<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1995
-----------------
Commission file number 0-8597
------
THE REPUBLIC CORPORATION
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
TEXAS 74-0911766
--------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5340 Weslayan, P.O. Box 270462
HOUSTON, TEXAS 77277
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 622-9727
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
NONE NONE
------------------- -----------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
750,000 SHARES COMMON STOCK, PAR VALUE $1 PER SHARE, OF WHICH 356,844
- -------------------------------------------------------------------------------
ARE OUTSTANDING INCLUDING 23,119 HELD IN TREASURY.
- -------------------------------------------------------------------------------
Indicate by check mark whether this 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
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (&229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. (X)
State the aggregate market value of the voting stock held by non-affiliates
of the registrant:
$624,115 as of January 31, 1996
Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of the latest practicable date:
Common Stock par value $1 per share
333,725 shares outstanding as of December 31, 1995
DOCUMENTS INCORPORATED BY REFERENCE
NONE
<PAGE>
REPUBLIC CORPORATION
FORM 10-K
INDEX
PAGE
----
IMPORTANT TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART I
ITEM 1. BUSINESS. . . . . . . . . . . . . . . . . . . . . . . 1-11
ITEM 2. PROPERTIES. . . . . . . . . . . . . . . . . . . . . . 12
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITIES HOLDERS . . . . . . . . . . . . . . . . 12
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS . . . . . . . . . . . 12
ITEM 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . 14-19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . 20-39
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . 40
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT . . . . . . . . . . . . . . . . . . 41
ITEM 11. EXECUTIVE COMPENSATION. . . . . . . . . . . . . . . . 42
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT. . . . . . . . . . . 43
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. . . . 44
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . 45-46
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SUPPLEMENTAL INFORMATION. . . . . . . . . . . . . . . . . . . . 48
<PAGE>
IMPORTANT TERMS
"Registrant" - THE REPUBLIC CORPORATION, a Texas Corporation whose sole purpose
is the holding and managing of The First National Bank in Trinidad.
"Bank" - The First National Bank in Trinidad is a commercial bank located in
Trinidad, Colorado and Walsenburg, Colorado, also referred to as the "Subsidiary
Bank".
"FRB" - The Board of Governors of the Federal Reserve System, the Agency which
has responsibility for administering the Bank Holding Company Act of 1956, as
amended.
<PAGE>
PART I
ITEM I. Business
THE REPUBLIC CORPORATION
GENERAL. On January 11, 1955, the Registrant was chartered under the laws
of the State of Texas as Columbia General Investment Corporation, conducting
business in mortgage banking until 1963. In 1960, Columbia General Investment
Corporation acquired The Republic Corporation. Shortly thereafter, the name
Columbia General Investment Corporation was changed to The Republic Corporation.
Also in 1960, the Registrant acquired 75% of the outstanding stock of the First
National Bank in Trinidad, Colorado. In 1961, an additional 23% of the stock
was purchased, and since then, only qualifying shares for directors and officers
of the Bank have been held by other than the Registrant.
Since discontinuing mortgage banking operations in 1963, the Registrant has
carried on no significant operations other than as an advisor to the Bank. In
this advisory position, the Registrant coordinates general policies and
activities, and assumes primary responsibility for all major decisions of the
Bank.
SUPERVISION AND REGULATION. THE REGISTRANT is a registered bank holding
company under the Bank Holding Company Act of 1956 (the "Act"), and is subject
to the supervision of, and regulation by, the Board of Governors of the Federal
Reserve System (the "Board"). Under the Act, a bank holding company may engage
in banking, managing or controlling banks, furnishing or performing services for
banks it controls, and conducting activities that the Board has determined to be
closely related to banking. The Registrant must obtain approval of the Board
before acquiring control of a bank or acquiring more than 5 percent of the
outstanding voting shares of a company engaged in a "bank-related" business.
Under the Act and state laws, the Registrant is subject to certain restrictions
as to states in which the Registrant can acquire a bank. National banks are
subject to the supervision of, and are examined by the Comptroller of the
Currency. State banks are subject to the supervision of the regulatory
authorities of the states in which they are located. The subsidiary bank of the
Registrant is a member of the Federal Deposit Insurance Corporation, and as such
is subject to examination thereby. In private, the primary federal regulator
makes regular examinations of the subsidiary bank subject to its regulatory
review or participates in joint examinations with other federal regulators.
Areas subject to regulation by federal and state authorities include the
allowance for credit losses, investments, loans, mergers, issuance of
securities, payment of dividends, establishment of branches and other aspects of
operations.
1
<PAGE>
BUSINESS. The Registrant is a holding company whose sole business purpose
is to hold the stock of the Bank. The operation of the Bank is described as
follows:
FIRST NATIONAL BANK IN TRINIDAD
SUBSIDIARY BANK
BUSINESS.
OPERATION OF THE SUBSIDIARY BANK. The Board of Directors and officers of
the subsidiary bank are responsible for its operation. However, the Republic
Corporation, as the controlling stockholder, coordinates the establishment of
goals, objectives and policies for the entire organization, assists the
subsidiary bank in the attainment of these objectives and monitors adherence to
established policies. The company also monitors adherence to lending and
accounting policies, budgetary goals and long-range plans.
The bank provides the following services:
COMMERCIAL BANKING SERVICES. The Bank provides a broad range of financial
services to a diversified group of commercial, industrial and financial
customers in Southern Colorado. Services provided to commercial customers
include short and medium term loans, revolving credit arrangements, trade
financing, energy related financing, real estate construction lending, capital
equipment financing and letters of credit.
CONSUMER SERVICES. The Bank provides a diverse range of personal services
to individuals including savings and time deposit accounts, installment lending,
bank check guarantee cards, checking accounts, N.O.W. accounts, mortgage loans,
safe deposit facilities, IRA services, money market deposits, and automatic
teller facilities.
EMPLOYEES. The Bank had 44 full time equivalent employees on December 31, 1995.
2
<PAGE>
COMPETITION
The Bank's primary market area is Trinidad, Colorado, Walsenburg, Colorado
and the surrounding communities. In this market are two other banks and a
savings and loan association. The deposits of the Bank are larger than those of
the savings and loan and larger than those of the other banks. The Bank
competes with these institutions in obtaining new deposits, making loans, and
providing additional banking services.
MONETARY POLICY.
The earnings and growth of the banking industry and of the Bank are
affected not only by general economic conditions, but also by the credit
policies of monetary authorities, particularly the Federal Reserve System. An
important function of the Federal Reserve System is to regulate the national
supply of bank credit in order to combat recession and curb inflationary
pressures. Among the instruments of monetary policy used by the Federal Reserve
System to implement these objectives are open market operations in U.S.
Government securities, changes in the discount rate on member bank borrowings
and changes in reserve requirements against member bank deposits. These means
are used in varying combinations to influence overall growth of bank loans,
investments and deposits and may also affect interest rates charged on loans or
paid for deposits.
The monetary policies of the Federal Reserve System have had a significant
effect on the operating results of commercial banks in the past and are expected
to continue to do so in the future. Because of changing conditions in the
national and international economy and in the money markets, and as a result of
actions by monetary and fiscal authorities, including the Federal Reserve
System, interest rates, credits and availability and deposit levels may change
due to circumstances beyond the control of The Republic Corporation or the Bank.
STATISTICAL DATA. The following sets forth certain statistical data regarding
the Republic Corporation.
I. DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY: INTEREST
RATES AND DIFFERENTIAL
BALANCE SHEET ANALYSIS
The following three tables present the consolidated monthly average balance
sheet, taxable equivalent interest revenue, interest expense, and average yields
and rates.
3
<PAGE>
Interest income on non-taxable investment securities has been adjusted to
reflect the tax benefit of tax exempt income at a marginal rate of 38% for each
year presented.
Non-accruing loans are included for purposes of the analysis of interest
earnings on loans.
TABLE #1
<TABLE>
<CAPTION>
Year Ended December 31, 1995 Average Interest Yield/
(Dollars in Thousands) Balance Rev./Exp. Rate
<S> <C> <C> <C>
ASSETS
Investment securities:
Taxable. . . . . . . . . . . . $ 9,091 $ 516 5.7%
Tax exempt . . . . . . . . . . - - - %
Loans. . . . . . . . . . . . . . . 56,938 5,006 8.8%
Less: Reserve for loan loss. . (907)
Funds sold . . . . . . . . . . . . 36,503 2,126 5.8%
--------- ------ -----
Total Earning Assets . . . . . 101,625 7,648 7.5%
--------- ------ -----
Cash and due from banks. . . . . . 2,061
Other assets . . . . . . . . . . . 3,158
---------
TOTAL ASSETS . . . . . . . . . $106,844
---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing demand deposits . $ 28,010 $1,037 3.7%
Savings deposits . . . . . . . . . 9,411 256 2.7%
Time deposits. . . . . . . . . . . 49,731 2,875 5.8%
--------- ------ -----
TOTAL INTEREST BEARING
LIABILITIES. . . . . . . . . . 87,152 4,168 4.8%
--------- ------ -----
NET INTEREST REVENUE . . . . . . . . . $3,480 2.7%
------
------
NET INTEREST REVENUE TO EARNING ASSETS 3.4%
Demand deposits (non-interest
bearing) . . . . . . . . . . . $ 9,600
Other liabilities. . . . . . . . . 1,202
Stockholders' equity . . . . . . . 8,890
--------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY . . . . . $106,844
---------
---------
</TABLE>
4
<PAGE>
TABLE #2
<TABLE>
<CAPTION>
Year Ended December 31, 1994 Average Interest Yield/
(Dollars in Thousands) Balance Rev./Exp. Rate
<S> <C> <C> <C>
ASSETS
Investment securities:
Taxable. . . . . . . . . . . . . $ 6,995 $ 296 4.2%
Tax exempt . . . . . . . . . 5 5 10.0%
Loans. . . . . . . . . . . . . . . . 43,109 3,760 8.7%
Less: Reserve for loan loss. . . (942)
Funds sold . . . . . . . . . . . . . 32,638 1,389 4.3%
-------- ------ -----
Total Earning Assets . . . . . . 81,805 5,446 6.7%
-------- ------ -----
Cash and due from banks. . . . . . . 2,816
Other assets . . . . . . . . . . . . 2,813
--------
TOTAL ASSETS . . . . . . . . . . $87,434
--------
--------
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing demand deposits . . $27,068 $ 812 3.0%
Savings deposits . . . . . . . . . . 9,414 320 3.4%
Time deposits. . . . . . . . . . . . 30,277 1,341 4.4%
-------- ------ -----
TOTAL INTEREST BEARING
LIABILITIES. . . . . . . . . . . 66,759 2,473 3.7%
-------- ------ -----
NET INTEREST REVENUE . . . . . . . . . . $2,973 3.0%
------
------
NET INTEREST REVENUE TO EARNING ASSETS . 3.6%
Demand deposits (non-interest
bearing) . . . . . . . . . . . . $11,855
Other liabilities. . . . . . . . . . 661
Stockholders' equity . . . . . . . . 8,159
--------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY . . . . . . $87,434
--------
--------
</TABLE>
5
<PAGE>
TABLE #3
<TABLE>
<CAPTION>
Year Ended December 31, 1993 Average Interest Yield/
(Dollars in Thousands) Balance Rev./Exp. Rate
<S> <C> <C> <C>
ASSETS
Investment securities:
Taxable. . . . . . . . . . . . . $ 7,057 $ 316 4.5%
Tax exempt . . . . . . . . . . . 5 5 10.0%
Loans. . . . . . . . . . . . . . . . 33,016 3,214 9.7%
Less: Reserve for loan loss. . . (895)
Funds sold . . . . . . . . . . . . . 27,613 817 3.0%
-------- ------ -----
Total Earnings Assets 66,796 4,348 6.5%
-------- ------ -----
Cash and due from banks. . . . . . . 2,300
Other assets . . . . . . . . . . . . 2,664
--------
TOTAL ASSETS . . . . . . . . . $71,760
--------
--------
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing demand deposits . . $25,471 $ 770 3.0%
Savings deposits . . . . . . . . . . 8,173 258 3.2%
Time deposit . . . . . . . . . . . . 19,946 780 3.9%
-------- ------ -----
TOTAL INTEREST BEARING
LIABILITIES. . . . . . . . . . . 53,590 1,808 3.4%
-------- ------ -----
NET INTEREST REVENUE . . . . . . . . . . $2,540 3.1%
------
------
NET INTEREST REVENUE TO EARNING ASSETS . 3.8%
Demand deposits (non-interest
bearing) . . . . . . . . . . . . $ 9,863
Other liabilities. . . . . . . . . . 600
Stockholders' Equity . . . . . . . . 7,707
--------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY . . . . . . $71,760
--------
--------
</TABLE>
6
<PAGE>
The following table presents statistical information regarding the
components of net interest income of the Registrant and an analysis of the
changes in net interest income due to changes in volume and rates.
Analysis of Changes in Components of Net Interest Income
(Dollars in thousands)
TABLE #4
<TABLE>
<CAPTION>
1995 VS 1994 1994 VS 1993
---------------------------------------------------------------------------------
Yield/ Yield/
Volume Rate Total Volume Rate Total
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
interest income on:
Loans. . . . . . . . . . . . $1,203 $ 43 $1,246 $ 887 $(341) $ 546
Investment securities. . . . 105 114 219 - (20) (20)
Federal funds sold . . . . . 219 518 737 186 386 572
------ ------ ------ ------- ------ -------
1,527 675 2,202 1,073 25 1,098
------ ------ ------ ------- ------ -------
Increase (decrease) in
interest expense on:
Demand deposits. . . . . . . 27 134 161 42 - 42
Savings. . . . . . . . . . . - - - 45 17 62
Time deposits. . . . . . . . 1,030 504 1,534 454 107 561
------ ------ ------ ------- ------ --------
1.057 638 1,695 541 124 665
------ ------ ------ ------- ------ --------
Net interest income. . . . . $ 470 $ 37 $ 507 $ 532 $ (99) $ 433
------ ------ ------ ------- ------ --------
------ ------ ------ ------- ------ --------
</TABLE>
The volume/rate variance was allocated to rate based on the percentage
increase or decrease in relation to the total previous year rates with the
remainder allocated to volume.
7
<PAGE>
II. INVESTMENT PORTFOLIO
The following table shows the classification of investment securities with
fixed maturities held at December 31, in each of the past three years (including
investments held for sale):
TABLE #5
<TABLE>
<CAPTION>
December 31
(Dollars in thousands) 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Government Securities. . . . . . . $ 9,978 $ 6,997 $ 7,015
States and political subdivisions . . . - 5 5
Other bonds, notes and securities . . . 24 24 24
------- ------- -------
Total $10,002 $ 7,026 $ 7,044
------- ------- -------
------- ------- -------
</TABLE>
The following is a table which shows the maturity distribution of
investment securities and the average taxable equivalent yield by each range.
Dollars presented are in thousands and a 38% rate has been used for converting
tax-exempt interest to a taxable-equivalent basis.
<TABLE>
<CAPTION>
TABLE #6
States and Federal
U.S. Government Political Reserve Bank
Securities Subdivisions Stock
--------------- ------------ ------------
Amount/Yield Amount/Yield Amount/Yield
--------------- ------------ ------------
<S> <C> <C> <C>
Within one year. . . . . . . $9,978 6.2% $ - -% $ - -%
After one year
through five years. . . - -% - -% - -%
After five years
through ten years . . . - -% - -% - -%
After ten years . . . . . . . - -% - -% 24 7.5%
------- ---- ------ ---- ---- ----
TOTAL $9,978 6.2% $ - -% $24 7.5%
------- ---- ------ ---- ---- ----
------- ---- ------ ---- ---- ----
</TABLE>
III. LOAN PORTFOLIO
Domestic loans by category are listed below (dollars in thousands):
TABLE #7
<TABLE>
<CAPTION>
December 31, December 31,
1995 1994
<S> <C> <C>
Commercial. . . . . . . . . . . . . . . $ 4,892 $ 3,470
Agricultural. . . . . . . . . . . . . . 3,676 3,277
Real Estate - Construction. . . . . . . 1,584 639
Real Estate - Mortgage. . . . . . . . . 44,594 34,248
Installment loans to individuals. . . . 8,679 7,504
------- -------
Total $63,425 $49,138
----- ------- -------
------- -------
</TABLE>
There were no foreign loans at December 31, 1995 or December 31, 1994.
8
<PAGE>
Commercial, agricultural and real estate - construction loans at December
31, 1995 are presented by maturity as follows (dollars in thousands):
<TABLE>
<CAPTION>
TABLE #8
Due After
Due in One One Year Due After
Year or Less Through Five Years Five Years
------------ ------------------ ----------
<S> <C> <C> <C>
Commercial:
Fixed rates. . . . 3,545 - -
Adjustable rates. . 1,347 - -
Agricultural:
Fixed rates . . . . 2,611 172 -
Adjustable rates. . 153 497 244
Real Estate -
Construction:
Fixed rates . . . . 959 625 -
Adjustable rates. . - - -
</TABLE>
Within the loan portfolio are loans which are considered non-performing.
Included in the table below are past due loans which are defined as past due (1)
single payment notes - these are considered past due 15 days or more after
maturity; (2) single payment loans, with interest payable at stated intervals,
and demand notes - these are considered past due when an interest payment is due
and unpaid for 15 days; (3) consumer, mortgage, or term business installment
loans - these loans are past due in whole after one installment is due and
unpaid for 30 days or one month. When an installment payment is past due, the
entire unpaid balance is past due; (4) overdrafts are considered past due when
not paid in 15 days. Such loans remain in past due status until all past due
payments are made.
TABLE #9
<TABLE>
<CAPTION>
December 31 (Dollars in thousands) 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
Non-accrual loans. . . . . . . . . . . . . . . . . . . . . $183 $217
Loans which are contractually past due 90 days or more
as to interest or principal, but have not been put
on a non-accrual basis (See discussion below) . .. . . - -
Loans restructured to provide concessions to the
borrower in order to maximize the recovery
possibility of the bank . . . . . . . . . . . . .. . . 593 668
</TABLE>
Foregone interest on restructured loans in 1995 was 14 thousand on
recognized income of 36 thousand. 1994 interest included was 47 thousand with
foregone interest of 19 thousand.
Past due and renegotiated loans as described above are defined as non-
performing loans for purposes of this discussion.
Non-accrual loans are defined as loans on which, in the opinion of
management, the collection of interest has become uncertain. Management places
loans on non-accrual status when loans become past due thirty days or if, in
their judgment, the ability of the borrower to service the debt has become
impaired.
9
<PAGE>
Interest is not taken into income unless received in cash or until such
time as the borrower demonstrates the ability to pay interest and principal.
Placing a loan on non-accrual status for the purpose of income recognition is
not by itself a reliable indicator of potential loss of principal. Other
factors, such as the value of the collateral securing the loan and the financial
condition of the borrower, serve as more reliable indicators of potential loss.
Management has no information that would indicate that any loans on hand
at December 31, 1995 that are not currently included as non-performing loans
have possible credit problems that would cause serious doubts as to their
ability to comply with the current repayment terms or contain uncertainties
which would have a material impact on future operations or financial position.
IV SUMMARY OF LOAN LOSS EXPERIENCE
The table below presents selected information analyzing the allowance for
loan losses (dollars in thousands):
TABLE #10
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Balance - Beginning of year. . . . . . . . . . . . . . $ 926 $ 956
-------- --------
Charge-offs:
Commercial. . . . . . . . . . . . . . . . . . . . - -
Agricultural. . . . . . . . . . . . . . . . . . . - -
Real Estate - Construction. . . . . . . . . . . . - -
Real Estate - Mortgage. . . . . . . . . . . . . . - 4
Installment loans to individuals. . . . . . . . . 73 42
-------- --------
$ 73 $ 46
-------- --------
Recoveries:
Commercial. . . . . . . . . . . . . . . . . . . . $ 4 $ 5
Agricultural. . . . . . . . . . . . . . . . . . . - -
Real Estate - Construction. . . . . . . . . . . . - -
Real Estate - Mortgage. . . . . . . . . . . . . . - -
Installment loans to individuals. . . . . . . . . 11 11
-------- --------
$ 15 $ 16
-------- --------
Net Charge-offs (recoveries) . . . . . . . . . . . . . $ 58 $ 30
-------- --------
Provision - Charged to operations. . . . . . . . . . . $ - $ -
-------- --------
Balance - End of Year. . . . . . . . . . . . . . . . . $ 868 $ 926
-------- --------
-------- --------
Average loan balance outstanding . . . . . . . . . . . $56,938 $43,109
-------- --------
-------- --------
Percentage of net charge offs to
average loans outstanding. . . . . . . . . . . . . . . .1% .07%
-------- --------
</TABLE>
There was no provision for loan losses in 1995 and 1994 due to the
continued reduction of loss exposure in the loan portfolio.
10
<PAGE>
The allocation of the allowance is as follows (dollars in thousands):
TABLE #11
<TABLE>
<CAPTION>
December 31, December 31,
1995 1994
-------------------------- ------------------------
Percent of Loans Percent of Loans
in Each Category in Each Category
Amount to Total Loans Amount to Total Loans
------ ---------------- ------ ----------------
<S> <C> <C> <C> <C>
Commercial . . . . . . $ 11 7.7% $ 24 7.1%
Agricultural. . . . . . 9 5.8% 15 6.7%
Real Estate -
Construction. . . . . - 2.5% - .9%
Real Estate-Mortgage. . 3 70.3% - 70.1%
Installment Loans . . . 23 13.7% 27 15.2%
Unallocated . . . . . . 822 N/A 860 N/A
---- ----- ---- -----
$868 100% $926 100%
---- ----- ---- -----
---- ----- ---- -----
</TABLE>
V. Deposits
The average amount of deposits and the average rates paid are presented in
the balance sheet analysis shown previously.
At December 31, 1995, there existed outstanding time certificates of deposit
in amounts of $100,000 or more of $11,692,086. The deposits by time remaining
until maturity were (dollars in thousands):
<TABLE>
<CAPTION>
TABLE #12
<S> <C>
3 months or less $4,358
Over 3 through 6 months 4,254
Over 6 through 12 months 2,580
Over 12 months 500
------
11,692
------
------
</TABLE>
<TABLE>
<CAPTION>
As required by the Monetary Control Act of 1980, the reserve balance held
against deposits at December 31, 1995 was $868,000.
TABLE #13
For the year ended December 31 1995 1994 1993
- ------------------------------ ---- ---- ----
<S> <C> <C> <C>
Return on Assets (Net income divided by
average total assets) . . . . . . . . . 9% .6% .6%
Return on Equity (Net income divided by
average equity) . . . . . . . . . . . . 9.2% 6.9% 5.4%
Dividend Payout Ratio (Dividends declared per
share divided by net income per share). 0% 0% 0%
Equity to Assets Ratio (Average equity
divided by average total assets). . . . 8.3% 9.3% 10.7%
</TABLE>
11
<PAGE>
ITEM 2. Properties:
The subsidiary Bank owns a building and annex at 100 East Main Street, and
the motor-bank facility, 122 East First Street, in which the banking operations
are carried on in Trinidad, Colorado. Approximately one-third (1/3) of the
building is utilized by the bank. The remaining space is leased to other
businesses. Additionally, a bank building in Walsenburg, Colorado was acquired
in 1992. Banking operations at this location began in October of 1993. In
1995, two automatic teller locations were added. One is in Trinidad and the
other is in La Veta, Colorado. Properties held as other real estate owned
consist of real property that has been acquired by the Bank through foreclosure
on real estate pledged as collateral on loans made by the Bank.
ITEM 3. Legal Proceedings:
Not applicable.
ITEM 4. Submission of Matters to a Vote of Securities Holders:
Not applicable.
PART II
ITEM 5. Market for The Republic Corporation's stock.
(a) The Articles of Incorporation do not restrict the marketability of
the Republic Corporation stock. However, due to the limited number
of shares outstanding, it is not anticipated that an active market
for the shares will develop. Shares may be purchased by The
Republic Corporation, but there is no assurance that the Corporation
will do so.
(b) There were approximately 1,757 shareholders as of the date of this
annual report.
Holders of Republic Corporation shares are entitled to their pro-rata
share of any dividends paid on the shares. However, because
the Corporation has no income other than distributions received on
its equity in The First National Bank in Trinidad, Colorado, its
ability to pay dividends depends upon its receipt of Bank
distributions. Decisions as to the declaration and payment of
dividends, subject to the availability of funds for this purpose,
rest exclusively with The Republic Corporation Board of Directors.
(c) No dividends have been declared in 1995 or 1994 and management has
no intention to declare dividends in the immediate future.
12
<PAGE>
<PAGE>
ITEM 6. Selected financial data:
The following table presents certain key financial information.
TABLE #14
<TABLE>
<CAPTION>
Selected Financial Data (Taxable Equivalent Basis) (1)
Year Ended December 31
(DOLLARS IN THOUSANDS) 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income. . . . . . . . . . . $7,648 $5,446 $4,348 $4,797 $5,262
Interest expense . . . . . . . . . . 4,168 2,473 1,808 2,473 3,394
------ ------ ------ ------ ------
Net interest income . . . . . . . 3,480 2,973 2,540 2,324 1,868
Provision for Loan Losses. . . . . . - - 115 115 118
------ ------ ------ ------ ------
Net interest income after
Provision for loan losses . . 3,480 2,973 2,425 2,209 1,750
Non-interest income. . . . . . . . . 389 357 325 360 330
Securities gains . . . . . . . . . . - - 192 864 371
Non-interest expense:
Personnel expenses. . . . . . . . 1,266 1,137 1,000 917 800
Other expenses. . . . . . . . . . 1,388 1,329 1,287 1,049 896
------ ------ ------ ------ ------
Income before income taxes . . . . . 1,215 864 655 1,467 755
Taxable-equivalent adjustment. . . . - 1 1 12 14
Applicable income taxes. . . . . . . 378 284 230 485 254
------ ------ ------ ------ ------
Income before reduction for minority
interest or security gains or
losses. . . . . . . . . . . . . . 837 579 424 970 487
Less minority interest . . . . . . . 20 14 9 (20) 10
------ ------ ------ ------ ------
Net Income . . . . . . . . . . . . . $ 817 $ 565 $ 415 $ 950 $ 477
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Net income per common share (2). . . $ 2.44 $ 1.69 $ 1.24 $ 2.84 $ 1.42
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Dividends declared per common share(2) $ 0 $ 0 $ 0 $ 0 $ 0
------ ------ ------ ------ ------
------ ------ ------ ------ ------
</TABLE>
(1) Interest income has been adjusted to reflect the tax benefit of tax exempt
income at a marginal tax rate of 38% for all years presented.
(2) Net income per common share and dividends declared per common share are in
actual dollars, not thousands.
<TABLE>
<CAPTION>
Selected Year End Balances:
(DOLLARS IN THOUSANDS) 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loans. . . . . . . . . . . . . . . . 63,425 49,138 36,482 30,454 27,179
Total assets . . . . . . . . . . . . 109,018 97,616 75,648 71,270 69,352
Long-term debt . . . . . . . . . . . -0- -0- -0- -0- -0-
</TABLE>
13
<PAGE>
ITEM 7. Management's discussion and analysis of financial condition and
results of operations:
FINANCIAL CONDITION
ASSET QUALITY
TABLE #15
<TABLE>
<CAPTION>
DECEMBER 31 (DOLLARS IN THOUSANDS) 1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans. . . . . . . . . . . . . . . 183 217 313 499 398
Past-due loans(*) . . . . . . . . . . . . . . - - - - -
Restructured loans. . . . . . . . . . . . . . 593 668 546 569 748
------ ----- ----- ----- -----
Total problem loans. . . . . . . . . . . . 776 885 859 1,068 1,146
Foreclosed Assets
Real estate. . . . . . . . . . . . . . . . - - - 91 303
In-substance foreclosures. . . . . . . . . - - - 105 40
Other. . . . . . . . . . . . . . . . . . . - - - - -
------ ----- ----- ----- -----
Total problem assets . . . . . . . . . 776 885 859 1,264 1,489
Total problem loans as a
percentage of total loans. . . . . . . . . 1.2% 1.8% 2.4% 3.5% 4.2%
Total problem assets as a percentage of
total loans and foreclosed assets. . . . . 1.2% 1.8% 2.4% 4.1% 5.4%
Reserve coverage ratio (*)(*) . . . . . . . . 112.0% 104.6% 111.3% 76.8% 63.3%
</TABLE>
(*) Past due loans which are still accruing interest but are contractually
ninety or more days delinquent as to principal or interest payments
(*)(*) Allowance for loan losses divided by problem loans
The continuing migration of residents to both Las Animas and Huerfano
Counties, and the favorable spin-off into the local retail and service sectors,
has resulted in the improved problem loan levels depicted in Table 15. The
larger part (approximately two thirds) of the percentage improvement is due,
however, to loan growth. (See also Table #7, P-8)
In spite of an improved reserve coverage ratio, and a generally healthy
business sector in the bank's market area, there have been indications of a
slight deterioration in the performance of the bank's consumer loan portfolio,
evidenced by an increase in net charge-offs in 1995. While 1995 reserve levels
remain adequate, the bank is exercising caution in 1996 by adopting a modest
loan loss provision. This, we believe, is most prudent, especially in view of
the closure in late 1995 of a local coal mine, a move which is expected to idle
approximately 200 workers. (Please see Table #15 and Table #10, P-10)
Loans secured by real estate represented 73% of total loans on December 31,
1995. All of the real property serving as collateral for these loans lies
within Las Animas, Huerfano or adjacent counties, with 59% consisting of 1-4
family homes, 31% commercial properties and 6% farm and ranch properties. The
bank does not sell any of its loans in the secondary market and does not buy or
sell participation loans. (Please see Table #7, P-8)
14
<PAGE>
SOURCES AND USES OF FUNDS
Deposit growth for 1995 was just under half of that which was experienced
in 1994, a likely result of the cessation of Federal Reserve tightening moves at
mid-year and the effect of same on the relative attractiveness of the bank's
time deposit offerings when compared with those of local competitors and
compared with investment product alternatives. (Please see STATEMENT OF CASH
FLOWS, P-24, and BALANCE SHEET, P-22)
This deposit growth, together with funds provided by operations and a
substantial reduction in cash and cash equivalents, was largely deployed into
continued loan growth and, to a lesser extent, investment securities and capital
expenditures. (Please see STATEMENT OF CASH FLOWS, P-24)
LIQUIDITY
Loan growth exceeded deposit growth in 1995 by an amount in excess of 4
million dollars. This resulted in a significant reduction in liquid assets,
and, more importantly, a reduction in the percentage of liabilities covered by
same. In 1995, average holdings of cash and due from banks, readily marketable
securities and federal funds sold represented 49% of average liabilities,
compared with 54% in 1994 and 58% in 1993. (Please see Tables #1-3, P-4-6)
15
<PAGE>
TABLE #16
INTEREST RATE SENSITIVITY
<TABLE>
<CAPTION>
DECEMBER 31, 1995 (DOLLARS IN THOUSANDS)
- ----------------------------------------------------------------------------------------------------------
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 months/years)
Loans (*). . . . . . . . . . . . . . . . . 19,287 36,256 7,258 414
Federal Funds Sold . . . . . . . . . . . 30,650 -0- -0- -0-
Taxable Securities(*)(*) . . . . . . . . . . -0- 9,978 -0- -0-
Municipal Bonds. . . . . . . . . . . . . -0- -0- -0- -0-
TOTAL. . . . . . . . . . . . . . . . 49,937 46,234 7,258 414
Rate Sensitive Liabilities
(Liabilities that can be
repriced within x months/years)
Time Certificates of Deposit . . . . . . 16,411 29,449 3,870 -0-
NOW Accounts . . . . . . . . . . . . . . 1,887 -0- -0- -0-
Super NOW Accounts . . . . . . . . . . . 20,606 -0- -0- -0-
Savings Accounts . . . . . . . . . . . . 9,457 -0- -0- -0-
MMDA Accounts. . . . . . . . . . . . . . 4,050 -0- -0- -0-
TOTAL. . . . . . . . . . . . . . . . 52,411 29,449 3,870 -0-
Interest Rate Sensitivity Gap. . . . . . (2,474) 16,785 3,388 414
Cumulative Interest Rate
Sensitivity Gap. . . . . . . . . . . (2,474) 14,311 17,699 18,113
</TABLE>
(*) Does not include $183 thousand in nonaccruing loans and $27 thousand in
overdrafts.
(*)(*) Does not include $24 thousand in Federal Reserve Bank Stock.
The positive gap figure (assets exceeding liabilities), particularly in the
3-12 month time frame depicted in Table 16, is not an accurate predictor of what
would normally be anticipated as lower earnings in a declining interest rate
environment, such as that which has occurred since July of 1995. This is true
because of the bank's practice of adjusting loan rates far less frequently and
in far lesser magnitude than that which is experienced in national markets.
Earnings results can therefore be expected to be substantially unaffected by any
likely scenario regarding Federal Reserve monetary policy.
16
<PAGE>
INVESTMENT SECURITIES
TABLE #17
AND FOOTNOTES 1-3
<TABLE>
<CAPTION>
Carrying Unrealized Unrealized Market
VALUE GAINS LOSSES VALUE
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
DECEMBER 31, 1995
(1) Held-to-Maturity:
U.S. Treasury Securities 9,977,841 31,534 - 10,009,375
Other - - - -
(2) Available-for-Sale Securities
Carried at Fair Value:
U.S. Treasury Securities - - - -
Other 24,000 - - 24,000
10,001,841 31,534 - 10,033,375
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
</TABLE>
(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 had occurred.
Cost of securities sold is determined on the specific identification method.
17
<PAGE>
(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 the 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 least 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.
Current securities holdings consist of one $10,000,000.00 par value, U.S.
TREASURY NOTE, which matures within 4 months. The bank has pledged the majority
of this asset to the State of Colorado in order to collateralize public deposit
holdings and a similar investment will likely be acquired as a replacement prior
to maturity. (Please see Table #17, P-17 and Note 2, P-28-29)
CAPITAL
Tier 1 and total risk based capital ratios ended 1995 at 14.73% and 15.99%,
respectively, compared with 16.29% and 17.55% in 1994 and 20.06% and 21.33% in
1993. This decline is a result of the rate of asset growth exceeding the rate
of retained earnings growth over the past 3 years and loan growth coupled with
the higher risk weighing given to loans versus cash equivalents in the risk
based capital calculation. The leverage ratio stood at 8.09% at year end, 1995,
compared with 8.19% in 1994 and 9.83 in 1993.
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income continued to advance on a dollar basis and yet decline
when expressed as a percentage of average earnings assets. As seen in Table
#14, P-13, net interest income increased in each of the last 4 years. Net
interest income, expressed as a percentage of average earning assets, however,
ended 1995 at 3.42% compared with 3.63% in 1994 and 3.80% in 1993. (Please see
also Tables #1-3, P-4-6)
Increased loan volume, coupled with somewhat higher average rates on
Federal Funds sold, were largely responsible for the improved dollar level of
net interest income in 1995, in spite of the countervailing effect of time
deposit growth. (Please see Table #4, P-7)
OTHER INCOME AND EXPENSE
Notwithstanding the effects of securities gains taken in years leading up
to and including 1993, growth in non-interest expense has steadily outpaced
growth in non-interest income in each of the past four years. (Please see Table
#14, P-13)
18
<PAGE>
Growth factors have disproprotionately impacted expense items, principally with
regard to salaries and other costs associated with expanded facilities and
operating levels. The elimination of FDIC insurance premiums in 1996, however,
will afford a measure of improvement. (Please see STATEMENT OF INCOME, P-23)
Management is not aware of any regulatory recommendations or other trends,
events or uncertainties that would have or would reasonably be likely to have a
material effect on liquidity, capital resources or operations of the company.
19
<PAGE>
ITEM 8. Financial statements and supplementary data.
Index to Financial Statements of
The Republic Corporation and Subsidiary PAGE
Accountant's Report. . . . . . . . . . . . . . . . . . . . 21
Balance Sheets as of December 31, 1995 and 1994. . . . . . 22
Statement of Income for the three years ended
December 31, 1995 . . . . . . . . . . . . . . . . . . 23
Statement of Cash Flows for the three years ended
December 31, 1995 . . . . . . . . . . . . . . . . . . 24-25
Statement of Changes in Stockholders' Equity
for the three years ended December 31, 1995 . . . . . 26
Notes to Financial Statements. . . . . . . . . . . . . . . 27-39
20
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
The Republic Corporation
We have audited the consolidated balance sheets of The Republic Corporation as
of December 31, 1995 and 1994, and the related consolidated statements of income
and stockholders' equity and cash flows for each of the three years in the
period ending December 31, 1995. These financial statements are the
responsibility of the Corporation's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Republic Corporation at
December 31, 1995 and 1994, and the results of its operations and its cash
flows, for each of the three years in the period ending December 31, 1995, in
conformity with generally accepted accounting principles.
/s/ Dixon, Waller & Co.
- -------------------------
Dixon, Waller & Co.
Trinidad, Colorado
February 1, 1996
21
<PAGE>
REPUBLIC CORPORATION AND SUBSIDIARY
Balance Sheet
<TABLE>
<CAPTION>
December 31 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and due from banks (demand). . . . . . . . $ 2,362,761 $ 3,073,573
Investment securities:
Held to maturity
Market value at 12-31-95 - 10,009,375
Market value at 12-31-94 - 6,952,200. 9,977,841 7,002,058
Available for Sale. . . . . . . . . . . . . 24,000 24,000
------------ -----------
12,364,602 10,099,631
------------ -----------
Loans . . . . . . . . . . . . . . . . . . . . . 63,425,397 49,138,466
Plus: Uncollected earned interest. . . . . 537,718 383,884
Less: Allowance or losses. . . . . . . . . (868,026) (925,572)
------------ -----------
NET LOANS AND OTHER RECEIVABLES . . . . 63,095,089 48,596,778
------------ -----------
Federal funds sold. . . . . . . . . . . . . . . 30,650,000 36,450,000
Property, equipment and vehicles (Net). . . . . 1,801,814 1,541,059
Other real estate . . . . . . . . . . . . . . . - -
Goodwill. . . . . . . . . . . . . . . . . . . . 436,079 436,079
Other assets. . . . . . . . . . . . . . . . . . 670,495 492,121
------------ -----------
Total Assets. . . . . . . . . . . . . . . . $109,018,079 $97,615,668
------------ -----------
------------ -----------
Liabilities and Stockholders' Equity
Deposits (Domestic):
Demand (noninterest bearing). . . . . . . . $ 10,768,809 $11,809,963
Savings, time and demand (interest bearing) 87,503,951 76,406,333
------------ -----------
98,272,760 88,216,296
------------ -----------
Accounts payable and accrued interest payable . 1,008,148 598,704
Accrued taxes payable . . . . . . . . . . . . . 425,902 325,275
------------ -----------
Total liabilities . . . . . . . . . . . . . 99,706,810 89,140,275
------------ -----------
Minority Interest in Consolidated Subsidiary. . 197,478 178,711
------------ -----------
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 12/31/95, 23,119 shares at 12/31/94) (91,303) (91,303)
------------ -----------
Total contributed capital . . . . 500,472 500,472
------------ -----------
Retained earnings . . . . . . . . . . . . . . . 8,613,319 7,796,210
------------ -----------
Stockholders' equity. . . . . . . . . . . . 9,113,791 8,296,682
------------ -----------
Total liabilities and
stockholders' equity . . . . . . . $109,018,079 $97,615,668
------------ -----------
------------ -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
REPUBLIC CORPORATION AND SUBSIDIARY
Statement of Income
<TABLE>
<CAPTION>
Year Ended December 31 1995 1994 1993
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans. . . . . $5,005,568 $3,760,091 $3,213,814
Interest on federal funds sold. . . 2,126,113 1,389,369 816,594
Interest and dividends on
investments:
Securities of U.S.
government agencies . . . 516,366 296,316 316,098
Obligations of states, political
subdivisions and other obli-
gations secured by the
government . . . . . . . . . . 125 267 269
----------- ----------- -----------
Total interest on investments. 2,642,604 1,685,952 1,132,961
----------- ----------- -----------
Total interest income. . . . . 7,648,172 5,446,043 4,346,775
----------- ----------- -----------
Interest expense:
Interest on deposits. . . . . . . . 4,168,021 2,473,418 1,807,990
----------- ----------- -----------
Total interest expense . . . . 4,168,021 2,473,418 1,807,990
----------- ----------- -----------
Net interest income. . . . . . 3,480,151 2,972,625 2,538,785
Provision for loan losses. . . . . . . . - - (115,354)
----------- ----------- -----------
Net interest income after
provision for loan losses. . . 3,480,151 2,972,625 2,423,431
Other income:
Service charges on deposit accounts 157,384 150,627 136,930
Other service charges,
commissions and fees . . . . . 162,998 131,574 114,407
Gain on sale of securities. . . . . - - 192,288
Net Income - Other Real Estate. . . - - 19,838
Other income. . . . . . . . . . . . 68,375 74,509 54,322
----------- ----------- -----------
Total other income . . . . . . 388,757 356,710 517,785
----------- ----------- -----------
Other expenses:
Salaries and wages. . . . . . . . . 1,092,575 979,191 848,054
Employee benefits . . . . . . . . . 173,784 158,185 152,208
Net occupancy expenses. . . . . . . 92,527 78,494 72,372
Furniture and equipment expense . . 81,683 77,084 55,655
Depreciation other than
rental property. . . . . . . . 177,414 189,842 132,664
Operating Loss. . . . . . . . . . . - - 132,280
Computer service center . . . . . . 93,759 73,186 66,725
FDIC Insurance. . . . . . . . . . . 102,024 156,816 140,617
Professional services . . . . . . . 88,200 87,809 82,673
Advertising . . . . . . . . . . . . 111,998 78,749 88,710
Other operating expenses. . . . . . 639,879 587,128 514,585
----------- ----------- -----------
Total other expenses . . . . . 2,653,843 2,466,484 2,286,543
----------- ----------- -----------
Income before income taxes . . 1,215,065 862,851 654,673
----------- ----------- -----------
Less applicable income taxes (Current) . 378,289 283,718 230,443
----------- ----------- -----------
Income before reduction
for minority interest. . . . . 836,776 579,133 424,230
Less minority interest in income (19,667) (14,157) (9,212)
----------- ----------- -----------
Net income. . . . . . . . . . . . . 817,109 564,976 415,018
----------- ----------- -----------
----------- ----------- -----------
Earnings per share. . . . . . . . . $2.44 $1.69 $1.24
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
REPUBLIC CORPORATION AND SUBSIDIARY
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
December 31 1995 1994 1993
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows and operating activities:
Net income (loss). . . . . . . . . . . $ 817,109 $ 564,976 $ 415,018
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation. . . . . . . . . . . 183,216 195,832 138,894
Provision for loan losses . . . . - - 115,354
Amortization (accretion) of
discounts and premiums . . . (48,752) 6,717 92,845
Other real estate gains/net . . . (1,000) - (19,838)
Re-appraisal - other real estate - - -
Gain on sale of securities. . . . - - (192,288)
(Decrease) increase in
interest payable . . . . . . 409,444 290,867 (80,059)
(Increase) Decrease in
interest receivable. . . . . (153,834) (61,166) 1,010
(Increase) decrease in
other assets . . . . . . . . (178,374) 3,383 307,945
Increase (decrease) in
other liabilities. . . . . . 119,394 85,243 (244,683)
------------ ------------ ------------
Total adjustments . . . 330,094 520,876 119,180
------------ ------------ ------------
Net cash provided by (used in)
operating activities . . . . . . . . . 1,147,203 1,085,852 534,198
------------ ------------ ------------
Cash flows from investing activities:
Proceeds from sales of investment
securities. . . . . . . . . . . . - - 7,280,000
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 . . . . . . . . . . (14,344,477) (12,686,557) (5,908,250)
Capital expenditures . . . . . . . . . (443,971) (113,425) (414,726)
Proceeds from sale
of other real estate. . . . . . . 1,000 - 116,450
------------ ------------ ------------
Net cash provided by
(used in) investing activities . . . . (17,714,479) (12,789,045) 1,073,474
------------ ------------ ------------
Cash flows from financing activities:
Net increase in demand deposits, NOW
accounts, savings accounts and
certificates of deposit. . . . . . . . 10,056,464 21,026,279 4,288,462
Purchase of treasury stock . . . . . . - - (5,000)
------------ ------------ ------------
Net cash provided by
(used in) financing activities . . . . 10,056,464 21,026,279 4,288,462
------------ ------------ ------------
Net increase (decrease) in cash
and cash equivalents . . . . . . . . . (6,510,812) 9,323,086 5,896,134
(Continued)
</TABLE>
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
REPUBLIC CORPORATION AND SUBSIDIARY
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
December 31 1995 1994 1993
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash and cash equivalents
at beginning of year:
Cash and due from banks. . . . . 3,073,573 2,525,487 2,579,353
Federal funds sold . . . . . . . 36,450,000 27,675,000 21,725,000
----------- ------------ ------------
Cash and cash equivalents
at beginning of year . . . . . . 39,523,573 30,200,487 24,304,353
----------- ------------ ------------
Cash and cash equivalents
at end of year:
Cash and due from banks. . . . . 2,362,761 3,073,573 2,525,487
Federal funds sold . . . . . . . 30,650,000 36,450,000 27,675,000
----------- ------------ ------------
Cash and cash equivalents
at end of year . . . . . . . . . 33,012,761 39,523,573 30,200,487
----------- ------------ ------------
----------- ------------ ------------
Supplemental disclosures of
cash flow information
Cash paid for interest . . . . . 3,758,577 2,182,551 1,888,049
----------- ------------ ------------
----------- ------------ ------------
Cash paid for income tax . . . . 403,718 285,621 211,982
----------- ------------ ------------
----------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
REPUBLIC CORPORATION AND SUBSIDIARY
Statement of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
For three Additional
years ended Capital Paid in Treasury Contributed Retained Total
December 31, Stock Capital Stock Capital Earnings Equity
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at
12-31-92 356,844 234,931 91,303 500,472 6,816,216 7,316,688
Net income - - - - 415,018 415,018
Market value
adjustment-
Securities - - - - - -
Addition to
treasury
stock - - - - - -
-------- -------- ------- -------- ---------- ----------
Balance at
12-31-93 356,844 234,931 91,303 500,472 7,231,234 7,731,706
Net income - - - - 564,976 564,976
Market value
adjustment-
Securities - - - - - -
Addition to
treasury
stock -- - - - -
-------- -------- ------- -------- ---------- ----------
Balance at
12-31-94 356,844 234,931 91,303 500,472 7,796,210 8,296,682
Net Income - - - - 817,109 817,109
Market value
adjustment-
Securities - - - - - -
Addition to
treasury
stock - - - - - -
-------- --------- ------- -------- ---------- ----------
Balance at
12-31-95 $356,844 $234,931 $91,303 $500,472 $8,613,319 $9,113,791
-------- -------- ------- -------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
THE REPUBLIC CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies.
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements
include The Republic Corporation, (Company) and its majority-owned
subsidiary, The First National Bank in Trinidad (Bank). All major items of
income and expense are recorded on the accrual basis of accounting, and all
significant intercompany accounts and transactions have been eliminated.
INVESTMENT SECURITIES. The investment securities are classified and
accounted for as follows:
. Held to Maturity - investment debt securities for 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.
. Available for sale - securities not classified as securities to be
held to maturity. Unrealized holding gains or losses, net of tax, are
reported as a separate component of shareholders' equity until realized.
LOANS. Interest on all loans is credited to interest income as earned
on the principal amount outstanding. Loans to individuals for household,
family and other consumer expenditures are principally written at the
amount disbursed, and interest income is accrued on the outstanding
principal balance.
ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses is
established through charges to earnings in the form of provisions for loan
losses. Loan losses or recoveries are charged or credited directly to the
allowance. In general, the amount charged to earnings each year by the
Bank is based on management's judgment which takes into consideration a
number of factors, including (1) loss experience in relation to outstanding
loans and the existing level of the valuation allowance, (2) a continuing
review of problem loans and overall portfolio quality, (3) regular
examinations and appraisals of loan portfolios conducted by Federal
supervisory authorities, and (4) current and expected economic conditions.
GOODWILL. The excess of the purchase cost over the net assets of the
Bank purchased represents goodwill. APB 17, which addresses the
amortization of intangible assets such as goodwill, is not to be applied
retroactively to assets acquired before November 1, 1970. Since the
acquisition of the Bank was made prior to November 1, 1970, the goodwill
acquired is considered to have continuing value over an indefinite period
and, therefore, is not being amortized.
27
<PAGE>
THE REPUBLIC CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
1. (Continued)
PROPERTY AND EQUIPMENT. Bank property and equipment are stated at
cost less accumulated depreciation. The building and improvements are
depreciated on the straight-line, declining balance, ACRS and MACRS
methods over estimated useful lives of 30 years. There is not a
material difference between the expense recognized using the ACRS and
MACRS methods and the expense that would be recognized using a method
acceptable under generally accepted accounting principles. Automobiles
are depreciated primarily on the straight-line basis over estimated
useful lives of 3-4 years. Other equipment is depreciated on the
straight-line, ACRS and MACRS methods over estimated useful lives of
5-10 years.
The accounting policy is to charge maintenance, repairs, minor
renewals and betterments of property and equipment to expense in the
year incurred. Major expenditures for renewals and betterments are
capitalized and depreciated or amortized over their estimated useful
lives. On disposal or retirement, the related cost and accumulated
depreciation are eliminated from the accounts and gain or loss on the
transaction is reflected in the statement of income.
LOAN ORIGINATION FEES AND COSTS. Loan origination fees are of an
immaterial nature and are recognized as income upon receipt.
INCOME TAXES. The Company files a consolidated federal income tax
return with the Bank. The corresponding amount of income tax expense
has been reflected in the financial statements. All expense recognized
is current due to the fact that temporary differences in the recognition
of income and expense for tax and financial statement purposes have
created an immaterial deferred credit not reflected in the accompanying
financial statements.
EMPLOYEE BENEFIT PLANS. The Bank makes payments into a 401K employee
benefit plan. All employees of the bank are covered, with the Bank
paying a discretionary percentage of the employee's earnings to the
plan. An employee can contribute an additional percentage of his/her
earnings if so desired. The plan is overseen by a board of trustees
composed of Bank officers.
EARNINGS PER SHARE COMPUTATIONS. Earnings per share computations are
based on the weighted average number of common shares outstanding during
each year.
2. Investment Securities, including investments held for sale.
A schedule of securities is as follows:
28
<PAGE>
THE REPUBLIC CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
2. (Continued)
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
---------------------------------------- ----------------------------------------
Principal Book Market Principal Book Market
Amount Value Value Amount Value Value
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Government
Securities 10,000,000 9,977,841 10,009,375 7,000,000 6,997,049 6,947,500
Obligations
of states
and polit-
ical sub-
divisions - - - 5,000 5,009 4,700
Other 24,000 24,000 24,000 24,000 24,000 24,000
---------- ---------- ---------- ---------- ---------- ----------
---------- 10,001,841 10,033,375 ---------- 7,026,058 6,976,200
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
The approximate amortized cost of investment securities pledged
by the Bank to secure public funds on deposit amounted to $9,478,949 at
December 31, 1995 and $6,497,259 at December 31, 1994. Additionally,
$498,892 was pledged to the Federal Reserve Bank in order to secure
treasury, tax and loan remittances at December 31, 1995.
Net gains on the sale of securities were as follows:
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
GAINS
U.S. Government Securities - -
------- -------
LOSSES
U.S. Government Securities - -
------- -------
NET GAINS ON SALE OF SECURITIES - -
------- -------
------- -------
</TABLE>
Unrealized gains and losses in the securities portfolio were as follows:
<TABLE>
<CAPTION>
Carrying Unrealized Unrealized Market
Value Gain Loss Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
December 31, 1995
-----------------
U.S. Treasury Securities 9,977,841 31,534 - 10,009,375
Obligations of States
and Political
Subdivisions. . . - - - -
Other. . . . . . . . . . 24,000 - - 24,000
---------- ------- ------ ----------
10,001,841 31,534 - 10,033,375
---------- ------- ------ ----------
---------- ------- ------ ----------
December 31, 1994
-----------------
U.S. Treasury Securities 6,997,049 - 49,549 6,947,500
Obligations of States
and Political
Subdivisions. . . 5,009 - 309 4,700
Other. . . . . . . . . . 24,000 - - 24,000
---------- ------- ------ ----------
7,026,058 - 49,858 6,976,200
---------- ------- ------ ----------
---------- ------- ------ ----------
</TABLE>
29
<PAGE>
THE REPUBLIC CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
3. Loans and Other Receivables
Loans and other receivables are summarized as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------
<S>
TYPE 1995 1994
------------ -----------
<C> <C>
Real estate. . . . . . . . . . . . . . $46,178,005 $34,887,703
Commercial and industrial. . . . . . . 4,892,134 3,470,031
Agriculture. . . . . . . . . . . . . . 3,676,333 3,276,612
Loans to individuals for household,
family and other consumer goods . 8,651,779 7,497,260
Other. . . . . . . . . . . . . . . . . 27,146 6,860
------------ -----------
TOTAL $63,425,397 $49,138,466
------------ -----------
-------- --------
$ 73 $ 46
-------- --------
Recoveries:
Commercial. . . . . . . . . . . . . . . . . . . . $ 4 $ 5
Agricultural. . . . . . . . . . . . . . . . . . . - -
Real Estate - Construction. . . . . . . . . . . . - -
Real Estate - Mortgage. . . . . . . . . . . . . <C>
Balance at beginning of year. . . . . $925,572 $956,000 $820,000
Provision charged to
operating expenses . . . . . . . - - 115,354
Loans charged off . . . . . . . . . . 73,040 46,489 43,991
Recoveries on loans
previously charged off . . . . . 15,494 16,061 64,637
-------- -------- --------
Balance at end of year. . . . . . . . $868,026 $925,572 $956,000
-------- -------- --------
-------- -------- --------
</TABLE>
4. Property and equipment.
Property and equipment are summarized as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Land. . . . . . . . . . . . . . $ 114,751 $ 49,681 $ 49,681
Buildings . . . . . . . . . . . 2,029,738 1,945,220 1,910,795
Furniture and equipment . . . . 1,287,430 993,047 914,047
---------- ---------- ----------
3,431,919 2,987,948 2,874,523
Less accumulated depreciation . 1,630,105 1,446,889 1,251,057
---------- ---------- ----------
Net. . . . . . . . . . . $1,801,814 $1,541,059 $1,623,466
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Depreciation expense for 1995, 1994 and 1993 was $183,216,
$195,832 and $138,894, respectively.
5. Income Taxes.
The components of the income tax provisions (benefits) are as
follows:
30
<PAGE>
THE REPUBLIC CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
5. (Continued)
<TABLE>
<CAPTION>
December 31,
----------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Federal provision:
Current. . . . . . . . . . . . $352,561 $262,050 $222,365
Deferred . . . . . . . . . . . - - -
-------- -------- --------
352,561 262,050 222,365
State provision . . . . . . . . . . 25,728 21,668 8,078
-------- -------- --------
Total. . . . . . . . . . . . . $378,289 $283,718 $230,443
-------- -------- --------
-------- -------- --------
</TABLE>
The difference between the total expected income tax expense
applying the Federal tax rates and the effective tax rate applicable to
income are as follows (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------------- ---------------- ------------
% of % of % of
Pretax Pretax Pretax
Amount Income Amount Income Amount Income
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Statutory tax rate Federal . 413 34 293 34 223 34
State income tax . . . . . . 25 2 22 3 8 1
Tax exempt revenue . . . . . (5) - (4) (1) (3) (1)
Accrual to cash adjustment . (21) (2) (21) (3) (21) (3)
Provision for loan loss. . . (20) (2) (3) - 39 6
Other (net). . . . . . . . . (14) (1) (3) - (16) (2)
---- ---- ---- ---- ---- ----
Total . . . . . . . . . 378 31 284 33 230 35
---- ---- ---- ---- ---- ----
---- ---- ---- ---- ---- ----
</TABLE>
In February 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes". This statement, which is generally effective for 1993
financial reporting, supersedes Statement No. 96, "Accounting for Income
Taxes". The adoption of this statement occurred for 1993 without a
material effect on the financial position or the results of operations
of the Registrant.
6. Service Commitments.
Computer and data processing services are provided to the Bank by
an outside service center. Expenses incurred for such services during
1995, 1994 and 1993 were $93,759, $73,186 and $66,725, respectively.
7. Other Real Estate.
Other real estate consists of properties acquired through
foreclosure and loans that are classified as in-substance foreclosed for
which the underlying collateral is real estate. There was a $1,000 gain
on properties sold in 1995.
There were no gains or losses in 1994 on other real estate
transactions.
The Bank sold properties previously held as other real estate at
a gain of approximately $20,000 in 1993.
31
<PAGE>
THE REPUBLIC CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
8. Certificates of Deposit.
The Bank has time certificates of deposit in amounts of $100,000
or more amounting to $11,692,086 and $9,446,053 at December 31, 1995 and
1994, respectively. Interest expense for the years ended December 31,
1995, 1994 and 1993 on this type of deposit was $596,555, $246,698, and
$136,794, respectively.
9. Regulatory Matters.
The Bank, as a National Bank, is subject to the dividend
restrictions set forth by the Comptroller of the Currency. Under such
restrictions, the Bank may not, without the prior approval of the
Comptroller of the Currency, declare dividends in excess of the sum of
the current year's earnings (as defined) plus the retained earnings (as
defined) from the prior two years. The dividends, as of December 31,
1995, that the Bank could declare, without the approval of the
Comptroller of the Currency, amounted to approximately $1,460,000. The
Bank is also required to maintain minimum amounts of capital to total
"risk weighted" assets, as defined by the banking regulators. As of
December 31, 1995, Banks are required to have minimum Tier 1 and Total
capital ratios of 4.00% and 8.00%, respectively. The Bank's actual
ratios at December 31, 1995 were $14.73% and 15.99%, respectively. The
Bank's Tier 1 leverage ratio at December 31, 1995 was 8.09%. The
minimum required leverage ratio for the Bank at December 31, 1995, was
3.00%.
10. Supplemental Cash Flow Information
In 1994 and 1993, the Bank recorded amounts of other real estate
acquired through foreclosure of $5,500 and $17,000. Of total sales of
other real estate during 1994 and 1993, $5,300 and $115,988 of the
purchase price was financed by the Bank, taking the other real estate as
security. Loans charged off in 1995, 1994 and 1993 amounted to $73,040,
$46,489 and $43,991. These noncash transactions have been excluded from
the consolidated statement of cash flows.
11. Financial Position and Results of Operations - Republic Corporation.
The financial position and results of operations of The Republic
Corporation (parent only) are as follows:
32
<PAGE>
THE REPUBLIC CORPORATION
Balance Sheet
<TABLE>
<CAPTION>
(Note 11 Continued)
December 31 1995 1994
- -------------------------------------------------------------------------------
Assets
<S> <C> <C>
Cash in Bank. . . . . . . . . . . . . . . . . $ 22,500 $ 21,679
Investment in subsidiary - equity method. . . 9,015,379 8,200,084
Vehicles and equipment (net). . . . . . . . . 108 215
Receivable - due from subsidiary. . . . . . . 19,200 18,100
Other assets. . . . . . . . . . . . . . . . . 56,604 56,604
---------- ----------
Total assets . . . . . . . . . . . . . . . $9,113,791 $8,296,682
---------- ----------
---------- ----------
Liabilities . . . . . . . . . . . . . . . . . $ - $ -
---------- ----------
Stockholders' Equity
Common stock, par value $1.00; authorized
750,000 shares, issued 356,844 shares
including stock held in treasury of
23,119 and 23,119 for 1995 and 1994,
respectively . . . . . . . . . . . . . . . 356,844 356,844
Additional paid in capital. . . . . . . . . . 234,931 234,931
Less cost of treasury stock (23,119 shares
at 12-31-95, 23,119 shares at 12-31-94). . (91,303) (91,303)
---------- ----------
Total contributed capital. . . . . . . . . 500,472 500,472
---------- -----------
Retained earnings . . . . . . . . . . . . . . 8,613,319 7,796,210
---------- -----------
Total stockholders' equity . . . . . . . . 9,113,791 8,296,682
---------- ----------
Total liabilities and
stockholders' equity . . . . . . . . . . . $9,113,791 $8,296,682
---------- ----------
---------- ----------
</TABLE>
33
<PAGE>
THE REPUBLIC CORPORATION
Statement of Income
<TABLE>
<CAPTION>
(Note 11 Continued)
Year Ended December 31 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Income
Investment income in subsidiary
Dividends received from
subsidiary bank. . . . . . . . . . $ 39,100 $ 39,100 $ 39,200
Other income . . . . . . . . . . . . . - - -
Total income . . . . . . . . . . . $ 39,100 $ 39,100 $ 39,200
Expenses
Salaries and employee benefits . . . . . . 41,073 41,073 41,073
Depreciation . . . . . . . . . . . . . . . 107 107 107
Examination and legal fees . . . . . . . . 8,127 6,375 6,075
Miscellaneous. . . . . . . . . . . . . . . 140 13,384 89
Office . . . . . . . . . . . . . . . . . . 3,729 3,726 3,993
Taxes. . . . . . . . . . . . . . . . . . . 3,310 3,315 3,314
Travel . . . . . . . . . . . . . . . . . . - 200 524
-------- --------- --------
Total expenses . . . . . . . . . . . . 56,486 68,180 55,175
-------- -------- --------
Income (Loss) before equity in
undistributed net income of subsidiary (17,386) (29,080) (15,975)
Less applicable income (taxes) benefit . . 19,200 18,100 18,800
-------- -------- --------
1,814 (10,980) 2,825
Equity in undistributed net income
(loss) of subsidiary . . . . . . . . . 815,295 575,956 412,193
-------- -------- --------
Net income (loss). . . . . . . . . . . $817,109 $564,976 $415,018
-------- -------- --------
-------- -------- --------
Earnings per share
Weighted average number of
shares outstanding . . . . . . . . 334,366 334,366 334,366
-------- -------- --------
-------- -------- --------
Net income (loss) per common share . . $ 2.44 $ 1.69 $ 1.24
-------- -------- --------
-------- -------- --------
</TABLE>
34
<PAGE>
THE REPUBLIC CORPORATION
Statement of Cash Flows
<TABLE>
<CAPTION>
(Note 11 Continued)
Year Ended December 31 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income. . . . . . . . . . . . . . . . $ 817,109 $ 564,976 $ 415,018
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation. . . . . . . . . . . . . 107 107 107
Dividends received - subsidiary . . . (39,100) (39,100) (39,200)
(Increase) in investment in
subsidiary-held on the
equity method . . . . . . . . . . (815,295) (557,573) (412,193)
(Increase) decrease in receivable
from subsidiary-income
tax benefit . . . . . . . . . . . (1,100) 700 3,400
Increase (decrease) in current
liabilities . . . . . . . . . . . - - -
--------- -------- ---------
Net cash (used in) operating activities . (38,279) (30,890) (32,868)
---------- ---------- ----------
Cash flows from investing activities-
Dividends received. . . . . . . . . . 39,100 39,100 39,200
--------- --------- ---------
Cash flows from financing activities-
Purchase of treasury stock. . . . . . - - -
--------- --------- ---------
Net increase (decrease) in cash . . . . . 821 8,210 6,332
Cash - beginning of year. . . . . . . . . 21,679 13,469 7,137
--------- --------- ---------
Cash - end of year. . . . . . . . . . . . 22,500 21,679 13,469
--------- --------- ---------
--------- --------- ---------
Supplemental disclosures of cash
flow information:
Cash paid for interest. . . . . . . . - - -
--------- --------- ---------
--------- --------- ---------
Cash paid for income taxes. . . . . . - - -
--------- --------- ---------
--------- --------- ---------
</TABLE>
35
<PAGE>
THE REPUBLIC CORPORATION
Statement of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
(Note 11 (Continued)
For the Three Additional Total
Year Ended Capital Paid in Treasury Contributed Retained
December 31 Stock Capital Stock Capital Earnings
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December
31, 1992 . . . . . $356,844 $234,931 $91,303 $500,472 $6,816,216*
Net income. . . . . . - - - - 415,018
Additions to
treasury stock . . - - - - -
---------- ---------- --------- ---------- -----------
Balance at December
31, 1993 . . . . . 356,844 234,931 91,303 500,472 7,231,234*
Net income. . . . . . - - - - 564,976
Additions to
treasury stock . . - - - - -
---------- ---------- --------- ---------- -----------
Balance at December
31, 1994 . . . . . 356,844 234,931 91,303 500,472 7,796,210*
Net income. . . . . . - - - - 817,109
Additions to
treasury stock . . - - - - -
---------- ---------- --------- ---------- -----------
Balance at December
31, 1995 $356,844 $234,931 $91,303 $500,472 $8,613,319*
---------- ---------- --------- ---------- -----------
---------- ---------- --------- ---------- -----------
</TABLE>
*On December 31, 1992, 1993, 1994 and 1995 the portion of retained earnings
resulting from Republic Corporation's equity in the undistributed income of its
subsidiary was $6,010,239, $6,422,432, $6,982,005 and $7,797,300, respectively.
12. Contingent Liabilities and Commitments.
The consolidated financial statements do not reflect various commitments and
contingent liabilities which arise in the normal course of business and which
involve elements of credit risk, interest rate risk and liquidity risk. These
commitments and contingent liabilities are commitments to extend credit and
standby letters of credit. A summary of the Bank's commitments and contingent
liabilities at December 31, 1995, is as follows:
National
Amount
--------
Commitments to extend credit 4,200,157
Standby letters of credit 590,460
36
<PAGE>
THE REPUBLIC CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
12. (Continued)
Commitments to extend credit and standby letters of credit all include
exposure to some credit loss in the event of nonperformance of the customer.
The Bank's credit policies and procedures for credit commitments and financial
guarantees are the same as those for extension of credit that are recorded on
the consolidated statements of condition. Because these instruments have fixed
maturity dates, and because many of them expire without being drawn upon, they
do not generally present any significant liquidity risk to the Bank.
13. Operating Loss
In 1993, the Bank experienced an operating loss of $132,280. This loss
resulted from the issuance in 1980 and 1986 of letters of credit which were not
backed by enforceable loan contracts.
14. Disclosures about the Fair Value of Financial Instruments
The following disclosures of the estimated fair value of financial
instruments are made in accordance with the requirements of SFAS No. 107,
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS. The estimated fair value
amounts have been determined by the Bank using available market information and
valuation methodologies. The fair value estimates presented are not necessarily
indicative of the amounts the company could realize in a current market
exchange. The use of different market assumptions and/or estimation
methodologies may have a material impact on the estimated fair value amounts.
SFAS No. 107 excludes certain financial instruments and all non-financial
instruments including intangible assets from its disclosure requirements.
Therefore the aggregate fair value amounts presented herein are not indicative
of the underlying value of the Bank.
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which is it practicable to estimate
that value:
- CASH AND DUE FROM BANKS
The current carrying amount is a reasonable estimate of fair value.
- FEDERAL FUNDS SOLD
The current carrying amount is a reasonable estimate of fair value.
37
<PAGE>
THE REPUBLIC CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
14. (Continued)
. INVESTMENT SECURITIES
An estimate of the fair value for investment securities is made
utilizing quoted market prices for publicly traded securities, where
available. A third-party pricing service that specializes in "matrix
pricing" and modeling techniques provides estimated fair values for
securities not actively traded.
. LOANS
The fair value of loans is estimated by discounting the future cash
flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings and for the same remaining
maturities. Due to the small amount of nonaccrual loans at December
31, 1995, these loans do not significantly impact the fair value of
loans.
. DEPOSITS
The fair value of demand deposits, savings accounts and money market
deposits is the amount payable on demand at the reporting date. The
fair value of fixed-maturity certificates of deposit is estimated by
discounting the future cash flows using the rates currently offered for
deposits of similar remaining maturities.
. COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT
The fair value of commitments is estimated using the fees currently
charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the present creditworthiness of
the customers. For fixed-rate loan commitments, fair value also
considers the difference between current levels of interest rates and
the committed rates. The estimated fair value of letters of credit is
based on the fees currently charged for similar agreements. The
instruments were determined to have no positive or negative market
value adjustments and are not listed in the following table.
The estimated fair value of the Company's financial instruments is as
follows:
38
<PAGE>
THE REPUBLIC CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
14. (Continued)
<TABLE>
<CAPTION>
December 31, 1995
-------------------------
Carrying Fair
Amount Value
-------- -------
(In Thousands)
<S> <C> <C>
Financial assets:
Cash and due from banks $ 2,363 $ 2,363
Held-to-maturity securities 9,978 10,009
Other Securities 24 24
Federal funds sold 30,650 30,650
Loans, net of allowance 62,557 62,507
Financial liabilities:
Deposits 98,273 98,288
</TABLE>
The fair value estimates presented herein are based on pertinent
information available to management as of December 31, 1995. Although
management is not aware of any factors that would significantly affect the
estimated fair value amounts, such amounts have not been comprehensively
revalued for purposes of the financial statements since that date and,
therefore, current estimates of fair value may differ significantly from
the amounts presented.
39
<PAGE>
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure:
Not applicable.
40
<PAGE>
PART III
ITEM 10. Directors and executive officers of the Republic Corporation.
The Republic Corporation's Board of Directors consists of Catherine G.
Eisemann, J.E. Eisemann, IV and Roger Dean Eisemann. All directors and officers
are U.S. citizens. Catherine G. Eisemann is the mother of J.E. and Roger Dean
Eisemann.
TERM OF PRINCIPAL OCCUPATIONS FOR THE
NAME AND TITLE AGE OFFICE LAST FIVE YEARS
- -------------- --- ------ -----------------------------
Catherine G. Eisemann 69 32 Years Catherine G. Eisemann has been a
Director of The Republic Corporation for
32 years. Mrs. Eisemann was elected
President of The Republic Corporation
and began serving December 11, 1981.
J.E. Eisemann, IV 48 19 Years J.E. Eisemann, IV has served as a
Director on The Republic Corporation
Board for 19 years. Mr. Eisemann has
been the Vice-President and Director of
the Subsidiary Bank for approximately 19
years. Mr. Eisemann has served as the
Chairman of the Board of The Republic
Corporation and Chairman of the Board
for the Subsidiary Bank for
approximately 14 years.
Roger Dean Eisemann 41 13 Years Roger Dean Eisemann was elected
Secretary and began serving as a
director of The Republic Corporation in
July, 1982.
J.E. Eisemann, III was the President and Chairman of the Board of The
Republic Corporation for 25 years. Mr. Eisemann passed away during 1981.
41
<PAGE>
ITEM 11. Executive Compensation.
EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
--------------------------------
Name & Principal Position Year Salary Bonus
- ------------------------- ---- ---------- ---------
<S> <C> <C> <C>
J.E. Eisemann, IV Chairman of the 1995 $52,716(1) $3,429(2)
Board of the Company, Vice 1994 50,767(1) 2,076(2)
President of the Company, 1993 47,283(1) 1,997(2)
Chairman of the Board & Vice
President of the Subsidiary Bank
Catherine Eisemann President of the 1995 $30,000 -0-
Company 1994 30,000 -0-
1993 30,000 -0-
</TABLE>
<TABLE>
<CAPTION>
Restricted Stock
Stock Options/ LTIP All Other
Name & Principal Position Awards SARs(#) Payouts($) Compensation
- ------------------------- ---------- -------- ---------- ------------
<S> <C> <C> <C> <C>
J.E. Eisemann, IV -0- -0- -0- -0-
Chairman of the Board -0- -0- -0- -0-
of the Company, Vice -0- -0- -0- -0-
President of the
Company, Chairman of
the Board & Vice
President of the
Subsidiary Bank
Catherine Eisemann -0- -0- -0- -0-
President of the -0- -0- -0- -0-
Company -0- -0- -0- -0-
</TABLE>
(1) Includes amounts deferred under Section 401(K) of the Internal Revenue
Code. Amounts deferred by Mr. Eisemann were $4,438 in 1993, $4,924 in 1994 and
$3,543 in 1995.
(2) Includes amounts deferred under Section 401(K) of the Internal Revenue
Code. Amounts deferred by Mr. Eisemann were $222 in 1993, $246 in 1994 and $343
in 1995.
STOCK OPTIONS/SAR GRANTS IN 1995-NONE
AGGREGATED STOCK OPTIONS/SAR EXERCISES IN 1995 AND OPTIONS/SAR
VALUES AS OF DECEMBER 31 1995 - NONE
LONG-TERM INCENTIVE PLANS - AWARDS IN 1995 - NONE
COMPENSATION OF DIRECTORS
Director fees are not paid to directors of the Company. A fee of $200.00
was paid to Roger Dean Eisemann in 1994 as reimbursement for travel
costs incurred in attending the Annual Shareholders Meeting.
EMPLOYMENT CONTRACTS AND TERMINATION OF
EMPLOYMENT ARRANGEMENTS - NONE
REPORT ON REPRICING OF OPTIONS/SARS - NONE
42
<PAGE>
ITEM 12. Security ownership of certain beneficial owners and management.
(a) Security ownership of certain beneficial owners.
The following schedule reflects security ownership of persons who are
the beneficial owners of more than 5% of any class of voting
securities of The Republic Corporation.
Amount and
Nature of Percent
Name of Title of Beneficial of
Person (1) Class Ownership (2) Class
---------- ----------- ------------- --------
Catherine G. Eisemann Common Stock 193,702 58.0424
5303 Willers Way
Houston, Texas 77056
(1) All persons shows are officers or directors of The Republic
Corporation
(2) Shares of The Republic Corporation have not been pledged by the
officers or directors of the corporation.
(b) Security ownership of management.
The following schedule reflects security ownership of the officers and
directors of The Subsidiary Bank:
<TABLE>
<CAPTION>
Amount and
Nature of Percent
Name of Director Title of Beneficial of
or Officer Class Ownership Class
- ---------------- ------------ --------------- --------
<S> <C> <C> <C>
The Republic Corporation(1) Common Stock 39,100 97.75
Catherine G. Eisemann Common Stock 100 .25
J.E. Eisemann, IV Common Stock 100 .25
R. Dean Eisemann Common Stock 100 .25
Ralph Gagliardi Common Stock 100 .25
Opal Gahm Common Stock 100 .25
Johnny Niccoli Common Stock 100 .25
Charles Latuda Common Stock 100 .25
Don Berg Common Stock 100 .25
James Cummings Common Stock 100 .25
</TABLE>
(1)Catherine G. Eisemann owns 58.0424 percent of The Republic
Corporation.
(c) Changes in control.
The Republic Corporation has the option of repurchasing its own stock,
thus increasing the ownership percentages of the remaining
shareholders.
43
<PAGE>
ITEM 13. Certain relationships and related transactions.
There have been no transactions with management or other related
parties that would require disclosure under current Securities and Exchange
Commission regulations. Additionally, no business relationships that would
require disclosure exist. A director was indebted to the subsidiary bank
during 1995 on a loan made in the ordinary course of business made on
substantially the same terms as those prevailing at the time for comparable
transactions with other persons and did not involve more than the normal
risk of collectibility. At no time was the amount of the loan in excess of
$60,000.
44
<PAGE>
PART IV
ITEM 14. Exhibits, financial statement, schedules, and reports on Form 8-K.
(a) 1. The following financial statements and financial statement
schedules are included in Part II of this report:
Consolidated statements of the parent and subsidiary bank:
Accountant's Report. . . . . . . . . . . . . 21
Balance Sheets as of December
31, 1995 and 1994 . . . . . . . . . . . 22
Statements of Income - years ended
December 31, 1995, 1994 and 1993. . . . 23
Statement of Cash Flows -
Years ended December 31,
1995, 1994 and 1993 . . . . . . . . . . 24-25
Statement of Changes in Stockholders'
Equity-years ended December 31,
1995, 1994 and 1993 . . . . . . . . . . 26
Notes to Financial Statements. . . . . . . . 27-39
2. All other schedules are omitted because they are not applicable,
are not required, or because the required information is included
in the consolidated financial statements or notes thereto.
45
<PAGE>
3. List of Exhibits.
The following documents were filed as exhibits to Registration
Statement Form 10 (which was filed with the Securities and
Exchange Commission under The Securities Exchange Act of 1934)
dated August 23, 1977.
Exhibit
No.
-------
3 The Republic Corporation, Articles of Incorporation and
By-Laws
22(a) Subsidiary of the Registrant.
The First National Bank in Trinidad, Colorado.
Incorporated in Colorado
(b) Reports on Form 8-K
There were no reports on Form 8-K for the three months ended December
31, 1995.
46
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Republic Corporation has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
REPUBLIC CORPORATION
/s/ J.E. Eisemann, IV March 22, 1996
- ----------------------------------- Chairman of the -----------------
J.E. Eisemann, IV Board, Director, Date
Chief Executive
Officer, Chief
Financial and
Accounting Officer
Pursuant to the requirements of the Securities Exchanges Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
Signature Title Date
- --------- ----- ----
/s/ J.E. Eisemann, IV March 22, 1996
- ----------------------------------- Chairman of the -----------------
J.E. Eisemann, IV Board, Director,
Chief Executive
Officer, Chief
Financial and
Accounting Officer
/s/ Catherine G. Eisemann March 22, 1996
- ----------------------------------- President of the -----------------
Catherine G. Eisemann Board and a Director
47
<PAGE>
SUPPLEMENTAL INFORMATION
The Republic Corporation will send the shareholders an annual report and proxy
materials subsequent to the filing of this report.
48
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
REGISTRANTS FORM 10-K, DATED DECEMBER 31, 1995
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 2,362,761
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 30,650,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 24,000
<INVESTMENTS-CARRYING> 9,977,841
<INVESTMENTS-MARKET> 10,009,375
<LOANS> 63,425,397
<ALLOWANCE> 868,026
<TOTAL-ASSETS> 109,018,079
<DEPOSITS> 98,272,760
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,434,050
<LONG-TERM> 0
0
0
<COMMON> 356,844
<OTHER-SE> 8,756,947
<TOTAL-LIABILITIES-AND-EQUITY> 109,018,079
<INTEREST-LOAN> 5,005,568
<INTEREST-INVEST> 516,491
<INTEREST-OTHER> 2,126,113
<INTEREST-TOTAL> 7,648,172
<INTEREST-DEPOSIT> 4,168,021
<INTEREST-EXPENSE> 4,168,021
<INTEREST-INCOME-NET> 3,480,151
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,653,843
<INCOME-PRETAX> 1,215,065
<INCOME-PRE-EXTRAORDINARY> 1,215,065
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 817,109
<EPS-PRIMARY> 2.44
<EPS-DILUTED> 2.44
<YIELD-ACTUAL> .073
<LOANS-NON> 183,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 593,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 926,000
<CHARGE-OFFS> 73,000
<RECOVERIES> 15,000
<ALLOWANCE-CLOSE> 868,000
<ALLOWANCE-DOMESTIC> 46,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 822,000
</TABLE>
