REPUBLIC BANCSHARES INC, 10-Q, 2000-08-03

REPUBLIC BANCSHARES INC
10-Q, 2000-08-03
STATE COMMERCIAL BANKS

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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, 2000




[ ]		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		59-3347653
(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:


Common stock par value $2.00 per share		10,555,959 shares outstanding at June 30, 2000

REPUBLIC BANCSHARES, INC.

INDEX

Part I. FINANCIAL INFORMATION


Item 1.	Financial Statements		Page
		Consolidated Balance Sheets – June 30, 2000 (unaudited)
		and December 31, 1999		2




		Consolidated Statements of Operations -
		Three and six month periods ended June 30, 2000 and 1999 (all unaudited)		3




		Consolidated Statements of Stockholders' Equity -
		Year ended December 31, 1999 and
		Six months ended June 30, 2000 (unaudited)		4




		Consolidated Statements of Comprehensive Income -
		Three and six month periods ended June 30, 2000 and 1999 (all unaudited)		4




		Consolidated Statements of Cash Flows -
		Three and six month periods ended June 30, 2000 and 1999 (all unaudited)		5




		Notes to Consolidated Financial Statements (unaudited)		6




		Selected Quarterly Financial and Other Data (unaudited)		12




Item 2.		Management's Discussion and Analysis of Financial Condition
		and Results of Operations		15




Part II.		OTHER INFORMATION




Item 1.		Legal Proceedings		21




Item 6.		Exhibits and Reports on Form 8-K		22




SIGNATURES				23

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995

Certain 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 our expectations and beliefs presented under the caption, “Management’s Discussion and Analysis,” may constitute forward-looking statements. Forward-looking statements are made based upon our expectations and beliefs concerning future development and their potential effect upon us. There can be no assurance that future developments will be in accordance with our expectations or that the effect of future developments will be those anticipated by us.

We wish 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, 2000, and thereafter include many factors that are beyond our ability to control or estimate precisely. These risks and uncertainties include, but are not limited to, the market demand and acceptance of our existing and new loan and deposit products, the impact of competitive products, and changes in economic conditions, such as inflation or fluctuations in interest rates.

While we periodically reassess material trends and uncertainties affecting our results of operations and financial condition in connection with our preparation of the stockholders’ letter and management’s discussion and analysis contained in our annual report, we do not intend to review or revise any particular forward-looking statement referenced herein in light of future events.

REPUBLIC BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS – JUNE 30, 2000 AND DECEMBER 31, 1999
($ in thousands, except share data)


				June 30,			December 31,
				2000			1999

				(unaudited)
ASSETS




Cash and due from banks				$	63,913		$	62,643




Interest bearing deposits in banks					7,037			3,758




Federal funds sold					36,462			27,060




Commercial paper — available for sale					—			39,888




Investment securities — available for sale					19,965			25,555




Mortgage-backed and mortgage-related securities:




	Held to maturity				39,655			33,068




	Available for sale				369,252			315,268




	Trading				37,308			39,229




FHLB stock					13,816			13,816




Loans, net of allowance for loan losses					1,836,367			1,861,715




Premises and equipment, net					49,145			52,574




Other real estate acquired through foreclosure, net					5,830			5,332




Accrued interest receivable					14,295			14,747




Goodwill and premium on deposits					30,897			32,827




Other assets					30,886			38,546

	Total assets			$	2,554,828		$	2,566,026

LIABILITIES AND STOCKHOLDERS’ EQUITY




Liabilities:




	Deposits-




		Noninterest bearing checking		$	133,408		$	127,619




		Interest checking			187,802			187,463




		Money market			291,149			211,558




		Savings			232,854			309,996




		Time deposits			1,407,769			1,446,173

			Total deposits		2,252,982			2,282,809




	Securities sold under agreements to repurchase				49,804			37,241




	FHLB advances				765			769




	Holding company senior debt				7,500			9,167




	Convertible subordinated debt				14,690			14,684




	Term subordinated debt and unsecured notes				3,912			2,750




	Other liabilities				23,171			19,611

			Total liabilities		2,352,824			2,367,031

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, 2000 and December 31, 1999.)				1,500			1,500




	Common stock ($2.00 par, 20,000,000 shares authorized, 10,555,959 and 10,555,889 shares issued and outstanding at June 30, 2000 and December 31, 1999, respectively.)				21,112			21,112




Capital surplus					128,735			128,780




Retained earnings					29,734			26,530




Net unrealized (loss) on available for sale securities, net of tax effect					(7,827	)		(7,677	)

		Total stockholders’ equity			173,254			170,245

		Total liabilities and stockholders’ equity		$	2,554,828		$	2,566,026

The accompanying notes are an integral part of these consolidated statements

REPUBLIC BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands, except share data; unaudited)


			For the Three Months Ended June 30,						For the Six Months Ended June 30,

			2000			1999			2000			1999

INTEREST INCOME:




	Interest and fees on loans		$	42,153		$	40,951		$	83,484		$	84,033




	Interest on investment securities			301			490			654			1,026




	Interest on mortgage-backed securities			6,463			3,324			12,457			3,918




	Interest on trading securities			293			689			585			1,639




	Interest on federal funds sold			1,282			1,128			2,416			2,364




	Interest on commercial paper			—			—			112			—




	Interest on other investments			354			383			724			664

		Total interest income		50,846			46,965			100,432			93,644




INTEREST EXPENSE:




	Interest on deposits			25,725			23,158			50,592			46,272




	Interest on FHLB advances			13			—			26			157




	Interest on senior debt			187			440			390			833




	Interest on subordinated debt			265			—			531			—




	Interest on term subordinated debt			71			—			138			—




	Interest on unsecured notes			4			133			4			269




	Interest on other borrowings			571			471			1,070			927

		Total interest expense		26,836			24,202			52,751			48,458

		Net interest income		24,010			22,763			47,681			45,186




PROVISION FOR LOAN LOSSES				5,000			1,410			9,400			2,932

Net interest income after provision for loan losses				19,010			21,353			38,281			42,254

NONINTEREST INCOME:




	Service charges on deposit accounts			1,903			1,509			3,890			2,963




	Loan service fees			1,514			1,718			3,212			3,603




	Other loan fee income			1,011			1,051			1,978			1,953




	(Loss) gain on sale of loans, net			(1	)		464			20			3,258




	Loss on securities, net			(797	)		(109	)		(936	)		(245	)




	Other operating income			548			1,167			945			1,631

		Total noninterest income		4,178			5,800			9,109			13,163




NONINTEREST EXPENSES:




	Salaries and employee benefits			9,161			10,422			18,515			22,432




	Net occupancy expense			4,033			3,869			8,044			7,598




	Advertising and marketing			251			225			789			593




	Data and item processing fees and services			1,196			1,242			2,390			2,194




	FDIC and state assessments			355			301			609			634




	Telephone, postage and supplies			1,034			1,500			2,121			3,395




	Legal and professional			343			266			886			775




	Other operating expenses			2,239			2,860			4,602			5,411

		Total operating expenses		18,612			20,685			37,956			43,032




	ORE expense (income), net			30			(130	)		346			(488	)




	Amortization of goodwill & premium on deposits			964			970			1,929			1,980

		Total noninterest expenses		19,606			21,525			40,231			44,524




Income before income taxes & minority interest				3,582			5,628			7,159			10,893




Income tax provision				(1,474	)		(2,219	)		(2,981	)		(4,209	)

Income before minority interest				2,108			3,409			4,178			6,684




Minority interest in income from subsidiary trust (net of tax)				(421	)		(421	)		(842	)		(842	)

	NET INCOME		$	1,687		$	2,988		$	3,336		$	5,842

PER SHARE DATA:




	Net income per common share — basic		$	.15		$	.28		$	.30		$	.56

	Weighted average common shares outstanding — basic			10,555,897			10,493,214			10,555,893			10,440,377

	Net income per common & common equivalent share — diluted		$	.15		$	.26		$	.30		$	.52

	Weighted average common & common equivalent shares outstanding — diluted			11,310,583			11,359,392			11,323,370			11,302,980

The accompanying notes are an integral part of these consolidated statements.

