$196,000, respectively.
4. 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 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.
The allowance for loan losses as of March 31, 1998, was comprised of (i) $ 13.6
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 March 31, 1998, 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 $4.4 million. Changes in the allowance for loan losses were as
follows (in thousands):
<TABLE>
<CAPTION>
For the Three Months Ended Mar. 31,
----------------------------------
1998 1997
---- ----
<S> <C> <C>
Balance, beginning of period $ 20,776 $ 18,747
Provision for possible loan losses 493 1,138
Discount on purchased loans allocated
to (from) allowance for loan losses - (642)
Loans charged off (833) (225)
Recoveries of loans charged off 121 69
-------- ---------
Balance, end of period $ 20,557 $ 19,087
======== =========
</TABLE>
7
<PAGE> 10
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.
The largest piece included in the ORE balance is a tract of land carried at
$2.7 million acquired through foreclosure in 1988 that has partially been
developed as a shopping center site. Federal law and regulations require the
Company to dispose of this tract by December 17, 1998. Management believes the
carrying value of the unsold remainder of the parcel approximates the amount
which could be realized upon final sale to an end-user but the proceeds from
sale to other than an end-user are uncertain.
5. BUSINESS SEGMENT INFORMATION
The Company's operations are divided into two business segments; commercial
banking and mortgage banking. Commercial banking activities include the
Company's lending for portfolio purposes, deposit gathering through the retail
branch network, investment and liquidity management. Mortgage banking
activities, which operate through Flagship, a separate division of the Bank,
include originating and purchasing mortgage loans for sale or securitization.
The Bank provides support for its mortgage banking division in areas such as
secondary marketing, data processing and financial management. All funding for
the mortgage banking division is provided through the Bank. The following are
the business segment results of operation for the three months ended March 31,
1998 and 1997. The Company has elected to report its business segments without
allocation of income taxes and minority interests.
BUSINESS SEGMENT DATA
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
($ IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997
----------------------------------- ----------------------------------
Commercial Mortgage Company Commercial Mortgage Company
Banking Banking Total Banking Banking Total
----------- --------- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
TOTAL ASSETS (AT PERIOD-END) $1,529,394 $311,749 $1,841,143 $1,186,143 $44,774 $1,231,456
OPERATING DATA:
---------------
Interest income 26,305 7,473 33,778 22,852 1,025 23,877
Interest expense 13,424 3,691 17,115 11,665 477 12,142
---------- -------- ---------- ---------- ------- ----------
Net interest income 12,881 3,782 16,663 11,187 548 11,735
Loan loss provision 493 - 493 1,138 - 1,138
---------- -------- ---------- ---------- ------- ----------
Net interest income after
loan loss provision 12,388 3,782 16,170 10,049 548 10,597
Other noninterest income 2,691 9,838 12,529 2,717 986 3,703
General and administrative
(G & A) expenses 10,061 12,862 22,923 9,028 1,454 10,482
Merger expenses 9 - 9 - - -
Provision for losses (recoveries)
on ORE (80) - (80) 170 - 170
Other noninterest expense 22 - 22 21 - 21
Amort. of goodwill & premium
on deposits 159 - 159 123 - 123
---------- -------- ---------- ---------- ------- ----------
Net inome (loss) before income
before taxes & minority interest $ 4,908 $ 758 5,666 $ 3,424 $ 80 3,504
---------- -------- ---------- -------
Income tax (expense) (2,175) (1,315)
Minority interest in income from
subsidiary trust (420) --
Minority interest in FFO - (188)
---------- ----------
Net income $ 3,071 $ 2,001
========== ==========
</TABLE>
8
<PAGE> 11
Commercial Banking Activities
Income from commercial banking activities in the first quarter of 1998 was $4.9
million compared to $3.4 million a year ago, an increase of $1.5 million or
30.2%. Net interest income from commercial banking activities was $12.9
million for the first three months of the year compared to $11.2 million for
the first quarter of 1997. Other improvements came from growth in the loan
portfolio and earnings on the assets acquired in the Firstate Acquisition. G&A
expenses in this business segment increased by $1.0 million over the same
period last year. However, the ratio of G&A expenses to average assets
assigned to commercial banking activities was 2.34% for the quarter, a
reduction of 60 basis points from 2.94% one year ago. This reduction resulted
primarily from the reduction of expenses achieved through the FFO merger. G&A
expenses attributable to the branches acquired from FFO amounted to $1.1
million in the first quarter of 1998. FFO's G&A expenses in the first quarter
of 1997 were $2.3 million.
