<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Six Months Ended June 30, 1995. Commission file Number 0-8597
-----------------------------
THE REPUBLIC CORPORATION
------------------------
Texas 74-0911766
- ----- ----------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5340 Weslayan - P.O. Box 270462, Houston, Tx 77277
- ----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 713-622-9727
--------------
NONE
- ----
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
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 report(s), and (2) has been subject to such filing requirements for
the past 90 days.
YES X. NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of
Common Stock, $1.00 par value Shares 356,844
- ----------------------------- -------
Outstanding at June 30,
1995, (excluding 23,119
shares held as treasury
shares)
<PAGE>
THE REPUBLIC CORPORATION
Index to Quarterly Report on Form 10-Q
Page
----
Part I. Financial Information
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets
December 31, 1994, and June 30, 1995. 1
Consolidated Statements of Income for
the three months and six months
ended June 30, 1994 and 1995. 2
Consolidated Statements of Cash Flows
for the six months ended June 30,
1994 and 1995. 3
Notes to Financial Statements 4
Item 2. Management's Discussion and Analysis 5-9
Part II. Other Information 10
Signatures 11
<PAGE>
<TABLE>
<CAPTION>
REPUBLIC CORPORATION AND SUBSIDIARY
Balance Sheet
June 30, December 31
1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and due from banks (demand). . . . . . $ 2,693,298 $ 3,073,573
Investment securities:
Held-to-maturity
Market value at 6-30-95 9,978,125
---------
Market value at 12-31-94 6,952,200 9,944,321 7,002,058
---------
Available-for-sale
Market value at 6-30-95 24,000
---------
Market value at 12-31-94 24,000 24,000 24,000
--------- ------------ ------------
$ 12,661,619 $ 10,099,631
------------ ------------
Loans . . . . . . . . . . . . . . . . . . . 56,727,229 49,138,466
Plus: Uncollected earned interest. . . 531,732 383,884
Less: Allowance for losses . . . . . . (898,162) (925,572)
------------ ------------
Net loans and other receivables . . 56,360,799 48,596,778
------------ ------------
Federal funds sold. . . . . . . . . . . . . 36,650,000 36,450,000
Property, equipment and vehicles (net). . . 1,596,514 1,541,059
Other real estate . . . . . . . . . . . . . -0- -0-
Goodwill. . . . . . . . . . . . . . . . . . 436,079 436,079
Other assets. . . . . . . . . . . . . . . . 431,242 492,121
------------ ------------
Total assets. . . . . . . . . . . . . . $108,136,253 $ 97,615,668
------------ ------------
Liabilities and Stockholders' Equity
Deposits (Domestic):
Demand (Non-interest bearing) . . . . . $ 13,825,624 $ 11,809,963
Savings, time and demand (Interest
bearing). . . . . . . . . . . . . . 84,322,173 76,406,333
------------- ------------
$ 98,147,797 $ 88,216,296
------------- ------------
Accounts payable and accrued interest payable 938,945 598,704
Accrued taxes payable . . . . . . . . . . . 226,898 325,275
------------ ------------
Total liabilities . . . . . . . . . . . $ 99,313,640 $ 89,140,275
------------ ------------
Minority Interest in Consolidated Subsidiary 186,866 178,711
------------ ------------
Stockholders' Equity
Common stock (par value $1; 750,000
shares authorized, 356,844 shares
issued including stock held
in treasury). . . . . . . . . . . . 356,844 356,844
Additional paid-in capital. . . . . . . . . 234,931 234,931
Less cost of treasury stock (23,119 shares
at 6-30-95 and 23,119 at 12-31-94). . . (91,303) (91,303)
------------ ------------
Total contributed capital . . . . . 500,472 500,472
------------ ------------
Retained earnings . . . . . . . . . . . . . 8,135,275 7,796,210
------------ ------------
Net Unrealized Gain (Loss) on Securities
Available-for-Sale (Net of Taxes) . . . -0- -0-
Stockholders' equity. . . . . . . . 8,635,747 8,296,682
------------ ------------
Total liabilities and stockholders equity $108,136,253 $ 97,615,668
------------ ------------
</TABLE>
The accompanying note is an integral part of these financial statements.