REPUBLIC BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1999 AND
THE SIX MONTHS ENDED JUNE 30, 2000
($ in thousands, except share data; unaudited)


	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

Balance, December 31, 1998		75,000	$	1,500		10,323,194	$	20,646	$	125,364		$	16,103		$	(16	)	$	163,597




Net income for the year ended Dec. 31, 1999		—		—		—		—		—			10,692			—			10,692




Net unrealized loss on available for sale securities, net of tax effect		—		—		—		—		—			—			(7,661	)		(7,661	)




Exercise of stock options		—		—		232,695		466		2,313			—			—			2,779




Additional paid-in capital from nonqualified/performance stock options		—		—		—		—		1,103			—			—			1,103




Dividends on preferred stock		—		—		—		—		—			(265	)		—			(265	)

Balance, December 31, 1999		75,000		1,500		10,555,889		21,112		128,780			26,530			(7,677	)		170,245




Net income for the six months ended June 30, 2000		—		—		—		—		—			3,336			—			3,336




Net unrealized loss on available for sale securities, net of tax effect		—		—		—		—		—			—			(150	)		(150	)




Exercise of stock options		—		—		70		—		1			—			—			1




Adjustment to paid-in capital from nonqualified/performance stock options		—		—		—		—		(46	)		—			—			(46	)




Dividends on preferred stock		—		—		—		—		—			(132	)		—			(132	)

Balance, June 30, 2000		75,000	$	1,500		10,555,959	$	21,112	$	128,735		$	29,734		$	(7,827	)	$	173,254

REPUBLIC BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
($ in thousands; unaudited)


		For the Three Months Ended June 30,					For the Six Months Ended June 30,

		2000		1999			2000			1999

Net income		$	1,687	$	2,988		$	3,336		$	5,842




Unrealized losses on securities:




	Unrealized holding gains (losses), net of tax effect during period		1,139		(4,455	)		(151	)		(4,827	)




Less reclassification adjustment for gains realized in net income			4		245			1			245

	Net unrealized gains (losses)		1,143		(4,210	)		(150	)		(4,582	)

	Comprehensive income (loss)	$	2,830	$	(1,222	)	$	3,186		$	1,260

The accompanying notes are an integral part of these consolidated statements.

REPUBLIC BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands; unaudited)


			For the Three Months Ended June 30,						For the Six Months Ended June 30,

			2000			1999			2000			1999

OPERATING ACTIVITIES:




Net income			$	1,687		$	2,988		$	3,336		$	5,842




Reconciliation of net income to net cash provided by operating activities:




	Provision for loan and ORE losses			5,000			1,410			9,400			2,932




	Depreciation and amortization, net			5,106			4,749			8,381			9,389




	Amortization of premium of fair value, net			242			3,920			1,934			5,181




	Gain on sale of loans			—			(465	)		(20	)		(3,258	)




	Loss on sale of investment securities			797			109			936			244




	(Gain)/loss on sale of ORE			(85	)		(239	)		105			(662	)




	Capitalization of mortgage servicing/residual interest			(990	)		(857	)		(353	)		(3,450	)




	Net decrease (increase) in deferred tax asset			1,862			(97	)		2,255			760




	Loss on disposal of premises & equipment			—			203			—			210




	Net decrease in other assets			1,925			4,558			4,511			4,663




	Net increase (decrease) in other liabilities			3,250			882			3,560			(1,802	)




	Net increase in value performance options			—			—			(46	)		—

		Net cash provided by operating activities		18,794			17,161			33,999			20,049




INVESTING ACTIVITIES:




	Net decrease in loans			7,862			7,455			9,839			116,630




	Proceeds from sales & maturities of:




		Investment securities available for sale		4,000			128,000			7,000			131,500




		Mortgage-backed securities available for sale		832			—			3,317			1,552




		Commercial paper		—			—			40,000			—




		Revenue bonds		—			—			75			—




	Purchase of investment securities AFS			(998	)		(1,899	)		(998	)		(136,767	)




	Purchase of mortgage-backed securities AFS			(41,674	)		(102,711	)		(76,574	)		(155,940	)




	Purchase of mortgage-backed securities held to maturity			(2,090	)		—			(16,980	)		—




	Principal repayment on mortgage-backed securities			16,704			7,763			28,428			14,090




	(Purchase) redemption of FHLB stock			—			27			—			(2,779	)




	Disposal/(purchase) of premises & equipment, net			767			(1,737	)		533			(110	)




	Proceeds from sale of ORE			1,159			2,528			3,151			4,947




	Investment in other real estate owned, net			(59	)		160			(56	)		322

		Net cash (used in) provided by investing activities		(13,497	)		39,586			(2,265	)		(26,555	)




FINANCING ACTIVITIES:




	Net (decrease) increase in deposits			(81,630	)		85,081			(29,712	)		86,245




	Net (decrease) increase in repurchase agreements			3,704			(4,612	)		12,563			5,466




	Repayment of FHLB advances, net			(2	)		—			(4	)		(25,000	)




	Proceeds from issuance of common stock			1			449			1			2,884




	Proceeds from Holding Company debt			1,162			—			1,162			—




	Repayment of Holding Company debt			(830	)		—			(1,661	)		—




	Dividends on perpetual preferred stock			(66	)		(66	)		(132	)		(132	)

		Net cash provided by (used in) financing activities		(77,661	)		80,852			(17,783	)		69,463




Net increase (decrease) in cash and cash equivalents				(72,364	)		137,599			13,951			62,957




Cash and cash equivalents, beginning of period				179,776			67,968			93,461			142,610

Cash and cash equivalents, end of period			$	107,412		$	205,567		$	107,412		$	205,567

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION




	Cash paid during the period for-




		Interest	$	26,925		$	24,186		$	52,375		$	63,490




		Income taxes (refunded)/paid		70			(4,556	)		185			(4,539	)

The accompanying notes are an integral part of these consolidated statements

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” or “Republic” or “We”), the accompanying consolidated financial statements (marked “unaudited” where applicable) reflect all adjustments necessary to present fairly our financial position as of June 30, 2000 and the results of operations and cash flows, for the three and six month periods ended June 30, 2000 and 1999. The accounting and reporting policies of the Company and its wholly-owned subsidiaries, Republic Bank (the “Bank”) and RBI Capital Trust I (“RBI”), are in conformity with generally accepted accounting principles and prevailing practices within the financial services industry. Financial data for 1999 includes results of operations for Republic Bank, F.S.B., which was dissolved on September 10, 1999.

The preparation of financial statements in conformity with generally accepted accounting principles requires that we 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.

Our consolidated financial statements include the accounts of the Company, RBI, the Bank, and the Bank’s wholly-owned subsidiary, Republic Insurance Agency, Inc. and, for the six months ended June 30, 1999, Republic Bank, F.S.B. All significant intercompany accounts and transactions have been eliminated. Our primary source of income is from the Bank, which operates 81 branches throughout Florida. 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 our Annual Report on Form 10-K for the year ended December 31, 1999, filed with the Securities and Exchange Commission (“SEC”) on March 10, 2000. The results for the six months ended June 30, 2000, are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2000.

Reclassifications

Certain reclassifications have been made to prior period financial statements to conform to the June 2000 financial statement presentation.

