<PAGE>
FORM 10-K
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, 1998
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) 993-9200
Securities registered pursuant to Section (b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
------------------- -----------------------------------------
None None
Securities registered pursuant to Section (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, 1999
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, 1998
DOCUMENTS INCORPORATED BY REFERENCE
NONE
<PAGE>
REPUBLIC CORPORATION
FORM 10-K
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
IMPORTANT TERMS . . . . . . . . . . . . . . . . . . . . . . . .
PART I
ITEM 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . 1-12
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. . . . 20-40
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE. . . . . . . . 41
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT. . . . . . . . . . . . . . . . . 42
ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . 43
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . . . 44
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . 45
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K. . . . . . . . . . . . . . 46-47
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . 48
SUPPLEMENTAL INFORMATION . . . . . . . . . . . . . . . . . . 49
</TABLE>
<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 64 full time equivalent employees on December 31, 1998.
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.
The principal methods of competition in the industry are price (i.e.
interest rates and fees) and service. Inasmuch as rate and fee structures at
all local competitors are somewhat similarly constrained by net interest
income objectives, competitive pressure and the restraint that must
necessarily be exercised in smaller communities of modest means, the primary
arena for competition is service. Community banks are uniquely able to
provide the type of personal service that is typically of greatest value in
smaller, less populated markets such as Las Animas and Huerfano Counties. The
ability of the bank to successfully market this type of service delivery,
along with a reasonable selection of more modern and less personal means of
access, will determine its ultimate competitive success.
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, 1998 Average Interest Yield/
(Dollars in Thousands) Balance Rev./Exp. Rate
<S> <C> <C> <C>
ASSETS
Investment securities:
Taxable. . . . . . . . . . . . . . . . . . . . . $ 23,399 $ 1,335 5.7%
Tax exempt . . . . . . . . . . . . . . . . . . . -- -- --
Loans. . . . . . . . . . . . . . . . . . . . . . . 87,275 7,683 8.8%
Less: Reserve for loan loss. . . . . . . . . . . (1,145)
Funds sold . . . . . . . . . . . . . . . . . . . . 12,435 665 5.3%
-------- ------- ----
Total Earning Assets. . . . . . . . . . . . . . 121,964 9,683 7.9%
-------- ------- ----
Cash and due from banks. . . . . . . . . . . . . . 3,696
Other assets . . . . . . . . . . . . . . . . . . . 4,224
--------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . $129,884
--------
--------
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing demand deposits . . . . . . . . . $ 35,669 $ 1,295 3.6%
Savings deposits . . . . . . . . . . . . . . . . . 9,282 252 2.7%
Time deposits. . . . . . . . . . . . . . . . . . . 55,591 3,024 5.4%
-------- ------- ----
TOTAL INTEREST BEARING LIABILITIES . . . . . . . 100,542 4,571 4.5%
-------- ------- ----
NET INTEREST REVENUE . . . . . . . . . . . . . . . . $ 5,112 3.4%
-------
-------
NET INTEREST REVENUE TO EARNING ASSETS . . . . . . . 4.2%
Demand deposits (non-interest bearing) . . . . . . $ 16,114
Other liabilities. . . . . . . . . . . . . . . . . 1,463
Stockholders' equity . . . . . . . . . . . . . . . 11,765
--------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . $129,884
--------
--------
</TABLE>
4
<PAGE>
TABLE #2
<TABLE>
<CAPTION>
Year Ended December 31, 1997 Average Interest Yield/
(Dollars in Thousands) Balance Rev./Exp. Rate
<S> <C> <C> <C>
ASSETS
Investment securities:
Taxable. . . . . . . . . . . . . . . . . . . . . $ 20,588 $ 1,112 5.4%
Tax exempt . . . . . . . . . . . . . . . . . . . -- -- --
Loans. . . . . . . . . . . . . . . . . . . . . . . 75,870 6,796 8.9%
Less: Reserve for loan loss. . . . . . . . . . . (1,049)
Funds sold . . . . . . . . . . . . . . . . . . . . 20,917 1,129 5.4%
-------- ------- ----
Total Earnings Assets 116,326 9,037 7.8%
-------- ------- ----
Cash and due from banks. . . . . . . . . . . . . . 2,250
Other assets . . . . . . . . . . . . . . . . . . . 3,462
--------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . $122,038
--------
--------
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing demand deposits . . . . . . . . . $ 31,498 $ 1,105 3.5%
Savings deposits . . . . . . . . . . . . . . . . . 9,381 259 2.8%
Time deposit . . . . . . . . . . . . . . . . . . . 54,614 3,087 5.7%
-------- ------- ----
TOTAL INTEREST BEARING LIABILITIES . . . . . . . 95,493 4,451 4.7%
-------- ------- ----
NET INTEREST REVENUE . . . . . . . . . . . . . . . . $ 4,586 3.1%
-------
-------
NET INTEREST REVENUE TO EARNING ASSETS . . . . . . . 3.9%
Demand deposits (non-interest bearing) . . . . . . $ 14,315
Other liabilities. . . . . . . . . . . . . . . . . 1,409
Stockholders' Equity . . . . . . . . . . . . . . . 10,821
--------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . $122,038
--------
--------
</TABLE>
5
<PAGE>
TABLE #3
<TABLE>
<CAPTION>
Year Ended December 31, 1996 Average Interest Yield/
(Dollars in Thousands) Balance Rev./Exp. Rate
<S> <C> <C> <C>
ASSETS
Investment securities:
Taxable. . . . . . . . . . . . . . . . . . . . . $ 10,006 $ 653 6.5%
Tax exempt . . . . . . . . . . . . . . . . . . . -- -- --
Loans. . . . . . . . . . . . . . . . . . . . . . . 68,841 6,184 9.0%
Less: Reserve for loan loss. . . . . . . . . . . (956)
Funds sold . . . . . . . . . . . . . . . . . . . . 27,844 1,483 5.3%
-------- ------- ----
Total Earning Assets . . . . . . . . . . . . . . 105,735 8,320 7.9%
-------- ------- ----
Cash and due from banks. . . . . . . . . . . . . . 2,776
Other assets . . . . . . . . . . . . . . . . . . . 3,486
--------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . $111,997
--------
--------
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing demand deposits . . . . . . . . . $ 29,339 $ 1,004 3.4%
Savings deposits . . . . . . . . . . . . . . . . . 9,703 268 2.8%
Time deposits. . . . . . . . . . . . . . . . . . . 49,773 2,852 5.7%
-------- ------- ----
TOTAL INTEREST BEARING LIABILITIES . . . . . . . 88,815 4,124 4.6%
-------- ------- ----
NET INTEREST REVENUE . . . . . . . . . . . . . . . . $ 4,196 3.3%
-------
-------
NET INTEREST REVENUE TO EARNING ASSETS 4.0%
Demand deposits (non-interest bearing) . . . . . . $ 12,596
Other liabilities. . . . . . . . . . . . . . . . . 1,338
Stockholders' equity . . . . . . . . . . . . . . . 9,248
--------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . $111,997
--------
--------
</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>
1998 vs 1997 1997 vs 1996
----------------------- -----------------------
Yield/ Yield/
Volume Rate Total Volume Rate Total
----------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in interest income on:
Loans. . . . . . . . . . . . . . . . . . . . . $ 963 $ (77) $ 886 $ 680 $ (68) $ 612
Investment securities. . . . . . . . . . . . . 160 63 223 589 (130) 459
Federal funds sold . . . . . . . . . . . . . . (444) (21) (465) (381) 28 (353)
----- ----- ----- ----- ----- -----
679 (35) 644 888 (170) 718
----- ----- ----- ----- ----- -----
Increase (decrease) in interest expense on:
Demand deposits. . . . . . . . . . . . . . . . 159 31 190 72 29 101
Savings. . . . . . . . . . . . . . . . . . . . (1) (6) (7) (9) - (9)
Time deposits. . . . . . . . . . . . . . . . . 99 (162) (63) 235 - 235
----- ----- ----- ----- ----- -----
257 (137) 120 298 29 327
----- ----- ----- ----- ----- -----
Net interest income. . . . . . . . . . . . . . 422 102 524 590 (199) 391
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
</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) 1998 1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Securities. . . . . . . . . . . . $ - $12,036 $10,006
Government Sponsored Agencies . . . . . . . . . 23,865 15,952 --
Other bonds, notes and securities . . . . . . . 24 24 24
------- ------- -------
TOTAL $23,889 $28,012 $10,030
------- ------- -------
------- ------- -------
</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.