Mortgage Banking Activities
Pre-tax net income from mortgage banking activities was $758,000 for the first
quarter of 1998, which included a $695,000 charge to G&A expenses to record
compensation expense on stock options issued to management of the mortgage
banking division. For the same period last year, pre-tax income from mortgage
banking activities was $80,000. The improvement was largely the result of the
introduction of the High LTV Loan product, which accounted for income of $2.2
million during the first quarter of 1998 compared to $310,000 for the same
period last year. Loan originations of High LTV Loans were $120.9 million in
1998, while loan sales of High LTV Loans were $95.6 million during the same
period. A $1.5 million net loss was incurred on first lien residential loans in
the first quarter of 1998, compared to a $230,000 net loss for the same period
last year. Originations of first lien loans held for sale amounted to $202.4
million, while sales from this category totaled $91.3 million.
6. MARKET RISK
The market risk inherent in the Company's market sensitive instruments is the
potential loss arising from changes in interest rates and the changes of prices
of marketable equity securities. At March 31, 1998, the Company did not use
derivitive financial instruments to manage its market risk.
The Company manages its interest rate market risk on the loans held for sale and
its estimated future commitments to originate and close mortgage loans for
borrowers at fixed prices ("Locked Loans") through hedging techniques which
include listed options and fixed price forward delivery commitments ("Forward
Commitments") to sell mortgage-backed securities or specific whole loans to
investors on a mandatory or best efforts basis. The Company records the
inventory of loans held for sale at the lower of cost or market on an aggregate
basis after considering any market value changes in the loans held for sale,
Locked loans, and Forward Commitments.
Currently, all investments in the Company's portfolio are identified as
securities available for sale or as trading assets. Securities
available-for-sale, which are those securities that may be sold prior to
maturity as part of managing the market risk or in response to other factors,
are carried at fair value with any valuation adjustment reported in a separate
component of stockholders' equity, net of tax. Trading securities include
mortgage backed securities resulting from the securitization of residential and
High LTV loans, the resulting residual interest in cash flows from those
securitizations, where applicable, and the excess spread on interest only strips
receivable. Trading securities are carried at market value with any unrealized
gains or losses included in the statement of operations under "Gain on sale of
securities, net."
There have been no material changes in the market risk inherent in the Company's
market sensitive instruments during the three month interim period ending March
31, 1998.
7. PROPOSED MERGERS AND ACQUISITIONS (unaudited)
NationsBank and Barnett Branches
In December 1997, the Company entered into two purchase and assumption
agreements with NationsBank Corporation ("NationsBank"), to acquire three
branches of NationsBank's subsidiary bank, NationsBank, N.A. ("NationsBank
Subsidiary"), and five branches of Barnett Bank, N.A. ("Barnett Subsidiary"), a
wholly-owned subsidiary of Barnett Banks, Inc ("BBI"), including the loans and
other assets recorded at those branches, and to assume the deposits and other
liabilities assigned to such branches for a purchase price of approximately
$32.7 million, based on the most recent data available (the "NationsBank
Subsidiary Acquisition"). The first purchase and assumption agreement (the
"Florida Agreement") is for three NationsBank Subsidiary and four Barnett
Subsidiary branches located throughout Florida (the "Florida Branches"),
consisting of three in Monroe County (Key West, Marathon and Plantation Key),
two in Marion County (Ocala and Silver Springs), one in Columbia County (Lake
City) and one in Suwannee County (Live Oak). The second purchase and
assumption agreement (the "Georgia Agreement" and with the Florida Agreement,
collectively, the "NationsBank Subsidiary Agreements") is for a Barnett
Subsidiary branch located in Glynn County, Georgia (the "Georgia Branch" and
with the "Florida Branches," collectively, the NationsBank Subsidiary
Branches"). At February
9
<PAGE> 12
28, 1998, the Florida Branches had deposit liabilities of $231.9 million and
loans of $151.8 million, and the Georgia Branch had deposit liabilities of $27.9
million and loans of $14.4 million (all data unaudited). The NationsBank
Subsidiary Acquisition will be accounted for using purchase accounting rules.