Recent Accounting Developments

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. SFAS No. 133 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 of all fiscal years beginning after June 15, 2000. We have not yet revised our reporting of derivative instruments and hedging activities to comply with SFAS No. 133, however, we do not believe that the adoption of SFAS No. 133 will have a material effect upon the results of operations of the Company.

2. EARNINGS (LOSS) PER SHARE

Diluted earnings (loss) per common and common equivalent shares have been computed by dividing net income (loss) by the weighted average common and common equivalent shares outstanding during the periods. The weighted average common and common equivalent shares outstanding has been adjusted to include the number of shares that would have been outstanding if the stock options had been exercised, at the average market price for the period, with the proceeds being used to buy shares from the market (i.e., the treasury stock method) and the perpetual preferred stock and the convertible subordinated debentures that have been converted to common stock earlier in the year or the issue date (i.e., the if-converted method). Basic earnings (loss) per common share was computed by dividing net income (loss) less dividends paid on preferred stock, by the weighted average number of shares of common stock outstanding during the year.

The table below reconciles the calculation of the diluted and basic earnings per share for 2000 and 1999 ($ in thousands, except per share data):


		For the three months ended June 30,

					2000						1999
					Weighted		Earnings				Weighted		Earnings
			Net		Shares		Per		Net		Shares		Per
			Income		Outstanding		Share		Income		Outstanding		Share

Net income/basic earnings
	per share		$	1,621		10,555,897	$	0.15	$	2,922		10,493,214	$	0.28




Options exercised during
	the period-incremental
	effect prior to exercise			—		1		—		—		4,192		—




Options outstanding at end
	of period			—		4,685		—		—		111,986		—




Convertible perpetual
	Preferred stock			66		750,000		—		66		750,000		—

Diluted earnings per share			$	1,687		11,310,583	$	0.15	$	2,988		11,359,392	$	0.26


		For the six months ended June 30,

					2000						1999
					Weighted		Earnings				Weighted		Earnings
			Net		Shares		Per		Net		Shares		Per
			Income		Outstanding		Share		Income		Outstanding		Share

Net income/basic earnings
	per share		$	3,204		10,555,893	$	0.30	$	5,710		10,440,377	$	0.56




Options exercised during
	the period-incremental
	effect prior to exercise			—		4		—		—		20,190		—




Options outstanding at end
	of period			—		17,473		—		—		92,413		—




Convertible perpetual
	Preferred stock			132		750,000		—		132		750,000		—

Diluted earnings per share			$	3,336		11,323,370	$	0.30	$	5,842		11,302,980	$	0.52

There were 664,017 and 252,617 of stock options that were anti-dilutive as of June 30, 2000 and 1999, respectively.

3. INVESTMENT, MORTGAGE-BACKED AND MORTGAGE-RELATED SECURITIES

Investments consisting of U.S. Treasury and federal agency securities (“Investment Securities”) and mortgage-backed and mortgage-related securities (“MBS”) were $466.2 million at June 30, 2000. We held no commercial paper at June 30, 2000. As of June 30, 2000, $389.2 million of securities were classified as available for sale (of which $369.3 million were MBS and $19.9 million were Investment Securities), $39.7 million of MBS were classified as held to maturity and $37.3 million were trading assets. Included in the trading asset category were: (1) a $10.9 million subordinate tranche purchased from our securitization of high loan-to-value loans (“High LTV Loans”) in June 1998; (2) $22.5 million in overcollateralization and residual interests in cash flows from a $60.0 million securitization in December 1997 and a $240.0 million securitization in June 1998; and (3) the excess spread on mortgage servicing rights, which amounted to $3.9 million.

The market values assigned to the MBS classified as available for sale were derived using market quotations at June 30, 2000. Trading assets are evaluated at least quarterly with any valuation adjustment reflected as a trading gain or loss in the statement of operations. Under applicable accounting rules, use of quoted market values is the preferred method for valuing trading assets. However, where the market for those assets is illiquid and price quotations are not readily available, other methods are permitted, including techniques utilizing the present value of expected cash flows. We have used present value techniques to value our trading assets. The factors used in the present value calculations included a 15% discount rate and a 15% prepayment speed assumption on both the December 1997 and June 1998 overcollateralization and residual interests. The default assumption on the December 1997 transaction, defined by estimating the total defaults over the life of the securitization, is 15.7% of the original $60 million collateral amount. Through June 30, 2000, actual losses have been 8.8% of the original collateral amount. The default assumption on the June 1998 securitization is 13.0% of the original $240 million collateral amount over the life of the securitization. Through June 30, 2000, actual losses have been 5.4% of the original collateral amount. Based on those valuations, a trading loss of $793,000 was recorded for the second quarter of 2000. We believe this valuation is a reasonable approximation of the fair market value of the MBS classified as trading assets; however, there is no assurance that we could realize this value if such assets were sold in the current illiquid market for High LTV- related assets.

4. LOANS AND LOANS HELD FOR SALE

Loans at June 30, 2000 and December 31, 1999, are summarized as follows ($ in thousands; unaudited):


			June 30,			December 31,
			2000			1999

Real estate mortgage loans:




	One-to-four family residential		$	695,651		$	725,333




	Nonconforming mortgages			71,356			79,562




	Multifamily residential			95,774			80,212




	Warehouse lines of credit			67,393			96,873




	Commercial real estate			447,323			416,827




	Construction/land development			126,295			165,649

		Mortgage loans secured by first liens		1,503,792			1,564,456




Commercial (business) loans				116,676			90,378




Consumer loans				24,805			23,737




Home equity loans				133,432			118,737




High LTV Loans				85,935			92,584

	Total gross portfolio loans			1,864,640			1,889,892




Less-allowance for loan losses				(28,273	)		(28,177	)

	Total loans held for portfolio		$	1,836,367		$	1,861,715

Mortgage loans serviced for others as of June 30, 2000 and December 31, 1999, were $1.4 billion and $1.5 billion, respectively. Included in the total amount serviced for others were High LTV Loans amounting to $631.9 million and $699.0 million at June 30, 2000 and December 31, 1999, respectively. Mortgage loan servicing rights (both purchased and originated) amounted to $18.3 million and $20.7 million at June 30, 2000 and December 31, 1999, respectively. Loans on which interest was not being accrued at June 30, 2000 and December 31, 1999, totaled approximately $29.5 million and $25.0 million, respectively. Loans past due 90 days or more and still accruing interest at June 30, 2000 and December 31, 1999 totaled $46,000 and $171,000, respectively.

5. ALLOWANCES FOR LOSSES

Allowance for loan losses

The allowance for loan losses provides for risks of losses inherent in the credit extension process. Losses and recoveries are either charged or credited to the allowance. Our allowance is an amount that we believe will be adequate to provide for probable losses on existing loans that may become uncollectible, based on our evaluations of the collectibility of the loans and prior loan loss experience. Our evaluations of the adequacy of the allowance take into consideration such factors as the Bank’s past loan loss experience, known and inherent risks in the loan portfolio, changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans, and current economic conditions and any adverse situations that may affect the borrower’s ability to pay (including the timing of future payments). The evaluations are periodically reviewed and adjustments are recorded in the period in which changes become known.

While we believe that the allowance for loan losses was adequate as of June 30, 2000, based on currently available information at that time, future provisions to the allowance may be necessary due to changes in economic conditions, deterioration of creditworthiness of borrowers, the value of underlying collateral, or other factors. Additionally, the Florida Department of Banking and Finance (the “Department”), the FDIC, and the Federal Reserve, as an integral part of their regular examination process, periodically review the allowance for loan losses. These agencies may require additions to the allowance based on their judgments about information available to them at the time of examination.

The portion of the allowance for loan losses that was created through the allocation of discounts on purchased loans may only be used to absorb losses on the related acquired loans. As of June 30, 2000, approximately $1.0 million of the allowance remained from the allocation of discounts on purchased loans.