TABLE #6
<TABLE>
<CAPTION>
Government Federal
U.S. Treasury Sponsored Reserve Bank
Securities Agencies Stock
------------- ------------ ------------
Amount/Yield Amount/Yield Amount/Yield
------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Within one year. . . . . . . . . . . . . -- --% $23,865 5.3% $ -- --%
After one year through five years. . . . -- --% -- --% -- --%
After five years through ten years . . . -- --% -- --% -- --%
After ten years. . . . . . . . . . . . . -- --% -- --% 24 7.5%
---- ---- ------- ---- ---- ----
TOTAL $ -- --% 23,865 5.3% 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,
1998 1997
------------ ------------
<S> <C> <C>
Commercial. . . . . . . . . . . . . . . $ 7,371 $ 5,762
Agricultural. . . . . . . . . . . . . . 4,156 3,459
Real Estate - Construction. . . . . . . 6,423 1,960
Real Estate - Mortgage. . . . . . . . . 66,652 59,562
Installment loans to individuals. . . . 9,967 8,865
-------- --------
TOTAL $ 94,569 $ 79,608
-------- --------
-------- --------
</TABLE>
There were no foreign loans at December 31, 1998 or December 31, 1997.
8
<PAGE>
Commercial, agricultural and real estate - construction loans at
December 31, 1998 are presented by maturity as follows (dollars in thousands):
TABLE #8
<TABLE>
<CAPTION>
Due After
Due in One One Year Due After
Year or Less Through Five Years Five Years
------------ ------------------ ----------
<S> <C> <C> <C>
Commercial:
Fixed rates. . . . . . . . . . 2,410 396 50
Adjustable rates . . . . . . . 213 4,085 217
Agricultural:
Fixed rates. . . . . . . . . . 2,080 528 --
Adjustable rates . . . . . . . 117 1,431 --
Real Estate - Construction:
Fixed rates. . . . . . . . . . 576 4,981 --
Adjustable rates . . . . . . . -- 34 832
</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) 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C>
Non-accrual loans. . . . . . . . . . . . . . . . . . . . . . $ 351 $ 809
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. . . . . . . . . . . . . . . . . . 714 2,465
</TABLE>
Foregone interest on restructured loans in 1998 was 15 thousand on
recognized income of 68 thousand. Interest recognized in 1997 was 141
thousand with foregone interest of 15 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, 1998 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>
1998 1997
-------- --------
<S> <C> <C>
Balance - Beginning of year . . . . . . . . . . . $ 1,070 $ 964
------- -------
Charge-offs:
Commercial. . . . . . . . . . . . . . . . . . . 20 15
Agricultural. . . . . . . . . . . . . . . . . . -- --
Real Estate - Construction. . . . . . . . . . . -- --
Real Estate - Mortgage. . . . . . . . . . . . . 10 33
Installment loans to individuals. . . . . . . . 98 132
------- -------
$ 128 $ 180
------- -------
Recoveries:
Commercial. . . . . . . . . . . . . . . . . . . 4 $ 14
Agricultural. . . . . . . . . . . . . . . . . . -- --
Real Estate - Construction. . . . . . . . . . . -- --
Real Estate - Mortgage. . . . . . . . . . . . . 12 8
Installment loans to individuals. . . . . . . . 34 34
------- -------
$ 50 $ 56
------- -------
Net Charge-offs (recoveries). . . . . . . . . . . $ 104 $ 124
------- -------
Provision - Charged to operations . . . . . . . . $ 241 $ 230
------- -------
Balance - End of Year . . . . . . . . . . . . . . $ 1,233 $ 1,070
------- -------
------- -------
Average loan balance outstanding. . . . . . . . . $87,275 $75,870
------- -------
------- -------
Percentage of net charge offs to
average loans outstanding . . . . . . . . . . . .1% .2%
------- -------
------- -------
</TABLE>
In 1998, provision was made based on the change in net charge-offs,
significant loan growth and ongoing analysis of problem loans.
The provision for 1997 decreased from that of 1996. This was mainly due
to a reduction in charge offs and a small increase in problem loans over the
prior year.
10
<PAGE>
The allocation of the allowance is as follows (dollars in thousands):
TABLE #11
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
--------------------------- ---------------------------
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. . . . . . . . . . . $ 5 7.8% $ 6 7.2%
Agricultural. . . . . . . . . . 20 4.4% 28 4.3%
Real Estate-Construction. . . . -- 6.8% -- 2.5%
Real Estate-Mortgage. . . . . . 194 70.5% 84 74.8%
Installment Loans . . . . . . . 49 10.5% 60 11.2%
Unallocated . . . . . . . . . . 965 N/A 892 N/A
------ ------ ------ -----
1,233 100.0% $1,070 100%
------ ------ ------ -----
------ ------ ------ -----
</TABLE>
The large, unallocated allowance for loan losses is being maintained in
recognition of several risk factors inherent in the bank's loan portfolio.
Foremost among these is the large concentration of loans of all types secured
by real property. While the vast majority of these loans are performing and
not in need of an allocated allowance, there has been significant growth in
this area and a noticeable increase in appraised values has occurred. (Please
see Table #7, P-8). Another significant area of concern is agricultural
purpose loans. This grouping consists largely of livestock growers in the
bank's market area and is uniquely vulnerable to adverse weather, crop or
livestock disease and market price decline. Borrowers of this type that have
required restructured terms or that have been non-performing receive an
allocation of the bank's allowance. Those remaining, however, still represent
a significant potential for loss should circumstances in that sector
deteriorate further. At the time of this writing, estimated charge-offs for
the coming year are not expected to exceed $100,000.00 and will be
concentrated in the commercial and installment areas.
V. DEPOSITS
The average amount of deposits and the average rates paid are presented
in the balance sheet analysis shown previously.
At December 31, 1998, there existed outstanding time certificates of
deposit in amounts of $100,000 or more of $15,371,575. The deposits by time
remaining until maturity were (dollars in thousands):
TABLE #12
<TABLE>
<S> <C>
3 months or less $6,466
Over 3 through 6 months 4,481
Over 6 through 12 months 4,021
Over 12 months 404
------
15,372
------
------
</TABLE>
As required by the Monetary Control Act of 1980, the reserve balance
held against deposits at December 31, 1998 was $1,005,000.
11
<PAGE>
TABLE #13
<TABLE>
<CAPTION>
For the year ended December 31 1998 1997 1996
- ------------------------------ ---- ---- ----
<S> <C> <C> <C>
Return on Assets (Net income divided by
average total assets) . . . . . . . . . . . . . . .7% .9% .8%
Return on Equity (Net income divided by
average equity) . . . . . . . . . . . . . . . . . 8.0% 10.5% 9.1%
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). . . . . . . . . 9.1% 8.9% 8.3%
</TABLE>
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 1996, two automatic teller locations were added. One is in Trinidad
and the other is in La Veta, Colorado. A facility with banking operations and
automated tellers was located in a Trinidad retail superstore and became
operational in 1998. 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 1998 or 1997 and management
has no intention to declare dividends in the immediate future.
12
<PAGE>
ITEM 6. Selected financial data:
The following table presents certain key financial information.
TABLE #14
<TABLE>
<CAPTION>
Selected Financial Data
Year Ended December 31
(Dollars in thousands) 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income. . . . . . . . . . . . . . 9,683 9,038 $ 8,320 $ 7,648 $ 5,445
Interest expense . . . . . . . . . . . . . 4,571 4,452 4,124 4,168 2,473
------- ------- ------- ------- -------
Net interest income. . . . . . . . . . . 5,112 4,586 4,196 3,480 2,972
Provision for Loan Losses. . . . . . . . . 241 230 393 - --
------- ------- ------- ------- -------
Net interest income after
Provision for loan losses. . . . . . . 4,871 4,356 3,803 3,480 2,972
Non-interest income. . . . . . . . . . . . 597 623 473 389 357
Securities gains . . . . . . . . . . . . . -- -- -- - --
Non-interest expense:
Personnel expenses . . . . . . . . . . . 1,872 1,532 1,391 1,266 1,137
Other expenses . . . . . . . . . . . . . 2,035 1,587 1,510 1,388 1,329
------- ------- ------- ------- -------
Income before income taxes . . . . . . . . 1,561 1,860 1,375 1,215 863
Applicable income taxes. . . . . . . . . . 593 699 514 378 284
------- ------- ------- ------- -------
Income before reduction for minority
interest or security gains or losses . . 968 1,161 861 837 579
Less minority interest . . . . . . . . . . 23 27 20 20 14
------- ------- ------- ------- -------
Net Income . . . . . . . . . . . . . . . . $ 945 $ 1,134 $ 841 $ 817 $ 565
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Net income per common share (2). . . . . . $ 2.83 $ 3.40 $ 2.52 $ 2.44 $ 1.69
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Dividends declared per common share(2) . . $ 0 $ 0 $ 0 $ 0 $ 0
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
(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) 1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loans. . . . . . . . . . . . . . . . 94,569 79,608 71,593 63,425 49,138
Total assets . . . . . . . . . . . . 131,275 125,190 114,963 109,018 97,616
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) 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans. . . . . . . . . . . . . . 351 809 759 183 217
Past-due loans* . . . . . . . . . . . . . . -- -- -- -- --
Restructured loans. . . . . . . . . . . . . 714 2,465 2,148 593 668
----- ----- ----- ----- -----
Total problem loans . . . . . . . . . . . 1,065 3,274 2,907 776 885
Foreclosed Assets
Real estate . . . . . . . . . . . . . . . 48 9 300 -- --
In-substance foreclosures . . . . . . . . -- -- -- -- --
Other . . . . . . . . . . . . . . . . . . 28 5 34 -- --
----- ---- ----- ----- -----
Total problem assets. . . . . . . . . . 1,141 3,288 3,241 776 885
Total problem loans as a
percentage of total loans . . . . . . . . 1.1% 4.1% 4.1% 1.2% 1.8%
Total problem assets as a percentage of
total loans and foreclosed assets . . . . 1.2% 4.1% 4.5% 1.2% 1.8%
Reserve coverage ratio ** . . . . . . . . . 115.8% 32.7% 33.2% 112.0% 104.6%
</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
14
<PAGE>
TABLE #16
INTEREST RATE SENSITIVITY
<TABLE>
<CAPTION>
December 31, 1998 (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 *. . . . . . . . . . . . . . . . . 14,456 39,335 40,111 306
Federal Funds Sold . . . . . . . . . . . 5,650 -0- -0- -0-
Taxable Securities** . . . . . . . . . . 23,865 -0- -0- -0-
Municipal Bonds. . . . . . . . . . . . . -0- -0- -0- -0-
TOTAL. . . . . . . . . . . . . . . . . 43,971 39,335 40,111 306
Rate Sensitive Liabilities
(Liabilities that can be
repriced within x months/years)
Time Certificates of Deposit . . . . . . 20,773 31,981 2,749 -0-
NOW Accounts . . . . . . . . . . . . . . 1,703 -0- -0- -0-
Super NOW Accounts . . . . . . . . . . . 19,808 -0- -0- -0-
Savings Accounts . . . . . . . . . . . . 9,180 -0- -0- -0-
MMDA Accounts. . . . . . . . . . . . . . 12,648 -0- -0- -0-
TOTAL. . . . . . . . . . . . . . . . . 64,112 31,981 2,749 -0-
Interest Rate Sensitivity Gap. . . . . . (20,141) 7,354 37,362 306
Cumulative Interest Rate
Sensitivity Gap. . . . . . . . . . . . (20,141) (12,787) 24,575 24,881
</TABLE>
* Does not include $351 thousand in nonaccruing loans and $10 thousand in
overdrafts.
** Does not include $24 thousand in Federal Reserve Bank Stock.
15
<PAGE>
INVESTMENT SECURITIES
TABLE #17
AND FOOTNOTES 1-2
<TABLE>
<CAPTION>
Carrying Unrealized Unrealized Market
Value Gains Losses Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
DECEMBER 31, 1998
(1) Held-to-Maturity:
U.S. Treasury Securities -- -- -- --
Other 23,864,557 4,493 -- 23,869,050
(2) Available-for-Sale Securities
Carried at Fair Value:
U.S. Treasury Securities -- -- -- --
Other 24,000 -- -- 24,000
---------- ------ ------ ----------
23,888,557 -- -- 23,893,050
---------- ------ ------ ----------
DECEMBER 31, 1997
(1) Held-to-Maturity:
U.S. Treasury Securities 12,036,450 -- 2,700 12,033,750
Other 15,951,840 -- 284 15,951,556
(2) Available-for-Sale Securities
Carried at Fair Value:
U.S. Treasury Securities -- -- -- --
Other 24,000 -- -- 24,000
---------- ------ ------ ----------
28,012,290 -- 2,984 28,009,306
---------- ------ ------ ----------
DECEMBER 31, 1996
(1) Held-to-Maturity:
U.S. Treasury Securities 10,006,368 -- 21,993 9,984,375
Other -- -- -- --
(2) Available-for-Sale Securities
Carried at Fair Value:
U.S. Treasury Securities -- -- -- --
Other 24,000 -- -- 24,000
---------- ------ ------ ----------
10,030,368 -- 21,993 10,008,375
---------- ------ ------ ----------
</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.
(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.
16
<PAGE>
ASSET QUALITY
Substantially all of the loan balances on nonaccrual status at year end,
1998 represent chronically past-due credits which have exhibited this pattern
and associated financial weakness for a protracted period. (Please see Table
#15, P-14)
The entire amount of the restructured loan grouping consists of two
loans to the same agricultural borrower, secured by a large tract of grazing
land. These loans are vulnerable to adverse weather, disease and market price
decline and have been at below-market interest rates due to past
difficulties. The total amount of restructured loans has declined from recent
periods due to the renewal of other loans at prevailing interest rates where
circumstances have improved and the borrower's ability to repay has
sufficiently recovered. (Please see Table #15, P-14)
Approximately 75% of total charge offs in the past two years consists of
installment loans to individuals. This is partially reflective of national
trends regarding personal debt recognition and is the primary reason that the
bank is continuing its monthly loan loss provision. (Please see Table #10,
P-10)
All loan type categories grew in the current year, however, installment
loans to individuals grew the least, at approximately 12%, whereas real
estate and construction loans, agricultural loans and commercial loans grew
approximately 19%, 20% and 28%, respectively. Loans secured by real estate of
all types represented 77% of total loans at year end, 1998. All of the
property serving as collateral for these loans lies within Las Animas,
Huerfano or adjacent counties, with 63% representing finished, 1-4 family
homes, 25% commercial properties and 3% farm and ranch properties. (Please
see Table #7, P-8)
Economic activity in the bank's market area has been suppressed by the
absence of snowfall and the negative impact this has had on the ski resort in
Huerfano county and by the cessation of construction at the prison site in
Las Animas County due to non conforming cement work. In spite of this, other
construction activity, predominantly residential, is still robust and retail
activity has continued to grow.
SOURCES AND USES OF FUNDS
Deposit growth in 1998 was $5,393,552, approximately 63% of 1997 deposit
growth and approximately 105% of 1996 deposit growth. Although the bank is
still gathering new deposit relationships, it is undoubtedly true that
significant numbers of existing or potential depositors are finding yield
opportunities in the equities markets preferable to deposit products. Loan
growth of $15,052,296 in 1998 was substantially funded by the previously
mentioned deposit growth, an approximate reduction of $9,500,000 in
securities and fed funds sold and $455,158 provided by operating activities.
(Please see STATEMENT OF CASH FLOWS, P-24-25 and BALANCE SHEET, P-22)
LIQUIDITY
Average 1998 holdings of cash and due from banks, readily marketable
securities and federal funds sold totaled approximately 33% of average
liabilities, down from approximately 39% in 1997 and approximately 40% in
1996. (Please see Tables 1-3, P-4-6)
17
<PAGE>
Current securities holdings consist of two $12,000,000 par value,
FEDERAL HOME LOAN BANK DISCOUNT NOTES which mature within 3 months. One of
these is pledged to the State of Colorado in order to collateralize uninsured
public deposits in accordance with State law. The current expectation is that
the bank will replace these securities with similar instruments when they
mature. (Please see Table #17, P-16 and NOTE 2, P-29-30)
CAPITAL
Tier 1 and total risk based capital ratios declined from 15.34% and
16.60% at year end, 1997 to an estimated 14.29% and 15.54%, respectively, at
year end, 1998. This was primarily a result of the migration of funds from
low risk investment asset categories to loan categories, which carry higher
risk. The leverage ratio rose to 8.98% at year end, 1998 from the year-ago
level of 8.66%.
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income grew $526,000 in 1998, compared with growth of
$390,000 in 1997. Total net interest income represented 4.15% of average
earning assets in 1998, compared with 3.91% in 1997. Volume driven increases
in interest income, particularly loan interest, far exceeded volume driven
increases in deposit interest expense. Also, declining interest rates had a
more significant impact on deposit interest expense than on interest income.
(Please see TABLE #14, P-13, TABLES 1 & 2, P-4-5 and TABLE #4, P-7)
OTHER INCOME AND EXPENSE
With the exception of professional services, which were in line with
prior periods, all non interest expense categories grew significantly in
1998, a phenomenon tied to growth in operating levels, facilities and
staffing.
If gains on the sale of other real estate are removed, non interest
income for 1998 is comparable to the 1997 level. (Please see TABLE #14, P-13
and STATEMENT OF INCOME, P-22)
Management is not aware of any regulatory recommendations or other
trends, events or uncertainties other than factors relating to the year 2000
that would have or would reasonable be likely to have a material effect on
liquidity, capital resources or operations of the company.
YEAR 2000 READINESS
The Bank has made substantial progress in implementing its Y2K
preparedness plan. The plan consists of the following five phases:
AWARENESS PHASE - The creation of a basic strategy for project
management.
ASSESSMENT PHASE-The identification of mission critical systems and
equipment as well as customer and provider relationships that may be
vulnerable to the year 2000 problem.
RENOVATION PHASE-The upgrading or replacement of systems and equipment
known to be deficient.
VALIDATION PHASE-The comprehensive testing of all systems and
equipment to ensure that they survive each of 13 suspect dates.
18
<PAGE>
IMPLEMENTATION PHASE-The correction of any deficiencies uncovered in
the validation phase along with the continued assessment and testing
of systems and equipment.
The awareness and assessment phases were completed during the first
quarter of 1998. The renovation phase was substantially completed by the end
of 1998 with the exception of credit reporting software at the bank's main
facility. The replacement of credit reporting software is expected by the end
of the first quarter of 1999. The validation phase is ongoing and on schedule
and it is anticipated that all testing will have been performed at least once
by the end of the first quarter of 1999. Of primary importance during this
phase is the proxy testing of all applications currently provided by the
bank's third party provider of computing services. These services are highly
critical to bank operations and any significant interruption in them could
materially impact the bank's results. Finally, the implementation phase is
ongoing and will continue beyond the end of the millennium.
Management is of the opinion that its readiness plan is more than
adequate to address the year 2000 threat and that all systems and hardware
will function as intended when the time comes, without any material adverse
effect on the company's business. Due to the uniqueness of the year 2000
issue and the direct impact it can have on bank operations, however, it is
not possible to escape risk and uncertainty, particularly that which is tied
to third party service providers. The bank has, as mentioned, an ongoing
process to monitor these critical third parties and has developed business
resumption and contingency plans that address failures from these sources.
Management is not aware of any material expenditures that could be necessary
in order to complete its year 2000 readiness plan or contingency plans.
19
<PAGE>
ITEM 8. Financial statements and supplementary data.
<TABLE>
<CAPTION>
Index to Financial Statements of
The Republic Corporation and Subsidiary PAGE
<S> <C>
Accountant's Report. . . . . . . . . . . . . . . . . . 21
Balance Sheets as of December 31, 1998 and 1997. . . . 22
Statement of Income for the three years ended
December 31, 1998. . . . . . . . . . . . . . . . . . 23
Statement of Cash Flows for the three years ended
December 31, 1998. . . . . . . . . . . . . . . . . . 24-25
Statement of Changes in Stockholders' Equity
for the three years ended December 31, 1998. . . . . 26
Notes to Financial Statements. . . . . . . . . . . . . 27-40
</TABLE>
20
<PAGE>
DIXON, WALLER & CO., INC.
[LETTERHEAD]
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, 1998 and 1997, 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, 1998. 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, 1998 and 1997, and the results of its operations and its cash
flows, for each of the three years in the period ending December 31, 1998, in
conformity with generally accepted accounting principles.
Dixon, Waller & Co., Inc.
Trinidad, Colorado
February 5, 1998
21
<PAGE>
REPUBLIC CORPORATION AND SUBSIDIARY
Balance Sheet
<TABLE>
<CAPTION>
December 31 1998 1997
- ----------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and due from banks (demand). . . . . . . . $ 3,682,131 $ 3,467,302
Investment securities:
Held to maturity
Market value at 12-31-98 - 23,869,050
Market value at 12-31-97 - 27,985,306 23,864,557 27,988,290
Available for Sale. . . . . . . . . . . . . . 24,000 24,000
------------ ------------
27,570,688 31,479,592
------------ ------------
Loans . . . . . . . . . . . . . . . . . . . . . 94,569,025 79,608,471
Plus: Uncollected earned interest . . . . . . 847,969 653,441
Less: Allowance or losses . . . . . . . . . . (1,233,000) (1,070,000)
------------ ------------
NET LOANS AND OTHER RECEIVABLES . . . . . . 94,183,994 79,191,912
------------ ------------
Federal funds sold. . . . . . . . . . . . . . . 5,650,000 11,150,000
Property, equipment and vehicles (Net). . . . . 2,610,729 1,842,555
Other real estate . . . . . . . . . . . . . . . 47,658 9,000
Goodwill. . . . . . . . . . . . . . . . . . . . 436,079 436,079
Other assets. . . . . . . . . . . . . . . . . . 776,201 1,080,644
------------ ------------
Total Assets. . . . . . . . . . . . . . . . . 131,275,349 125,189,782
------------ ------------
------------ ------------
Liabilities and Stockholders' Equity
Deposits (Domestic):
Demand (noninterest bearing). . . . . . . . . $ 16,718,279 $ 14,999,271
Savings, time and demand (interest bearing) 100,632,666 96,958,122
------------ ------------
117,350,945 111,957,393
------------ ------------
Accounts payable and accrued interest payable . 985,528 1,153,610
Accrued taxes payable . . . . . . . . . . . . . 641,266 747,184
------------ ------------
Total liabilities . . . . . . . . . . . . . . 118,977,739 113,858,187
------------ ------------
Minority Interest in Consolidated Subsidiary. . 264,371 242,912
------------ ------------
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 12/31/98, 23,119 shares at 12/31/97) . . (91,303) (91,303)
------------ ------------
Total contributed capital . . . . . . . . 500,472 500,472
------------ ------------
Retained earnings . . . . . . . . . . . . . . . 11,532,767 10,588,211
------------ ------------
Stockholders' equity. . . . . . . . . . . . . 12,033,239 11,088,683
------------ ------------
Total liabilities and
stockholders' equity. . . . . . . . . . . $131,275,349 $125,189,782
------------ ------------
------------ ------------
</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 1998 1997 1996
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans. . . . . . . . $7,682,475 $6,796,396 $6,184,010
Interest on federal funds sold. . . . . . 664,985 1,129,794 1,483,240
Interest and dividends on investments:
Securities of U.S. Treasury and
government sponsored agencies . . . . 1,335,139 1,112,064 652,786
Obligations of states, political
subdivisions and other obligations
secured by the government . . . . . . . -- -- --
---------- ---------- ----------
Total interest on investments . . . . . 1,335,139 1,112,064 652,786
---------- ---------- ----------
Total interest income . . . . . . . . . 9,682,599 9,038,227 8,320,036
---------- ---------- ----------
Interest expense:
Interest on deposits. . . . . . . . . . . 4,571,268 4,452,159 4,124,629
---------- ---------- ----------
Total interest expense. . . . . . . . . 4,571,268 4,452,159 4,124,629
---------- ---------- ----------
Net interest income . . . . . . . . . . 5,111,331 4,586,068 4,195,407
Provision for loan losses . . . . . . . . . 240,895 230,059 392,703
---------- ---------- ----------
Net interest income after
provision for loan losses . . . . . . 4,870,436 4,356,009 3,802,704
Other income:
Service charges on deposit accounts . . 203,136 202,137 185,218
Other service charges,
commissions and fees. . . . . . . . . 263,849 241,081 191,527
Gain on sale of securities. . . . . . . -- -- --
Gain on Sale - Other Real Estate. . . . 38,760 72,465 --
Other income. . . . . . . . . . . . . . 91,336 107,609 96,293
---------- ---------- ----------
Total other income. . . . . . . . . . 597,081 623,292 473,038
---------- ---------- ----------
Other expenses:
Salaries and wages. . . . . . . . . . . . 1,649,366 1,347,288 1,217,215
Employee benefits . . . . . . . . . . . . 222,967 184,852 173,827
Net occupancy expenses. . . . . . . . . . 171,225 135,321 119,604
Equipment expense . . . . .. . . . . . . 144,716 94,652 108,633
Depreciation other than
rental property . . . . . . . . . . . . 288,183 197,448 227,772
Operating Loss. . . . . . . . . . . . . . -- -- --
Computer service center . . . . . . . . . 212,117 165,771 119,105
FDIC Assesment. . . . . . . . . . . . . . 16,692 9,471 --
Professional services . . . . . . . . . . 122,428 132,906 121,272
Advertising . . . . . . . . . . . . . . . 163,717 102,234 102,069
Other operating expenses. . . . . . . . . 915,720 748,933 711,316
---------- ---------- ----------
Total other expenses. . . . . . . . . . 3,907,131 3,118,876 2,900,813
---------- ---------- ----------
Income before income taxes. . . . . . . 1,560,386 1,860,425 1,374,929
---------- ---------- ----------
Less applicable income taxes (Current). . . 593,111 699,414 513,814
---------- ---------- ----------
Income before reduction
for minority interest . . . . . . . . . 967,275 1,161,011 861,115
Less minority interest in income (22,719) (26,986) (20,248)
---------- ---------- ----------
Net income. . . . . . . . . . . . . . . . 944,556 1,134,025 840,867
---------- ---------- ----------
---------- ---------- ----------
Earnings per share. . . . . . . . . . . . $2.83 $3.40 $2.52
---------- ---------- ----------
---------- ---------- ----------
</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 1998 1997 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows and operating activities:
Net income (loss). . . . . . . . . . . . $ 944,556 $ 1,134,025 $ 840,867
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation . . . . . . . . . . . . . 291,900 201,164 233,578
Provision for loan losses. . . . . . . 240,895 230,059 392,703
Amortization (accretion) of
discounts and premiums . . . . . . . (840,807) (471,569) (14,464)
Other real estate gains/net. . . . . . (38,760) (72,465) --
Re-appraisal - other real estate 12,500 9,693
Gain on sale of securities . . . . . . -- -- --
(Decrease) increase in
interest payable . . . . . . . . . . (168,082) 319,597 (174,135)
(Increase) Decrease in
interest receivable. . . . . . . . . (194,528) (23,764) (91,959)
(Increase) decrease in
other assets . . . . . . . . . . . . 304,443 (192,275) (217,874)
Increase (decrease) in
other liabilities. . . . . . . . . . (84,459) 213,820 152,896
------------ ------------ ------------
Total adjustments. . . . . . . . . (489,398) 217,067 290,438
------------ ------------ ------------
Net cash provided by (used in)
operating activities . . . . . . . . . . 455,158 1,351,092 1,131,305
------------ ------------ ------------
Cash flows from investing activities:
Proceeds from sales of investment
securities . . . . . . . . . . . . . . -- -- 5,000
Proceeds from maturities of
investment securities. . . . . . . . . 70,000,000 61,000,000 10,005,000
Purchase of investment securities. . . . (65,035,460) (78,510,353) (10,024,063)
Loans made to customers-net
cash activity. . . . . . . . . . . . . (15,052,296) (8,011,488) (8,785,526)
Capital expenditures . . . . . . . . . . (1,060,074) (392,333) (83,150)
Proceeds from sale
of other real estate . . . . . . . . . 13,949 222,424 12,000
------------ ------------ ------------
Net cash provided by
(used in) investing activities . . . . . (11,133,881) (25,691,750) (8,870,739)
------------ ------------ ------------
Cash flows from financing activities:
Net increase in demand deposits, NOW
accounts, savings accounts and
certificates of deposit. . . . . . . . . 5,393,552 8,559,380 5,125,253
Purchase of treasury stock . . . . . . . -- -- --
------------ ------------ ------------
Net cash provided by
(used in) financing activities . . . . . 5,393,552 8,559,380 5,125,253
------------ ------------ ------------
Net increase (decrease) in cash
and cash equivalents . . . . . . . . . . (5,285,171) (15,781,278) (2,614,181)
</TABLE>
(Continued)
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 1998 1997 1996
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash and cash equivalents at beginning of year:
Cash and due from banks. . . . . . . . . . . . . . 3,467,302 3,273,580 2,362,761
Federal funds sold . . . . . . . . . . . . . . . . 11,150,000 27,125,000 30,650,000
---------- ---------- ----------
Cash and cash equivalents
at beginning of year . . . . . . . . . . . . . . . 14,617,302 30,398,580 33,012,761
---------- ---------- ----------
Cash and cash equivalents at end of year:
Cash and due from banks. . . . . . . . . . . . . . 3,682,131 3,467,302 3,273,580
Federal funds sold . . . . . . . . . . . . . . . . 5,650,000 11,150,000 27,125,000
---------- ---------- ----------
Cash and cash equivalents
at end of year . . . . . . . . . . . . . . . . . . 9,332,131 14,617,302 30,398,580
---------- ---------- ----------
---------- ---------- ----------
Supplemental disclosures of
cash flow information
Cash paid for interest . . . . . . . . . . . . . . 4,739,350 4,132,562 4,298,764
---------- ---------- ----------
---------- ---------- ----------
Cash paid for income tax . . . . . . . . . . . . . 621,414 678,814 468,289
---------- ---------- ----------
---------- ---------- ----------
</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 12-31-95 $356,844 $234,931 $(91,303) $500,472 $ 8,613,319 $ 9,113,791
Net income -- -- -- -- 840,867 840,867
Market value adjustment-Securities -- -- -- -- -- --
Addition to treasury stock -- -- -- -- -- --
-------- -------- -------- -------- ----------- -----------
Balance at 12-31-96 356,844 234,931 (91,303) 500,472 9,454,186 9,954,658
Net Income -- -- -- -- 1,134,025 1,134,025
Market value adjustment-Securities -- -- -- -- -- --
Addition to treasury stock -- -- -- -- -- --
-------- -------- -------- -------- ----------- -----------
Balance at 12-31-97 356,844 234,931 (91,303) 500,472 10,588,211 11,088,683
Net Income
Market value adjustment-Securities -- -- -- -- 944,556 944,556
Additions to treasury stock -- -- -- -- -- --
-------- -------- -------- -------- ----------- -----------
Balance at 12-31-98 $356,844 $234,931 $(91,303) $500,472 $11,532,767 $12,033,239
-------- -------- -------- -------- ----------- -----------
-------- -------- -------- -------- ----------- -----------
</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.
USE OF ESTIMATES. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Material estimates that are particularly susceptible to significant
change relate to the determination of the allowance for losses on loans and
the valuation of foreclosed real estate. In connection with the
determination of the estimated losses on loans and foreclosed real estate,
management obtains independent appraisals for significant properties.
While management uses available information to recognize losses on
loans and foreclosed real estate, further reductions in the carrying
amounts of loans and foreclosed assets may be necessary based on changes in
local economic conditions. In addition, regulatory agencies, as an integral
part of their examination process, periodically review the estimated losses
on loans and foreclosed real estate. Such agencies may require the Company
to recognize additional losses based on their judgments about information
available to them at the time of their examination. Because of these
factors, it is reasonably possible that the estimated losses on loans and
foreclosed real estate may change materially in the near term. However, the
amount of the change that is reasonably possible cannot be estimated.
27
<PAGE>
THE REPUBLIC CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
INCOME RECOGNITION ON IMPAIRED LOANS. Interest income generally is not
recognized on specific impaired loans unless the likelihood of further loss
is remote. Interest payments received on such loans are applied as a
reduction of the loan principal balance. Interest income on other impaired
loans is recognized only to the extent of interest payments received.
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.
LONG-LIVED ASSETS. The undiscounted future net cash flows of the
Company are expected to be greater than the net book value of long-lived
assets (including goodwill) so that recoverability is not determined to be
impaired.
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.
28
<PAGE>
THE REPUBLIC CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
FORECLOSED REAL ESTATE. Foreclosed real estate includes formally
foreclosed properties.
At the time of foreclosure, foreclosed real estate is recorded at the
lower of the carrying amount or fair value less cost to sell, which becomes
the property's new basis.
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:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
------------------------------------ ------------------------------------
Principal Book Market Principal Book Market
Amount Value Value Amount Value Value
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Government Securities 24,000,000 23,864,557 23,869,050 28,000,000 27,988,290 27,985,306
Obligations of states
and political subdivisions -- -- -- -- -- --
Other 24,000 24,000 24,000 24,000 24,000 24,000
---------- ---------- ---------- ---------- ---------- ----------
---------- ----------
23,888,557 23,893,050 28,012,290 28,009,306
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
29
<PAGE>
THE REPUBLIC CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
The approximate amortized cost of investment securities pledged by the
Bank to secure public funds on deposit amounted to $11,715,533 at December
31, 1998 and $11,534,931 at December 31, 1996. Additionally, $249,267 was
pledged to the Federal Reserve Bank in order to secure treasury, tax and
loan remittances at December 31, 1998.
Net gains on the sale of securities were as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<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, 1998
U.S. Treasury Securities . . . . . -- -- -- --
Government Sponsored Agencies. . . 23,864,557 4,493 -- 23,869,050
Other. . . . . . . . . . . . . . . 24,000 -- -- 24,000
---------- ------- ------ ----------
23,888,557 4,493 -- 23,893,050
---------- ------- ------ ----------
---------- ------- ------ ----------
DECEMBER 31, 1997
U.S. Treasury Securities 12,036,450 -- 2,700 12,033,750
Government Sponsored Agencies. . . 15,951,840 -- 284 15,951,556
Other. . . . . . . . . . . . . . . 24,000 -- -- 24,000
---------- ------- ------ ----------
28,012,290 -- 2,984 28,009,306
---------- ------- ------ ----------
---------- ------- ------ ----------
</TABLE>
3. Loans and Other Receivables
Loans and other receivables are summarized as follows:
<TABLE>
<CAPTION>
December 31,
---------------------------
Type 1998 1997
- ---- ------------ -----------
<S> <C> <C>
Real estate. . . . . . . . . . . . . . . . . . $73,075,345 $61,522,710
Commercial and industrial. . . . . . . . . . . 7,371,019 5,761,796
Agriculture. . . . . . . . . . . . . . . . . . 4,155,528 3,458,889
Loans to individuals for household,
family and other consumer goods . . . 9,957,149 8,840,179
Other. . . . . . . . . . . . . . . . . . . . . 9,984 24,897
----------- -----------
TOTAL $94,569,025 $79,608,471
----------- -----------
----------- -----------
</TABLE>
30
<PAGE>
THE REPUBLIC CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
The changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------------------
1998 1997 1996
---------- ---------- ---------
<S> <C> <C> <C>
Balance at beginning of year. . . . . . . . . . . . . $1,070,000 $ 964,057 $ 868,026
Provision charged to operating expenses . . . . . . . 240,895 230,059 392,703
Loans charged off . . . . . . . . . . . . . . . . . . 128,284 180,345 322,659
Recoveries on loans previously charged off. . . . . . 50,389 56,229 25,987
---------- ---------- ---------
Balance at end of year. . . . . . . . . . . . . . . . 1,233,000 1,070,000 $ 964,057
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
At December 31, 1998 and 1997, the total recorded investment in
impaired loans, all of which had allowances determined in accordance
with SFAS No. 114 and No. 118, amounted to approximately $1,065,000 and
$3,274,000 respectively. The average recorded investment in impaired
loans amounted to approximately $1,656,000 and $3,124,000 for the years
ended December 31, 1998 and 1997, respectively. The allowance for loan
losses related to impaired loans amounted to approximately $21,500 and
$42,853 at December 31, 1998 and 1997, respectively. Interest income on
impaired loans of $67,703 and $243,569 was recognized for cash payments
received in 1998 and 1997 respectively.
4. Property and equipment.
Property and equipment are summarized as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Land . . . . . . . . . . . . . . . $ 134,750 $ 114,751 $ 114,751
Buildings. . . . . . . . . . . . . 2,815,269 2,202,422 2,029,738
Furniture and equipment. . . . . . 2,002,637 1,590,229 1,370,580
----------- ----------- -----------
4,952,656 3,907,402 3,515,069
Less accumulated depreciation. . . 2,341,927 2,064,847 1,863,683
----------- ----------- -----------
Net. . . . . . . . . . . . . . . 2,610,729 1,842,555 1,651,386
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
Depreciation expense for 1998, 1997 and 1996 was $291,890, $201,164
and $233,578, respectively.
5. Income Taxes.
The components of the income tax provisions (benefits) are as follows:
31
<PAGE>
THE REPUBLIC CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
5. (Continued)
<TABLE>
<CAPTION>
December 31,
-------------------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Federal provision:
Current. . . . . . . . . . . . $579,168 $656,555 $478,584
Deferred . . . . . . . . . . . -- -- --
-------- -------- --------
579,168 656,555 478,584
State provision. . . . . . . . . 13,943 42,859 35,230
-------- -------- --------
Total. . . . . . . . . . . . . 593,111 699,414 $513,814
-------- -------- --------
-------- -------- --------
</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>
1998 1997 1996
------------------ ------------------ ------------------
% of % of % of
Pretax Pretax Pretax
Amount Income Amount Income Amount Income
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Statutory tax rate Federal . . 530 34 633 34 467 34
State income tax . . . . . . . 22 1 43 2 35 2
Tax exempt revenue . . . . . . (9) (1) (11) (1) (5) --
Accrual to cash adjustment . . -- -- -- -- -- --
Provision for loan loss. . . . 55 4 36 2 33 2
Other (net). . . . . . . . . . (5) -- (2) -- (16) (1)
---- ---- ---- ---- ---- ----
Total . . . . . . . . 593 38 699 37 514 37
---- ---- ---- ---- ---- ----
---- ---- ---- ---- ---- ----
</TABLE>
6. Service Commitments.
Computer and data processing services are provided to the
Bank by an outside service center. Expenses incurred for such services
during 1998, 1997 and 1996 were $212,117, $165,771 and $119,105,
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.
No gains or losses were incurred in 1996 on other real estate
transactions.
During 1997, other real estate was sold at a gain of $72,465.
Reductions in the carrying value of other real estate due to
reappraisal were $12,500.