Bankers Savings Bank
In February 1998, the Company and Bankers Savings Bank, Inc. ("BSB"), Coral
Gables, Florida, entered into a definitive agreement (the "BSB Agreement") for
the merger of BSB into the Bank by the Company (the "BSB Acquisition") at an
estimated exchange ratio of .44 of a share of the Company's Common Stock for
each share of BSB's Common Stock (based on data at March 31, 1998), subject to
certain changes in the price of the Company's Common Stock, among other
factors. BSB has two branches in Dade County and, as of March 31, 1998, had
total assets of $69.7 million, total loans of $50.9 million and total deposits
of $62.8 million (all data unaudited). It is anticipated that the BSB
Acquisition will be accounted for as a pooling of interests. The BSB
Acquisition may be terminated by either BSB or the Company if it is not
consummated by November 1, 1998.
Dime Savings Bank
In March 1998, the Company entered into an agreement with Dime Savings Bank,
F.S.B. (The "DSB Agreement" and "DSB", respectively), to acquire a DSB branch
in Deerfield Beach, Florida (Broward County) and to assume the deposits and
other liabilities of approximately $202.9 million, assume the leasehold on the
branch property and purchase the personal property and equipment of the branch
for $100,000 based on data as of March 31, 1998 (unaudited). The transaction
will be accounted for using purchase accounting rules and must be consummated
within 30 days of receiving regulatory approval.
Lochaven Savings
On April 21, 1998, the Company entered into a letter of intent with Lochaven
Federal Savings and Loan Association, Orlando, Florida, providing for the
merger of Lochaven with and into Republic Bank. Lochaven has one branch in
Orange County, Florida, and as of March 31, 1998, had total assets of $59.7
million, total loans of $52.6 million and total deposits of $56.5 million.
Under the terms of the letter of intent, stockholders of Lochaven are to
receive 169,804 shares of Common Stock. It is anticipated that the Lochaven
acquisition will be accounted for as a pooling of interests. The transaction
may be terminated by either Lochaven or the Company if it is not consummated by
December 1, 1998.
10
<PAGE> 13
SELECTED QUARTERLY FINANCIAL AND OTHER DATA
EIGHT CONSECUTIVE QUARTERS (UNAUDITED)
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Quarters Ending
-------------------------------------------------------
Mar. 1998 Dec. 1997 Sept. 1997 June 1997
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
OPERATING DATA:
Interest income $ 33,778 $ 29,771 $ 29,464 $ 25,344
Interest expense 17,115 15,239 14,721 12,821
---------- ---------- ---------- ----------
Net interest income 16,663 14,532 14,743 12,523
Loan loss provision 493 494 495 501
---------- ---------- ---------- ----------
Net interest income after loan loss provision 16,170 14,038 14,248 12,022
Other noninterest income 12,529 9,505 9,115 2,708
General and administrative ("G&A") expenses 22,923 18,720 16,114 12,168
Other noninterest expense 110 439 1,298 360
---------- ---------- ---------- ----------
Net income before income taxes & minority interest 5,666 4,384 5,951 2,202
Income tax provision (2,175) (1,701) (2,217) (863)
Minority interest in income from subsidiary trust (420) (417) (284) -
Minority interest in FFO - - (259) (227)
---------- ---------- ---------- ----------
Net income $ 3,071 $ 2,266 $ 3,191 $ 1,112
========== ========== ========== ==========
PER SHARE DATA:
Earnings per share - diluted $ .39 $ .29 $ .45 $ .17
========== ========== ========== ==========
Weighted average shares outstanding - diluted 7,968,984 7,953,978 7,188,255 7,017,181
========= ========== ========== ==========
Earnings per share - basic $ .44 $ .33 $ .54 $ .19