Changes in the allowance for loan losses were as follows ($ in thousands; unaudited):


		For the Six Months Ended June 30,

		2000			1999

Balance, beginning of period		$	28,177		$	28,077




Provision for possible loan losses			9,400			2,932




Loan discount (net) allocated to (from) purchased portfolios			(5	)		—




Acquired reserve – purchased portfolios			—			275




Loans charged-off			(10,199	)		(6,082	)




Recoveries of loans charged-off			900			1,007

	Net charge-offs		(9,299	)		(5,075	)

Balance, end of period		$	28,273		$	26,209

Allowance for Losses on Other Real Estate (“ORE”)

We generally conduct appraisals on ORE on an annual basis. We recognize 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 us to dispose of all ORE acquired through foreclosure within five years of acquisition, with a possibility for additional extensions, each of up to five years. We have been granted an extension on a piece of property, with a book value of $149,000, until December 6, 2000. This property, consisting of residential lots, is currently under contract. There are no other properties that have exceeded the five-year holding period limitation.

6. MARKET RISK

The market risk inherent in market sensitive instruments is the potential loss arising from changes in interest rates and the changes in prices of marketable equity securities. One of our primary objectives is to reduce fluctuations in net interest income caused by changes in interest rates. To manage interest rate risk, the Bank’s Board of Directors has established interest rate risk policies and procedures that delegate to the Bank’s 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.

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 a subordinate tranche from a 1998 securitization of High LTV Loans, the resulting residual interest in cash flows from that securitization and from a securitization completed in 1997, and the excess spread on interest-only strips receivable. (See “Note 3. Investment, Mortgage-Backed and Mortgage-Related Securities”). Trading securities are carried at market value with any unrealized gains or losses included in the statement of operations under “Loss on securities, net”. Securities held to maturity are carried at amortized cost.

7. RELATED PARTY TRANSACTIONS

Mr. William R. Hough, is chairman of the board of the Company, a director and the largest shareholder of the Company. Mr. Hough is also President and the controlling shareholder of William R. Hough & Co. (“WRHC”), a NASD-member investment-banking firm. During 1999, we entered into an agreement with WRHC whereby they would act as our agent in open-market purchases of securities. WRHC is compensated under that agreement on a commission basis. We also periodically purchase securities under agreement to repurchase at a rate based on the prevailing federal funds rate plus one-eighth of one percent, per an agreement entered into on August 15, 1995.

WRHC offers sales of insurance and mutual fund products and investment advisory services on our premises. We are paid 50% of the net profits earned from sales of investment products on our premises. The Company fee income earned from this relationship was $153,000 and $100,000 for the six months ended June 30, 2000 and 1999, respectively.

On May 17, 2000, we entered into a loan agreement with William R. Hough, individually, to borrow up to $2.0 million on an unsecured, revolving line of credit basis. Interest on this loan is at a variable rate, changing daily, and equal to the Citibank, N.A., New York Base Rate (the “Index”) plus .50%. The rate at June 30, 2000 was 9.5% per annum. This loan will be paid in one payment of all outstanding principal plus all accrued unpaid interest on March 31, 2001. In addition, we will pay regular monthly payments of all accrued unpaid interest due as of each payment date beginning June 30, 2000 and all subsequent interest payments to be due on the same day at each month thereafter. The repayment of principal and interest on this loan is subordinate to the payment of all principal and interest on the senior debt. We will use these proceeds for holding company debt service.

Certain directors and executive officers, members of their immediate families, and entities with which such persons are associated are customers of ours. As such, they had transactions in the ordinary course of business with us. All loans and commitments to lend included in those transactions were made in the ordinary course of business, upon substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and, in our opinion, have not involved more than the normal risk of collectability or presented other unfavorable features.

8. HOLDING COMPANY CASHFLOW AND DEBT SERVICE

As a Florida-chartered commercial bank, the Bank is subject to the laws of Florida as to the payment of dividends. Under the Florida Financial Institutions Code, the prior approval of the Department is required if the total of all dividends declared by a bank in any calendar year will exceed the sum of a bank’s net retained profits (net income less any dividends paid) for that year and its retained net profits for the preceding two years. The aggregate retained net profit for 1998 and 1999 was a $6.8 million deficit. Therefore, the Bank will not be permitted to make dividend payments to the holding company until those retained net profits for calendar year 2000 exceed the $6.8 million deficit. As of June 30, 2000, there remains a net retained profit deficit of $1.9 million.

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SELECTED QUARTERLY FINANCIAL AND OTHER DATA
FIVE CONSECUTIVE QUARTERS
($ in thousands, except share data; unaudited)


	Quarters Ended

	June 2000			Mar. 2000			Dec. 1999			Sept. 1999			June 1999

*OPERATING DATA:*




Interest income	$	50,846		$	49,587		$	48,961		$	48,158		$	46,965




Interest expense		26,836			25,915			25,128			24,795			24,202

Net interest income		24,010			23,672			23,833			23,363			22,763




Loan loss provision		5,000			4,400			3,120			3,871			1,410

Net interest income after loan loss provision		19,010			19,272			20,713			19,492			21,353




Noninterest income		4,178			4,930			5,048			7,621			5,800




Operating expenses		18,612			19,343			20,782			20,615			20,685




Other noninterest expense		994			1,282			1,150			1,043			840

Net income before income taxes & minority interest		3,582			3,577			3,829			5,455			5,628




Income tax provision		(1,474	)		(1,507	)		(1,622	)		(1,968	)		(2,219	)




Minority interest in income from subsidiary trust		(421	)		(421	)		(421	)		(424	)		(421	)

Net income	$	1,687		$	1,649		$	1,786		$	3,063		$	2,988

*PER SHARE DATA:*




Earnings per share – basic	$	.15		$	.15		$	.17		$	.29		$	.28

Weighted average shares outstanding – basic		10,555,897			10,555,889			10,547,802			10,510,415			10,493,214

Earnings per share – diluted	$	.15		$	.15		$	.16		$	.27		$	.26

Weighted average shares outstanding – diluted		11,310,583			11,318,488			11,310,681			11,309,550			11,359,392

*BALANCE SHEET DATA (at period-end):*




Total assets	$	2,554,828		$	2,626,458		$	2,566,026		$	2,516,507		$	2,573,825




Investment & mortgage-backed securities		466,180			442,845			453,008			356,639			345,128




Portfolio loans, net of unearned income		1,864,640			1,882,560			1,889,892			1,867,387			1,876,982




Nonperforming assets		36,066			29,903			31,218			32,633			39,205




Allowance for loan losses		28,273			30,470			28,177			28,189			26,209




Goodwill & premium on deposits		30,897			31,862			32,827			33,791			34,936




Deposits		2,252,982			2,334,661			2,282,809			2,224,614			2,273,443




Stockholders’ equity		173,254			170,489			170,245			169,544			167,608




Book value per share (dollars)		15.32			15.08			15.06			15.05			14.89




*SELECTED FINANCIAL RATIOS:*




Return on average assets		.26	%		.26	%		.28	%		.47	%		.48	%




Return on average equity		3.96			3.90			4.19			7.14			7.23




Equity to assets		6.78			6.42			6.63			6.73			6.51




Equity and minority interest in preferred subsidiary to assets		7.91			7.50			7.75			7.88			7.63




Portfolio loans/deposit ratio		82.75			80.64			82.79			83.94			82.56




Net interest spread		3.49			3.50			3.63			3.50			3.53




Net interest margin		3.89			3.86			3.99			3.85			3.87




Operating expense to average assets		2.88			3.00			3.27			3.38			3.30




Operating efficiency ratio		66.03			67.63			71.96			70.89			72.42




Loan loss allowance to portfolio loans		1.52			1.62			1.49			1.51			1.40




Loan loss allowance to nonperforming loans		95.68			128.40			112.04			108.32			77.11




