<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 Three Months Ended March 31, 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 March 31,
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 March 31, 1995. 1
Consolidated Statements of Income for
the three months ended
March 31, 1994 and 1995. 2
Consolidated Statements of Cash Flows
for the three months ended March 31,
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>
REPUBLIC CORPORATION AND SUBSIDIARY
Balance Sheet
<TABLE>
<CAPTION>
March 31 December 31
1995 1994
- - - - - - -------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and due from banks (demand). . . . . . $ 2,416,252 $ 3,073,573
Investment securities:
Held-to-maturity
Market value at 3-31-95 6,986,875
---------
Market value at 12-31-94 6,952,200 6,999,281 7,002,058
---------
Available-for-sale
Market value at 3-31-95 24,000
---------
Market value at 12-31-94 24,000 24,000 24,000
--------- ------------ -------------
$ 9,439,533 $ 10,099,631
Loans . . . . . . . . . . . . . . . . . . . 52,470,146 49,138,466
Plus: Uncollected earned interest. . . 479,221 383,884
Less: Allowance for losses . . . . . . (920,670) (925,572)
------------ -------------
Net loans and other receivables . . 52,028,697 48,596,778
------------ -------------
Federal funds sold. . . . . . . . . . . . . 41,000,000 36,450,000
Property, equipment and vehicles (net). . . 1,575,591 1,541,059
Other real estate . . . . . . . . . . . . . -0- -0-
Goodwill. . . . . . . . . . . . . . . . . . 436,079 436,079
Other assets. . . . . . . . . . . . . . . . 290,922 492,121
------------ -------------
Total assets. . . . . . . . . . . . . . $104,770,822 $ 97,615,668
------------ -------------
Liabilities and Stockholders' Equity
Deposits (Domestic):
Demand (Non-interest bearing) . . . . . $ 12,793,787 $ 11,809,963
Savings, time and demand (Interest
bearing). . . . . . . . . . . . . . 82,399,131 76,406,333
------------ -------------
$ 95,192,918 $ 88,216,296
------------ -------------
Accounts payable and accrued interest payable 854,087 598,704
Accrued taxes payable . . . . . . . . . . . 101,485 325,275
------------ -------------
Total liabilities . . . . . . . . . . . $ 96,148,490 $ 89,140,275
------------ -------------
Minority Interest in Consolidated Subsidiary 182,192 178,711
------------ -------------
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 3-31-95 and 23,119 at 12-31-94). . . (91,303) (91,303)
------------ -------------
Total contributed capital . . . . . 500,472 500,472
------------ -------------
Retained earnings . . . . . . . . . . . . . 7,939,668 7,796,210
------------ -------------
Net Unrealized Gain (Loss) on Securities
Available-for-Sale (Net of Taxes) . . . -0- -0-
Stockholders' equity. . . . . . . . 8,440,140 8,296,682
------------ -------------
Total liabilities and stockholders equity $104,770,822 $ 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
March 31 March 31
1995 1994
- - - - - - -------------------------------------------------------------------------------
<S> <C> <C>
Interest income:
Interest and fees on loans. . . . . . . $ 1,123,218 $ 831,878
Interest on federal funds sold and
securities purchased under
agreement to resell . . . . . . . . 572,317 212,238
Interest and dividends on investments:
Securities of U.S. Government and
government agencies . . . . . . 70,381 85,087
Obligations of states, political
subdivisions and other obligations
secured by the government . . . -0- 67
------------ -------------
Total interest on investments . . . 642,698 297,392
------------ -------------
Total interest income . . . . . . . $ 1,765,916 $ 1,129,270
------------ -------------
Interest expense:
Interest on deposits. . . . . . . . . . 976,223 479,317
------------ -------------
Total interest expense. . . . . . . 976,223 479,317
------------ -------------
Net interest income . . . . . . . . 789,693 649,953
Provision for loan losses . . . . . . . . . -0- -0-
------------ -------------
Net interest income after provision
for loan losses . . . . . . . . . . 789,693 649,953
Other income:
Service charges on deposit accounts . . 36,670 31,473
Other service charges, commission & fees 39,519 33,626
Gain on Sale of Securities. . . . . . . -0- -0-
Net Income - Other Real Estate. . . . . -0- -0-
Other Income 13,689 9,693
------------ -------------
Total other income. . . . . . . . . 89,878 74,792
------------ -------------
Other expenses:
Salaries and wages. . . . . . . . . . . 242,271 220,195
Employee benefits . . . . . . . . . . . 61,316 57,171
Net occupancy expenses. . . . . . . . . 54,029 39,714
Furniture and equipment expenses. . . . 18,658 23,309
Depreciation other than rental property 21,963 23,593
Net Cost-other real estate. . . . . . . -0- -0-
Computer Service Center . . . . . . . . 22,687 18,363
FDIC - Insurance. . . . . . . . . . . . 48,195 36,637
Professional services . . . . . . . . . 42,010 38,517
Advertising . . . . . . . . . . . . . . 18,559 9,593
Other operating expenses. . . . . . . . 114,944 124,513
------------ -------------
Total other expenses. . . . . . . . 644,632 591,605
------------ -------------
Income before income taxes. . . . . 234,939 133,140
------------ -------------
Less applicable income taxes (Current). 88,000 55,724
------------ -------------
Income before reduction
for minority interest . . . . . 146,939 77,416
Less minority interest income (loss). . (3,481) (2,211)
------------ -------------
Net income. . . . . . . . . . . . . $ 143,458 $ 75,205
------------ -------------
Earnings per share. . . . . . . . . $ .43 .23
------------ -------------
</TABLE>
The accompanying note is an integral part of these financial statements.
(2)
<PAGE>
REPUBLIC CORPORATION AND SUBSIDIARY
Statement of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended
March 31 March 31
1995 1994
- - - - - - -------------------------------------------------------------------------------
<S> <C> <C>
Cash flows and operating activities:
Net income (loss). . . . . . . . . . . . $ 143,458 $ 75,205
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation . . . . . . . . . . 40,650 43,668
Provision for loan losses. . . . -0- -0-
Amortization (accretion) of
discounts and premium. . . . (2,223) 13,411
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. . . . . . . . . . . 255,383 65,418
(Increase) decrease in interest
receivable . . . . . . . . . (95,337) (11,558)
(Increase) decrease in other assets 201,199 210,886
Increase (decrease) in other
liabilities. . . . . . . . . (220,309) (185,526)
------------ -------------
Total adjustments. . . . . . . . . . . . . . 179,363 136,299
------------ -------------
Net cash provided by (used in) operating
activities . . . . . . . . . . . . . . . 322,821 211,504
------------ -------------
Cash flows from investing activities
Proceeds from sales of investment securities -0- -0-
Proceeds from maturities of
investment securities. . . . . . . . 5,000 7,000,000
Purchase of investment securities. . . . -0- (6,989,063)
Loans made to customers net cash activity (3,336,582) (2,270,220)
Capital expenditure. . . . . . . . . . . (75,182) (12,194)
Proceeds from sale of other real estate. -0- -0-
------------ -------------
Net cash provided by (used in) investing
activities . . . . . . . . . . . . . . . (3,406,764) (2,271,477)
------------ -------------
Cash flows from financing activities
Net increase (decrease) in demand deposits,
NOW accounts, savings accounts and
certificates of deposit. . . . . . . 6,976,622 3,759,897
Purchase of treasury stock . . . . . . . -0- -0-
------------ -------------
Net cash provided by (used in) financing
activities . . . . . . . . . . . . . . . 6,976,622 3,759,897
------------ -------------
Net increase (decrease) in cash and cash
equivalents. . . . . . . . . . . . . . . 3,892,679 1,699,924
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 March 31, 1995:
Cash and due from banks. . . . . . . . . 2,416,252 2,600,411
Federal funds sold . . . . . . . . . . . 41,000,000 29,300,000
------------ -------------
Cash and cash equivalents at March 31, 1995. 43,416,252 31,900,411
------------ -------------
------------ -------------
Supplemental disclosures of cash flow
information:
Cash paid for interest . . . . . . . 781,952 413,899
Cash paid for income tax . . . . . . -0- 18,822
</TABLE>
The accompanying note is an integral part of these financial statements.
(3)
<PAGE>
REPUBLIC CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 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
Total problem loans are up slightly from year end, 1994, primarily due to
the placement of one loan on non-accrual. The local economy continues to
benefit from robust construction spending and reserve coverage continues to be
adequate in view of the exposure in the loan portfolio and recent charge off
experience. (Please see Balance Sheet, P-1)
TABLE 1 PROBLEM ASSETS
<TABLE>
<CAPTION>
December 31
(dollars in thousands) March 31 ---------------------------
1995 1994 1993 1992
<S> <C> <C> <C> <C>
Nonaccrual loans $ 299 $ 217 $ 313 $ 499
Past-due loans (over 90 days) -0- -0- -0- -0-
Restructured loans 702 668 546 569
------ ------ ------ ------
Total problem loans $1,001 $ 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 $1,001 $ 885 $ 859 $1,264
Total problem loans as
a percentage of total loans 1.9% 1.8% 2.4% 3.5%
Total problem assets as a
percentage of total loans
and foreclosed assets 1.9% 1.8% 2.4% 4.1%
</TABLE>
TABLE 2 LOAN CONCENTRATIONS
<TABLE>
<CAPTION>
December 31
(dollars in thousands) March 31 ------------------
1995 1994 1993
<S> <C> <C> <C>
Commercial $ 4,536 $ 3,470 $ 2,222
Agricultural 3,290 3,277 2,776
Real Estate-Construction 820 639 220
Real Estate-Mortgage 36,150 34,248 25,277
Installment loans to Individuals 7,674 7,504 5,987
------- ------- -------
Totals $52,470 $49,138 $36,482
</TABLE>
(5)
<PAGE>
SOURCES AND USES OF FUNDS
The Statement of Cash Flows on page 3 reveals $6,976,622 in deposit growth
during the first quarter. Cash uses included $3,336,582 going into the loan
portfolio and $3,892,679 going into cash and cash equivalents.
LIQUIDITY
Loan growth was entirely funded by deposit growth in the first quarter.
Approximately 52% of total liabilities is presently available in cash, fed funds
sold and readily marketable, U.S. TREASURY NOTES. This represents a significant
capability for the bank in responding to escalating loan demand and withdrawal
requests. (Please see Balance Sheet, P-1)
INTEREST RATE SENSITIVITY MANAGEMENT
Although the positive gap figures depicted in Table 3, P-7 indicate a
substantial capability to respond to rising interest rates, the bank's practice
of adjusting loan interest rates infrequently and in small measure causes the
result to be more neutral.
(6)
<PAGE>
INTEREST RATE SENSITIVITY MANAGEMENT
Table 3 - REPRICING SCHEDULE
3-31-95
<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 * 8,171 36,914 6,331 810
Federal Funds Sold 41,000 -0- -0- -0-
Taxable Securities ** 6,999 -0- -0- -0-
Municipal Bonds -0- -0- -0- -0-
TOTAL 56,170 36,914 6,331 810
RATE SENSITIVE LIABILITIES
(Liabilities that can be
repriced within X days)
Time Certificates of Deposit 16,765 24,947 5,130 -0-
NOW Accounts 1,643 -0- -0- -0-
Super NOW Accounts 21,695 -0- -0- -0-
Savings Accounts 9,154 -0- -0- -0-
MMDA Accounts 3,039 -0- -0- -0-
TOTAL 52,296 24,947 5,130 -0-
Interest Rate Sensitivity Cap 3,874 11,967 1,201 810
Cumulative Interest Rate
Sensitivity Cap 3,874 15,841 17,042 17,852
<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 4
<TABLE>
<CAPTION>
CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE
-------- ---------- ---------- -------
<S> <C> <C> <C> <C>
March 31, 1995
- - - - - - --------------
(1) Held-to-Maturity:
U.S. Treasury Securities 6,999,281 -- 12,406 6,986,875
Other -- -- -- --
(2) Available-for-Sale
Securities Carried at
Fair Value:
U.S. Treasury Securities -- -- -- --
Other 24,000 -- -- 24,000
--------- --------- --------- ---------
7,023,281 -- 12,406 7,010,875
--------- --------- --------- ---------
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 levels continue to decline as retained earnings growth continues to
be outstripped by deposit growth. (Please see Table 4, P-9 and Balance Sheet,
P-1)
TABLE 4 - CAPITAL
<TABLE>
<CAPTION>
March 31 December
1995 1994
<S> <C> <C>
Tier 1 risk-based capital
(minimum is 4%) 15.56% 16.29%
Tier 1 + Tier 2 risk based capital
(minimum is 8%) 16.81% 17.55%
Tier 1 leverage (minimum is 3%) 7.78% 8.19%
</TABLE>
RESULTS OF OPERATIONS
NET INTEREST INCOME
Both the dollar level of net interest income and net interest income
expressed as a percentage of earning assets are slightly improved over the prior
year period but continue at low levels due to the continued reliance upon fed
funds sold to offset increases in the cost of funds. (Please see Statement of
Income, P-2)
OTHER INCOME AND EXPENSE
Due to the low level of risk in the bank's loan portfolio and the low level
of recent charge-off activity, no provision for loan losses was made in the
first quarter of 1995.
Non-interest expenses, net of non-interest income items, are higher in the
current period due to growth factors that have not been entirely 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: April 26, 1995 /S/ J. Ed Eisemann, IV
----------------------------
Chairman of the Board
Date: April 26, 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 MARCH 31, 1995
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 2,416,252
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 41,000,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 24,000
<INVESTMENTS-CARRYING> 6,999,281
<INVESTMENTS-MARKET> 6,986,875
<LOANS> 52,470,146
<ALLOWANCE> 920,670
<TOTAL-ASSETS> 104,770,822
<DEPOSITS> 95,192,918
<SHORT-TERM> 0
<LIABILITIES-OTHER> 955,572
<LONG-TERM> 0
<COMMON> 356,844
0
0
<OTHER-SE> 8,083,296
<TOTAL-LIABILITIES-AND-EQUITY> 104,770,822
<INTEREST-LOAN> 1,123,218
<INTEREST-INVEST> 70,381
<INTEREST-OTHER> 572,317
<INTEREST-TOTAL> 1,765,916
<INTEREST-DEPOSIT> 976,223
<INTEREST-EXPENSE> 976,223
<INTEREST-INCOME-NET> 789,693
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 644,632
<INCOME-PRETAX> 234,939
<INCOME-PRE-EXTRAORDINARY> 234,939
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 143,458
<EPS-PRIMARY> .43
<EPS-DILUTED> .40
<YIELD-ACTUAL> .070
<LOANS-NON> 299,218
<LOANS-PAST> 0
<LOANS-TROUBLED> 701,627
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 925,572
<CHARGE-OFFS> 8,983
<RECOVERIES> 4,081
<ALLOWANCE-CLOSE> 920,670
<ALLOWANCE-DOMESTIC> 75,408
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 845,262
</TABLE>