========== ========== ========== ==========
Weighted average shares outstanding - basic 7,043,024 6,832,737 5, 963,108 5,852,861
========== ========== ========== ==========
BALANCE SHEET DATA (AT PERIOD-END):
Total assets $1,841,143 $1,552,405 $1,469,352 $1,321,573
Investment & mortgage backed securities 99,341 108,593 96,982 140,899
Loans held for sale 311,749 151,404 94,896 72,487
Portfolio loans, net of unearned income 1,158,251 1,149,731 1,106,728 995,864
Allowance for loan losses 20,557 20,776 20,417 19,328
Goodwill & premium on deposits 4,679 4,855 4,872 397
Deposits 1,418,555 1,361,312 1,289,100 1,165,042
Stockholders' equity 98,281 95,531 87,593 71,254
Book value per share (dollars) 12.60 12.27 11.77 10.79
SELECTED FINANCIAL RATIOS:
Return on average assets .75% .61% .89% .35%
Return on average equity 13.60 10.24 17.53 6.33
Equity to assets 5.34 6.15 5.96 5.39
Equity and minority interest in preferred
subsidiary to assets 6.90 8.01 7.92 -
Portfolio loans/deposit ratio 81.65 84.46 85.85 85.48
Net interest spread 3.85 3.71 4.03 3.52
Net interest margin 4.24 4.18 4.41 4.10
G&A expense to average assets (1) 2.84 3.24 3.00 3.29
G&A efficiency ratio (2) 64.61 74.69 61.98 73.79
Nonperforming loans to portfolio loans 2.51 2.25 2.01 1.99
Nonperforming assets to total assets 2.03 2.20 2.05 2.08
Loan loss allowance to portfolio loans (1) 1.77 1.81 1.78 1.94
Loan loss allowance to nonperforming loans (2)
Originated portfolio 75.32 102.83 83.75 90.96
July 1997 Purchase 35.35 31.74 31.12 -
March 1995 Purchase 459.97 373.91 504.89 441.82
CrossLand portfolio 71.39 421.88 81.30 106.60
Other purchased portfolios 24.01 18.41 128.42 46.67
Total 70.62 80.41 91.64 97.32
OTHER DATA (AT PERIOD-END):
Number of branch banking offices 46 46 45 45
Number of full-time equivalent employees 1,256 1,045 958 856
</TABLE>
(1) Commercial banking segment only
(2) See "Note 4.- Allowance For Losses" for a discussion of the
allocation and availability of loan loss reserves among portfolios of
loans within the Bank.
11
<PAGE> 14
SELECTED QUARTERLY FINANCIAL AND OTHER DATA
EIGHT CONSECUTIVE QUARTERS (UNAUDITED)
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Quarters Ending
---------------------------------------------------------
March 1997 Dec. 1996 Sept. 1996 June 1996
---------- --------- ----------- ---------
<S> <C> <C> <C> <C>
OPERATING DATA:
Interest income $ 23,877 $ 24,216 $ 22,065 $ 21,335
Interest expense 12,142 11,839 11,279 10,764
----------- ---------- ---------- ----------
Net interest income 11,735 12,377 10,786 10,571
Loan loss provision 1,138 1,075 457 450
----------- ---------- ---------- ----------
Net interest income after loan loss provision 10,597 11,302 10,329 10,121
Noninterest income 3,703 2,604 2,841 1,523
General and administrative ("G&A") expenses 10,482 10,594 9,174 8,743
Other noninterest expense 314 (1,331) 5,106 5
----------- ---------- ---------- ----------
Net income (loss) before income taxes & minority interest 3,504 4,643 (1,110) 2,896
Income tax (provision) benefit (1,315) (1,651) 451 (1,104)
Minority interest in FFO (net of tax) (188) (467) 144 (165)
----------- ---------- ---------- ----------
Net income (loss) $ 2,001 $ 2,525 $ (515) $ 1,627
=========== ========== ========== ==========
PER SHARE DATA:
Earnings per share - diluted $ .30 $ .38 $ (.08) $ .25
=========== ========== ========== ==========
Weighted average shares outstanding - diluted 6,987,074 6,641,203 6,622,493 6,627,235
=========== ========== ========== ==========
Earnings per share - basic $ . 34 $ .43 $ (.09) $ .28
=========== ========== ========== ==========
Weighted average shares outstanding - basic 5,854,414 5,856,511 5,856,952 5,856,952
=========== ========== ========== ==========
BALANCE SHEET DATA (AT PERIOD-END):