*CAPITAL RATIOS:*




Tier 1 (leverage) – Company		6.14			5.93			6.02			5.97			5.83




Tier 1 (leverage) – Bank		6.95			6.78			6.78			6.88			6.96




Tier 1/risk-assets – Company		9.81			9.27			9.17			9.28			8.91




Tier 1/risk assets – Bank		11.12			10.59			10.33			10.64			10.59




Risk-based capital – Company		12.20			11.65			11.53			11.66			10.21




Risk-based capital – Bank		12.41			11.89			11.63			11.94			11.88




*OTHER DATA (at period-end):*




Number of branch banking offices		81			81			81			81			83




Number of full-time equivalent employees		997			995			1,000			1,019			1,151

REPUBLIC BANCSHARES, INC.
QUARTERLY NONPERFORMING ASSET TREND
($ in thousands; unaudited)


		Quarters Ended

		June 2000		Mar. 2000		Dec. 1999		Sept. 1999		June 1999

Non-performing loans:




Residential first lien		$	26,284	$	19,605	$	19,654	$	20,326	$	25,621




Commercial real estate			1,328		1,327		3,252		3,749		5,483




Multifamily residential			—		—		—		—		182




Commercial (business)			592		602		797		178		950




Home equity			831		1,841		833		440		872




Consumer & other			178		183		140		83		72




High LTV			336		173		474		1,249		808

	Total nonperforming loans (1)		29,549		23,731		25,150		26,025		33,988




Other nonperforming receivables			687		711		736		761		820




Other real estate:




Residential			2,508		2,141		3,804		3,568		3,176




Commercial-bulk sale			3,322		3,320		1,528		2,279		1,221

	Total ORE		5,830		5,461		5,332		5,847		4,397




	Total nonperforming assets	$	36,066	$	29,903	$	31,218	$	32,633	$	39,205

(1) Represents all loans on nonaccrual and all loans 90 days and over past due


Memorandum:




Past due 90+ days-still accruing (incl. above)				$	46		$	4		$	171		$	1,273		$	41




Nonperforming loans/portfolio loans					1.58	%		1.26	%		1.33	%		1.39	%		1.81	%




Nonperforming assets/assets					1.41			1.14			1.22			1.30			1.52




ORE/assets					.23			.21			.21			.23			0.17




Loan loss allowance to nonperforming loans:




		Originated portfolio			98.18	%		143.60	%		137.61	%		121.52	%		85.79	%




		July 1997 Purchase			1.94			2.43			—			35.21			34.03




		March 1995 Purchase			1,136.17			228.45			246.89			153.85			128.73




		CrossLand portfolio			—			—			24.63			42.90			43.31




		Other purchased portfolios			69.52			21.03			14.03			36.56			26.92

			Total		95.68	%		128.40	%		112.04	%		108.32	%		77.11	%

Other loan delinquency data




	30-89 days past due:




		Residential first lien		$	11,258		$	23,305		$	17,334		$	14,180		$	13,782




		Commercial real estate/multifamily			1,925			915			5,282			314			4,140




		Commercial (business)			686			824			1,190			1,535			1,872




		Home equity			1,290			1,351			1,864			1,399			3,082




		Consumer & other			378			364			479			491			293




		High LTV			2,890			2,385			3,301			2,253			1,265

			Total	$	18,427		$	29,144		$	29,450		$	20,172		$	24,434

REPUBLIC BANCSHARES, INC.
QUARTERLY CREDIT LOSS EXPERIENCE
($ in thousands; unaudited)


			Quarters Ended

			June 2000			Mar. 2000			Dec. 1999			Sept. 1999			June 1999

Daily average loans outstanding:




Residential first lien			$	735,289		$	748,869		$	757,410		$	768,772		$	801,171




Warehouse lines of credit				71,124			81,049			95,654			103,847			120,866




Subprime mortgages				73,570			78,118			82,167			84,919			79,712




Commercial real estate/multifamily				728,835			714,664			672,858			641,950			622,678




Commercial (business)				100,975			80,728			78,213			82,769			59,397




Home equity				64,308			63,554			63,632			65,318			69,511




Consumer				24,937			23,719			25,406			30,193			30,254




High LTV				87,269			90,142			98,565			102,674			106,168

	Total		$	1,886,307		$	1,880,843		$	1,873,905		$	1,880,442		$	1,889,757

Allowance for loan losses at beginning of period			$	30,470		$	28,177		$	28,189		$	26,209		$	27,442




Loan discount (net) allocated to (from) purchased portfolios				—			(5	)		(470	)		—			—




Provision for loan losses				5,000			4,400			3,120			3,871			1,410




Acquired reserve-purchased loans				—			—			—			—			275




Charge-offs:




Residential first lien				(374	)		(463	)		(468	)		(534	)		(690	)




Warehouse lines of credit				(4,412	)		(66	)		—			—			—




Subprime mortgages				(290	)		(319	)		(305	)		(239	)		(35	)




Commercial real estate/multifamily				(1	)		—			(167	)		(20	)		(634	)




Commercial (business)				(3	)		—			(115	)		(56	)		(176	)




Home equity				(945	)		—			—			(312	)		(386	)




Consumer				(44	)		(34	)		(155	)		(96	)		(140	)




Other				(82	)		(32	)		(14	)		(77	)		(35	)




High LTV				(1,299	)		(1,835	)		(1,620	)		(863	)		(1,468	)

	Total			(7,450	)		(2,749	)		(2,844	)		(2,197	)		(3,564	)




Recoveries:
Residential first lien				31			48			4			110			559




Warehouse lines of credit				10			—			—			—			—




Subprime mortgages				4			—			—			—			—




Commercial real estate/multifamily				3			287			8			2			3




Commercial (business)				9			29			13			44			16




Home equity				9			4			25			21			6




Consumer				12			11			11			29			35




Other				5			2			24			16			7




High LTV				170			266			97			84			20

	Total			253			647			182			306			646




Net (charge-offs) recoveries:
Residential first lien				(343	)		(415	)		(464	)		(424	)		(131	)




Warehouse lines of credit				(4,402	)		(66	)		—			—			—




Subprime mortgages				(286	)		(319	)		(305	)		(239	)		(35	)




Commercial real estate/multifamily				2			287			(159	)		(18	)		(631	)




Commercial (business)				6			29			(102	)		(12	)		(160	)




Home equity				(936	)		4			25			(291	)		(380	)




Consumer				(32	)		(23	)		(144	)		(67	)		(105	)




Other				(77	)		(30	)		10			(61	)		(28	)




High LTV				(1,129	)		(1,569	)		(1,523	)		(779	)		(1,448	)

	Total			(7,197	)		(2,102	)		(2,662	)		(1,891	)		(2,918	)

Allowance for loan losses at end of period			$	28,273		$	30,470		$	28,177		$	28,189		$	26,209

Net charge-offs (recoveries) to average loans-annualized:




Residential first lien				.19	%		.22	%		.25	%		.22	%		.06	%




Warehouse lines of credit				24.76			.33			—			—			—




Subprime mortgages				1.55			1.63			1.48			1.13			.18




Commercial real estate/multifamily				—			(.16	)		.09			.01			.47




Commercial (business)				(.02	)		(.14	)		.52			.03			.36




Home equity				5.82			(.03	)		(.16	)		1.78			2.19




Consumer				.51			.39			2.27			.89			1.39




High LTV				5.17			6.96			6.18			3.03			5.46

		Total		1.53	%		.45	%		.57	%		.40	%		.62	%

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Comparison of Balance Sheets at June 30, 2000 and December 31, 1999

Overview

At June 30, 2000, the Company had total assets of $2.55 billion, stockholders’ equity of $173.3 million and a book value per share of $15.32, compared with total assets of $2.57 billion, stockholders’ equity of $170.2 million and a book value of $15.06 at December 31, 1999. Loans, net of allowances for loan losses, were $1.84 billion at June 30, 2000, compared with $1.86 billion at December 31, 1999, while total deposits were $2.25 billion, a decrease of $29.8 million from $2.28 billion at year-end 1999.