Other real estate was sold at a gain of $38,760 in the year
ended December 31, 1998.
32
<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 $15,371,575 and $14,057,867 at December 31, 1998 and
1997, respectively. Interest expense for the years ended December 31, 1998,
1997 and 1996 on this type of deposit was $859,782, $619,979, and $619,605,
respectively.
The deposits by time remaining until maturity were (dollars in
thousands).
<TABLE>
<CAPTION>
<S> <C>
3 months or less $ 6,466
3 to 6 months 4,481
6 to 12 months 4,021
over 12 months 404
-------
$15,372
-------
-------
</TABLE>
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, 1998, that the Bank
could declare, without the approval of the Comptroller of the Currency,
amounted to approximately $2,153,000. 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, 1998, Banks are required to have
minimum Tier 1 and Total capital ratios of 4.00% and 8.00%, respectively.
The Bank's estimated ratios at December 31, 1998 were $14.29% and 15.54%,
respectively. The Bank's Tier 1 leverage ratio at December 31, 1998 was
8.98%. The minimum required leverage ratio for the Bank at December 31,
1998, was 3.00%.
10. Supplemental Cash Flow Information
In 1998 and 1997, the Bank recorded amounts of other real estate
acquired through foreclosure of $179,209 and $67,000. Of total sales of
other real estate during 1998 and 1997, $184,851 and $195,566 of the
purchase price was financed by the Bank, taking the other real estate as
security. Loans charged off due to foreclosure transactions in 1998, 1997
and 1996 amounted to $179,209, $67,000 and $322,659. 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:
33
<PAGE>
THE REPUBLIC CORPORATION
Balance Sheet
<TABLE>
<CAPTION>
(Note 11 Continued)
December 31 1998 1997
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash in Bank. . . . . . . . . . . . . . . . . . . . . . . . $ 33,191 $ 23,024
Investment in subsidiary - equity method. . . . . . . . . . 11,921,544 10,989,255
Vehicles and equipment (net). . . . . . . . . . . . . . . . -- --
Receivable - due from subsidiary. . . . . . . . . . . . . . 21,000 19,800
Other assets. . . . . . . . . . . . . . . . . . . . . . . . 56,604 56,604
----------- -----------
Total assets. . . . . . . . . . . . . . . . . . . . . . . 12,033,239 $11,088,683
----------- -----------
----------- -----------
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 1998 and 1997, respectively . . . . 356,844 356,844
Additional paid in capital. . . . . . . . . . . . . . . . . 234,931 234,931
Less cost of treasury stock (23,119 shares
at 12-31-98, 23,119 shares at 12-31-97) . . . . . . . . . (91,303) (91,303)
----------- -----------
Total contributed capital . . . . . . . . . . . . . . . 500,472 500,472
----------- -----------
Retained earnings . . . . . . . . . . . . . . . . . . . . . 11,532,767 10,588,211
----------- -----------
Total stockholders' equity. . . . . . . . . . . . . . . . 12,033,239 11,088,683
----------- -----------
Total liabilities and stockholders' equity. . . . . . . . $12,033,239 $11,088,683
----------- -----------
----------- -----------
</TABLE>
34
<PAGE>
THE REPUBLIC CORPORATION
Statement of Income
<TABLE>
<CAPTION>
(Note 11 Continued)
Year Ended December 31 1998 1997 1996
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income
Investment income in subsidiary
Dividends received from subsidiary bank. . $ 54,740 $ 39,100 $ 39,100
Other income . . . . . . . . . . . . . . . -- -- --
--------- ---------- ---------
Total income . . . . . . . . . . . . . . $ 54,740 $ 39,100 $ 39,100
--------- ---------- ---------
Expenses
Salaries and employee benefits . . . . . . . 46,073 41,073 41,073
Depreciation . . . . . . . . . . . . . . . . -- -- 108
Examination and legal fees . . . . . . . . . 10,468 9,451 9,826
Miscellaneous. . . . . . . . . . . . . . . . -- 100 90
Office . . . . . . . . . . . . . . . . . . . 4,093 4,254 4,406
Taxes. . . . . . . . . . . . . . . . . . . . 3,739 3,300 3,303
Travel . . . . . . . . . . . . . . . . . . . -- -- --
--------- ---------- ---------
Total expenses . . . . . . . . . . . . . . 64,373 58,178 58,806
--------- ---------- ---------
Income (Loss) before equity in
undistributed net income of subsidiary . . (9,633) (19,078) (19,706)
Less applicable income (taxes) benefit . . . 21,000 19,800 20,000
--------- ---------- ---------
12,267 722 294
Equity in undistributed net income
(loss) of subsidiary . . . . . . . . . . . 932,289 1,133,303 840,573
--------- ---------- ---------
Net income (loss). . . . . . . . . . . . . 944,556 1,134,025 $ 840,867
--------- ---------- ---------
--------- ---------- ---------
Earnings per share
Weighted average number of
shares outstanding. . . . . . . . . . . 333,725 333,725 333,725
--------- ---------- ---------
--------- ---------- ---------
Net income (loss) per common share . . . . $ 2.83 $ 3.40 $ 2.52
--------- ---------- ---------
--------- ---------- ---------
</TABLE>
35
<PAGE>
THE REPUBLIC CORPORATION
Statement of Cash Flows
<TABLE>
<CAPTION>
(Note 11 Continued)
Year Ended December 31 1998 1997 1996
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income. . . . . . . . . . . . . . . . . . . . . . . $ 944,556 $ 1,134,025 $ 840,867
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation. . . . . . . . . . . . . . . . . . . . . -- -- 108
Dividends received - subsidiary . . . . . . . . . . . (54,740) (39,100) (39,100)
(Increase) in investment in subsidiary-held
on the equity method. . . . . . . . . . . . . . . . (932,289) (1,133,303) (840,573)
(Increase) decrease in receivable
from subsidiary-income tax benefit. . . . . . . . . (2,100) 200 (800)
Increase (decrease) in current liabilities. . . . . . -- -- --
--------- ----------- ---------
Net cash (used in) operating activities . . . . . . . . (44,573) (38,178) (39,498)
--------- ----------- ---------
Cash flows from investing activities-
Dividends received. . . . . . . . . . . . . . . . . . 54,740 39,100 39,100
--------- ----------- ---------
Cash flows from financing activities-
Purchase of treasury stock. . . . . . . . . . . . . . -- -- --
--------- ----------- ---------
Net increase (decrease) in cash . . . . . . . . . . . 10,167 922 (398)
Cash - beginning of year. . . . . . . . . . . . . . . . 23,024 22,102 22,500
--------- ----------- ---------
Cash - end of year. . . . . . . . . . . . . . . . . . . 33,191 23,024 22,102
--------- ----------- ---------
--------- ----------- ---------
Supplemental disclosures of cash flow information:
Cash paid for interest. . . . . . . . . . . . . . . . -- -- --
--------- ----------- ---------
--------- ----------- ---------
Cash paid for income taxes. . . . . . . . . . . . . . -- -- --
--------- ----------- ---------
--------- ----------- ---------
</TABLE>
36
<PAGE>
THE REPUBLIC CORPORATION
Statement of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
(Note 11 Continued)
For the Three Additional Total
Years Ended Capital Paid in Treasury Contributed Retained
Stock Capital Stock Capital Earnings
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995. . . . $356,844 $234,931 $(91,303) $500,472 $ 8,613,319*
Net income. . . . . . . . . . . . . -- -- -- -- $ 840,867
Additions to treasury stock . . . . -- -- -- -- --
--------- -------- -------- -------- -----------
Balance at December 31, 1996. . . . $356,844 $234,931 $(91,303) $500,472 $ 9,454,186*
Net income. . . . . . . . . . . . . -- -- -- -- $ 1,134,025
Additions to treasury stock . . . . -- -- -- -- --
--------- -------- -------- -------- -----------
Balance at December 31, 1997. . . . $356,844 $234,931 $(91,303) $500,472 $10,588,211*
Net income. . . . . . . . . . . . . -- -- -- -- $ 944,556
Additions to treasury stock . . . . -- -- -- -- --
--------- -------- -------- -------- -----------
Balance at December 31, 1998. . . . $356,844 $234,931 $(91,303) $500,472 $11,532,767*
--------- -------- -------- -------- -----------
--------- -------- -------- -------- -----------
</TABLE>
*On December 31, 1995, 1996, 1997 and 1998 the portion of retained
earnings resulting from Republic Corporation's equity in the undistributed
income of its subsidiary was $6,982,005, $7,797,300, $8,637,872 9,771,176 and
10,703,465 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, 1998, is as follows:
<TABLE>
<S> <C>
Commitments to extend credit 3,775,000
Standby letters of credit 488,000
</TABLE>
37
<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 extensions 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. 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.
- 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.
38
<PAGE>
THE REPUBLIC CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
13. (Continued)
- 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, 1998, 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:
<TABLE>
<CAPTION>
December 31, 1998
------------------------
Carrying Fair
Amount Value
-------- -------
(In Thousands)
<S> <C> <C>
Financial assets:
Cash and due from banks $ 3,682 $ 3,682
Held-to-maturity securities 23,865 23,869
Other Securities 24 24
Federal funds sold 5,650 5,650
Loans, net of allowance 93,336 93,416
Financial liabilities:
Deposits 117,351 117,358
</TABLE>
39
<PAGE>
THE REPUBLIC CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
13. (Continued)
The fair value estimates presented herein are based on pertinent
information available to management as of December 31, 1998. 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.
40
<PAGE>
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure:
Not applicable.
41
<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.
<TABLE>
<CAPTION>
TERM OF PRINCIPAL OCCUPATIONS FOR THE
NAME AND TITLE AGE OFFICE LAST FIVE YEARS
- -------------- --- ------ -----------------------------
<S> <C> <C> <C>
Catherine G. Eisemann 72 35 Years Catherine G. Eisemann has been a Director of
The Republic Corporation for 35 years.
Mrs. Eisemann was elected President of The
Republic Corporation and began serving
December 11, 1981.
J.E. Eisemann, IV 51 22 Years J.E. Eisemann, IV has served as a Director on
The Republic Corporation Board for 22 years.
Mr. Eisemann has been the Vice-President and
Director of the Subsidiary Bank for approximately
21 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 17 years.
Roger Dean Eisemann 44 16 Years Roger Dean Eisemann was elected Secretary and
began serving as a director of The Republic
Corporation in July, 1982.
</TABLE>
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.
42
<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 1998 $84,773(1) $6,700(2)
Board of the Company, Vice 1997 82,573(1) 7,150(2)
President of the Company, 1996 54,193(1) 3,881(2)
Chairman of the Board & Vice
President of the Subsidiary Bank
Catherine Eisemann President of the Company 1998 $30,000 -0-
1997 30,000 -0-
1996 30,000 -0-
</TABLE>
<TABLE>
<CAPTION>
Restricted Stock
Stock Options/ LTIP All Other
Name & Principal Position Awards SARs(#) Payouts($) Compensation
- ------------------------- ----------- -------- ---------- ------------
<S> <C> <C> <C> <C>
J.E. Eisemann, IV -0- -0- -0- -0-
Chairman of the Board of the Company, -0- -0- -0- -0-
Vice President of the Company, -0- -0- -0- -0-
Chairman of the Board & Vice
President of the Subsidiary Bank
Catherine Eisemann -0- -0- -0- -0-
President of the Company -0- -0- -0- -0-
-0- -0- -0- -0-
</TABLE>
(1) Includes amounts deferred under Section 401(K) of the Internal Revenue
Code. Amounts deferred by Mr. Eisemann were $3,920 in 1996 $6,500 in 1997 and
6,700 in 1998.
(2) Includes amounts deferred under Section 401(K) of the Internal Revenue
Code. Amounts deferred by Mr. Eisemann were $353 in 1996 $650 in 1997 and 670
in 1998.
STOCK OPTIONS/SAR GRANTS IN 1998-NONE
AGGREGATED STOCK OPTIONS/SAR EXERCISES IN 1998 AND OPTIONS/SAR
VALUES AS OF DECEMBER 31 1998 - NONE
LONG-TERM INCENTIVE PLANS - AWARDS IN 1998 - NONE
COMPENSATION OF DIRECTORS
Director fees are not paid to directors of the Company.
EMPLOYMENT CONTRACTS AND TERMINATION OF
EMPLOYMENT ARRANGEMENTS - NONE
REPORT ON REPRICING OF OPTIONS/SARS - NONE
43
<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.
<TABLE>
<CAPTION>
Amount and
Nature of Percent
Name of Title of Beneficial of
Person (1) Class Ownership (2) Class
- ---------- -------- ------------- --------
<S> <C> <C> <C>
Catherine G. Eisemann Common Stock 193,702 58.0424
3350 McCue, #904
Houston, Texas 77056
</TABLE>
(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
John Davis 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.
44
<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. No directors were indebted to the subsidiary bank
during 1998.
45
<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:
<TABLE>
<S> <C>
Accountant's Report . . . . . . . . . . . . . . . . . . . . . 21
Balance Sheets as of December 31, 1998 and 1997 . . . . . . . 22
Statements of Income - years ended
December 31, 1998, 1997 and 1996. . . . . . . . . . . . . . 23
Statement of Cash Flows - Years ended
December 31, 1998, 1997 and 1996. . . . . . . . . . . . . . 24-25
Statement of Changes in Stockholders' Equity-years
ended December 31, 1998, 1997 and 1996. . . . . . . . . . . 26
Notes to Financial Statements . . . . . . . . . . . . . . . . 27-40
</TABLE>
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.
46
<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.
<TABLE>
<CAPTION>
Exhibit
No.
--------
<S> <C>
3 The Republic Corporation, Articles of Incorporation
and By-Laws
22(a) Subsidiary of the Registrant.
</TABLE>
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,
1998.
47
<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 Chairman of the Board,
- ----------------------------- Director, Chief Executive ----------
J.E. Eisemann, IV Officer, Chief Financial Date
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 Chairman of the Board,
- ----------------------------- Director, Chief Executive ----------
J.E. Eisemann, IV Officer, Chief Financial
and Accounting Officer
/S/ Catherine G. Eisemann President of the Board ----------
- ----------------------------- and a Director
Catherine G. Eisemann
48
<PAGE>
SUPPLEMENTAL INFORMATION
The Republic Corporation will send the shareholders an annual report and
proxy materials subsequent to the filing of this report.
49
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REGISTRANT'S
FORM 10-K, DATED DEC 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 3,682,131
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 5,650,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 24,000
<INVESTMENTS-CARRYING> 23,864,557
<INVESTMENTS-MARKET> 23,869,050
<LOANS> 94,569,025
<ALLOWANCE> 1,233,000
<TOTAL-ASSETS> 131,275,349
<DEPOSITS> 117,350,945
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,626,794
<LONG-TERM> 0
0
0
<COMMON> 356,844
<OTHER-SE> 11,676,395
<TOTAL-LIABILITIES-AND-EQUITY> 131,275,349
<INTEREST-LOAN> 7,682,475
<INTEREST-INVEST> 1,335,139
<INTEREST-OTHER> 664,985
<INTEREST-TOTAL> 9,682,599
<INTEREST-DEPOSIT> 4,571,268
<INTEREST-EXPENSE> 4,571,268
<INTEREST-INCOME-NET> 5,111,331
<LOAN-LOSSES> 240,895
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,907,131
<INCOME-PRETAX> 1,560,386
<INCOME-PRE-EXTRAORDINARY> 1,560,386
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 944,556
<EPS-PRIMARY> 2.83
<EPS-DILUTED> 2.83
<YIELD-ACTUAL> .078
<LOANS-NON> 351,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 714,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,070,000
<CHARGE-OFFS> 128,000
<RECOVERIES> 50,000
<ALLOWANCE-CLOSE> 1,233,000
<ALLOWANCE-DOMESTIC> 268,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 965,000
</TABLE>