Total assets $ 1,231,456 $1,224,357 $1,163,506 $1,142,060
Investment & mortgage backed securities 134,781 161,357 113,446 116,045
Loans held for sale 44,774 47,052 32,444 30,293
Portfolio loans, net of unearned income 928,973 920,323 905,599 867,326
Allowance for loan losses 19,088 18,747 19,858 19,829
Goodwill & premium on deposits 404 527 650 772
Deposits 1,118,710 1,114,907 1,049,998 1,028,692
Stockholders' equity 69,694 68,178 65,804 66,241
Book value per share (dollars) 10.55 10.32 9.96 10.03
SELECTED FINANCIAL RATIOS:
Return on average assets .66% .84% (.18)% .58%
Return on average equity 11.76 14.95 (3.09) 9.96
Equity to assets 5.66 5.57 5.66 5.80
Portfolio loans/deposit ratio 83.04 82.55 86.25 84.31
Net interest spread 3.52 4.12 3.50 3.46
Net interest margin 4.10 4.40 3.65 3.56
G&A expense to average assets (1) 3.06 3.25 3.05 3.09
G&A efficiency ratio (1) 64.93 65.34 65.80 72.45
Nonperforming loans to portfolio loans 2.19 2.10 2.43 2.30
Nonperforming assets to total assets 2.36 2.26 2.78 2.73
Loan loss allowance to loans (2) 2.05 2.04 2.19 2.29
Loan loss allowance to nonperforming loans: (2)
Originated portfolio 84.74 74.00 65.76 90.06
July 1997 Purchase - - - -
March 1995 purchase 551.88 488.78 689.66 552.18
Crossland portfolio 104.82 126.12 81.80 53.22
Other purchased portfolios 45.60 89.80 59.97 39.79
Total portfolio loans 94.62 96.93 90.42 99.41
OTHER DATA (AT PERIOD-END):
Number of branches 43 42 42 42
Number of full-time equivalent employees 802 785 749 692
</TABLE>
(1) Commercial Banking segment only
(2) See "Note 4.- Allowance For Losses" for a discussion of the allocation
and availability of loan loss reserves among portfolios of loans within
the Bank.
12
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
COMPARISON OF BALANCE SHEETS AT MARCH 31, 1998 AND DECEMBER 31, 1997
Overview
Total assets were $1.8 billion at March 31, 1998, and $1.6 billion at December
31, 1997, an increase of $288.7 million or 18.60%. Total portfolio loans
increased $8.5 million from the prior year-end to $1.2 billion at March 31,
1998, while loans held for sale increased $160.3 million. Commercial real
estate and multi-family residential loans increased by $14.1 million,
construction and land development loans increased $10.9 million, commercial
(business) loans increased by $3.5 million, and consumer loans, including
retail home equity loans, increased by $5.9 million. This was partially offset
by a $25.9 million decline in residential loans.
Investment and Mortgage-Backed Securities
Investment and mortgage-backed securities, consisting of U.S. Treasury and
federal agency securities, were $59.7 million at March 31, 1998 compared to
$71.5 million at December 31, 1997 an increase of $11.8 million. The Company
has recorded all its purchased investment and mortgage-backed securities as of
March 31, 1998 as "available for sale" and all mortgage-backed securities
resulting from securitization of the Company's loans as trading securities at
their period-end market value. The Company recorded $222,000 in net gains on
the sales of $25.9 million in investments and mortgage-backed securities.
Federal funds sold, all on an overnight basis, increased by $72.0 million from
$33.0 million at the prior year-end to $105.0 million at March 31, 1998.
Loans
Total loans held for portfolio increased $6.6 million from $1.149 billion at
the prior year-end to $1.156 billion at March 31, 1998. One-to-four family
residential loans decreased by $25.9 million, primarily as a result of the
$22.0 million decline in loan originations. Commercial real estate and
multifamily residential loans increased $14.1 million to $362.6 million,
consumer loans increased $5.9 million, and commercial (business) loans
increased $3.5 million.