Investment Securities, Commercial Paper, Mortgage-Backed and Mortgage-Related Securities

Available for sale investments at June 30, 2000 were comprised of U.S. Treasury and mortgage-backed securities issued by federal agencies totaling $466.2 million compared to $453.0 million at the end of last year. Mortgage-backed securities increased $60.6 million, while commercial paper totaling $39.9 million matured without replacement. Mortgage-related securities in the trading category amounted to $37.3 million at June 30, 2000, a $1.9 million decrease from $39.2 million at December 31, 1999. These trading assets consisted of: (1) a $10.9 million subordinate tranche purchased from our securitization of High LTV Loans in June 1998; (2) $22.5 million in overcollateralization and residual interests in cash flows from securitizations in December 1997 and June 1998; and (3) the excess spread on mortgage servicing rights, which amounted to $3.9 million at year-end 1999.

Loans

Total loans declined by $25.3 million from $1.89 billion at the prior year-end to $1.86 billion at June 30, 2000. Payoffs and other reductions of warehouse lines of credit and residential mortgages more than offset increases in commercial and consumer loans. Warehouse lines of credit decreased $29.5 million, subprime mortgages decreased $8.2 million and conventional/government residential loans declined by $29.7 million. High LTV Loans decreased by $6.6 million. Commercial loans increased $26.3 million and home equity loans increased $14.7 million, while commercial real estate loans and business loans secured by real estate increased $6.7 million.

Allowance for Loan Losses

The allowance for loan losses amounted to $28.3 million (1.52% of portfolio loans) at June 30, 2000, compared with $28.2 million (1.49% of portfolio loans) at December 31, 1999. Activity to the allowance in 2000 included provisions for loan losses of $9.4 million less loan charge-offs (net of recoveries) of $9.3 million. Of the net amount of charge-offs, $4.4 million resulted from charging off as uncollectible a portion of several mortgage warehouse lines of credit. The remainder resulted from charge-offs of High LTV, home equity and residential loans deemed uncollectible. At June 30, 2000, the ratio of the allowance for loan losses to nonperforming loans was 95.68% compared to 112.04% at the end of 1999.

Nonperforming Assets

Nonperforming assets amounted to $36.1 million (1.41% of total assets) at June 30, 2000, compared with $31.2 million (1.22% of total assets) at December 31, 1999. Nonperforming loans totaled $29.5 million at June 30, 2000, an increase of $4.4 million from the prior year-end total of $25.2 million. Nonperforming one-to-four family residential mortgage loans increased by $5.3 million, primarily from transferring a $5.0 million condominium development loan to nonperforming status in the second quarter of 2000. Nonperforming mortgage warehouse lines of credit increased $2.0 million. Nonperforming commercial real estate and commercial (business) loans decreased $2.1 million and nonperforming High LTV Loans and subprime mortgages decreased

$138,000 and $693,000, respectively. ORE balances increased $498,000 to $5.8 million, primarily from the transfer of land and building, acquired in a previous merger but no longer used for banking purposes, from premises and equipment to other real estate.

Deposits

Total deposits were $2.25 billion at June 30, 2000, a $29.8 million decrease from the prior year-end. Certificates of deposit declined by $38.4 million which reflects the increasingly competitive market for deposit accounts. This was partially offset by increases in checking, savings and money market deposits. Checking accounts (including non-retail deposits such as official checks) increased by $6.1 million while money market and savings deposits grew by $2.4 million. Total deposits from the 24 branches, which comprised our 1998 and 1999 branch expansion program, have increased by $57.7 million to $259.5 million at June 30, 2000.

Holding Company Debt

Holding company debt decreased by $499,000 to $26.1 million at June 30, 2000. Holding company debt at June 30, 2000 consisted of senior debt to SunTrust of $7.5 million, term subordinated debt payable to several of the Company’s current and former directors of $2.8 million, $1.2 million of an unsecured note from Mr. William R. Hough, the Company’s chairman of the board (see “Note 7. Related Party Transactions”) and $14.7 million of convertible subordinated debentures. The senior debt requires monthly principal payments of $278,000 plus interest at Libor plus 1.75% and a balloon payment on March 31, 2001 of approximately $5.0 million. The unsecured note from the Company’s chairman also matures on March 31, 2001. The term subordinated debt and convertible subordinated debt mature on September 22, 2006 and October 1, 2014, respectively.

Stockholders’ Equity

Stockholders’ equity was $173.3 million at June 30, 2000, or 6.8% of total assets, compared to $170.2 million or 6.6% of total assets at December 31, 1999. At June 30, 2000, the Bank’s tier 1 (leverage) capital ratio was 6.95%, its tier 1 (risk-based) capital ratio was 11.12%, and its total risk-based capital ratio was 12.41%, all in excess of minimum FDIC guidelines for an institution to be considered a “well-capitalized” bank. The same ratios for the Company at June 30, 2000 were 6.14%, 9.81%, and 12.20%, respectively.

Comparison of Results of Operations for the Three Months Ended June 30, 2000 and 1999

Overview

Net income for the second quarter of 2000 was $1.7 million, or $.15 per share (on a diluted basis), compared with $3.0 million, or $.26 per share, on the same basis for the same period in 1999. In the current quarter the Company recorded a $5.0 million loan loss provision and a $793,000 trading loss on its residual interest in two High LTV Loan securitizations, compared with a $1.4 million loan loss provision and a $109,000 trading loss in 1999. Net income before tax for 1999 included $464,000 in gains on sale of loans in addition to a lesser loss provision.

Analysis of Net Interest Income (see table on page 17)

Net interest income for the three months ended June 30, 2000 was $24.0 million compared with $22.8 million for the same period last year, a $1.2 million or 5.5% increase. Interest income was $50.8 million for the second quarter of 2000, an increase of $3.9 million over the same period in 1999. Interest expense increased by $2.6 million from $24.2 million in 1999 to $26.8 million in 2000. Average asset yield increased by 29 basis points from 8.03% for the same period of 1999 to 8.32% for 2000, primarily as a result of a 25 basis point increase in loan portfolio yield. The average cost of interest-bearing liabilities also increased by 34 basis points from 4.50% to 4.84%, primarily due to an increasingly competitive market for deposit accounts and a rising interest rate environment. Net interest margin, which includes the benefit of noninterest bearing funds, increased from 3.87% for the second quarter of 1999 to 3.89% for the second quarter of 2000 while net interest spread decreased from 3.53% for the second quarter of 1999 to 3.49% for the second quarter of 2000.

