<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, 1999
[ ] 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
(727) 823-7300
(Registrant's Telephone Number, Including Area Code)
N/A
- -------------------------------------------------------------------------------
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 10,502,981 SHARES OUTSTANDING AT JULY 26, 1999
- -------------------------------------- ----------------------------------------------
</TABLE>
<PAGE> 2
REPUBLIC BANCSHARES, INC.
INDEX
PART I. FINANCIAL INFORMATION (all financial information for prior periods
has been restated for the mergers with Lochaven Federal Savings and
Loan Association and Bankers Savings Bank, F.S.B.)
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Consolidated Balance Sheets - June 30, 1999 (unaudited)
and December 31, 1998.........................................................................1
Consolidated Statements of Operations -
Three and six month periods ended June 30, 1999 and 1998 (all unaudited)......................2
Consolidated Statements of Stockholders' Equity -
Year ended December 31, 1998 and Six months ended June 30, 1999 (unaudited)...................3
Consolidated Statements of Comprehensive Income
Six month periods ended June 30, 1999 and 1998 (all unaudited)................................3
Consolidated Statements of Cash Flows -
Three and six month periods ended June 30, 1999 and 1998 (all unaudited)......................4
Notes to Consolidated Financial Statements (unaudited)..........................................5
Selected Quarterly Financial and Other Data (unaudited)........................................10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS......................................................................13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS..............................................................................22
ITEM 2. SALE OF THE SAVINGS BANK.......................................................................23
ITEM 3. EXHIBITS AND REPORTS ON FORM 8-K...............................................................23
SIGNATURES...............................................................................................24
</TABLE>
<PAGE> 3
REPUBLIC BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS - JUNE 30, 1999 AND DECEMBER 31, 1998
($ in thousands, except share data)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
---- ----
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and due from banks $ 45,128 $ 46,143
Interest bearing deposits in banks 12,439 3,467
Federal funds sold 148,000 93,000
Investment securities (all available for sale) 36,063 31,003
Mortgage-backed and mortgage-related securities:
Available for sale 268,960 32,713
Trading 40,105 66,067
FHLB stock 13,931 11,152
Loans held for sale -- 184,176
Loans, net of allowance for loan losses 1,850,773 1,868,212
Premises and equipment, net 56,532 60,274
Other real estate acquired through foreclosure, net 4,397 4,951
Accrued interest receivable 13,870 13,452
Goodwill and premium on deposits 34,936 36,916
Other assets 48,691 53,591
----------- -----------
Total assets $ 2,573,825 $ 2,505,117
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits-
Noninterest bearing checking $ 125,489 $ 138,934
Interest checking 173,256 189,392
Money market 204,831 159,868
Savings 352,263 366,817
Time deposits 1,417,604 1,332,401
----------- -----------
Total deposits 2,273,443 2,187,412
Securities sold under agreements to repurchase 42,106 36,640
FHLB advances -- 25,000
Holding company senior debt 25,000 25,000
Holding company unsecured notes 7,000 7,000
Other liabilities 29,918 31,718
----------- -----------
Total liabilities 2,377,467 2,312,770
----------- -----------
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 $6.6 million at June 30, 1999 and December 31, 1998.) 1,500 1,500
Common stock ($2.00 par, 20,000,000 shares authorized, 10,502,821 and
10,323,194 shares issued and outstanding at June 30, 1999 and
December 31, 1998, respectively.) 21,005 20,646
Capital surplus 127,888 125,364
Retained earnings 21,813 16,103
Net unrealized (loss) on available for sale securities, net of tax effect (4,598) (16)
----------- -----------
Total stockholders' equity 167,608 163,597
----------- -----------
Total liabilities and stockholders' equity $ 2,573,825 $ 2,505,117
=========== ===========
</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 share data)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JUNE 30, FOR THE SIX MONTHS ENDED JUNE 30,
----------------------------------- ---------------------------------
1999 1998 1999 1998
---- ---- ---- ----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 40,951 $ 38,071 $ 84,033 $ 71,437
Interest on investment securities 490 588 1,026 1,184
Interest on mortgage-backed securities 3,324 361 3,918 986
Interest on trading securities 689 315 1,639 1,016
Interest on federal funds sold 1,128 723 2,364 1,197
Interest on other investments 383 264 664 462
------------ ----------- ------------ -----------
Total interest income 46,965 40,322 93,644 76,282
INTEREST EXPENSE:
Interest on deposits 23,158 17,926 46,272 34,217
Interest on FHLB advances -- 2,869 157 4,824
Interest on senior debt 440 -- 833 --
Interest on unsecured notes 133 -- 269 --
Interest on other borrowings 471 507 927 819
------------ ----------- ------------ -----------
Total interest expense 24,202 21,302 48,458 39,860
------------ ----------- ------------ -----------
Net interest income 22,763 19,020 45,186 36,422
PROVISIONS FOR LOAN LOSSES 1,410 1,078 2,932 1,616
------------ ----------- ------------ -----------
Net interest income after provision
for loan losses 21,353 17,942 42,254 34,806
------------ ----------- ------------ -----------
NONINTEREST INCOME:
Service charges on deposit accounts 1,164 998 2,295 1,849
Loan service fees 1,718 73 3,603 659
Other loan fee income 1,051 628 1,953 1,308
Gain on sale of loans, net 464 1,096 3,258 1,966
Income from mortgage banking activities -- 8,426 -- 18,411
Gain (loss) on securities, net (109) 521 (245) 743
Other operating income 1,512 1,159 2,299 2,032
------------ ----------- ------------ -----------
Total noninterest income 5,800 12,901 13,163 26,968
NONINTEREST EXPENSES:
General and administrative
("G&A") expenses 20,685 31,987 43,032 57,188
Merger expenses -- 420 -- 423
Provision for losses on ORE -- 120 -- 40
Other ORE (income) expense, net (130) (16) (488) (8)
Amortization of goodwill
& premium on deposits 970 160 1,980 319
------------ ----------- ------------ -----------
Total noninterest expenses 21,525 32,671 44,524 57,962
Income (loss) before income taxes &
minority interest 5,628 (1,828) 10,893 3,812
Income tax (provision) benefit (2,219) 736 (4,209) (1,418)
------------ ----------- ------------ -----------
Income (loss) before minority interest 3,409 (1,092) 6,684 2,394
Minority interest in income from
subsidiary trust (net of tax) (421) (422) (842) (843)
------------ ----------- ------------ -----------
NET INCOME (loss) $ 2,988 $ (1,514) $ 5,842 $ 1,551
============ =========== ============ ===========
PER SHARE DATA:
Net income (loss) per common and
common equivalent share - diluted $ .26 $ (.17) $ .52 $ .17
============ =========== ============ ===========
Weighted average common & common
equivalent shares outstanding-diluted 11,359,392 8,840,330 11,302,980 9,240,762
============ =========== ============ ===========
Net income (loss) per common share - basic $ .28 $ (.17) $ .56 $ .19
============ =========== ============ ===========
Weighted average common shares
outstanding - basic 10,493,214 8,840,330 10,440,377 8,224,572
============ =========== ============ ===========
</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, 1998 AND
THE SIX MONTHS ENDED JUNE 30, 1999 (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, 1997 75,000 $1,500 7,602,992 $15,206 $ 56,553 $ 28,789 $ 482 $ 102,530
Net loss for the twelve months
ended December 31, 1998 -- -- -- -- -- (12,421) -- (12,421)
Net unrealized losses on
available for sale securities,
net of tax effect -- -- -- -- -- -- (498) (498)
Exercise of stock options -- -- 78,052 156 662 -- -- 818
Issuance of common stock -- -- 2,642,150 5,284 67,598 -- -- 72,882
Additional paid-in capital from
performance stock options -- -- -- -- 551 -- -- 551
Dividends on preferred
stock -- -- -- -- -- (265) -- (265)
------ ------ ---------- ------- -------- -------- ------- ---------
BALANCE, DECEMBER 31, 1998 75,000 1,500 10,323,194 20,646 125,364 16,103 (16) 163,597
Net income for the six
months ended June 30, 1999 -- -- -- -- -- 5,842 -- 5,842
Net unrealized loss on
available for sale securities,
net of tax -- -- -- -- -- -- (4,582) (4,582)
Exercise of stock options -- -- 179,627 359 1,815 -- -- 2,174
Additional paid-in capital from
nonqualified/performance
stock options -- -- -- -- 709 -- -- 709
Dividends on preferred
stock -- -- -- -- -- (132) -- (132)
------ ------ ---------- ------- -------- -------- ------- ---------
BALANCE, JUNE 30, 1999 75,000 $1,500 10,502,821 $21,005 $127,888 $ 21,813 $(4,598) $ 167,608
====== ====== ========== ======= ======== ======== ======= =========
</TABLE>
REPUBLIC BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
($ in thousands)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30,
1999 1998
---- ----
<S> <C> <C>
Net income $ 5,842 $ 1,551
Unrealized losses on securities:
Unrealized holding losses, net of tax effect during period (4,827) 427
Less reclassification adjustment for gains realized in net income 245 (461)
------- -------
Net unrealized losses (4,582) (34)
------- -------
Comprehensive income $ 1,260 $ 1,517
======= =======
</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, OR THE SIX MONTHS ENDED JUNE 30,
----------------------------------- --------------------------------
1999 1998 1999 1998
---- ---- ---- ----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 2,988 $ (1,514) $ 5,842 $ 1,551
Reconciliation of net income to net cash
provided by (used in):
Provision for loan and ORE losses 1,410 1,198 2,932 1,656
Depreciation and amortization, net 4,749 3,951 9,389 5,400
Amortization of premium (accretion)
of fair value, net 3,920 (333) 5,181 192
Gain on sale of loans (465) (9,522) (3,258) (20,378)
Loss/(Gain) on sale of investment securities 109 (520) 244 (742)
(Gain) on sale of ORE (239) (104) (662) (111)
Capitalization of mortgage servicing/residual interest (857) (17,009) (3,450) (21,217)
Net decrease in deferred tax asset (97) (960) 760 62
Loss/(Gain) on disposal of premises & equipment 203 -- 210 (2)
Net decrease (increase) in other assets 4,558 (3,711) 4,663 (4,691)
Net increase (decrease) in other liabilities 882 37,458 (1,802) 34,068
--------- --------- --------- ---------
Net cash provided by (used in)
operating activities 17,161 8,934 20,049 (4,212)
INVESTING ACTIVITIES:
Net decrease (increase) in loans 7,455 (148,719) 116.630 (363,081)
Proceeds from excess of deposit liabilities
assumed over assets acquired (net) -- 46,613 -- 46,613
Proceeds from sales & maturities of:
Investment securities held-to-maturity 2,000 2,000
Mortgage-backed securities available for sale -- 10,767 1,552 37,055
Investment securities available for sale 128,000 3,250 131,500 7,250
Mortgage-backed securities in trading portfolio -- 8,379 -- 8,379
Purchase of investment securities AFS (1,899) (8,013) (136,767) (28,150)
Purchase of mortgage-backed securities AFS (102,711) -- (155,940) --
Purchase of mortgage-backed securities
in trading portfolio -- (12,000) -- (12,000)
Principal repayment on mortgage-backed securities 7,763 4,900 14,090 8,345
(Purchase) redemption of FHLB stock 27 2,753 (2,779) (1,994)
Disposal/(purchase) of premises & equipment, net (1,737) (5,443) (110) (7,243)
Proceeds from sale of ORE 2,528 1,071 4,947 2,135
Investments in unconsolidated subsidiary -- 10,817 -- --
Investment in other real estate owned, net 160 (267) 322 (575)
--------- --------- --------- ---------
Net cash used in investing activities 39,586 (83,892) (26,555) (301,266)
FINANCING ACTIVITIES:
Net increase in deposits 85,081 118,242 86,245 182,338
Net (decrease) increase in repurchase agreements (4,612) 18,544 5,466 24,441
(Repayment) proceeds from FHLB advances, net -- (135,000) (25,000) 87,500
Proceeds from issuance of common stock 449 73,904 2,884 74,067
Dividends on perpetual preferred stock (66) (66) (132) (132)
--------- --------- --------- ---------
Net cash provided by (used in)
financing activities 80,852 75,624 69,463 368,214
Net increase (decrease) in cash and
cash equivalents 137,599 666 62,957 62,736
Cash and cash equivalents, beginning of period 67,968 150,140 142,610 88,070
--------- --------- --------- ---------
Cash and cash equivalents, end of period $ 205,567 $ 150,806 $ 205,567 $ 150,806
========= ========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for-
Interest $ 24,186 $ 6,326 $ 63,490 $ 34,930
Income taxes (refunded)/paid (4,556) 3,035 (4,539) 3,106
</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 necessary
to present fairly the financial position of the Company as of June 30, 1999 and
the results of operations and cash flows, for the three and six month periods
ended June 30, 1999 and 1998. The December 31, 1998 statement of financial
position was derived from audited financial statements. The accounting and
reporting policies of the Company and its wholly-owned subsidiaries, Republic
Bank (the "Bank"), RBI Capital Trust I ("RBI") and Republic Bank, F.S.B. (the
"Savings 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, the Savings Bank, the Bank, and the Bank's wholly-owned
subsidiaries, Republic Insurance Agency, Inc. and VQH Development, Inc. All
financial information for 1998 has been restated for the acquisitions of
Bankers Savings Bank, F.S.B. ("BSB") and Lochaven Federal Savings and Loan
Association ("Lochaven"), both consummated in 1998. All significant
inter-company accounts and transactions have been eliminated. The Company's
primary source of income is from its banking subsidiary, which operates 81
branches throughout Florida. The Savings Bank operates two branches, one in
Pinellas County, Florida and one in Brunswick, Georgia. The Bank's primary
source of revenue has been derived from net interest income on loans and
investments.
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, 1998, filed with the Securities and
Exchange Commission ("SEC") on Form 10-K. The results for the six months ended
June 30, 1999, are not necessarily indicative of the results to be expected for
the fiscal year ending December 31, 1999.
Reclassifications
Certain reclassifications have been made to prior period financial statements
to conform with the June 1999 financial statement presentation.
Recent Accounting Developments
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. The adoption of
SOP 98-1 did not have a material impact on the accompanying consolidated
financial statements.
5
<PAGE> 8
Accounting for Derivative Instruments and Hedging Activities
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards ("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
entities recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. In
June 1999 the FASB issued SFAS No. 137, "Accounting for Derivative Instruments
and Hedging activities - Deferral of the Effective Date of FASB Statement No.
133", which delayed the date for implementation to all fiscal quarters
beginning after June 15, 2000. Management does not believe that the adoption of
SFAS No. 133 will have a material effect upon the results of operations of the
Company.
2. MORTGAGE-BACKED AND MORTGAGE-RELATED SECURITIES
During the second quarter ended June 30, 1999, the Company reclassified its
mortgage-backed securities resulting from securitization of its loans held for
sale from the trading category to available for sale. As of June 30, 1999,
there were $269.0 million of mortgage backed securities in the available for
sale category and $40.1 million of mortgage-related securities held as trading
assets. Remaining in the trading category were: (i) a $10.9 million subordinate
tranche purchased from the Company's securitization of High LTV Loans in June
1998; (ii) $24.6 million in overcollateralization and residual interests in
cash flows from securitizations in December 1997 and June 1998; and (iii) $4.6
million of excess servicing interest only strips.
The market values assigned to the mortgage-backed securities classified as
available for sale were derived using market quotations at June 30, 1999.
However, market value quotations for the Company's mortgage-related securities
classified as trading assets, principally retained interests in the excess cash
flows from securitizing High Loan-to-Value ("High LTV Loans"), were generally
not available. These retained interests were valued based on estimates of the
present value of the future excess cash flows from the underlying pool or pools
of loans.
In valuing the Company's mortgage-related securities, management has conducted
surveys and analyses of current market conditions and has relied on third
parties to assist in this process. The calculation of the present value of the
excess cash flows principally include the following assumptions: (i) the future
rate of prepayment; (ii) the discount rate used to calculate present value; and
(iii) the estimate for credit losses on loans sold. The estimated life of the
securitized loans depends on the assumed annual prepayment rate which is a
function of estimated voluntary (full and partial) and involuntary
(liquidations) prepayments. The prepayment rate used in the valuation process
represents management's expectations of future prepayment rates based on prior
observed and future expected loan performance, the type of loans in the
relevant pool and industry data. The rate of prepayment may be affected by a
variety of economic and other factors, including prevailing interest rates, the
presence of prepayment penalties, the loan-to-value ratios and the credit
grades of the loans included in the securitization. Management has used
prepayment estimates resulting in an initial average expected life of the pool
of loans ranging from 4.0 to 4.5 years, cumulative lifetime default rates
ranging from 9.5% to 10% and discount rates ranging from 14% to 15%. To date,
the retained interests have performed in a manner consistent with management's
assumptions.
6
<PAGE> 9
3. LOANS AND LOANS HELD FOR SALE
Loans at June 30, 1999 and December 31, 1998, are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
---- ----
<S> <C> <C>
Real estate mortgage loans:
One-to-four family residential $ 870,968 $ 871,462
Nonconforming mortgages 86,444 72,980
Multifamily residential 84,286 92,209
Commercial real estate 356,235 379,797
Construction/land development 159,098 130,415
----------- -----------
Mortgage loans secured by first liens 1,557,031 1,546,863
Commercial (business) loans 78,140 84,002
Consumer loans 30,386 43,857
Home equity loans 106,500 104,803
High LTV Loans 104,925 116,764
----------- -----------
Total gross portfolio loans 1,876,982 1,896,289
Less-allowance for loan losses (26,209) (28,077)
----------- -----------
Total loans held for portfolio 1,850,773 1,868,212
Loans held for sale:
Residential first lien mortgage loans -- 184,176
----------- -----------
Total loans $ 1,850,773 $ 2,052,388
=========== ===========
</TABLE>
Mortgage loans serviced for others as of June 30, 1999 and December 31, 1998
were $1.6 billion and $1.5 billion, respectively. Included in the total amount
serviced for others were High LTV Loans amounting to $777.5 million and $835.0
million at June 30, 1999 and December 31, 1998, respectively. Mortgage loan
servicing rights (both purchased and originated) amounted to $23.3 million and
$22.9 million at June 30, 1999 and December 31, 1998, respectively. Loans on
which interest was not being accrued at June 30, 1999 and December 31, 1998,
totaled approximately $33.9 million and $35.6 million, respectively. Loans past
due 90 days or more and still accruing interest at June 30, 1999 and December
31, 1998 totaled $41,000 and $1.2 million, 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 and recoveries are either charged or credited
to the allowance. The Company's allowance is an amount that management believes
will be adequate to absorb probable 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 June 30, 1999, was comprised of: (i) $23.2
million allocated to originated loans (including loans acquired through mergers
and acquisitions); (ii) $547,000 allocated to loans acquired from CrossLand
Savings, F.S.B. in December 1993, (the "CrossLand Portfolio"); (iii) $1.0
million allocated to a pool of loans purchased in March 1995 (the "March 1995
Purchase"); (iv) $473,000 allocated to a pool of loans purchased in July 1997
(the "July 1997 Purchase"); and (v) $967,000 allocated to the other pools of
purchased loans. Of the amounts allocated to the Crossland Portfolio, the March
1995 Purchase, the July 1997 Purchase and other purchased loan portfolios, $2.1
million are acquired reserves which only are available to absorb losses on the
related acquired loans. In addition to amounts allocated to the allowance at
June 30, 1999, the balance of
7
<PAGE> 10
unaccreted loan discount available to absorb losses on pools of portfolios of
purchased loans exceeding amounts transferred to the allowance amounted to $3.6
million.
Changes in the allowance for loan losses were as follows (in thousands):
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
---------------------------------
1999 1998
---- ----
<S> <C> <C>
Balance, beginning of period $ 28,077 $ 22,023
Provision for possible loan losses 2,932 1,616
Loan discount (net) allocated to (from) purchased portfolios -- (1,041)
Acquired reserve-purchased portfolios 275 --
Loans charged off (6,082) (1,389)
Recoveries of loans charged off 1,007 296
-------- --------
Net charge-offs (5,075) (1,093)
-------- --------
Balance, end of period $ 26,209 $ 21,505
======== ========
</TABLE>
Of the $5.1 million of net charge-offs in the first half of 1999, $2.8 million
resulted from losses on High LTV Loans taken into portfolio in the fourth
quarter of 1998.
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.
State banking regulations require the Bank to dispose of all ORE acquired
through foreclosure within five years of acquisition, with a possibility for
additional extension, each of up to five years. During the quarter ended March
31, 1999, the Bank sold a tract of land carried at $884,000 acquired through
foreclosure in 1988 that had partially been developed as a shopping center
site. The Bank has been granted an extension on a second piece of property,
with a book value of $177,000, until November 30, 1999. This property,
consisting of residential lots, is currently under contract.
5. 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. One of the primary objectives of the Company
is to reduce fluctuations in net interest income caused by changes in interest
rates.
To manage interest rate risk, the Board of Directors has established interest
rate risk policies and procedures which delegate to the Asset/Liability
Committee the responsibility to monitor and report on interest rate risk,
devise strategies to manage interest rate risk, monitor loan originations and
deposit activity, and approve pricing strategies.
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
asset/liability management 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 effect. Trading securities include the
residual interest in cash flows resulting from securitizations of High LTV
Loans and the excess spread on interest only-strips receivable. The Company's
trading securities are valued based on present value techniques which
management believes reasonably approximate market values. Any unrealized gains
or losses are included in the statement of operations under "Gain on sale of
securities, net".
8
<PAGE> 11
6. RESTRUCTURING COSTS AND OTHER RELATED CHARGES
In the fourth quarter of 1998 the Company significantly reduced the size and
scope of its mortgage banking activities. The Company ceased originating High
LTV Loans and substantially reduced its originations of nonconforming first
mortgage loans. The Company also closed its out-of-state lending offices and
ceased all telemarketing efforts that were the source of the majority of the
loan originations from its mortgage banking unit.
In connection with this reorganization of mortgage banking activities, a
restructuring charge of approximately $6.7 million was recorded, which included
severance benefits payable to mortgage banking employees whose positions were
eliminated, outplacement services for those employees, write-downs for
abandoned assets, costs related to the consolidation of facilities and legal
costs directly related to the restructuring. In addition, an $818,000 charge
was recorded for legal and other costs related to the reorganization but not
includable in the restructuring charge. The Company has substantially completed
the restructuring process of the mortgage banking unit.
Expenses charged against the restructuring accrual for the six months ended
June 30, 1999 are as follows:
<TABLE>
<S> <C>
Balance at December 31, 1998 $ 6,673
Deductions:
Severance & benefits (4,274)
Outplacement costs (200)
Abandonment of assets (614)
Consolidation of facilities (1,335)
Legal costs (114)
---------
Ending balance at June 30, 1999 $ 136
=========
</TABLE>
7. PRIOR YEAR BUSINESS SEGMENT INFORMATION
As a result of the restructuring of the Company's mortgage banking operation in
the fourth quarter of 1998, that operation now represents an insubstantial
portion of the Company's overall business activities during 1999 and has ceased
to be a reportable business segment. The Company's operations during 1998 were
divided into two business segments; commercial banking and mortgage banking.
Commercial banking activities included the Company's lending for portfolio
purposes, deposit gathering through the retail branch network, investment and
liquidity management. Mortgage banking activities, which operated through a
separate division of the Bank, included originating and purchasing mortgage
loans for sale or securitization. The Bank provided support for its mortgage
banking division in areas such as secondary marketing and data processing. All
funding for the mortgage banking division was provided through the Bank. The
following are the prior year business segment results of operation for the six
months ended June 30, 1998. The Company elected to report its business segments
without allocation of income taxes and minority interests.
<TABLE>
<CAPTION>
BUSINESS SEGMENT DATA
($ in thousands)
1998
--------------------------------------------------
COMMERCIAL MORTGAGE COMPANY
BANKING BANKING TOTAL
---------- --------- ----------
<S> <C> <C> <C>
Total assets (at period-end) $1,872,488 $ 410,113 $2,282,601
========== ========= ==========
Gross revenues $ 36,133 $ 27,257 $ 63,390
========== ========= ==========
Net income before taxes and
minority interest $ 7,665 $ (3,853) $ 3,812
========== ========= ==========
</TABLE>
9
<PAGE> 12
SELECTED QUARTERLY FINANCIAL AND OTHER DATA
FIVE CONSECUTIVE QUARTERS (UNAUDITED)
($ in thousands, except share data)
<TABLE>
<CAPTION>
QUARTERS ENDED
--------------------------------------------------------------------------------
JUNE 1999 MAR. 1999 DEC. 1998 SEPT. 1998 JUNE 1998
--------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Interest income $ 46,965 $ 46,679 $ 45,734 $ 50,777 $ 40,322
Interest expense 24,202 24,256 25,303 24,446 21,302
------------ ------------ ------------ ------------ -----------
Net interest income 22,763 22,423 20,431 26,331 19,020
Loan loss provision 1,410 1,522 8,305 4,340 1,078
------------ ------------ ------------ ------------ -----------
Net interest income after loan loss provision 21,353 20,901 12,126 21,991 17,942
Noninterest income 5,800 7,363 3,424 25,765 12,901
General & administrative ("G&A") expenses 20,685 22,346 37,214 34,615 31,987
Other noninterest expense 840 651 11,403 1,222 684
------------ ------------ ------------ ------------ -----------
Net income (loss) before income taxes
& minority interest 5,628 5,267 (33,067) 11,919 (1,828)
Income tax (provision) benefit (2,219) (1,991) 12,391 (4,370) 736
Minority interest in income from
subsidiary trust (421) (421) (421) (424) (422)
------------ ------------ ------------ ------------ -----------
Net income (loss) $ 2,988 $ 2,855 $ (21,097) $ 7,125 $ (1,514)
============ ============ ============ ============ ===========
PER SHARE DATA:
Earnings per share - diluted $ .26 $ .25 $ (2.04) $ .63 $ (.17)
============ ============ ============ ============ ===========
Weighted average shares outstanding - diluted 11,359,392 11,246,636 10,322,263 11,238,535 8,840,330
============ ============ ============ ============ ===========
Earnings per share - basic $ .28 $ .27 $ (2.04) $ .69 $ (.17)
============ ============ ============ ============ ===========
Weighted average shares outstanding - basic 10,493,214 10,386,952 10,322,263 10,307,777 8,840,330
============ ============ ============ ============ ===========
BALANCE SHEET DATA (AT PERIOD-END):
Total assets $ 2,573,825 $ 2,493,425 $ 2,505,117 $ 2,455,397 $ 2,282,601
Investment & mortgage-backed securities 345,128 355,024 129,783 115,891 115,792
Loans held for sale -- 80,915 184,176 318,854 410,113
Portfolio loans, net of unearned income 1,876,982 1,836,355 1,896,289 1,477,124 1,477,814
Allowance for loan losses 26,209 27,442 28,077 20,530 21,505
Goodwill & premium on deposits 34,936 35,906 36,916 37,880 28,765
Deposits 2,273,443 2,188,470 2,187,412 2,138,970 1,853,535
Stockholders' equity 167,608 168,448 163,597 185,028 177,563
Book value per share (dollars) 14.89 15.01 14.77 16.71 16.07
SELECTED FINANCIAL RATIOS:
Return on average assets .48% .47% (3.37)% 1.20% (.30)%
Return on average equity 7.23 7.11 (45.03) 14.32 (4.23)
Equity to assets 6.51 6.76 6.53 7.54 7.78
Equity and minority interest in preferred
subsidiary to assets 7.63 7.91 7.68 8.71 9.04
Portfolio loans/deposit ratio 82.56 83.91 86.69 69.06 79.73
Net interest spread 3.53 3.46 3.17 4.38 3.50
Net interest margin 3.87 3.81 3.59 4.80 3.91
G & A expense to average assets (1) 3.30 3.61 2.78 2.75 2.73
G & A efficiency ratio (1) 72.42 75.02 73.75 63.83 75.14
Loan loss allowance to portfolio loans 1.40 1.49 1.48 1.39 1.46
Loan loss allowance to nonperforming loans 77.11 79.16 74.21 68.26 67.65
CAPITAL RATIOS:
Tier 1 (leverage) - Company 5.83 5.76 5.49 6.13 7.76
Tier 1 (leverage) - Bank 6.96 6.85 6.66 7.10 7.54
Tier 1/risk-assets - Company 8.91 8.72 7.72 9.51 9.85
Tier 1/risk assets - Bank 10.59 10.35 9.27 11.07 9.57
Risk-based capital - Company 10.21 10.02 9.01 10.75 10.91
Risk-based capital - Bank 11.88 11.65 10.56 12.32 10.63
OTHER DATA (AT PERIOD-END):
Number of branch banking offices 83 70 62 58 56
Number of full-time equivalent employees 1,151 1,297 1,733 1,702 1,558
</TABLE>
(1) Ratios prior to 1999 include the commercial banking segment only.
10
<PAGE> 13
REPUBLIC BANCSHARES, INC.
QUARTERLY NONPERFORMING ASSET TREND
(unaudited; $ in thousands)
<TABLE>
<CAPTION>
QUARTERS ENDED
---------------------------------------------------------------------------------
JUNE 1999 MAR. 1999 DEC. 1998 SEPT. 1998 JUNE 1998
--------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
NON-PERFORMING LOANS:
Residential first lien $ 25,621 $ 26,398 $ 24,714 $ 20,797 $ 21,610
Commercial real estate 5,483 4,764 9,699 6,647 9,251
Multifamily residential 182 409 183 186 --
Commercial (business) 950 1,386 1,312 649 595
Home equity 872 1,085 713 320 225
Consumer & other 72 160 203 351 213
High LTV 808 464 -- 290 --
------------ ------------ ------------ ------------ -----------
Total nonperforming loans (1) 33,988 34,666 36,824 29,240 31,894
Total nonperforming other assets 820 901 1,010 1,091 2,231
OTHER REAL ESTATE:
Residential 3,176 3,567 3,069 3,058 4,335
Commercial-build & sell -- 620 884 2,004 2,480
Commercial bulk sale 1,221 2,109 998 981 1,823
------------ ------------ ------------ ------------ -----------
Total ORE 4,397 6,296 4,951 6,043 8,638
Total nonperforming assets $ 39,205 $ 41,863 $ 42,785 $ 36,374 $ 42,763
============ ============ ============ ============ ===========
(1) Represents all loans on nonaccrual and 90 days and over past due
MEMORANDUM:
Past due 90+ days-still accruing (incl. above) $ 41 $ 289 $ 1,232 $ 266 $ 2,036
Nonperforming loans/portfolio loans 1.81% 1.89% 1.94% 2.04% 2.15%
Nonperforming assets/assets 1.52 1.68 1.71 1.48 1.87
ORE/assets 0.17 0.25 0.20 0.25 0.38
LOAN LOSS ALLOWANCE TO NONPERFORMING LOANS:
Originated portfolio 85.79 80.87 74.71 71.32 78.44
July 1997 Purchase 34.03 27.01 35.70 35.22 52.11
March 1995 Purchase 128.73 111.62 108.06 111.62 263.80
CrossLand portfolio 43.31 41.65 43.50 50.80 409.57
Other purchased portfolios 26.92 79.86 113.69 45.08 17.82
Total 77.11 79.16 74.21 68.26 67.65
OTHER LOAN DELINQUENCY DATA
30-89 DAYS PAST DUE:
Residential $ 13,782 $ 12,553 $ 17,032 $ 18,496 $ 21,788
Commercial/multifamily 4,140 6,958 7,128 7,583 6,266
Commercial (business) 1,872 1,540 2,082 1,101 3,924
Home equity 3,082 1,228 1,218 598 175
Consumer & other 293 453 720 519 517
High LTV 1,265 1,935 1,485 1,231 --
------------ ------------ ------------ ------------ -----------
Total $ 24,434 $ 24,667 $ 29,665 $ 29,528 $ 32,670
============ ============ ============ ============ ===========
</TABLE>
11
<PAGE> 14
REPUBLIC BANCSHARES, INC.
QUARTERLY CREDIT LOSS EXPERIENCE
(unaudited; $ in thousands)
<TABLE>
<CAPTION>
QUARTERS ENDED
---------------------------------------------------------------------------------
JUNE 1999 MAR. 1999 DEC. 1998 SEPT. 1998 JUNE 1998
--------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
DAILY AVERAGE LOANS OUTSTANDING:
Residential $ 880,883 $ 976,233 $ 962,492 $ 883,735 $ 852,224
Commercial real estate/multifamily 622,678 629,870 592,009 556,171 497,029
Commercial (business) 180,263 197,055 188,348 152,522 129,984
Home equity 69,511 72,702 67,858 53,280 34,749
Consumer & other 30,254 32,476 34,576 29,795 28,256
High LTV 106,168 113,113 107,379 230,937 186,684
------------ ------------ ------------ ------------ -----------
Total $ 1,889,757 $ 2,021,449 $ 1,952,662 $ 1,906,440 $ 1,728,926
============ ============ ============ ============ ===========
Allowance for loan losses
at beginning of period $ 27,442 $ 28,077 $ 20,530 $ 21,505 $ 21,800
Loan discount (net) allocated to
(from) purchased portfolios -- -- -- (3,262) (1,041)
Provision for loan losses 1,410 1,522 8,305 4,340 1,078
Acquired reserve-purchased loans 275 -- -- -- --
CHARGE-OFFS:
Residential (678) (709) (328) (772) (158)
Commercial real estate/multifamily (634) (17) -- -- --
Commercial (business) (176) (6) (129) (1,057) (50)
Home equity (433) (32) (6) -- --
Consumer (140) (188) (160) (181) (238)
Other (35) (160) (268) (104) (66)
High LTV (1,468) (1,406) -- -- --
------------ ------------ ------------ ------------ -----------
Total (3,564) (2,518) (891) (2,114) (512)
RECOVERIES:
Residential 559 25 55 17 28
Commercial real estate/multifamily 3 5 -- -- 90
Commercial (business) 16 111 7 19 16
Home equity 6 -- 12 -- --
Consumer 35 43 36 18 45
Other 7 80 23 7 1
High LTV 20 97 -- -- --
------------ ------------ ------------ ------------ -----------
Total 646 361 133 61 180
NET CHARGE-OFFS (RECOVERIES):
Residential (119) (684) (273) (755) (130)
Commercial real estate/multifamily (631) (12) -- -- 90
Commercial (business) (160) 105 (122) (1,038) (34)
Home equity (427) (32) 6 -- --
Consumer (105) (145) (124) (163) (193)
Other (28) (80) (245) (97) (65)
High LTV (1,448) (1,309) -- -- --
------------ ------------ ------------ ------------ -----------
Total (2,918) (2,157) (758) (2,053) (332)
------------ ------------ ------------ ------------ -----------
Allowance for loan losses at
end of period $ 26,209 $ 27,442 $ 28,077 $ 20,530 $ 21,505
============ ============ ============ ============ ===========
NET CHARGE-OFFS (RECOVERIES) TO AVERAGE
LOANS - ANNUALIZED:
Residential .05% .28% .12% .36% .08%
Commercial real estate/multifamily .47 .01 -- -- (.08)
Commercial (business) .36 (.20) .24 .03 .12
Home equity 2.46 .16 (.04) -- --
Consumer & other 1.39 1.80 1.44 2.20 2.72
High LTV 5.46 4.64 -- -- --
------------ ------------ ------------ ------------ -----------
Total .62% .44% .16% .44% .08%
============ ============ ============ ============ ===========
</TABLE>
12
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
COMPARISON OF BALANCE SHEETS AT JUNE 30, 1999 AND DECEMBER 31, 1998
Overview
Total assets were $2.6 billion at June 30, 1999, a $68.7 million increase from
that at December 31, 1998. The mix of the Company's asset base changed
substantially as the Company sold its December 1998 inventory of loans held for
sale and reinvested those funds into U.S. Treasury and mortgage-backed
securities. At June 30, 1999, the Company no longer maintained an inventory of
loans held for sale. The percentage of portfolio loans and loans held for sale
to total assets was 72.9% and 83.0% at June 30, 1999 and December 31, 1998,
respectively.
Federal Funds Sold and Interest Bearing Deposits
Federal funds sold, all on an overnight basis, increased by $55.0 million from
$93.0 million at the prior year-end to $148.0 million at June 30, 1999,
primarily as a result of the investment of excess cash from deposit growth.
Mortgage-Backed and Mortgage-Related Securities
In the second quarter of 1999, the Company transferred $89.3 million of
mortgage-backed securities created through securitization of the Company's
residential loan production, which had been classified as trading assets, into
available for sale. As a result, in the six months ended June 30, 1999, the
Company increased its mortgage securities in the available for sale category by
$236.2 million through this reclassification and by purchases of securities
issued by the Government National Mortgage Association ("GNMA"). Mortgage
securities which remain in the trading category includes (i) a $10.9 million
subordinate tranche purchased from the Company's securitization of High LTV
Loans in June 1998; (ii) $24.7 million in overcollateralization and residual
interests in cash flows from securitizations in December 1997 and June 1998;
and (iii) $4.6 million excess servicing interest-only strips.
Loans and Loans Held for Sale
Total loans held for portfolio decreased by $19.3 million from $1.90 billion at
the prior year-end to $1.88 billion at June 30, 1999. At June 30, 1999, the
Company no longer maintained an inventory of loans held for sale. Real
estate-secured loans increased during the period by $10.2 million to $1.56
billion or 82.9% of total portfolio loans, while consumer loans declined by
$13.5 million, and High LTV Loans decreased by $11.8 million.
Allowance for Loan Losses
The allowance for loan losses amounted to $26.2 million at June 30, 1999,
(1.40% of portfolio loans) compared with $28.1 million (1.48% of portfolio
loans) at December 31, 1998. Activity relating to the allowance in 1999
included provisions for loan losses of $2.9 million, and loan charge-offs (net
of recoveries) of $5.1 million. Of the net amount of charge-offs, $2.8 million
resulted from High LTV Loans taken into portfolio in the fourth quarter of
1998.
Nonperforming Assets
Nonperforming assets amounted to $39.2 million or 1.52% of total assets at June
30, 1999, compared with $42.8 million or 1.71% of total assets at December 31,
1998. Nonperforming loans totaled $34.8 million at June 30, 1999, a decrease of
$3.0 million from the prior year-end total of $37.8 million. Nonperforming
13
<PAGE> 16
residential mortgage loans increased by $2.7 million, due primarily to
increased delinquency levels from loans transferred from held for sale to
portfolio at the end of 1998. This was offset by a decrease in nonperforming
commercial real estate and commercial (business) nonperforming loans of $6.0
million. ORE balances decreased by $554,000 to $4.4 million.
Deposits
Total deposits were $2.3 billion at June 30, 1999, an $86.0 million increase
from the prior year-end. Checking account, savings and money market accounts
decreased by $7.3 million while certificates of deposit increased by $85.2
million. Total deposits from the 24 new branches which comprise the Company's
1999 branch expansion program have increased by $133.9 million to $134.8
million at June 30, 1999.
Stockholders' Equity
Stockholders' equity was $167.6 million at June 30, 1999, or 6.51% of total
assets, compared to $163.6 million or 6.53% of total assets at December 31,
1998. At June 30, 1999, the Bank's Tier 1 ("Leverage") Capital ratio was 6.93%,
its Tier 1 Risk-Based Capital ratio was 10.36%, and its Total Risk-Based
Capital ratio was 11.66%, all in excess of minimum FDIC guidelines for an
institution to be considered a "well-capitalized" bank. The Company's ratios
were 5.84%, 8.77%, and 10.06%, respectively.
COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1999
AND 1998
Overview
Net income for the second quarter of 1999 was $3.0 million, or $.26 per share
(on a diluted basis), compared with a net loss of $1.5 million, or $.17 per
share, on the same basis for the same period in 1998.
The Company's net income for the quarterly periods was as follows, using the
following components: (i) base net income (which excludes items ii - iv); (ii)
the contribution from the 24 new branches opened in late 1998 and 1999; (iii)
direct costs of mortgage production activities, net of gains on loans held for
sale; and (iv) other unusual or infrequently occurring items; ($ in thousands,
net of tax effect).
<TABLE>
<CAPTION>
QUARTERS ENDED JUNE 30,
1999 1998
---- ----
(UNAUDITED)
<S> <C> <C>
BASE NET INCOME DETAIL:
Net interest income $ 13,364 $ 11,362
Loan loss provision (854) (644)
Noninterest income 3,201 2,019
G & A expense (9,963) (10,082)
Amortization of goodwill & premium on deposits (588) (96)
-------- --------
After-tax base net income 5,160 2,559
OTHER AFTER-TAX NET INCOME (LOSS) COMPONENTS:
New branches (967) --
Mortgage production activities (1,146) (3,993)
Sale of portfolio loans 282 655
ORE & other non-operating items 79 (313)
-------- --------
Net income before minority interest 3,408 (1,092)
Minority interest (net of tax) (420) (422)
-------- --------
Net income $ 2,988 $ (1,514)
======== ========
</TABLE>
14
<PAGE> 17
Analysis of Net Interest Income (see table on page 16)
Net interest income for the three months ended June 30, 1999 was $22.8 million
compared with $19.0 million for the same period last year, a $3.7 million or
19.7% increase. Interest income was $47.0 million for the second quarter of
1999, an increase of $6.6 million over the same period in 1998. Interest
expense increased by $2.9 million. Average asset yield decreased by 41 basis
points from 8.44% for the same period of 1998 to 8.03% for 1999, primarily as a
result of a higher investment in securities and federal funds sold relative to
total earning assets. The average cost of interest-bearing liabilities also
declined by 41 basis points from 4.91% to 4.50%, primarily due to reduced
reliance on outside borrowings and lower costs for certificate of deposits. As
a result, net interest spread between the two periods remained level at 3.53%.
However, net interest margin, which includes the benefit of noninterest bearing
funds, declined slightly from 3.93% for 1998 to 3.87% for 1999.
Noninterest Income
Noninterest income for the three months ended June 30, 1999 was $5.8 million
compared with $12.9 million for the same period of 1998, a decrease of $7.1
million. Excluding gains on sale of loans and income from mortgage banking
activities, noninterest income was $5.3 million for the second quarter of 1999
compared to $3.4 million for the same period last year, an increase of $1.9
million or 55.9%. Loan service fees increased $1.6 million, other loan fee
income increased $423,000 and service charges on deposit accounts and other
deposit-related fee income sources increased $290,000. Included in the other
income line item for the second quarter of 1999 was $491,000 of income earned
on recovery of a reserve fund related to the July 1997 loan purchase.
The following table reflects the components of noninterest income for the three
months ended June 30, 1999, and 1998 (in thousands):
<TABLE>
<CAPTION>
For the Three Months Ended June 30,
---------------------------------------
Increase
1999 1998 (Decrease)
---- ---- ----------
<S> <C> <C> <C>
Service charges on deposit accounts $ 1,164 $ 998 $ 166
Loan servicing fees 1,718 73 1,645
Other loan fee income 1,051 628 423
Gains on sales of loans, net 464 1,096 (632)
Income from mortgage banking operations -- 8,426 (8,426)
Income from special purpose corporation -- 434 (434)
Gain on sale of securities, net -- 128 (128)
Net trading account (loss) gain (109) 393 (502)
Generations Gold fee income 345 221 124
Foreign exchange income 29 24 5
Other income 1,138 480 658
------- ------- -------
Total noninterest income $ 5,800 $12,901 $(7,101)
======= ======= =======
</TABLE>
[Balance of page intentionally left blank]
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 June 30, 1999 and 1998 (in thousands):
<TABLE>
<CAPTION>
Three Months Ended June 30,
----------------------------------------------------------------------------
1999 1998
--------------------------------------- ---------------------------------
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 $1,889,757 $ 40,951 8.65% $1,728,926 $38,071 8.73%
Investment securities 37,497 490 5.23 39,106 588 6.03
Mortgage-backed securities 222,391 3,324 5.98 21,456 361 6.73
Trading securities 65,530 689 4.21 33,913 315 3.71
Interest bearing deposits in banks 10,623 125 4.71 1,980 26 5.24
FHLB stock 13,939 258 7.44 13,133 238 7.28
Federal funds sold 94,964 1,128 4.70 56,184 723 5.09
---------- ---------- ---------- -------
Total interest earning assets 2,334,701 46,965 8.03 1,894,698 40,322 8.44
Noninterest earning assets 175,148 123,361
---------- ----------
Total assets $2,509,849 $2,018,059
========== ==========
Interest bearing liabilities:
Interest checking $ 179,144 343 .77 141,563 576 1.63%
Money market 196,701 1,825 3.72 70,121 297 1.70
Savings 70,915 273 1.55 55,758 290 2.09
Passbook Gold 287,715 2,983 4.16 264,730 3,249 4.92
Time deposits 1,348,788 17,734 5.27 967,793 13,514 5.60
FHLB advances -- -- -- 198,229 2,869 5.81
Other borrowings 75,877 1,044 5.52 40,423 507 5.03
---------- ---------- ---------- -------
Total interest bearing liabilities 2,159,140 24,202 4.50 1,738,617 21,302 4.91
---------- -------
Noninterest bearing liabilities 185,463 137,588
Stockholders' equity 165,246 141,854
---------- ----------
Total liabilities and equity $2,509,849 $2,018,059
========== ==========
Net interest income/net interest spread $ 22,763 3.53% $19,020 3.53%
========== ==== ======= ====
Net interest margin 3.87% 3.93%
==== ====
</TABLE>
<TABLE>
<CAPTION>
Increase (Decrease) Due to
---------------------------------------
Changes in Net Interest Income Volume Rate Total
- ------------------------------ ------- ------- --------
<S> <C> <C> <C>
Interest earning assets:
Loans, net $ 2,896 $ (16) $ 2,880
Investment securities 34 (132) (98)
Mortgage-backed securities 3,008 (45) 2,963
Trading securities 328 46 374
Interest bearing deposits in banks 102 (3) 99
FHLB stock 15 5 20
Federal funds sold 464 (59) 405
------- ------- -------
Total change in interest income 6,847 (204) 6,643
Interest bearing liabilities:
Interest checking 126 (359) (233)
Money market 920 608 1,528
Savings 68 (85) (17)
Passbook Gold 266 (532) (266)
Time deposits 5,338 (1,118) 4,220
FHLB advances (1,435) (1,434) (2,869)
Other borrowings 643 (106) 537
------- ------- -------
Total change in interest expense 5,926 (3,026) 2,900
------- ------- -------
Increase (decrease) in net interest income $ 921 $ 2,822 $ 3,743
======= ======= =======
</TABLE>
16
<PAGE> 19
Noninterest Expense
General and administrative ("G & A") expenses for the second quarter of 1999
were $20.7 million compared with $32.0 million for the same period last year, a
decrease of $11.3 million. These improvements were primarily attributable to
the reduced operating expenses associated with the Company's restructured
mortgage activities. Total noninterest expenses, which include G & A expense,
were $21.5 million for the three months ended June 30, 1999 compared with $32.7
million for the same period last year.
The following table reflects the components of noninterest expense for the
three months ended June 30, 1999 and 1998 (in thousands):
<TABLE>
<CAPTION>
For the Three Months Ended June 30,
------------------------------------------
Increase
1999 1998 (Decrease)
-------- -------- --------
<S> <C> <C> <C>
Salaries and benefits $ 10,422 $ 12,222 $ (1,800)
Net occupancy expense 3,919 3,082 837
Advertising 225 6,205 (5,980)
Data processing fees 1,327 854 473
FDIC and state assessments 301 276 25
Telephone expense 454 630 (176)
Legal and professional 384 793 (409)
Postage and supplies 824 5,586 (4,762)
Other operating expense 2,829 2,339 490
-------- -------- --------
Total G & A expenses 20,685 31,987 (11,302)
Merger expenses -- 420 (420)
Provision for losses on ORE -- 120 (120)
ORE expense, net of ORE income (130) (16) (114)
Amortization of premium on deposits
and goodwill 970 160 810
-------- -------- --------
Total noninterest expense $ 21,525 $ 32,671 $(11,146)
======== ======== ========
</TABLE>
COMPARISON OF RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1999
AND 1998
Overview
Net income for the first half of 1999 was $5.8 million, or $.52 per share (on a
diluted basis), compared with net income of $1.6 million, or $.17 per share, on
the same basis for the same period in 1998.
The Company's net income for the six month periods was as follows, using the
following components: (i) base net income (which excludes items ii - iv); (ii)
the contribution from new branches opened in late 1998 and 1999; (iii) direct
costs of mortgage production activities, net of gains on loans held for sale;
and (iv) other unusual or infrequently occurring items; ($ in thousands, net of
tax effect).
17
<PAGE> 20
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1999 1998
-------- --------
<S> <C> <C>
BASE NET INCOME DETAIL:
Net interest income $ 27,189 $ 22,118
Loan loss provision (1,800) (977)
Noninterest income 6,034 4,004
G & A expense (20,671) (18,785)
Amortization of goodwill & premium on deposits (1,216) (194)
-------- --------
After-tax base net income 9,536 6,166
OTHER AFTER-TAX NET INCOME (LOSS) COMPONENTS: (UNAUDITED)
New branches (1,774) --
Mortgage production activities (3,400) (4,695)
Sale of portfolio loans 2,019 1,193
ORE & other non-operating items 302 (270)
-------- --------
Net income before minority interest 6,683 2,394
Minority interest (net of tax) (840) (843)
-------- --------
Net income $ 5,843 $ 1,551
======== ========
</TABLE>
Analysis of Net Interest Income (see table on page 19)
Net interest income for the six months ended June 30, 1999 was $45.2 million
compared with $36.4 million for the same period last year, an $8.8 million or a
24.1% increase. Interest income was $93.6 million for the first six months of
1999, an increase of $17.4 million over the same period in 1998. Interest
expense increased by $8.6 million. Average asset yield decreased by 50 basis
points from 8.55% for the same period in 1998 to 8.05% for 1999, primarily as a
result of a change in asset mix which resulted in a higher investment in
securities and federal funds sold relative to total earning assets. The average
cost of interest-bearing liabilities also declined by 36 basis points from
4.91% to 4.55%, primarily due to reduced reliance on outside borrowings and
lower costs for certificate of deposits. As a result, net interest spread
decreased 14 basis points from 3.64% for 1998 to 3.50% for 1999 and net
interest margin, which includes the benefit of noninterest bearing funds,
declined by 19 basis points from 4.03% for 1998 to 3.84% for 1999.
Noninterest Income
Noninterest income for the six months ended June 30, 1999 was $13.2 million
compared with $27.0 million for the same period in 1998, a decrease of $13.8
million. Excluding gains on sale of loans and income from mortgage banking
activities, noninterest income was $9.9 million for the first half of 1999
compared to $6.6 million for the same period last year. Loan service fees
increased $2.9 million and other loan fee income increased $645,000, while
service charges on deposit accounts and other deposit-related fee income
sources increased by $698,000.
The following table reflects the components of noninterest income for the six
months ended June 30, 1999, and 1998 (in thousands):
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
-----------------------------------------
Increase
1999 1998 (Decrease)
----- ----- ---------
<S> <C> <C> <C>
Service charges on deposit accounts $ 2,295 $ 1,849 $ 446
Loan service fees 3,603 659 2,944
Other loan fee income 1,953 1,308 645
Gains on sales of loans, net 3,258 1,966 1,292
Income from mortgage banking operations -- 18,411 (18,411)
Income from special purpose corporation -- 434 (434)
Gain on sale of securities, net -- 462 (462)
Net trading account (loss) gain (245) 281 (526)
Generations Gold fee income 668 416 252
Foreign exchange income 58 24 34
Other income 1,573 1,158 415
-------- ------- --------
Total noninterest income $ 13,163 $26,968 $(13,805)
======== ======= ========
</TABLE>
18
<PAGE> 21
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, 1999 and 1998 (in thousands):
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------------------------------------------------------
1999 1998
------------------------------------ ---------------------------------
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 $1,955,523 $ 84,033 8.58% $1,616,672 $71,437 8.81%
Investment securities 39,910 1,026 5.17 37,695 1,184 6.32
Mortgage-backed securities 130,141 3,918 6.02 29,172 986 6.76
Trading securities 74,270 1,639 4.41 35,688 1,016 5.69
Interest bearing deposits in banks 9,080 197 4.37 1,892 42 4.50
FHLB stock 12,693 467 7.42 11,572 420 7.32
Federal funds sold 100,660 2,364 4.67 47,331 1,197 5.03
---------- -------- ---------- -------
Total interest earning assets 2,322,277 93,644 8.05 1,780,022 76,282 8.55
Noninterest earning assets 171,246 109,130
---------- ----------
Total assets $2,493,523 $1,889,152
========== ==========
Interest bearing liabilities:
Interest checking $ 179,395 683 .77% 137,987 1,164 1.70%
Money market 184,650 3,440 3.76 62,740 495 1.59
Savings 71,750 602 1.69 55,355 587 2.14
Passbook Gold 289,662 6,032 4.20 258,774 6,307 4.91
Time deposits 1,339,109 35,515 5.35 921,713 25,663 5.61
FHLB advances 6,381 157 4.95 166,661 4,824 5.84
Other borrowings 74,972 2,029 5.46 32,677 820 5.06
---------- -------- ---------- -------
Total interest bearing liabilities 2,145,919 48,458 4.55 1,635,907 39,860 4.91
Noninterest bearing liabilities 183,253 133,837
Stockholders' equity 164,351 119,408
---------- ----------
Total liabilities and equity $2,493,523 $1,889,152
========== ==========
Net interest income/net interest spread $ 45,186 3.50% $36,422 3.64%
======== ==== ======= ====
Net interest margin 3.84% 4.03%
==== ====
</TABLE>
<TABLE>
<CAPTION>
Increase (Decrease) Due to
---------------------------------
Changes in Net Interest Income Volume Rate Total
- ------------------------------ ------- ------- --------
<S> <C> <C> <C>
Interest earning assets:
Loans, net $13,136 $ (540) $ 12,596
Investment securities 163 (321) (158)
Mortgage-backed securities 3,051 (119) 2,932
Trading securities 894 (271) 623
Interest bearing deposits in banks 156 (1) 155
FHLB stock 41 6 47
Federal funds sold 1,258 (91) 1.167
------- ------- --------
Total change in interest income 18,699 (1,337) 17,362
Interest bearing liabilities:
Interest checking 282 (763) (481)
Money market 1,732 1,213 2,945
Savings 153 (138) 15
Passbook Gold 703 (978) (275)
Time deposits 11,552 (1,700) 9,852
FHLB advances (2,660) (2,007) (4,667)
Other borrowings 1,359 (150) 1,209
------- ------- --------
Total change in interest expense 13,121 (4,523) 8,598
------- ------- --------
Increase (decrease) in net interest income $ 5,578 $ 3,186 $ 8,764
======= ======= ========
</TABLE>
19
<PAGE> 22
Noninterest Expense
General and administrative ("G & A") expenses for the first six months of 1999
were $43.0 million compared with $57.2 million for the same period last year, a
decrease of $14.2 million. These improvements were primarily attributable to
the reduced operating expenses associated with the Company's restructured
mortgage activities which more than offset the additional cost of new branch
openings in 1999. Total noninterest expenses, which include G & A expense, were
$44.5 million for the six months ended June 30, 1999 compared with $58.0
million for the same period last year.
The following table reflects the components of noninterest expense for the six
months ended June 30, 1999 and 1998 (in thousands):
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
----------------------------------------------
Increase
1999 1998 (Decrease)
-------- -------- ----------
<S> <C> <C> <C>
Salaries and benefits $ 22,432 $ 22,799 $ (367)
Net occupancy expense 7,711 5,821 1,890
Advertising 593 10,571 (9,978)
Data processing fees 2,361 1,575 786
FDIC and state assessments 634 548 86
Telephone expense 1,005 1,156 (151)
Legal and professional 1,016 6,325 (5,309)
Postage and supplies 1,926 4,867 (2,941)
Other operating expense 5,354 3,526 1,828
-------- -------- --------
Total G & A expenses 43,032 57,188 (14,156)
Merger expenses -- 423 (423)
Provision for losses on ORE -- 40 (40)
ORE expense, net of ORE income (488) (8) (480)
Amortization of premium on deposits
and goodwill 1,980 319 1,661
-------- -------- --------
Total noninterest expense $ 44,524 $ 57,962 $(13,438)
======== ======== ========
</TABLE>
20
<PAGE> 23
YEAR 2000 ISSUES
In the next year, 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. If a Company's critical internal systems do not correctly
recognize and process data information beyond the year 1999, there could be a
material adverse impact on business and operations.
In 1997, the Company began the process of identifying the many software
applications and hardware devices affected by Year 2000 issues. The Company
formed a Year 2000 Committee, consisting of the Bank's senior management and
essential data processing employees to address the year 2000 compliance
project. The Board of Directors is updated on the Company's progress towards
compliance on a monthly basis. In addition, as the Bank's primary federal
regulator, the FDIC conducts periodic examinations of the Bank's Year 2000
readiness.
Additional staffing for Year 2000 compliance, including a full-time project
coordinator and other technically proficient employees, have been hired to
monitor the daily activities of the project for the Bank. Non-compliant vendors
have been and continue to be contacted for project progress reports. The Bank is
independently verifying significant vendors' Year 2000 readiness. Communication
with compliant vendors to develop and implement testing plans is also ongoing.
The Company originally estimated that the costs associated with replacing
non-compliant hardware and software would be approximately $1.4 million, the
majority of which would be incurred in the normal course of upgrading the
Company's computer systems. The Company now expects that amount to be
approximately $900,000, a $500,000 reduction in the estimate. This change in
the amount estimated is primarily the result of the reduction in size of the
Company's mortgage activities. For the fiscal year ending December 31, 1998,
the Company's Year 2000 compliance expenditures had totaled $345,000. For the
first six months of 1999, the Company had expenditures of $357,000, for a total
of $702,000 on a cumulative basis. The balance of the $900,000 is expected to
be expended during the remaining of 1999.
In the event that the Bank's efforts are unsuccessful and/or that one or more
of the Company's critical internal systems should not properly recognize
January 1, 2000 and subsequent dates, the following could occur, any of which
could have a material adverse impact on the operations of the Company and the
Bank.
(a) Client service could deteriorate to the point that a substantial
number of the Bank's and Savings Bank's clients move their account
relationships to another financial institution;
(b) The Company and the Bank may be unable to provide the public and the
applicable regulatory authorities with timely and accurate financial
information; or
(c) The Company, the Bank, and the Savings Bank may be unable to fulfill,
on a timely basis, their various contractual obligations.
The FDIC set a target date of June 30, 1999 for financial institutions to
substantially complete all phases of the Year 2000 compliance effort. The Bank
and the Savings Bank's main client loan, deposit and general ledger application
systems are processed by ALLTEL Information Services, Inc. ("ALLTEL") which has
certified its applications as Year 2000 compliant with the test results
forwarded to Bank personnel for verification.
21
<PAGE> 24
The Bank has completed its hardware and substantially completed the remediation
of its software applications. Application testing of all "Mission Critical" and
"Important" software is nearing completion. The Company has made significant
progress in its readiness efforts and has been successful in meeting target
dates set by the FDIC. The critical internal systems of all the Bank's merged
and acquired entities have been converted to the ALLTEL loan and deposit
application systems as well as the conversion of the Item Processing and
Lockbox functions to an outside servicer.
The Bank and Savings Bank have formulated a contingency plan for the remote
possibility that ALLTEL will not be year 2000 compliant. The Company has also
formulated contingency plans for all branches and departments and will continue
to be aggressive in its efforts toward year 2000 readiness.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION 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
beliefs presented under the caption, "Management's Discussion and Analysis,"
may constitute forward-looking statements. Forward-looking statements are made
based upon management's expectations and beliefs concerning future development
and their potential effect upon the Company. 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 Company will be those anticipated
by management.
The Company 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, 1999, and thereafter include many factors that are
beyond the Company's ability to control or estimate precisely. These risks and
uncertainties include, but are not limited to, the market demand and acceptance
of the Company'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 Company periodically reassesses material trends and uncertainties
affecting the Company's results of operations and financial condition in
connection with its preparation of management's discussion and analysis
contained in its Quarterly Report, the Company 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
In January 1999, the Company filed a lawsuit against a former vendor that
provided printing and direct mailing services for the Company's mortgage
banking operation to invalidate a term contract executed by the former manager
of the High LTV Loan origination unit who was not an officer of the Company or
the Bank at the time the contract was executed. The lawsuit also alleges civil
conspiracy and fraud in connection with the execution of the contract. The
vendor has, at this same time, filed an arbitration proceeding against the
Company relating to the same issues. This matter is in the discovery phase. The
vendor has asserted alleged damages in a range of $2.0 - $9.0 million.
The Company is also subject 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.
22
<PAGE> 25
ITEM 2. SALE OF THE SAVINGS BANK
On April 5, 1999, the Company announced that it has entered into an agreement
to sell its Brunswick, Georgia office of the Savings Bank to Sapelo National
Bank ("Sapelo"). Sapelo will acquire all of the associated deposits at the
Brunswick office. This purchase also includes lease rights on the building and
all fixed assets associated with the property. The Savings Bank has also
entered into an agreement to sell its loan portfolio to its sister corporation,
the Bank. The transaction is expected to be completed by the end of the third
quarter of 1999 after which time the Savings Bank will be dissolved.
ITEM 3. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
27.0 Financial Data Schedule
b. Reports filed on Form 8-K:
(1) On January 7, 1999, the Company filed a report on
Form 8-K disclosing the text of a press release
initially disclosed on December 30, 1998 which
amended the Company's projected loss for the period
ended December 31, 1998.
(2) On January 29, 1999, the Company filed a report on
Form 8-K disclosing the text of a press release
disclosed on that same day that the Company's Board
of Directors had hired an investment banker to
assist it in evaluating strategic alternatives among
which included the possible sale of the Company.
(3) On July 8, 1999, the Company filed a report on Form
8-K disclosing the text of a press release that the
Company's Board of Directors had completed its
evaluation of strategic alternatives and determined
that it was in the best interest of the shareholders
to remain independent for the foreseeable future.
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: July 27, 1999 By: /s/ Alfred T. May
------------------------------------
Alfred T. May
Chairman, President and Chief
Executive Officer
(principal executive officer)
Date: July 27, 1999 By: /s/ William R. Falzone
------------------------------------
William R. Falzone
Treasurer (principal financial
and accounting officer)
24
<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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 45,128
<INT-BEARING-DEPOSITS> 12,439
<FED-FUNDS-SOLD> 148,000
<TRADING-ASSETS> 40,105
<INVESTMENTS-HELD-FOR-SALE> 305,023
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 1,876,982
<ALLOWANCE> 26,209
<TOTAL-ASSETS> 2,573,825
<DEPOSITS> 2,273,443
<SHORT-TERM> 74,106
<LIABILITIES-OTHER> 29,918
<LONG-TERM> 0
0
1,500
<COMMON> 21,006
<OTHER-SE> 145,102
<TOTAL-LIABILITIES-AND-EQUITY> 2,573,825
<INTEREST-LOAN> 84,033
<INTEREST-INVEST> 9,611
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 93,644
<INTEREST-DEPOSIT> 46,272
<INTEREST-EXPENSE> 2,186
<INTEREST-INCOME-NET> 45,186
<LOAN-LOSSES> 2,932
<SECURITIES-GAINS> (245)
<EXPENSE-OTHER> 43,032
<INCOME-PRETAX> 10,893
<INCOME-PRE-EXTRAORDINARY> 10,893
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,842
<EPS-BASIC> .56
<EPS-DILUTED> .52
<YIELD-ACTUAL> 8.05
<LOANS-NON> 33,947
<LOANS-PAST> 41
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 820
<ALLOWANCE-OPEN> 28,077
<CHARGE-OFFS> (6,081)
<RECOVERIES> 1,008
<ALLOWANCE-CLOSE> 26,209
<ALLOWANCE-DOMESTIC> 26,209
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 26,209
</TABLE>