Allowance for Loan Losses
The allowance for loan losses amounted to $20.6 million at March 31, 1998,
(1.77% of portfolio loans) compared with $20.8 million at December 31, 1997. At
March 31, 1998, the allowance for loan losses included $13.6 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"), $1.2 million allocated
to the July 1997 purchase, $1.0 million allocated to loans purchased from
CrossLand 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 1998 included provisions for
loan losses of $493,000 (based generally on the growth in the loan portfolio)
and loan charge-offs (net of recoveries) of $712,000.
Nonperforming Assets
Nonperforming assets amounted to $37.3 million or 2.03% of total assets at
March 31, 1998, compared with $34.2 million or 2.20% of total assets at
December 31, 1997. Nonperforming loans totaled $29.1 million at March 31,
1998, an increase of $3.3 million from the prior year-end total of $25.8
million. This increase was primarily the result of a $2.1 million increase in
1-4 originated loans. This was partially offset by a $1.3 million reduction in
commercial business loans. Commercial real estate, acquired in the FFO
merger, increased by $1.2 million from the end of the prior year to $4.2
million at the end of the first quarter.
13
<PAGE> 16
Deposits
Total deposits were $1.42 billion at March 31, 1998, compared to $1.36 billion
at the prior year-end, an increase of $57.2 million. This included a $35.7
million increase in certificates of deposit as the Company maintained a more
competitive rate strategy during the first three months of the year. Passbook
Gold balances increased by $21.0 million while regular savings accounts
declined by $1.6 million.
Stockholders' Equity
Stockholders' equity was $98.3 million at March 31, 1998, or 5.34% of total
assets, compared to $95.5 million or 6.15% of total assets at December 31,
1997. At March 31, 1998, the Bank's Tier 1 ("Leverage") Capital ratio was
6.70%, its Tier 1 Risk-Based Capital ratio was 9.46%, and its Total Risk-Based
Capital ratio was 10.72%, all in excess of minimum FDIC capital guidelines for
an institution to be considered a "well-capitalized" bank. At December 31,
1997, the Company's Tier 1 ("Leverage") ratio, Tier 1 Risk-Based Capital ratio
and total Risk-Based Capital ratio was 6.58%, 9.30%, and 10.71%, respectively.
Although the Company's 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.
Republic SPC1 Corp.
On March 31, 1998, the Company sold on a non-recourse basis the $95.2 million of
Repo Loans to SPC, a wholly owned, second-tier subsidiary of the Company. The
Repo Loans were sold on a whole loan basis with the Company recording a gain on
sale and retaining servicing rights. SPC purchased the loans utilizing the
Company's $10.7 million capital contribution to SPC and the proceeds of a
Repurchase Agreement simultaneously entered into between SPC and a third-party.
The capital contribution will be treated for accounting purposes by the Company
as an investment in an unconsolidated subsidiary. The Repurchase Agreement
provides for SPC to repurchase the Repo Loans within a period of 90 days.
14
<PAGE> 17
COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998
AND 1997
Overview
Net income for the three months ended March 31, 1998 was $3.1 million or $0.39
per share compared with $2.0 million or $0.30 per share for the first quarter
of 1997. Return on average assets for the first quarter of 1998 was 0.75%,
while return on average equity was 13.60%. Results for the first quarter of
1998 include $678,000 improvement in net income from mortgage banking
activities and $1.5 million in income from commercial banking activities.
Analysis of Net Interest Income (see table on page 16)
Net interest income for the first quarter of 1998 was $16.7 million compared
with $11.7 million for the same period last year. This $4.9 million or 42.0%
increase was the result of $1.0 million from an improved net interest spread
and $3.8 million in additional income from balance sheet growth. Interest
income was $33.8 million for 1998, an increase of $9.9 million over the same
period in 1997 while interest expense increased by $4.9 million. Average asset
yield increased 17 basis points from 8.51% for the first quarter of 1997 to
8.68% for 1998. The average cost of interest-bearing liabilities declined 16
basis points from 4.99% to 4.83% primarily as a result of the $6.0 million
subordinated debt issued which was converted to common stock during the fourth
quarter of 1997. As a result, net interest spread increased 33 basis points
from 3.52% for 1997 to 3.85% for 1998 and net interest margin, which includes
the benefit of noninterest bearing funds, increased 14 basis points from 4.10%
for 1997 to 4.24% for 1998.
Noninterest Income
Noninterest income for the first quarter of 1998 was $12.5 million compared
with $3.7 million for the same period of 1997, an increase of $8.8 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 mortgage servicing rights net of direct costs of production, which
increased $9.1 million, while gain on sale of portfolio loans decreased $1.3
million compared to the same period in 1997.
The following table reflects the components of noninterest income for the three
months ended March 31, 1998, and 1997 (in thousands):
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
-------------------------------------------------
Increase
1998 1997 (Decrease)
-------- --------- -------------
<S> <C> <C> <C>
Income from mortgage banking operations $ 9,985 $ 898 $ 9,087
Service charges on deposit accounts 799 745 54
Loan fee income 680 331 349
Merchant charge card processing fees 74 62 12
Gains on sales of portfolio loans, net - 1,242 (1,242)
Unrealized gains on loans held for sale - 84 (84)
Gain on sale of securities, net 333 42 291
Net trading account losses (111) (138) 27
Generations Gold fee income 195 100 95
Other income 574 337 237
-------- -------- -------
Total noninterest income $ 12,529 $ 3,703 $ 8,826
======== ======= =======
</TABLE>
15
<PAGE> 18
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 March 31, 1998 and 1997 (in thousands):
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------------------------------------------------
1998 1997
------------------------------------ ---------------------------------------
Average Average Average Average
Summary of Average Rates Balance Interest Rate Balance Interest Rate
- ------------------------ ------- -------- ------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Loans, net $1,417,066 $ 31,204 8.84% $ 936,733 $ 21,097 8.95%
Investment securities 29,860 433 5.87 38,719 583 6.09
Mortgage backed securities 36,858 625 6.78 74,640 1,290 6.91
Trading securities 37,466 910 9.72 664 - -
Interest bearing deposits
in banks 1,082 17 6.12 4,600 46 4.14
FHLB stock 9,281 166 7.25 6,927 130 7.58
Federal funds sold 30,936 423 5.87 53,311 731 5.48
----------- --------- ----------- ----------
Total interest-earning assets 1,562,549 33,778 8.68 1,115,594 23,877 8.51
Non interest-earning assets 86,690 59,146
----------- -----------
Total assets $1,649,239 $1,174,740
========== ==========
Interest-bearing liabilities:
Interest checking $ 129,631 $ 327 1.02 $ 88,460 309 1.42
Savings 52,464 254 1.97 27,078 261 3.90
Passbook Gold 251,689 3,058 4.93 222,998 2,649 4.86
Money market 31,428 147 1.89 32,364 165 2.07
Time deposits 814,072 11,127 5.54 591,482 8,441 5.79
Subordinated debt - - .- 6,000 108 7.27
FHLB advances 132,889 1,900 5.80 3,422 10 1.17
Other borrowings 23,527 302 5.21 16,161 199 5.00
----------- ---------- ----------- ----------
Total interest-bearing
liabilities 1,435,700 17,115 4.83 985,965 12,142 4.99
--------- ---------
Non interest-bearing liabilities 121,982 122,029
Stockholders' equity 91,557 64,746
----------- -----------
Total liabilities and equity $1,649,239 $1,174,740
========== ==========
Net interest income/net
interest spread $ 16,663 3.85% $11,735 3.52%
========= ==== ======= ====
Net interest margin 4.24% 4.10%
==== ====
</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 $ 10,227 $ (120) $10,107
Investment securities (130) (20) (150)
Mortgage backed securities (641) (24) (665)
Trading Securities - 910 910
Interest bearing deposits in banks (46) 17 (29)
FHLB stock 42 (6) 36
Federal funds sold (306) (2) (308)
---------- ------ -------
Total change in interest income 9,146 755 9,901
Interest-bearing liabilities:
Interest checking 119 (101) 18
Savings 165 (172) (7)
Passbook Gold 373 36 409
Money market (4) (14) (18)
Time deposits 2,946 (260) 2,686
Subordinated debt (54) (54) (108)
FHLB advances 1,723 167 1,890
Other borrowings 92 11 103
---------- ------ -------
Total change in interest expense 5,360 (387) 4,973
---------- ------ -------
Increase (decrease) in net interest income $ 3,786 $1,142 $ 4,928
========== ====== =======
</TABLE>
16
<PAGE> 19
Noninterest Expense
General and administrative ("G & A") expenses for the first quarter of 1998
were $22.9 million compared with $10.5 million in 1997, an increase of $12.4
million. Total noninterest expenses, which include G & A expense, were $23.0
million for the first quarter of 1998 compared with $10.8 million for the same
period last year, an increase of $12.2 million. Increases occurred in
substantially all areas of expense primarily as a result of the costs
associated with the increased number of employees and advertising and marketing
attributable to the company's growth.
The following table reflects the components of noninterest expense for the
three months ended March 31, 1998 and 1997 (in thousands):
<TABLE>
<CAPTION>
For the three Months
Ended March 31,
--------------------------------------------------
Increase
1998 1997 (Decrease)
------ ------ ----------
<S> <C> <C> <C>
Salaries and benefits $ 9,398 $ 5,362 $ 4,036
Net occupancy expense 2,509 1,740 769
Advertising 4,351 345 4,006
Data processing fees 708 570 138
FDIC and state assessments 217 210 7
Telephone expense 465 428 37
Legal & professional 637 326 311
Postage and supplies 3,717 336 3,381
Other operating expense 921 1,165 (244)
-------- -------- --------
Total G & A expenses 22,923 10,482 12,441
Merger expenses 9 - 9
Provision for losses on ORE (80) 170 (250)
ORE expense, net of ORE income 22 21 1
Amortization of premium on deposits 159 123 36
--------- --------- ----------
Total noninterest expense $23,033 $10,796 $12,237
======= ======= =======
</TABLE>
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
b. Reports on Form 8-K
There were no reports on Form 8-K filed during the three months
ended March 31, 1998.
17
<PAGE> 20
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: 05/15/98 By: /s/ John W. Sapanski
---------------------------------
John W. Sapanski
Chairman and Chief Executive
Officer (principal executive
officer)
Date: 05/15/98 By: /s/ William R. Falzone
---------------------------------
William R. Falzone
Treasurer (principal financial
and accounting officer)
18
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 36,713
<INT-BEARING-DEPOSITS> 2,164
<FED-FUNDS-SOLD> 105,000
<TRADING-ASSETS> 39,630
<INVESTMENTS-HELD-FOR-SALE> 59,711
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 1,468,048
<ALLOWANCE> 20,557
<TOTAL-ASSETS> 1,841,143
<DEPOSITS> 1,418,555
<SHORT-TERM> 254,640
<LIABILITIES-OTHER> 10,917
<LONG-TERM> 0
28,750
1,500
<COMMON> 14,099
<OTHER-SE> 82,682
<TOTAL-LIABILITIES-AND-EQUITY> 1,841,143
<INTEREST-LOAN> 31,204
<INTEREST-INVEST> 2,574
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 33,778
<INTEREST-DEPOSIT> 14,913
<INTEREST-EXPENSE> 17,115
<INTEREST-INCOME-NET> 16,663
<LOAN-LOSSES> 493
<SECURITIES-GAINS> 222
<EXPENSE-OTHER> 23,033
<INCOME-PRETAX> 5,666
<INCOME-PRE-EXTRAORDINARY> 5,666
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,071
<EPS-PRIMARY> .44
<EPS-DILUTED> .39
<YIELD-ACTUAL> 884
<LOANS-NON> 26,866
<LOANS-PAST> 2,244
<LOANS-TROUBLED> 1,015
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 20,776
<CHARGE-OFFS> 833
<RECOVERIES> 121
<ALLOWANCE-CLOSE> 20,557
<ALLOWANCE-DOMESTIC> 20,557
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 20,557
</TABLE>