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, 2000 and 1999 ($ in thousands; unaudited):


		Three Months Ended June 30,

		2000							1999

		Average				Average			Average				Average
Summary of Average Rates		Balance		Interest		Rate			Balance		Interest		Rate

Interest earning assets:




	Loans, net	$	1,886,291	$	42,153		8.90	%	$	1,889,757	$	40,951		8.65	%




Investment securities			19,991		301		6.04			37,497		490		5.23




	Mortgage-backed securities		389,733		6,463		6.63			222,391		3,324		5.98




	Trading securities		38,418		293		3.05			65,530		689		4.21




	Commercial paper		—		—		—			—		—		—




	Interest bearing deposits in banks		5,316		89		6.75			10,623		125		4.71




	FHLB stock		13,816		265		7.73			13,939		258		7.44




	Federal funds sold		82,620		1,282		6.14			94,964		1,128		4.70

	Total interest earning assets		2,436,185		50,846		8.32			2,334,701		46,965		8.03




	Noninterest earning assets		145,957							175,148

	Total assets	$	2,582,142						$	2,509,849

Interest bearing liabilities:




	Interest checking	$	184,023	$	358		.78	%	$	179,144	$	343		.77	%




	Money market		282,095		3,060		4.36			196,701		1,825		3.72




	Savings		62,501		255		1.64			70,915		273		1.55




	Passbook Gold		183,790		1,865		4.08			287,715		2,983		4.16




	Time deposits		1,450,836		20,187		5.60			1,348,788		17,734		5.27




	FHLB advances		766		13		6.85			—		—		—




	Subordinated debt		14,688		265		7.23			—		—		—




	Other holding company debt		10,856		262		9.65			32,000		573		7.16




	Other borrowings		42,617		571		5.39			43,877		471		4.29

	Total interest bearing liabilities		2,232,172		26,836		4.84			2,159,140		24,202		4.50

	Noninterest bearing liabilities		180,407							185,463




	Stockholders’ equity		169,563							165,246

	Total liabilities and equity	$	2,582,142						$	2,509,849

Net interest income/net interest spread				$	24,010		3.49	%			$	22,763		3.53	%

Net interest margin							3.89	%						3.87	%


			Increase (Decrease) Due to

Changes in Net Interest Income			Volume			Rate			Total

Interest earning assets:




	Loans, net		$	41		$	1,161		$	1,202




	Investment securities			(208	)		19			(189	)




	Mortgage-backed securities			2,752			387			3,139




	Trading securities			(211	)		(185	)		(396	)




	Commercial paper			—			—			—




	Interest bearing deposits in banks			(78	)		42			(36	)




	FHLB stock			(2	)		9			7




	Federal funds sold			(160	)		314			154

		Total change in interest income		2,134			1,747			3,881




Interest bearing liabilities:




	Interest checking			9			6			15




	Money market			885			350			1,235




	Savings			(34	)		16			(18	)




	Passbook Gold			(1,063	)		(55	)		(1,118	)




	Time deposits			1,825			628			2,453




	FHLB advances			13			—			13




	Subordinated debt			265			—			265




	Other holding company debt			(465	)		154			(311	)




	Other borrowings			(12	)		112			100

Total change in interest expense				1,423			1,211			2,634

Increase (decrease) in net interest income			$	711		$	536		$	1,247

Noninterest Income

Noninterest income for the three months ended June 30, 2000 was $4.2 million compared with $5.8 million for the same period of 1999, a decrease of $1.6 million. A trading loss of $793,000 on the residual assets from securitizing High LTV Loans in prior years was recorded in the second quarter this year compared to a similar trading loss of $109,000 for the second quarter last year. Gains on sale of loans were $464,000 in 1999 compared to a loss of sale on loans of $1,000 in 2000. Other changes included a $204,000 decrease in loan service fees and a $604,000 decline in other income primarily from a one-time recovery of a reserve fund of $491,000 recorded in 1999. These declines were partially offset by a $394,000 increase in service charges on deposit accounts and other deposit-related fee income sources.

The following table reflects the components of noninterest income for the three months ended June 30, 2000, and 1999 ($ in thousands; unaudited):


	For the Three Months Ended June 30,

							Increase
	2000			1999			(Decrease)

Service charges on deposit accounts	$	1,903		$	1,509		$	394




Loan service fees		1,514			1,718			(204	)




Other loan fee income		1,011			1,051			(40	)




(Loss) gain on sale of loans, net		(1	)		464			(465	)




Loss on sale of securities, net		(4	)		—			(4	)




Net trading account loss		(793	)		(109	)		(684	)




Foreign exchange income		14			29			(15	)




Other income		534			1,138			(604	)

Total noninterest income	$	4,178		$	5,800		$	(1,622	)

Noninterest Expense

Operating expenses for the second quarter of 2000 were $18.6 million compared with $20.7 million for the same period last year, a decrease of $2.1 million or 10%. This improvement is primarily due to a $1.3 million decrease in salary and benefits expenses, a $103,000 decrease in telephone expense and a $363,000 decrease in postage and supplies expense, resulting primarily from the 1999 closing of the Bank’s mortgage banking division. Total noninterest expenses, which includes operating expenses, were $19.6 million for the three months ended June 30, 2000 compared with $21.5 million for the same period last year.

The following table reflects the components of noninterest expense for the three months ended June 30, 2000 and 1999 ($ in thousands; unaudited):


	For the Three Months Ended June 30,

						Increase
	2000		1999			(Decrease)

Salaries and benefits	$	9,161	$	10,422		$	(1,261	)




Net occupancy expense		4,033		3,869			164




Advertising and marketing		251		225			26




Data processing fees and services		1,196		1,242			(46	)




FDIC and state assessments		355		301			54




Telephone expense		351		454			(103	)




Postage and supplies		683		1,046			(363	)




Legal and professional		343		266			77




Other operating expense		2,239		2,860			(621	)

Total operating expenses		18,612		20,685			(2,073	)




ORE expense, net of ORE income		30		(130	)		160




Amortization of premium on deposits and goodwill		964		970			(6	)

Total noninterest expense	$	19,606	$	21,525		$	(1,919	)

Comparison of Results of Operations for the Six Months Ended June 30, 2000 and 1999

Overview

Net income for the first half of 2000 was $3.3 million, or $.30 per share (on a diluted basis), compared with net income of $5.8 million, or $.52 per share, on the same basis for the same period in 1999.

Analysis of Net Interest Income (see table on page 20)

Net interest income for the six months ended June 30, 2000 was $47.7 million compared with $45.2 million for the same period last year, a $2.5 million or a 5.5% increase. Interest income was $100.4 million for the first six months of 2000, an increase of $6.8 million over the same period in 1999. Interest expense increased by $4.3 million. Average asset yield increased by 19 basis points from 8.05% for the same period in 1999 to 8.24% for 2000. The average cost of interest-bearing liabilities also increased by 20 basis points from 4.55% to 4.75%. As a result, net interest margin, which includes the benefit of noninterest bearing funds, increased by 4 basis points from 3.84% for 1999 to 3.88% for 2000 and net interest spread remained relatively level at 3.49% for the first six months of 2000.

Noninterest Income

Noninterest income for the six months ended June 30, 2000 was $9.1 million compared with $13.2 million for the same period in 1999, a decrease of $4.1 million. Gains on sale of loans from mortgage banking activities in 1999 accounted for $3.2 million of the decrease and a trading loss of $935,000 in 2000 versus a trading loss of $245,000 in 1999 accounted for $690,000 and lower service fee revenue from a declining loan servicing portfolio accounted for $391,000 of the decrease. Other loan fee income increased $25,000, while service charges on deposit accounts and other deposit-related fee income sources increased by $927,000.