(1)
<PAGE>
REPUBLIC CORPORATION AND SUBSIDIARY
Statement of Income
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------- -------------------------------
June 30 June 30 June 30 June 30
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans $1,171,096 $ 894,826 $2,294,314 $1,726,704
Interest on funds sold and securities
purchased under agreement to resell 580,448 314,356 1,152,765 526,594
Interest and dividends on investments
Securities of U.S. Government and
government agencies 135,719 69,661 206,100 154,748
Obligations of states, political
subdivisions and other obligations
secured by the government -0- 67 -0- 134
---------- ---------- ---------- ----------
Total interest on investments 716,167 384,084 1,358,865 681,476
---------- ---------- ---------- ----------
Total interest income $1,887,263 $1,278,910 $3,653,179 $2,408,180
---------- ---------- ---------- ----------
Interest expense:
Interest on deposits 1,066,771 552,365 2,042,994 1,031,682
---------- ---------- ---------- ----------
Total Interest expense 1,066,771 552,365 2,042,994 1,031,682
---------- ---------- ---------- ----------
Net interest income 820,492 726,545 1,610,185 1,376,498
Provision for loan losses -0- -0- -0- -0-
---------- ---------- ---------- ----------
Net interest income after provision for
loan losses 820,492 726,545 1,610,185 1,376,498
---------- ---------- ---------- ----------
Other income:
Service charges on deposit accounts 39,497 33,780 76,167 65,253
Other service charges, commission and fees 41,886 35,264 81,405 68,890
Gain on sale of securities -0- -0- -0- -0-
Net income- other real estate -0- -0- -0- -0-
Other income 10,458 33,098 24,147 42,791
---------- ---------- ---------- ----------
Total other income 91,841 102,142 181,719 176,934
---------- ---------- ---------- ----------
Other expenses:
Salaries and wages 236,402 223,719 478,673 443,914
Employee benefits 62,190 56,079 123,506 113,250
Net occupancy expenses 43,666 59,908 97,695 99,622
Furniture and equipment expenses 15,155 13,285 33,813 36,594
Depreciation other than rental property 22,072 21,848 44,035 45,441
Net cost-other real estate -0- -0- -0- -0-
Computer service center 20,645 20,054 43,332 38,417
FDIC-insurance 48,194 36,637 96,389 73,274
Professional services 10,395 7,248 52,405 45,765
Advertising 17,852 5,833 36,411 15,426
Other operating expenses 117,482 102,033 232,426 226,546
---------- ---------- ---------- ----------
Total other expenses 594,053 546,644 1,238,685 1,138,249
---------- ---------- ---------- ----------
Income before income taxes 318,280 282,043 553,219 415,183
Less applicable income taxes (Current) (118,000) (106,000) (206,000) (161,724)
---------- ---------- ---------- ----------
Income before reduction for minority interest 200,280 176,043 347,219 253,459
Less minority interest income (4,673) (4,149) (8,154) (6,360)
---------- ---------- ---------- ----------
Net income $ 195,607 $ 171,894 $ 339,065 $ 247,099
---------- ---------- ---------- ----------
Earnings per share $ .59 $ .52 $ 1.02 $ .74
---------- ---------- ---------- ----------
</TABLE>
The accompanying note is an integral part of these financial statements.
(2)
<PAGE>
REPUBLIC CORPORATION AND SUBSIDIARY
Statement of Cash Flows
<TABLE>
<CAPTION>
Six Months Ended
June 30 June 30
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Cash flows and operating activities:
Net income (loss). . . . . . . . . . . . $ 339,065 $ 247,099
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation . . . . . . . . . . 81,500 87,336
Provision for loan losses. . . . -0- -0-
Amortization (accretion) of
discounts and premium. . . . (15,232) 11,179
Other real estate gains/net. . . -0- -0-
Investment securities gains/net. -0- -0-
Re-appraisal - other real estate -0- -0-
(Decrease) increase in interest
payable. . . . . . . . . . . 340,241 151,942
(Increase) decrease in interest
receivable . . . . . . . . . (147,848) (76,764)
(Increase) decrease in other assets 60,879 193,572
Increase (decrease) in other
liabilities. . . . . . . . . (90,222) (65,708)
----------- -----------
Total adjustments. . . . . . . . . . . . . . 229,318 301,557
----------- -----------
Net cash provided by (used in) operating
activities . . . . . . . . . . . . . . . 568,383 548,656
----------- -----------
Cash flows from investing activities
Proceeds from sales of investment securities -0- -0-
Proceeds from maturities of
investment securities. . . . . . . . 7,005,000 7,000,000
Purchase of investment securities. . . . (9,932,031) (6,989,063)
Loans made to customers net cash activity (7,616,173) (6,189,443)
Capital expenditure. . . . . . . . . . . (136,955) (58,566)
Proceeds from sale of other real estate. -0- -0-
----------- -----------
Net cash provided by (used in) investing
activities . . . . . . . . . . . . . . . (10,680,159) (6,237,072)
----------- -----------
Cash flows from financing activities
Net increase (decrease) in demand deposits,
NOW accounts, savings accounts and
certificates of deposit. . . . . . . 9,931,501 11,493,592
Purchase of treasury stock . . . . . . . -0- -0-
----------- -----------
Net cash provided by (used in) financing
activities . . . . . . . . . . . . . . . 9,931,501 11,493,592
----------- -----------
Net increase (decrease) in cash and cash
equivalents. . . . . . . . . . . . . . . (180,275) 5,505,176
Cash and cash equivalents at beginning of year:
Cash and due from banks. . . . . . . . . 3,073,573 2,525,487
Federal funds sold . . . . . . . . . . . 36,450,000 27,675,000
----------- -----------
Cash and cash equivalents at beginning of year 39,523,573 30,200,487
----------- -----------
Cash and cash equivalents at June 30:
Cash and due from banks. . . . . . . . . 2,693,298 2,805,663
Federal funds sold . . . . . . . . . . . 36,650,000 33,200,000
----------- -----------
Cash and cash equivalents at June 30: 39,343,298 36,005,663
----------- -----------
----------- -----------
Supplemental disclosures of cash flow
information:
Cash paid for interest . . . . . . . 1,763,864 879,740
Cash paid for income tax . . . . . . 138,718 112,843
</TABLE>
The accompanying note is an integral part of these financial statements.
(3)
<PAGE>
REPUBLIC CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 1995
Note 1 -- BASIS OF PREPARATION AND PRESENTATION
The consolidated financial statements included herein have been prepared by
The Republic Corporation, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission and include all adjustments which are,
in the opinion of management, necessary for a fair presentation. The condensed
consolidated financial statements include the accounts of the company and its
subsidiaries. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. The Republic Corporation believes that the disclosures are
adequate to make the information presented not misleading; however, it is
suggested that these financial statements be read in conjunction with the
financial statements and the notes thereto which are on Form 10-K for the fiscal
year ended December 31, 1994. The financial data for the interim periods may
not necessarily be indicative of results to be expected for the year.
Securities that will be held for indefinite periods of time, including
securities that will be used as part of the Company's asset/liability management
strategy and that may be sold in response to changes in interest rates,
prepayments, and similar factors, are classified as Available-for-Sale and
accounted for at fair value.
(4)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL CONDITION
ASSET QUALITY
Problem loan percentages have fallen since year-end, 1994 by virtue of the
loan growth that has occurred during the first half of 1995. Reserve coverage
continues to be adequate in relation to the level of problem loans, the current
loss exposure in the loan portfolio and the recent, as well as anticipated
charge-off levels. (Please see Balance Sheet, P-1)
<TABLE>
<CAPTION>
Table 1 PROBLEM ASSETS
-----------------------
(dollars in thousand) June 30 December 31
--------------------
1995 1994 1993 1992
<S> <C> <C> <C> <C>
Nonaccrual loans $ 239 $ 217 $ 313 $ 499
Past-due loans (over 90 days) -0- -0- -0- -0-
Restructured loans 649 668 546 569
------ ------ ------ ------
Total problem loans $ 888 $ 885 $ 859 $1,068
Foreclosed assets
Real estate -0- -0- -0- 91
In-substance foreclosures -0- -0- -0- 105
Other -0- -0- -0- -0-
------ ------ ------ ------
Total Problem Assets $ 888 $ 885 $ 859 $1,264
Total problem loans as
a percentage of total loans 1.6% 1.8% 2.4% 3.5%
Total problem assets as a
percentage of total loans
and foreclosed assets 1.6% 1.8% 2.4% 4.1%
</TABLE>
<TABLE>
<CAPTION>
Table 2 LOAN CONCENTRATIONS
----------------------------
(dollars in thousands) June 30 December 31
--------------
1995 1994 1993
<S> <C> <C> <C>
Commercial $ 4,526 $ 3,470 $ 2,222
Agricultural 3,727 3,277 2,776
Real Estate-Construction 1,070 639 220
Real Estate-Mortgage 39,396 34,248 25,277
Installment loans to Individuals 8,008 7,504 5,987
------- ------- -------
Totals $56,727 $49,138 $36,482
</TABLE>
(5)
<PAGE>
SOURCES AND USES OF FUNDS
The $9,931,501 in deposit growth in the six months ended June 30, 1995 was
accompanied by $7,616,173 in loan extensions and $2,927,031 in increased
investments. Cash equivalents remained at approximate, year-end, 1994 levels at
the end of the first half of 1995. (Please see Statement of Cash Flows, P-3)
LIQUIDITY
Ample capability remains for the bank to respond to loan and withdrawal
requests. Approximately 50% of current liabilities are presently held in cash,
fed funds sold and readily marketable, U.S. TREASURY NOTES. (Please see Balance
Sheet, P-1)
INTEREST RATE SENSITIVITY MANAGEMENT
In spite of the asset sensitive profile revealed in Table 3, P-7, bank
earnings are expected to be substantially unaffected by market interest rate
change. This is primarily due to the bank's practice of adjusting loan rates
infrequently, even though the contractual capability exists.
(6)
<PAGE>
INTEREST RATE SENSITIVITY MANAGEMENT
------------------------------------
Table 3 - REPRICING SCHEDULE
6-30-95
<TABLE>
<CAPTION>
3 MO 3-12 1-5 OVER
OR LESS MONTHS YEARS 5 YEARS
------- ------ ----- -------
<S> <C> <C> <C> <C>
RATE SENSITIVE ASSETS
(Assets that can be
repriced within X days)
Loans * 9,352 40,137 6,563 420
Federal Funds Sold 36,650 -0- -0- -0-
Taxable Securities ** -0- 9,944 -0- -0-
Municipal Bonds -0- -0- -0- -0-
TOTAL 46,002 50,081 6,563 420
RATE SENSITIVE LIABILITIES
(Liabilities that can be
repriced within X days)
Time Certificates of Deposit 15,659 26,849 6,775 -0-
NOW Accounts 1,656 -0- -0- -0-
Super NOW Accounts 21,260 -0- -0- -0-
Savings Accounts 9,415 -0- -0- -0-
MMDA Accounts 2,958 -0- -0- -0-
TOTAL 50,948 26,849 6,775 -0-
Interest Rate Sensitivity Cap (4,946) 23,232 (212) 420
Cumulative Interest Rate
Sensitivity Cap (4,946) 18,286 18,074 18,494
<FN>
* Does not include $239,000 in nonaccruing loans
** Does not include $24,000 in Federal Reserve Bank stock
</TABLE>
(7)
<PAGE>
INVESTMENT SECURITIES
<TABLE>
<CAPTION>
Table 4
-------
CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE
-------- ---------- ---------- -------
<S> <C> <C> <C> <C>
June 30, 1995
- -------------
(1) Held-to-Maturity:
U.S. Treasury Securities 9,944,321 33,804 -- 9,978,125
Other -- -- -- --
(2) Available-for-Sale
Securities Carried at
Fair Value:
U.S. Treasury Securities -- -- -- --
Other 24,000 -- -- 24,000
--------- -------- --------- ----------
9,968,321 33,804 -- 10,002,125
--------- -------- --------- ----------
December 31, 1994
- -----------------
(1) Held-to-Maturity:
U.S. Treasury Securities 6,997,049 -- 49,549 6,947,500
Other 5,009 -- 309 4,700
(2) Available-for-Sale
Securities Carried
at Fair Value:
U.S. Treasury Securities -- -- -- --
Other 24,000 -- -- 24,000
--------- -------- --------- ----------
7,026,058 -- 49,858 6,976,200
--------- -------- --------- ----------
December 31, 1993
- -----------------
(1) Held-to-Maturity:
U.S. Treasury Securities 7,014,700 9,363 -- 7,024,063
Other 5,012 -- 27 4,985
(3) Held-for-Sale Securities
Carried at Lower of
Aggregate Cost or Market:
U.S. Treasury Securities -- -- -- --
Other 24,000 -- -- 24,000
--------- -------- --------- ----------
7,043,712 9,363 27 7,053,048
--------- -------- --------- ----------
<FN>
(1) Securities which the Bank has the ability and intent to hold to maturity.
These securities are stated at cost, adjusted for amortization of premiums and
accretion of discounts, computed by the interest method. Because securities are
purchased for investment purposes and quoted market values fluctuate during the
investment period, gains and losses are recognized upon disposition or at such
time as management determines that a permanent impairment of value has occurred.
Cost of securities sold is determined on the specific identification method.
(2) Securities that the bank may sell in response to changes in market
conditions or in the balance sheet objectives of the bank. Securities in this
category will be reported at fair market value. Unrealized gains or losses (net
of tax) will be reported as a separate item in the shareholder's equity section
of the balance sheet. Adjustments will be recorded at lease quarterly.
(3) Securities which the bank had determined would be held for indefinite
periods (no stated intent to hold until maturity). These securities were
accounted for at the lower of their cost or market value.
</TABLE>
(8)
<PAGE>
CAPITALIZATION:
Capital ratios have continued to decline, but at a slower pace than in the
first quarter of 1995. This is primarily a result of the slowing rate of asset
growth in the second quarter, compared with the first quarter of 1995. (Please
see Table 4, P-9 and Balance Sheet, P-1)
Table 4 - CAPITAL
-----------------
<TABLE>
<CAPTION>
June 30 December
1995 1994
<S> <C> <C>
Tier 1 risk-based capital
(minimum is 4%) 15.02% 16.29%
Tier 1 + Tier 2 risk based capital
(minimum is 8%) 16.28% 17.55%
Tier 1 leverage (minimum is 3%) 7.73% 8.19%
</TABLE>
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income in the three and six month periods ending June 30, 1995
were increased over the prior year periods. This is a result of loan growth as
well as volume and rate driven increases in interest on fed funds sold and
investments which outstripped volume and rate driven increases in deposit
interest expense. (Please see Statement of Income, P-2 and Balance Sheet, P-1)
OTHER INCOME AND EXPENSE
Due to the continued favorable economic conditions in the bank's lending
area and the low level of risk in the bank's loan portfolio, no provisions for
loan loss were made in the current or prior year periods.
Salary and employee benefit expenses, together with FDIC insurance premiums
and advertising costs, were up significantly from the prior year periods,
primarily due to growth factors. These increased costs were not significantly
offset by increases in fee income. (Please see Statement of Income, P-2)
(9)
<PAGE>
PART II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
not applicable
Item 2. CHANGES IN SECURITIES
not applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
not applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
not applicable
Item 5. OTHER INFORMATION
not applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a). Exhibits
none
b). No reports on Form 8-K have been filed during the quarter for
which this report was filed.
(10)
<PAGE>
SIGNATURES
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.
THE REPUBLIC CORPORATION
Date: July 20, 1995 /S/ J. Ed Eisemann, IV
--------------------------
Chairman of the Board
Date: July 20, 1995 /S/ Catherine G. Eisemann
--------------------------
Director
(11)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REGISTRANTS
FORM 10-Q, DATED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 2,693,298
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 36,650,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 24,000
<INVESTMENTS-CARRYING> 9,944,321
<INVESTMENTS-MARKET> 9,978,125
<LOANS> 56,727,229
<ALLOWANCE> 898,162
<TOTAL-ASSETS> 108,136,253
<DEPOSITS> 98,147,797
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,165,843
<LONG-TERM> 0
<COMMON> 356,844
0
0
<OTHER-SE> 8,278,903
<TOTAL-LIABILITIES-AND-EQUITY> 108,136,253
<INTEREST-LOAN> 2,294,314
<INTEREST-INVEST> 206,100
<INTEREST-OTHER> 1,152,765
<INTEREST-TOTAL> 3,653,179
<INTEREST-DEPOSIT> 2,042,994
<INTEREST-EXPENSE> 2,042,994
<INTEREST-INCOME-NET> 1,610,185
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,238,685
<INCOME-PRETAX> 553,219
<INCOME-PRE-EXTRAORDINARY> 553,219
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 339,065
<EPS-PRIMARY> 1.02
<EPS-DILUTED> .95
<YIELD-ACTUAL> .071
<LOANS-NON> 238,665
<LOANS-PAST> 0
<LOANS-TROUBLED> 649,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 925,572
<CHARGE-OFFS> 34,449
<RECOVERIES> 7,039
<ALLOWANCE-CLOSE> 898,162
<ALLOWANCE-DOMESTIC> 54,940
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 843,222
</TABLE>
