<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 JUNE 30, 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:
<TABLE>
<S> <C>
COMMON STOCK PAR VALUE $2.00 PER SHARE 9,724,325 SHARES OUTSTANDING AT JUNE 30, 1998
</TABLE>
<PAGE> 2
REPUBLIC BANCSHARES, INC.
INDEX
PART I. FINANCIAL INFORMATION (all financial information for prior periods has
been restated for the merger with F.F.O. Financial Group, Inc.)
ITEM 1. FINANCIAL STATEMENT PAGE
Consolidated Balance Sheets - June 30, 1998 (unaudited)
and December 31, 1997..............................................1
Consolidated Statements of Operations -
Three month periods and six month periods
ended June 30, 1998 and 1997 (all unaudited).......................2
Consolidated Statements of Stockholders Equity -
Year ended December 31, 1997 and
Six months ended June 30, 1998 (unaudited).........................3
Consolidated Statements of Cash Flows -
Three month and six month periods
ended June 30, 1998 and 1997 (all unaudited).......................4
Notes to Consolidated Financial Statement (unaudited)...............5
Selected Quarterly Financial and Other Data (unaudited)............13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS..........................................15
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS..................................................23
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...................................23
SIGNATURES..................................................................24
<PAGE> 3
REPUBLIC BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS - JUNE 30, 1998 AND DECEMBER 31, 1997
($ IN THOUSANDS, EXCEPT PAR VALUES)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- ----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and due from banks $ 39,095 $ 45,998
Interest bearing deposits in banks 29,356 671
Federal funds sold 73,500 33,000
Investment securities:
Available for sale 36,854 16,080
Mortgage-backed securities:
Available for sale 12,296 55,467
Trading 60,610 36,189
FHLB stock 10,247 8,148
Loans held for sale 410,113 151,404
Loans, net of allowance for loan losses (Notes 3 and 4) 1,354,501 1,128,955
Premises and equipment, net 50,856 34,168
Other real estate owned acquired through foreclosure, net 6,944 6,997
Accrued interest receivable 11,051 9,611
Goodwill and premium on deposits 28,765 4,855
Other assets 30,837 20,862
---------- ----------
Total assets $2,155,025 $1,552,405
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits-
Noninterest-bearing checking $ 135,441 $ 93,843
Interest checking 160,762 137,240
Money market 81,256 30,389
Savings 336,449 291,604
Time deposits 1,027,469 808,236
---------- ----------
Total deposits 1,741,377 1,361,312
Securities sold under agreements to repurchase 40,745 19,654
FHLB advances 125,000 35,000
Other liabilities 48,806 12,158
---------- ----------
Total liabilities 1,955,928 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 $6,600
at June 30, 1998 and December 31, 1997.) 1,500 1,500
Common stock ($2.00 par, 20,000,000 shares authorized, 9,724,325 and
7,035,886 shares issued and outstanding at June 30, 1998 and
December 31, 1997, respectively.) 19,449 14,072
Capital surplus 118,937 50,322
Retained earnings 30,429 29,155
Net unrealized gain on available-for-sale securities, net of tax effect 32 482
---------- ----------
Total stockholders' equity 170,347 95,531
---------- ----------
Total liabilities and stockholders' equity $2,155,025 $1,552,405
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
1
<PAGE> 4
REPUBLIC BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JUNE 30, FOR THE SIX MONTHS ENDED JUNE 30,
1998 1997 1998 1997
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 35,912 $ 22,390 $ 67,117 $ 43,486
Interest on investment securities 473 728 906 1,311
Interest on mortgage-backed securities 360 1,560 985 2,849
Interest on trading securities 462 -- 1,372 --
Interest on federal funds sold 659 478 1,082 1,209
Interest on other investments 249 188 431 366
----------- ----------- ----------- -----------
Total interest income 38,115 25,344 71,893 49,221
----------- ----------- ----------- -----------
INTEREST EXPENSE:
Interest on deposits 16,554 12,332 31,467 24,156
Interest on FHLB advances 2,796 117 4,696 127
Interest on subordinated debt -- 108 -- 216
Interest on other borrowings 507 265 809 464
----------- ----------- ----------- -----------
Total interest expense 19,857 12,822 36,972 24,963
----------- ----------- ----------- -----------
Net interest income 18,258 12,522 34,921 24,258
PROVISIONS FOR LOAN LOSSES 1,032 501 1,525 1,639
----------- ----------- ----------- -----------
Net interest income after provision
for possible loan losses 17,226 12,021 33,396 22,619
----------- ----------- ----------- -----------
NONINTEREST INCOME:
Income from mortgage banking activities 8,426 660 18,411 1,558
Gain on sale of portfolio loans, net -- 237 -- 1,563
Service charges on deposit accounts 937 835 1,736 1,580
Loan fee income 195 443 875 774
Gain on sale of securities, net 520 243 742 148
Other operating income 1,140 331 1,983 830
----------- ----------- ----------- -----------
Total noninterest income 11,218 2,749 23,747 6,453
NONINTEREST EXPENSES:
General and administrative
("G&A") expenses 29,896 12,224 52,828 22,707
Merger expenses 294 -- 294 --
Provision for losses on ORE 120 120 40 290
Other ORE expense, net 15 59 37 80
Amortization of premium on deposits 160 124 319 247
----------- ----------- ----------- -----------
Total noninterest expenses 30,485 12,527 53,518 23,324
Income (loss) before income taxes (2,041) 2,243 3,625 5,748
Income tax (provision) benefit 800 (863) (1,375) (2,178)
Minority interest in income from subsidiary
trust (net of tax) (422) -- (842) --
Minority interest in FFO (net of tax) -- (227) -- (415)
----------- ----------- ----------- -----------
NET INCOME (loss) $ (1,663) $ 1,153 $ 1,408 $ 3,155
=========== =========== =========== ===========
PER SHARE DATA:
Net income (loss) per common share and
common equivalent share - diluted $ (.23) $ .17 $ .16 $ .47
=========== =========== =========== ===========
Weighted average common and common
equivalent shares outstanding-diluted 8,522,623 7,017,181 8,712,367 7,002,356
=========== =========== =========== ===========
Net income (loss) per common share -
basic $ (.26) $ .20 $ .18 $ .54
=========== =========== =========== ===========
Weighted average common shares
outstanding - basic 8,522,623 5,852,861 7,786,911 5,853,633
=========== =========== =========== ===========
</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 SIX MONTHS ENDED JUNE 30, 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 six
months ended June 30, 1998 -- -- -- -- -- 1,408 -- 1,408
Net unrealized loss on
available-for-sale securities
net of tax -- -- -- -- -- -- (450) (450)
Issuance of common stock -- -- 2,642,150 5,284 67,598 -- -- 72,882
Exercise of stock options -- -- 46,289 93 466 -- -- 559
Additional paid-in capital from
performance stock options -- -- -- -- 551 -- -- 551
Dividends on preferred
stock -- -- -- -- -- (134) -- (134)
------ ------ --------- -------- --------- -------- ----- ---------
BALANCE, JUNE 30, 1998 75,000 $1,500 9,724,325 $ 19,449 $ 118,937 $ 30,429 $ 32 $ 170,347
====== ====== ========== ======== ========= ======== ===== =========
</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 JUNE 30, FOR THE SIX MONTHS ENDED JUNE30,
----------------------------------- --------------------------------
1998 1997 1998 1997
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (1,663) $ 1,154 $ 1,408 $ 3,155
Reconciliation of net income (loss) to net cash
provided by (used in):
Provision for losses on loans and ORE 780 621 1,394 1,929
Depreciation and amortization, net 3,342 905 4,432 780
Amortization of premium and accretion of fair value (301) (70) 600 219
(Gain) loss on sale of loans (8,426) (897) (18,411) (3,121)
(Gain) on sale of investment securities (93) (171) (731) (213)
(Gain) loss on sale of ORE (104) (20) (111) (128)
Capitalization of mortgage servicing (18,751) (645) (18,208) (1,484)
Net increase in deferred tax benefit (960) 5,299 716 4,402
Gain on disposal of premises & equipment - 2 (2) 1
Net (increase) decrease in other assets (1,781) (6,537) (5,490) (5,941)
Net increase (decrease) in other liabilities 37,016 35,540 35,775 37,685
--------- -------- --------- --------
Net cash provided by (used in) operating activities (9,059) 35,181 1,372 37,284
--------- -------- --------- --------
INVESTING ACTIVITIES:
Proceeds from excess of deposit liabilities assumed
over assets acquired, net cash acquired 46,613 7,223 46,613 7,223
Proceeds from sales & maturities of:
Mortgage-backed securities available for sale 12,587 - 41,055 -
Mortgage-backed securities in trading portfolio 8,379 - 8,379 -
Investment securities available for sale 3,250 41,475 3,250 109,922
Purchase of investment securities held to maturity (998) (15,612) (998) (15,612)
Purchase of investment securities available for sale (7,015) (16,973) (27,152) (56,776)
Purchase of mortgage-backed securities
in trading portfolio (12,000) 805 (12,000) (2,784)
Principal repayment on mortgage-backed securities 3,734 3,127 6,757 4,352
Purchase of FHLB stock 2,752 0 (2,100) (251)
Net increase in loans (153,460) (79,665) (363,743) (85,613)
Investment in unconsolidated subsidiaries 10,817 - - -
Purchase of premises and equipment, net (5,368) (3,692) (6,880) (4,469)
Proceeds from sale of ORE 1,071 2,372 2,135 3,216
Disposals in other real estate owned (net) 651 117 96 138
--------- -------- --------- --------
Net cash used in investing activities (88,987) (60,823) (304,588) (40,654)
--------- -------- --------- --------
FINANCING ACTIVITIES:
Net increase (decrease) in deposits 123,132 (23,106) 180,547 (22,469)
Net increase (decrease) in repurchase agreements 16,105 3,843 21,091 4,630
Reduction of minority interest in FFO - 184 - 408
Proceeds from FHLB Advances, net (135,000) 4,000 90,000 6,000
Proceeds from issuance of common stock 73,829 27 73,991 27
Dividends on perpetual preferred stock (65) (66) (132) (132)
--------- -------- --------- --------
Net cash provided by (used in) financing activities 78,001 (15,118) 365,497 (11,536)
--------- -------- --------- --------
Net increase (decrease) in cash and cash equivalents (1,927) (40,760) 62,281 (14,906)
Cash and cash equivalents, beginning of period 143,878 79,746 79,670 53,892
--------- -------- --------- --------
Cash and cash equivalents, end of period $ 141,951 $ 38,986 $ 141,951 $ 38,986
========= ======== ========= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for-
Interest 20,994 13,234 49,156 25,053
Income taxes (1,052) 3,108 869 3,639
</TABLE>
The accompanying notes are an integral part of these consolidated statements
4
<PAGE> 7
REPUBLIC BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Organization
In the opinion of Republic Bancshares, Inc. (the "Company"), the accompanying
unaudited consolidated financial statements reflect all adjustments (consisting
only of normal recurring adjustments) necessary to present fairly the financial
position of the Company as of June 30, 1998 and the results of operations and
cash flows, for the three month and six month periods ended June 30, 1998 and
1997. The December 31, 1997 statement of financial position was derived from
audited financial statements. The accounting and reporting policies of the
Company and its wholly-owned subsidiary, Republic Bank (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
expense 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 the Company include the accounts of the
Company, RBI Capital Trust I ("RBI"), 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 53 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 six months ended
June 30, 1998, are not necessarily indicative of the results to be expected for
the fiscal year ending December 31, 1998.
Reclassifications
Certain reclassifications have been made to prior period financial statements to
conform with the June 1998 financial statement presentation.
Recent Accounting Developments
Reporting Comprehensive Income
In June 1997, the FASB issued Statement of Financial Accounting Standard
("SFAS") No. 130, "Reporting Comprehensive Income," which was effective for the
Company's fiscal year beginning January 1, 1998. SFAS No. 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 (loss) income to comprehensive income, as
defined in SFAS No. 130, for the six months ended June 30, 1998 and 1997 are as
follows:
<TABLE>
<CAPTION>
Six Months Ended June 30,
1998 1997
------- -------
<S> <C> <C>
Net income $ 1,408 $ 3,155
Unrealized gains (losses) on securities
Unrealized holding gains (losses), net of tax effect during period 292 237
Less reclassification adjustment for gains realized in net income (742) (148)
------- -------
Net unrealized gains (losses) (450) 89
------- -------
Comprehensive income $ 958 $ 3,244
======= =======
</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 computer 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
consolidated financial statements.
Accounting for Derivative Instruments and Hedging Activities
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. SFAS No. 133 is effective
for all fiscal quarters of all fiscal years beginning after June 15, 1999.
Management is currently assessing the financial implications of SFAS No. 133 and
has not yet determined if the adoption will have a material effect upon the
results of operations of the Company.
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, currently one of the Company's principal
stockholders and the majority stockholder of the Company at the time of merger,
owned a majority interest in FFO at the time of merger.
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 Company issued 1,668,370
shares of common stock to FFO's majority stockholder and 826,709 shares of
common stock to the minority interest in the FFO merger.
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 reported
components of consolidated income and the amounts reflected in the accompanying
consolidated statements of operations for the six and three months ended June
30, 1997, are as follows (in thousands):
6
<PAGE> 9
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
1997 1997
-------- --------
<S> <C> <C>
Net Interest Income:
As previously reported:
Republic Bancshares, Inc. $ 9,697 $ 18,799
F.F.O Financial Group, Inc. 2,825 5,459
-------- --------
Combined as restated $ 12,522 $ 24,258
======== ========
Net Income:
As previously reported:
Republic Bancshares, Inc. $ 629 $ 2,232
F.F.O. Financial Group, Inc. 751 1,338
Minority interest decrease (227) (415)
-------- --------
Combined as restated 1,153 3,155
======== ========
</TABLE>
3. LOANS AND LOANS HELD FOR SALE:
Loans at June 30, 1998 and December 31, 1997, are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
----------- -----------
<S> <C> <C>
Real estate mortgage loans:
One-to-four family residential $ 736,016 $ 644,235
Multifamily residential 92,876 86,835
Commercial real estate (1) 332,965 265,153
Construction/land development 84,847 50,203
Home equity loans 47,287 44,389
Commercial loans 52,601 36,515
Consumer loans 31,870 26,259
Other loans 155 442
----------- -----------
Total gross portfolio loans 1,378,617 1,154,031
Less allowance for loan losses (20,296) (20,776)
Less premiums and unearned discounts on loans purchased 210 (3,273)
Less unamortized loan fees (4,030) (1,027)
----------- -----------
Total loans held for portfolio 1,354,501 1,128,955
Loans held for sale:
First lien residential 270,648 101,454
High LTV loans 135,225 47,038
Title I loans 4,240 2,912
----------- -----------
Total loans held for sale 410,113 151,404
Total loans $ 1,764,614 $ 1,280,359
=========== ===========
</TABLE>
(1) Includes business loans, the primary collateral of which was real estate.
Mortgage loans serviced for others as of June 30, 1998 and December 31, 1997
were $761.2 million and $370.0 million, respectively. Loans on which interest
was not being accrued at June 30, 1998 and December 31, 1997, totaled
approximately $27.4 million and $25.6 million, respectively. Loans past due 90
days or more and still accruing interest at June 30, 1998 and December 31, 1997
totaled approximately $1.9 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
7
<PAGE> 10
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 June 30, 1998, was comprised of (i) $14.4
million allocated to originated loans (including loans combined from the FFO
merger and loans acquired through the acquisition of Firstate Financial, F.A.),
(ii) $942,000 allocated to loans acquired from CrossLand Savings, FSB in
December 1993, (the "CrossLand Portfolio") (iii) $2.4 million allocated to a
pool of loans purchased in March 1995 (the "March 1995 Purchase"), (iv) $1.0
million allocated to a pool of loans purchased in July 1997 (the "July 1997
Purchase") and (v) $1.5 million allocated to the other pools of purchased loans.
As of June 30, 1998 the balance of unaccreted loan discount available to absorb
losses on pools of portfolios of purchased loans exceeding amounts transferred
to the allowance amounted to $4.2 million.
Changes in the allowance for loan losses were as follows (in thousands):
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
1998 1997
-------- --------
<S> <C> <C>
Balance, beginning of period $ 20,776 $ 18,747
Provision for possible loan losses 1,525 1,639
Discount on purchased loans allocated from allowance for loan losses (1,041) (773)
Allowances from acquisitions -- 132
Loans charged off (1,268) (577)
Recoveries of loans charged off 304 160
-------- --------
Net charge-offs $ (964) (417)
-------- --------
Balance, end of period $ 20,296 $ 19,328
======== ========
</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.
At June 30, 1998, the Company had one ORE property with a balance of $1.0
million or more, a tract of land carried at $2.4 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 that could be realized upon
final sale to an end-user, but the proceeds from sale to an entity 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 Mortgage, a separate division of the
Bank, include originating, purchasing and servicing residential 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 and the six months ended June 30, 1998 and 1997. Intracompany
services between business segments are reflected at the Company's actual cost
for services provided. The Company has elected to report its business segments
without allocation of income taxes and minority interests.
8
<PAGE> 11
BUSINESS SEGMENT DATA
THREE MONTHS ENDED JUNE 30, 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) $ 1,731,591 $ 423,434 $ 2,155,025 $1,249,086 $ 72,487 $1,321,573
OPERATING DATA:
Interest income $ 28,619 $ 9,496 $ 38,115 $ 23,810 $ 1,534 $ 25,344
Interest expense 14,170 5,687 19,857 12,240 582 12,822
----------- --------- ----------- ---------- -------- ----------
Net interest income 14,449 3,809 18,258 11,570 952 12,522
Loan loss provision 1,032 -- 1,032 501 -- 501
----------- --------- ----------- ---------- -------- ----------
Net interest income after
loan loss provision 13,417 3,809 17,226 11,069 952 12,021
Noninterest income 2,531 8,687 11,218 2,024 725 2,749
General and administrative
(G & A expenses) 12,067 17,829 29,896 10,057 2,167 12,224
Merger expenses 294 -- 294 -- -- --
Provision for losses on ORE 120 -- 120 120 -- 120
Other noninterest expense 15 -- 15 59 -- 59
Amortization of goodwill and
premium on deposits 160 -- 160 124 -- 124
----------- --------- ----------- ---------- -------- ----------
Net income (loss) before taxes
& minority interest $ 3,292 $ (5,333) (2,041) $ 2,733 $ (490) 2,243
=========== ========= ========== ========
Income tax benefit (expense) 800 (863)
Minority interest in income from
subsidiary trust (net of tax) (422) --
Minority interest in FFO (net of tax) -- (227)
----------- ----------
Net income (loss) $ (1,663) $ 1,153
=========== ==========
MEMORANDUM (AS OF OR FOR THE THREE MONTHS
ENDED JUNE 30, 1998 AND 1997):
Loans held for sale $ -- $ 410,113 $ 410,113 $ -- $ 72,487 $ 72,487
Loans closed 185,263 357,456 542,719 66,684 97,630 164,314
Loans sold -- 227,490 227,490 2,753 53,287 56,040
</TABLE>
Commercial Banking Activities
Income from commercial banking activities in the second quarter of 1998 was $3.3
million compared with $2.7 million for the second quarter of 1997, an increase
of $559,000 or 20.5%. Net interest income after provision for loan losses
increased from $11.1 million to $13.4 million and noninterest income increased
by $507,000. This more than offset the $2.0 million increase in G&A expenses,
which were $12.1 million during the current quarter compared with $10.1 million
for the same period a year ago. The improvements were primarily the result of
continued growth in the Company's commercial banking loan portfolio and expense
savings from the Company's 1997 acquisitions.
Mortgage Banking Activities
Residential first and second lien loans closed for the quarter ended June 30,
1998 were $357.5 million compared with $97.6 million for the same period of
1997. The Company sold $227.5 million of loans during the current quarter,
$130.0 million less than the amount of loans closed during the second quarter of
1998. Consequently, loans held for sale increased to $410.1 million at June 30,
1998. The Company expensed approximately $10.8 million in indirect loan
production costs in the second quarter of 1998 that relate to loans held for
sale.
9
<PAGE> 12
BUSINESS SEGMENT DATA
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
($ 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) $ 1,731,591 $ 423,434 $2,155,025 $1,249,086 $ 72,487 $1,321,573
OPERATING DATA:
Interest income $ 54,518 $ 17,375 $ 71,893 $ 46,662 $ 2,559 $ 49,221
Interest expense 27,662 9,310 36,972 23,904 1,059 24,963
----------- --------- ---------- ---------- --------- ----------
Net interest income 26,856 8,065 34,921 22,758 1,500 24,258
Loan loss provision 1,525 -- 1,525 1,639 -- 1,639
----------- --------- ---------- ---------- --------- ----------
Net interest income after
loan loss provision 25,331 8,065 32,896 21,119 1,500 22,619
Other noninterest income 4,555 19,192 24,247 4,742 1,711 6,453
General and administrative
(G & A expenses) 21,718 31,110 52,828 19,086 3,621 22,707
Merger expenses 294 -- 294 -- -- --
Provision for losses (recoveries)
on ORE 40 -- 40 290 -- 290
Noninterest expense 37 -- 37 80 -- 80
Amortization of goodwill and
premium on deposits 319 -- 319 247 -- 247
----------- --------- ---------- ---------- --------- ----------
Net income (loss) before taxes
& minority interest $ 7,478 $ (3,853) 3,625 $ 6,158 $ (410) 5,748
=========== ========= ========== =========
Income tax expense (1,375) (2,178)
Minority interest in income from
subsidiary trust (net of tax) (842) --
Minority interest in FFO (net of tax) -- (415)
---------- ----------
Net income $ 1,408 $ 3,155
========== ==========
MEMORANDUM AS OF OR FOR THE SIX MONTHS
ENDED JUNE 30, 1998 AND 1997:
Loans held for sale $ -- $ 410,113 $ 410,113 $ -- $ 72,487 $ 72,487
Loans closed 257,897 680,804 938,701 190,029 167,350 357,379
Loans sold -- 414,262 414,262 16,458 125,561 142,019
</TABLE>
Commercial Banking Activities
Income from commercial banking activities was $7.5 million for the six months
ended June 30, 1998, compared to $6.2 million for the same period of 1997. Net
interest income increased by $4.1 million while G & A expenses increased by $2.6
million. This improvement was largely the result of the additional income and
operating efficiencies from the Company's 1997 acquisitions.
Mortgage Banking Activities
First and second lien residential loans closed during the first six months of
1998 totaled $680.8 million, a $513.4 million increase over the same period last
year. Loans held for sale at June 30, 1998 were $410.1 million or 60.2% of total
loan production for Flagship during the first six months of 1998. A majority of
the expenses associated with that increased loan production was charged to
operations during the first half of 1998. Any revenues associated with loans
held for sale will not be recognized until the quarters in which such loans are
sold.
10
<PAGE> 13
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 in prices
of marketable equity securities. At June 30, 1998, the Company did not use
derivative 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 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 High LTV and other residential mortgage
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 six month interim period ending June 30,
1998.
7. CONSUMMATED AND PROPOSED MERGERS & ACQUISITIONS
NationsBank and Barnett Branches
In December 1997, the Company entered into two agreements with NationsBank
Corporation ("NationsBank") to acquire eight branch offices of NationsBank's
subsidiary banks, NationsBank, N.A. ("NationsBank Subsidiary") and Barnett Bank,
N.A. ("Barnett"), including the loans and other assets recorded at those
branches, and to assume the deposits and other liabilities assigned to these
branches. The first agreement (the "Florida Agreement"), consummated on June 19,
1998, collectively, three NationsBank Subsidiary branches and four Barnett
branches located throughout Florida (the "Florida Branches"). The second
agreement (the "Georgia Agreement"), which is expected to be consummated in the
third quarter of 1998, is for a Barnett branch located in Brunswick, Georgia
(the "Georgia Branch"). When acquired on June 19, 1998, the Florida Branches had
deposit liabilities of $199.9 million and loans of $114.4 million, and based on
unaudited financial statements at July 31, 1998 (the most recent data
available), the Georgia Branch had deposit liabilities of $18.1 (unaudited)
million and loans of $8.4 (unaudited) million. The acquisition of the Florida
Branches was accounted for using purchase accounting rules. A deposit premium of
$23.8 million which will be amortized on the straight-line method over a 10 year
period, was recorded. The Georgia branch acquisition, for which all regulatory
approval has been approved, will also be accounted for using purchase accounting
rules, with an expected deposit premium of approximately $181,000 (unaudited).
Bankers Savings Bank (unaudited)
In February 1998, the Company and Bankers Savings Bank, Inc., Coral Gables,
Florida, ("BSB") entered into a definitive agreement (the "BSB Agreement") for
the merger of BSB into the Bank (the "BSB" Acquisition") with BSB stockholders
receiving approximately 0.5132 of a share of the Company's Common Stock for each
share of BSB's Common Stock (based on data at June 30, 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 June 30,
11
<PAGE> 14
1998, had total assets of $68.3 million, total loans of $49.4 million and total
deposits of $60.7 million (all data unaudited). It is anticipated that the BSB
Acquisition will be accounted for as a pooling of interests. Either BSB or the
Company may terminate the BSB Acquisition if it is not consummated by November
1, 1998. Regulatory approval has been received and the transaction is expected
to be completed in the fourth quarter of 1998, subject to approval by BSB's
stockholders.
Dime Savings Bank (unaudited)
In March 1998, the Company entered into an agreement (the "DSB Agreement") with
Dime Savings Bank, F.S.B. ("DSB"), to acquire DSB's branch in Deerfield Beach,
Florida (Broward County) and to assume the deposits and other liabilities of
approximately $209.5 million and purchase the personal property and equipment of
the branch for $100,000, (the "Dime Branch Acquisition"). The transaction, which
was consummated on August 13, 1998, will be accounted for using purchase
accounting rules, with a deposit premium of $9.8 million to be amortized over 10
years.
Lochaven Savings (unaudited)
On May 6, 1998, the Company entered into a definitive agreement with Lochaven
Federal Savings and Loan Association, Orlando, Florida, ("Lochaven"), providing
for the merger of Lochaven with and into Republic Bank (the "Lochaven
Acquisition"). Lochaven has one branch in Orange County, Florida, and as of June
30, 1998, had total assets of $59.3 million, total loans of $54.4 million and
total deposits of $56.1 million. Under the terms of the Lochaven Agreement,
stockholders of Lochaven are to receive 0.2776 of a share of the Company's
Common Stock for each share of Lochaven's Common Stock. It is anticipated that
the Lochaven Acquisition will be accounted for as a pooling of interests. Either
Lochaven or the Company may terminate the transaction, for which regulatory
approval is pending, if it is not completed by December 1, 1998.
12
<PAGE> 15
SELECTED QUARTERLY FINANCIAL AND OTHER DATA
EIGHT CONSECUTIVE QUARTERS (UNAUDITED)
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
QUARTERS ENDING
-----------------------------------------------------------------
JUNE 1998 MAR. 1998 DEC. 1997 SEPT. 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATING DATA:
Interest income $ 38,115 $ 33,778 $ 29,771 $ 29,464
Interest expense 19,857 17,115 15,239 14,721
----------- ----------- ----------- -----------
Net interest income 18,258 16,663 14,532 14,743
Loan loss provision 1,032 493 494 495
----------- ----------- ----------- -----------
Net interest income after loan loss provision 17,226 16,170 14,038 14,248
Other noninterest income 11,218 12,529 9,505 9,115
General and administrative ("G&A") expenses 29,896 22,923 18,720 16,114
Other noninterest expense 589 110 439 1,298
----------- ----------- ----------- -----------
Net income (loss) before income taxes &
minority interest (2,041) 5,666 4,384 5,951
Income tax (provision) benefit 800 (2,175) (1,701) (2,217)
Minority interest in income from subsidiary trust (422) (420) (417) (284)
Minority interest in FFO -- -- -- (259)
----------- ----------- ----------- -----------
Net income (loss) $ (1,663) $ 3,071 $ 2,266 $ 3,191
=========== =========== =========== ===========
PER SHARE DATA:
Earnings per share - diluted $ (.23) $ .39 $ .29 $ .45
=========== =========== =========== ===========
Weighted average shares outstanding - diluted 8,522,623 7,968,984 7,953,978 7,188,255
=========== =========== =========== ===========
Earnings per share - basic $ (.26) $ .44 $ .33 $ .54
=========== =========== =========== ===========
Weighted average shares outstanding - basic 8,522,623 7,043,024 6,832,737 5,963,108
=========== =========== =========== ===========
BALANCE SHEET DATA (AT PERIOD-END):
Total assets $ 2,155,025 $ 1,841,143 $ 1,552,405 $ 1,469,352
Investment & mortgage backed securities 109,760 99,341 107,736 96,982
Loans held for sale 410,113 311,749 151,404 94,896
Portfolio loans, net of unearned income 1,374,797 1,158,251 1,149,731 1,106,728
Allowance for loan losses 20,296 20,557 20,776 20,417
Goodwill & premium on deposits 28,765 4,679 4,855 4,872
Deposits 1,741,377 1,418,555 1,361,312 1,289,100
Stockholders' equity 170,347 98,281 95,531 87,593
Book value per share (dollars) 16.26 12.60 12.27 11.77
SELECTED FINANCIAL RATIOS:
Return on average assets (.35)% .75% .61% .89%
Return on average equity (5.29) 13.60 10.24 17.53
Equity to assets 7.90 5.34 6.15 5.96
Equity and minority interest in preferred
subsidiary to assets 9.24 6.90 8.01 7.92
Portfolio loans/deposit ratio 78.95 81.65 84.46 85.85
Net interest spread 3.85 3.85 3.71 4.03
Net interest margin 4.14 4.24 4.18 4.41
G & A expense to average assets (1) 3.16 2.83 3.24 3.00
G & A efficiency ratio (1) 71.07 65.77 74.69 61.98
Nonperforming loans to portfolio loans 2.13 2.51 2.25 2.01
Nonperforming assets to total assets 1.79 2.03 2.20 2.05
Loan loss allowance to portfolio loans (2) 1.48 1.77 1.79 1.84
Loan loss allowance to nonperforming loans (2)
Originated portfolio 90.92 75.32 102.83 107.98
July 1997 Purchase 27.64 35.35 31.74 36.12
March 1995 Purchase 263.80 459.97 373.91 504.89
CrossLand portfolio 409.57 71.39 421.88 81.57
Other purchased portfolios 17.82 24.01 18.41 44.32
Total 69.19 70.62 80.41 98.80
OTHER DATA (AT PERIOD-END):
Number of branch banking offices 53 46 46 45
Number of full-time equivalent employees 1,439 1,262 1,046 958
</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 portfolio of loans within the
Bank.
13
<PAGE> 16
SELECTED QUARTERLY FINANCIAL AND OTHER DATA
EIGHT CONSECUTIVE QUARTERS (UNAUDITED)
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
QUARTERS ENDING
-----------------------------------------------------------------
JUNE 1997 MAR. 1997 DEC. 1996 SEPT. 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATING DATA:
Interest income $ 25,344 $ 23,877 $ 24,216 $ 22,065
Interest expense 12,822 12,142 11,839 11,279
----------- ----------- ----------- -----------
Net interest income 12,522 11,735 12,377 10,786
Loan loss provision 501 1,138 1,075 457
----------- ----------- ----------- -----------
Net interest income after loan loss provision 12,021 10,597 11,302 10,329
Noninterest income 2,749 3,703 2,604 2,841
General and administrative ("G&A") expenses 12,224 10,482 10,594 9,174
Other noninterest expense 303 314 (1,331) 5,106
----------- ----------- ----------- -----------
Net income (loss) before income taxes & minority interest 2,243 3,504 4,643 (1,110)
Income tax (provision) benefit (863) (1,315) (1,651) 451
Minority interest in FFO (net of tax) (227) (188) 467 144
----------- ----------- ----------- -----------
Net income (loss) $ 1,153 $ 2,002 $ 2,525 $ (515)
=========== =========== =========== ===========
PER SHARE DATA:
Earnings per share - diluted $ .17 $ .30 $ .38 (.08)
=========== =========== =========== ===========
Weighted average shares outstanding - diluted 7,017,181 6,987,074 6,641,203 6,622,493
=========== =========== =========== ===========
Earnings per share - basic $ .20 $ .34 $ .43 $ (.09)
=========== =========== =========== ===========
Weighted average shares outstanding - basic 5,852,861 5,854,414 5,856,511 5,856,952
=========== =========== =========== ===========
BALANCE SHEET DATA (AT PERIOD-END):
Total assets $ 1,321,573 $ 1,231,456 $ 1,224,357 $ 1,163,506
Investment & mortgage backed securities 140,899 134,781 161,357 113,446
Loans held for sale 72,487 44,774 47,052 32,444
Portfolio loans, net of unearned income 995,864 928,973 920,323 905,599
Allowance for loan losses 19,328 19,088 18,747 19,858
Goodwill & premium on deposits 397 404 527 650
Deposits 1,165,042 1,118,710 1,114,907 1,049,998
Stockholders' equity 71,254 69,694 68,178 65,804
Book value per share (dollars) 10.79 10.55 10.32 9.96
SELECTED FINANCIAL RATIOS:
Return on average assets .35% .66% .84% (.18)%
Return on average equity 6.33 11.76 14.95 (3.09)
Equity to assets 5.39 5.57 5.66 5.80
Portfolio loans/deposit ratio 85.48 83.04 82.55 86.25
Net interest spread 3.52 3.52 4.12 3.50
Net interest margin 4.10 4.10 4.40 3.65
G & A expense to average assets (1) 3.29 3.06 3.25 3.05
G & A efficiency ratio (1) 73.79 64.93 65.34 65.80
Nonperforming loans to portfolio loans 1.99 2.19 2.10 2.43
Nonperforming assets to total assets 2.08 2.36 2.26 2.73
Loan loss allowance to loans (2) 1.94 2.05 2.02 2.19
Loan loss allowance to nonperforming loans (2)
Originated portfolio 90.96 84.74 73.15 65.76
July 1997 Purchase -- -- -- --
March 1995 Purchase 441.82 551.88 488.78 689.66
CrossLand portfolio 106.60 104.82 126.12 81.80
Other purchased portfolios 46.67 45.60 89.80 59.97
Total portfolio loans 97.32 94.62 96.03 90.42
OTHER DATA (AT PERIOD-END):
Number of branches 45 43 42 42
Number of full-time equivalent employees 856 802 785 749
</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 portfolio of loans within the
Bank.
14
<PAGE> 17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
COMPARISON OF BALANCE SHEETS AT JUNE 30, 1998 AND DECEMBER 31, 1997
Overview
Total assets were $2.2 billion at June 30, 1998, compared to $1.6 billion at
December 31, 1997, an increase of $602.6 million or 38.8%. This increase
included $155.6 million in assets from the acquisition of the Florida Branches
from NationsBank in June 1998. Also, during the second quarter of 1998, the
Company completed a public offering of 2,642,150 shares of its Common Stock,
realizing net proceeds of $72.9 million, which provided the capital necessary to
support the Company's 1998 acquisitions. On June 25, 1998, the Company completed
a private placement of $240.0 million of securities (the "June Securitization")
backed by an equal amount of High LTV Loans.
Federal Funds Sold and Interest Bearing Deposits
Federal funds sold, all on an overnight basis, increased by $40.5 million from
$33.0 million at the prior year to $73.5 million at June 30, 1998, and interest
bearing deposits, comprised primarily of the funds placed on deposit with the
trustee for the Company's securitization of High LTV Loans, were $29.4 million.
Investment and Mortgage-Backed Securities
Investment and mortgage-backed securities, consisting of U.S. Treasury and
federal agency securities, were $49.2 million at June 30, 1998 compared to $71.5
million at December 31, 1997, a decrease of $22.3 million. The Company has
recorded all its purchased investment and mortgage-backed securities at June 30,
1998 as "available-for-sale". The Company recorded $402,000 in net gains on the
sale of $44.9 million in investments and mortgage-backed securities during the
six months ended June 30, 1998.
Trading Assets
The Company records all mortgage-related securities resulting from
securitization of the Company's loans held for sale as trading assets. In the
June Securitization, the Company retained a $12.0 million subordinate tranche of
the securities from the securitization and the residual interest in cash flows.
All of the assets retained from the June Securitization have been recorded as
trading assets at their fair value. The fair value assigned to the residual
interest from the June Securitization was based on an evaluation of the present
value of expected future cash flows using a 15% discount rate, a cumulative
default rate equivalent to 10.7% of the face amount of the loans and prepayment
rate resulting in an average expected life of the pool of loans of 4.2 years.
Management reviews the fair value determination of its trading assets quarterly
and any valuation adjustments are reflected in current period results of
operations.
Loans & Loans Held for Sale
Total loans held in portfolio increased $225.1 million from $1.1 billion at the
prior year-end to $1.4 billion at June 30, 1998. A $114.4 million portion of the
increase was attributable to loans purchased from NationsBank in the Company's
acquisition of the Florida Branches. Real estate-secured loans increased during
the period by $203.4 million to $1.3 billion or 93.8% of total portfolio loans.
Loans held for sale increased by $258.7 million to $410.1 million, with
residential loans secured by first liens increasing by $169.2 million to $270.7
million and High LTV Loans increasing by $88.1 million to $135.2 million.
15
<PAGE> 18
Allowance for Loan Losses
The allowance for loan losses amounted to $20.3 million at June 30, 1998, (1.5%
of portfolio loans) compared with $20.8 million (1.8% of portfolio loans) at
December 31, 1997. At June 30, 1998, the allowance for loan losses included
$14.4 million allocated to loans originated by the Company, $2.4 million
allocated to the March 1995 purchase, $951,000 allocated to the "July 1997
Purchase", $942,000 allocated to the CrossLand Portfolio and $1.6 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 relating to the
allowance in 1998 included provisions for loan losses of $1.5 million, part of
which was a $.5 million charge to provision for the originated portfolio, offset
by the transfer of allowances from the March 1995 Purchase to loan discount
of $1 million. Loan charge-offs (net of recoveries) were $964,000.
Nonperforming Assets
Nonperforming assets amounted to $38.5 million or 1.79% of total assets at June
30, 1998, compared with $34.2 million or 2.20% of total assets at December 31,
1997. Nonperforming loans totaled $29.3 million at June 30, 1998, an increase of
$3.5 million from the prior year-end total of $25.8 million. This was primarily
due to a $5.2 million increase in nonperforming residential loans. Commercial
real estate loans and commercial (business) nonperforming loans decreased by
$1.5 million. ORE balances were generally unchanged.
Deposits
Total deposits were $1.74 billion at June 30, 1998, compared to $1.36 billion at
the prior year-end, an increase of $380.1 million. A $199.9 million portion of
the increase resulted from the additional deposits held at the Florida Branches
purchased from NationsBank. Of the total increase, checking account balances
increased by $65.1 million, savings and money market accounts increased by $95.7
million and certificates of deposit increased by $219.2 million.
Stockholders' Equity
Stockholders' equity was $170.3 million at June 30, 1998, or 7.90% of total
assets, compared to $95.5 million or 6.15% of total assets at December 31, 1997.
At June 30, 1998, the Bank's tier 1 ("leverage") capital ratio was 7.33%, its
tier 1 risk-based capital ratio was 9.40%, and its total risk-based capital
ratio was 10.49%, all in excess of minimum FDIC capital 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
ratios were 7.55%, 9.66%, and 10.76%, respectively. In May 1998, the Company
completed a public offering of 2,642,150 shares of its Common Stock at an
offering price of $29.50 per share, realizing net proceeds of $72.9 million
after deducting underwriters' discounts and offering expenses.
16
<PAGE> 19
COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND
1997
Overview
A net loss of $1.7 million or $.23 per share on a diluted basis was incurred for
the three months ended June 30, 1998 compared with a gain of $1.2 million or
$.17 per share for the same period in 1997. During the second quarter of 1998
the Company expensed approximately $10.8 million of indirect loan production
costs associated with loans held for sale at period-end. Also, a $3.0 million
portion of the gain on June Securitization was required to be deferred for
recognition until the third quarter of 1998.
Analysis of Net Interest Income (see table on page 18)
Net interest income for the three months ended June 30, 1998 was $18.3 million
compared with $12.5 million for the same period last year. This $5.8 million or
45.6% increase consisted of $4.6 million from an improved net interest spread
and $1.1 million in additional income from balance sheet growth. Interest income
was $38.1 million for the second quarter of 1998, an increase of $12.8 million
over the same period in 1997. Interest expense increased by $7.0 million.
Average asset yield increased by 40 basis points from 8.35% for the first three
months of 1997 to 8.75% for 1998. The average cost of interest-bearing
liabilities increased by 7 basis points from 4.83% to 4.90%. 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 by 4 basis points from 4.10% for 1997 to 4.14% for 1998.
Noninterest Income
Noninterest income for the three months ended June 30, 1998 was $11.2 million
compared with $2.7 million for the same period of 1997, an increase of $8.5
million. This increase was primarily the result of significant growth in the
Company's mortgage banking operations, with gains on sale of loans and
recognition of the value of mortgage servicing rights net of direct costs of
production increasing by $7.8 million, and $.4 million from SPC, an
unconsolidated subsidiary, accounted for using the equity method.
The following table reflects the components of noninterest income for the three
months ended June 30, 1998, and 1997 (in thousands):
<TABLE>
<CAPTION>
For the three Months
Ended June 30,
------------------------------
Increase
1998 1997 (Decrease)
------- ------ -------
<S> <C> <C> <C>
Income from mortgage banking operations $ 8,426 $ 660 $ 7,766
Service charges on deposit accounts 937 835 102
Loan fee income 195 443 (248)
Merchant charge card processing fees 97 64 33
Gains on sales of portfolio loans, net -- 171 (171)
Unrealized gains on loans held for sale -- 66 (66)
Gain on sale of securities, net 128 171 (43)
Net trading account gains 392 72 320
Generations Gold fee income 221 101 120
Income from SPC 434 -- 434
Foreign exchange income 24 20 4
Other income 364 146 218
------- ------ -------
Total noninterest income $11,218 $2,749 $ 8,469
======= ====== =======
</TABLE>
17
<PAGE> 20
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 June 30, 1998 and 1997 (in thousands):
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------------------------------------------------
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 $1,577,077 $35,912 9.03% $1,017,334 $22,390 8.78%
Investment securities 33,106 473 5.72 47,559 728 6.14
Mortgage-backed securities 21,424 360 6.73 99,181 1,560 6.29
Trading securities 33,937 462 5.43 904 -- --
Interest bearing deposits in banks 1,362 26 7.61 4,338 41 3.79
FHLB stock 12,370 223 7.24 8,165 147 7.20
Federal funds sold 48,780 659 5.34 32,585 478 5.81
---------- ------- ---------- -------
Total interest-earning assets 1,728,056 38,115 8.75 1,210,066 25,344 8.35
Non interest-earning assets 144,598 65,935
---------- ----------
Total assets $1,872,654 $1,276,001
========== ==========
Interest-bearing liabilities:
Interest checking $ 136,818 $ 335 .98 $ 88,795 $ 302 1.36
Savings 53,125 253 1.91 28,623 278 3.90
Passbook Gold 263,631 3,249 4.94 222,575 2,708 4.88
Money market 42,810 236 2.21 32,674 166 2.04
Time deposits 896,294 12,481 5.59 653,183 8,878 5.45
Subordinated debt -- -- -- 6,000 108 7.20
FHLB advances 196,429 2,796 5.71 12,637 117 3.71
Other borrowings 37,094 507 5.48 26,057 265 5.74
---------- ------- ---------- -------
Total interest-bearing liabilities 1,626,201 19,857 4.90 1,070,544 12,822 4.83
Non interest-bearing liabilities 120,389 136,169
Stockholders' equity 126,064 69,288
---------- ----------
Total liabilities and equity $1,872,654 $1,276,001
========== ------- ---- ========== ------- ----
Net interest income/net interest spread $18,258 3.85 $12,522 3.52
======= ==== ======= ====
Net interest margin 4.14 4.10
==== ====
<CAPTION>
Increase (Decrease)
Due to (1)
--------------------
Changes in Net Interest Income Volume Rate Total
------- ------- --------
<S> <C> <C> <C>
Interest earning assets:
Loans, net $ 9,388 $ 4,134 $ 13,522
Investment securities (225) (30) (255)
Mortgage backed securities (1,301) 101 (1,200)
Trading Securities 1 461 462
Interest bearing deposits in banks (39) 24 (15)
FHLB stock 75 1 76
Federal funds sold 222 (41) 181
------- ------- --------
Total change in interest income 8,121 4,650 12,771
Interest-bearing liabilities:
Interest checking 134 (101) 33
Savings 162 (187) (25)
Passbook Gold 505 36 541
Money market 55 15 70
Time deposits 3,491 112 3,603
Subordinated debt (54) (54) (108)
FHLB advances 2,450 229 2,679
Other borrowings 248 (6) 242
------- ------- --------
Total change in interest expense 6,991 44 7,035
------- ------- --------
Increase (decrease) in net interest income $ 1,130 $ 4,606 $ 5,736
======= ======= ========
</TABLE>
18
<PAGE> 21
Noninterest Expense
General and administrative ("G & A") expenses for the second quarter of 1998
were $29.9 million compared with $12.2 million for the same period last year, an
increase of $17.7 million. G & A expenses for the commercial banking segment
increased $1.8 million while the mortgage banking segment increased $15.9
million. Increases in salaries, advertising, postage and supplies are
representative of the additional administrative costs related to increased loan
production by the mortgage banking division. Total noninterest expenses, which
include G & A expense, were $30.5 million for the three months ended June 30,
1998 compared with $12.5 million for the same period last year.
The following table reflects the components of noninterest expense for the three
months ended June 30, 1998 and 1997 (in thousands):
<TABLE>
<CAPTION>
For the Quarters Ended
June 30,
--------------------------------
Increase
1998 1997 (Decrease)
------- ------- --------
<S> <C> <C> <C>
Salaries and benefits $11,181 $ 5,693 $ 5,488
Net occupancy expense 2,808 1,990 818
Advertising 6,197 640 5,557
Data processing fees 835 670 165
FDIC and state assessments 224 263 (39)
Telephone expense 570 352 218
Legal and professional 769 412 357
Postage and supplies 5,231 956 4,275
Other operating expense 2,081 1,248 833
------- ------- --------
Total G & A expenses 29,896 12,224 17,672
Merger expenses 294 -- 294
Provision for losses on ORE 120 120 --
ORE expense, net of ORE income 15 59 (44)
Amortization of premium on deposits 160 124 36
------- ------- --------
Total noninterest expense $30,485 $12,527 $ 17,958
======= ======= ========
</TABLE>
19
<PAGE> 22
COMPARISON OF RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND
1997
Overview
Net income for the six months ended June 30, 1998 was $1.4 million or $.16 per
share on a diluted basis compared with $3.2 million or $.47 per share for the
second quarter of 1997. Return on average assets for the first half of 1998 was
.16%, while return on average equity was 2.61%.
Analysis of Net Interest Income (see table on page 21)
Net interest income for the six months ended June 30, 1998 was $34.9 million
compared with $24.3 million for the same period last year. This $10.6 million
increase was the result of $8.8 million from an improved net interest spread and
$1.8 million in additional income from balance sheet growth. Average asset yield
was 8.72% for 1998, a 29 basis point increase from 8.43 for 1997. The average
yield on loans was 8.94%, up from 8.86% last year. The average cost of
interest-bearing liabilities decreased 4 basis points from 4.91% to 4.87%. Net
interest spread increased 33 basis points to 3.85% from 3.52% for 1997 and net
interest margin, which includes the benefit of noninterest bearing funds,
increased 8 basis points from 4.10% for 1997 to 4.18% for 1998.
Noninterest Income
Noninterest income for the first half of 1998 was $23.7 million compared with
$6.5 million for the same period of 1997, an increase of $17.3 million. This
increase was primarily the result of increased income from 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
$16.9 million.
The following table reflects the components of noninterest income for the six
months ended June 30, 1998, and 1997 (in thousands):
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
---------------------------------
Increase
1998 1997 (Decrease)
------- ------- --------
<S> <C> <C> <C>
Income from mortgage banking operations $18,411 $ 1,558 $ 16,853
Service charges on deposit accounts 1,736 1,580 156
Loan fee income 875 774 101
Merchant charge card processing fees 171 126 45
Gains on sales of portfolio loans, net -- 1,413 (1,413)
Unrealized gains on loans held for sale -- 150 (150)
Gain on sale of securities, net 461 213 248
Trading asset gains (losses), net 281 (65) 346
Generations Gold fee income 416 201 215
Income from SPC 534 -- 534
Foreign exchange income 56 36 20
Other income 806 467 339
------- ------- --------
Total noninterest income $23,747 $ 6,453 $ 17,294
======= ======= ========
</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 six
months ended June 30, 1998 and 1997 (in thousands):
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------------------------------------------------
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 $1,497,241 $67,117 8.94% $ 977,115 $43,486 8.86%
Investment securities 31,496 906 5.79 43,159 1,311 6.12
Mortgage-backed securities 29,142 985 6.76 86,910 2,849 6.56
Trading securities 35,700 1,372 7.68 784 -- --
Interest bearing deposits in banks 1,223 42 6.96 4,468 88 3.97
FHLB stock 10,834 389 7.24 7,550 278 7.37
Federal funds sold 39,907 1,082 5.39 42,891 1,209 5.61
---------- ------- ---------- -------
Total interest-earning assets 1,645,543 71,893 8.72 1,162,877 49,221 8.43
Non interest-earning assets 115,789 62,559
---------- ----------
Total assets $1,761,332 $1,225,436
========== ==========
Interest-bearing liabilities:
Interest checking $ 133,244 661 1.00 $ 88,629 612 1.39
Savings 52,797 507 1.94 27,855 539 3.90
Passbook Gold 257,693 6,307 4.94 221,786 5,356 4.87
Money market 37,151 383 2.08 32,520 331 2.06
Time deposits 855,410 23,609 5.57 622,503 17,318 5.61
Subordinated debt -- -- -- 6,000 216 7.23
FHLB advances 164,834 4,696 5.74 8,055 127 3.17
Other borrowings 30,348 809 5.38 18,119 464 5.17
---------- ------- ---------- -------
Total interest-bearing liabilities 1,531,477 36,972 4.87 1,025,467 24,963 4.91
Non interest-bearing liabilities 120,949 132,940 -------
Stockholders' equity 108,906 67,029
---------- ----------
Total liabilities and equity $1,761,332 $1,225,436
========== ------- ---- ========== ------- ----
Net interest income/net interest spread $34,921 3.85% 24,258 3.52%
======= ==== ======= ====
Net interest margin 4.18% 4.10%
==== ====
<CAPTION>
Increase (Decrease)
Due to (1)
---------------------
Changes in Net Interest Income Volume Rate Total
-------- ------- --------
<S> <C> <C> <C>
Interest earning assets:
Loans, net $ 16,569 $ 7,062 $ 23,631
Investment securities (351) (54) (405)
Mortgage backed securities (1,949) 85 (1,864)
Trading Securities -- 1,372 1,372
Interest bearing deposits in banks (88) 42 (46)
FHLB stock 116 (5) 111
Federal funds sold (82) (45) (127)
-------- ------- --------
Total change in interest income 14,215 8,457 22,672
Interest-bearing liabilities:
Interest checking 251 (202) 49
Savings 327 (359) (32)
Passbook Gold 879 72 951
Money market 48 4 52
Time deposits 6,445 (154) 6,291
Subordinated debt (108) (108) (216)
FHLB advances 4,192 377 4,569
Other borrowings 341 4 345
-------- ------- --------
Total change in interest expense 12,375 (366) 12,009
-------- ------- --------
Increase (decrease) in net interest income $ 1,840 $ 8,823 $ 10,663
======== ======= ========
</TABLE>
21
<PAGE> 24
Noninterest Expense
General and administrative ("G & A") expenses for the first half of 1998 were
$52.8 million compared with $22.7 million in 1997, an increase of $30.1 million.
Total noninterest expenses, which include G & A expense, were $53.5 million for
1998 compared with $23.3 million for the same period last year, an increase of
$30.2 million. Noninterest expenses in the commercial banking segment increased
$2.3 million while the mortgage banking segment increased $27.9 million.
The following table reflects the components of noninterest expense for the six
months ended June 30, 1998 and 1997 (in thousands):
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
--------------------------------
Increase
1998 1997 (Decrease)
------- ------- --------
<S> <C> <C> <C>
Salaries and benefits $20,611 $11,055 $ 9,556
Net occupancy expense 5,302 3,729 1,573
Advertising 10,548 984 9,564
Data processing fees 1,543 1,240 303
FDIC and state assessments 441 473 (32)
Telephone expense 1,035 750 285
Legal and professional 1,406 738 668
Postage and supplies 8,949 1,322 7,627
Other operating expense 2,993 2,416 577
------- ------- --------
Total G & A expense 52,828 22,707 30,121
Merger expenses 294 -- 294
Provision for losses on ORE 40 290 (250)
ORE expense, net of ORE income 37 80 (43)
Amortization of premium on deposits 319 247 72
------- ------- --------
Total noninterest expense $53,518 $23,324 $ 30,194
======= ======= ========
</TABLE>
YEAR 2000 PREPARATIONS
In the next two years, many companies, including financial institutions such as
the Company, will face potentially serious risks associated with the inability
of existing data processing hardware and software to appropriately recognize
calendar dates beginning in the year 2000. Many computer programs that can only
distinguish the final two digits of the year entered may read entries for the
year 2000 as the year 1900 and compute payment, interest or delinquency based on
the wrong date, or are expected to be unable to compute payment interest or
delinquency. If the Company's internal systems do not correctly recognize and
process data information beyond the year 1999, there could be a material adverse
impact on the Company's business and operations.
In 1997, the Company began the process of identifying the many software
applications and hardware devices expected to be impacted by this issue. The
Company formed a Year 2000 Committee, consisting of the Bank's senior management
and key data processing employees to address the year 2000 compliance project.
The Board of Directors is updated as progress towards compliance on a monthly
basis. Also, as the Bank's primary federal regulator, the FDIC conducts periodic
examinations of the Bank's readiness for year 2000 operations.
A full-time project coordinator for year 2000 compliance was hired to monitor
the daily activity of the project for the Bank. Non-compliant vendors have been
and continue to be contacted for project progress reports. Communication with
compliant vendors to develop testing plans is also ongoing. The Company has set
a target date of December 31, 1998 to complete testing of vendor systems other
than its main client loan and deposit application systems which are processed by
ALLTEL Information Services, Inc. ("ALLTEL"). As ALLTEL tests and certifies
applications as year 2000 compliant, the test results are being forwarded to the
Bank for verification. All main client applications are
22
<PAGE> 25
expected to be compliant and installed by year-end 1998 and the Bank will be
performing future date testing with ALLTEL during the fourth quarter of 1999.
The Bank's vendors will be able to perform tests with ALLTEL during this time
also. The Bank expects to formulate a contingency plan for the remote
possibility that ALLTEL will not be year 2000 compliant by September 30, 1998.
The Bank will continue its efforts toward year 2000 compliance with a goal of
January 1, 1999 for completion of all testing and implementation of compliant
systems. The Company does not expect the cost of addressing the year 2000 issue
to be a material event or uncertainty.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES REFORM ACT OF 1995
Certain of the statements contained in this Quarterly Report on Form 10-Q (other
than the financial statements and statements of historical fact), including,
without limitation, statements as to management expectations and belief
presented under the captions "Letters to Our Stockholders" and "Management's
Discussion and Analysis," are forward-looking statements. Forward-looking
statements are based upon management's expectations and belief concerning future
development and their potential effect upon the Corporation. There can be no
assurance that future developments will be in accordance with management's
expectations or that the effect of future developments on the Corporation will
be those anticipated by management.
The Corporation wishes to caution readers that the assumptions which form the
basis for forward-looking statements with respect to or that may impact
earnings for the year ended December 31, 1998, and thereafter include many
factors that are beyond the Corporation's ability to control or estimate
precisely. These risks and uncertainties include, but are not limited to, the
market demand and acceptance of the Corporation's existing and new loan and
deposit products, the impact of competitive products, the Company's ability to
achieve the desired consolidation efficiencies from its planned acquisitions,
and changes in economic conditions, such as inflation or fluctuations in
interest rates.
While the Corporation periodically reassesses material trends and uncertainties
affecting the Corporation's results of operations and financial condition in
connection with its preparation of the stockholders' letter and management's
discussion and analysis contained in its Annual Report, the Corporation does
not intend to review or revise any particular forward-looking statement
referenced herein in light of future events.
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:
15.0 Acknowledgement letter
27.0 Financial Data Schedule
99.0 Review Report of Independent Certified Public Accountants
b. There were no reports on Form 8-K filed during the six months ended
June 30, 1998.
23
<PAGE> 26
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: 08/14/98 By: /s/ John W. Sapanski
------------------------------------
John W. Sapanski
Chairman and Chief Executive Officer
(principal executive officer)
Date: 08/14/98 By: /s/ William R. Falzone
------------------------------------
William R. Falzone
Treasurer (principal financial and
accounting officer)
<PAGE> 1
EXHIBIT 15.0
August 14, 1998
Republic Bancshares, Inc.
111 2nd Avenue NE, Suite 300
St. Petersburg, FL 33701
Republic Bancshares, Inc.:
We are aware that Republic Bancshares, Inc. has incorporated, by reference in
its Registration Statement File No. 333-32151, its Form 10-Q for the quarter
ended June 30, 1998, which includes our report dated August 13, 1998, covering
the unaudited interim financial information contained therein. Pursuant to
Regulation C of the Securities Act of 1933 (the Act), that report is not
considered a part of the registration statement prepared or certified by our
firm or a report prepared or certified by our firm within the meaning of
Sections 7 and 11 of the Act.
Very truly yours,
ARTHUR ANDERSEN LLP
By /s/ William J. Meurer
-----------------------------------
William J. Meurer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
COMPANY'S CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATION
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1998
<CASH> 39,095
<INT-BEARING-DEPOSITS> 29,356
<FED-FUNDS-SOLD> 73,500
<TRADING-ASSETS> 60,610
<INVESTMENTS-HELD-FOR-SALE> 49,150
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 1,784,910
<ALLOWANCE> 20,296
<TOTAL-ASSETS> 2,155,025
<DEPOSITS> 1,741,377
<SHORT-TERM> 165,745
<LIABILITIES-OTHER> 48,806
<LONG-TERM> 0
28,750
1,500
<COMMON> 19,449
<OTHER-SE> 149,398
<TOTAL-LIABILITIES-AND-EQUITY> 2,155,025
<INTEREST-LOAN> 67,117
<INTEREST-INVEST> 4,776
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 71,893
<INTEREST-DEPOSIT> 31,467
<INTEREST-EXPENSE> 36,972
<INTEREST-INCOME-NET> 34,921
<LOAN-LOSSES> 1,525
<SECURITIES-GAINS> 742
<EXPENSE-OTHER> 53,518
<INCOME-PRETAX> 3,625
<INCOME-PRE-EXTRAORDINARY> 3,625
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,408
<EPS-PRIMARY> .18
<EPS-DILUTED> .16
<YIELD-ACTUAL> 8.72
<LOANS-NON> 27,704
<LOANS-PAST> 1,928
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 20,776
<CHARGE-OFFS> 1,269
<RECOVERIES> 305
<ALLOWANCE-CLOSE> 20,296
<ALLOWANCE-DOMESTIC> 20,296
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 20,296
</TABLE>
<PAGE> 1
Exhibit 99.0
REVIEW REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Republic Bancshares, Inc.:
We have reviewed the accompanying consolidated balance sheet of Republic
Bancshares, Inc. (a Florida corporation) and subsidiaries as of June 30, 1998,
and the related consolidated statements of operations and cash flows for the
three-month and six-month periods ended June 30, 1998, and the consolidated
statement of stockholders' equity for the period ended June 30, 1998. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Republic Bancshares, Inc. and
subsidiaries as of December 31, 1997, and the related consolidated statements of
operations, stockholders' equity and cash flows for the year then ended (not
presented separately herein), and, in our report dated March 13, 1998, we
expressed an unqualified opinion on those statements. In our opinion, the
information set forth in the accompanying consolidated balance sheet as of
December 31, 1997, is fairly stated, in all material respects, in relation to
the consolidated balance sheet from which it has been derived.
ARTHUR ANDERSEN LLP
Tampa, Florida,
August 13, 1998