The following table reflects the components of noninterest income for the six months ended June 30, 2000, and 1999 ($ in thousands; unaudited):


	For the Six Months Ended June 30,

							Increase
	2000			1999			(Decrease)

Service charges on deposit accounts	$	3,890		$	2,963		$	927




Loan service fees		3,212			3,603			(391	)




Other loan fee income		1,978			1,953			25




Gains on sales of loans, net		20			3,258			(3,238	)




Loss on sale of securities, net		(1	)		—			(1	)




Net trading account (loss) gain		(935	)		(245	)		(690	)




Foreign exchange income		53			58			(5	)




Other income		892			1,573			(681	)

Total noninterest income	$	9,109		$	13,163		$	(4,054	)

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, 2000 and 1999 ($ in thousands; unaudited):


		Six Months Ended June 30,

		2000								1999

			Average				Average			Average				Average
Summary of Average Rates			Balance		Interest		Rate			Balance		Interest		Rate

Interest earning assets:




Loans, net			$	1,883,567	$	83,484		8.83	%	$	1,955,523	$	84,033		8.58	%




Investment securities				22,610		654		5.80			39,910		1,026		5.17




Mortgage-backed securities				380,220		12,457		6.55			130,141		3,918		6.02




Trading securities				38,725		585		3.02			74,270		1,639		4.41




Commercial paper				3,774		112		5.87			—		—		—




Interest bearing deposits in banks				5,530		183		6.65			9,080		197		4.37




FHLB stock				13,816		541		7.88			12,693		467		7.42




Federal funds sold				81,577		2,416		5.86			100,660		2,364		4.67

Total interest earning assets				2,429,819		100,432		8.24			2,322,277		93,644		8.05




	Noninterest earning assets			149,612							171,246

	Total assets		$	2,579,431						$	2,493,523

Interest bearing liabilities:




	Interest checking		$	184,857	$	708		.77	%	$	179,395	$	683		.77	%




	Money market			264,483		5,580		4.24			184,650		3,440		3.76




	Savings			62,234		509		1.65			71,750		602		1.69




	Passbook Gold			202,313		4,117		4.09			289,662		6,032		4.20




	Time deposits			1,452,965		39,678		5.49			1,339,109		35,515		5.35




	FHLB advances			767		26		6.85			6,381		157		4.95




	Subordinated debt			14,686		531		7.23			—		—		—




	Other holding company debt			11,206		532		9.49			32,000		1,102		6.89




	Other borrowings			40,763		1,070		5.28			42,972		927		4.40

	Total interest bearing liabilities			2,234,274		52,751		4.75			2,145,919		48,458		4.55

	Noninterest bearing liabilities			175,351							183,253




	Stockholders’ equity			169,806							164,351

	Total liabilities and equity		$	2,579,431						$	2,493,523

Net interest income/net interest spread					$	47,681		3.49	%			$	45,186		3.50	%

Net interest margin								3.88	%						3.84	%


			Increase (Decrease) Due to

Changes in Net Interest Income			Volume			Rate			Total

Interest earning assets:




	Loans, net		$	(2,739	)	$	2,190		$	(549	)




	Investment securities			(401	)		29			(372	)




	Mortgage-backed securities			8,143			396			8,539




	Trading securities			(552	)		(502	)		(1,054	)




	Commercial paper			112			—			112




	Interest bearing deposits in banks			(93	)		79			(14	)




	FHLB stock 45			29			74




	Federal funds sold			(484	)		536			52

		Total change in interest income		4,031			2,757			6,788




Interest bearing liabilities:




	Interest checking			23			2			25




	Money market			1,651			489			2,140




	Savings			(76	)		(17	)		(93	)




	Passbook Gold			(1,762	)		(153	)		(1,915	)




	Time deposits			3,800			363			4,163




	FHLB advances			(78	)		(53	)		(131	)




	Subordinated debt			531			—			531




	Other holding company debt			(890	)		320			(570	)




	Other borrowings			(35	)		178			143

Total change in interest expense				3,164			1,129			4,293

Increase (decrease) in net interest income			$	867		$	1,628		$	2,495

Noninterest Expense

Operating expenses for the first six months of 2000 were $38.0 million compared with $43.0 million for the same period last year, a decrease of $5.0 million. Cost associated with the now-discontinued mortgage banking operation accounted for $5.5 million in operating expenses last year. The branch expansion program accounted for $4.2 million and $3.8 million of the operating expenses in 2000 and 1999, respectively. Total noninterest expenses, which include operating expense, were $40.2 million for the six months ended June 30, 2000 compared with $44.5 million for the same period last year.

The following table reflects the components of noninterest expense for the six months ended June 30, 2000 and 1999 ($ in thousands; unaudited):


	For the Six Months Ended June 30,

						Increase
	2000		1999			(Decrease)

Salaries and benefits	$	18,515	$	22,432		$	(3,917	)




Net occupancy expense		8,044		7,598			446




Advertising and marketing		789		593			196




Data processing fees and services		2,390		2,194			196




FDIC and state assessments		609		634			(25	)




Telephone expense		708		1,005			(297	)




Postage and supplies		1,413		2,390			(977	)




Legal and professional		886		775			111




Other operating expense		4,602		5,411			(809	)

Total operating expenses		37,956		43,032			(5,076	)




ORE expense, net of ORE income		346		(488	)		834




Amortization of premium on deposits and goodwill		1,929		1,980			(51	)

Total noninterest expense	$	40,231	$	44,524		$	(4,293	)

Part II. Other Information

Item 1. Legal Proceedings

In November 1999, 18 former shareholders of Bankers Savings Bank, F.S.B. (“BSB”) filed a claim against us in the Miami-Dade County, Florida, Circuit Court that alleges we had knowledge of and failed to disclose to them, BSB and to its shareholders, prior to acquiring BSB in November 1998, the loss incurred for the fourth quarter of 1998 which resulted from now-discontinued mortgage banking activities. The claim alleges breach of contract, fraud, negligent misrepresentation and violation of the Florida Securities and Investor Protection Act. The plaintiffs have alleged damages generally in the amount of $3.4 million. This matter has been scheduled for mediation on or before September 13, 2000 and for trial thereafter. We believe the plaintiffs’ claims are without merit and intend to continue to defend such action vigorously.

In January 1999, we filed a lawsuit in Pinellas County, Florida, Circuit Court against a former vendor that provided printing and direct mailing services for our now-discontinued mortgage banking operations to invalidate a term contract executed by the former manager of the High LTV Loan unit. The former manager was joined as an additional party defendant. A settlement was reached in the first quarter of 2000 with the printing vendor, effectively removing the vendor as a party to this action, wherein we paid the former vendor $716,000 and the vendor agreed to waive all further claims of contract payments allegedly due it. This amount was recorded as an expense in the fourth quarter of 1999. We have amended our complaint against the former High LTV Loan manager to assert claims to recover the sums paid to the printing vendor, including causes of action for indemnity and breach of fiduciary duty. The former manager has asserted a counterclaim, alleging unpaid compensation in an amount in excess of $1 million. We believe this claim is without merit and intend to continue to defend such action vigorously.

We are subject to various legal proceedings in the ordinary course of business. Based on information presently available, we do not believe that the ultimate outcome in such proceedings, in the aggregate, would have a material adverse effect on our financial position or results of operation.

Item 6. Exhibits and Reports on Form 8-K

a. Exhibits:

27.0 Financial Data Schedule (for SEC use only)

b. The following reports on Form 8-K filed year-to-date, are hereby incorporated by reference:


	1.		Report on Form 8-K dated February 9, 2000 – Announcement of net income of $10.7 million or $.95 per share on a diluted basis for year-ended December 31, 1999.

	2.		Report on Form 8-K dated March 20, 2000 – Announcement of the appointment of Mr. William R. Klich as President and Chief Executive Officer. Separately, disclosure of operational deficiencies in the warehouse lending department.

	3.		Report on Form 8-K dated April 18, 2000 – Announcement of net income of $1.6 million or $.15 per share on a diluted basis for the first quarter of 2000.

Pursuant to the requirements 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:	August 1, 2000	By:	/s/William R. Klich

			William R. Klich President and Chief Executive Officer (principal executive officer)




Date:	August 1, 2000	By:	/s/William R. Falzone

			William R. Falzone Treasurer (principal financial and accounting officer)


	b.		The following reports on Form 8-K filed year-to-date, are hereby incorporated by reference: