SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO _____________
COMMISSION FILE NUMBER: 0-23643
REPUBLIC BANKING CORPORATION OF FLORIDA
------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 59-1318959
------------------------------- ---------------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
2800 PONCE DE LEON BLVD., CORAL GABLES, FLORIDA 33134
-----------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER: (305) 774-5197
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
The number of shares outstanding of the registrant's common stock as of
March 31, 1998 was 21,326,399
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION:
Item 1. Consolidated Financial Statements and Condensed Notes to Consolidated
Financial Statements (unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
<PAGE>
PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------------------- -----------
1998 1997 1997
----------- ----------- -----------
(UNAUDITED)
-------------------------
(In thousands, except share amounts)
ASSETS
<S> <C> <C> <C>
Cash and federal funds sold:
Non-interest earning ....................................... $ 58,014 $ 49,408 $ 49,362
Federal funds sold ......................................... 63,004 106,811 76,038
----------- ----------- -----------
121,018 156,219 125,400
Interest earning deposits in other banks ................... 12,872 5,877 873
Held-to-maturity securities (market value of $ 280,798 at
March 31, 1998, $ 162,118 at March 31, 1997, and 279,803 162,238 213,060
$214,555 at December 31, 1997)
Available-for-sale securities .............................. 106,668 139,857 159,928
Loans receivable, net ...................................... 925,491 984,372 917,411
Premises and equipment, net ................................ 58,563 52,507 58,737
Customers' acceptance liability ............................ 3,941 3,964 3,313
Accrued interest receivable ................................ 11,426 11,681 12,941
Other real estate owned .................................... 2,050 2,191 2,047
Deferred taxes ............................................. 3,948 4,175 3,852
Other assets ............................................... 5,438 3,915 4,829
Goodwill and other intangibles ............................. 12,359 8,939 12,615
----------- ----------- -----------
Total assets ............................................... $ 1,543,577 $ 1,535,935 $ 1,515,006
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing ....................................... $ 269,447 $ 261,565 $ 261,675
Interest bearing:
NOW and money market ....................................... 183,802 194,356 177,539
Savings .................................................... 130,008 133,567 127,597
Time ....................................................... 719,933 743,044 735,406
----------- ----------- -----------
1,303,190 1,332,532 1,302,217
Securities sold under repurchase agreements ................ 53,743 52,814 45,594
Other short-term borrowings ................................ 9,196 8,878 10,573
Acceptances outstanding .................................... 3,941 3,964 3,313
Accrued interest payable ................................... 2,750 2,384 2,763
Income taxes payable ....................................... 2,172 4,567 383
Other liabilities .......................................... 2,068 2,581 2,684
----------- ----------- -----------
Total liabilities .......................................... 1,377,060 1,407,720 1,367,527
----------- ----------- -----------
Minority interest in consolidated subsidiary ............... 1,372 8,870 1,348
----------- ----------- -----------
Stockholders' equity:
Common stock-authorized 50,000,000 shares of
$0.01 par value: 21,326,399 shares issued and outstanding
at March 31, 1998; 18,872,904 shares issued and
outstanding at March 31, 1997 and 20,093,129 shares
issued and outstanding at December 31, 1997 ............. 213 189 201
Capital surplus ............................................ 115,532 86,469 99,240
Retained earnings .......................................... 49,173 32,965 46,311
Net unrealized gain (loss) on available-for-sale securities,
net of tax ............................................ 227 (278) 379
----------- ----------- -----------
Total stockholders' equity ................................. 165,145 119,345 146,131
----------- ----------- -----------
Total liabilities and stockholders' equity ................. $ 1,543,577 $ 1,535,935 $ 1,515,006
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Operations
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------------------
1998 1997
------------ ------------
(unaudited)
--------------------------------------
(In thousands, except per share amounts)
<S> <C> <C>
Interest income:
Interest and fees on loans ........................ $ 20,984 $ 21,918
Investment securities:
Taxable interest .................................. 5,486 4,237
Tax exempt interest ............................... 369 530
Interest on deposits in other banks ............... 90 74
Interest on federal funds sold .................... 805 1,379
-------- --------
Total interest income ............................. 27,734 28,138
-------- --------
Interest expense:
Deposits .......................................... 11,970 11,688
Securities sold under repurchase agreements ....... 510 548
Other borrowings .................................. 101 136
-------- --------
Total interest expense ............................ 12,581 12,372
-------- --------
Net interest income ............................... 15,153 15,766
Provision for loan losses ......................... 1,500 900
-------- --------
Net interest income after provision for loan losses 13,653 14,866
-------- --------
Non-interest income:
Service charges on deposit accounts ............... 2,984 3,137
Other charges, commissions and fees ............... 2,668 2,944
Gain on sale of securities ........................ 52 --
-------- --------
5,704 6,081
-------- --------
Non-Interest expenses:
Salaries and wages ................................ 5,193 5,192
Employee benefits ................................. 1,396 1,495
Occupancy expense ................................. 1,666 1,328
Furniture and equipment expense ................... 753 558
Other real estate owned expense ................... 47 195
Other ............................................. 4,060 3,901
-------- --------
13,115 12,669
-------- --------
Income before provision for income taxes .......... 6,242 8,278
Provision for income taxes ........................ 1,932 2,909
-------- --------
Income before minority interest ................... 4,310 5,369
Minority interest ................................. 41 375
-------- --------
Net income ........................................ $ 4,269 $ 4,994
-------- --------
Basic and diluted earnings per share .............. $ 0.21 $ 0.26
======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Changes in Stockholders Equity
COMMON STOCK
------------------------ UNREALIZED
SHARES GAIN (LOSS) ON
ISSUED AND PAR CAPITAL RETAINED AVAILABLE-FOR-SALE
OUTSTANDING VALUE SURPLUS EARNINGS SECURITIES, NET
----------- --------- ---------- --------- ------------------
(In thousands)
(unaudited)
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997 ................... 18,873 $ 9,437 $ 77,221 $ 37,785 $ 250
Cash dividend ................................ -- -- -- (9,814) --
Net income ................................... -- -- -- 4,994 --
Net change in unrealized gain on
available-for-sale securities, net of tax -- -- -- -- (528)
--------- --------- --------- --------- ---------
Balance at March 31, 1997 .................... 18,873 $ 9,437 $ 77,221 $ 32,965 $ (278)
========= ========= ========= ========= =========
Balance at January 1, 1998 ................... 20,093 $ 10,047 $ 89,394 $ 46,311 $ 379
Change in par value .......................... -- (9,846) 9,846 -- --
Cash dividend ................................ -- -- -- (1,407) --
Net income ................................... -- -- -- 4,269 --
Initial public offering, net of offering
expenses ................................ 1,233 12 16,292 -- --
Net change in unrealized gain on
available-for-sale securities, net of tax -- -- -- -- (152)
--------- --------- --------- --------- ---------
Balance at March 31, 1998 .................... 21,326 $ 213 $ 115,532 $ 49,173 $ 227
========= ========= ========= ========= =========
</TABLE>
TOTAL
STOCKHOLDERS'
EQUITY
------------
(In thousands)
(unaudited)
Balance at January 1, 1997 ................... $ 124,693
Cash dividend ................................ (9,814)
Net income ................................... 4,994
Net change in unrealized gain on
available-for-sale securities, net of tax (528)
---------
Balance at March 31, 1997 .................... $ 119,345
=========
Balance at January 1, 1998 ................... $ 146,131
Change in par value .......................... --
Cash dividend ................................ (1,407)
Net income ................................... 4,269
Initial public offering, net of offering
expenses ................................ 16,304
Net change in unrealized gain on
available-for-sale securities, net of tax (152)
---------
Balance at March 31, 1998 .................... $ 165,145
=========
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
THREE MONTHS ENDED
MARCH 31,
-----------------------
1998 1997
--------- ---------
(In Thousands)
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income ...................................................................... $ 4,269 $ 4,994
--------- ---------
Adjustments to reconcile net income to net cash provided by operating activities:
Minority interest in consolidated subsidiary .................................... 39 374
Depreciation and amortization ................................................... 818 478
Investment accretion, net ....................................................... (107) (197)
Amortization of goodwill and other intangibles .................................. 284 236
Provision for loan losses ....................................................... 1,500 900
Gain on sale of securities ...................................................... (52) --
Construction period interest credit ............................................. -- (314)
Other ........................................................................... -- 182
Changes in assets and liabilities:
Decrease in unearned income ..................................................... (69) (138)
Decrease in accrued interest receivable ......................................... 1,515 478
Increase in other assets ........................................................ (611) (492)
Increase in income taxes payable ................................................ 1,789 2,821
Decrease in accrued interest payable ............................................ (13) (43)
Decrease in other liabilities ................................................... (616) (1,222)
--------- ---------
Total adjustments ............................................................... 4,477 3,063
--------- ---------
Net cash provided by operating activities ....................................... 8,746 8,057
--------- ---------
Cash flows from investing activities:
Proceeds from redemptions of held-to-maturity securities ........................ 44,097 41,255
Purchases of held-to-maturity securities ........................................ (110,778) (10,634)
Proceeds form sales or redemptions of available-for-sale securities ............. 92,600 10,830
Purchases of available-for-sale securities ...................................... (39,490) (13,070)
Net loan originations ........................................................... (9,513) (23,125)
Investment in premises and equipment ............................................ (644) (4,322)
Proceeds from sale of other real estate owned ................................... -- 92
Other ........................................................................... (27) 3
--------- ---------
Net cash provided by (used in) investing activities ............................. (23,755) 1,029
--------- ---------
Cash flows from financing activities:
Net Increase in demand deposits, NOW, money market and savings accounts ......... 16,446 7,524
Net (decrease) increase in time deposits ........................................ (15,473) 4,882
Net increase in securities sold under repurchase agreements ..................... 8,149 23,896
Net decrease in other borrowings ................................................ (1,377) (7,801)
Issuance of common stock ........................................................ 16,304 --
Dividend paid by subsidiary to minority interest ................................ (15) (734)
Cash dividends paid ............................................................. (1,407) (9,814)
--------- ---------
Net cash provided by financing activities ....................................... 22,627 17,953
--------- ---------
Net increase in cash and cash equivalents ....................................... 7,618 27,039
Cash and cash equivalents at beginning of the period ............................ 125,400 129,180
--------- ---------
Cash and cash equivalents at end of the period .................................. $ 133,018 $ 156,219
========= =========
</TABLE>
(continued)
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows--(Continued)
THREE MONTHS ENDED
MARCH 31,
-------------------
1998 1997
-------- -------
(In Thousands)
(unaudited)
<S> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest ............................................. $ 12,594 $12,415
======== =======
Income taxes ......................................... $ 91 $ --
======== =======
Supplemental schedule of noncash investing activities:
Transfers from loans to other real estate owned ...... $ -- $ 53
======== =======
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Comprehensive Income
THREE MONTHS ENDED
MARCH 31,
------------------
1998 1997
------- -------
(In Thousands)
(unaudited)
Net Income .............................................. $ 4,269 $ 4,994
------- -------
Other comprehensive income, net of tax:
Unrealized loss on AFS securities arising during period (103) (528)
Less: reclassification adjustment for
gains on AFS securities included in net income 49 --
------- -------
Other comprehensive income .............................. (152) (528)
------- -------
Comprehensive income .................................... 4,117 $ 4,466
======= =======
See notes to consolidated financial statements.
<PAGE>
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In January 1998, Republic completed a 2.5 - for - 1 stock split. All historical
data in this report has been restated to reflect the split.
A. GENERAL
The accounting and reporting policies of Republic Banking Corporation of Florida
and its subsidiary conform to generally accepted accounting principles and to
predominant practices within the banking industry. The company has not changed
its accounting and reporting policies from those disclosed in its 1997 Annual
Report on Form 10-K.
The results of operations for the three-month period ended March 31, 1998 may
not be indicative of operating results for the year ending December 31, 1998.
Certain prior year and prior quarter amounts have been reclassified to conform
to current classifications.
In the opinion of the company's management, all adjustments necessary to fairly
present the financial position as of March 31, 1998 and 1997, and the results of
operations and cash flows for the periods then ended, all of which are of a
normal and recurring nature, have been included.
<PAGE>
B. ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses are as follows (in thousands):
FOR THE THREE MONTHS
ENDED
MARCH 31,
-------------------------
1998 1997
-------- --------
(unaudited)
Balance at beginning of period ............... $ 11,999 $ 11,578
Provision charged to operations .............. 1,500 900
-------- --------
13,499 12,478
-------- --------
Loans charged-off ............................ (680) (996)
Less recoveries .............................. 347 623
-------- --------
Net charge-offs ......................... (333) (373)
-------- --------
Balance at end of period ..................... $ 13,166 $ 12,105
======== ========
Loans not accruing interest at end
of period ............................... $ 10,959 $ 11,149
======== ========
<TABLE>
<CAPTION>
C. EARNINGS PER COMMON SHARE
FOR THE THREE MONTHS
ENDED
MARCH 31,
------------------------
1998 1997
---------- ----------
(unaudited)
<S> <C> <C>
Basic Shares:
Weighted average common shares outstanding ....................... 20,682,358 18,872,904
Earnings per common share ........................................ $ 0.21 $ 0.26
Diluted Shares:
Weighted average common shares outstanding ....................... 20,682,358 18,872,904
Weighted average common shares assumed
outstanding to reflect diluted effect of common stock options 36,071 N/A
Total diluted average common shares outstanding .................. 20,718,429 18,872,904
Diluted earnings per sha.re ...................................... $ 0.21 $ 0.26
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
D. TAX EFFECT OF OTHER COMPREHENSIVE INCOME
THREE MONTHS ENDED
MARCH 31, 1998
------------------------------------
TAX
BEFORE-TAX (EXPENSE) NET-OF-TAX
AMOUNT BENEFIT AMOUNT
---------- -------- ----------
(In Thousands)
(unaudited)
<S> <C> <C> <C>
Unrealized loss on securities:
Unrealized holding losses on AFS securities arising
during the period .................................. $(167) $ 64 $(103)
Less: reclassification adjustment for
gains on AFS securities included in net income 80 (31) 49
----- ----- -----
Comprehensive income .................................. $(247) $ 95 $(152)
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1997
----------------------------------
TAX
BEFORE-TAX (EXPENSE) NET-OF-TAX
AMOUNT BENEFIT AMOUNT
---------- -------- ----------
(In Thousands)
(unaudited)
<S> <C> <C> <C>
Unrealized loss on securities:
Unrealized holding losses on AFS securities arising
during the period .................................. $(860) $ 332 $(528)
Less: reclassification adjustment for
gains on AFS securities included in net income -- -- --
----- ----- -----
Comprehensive income ................................... $(860) $ 332 $(528)
===== ===== =====
</TABLE>
<PAGE>
Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Form 10-Q contains "forward looking statements" which represent Republic's
expectations or beliefs including, but not limited to, statements concerning
Republic's operations, performance, financial condition, growth or strategies.
For this purpose, any statements contained in the Form 10-Q that are not
statements of historical facts may be deemed to be forward looking statements.
Without limiting the generality of the foregoing, words such as "may", "will",
"expect", "believe", "estimate", "anticipate" or "continue" or the negative or
other variations thereof or comparable terminology are intended to identify
forward-looking statements. The statements by their nature involve substantial
risks and uncertainties, certain of which are beyond Republic's control, and
actual results may differ materially depending on a variety of important
factors, including but not limited to the potential impact of changes in
interest rates, competition, credit risks and collateral, changes in local or
regional economic conditions, the ability of Republic to continue its growth
strategy, dependence on management and key personnel, regulatory supervision and
cross-border lending activities.
RESULTS OF OPERATIONS
All historical per share data in this report has been adjusted to reflect a 2.5
- - for - 1 stock split in January 1998.
Republic Banking Corporation of Florida ("Republic") reported first quarter 1998
net income of $4.3 million or $0.21 per basic and diluted share, compared to
$5.0 million or $0.26 per basic and diluted share in the first quarter of 1997
and $4.2 million or $0.22 per basic and diluted share in the fourth quarter of
1997.
First quarter 1998 results represent a return on average assets of 1.14%
compared to 1.32% for the first quarter of 1997. Return on average shareholders'
equity was 11.19% for the first quarter of 1998 compared to 16.94% for the first
quarter of 1997.
<PAGE>
<TABLE>
<CAPTION>
Selected Quarterly Data
AS OF AND FOR THE
THREE MONTHS ENDED
MARCH 31,
-------------------------
1998 1997
---------- ----------
(Dollars in thousands, except
per share data)
(unaudited)
<S> <C> <C>
INCOME STATEMENT DATA:
Interest income .................................... $ 27,734 $ 28,138
Interest expense ................................... 12,581 12,372
---------- ----------
Net interest income ................................ 15,153 15,766
Provision for loan losses .......................... 1,500 900
---------- ----------
Net interest income after provision for loan losses. 13,653 14,866
Non-interest income ................................ 5,704 6,081
Non-interest expenses .............................. 13,115 12,669
---------- ----------
Net income before taxes ............................ 6,242 8,278
Provision for income tax expense ................... 1,932 2,909
Minority interest .................................. 41 375
---------- ----------
Net income ......................................... $ 4,269 $ 4,994
========== ==========
PER SHARE DATA:
Net income (quarter) ............................... 0.21 0.26
Book value ......................................... 7.74 6.32
Tangible book value ................................ 7.16 5.85
Cash dividends (annualized) ........................ 0.28 0.52
Dividends payout ratio ............................. 33.33% 48.60%
Weighted average common and common equivalent
shares outstanding (in thousands) ............. 20,682 18,873
BALANCE SHEET DATA:
Total assets ....................................... $1,543,577 $1,535,935
Securities ......................................... 386,471 302,095
Loans .............................................. 938,657 996,477
Allowance for loan losses .......................... 13,166 12,105
Total deposits ..................................... 1,303,190 1,332,532
Total shareholders' equity ......................... 165,145 119,345
AVERAGE BALANCE SHEET DATA:
Total assets ....................................... $1,516,697 $1,531,868
Securities ......................................... 379,668 308,578
Loans .............................................. 930,644 980,181
Allowance for loan losses .......................... 12,348 11,737
Total deposits ..................................... 1,298,918 1,328,359
Total shareholders' equity ......................... 154,699 119,574
PERFORMANCE RATIOS:
Return on average assets ........................... 1.14% 1.32%
Return on average equity ........................... 11.19 16.94
Net interest margin ................................ 4.47 4.56
Efficiency ratio ................................... 62.88 57.99
ASSET QUALITY RATIOS:
Non-performing assets to total loans
and other real estate ......................... 1.43% 1.57%
Net loan charge-offs to average loans .............. 0.15 0.16
Allowance for loan losses to total loans ........... 1.40 1.21
Allowance for loan losses to non-performing loans .. 115.17 89.74
CAPITAL RATIOS:
Leverage ratio (Tier 1 capital-to-total assets) .... 10.23% 7.85%
Average shareholders' equity to average total assets 10.20 7.81
Tier 1 risk-based capital ratio .................... 16.93 13.41
Total risk-based capital ratio ..................... 18.18 14.66
</TABLE>
<PAGE>
Net Interest Income
Net interest income declined by 4% from the first quarter of 1997 reflecting,
primarily, a decline in loan and interest earning asset volume with an increase
of 25 basis points in the average rate paid on interest bearing liabilities. Net
interest margin decreased from 3.70% in the first quarter of 1997 to 3.49% in
the first quarter of 1998, and net interest spread decreased from 4.56% to
4.47%.
The following table represents, for the periods indicated, the total dollar
amount of interest income from average interest earning assets and the resultant
yields, as well as the interest expense on average interest bearing liabilities
and the resultant rates. No tax equivalent adjustments have been made. All
average balances are daily average balances. Non-accruing loans have been
included in the table as loans carrying a zero yield.
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------------------------------------------------------------
1998 1997
-------------------------------------- -------------------------------------
AVERAGE AVERAGE
OUTSTANDING INTEREST AVERAGE OUTSTANDING INTEREST AVERAGE
BALANCE EARNED/PAID YIELD/RATE BALANCE EARNED/PAID YIELD/RATE
----------- ----------- ---------- ---------- ----------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest earning assets:
Total loans .............................. $ 930,644 $ 20,984 (1) 9.14% $ 980,181 $ 21,918 (1) 9.07%
Taxable securities ....................... 350,813 5,486 6.34 272,430 4,237 6.31
Tax-exempt securities .................... 28,855 369 5.19 36,148 530 5.95
Federal funds sold and other
temporary investments ............... 63,218 895 5.74 111,916 1,453 5.27
---------- --------- ---------- ---------- --------- ---------
Total interest earning assets ............ 1,373,530 27,734 8.19 1,400,675 28,138 8.15
--------- ---------- --------- ---------
Less allowance for loan losses ........... 12,348 11,737
---------- ---------
Total interest earning assets, net of
allowance ........................... 1,361,182 1,388,938
Non-earning assets ....................... 155,515 142,930
---------- ----------
Total assets ............................. $1,516,697 $1,531,868
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
Interest bearing demand deposits ......... $ 59,920 $ 224 1.52% $ 67,594 $ 263 1.58%
Savings and money market accounts ........ 252,847 1,949 3.13 250,935 1,755 2.84
State, county and municipal
certificates of deposit ............. 46,883 660 5.71 30,189 405 5.44
Certificates of deposit .................. 675,672 9,137 5.48 718,461 9,265 5.23
Federal funds purchased and securities
sold under repurchase agreements .... 46,656 556 4.83 53,404 602 4.57
Other borrowings ......................... 4,263 55 5.23 6,685 82 4.97
---------- --------- ---------- ---------- --------- ---------
Total interest bearing liabilities ....... 1,086,241 12,581 4.70 1,127,268 12,372 4.45
--------- ---------- --------- ---------
Non-interest bearing demand deposits ..... 263,596 261,180
Other liabilities ........................ 10,801 15,022
--------- ----------
Total liabilities ........................ 1,360,638 1,403,470
Minority interest ........................ 1,360 8,824
Shareholders' equity ..................... 154,699 119,574
---------- ----------
Total liabilities and shareholders' equity $1,516,697 1,531,868
========== ==========
Net interest income ...................... $ 15,153 $ 15,766
========= =========
Net interest spread ...................... 3.49% 3.70%
========= =========
Net interest margin ...................... 4.47% 4.56%
========= =========
<FN>
- ----------
(1) Includes $ 577,000 and $ 721,000 in loan fees for 1998 and 1997,
respectively.
</FN>
</TABLE>
<PAGE>
The following table presents the dollar amount of changes in interest income and
interest expense for the major components of interest earning assets and
interest bearing liabilities. For purposes of this table, changes attributable
to both rate and volume have been allocated to rate.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1998 V. 1997
-------------------------------
INCREASE (DECREASE)
DUE TO
------------------
VOLUME RATE TOTAL
------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C>
Interest earning assets:
Total loans ....................................... $(1,108) $ 174 $ (934)
Securities ........................................ 1,099 (11) 1,088
Federal funds sold and other temporary investments (633) 75 (558)
------- ------- -------
Total increase (decrease) in interest income ...... (642) 238 (404)
------- ------- -------
Interest bearing liabilities:
Interest bearing demand deposits .................. (30) (9) (39)
Savings and money market accounts ................. 13 181 194
State, county and municipal certificates of deposit 224 31 255
Certificates of deposit and other time deposits ... (552) 423 (129)
Federal funds purchased and securities sold under
repurchase agreements ........................ (76) 31 (45)
Other borrowings .................................. (30) 3 (27)
------- ------- -------
Total increase (decrease) in interest expense ..... (451) 660 209
------- ------- -------
Decrease in net interest income ................... $ (191) $ (422) $ (613)
======= ======= =======
</TABLE>
Provision for Loan Losses
In determining the adequacy of the allowance for loan losses, Republic considers
portfolio quality, composition, loss experience, growth, economic conditions and
other risk factors related to the loan portfolio. The provision for loan losses
for the first quarter of 1998 increased by 67% from the first quarter of 1997.
At March 31, 1998 the allowance for loan losses, at $13.2 million, represented
1.40% of total loans and 115.2% of non-performing loans.
Net charge-offs for the 1998 first quarter were $0.3 million, or 0.15% of
average loans, as compared to $0.4 million, or 0.16% of average loans, in the
first quarter of 1997.
Non-performing assets at March 31, 1998 of $13.5 million represented 1.43% of
total loans and other real estate owned. The provision for loan losses in the
first quarter of 1998 reflected the effect of an increase in the level of
non-performing loans from $6.7 million at December 31, 1997 to $11.4 million at
March 31, 1998, a 70% increase.
<PAGE>
Non-performing loans increased primarily as a result of a single credit
relationship in the amount of $6.9 million which was placed on non-performing
status in March 1998. A specific allocation of $4.4 million has been made for
this credit relationship within the allowance for loan losses. Management is
monitoring this relationship carefully to assess any loss potential.
Non-Interest Income
Non-interest income, excluding securities transactions, declined by 7%. The
decline in non-interest income reflects competitive pricing pressures beginning
in the second quarter of 1997 which continued into the first quarter of 1998.
The following table represents, for the periods indicated, the major categories
of non-interest income.
THREE MONTHS ENDED
MARCH 31,
---------------------
1998 1997
------ ------
(Dollars in thousands)
Service charges on deposit accounts .............. $2,984 $3,137
Merchant credit card discounts ................... 1,790 2,061
Letter of credit fees ............................ 212 246
Gains on sale of securities ...................... 52 --
Other non-interest income ........................ 666 637
------ ------
Total non-interest income .............. $5,704 $6,081
====== ======
<PAGE>
Non-Interest Expense
Non-interest expense for the first quarter of 1998 increased by 3.5% from the
first quarter of 1997. Personnel costs declined by 1.5% in the same period.
Occupancy and furniture and equipment costs increased 28.3% for the same period.
This reflects the impact of the move into Republic's corporate offices in the
second quarter of 1997 and an increase in related property tax costs beginning
in 1998. Other non-interest expenses remained level in the year to year first
quarter comparison. The following table represents, for the periods indicated,
the major categories of non-interest expenses.
THREE MONTHS ENDED
MARCH 31,
-----------------------
1998 1997
-------- --------
(Dollars in thousands)
Employee compensation and benefits .............. $ 6,589 $ 6,687
-------- --------
Non-staff expenses:
Occupancy ....................................... $ 1,666 $ 1,328
Furniture and equipment ......................... 753 558
Merchant credit card interchange fees ........... 1,210 1,451
Professional fees ............................... 159 79
FDIC assessment ................................. 67 63
Advertising ..................................... 96 160
Amortization of intangibles ..................... 283 236
Printing and supplies ........................... 254 265
Other real estate owned ......................... 47 195
Fraud losses, net ............................... 28 113
Capitalized construction interest credit ........ -- (314)
Other ........................................... 1,963 1,848
-------- --------
Total non-staff expenses ........................ $ 6,526 $ 5,982
-------- --------
Total non-interest expense ...................... $ 13,115 $ 12,669
======== ========
<PAGE>
FINANCIAL CONDITION
Loan Portfolio
End of period gross loans at March 31, 1998 declined by $59.4 million, or 6%,
from March 31, 1997, however, there was an increase from December 31, 1997 of
$9.2 million, or 1%.
During the first quarter of 1998, commercial real estate and construction loans
increased by $14.5 million, or 5%, residential first mortgage lending increased
by $4.7 million, or 3%, and international lending increased by $4.9 million, or
5%.
Other consumer loans declined by $6.4 million, or 9%, in the first quarter of
1998 and commercial lending declined by $5.4 million or 2% during the same
period.
Growth in real estate lending reflects an increased emphasis in this type of
lending, while growth in international lending reflects the impact of new
staffing in this department following the turnover in personnel in 1997. The
decline in consumer lending reflects the discontinuation of indirect auto
lending activities in April 1997.
The following table reflects the major classification of loans for the periods
indicated.
MARCH 31, DECEMBER 31,
-----------------------------------------
1998 1997 1997
----------- ----------- -----------
Commercial ................ $ 280,298 $ 315,660 $ 285,733
Commercial real estate
and construction ..... 324,862 279,672 310,336
International ............. 97,664 130,692 92,734
Residential first mortgages 159,610 135,732 154,864
Residential equity lines .. 15,867 19,105 16,487
Consumer .................. 52,262 83,729 58,024
Overdrafts ................ 2,514 5,038 5,352
Bankers' acceptances ...... 8,026 30,915 8,395
----------- ----------- -----------
941,103 1,000,543 931,925
Unearned income ........... (2,446) (4,066) (2,515)
----------- ----------- -----------
938,657 996,477 929,410
Allowance for loan losses
and transfer risk .... (13,166) (12,105) (11,999)
----------- ----------- -----------
Loans, net ................ $ 925,491 $ 984,372 $ 917,411
=========== =========== ===========
<PAGE>
Non-performing Assets
Non-performing assets at March 31, 1998 were $13.5 million as compared to $15.7
million at March 31, 1997 and $8.7 million at December 31, 1997. The resultant
ratio of non-performing assets to total loans and other real estate was 1.43%,
1.57% and .94%, respectively.
The following table presents information regarding non-performing assets at the
dates indicated.
MARCH 31,
------------------
1998 1997
------- -------
(Dollars in thousands)
Non-accrual loans ........................................ $10,959 $11,149
Restructured loans ....................................... 56 392
Accruing loans 90 days or more past due .................. 417 1,948
Other real estate ........................................ 2,050 2,191
------- -------
Total non-performing assets ......................... $13,482 $15,680
======= =======
Non-performing assets to total loans and other real estate 1.43% 1.57%
<PAGE>
Allowance for Loan Losses
The following table presents, for the periods indicated, an analysis of the
allowance for loan losses and other related data.
<TABLE>
<CAPTION>
MARCH 31,
-----------------------
1998 1997
--------- ---------
(Dollars in thousands)
<S> <C> <C>
Average loans outstanding ........................................ $ 930,644 $ 980,181
--------- ---------
Total loans outstanding at end of period .......................... 938,657 996,477
========= =========
Allowance for loan losses at beginning of period ................. $ 11,999 $ 11,578
Provision for loan losses ......................................... 1,500 900
Charge-offs:
Commercial and industrial .................................... (298) (262)
Real estate .................................................. (29) (120)
Consumer ..................................................... (353) (614)
Foreign ...................................................... -- --
Recoveries:
Commercial and industrial .................................... 174 355
Real estate .................................................. 6 2
Consumer ..................................................... 167 266
Foreign ...................................................... -- --
--------- ---------
Net loan charge-offs .............................................. (333) (373)
--------- ---------
Allowance for loan losses at end of period ....................... $ 13,166 $ 12,105
========= =========
Ratio of allowance to end of period loans ......................... 1.40% 1.21%
Ratio of net loan charge-offs to average loans (quarter) .......... 0.04 0.04
Ratio of allowance to end of period non-performing loans .......... 115.17 89.74
--------- ---------
</TABLE>
Investment Securities and Other Earning Assets
Average investment securities and other temporary investments represent $442.9
million, or 29%, of average assets for the first quarter of 1998 and increased
by $22.4 million from the average for the first quarter of 1997. The investment
securities portfolio grew by $13.5 million from December 31, 1997 to March 31,
1998. Investment activity during the first quarter of 1998 was centered in
purchasing U.S. government agency securities. As of March 31, 1998, U.S.
government agency comprised 64% of investment securities and U.S. Treasury
obligations comprised 28% of investment securities. The balance of investment
securities is composed of investment grade securities, primarily bank qualified
municipal obligations.
<PAGE>
Derivatives
At March 31, 1998, there were no off-balance sheet derivative contracts
outstanding. Republic does engage in a nominal amount of foreign exchange
contracts primarily as an accommodation to commercial customer needs. A $25
million par value U.S. government agency inverse floater matured in February
1998. There are no other inverse floating instruments in the investment
portfolio. The portfolio contains securities with callable options.
Deposits and Other Funding Sources
End of period deposits at March 31, 1998 increased by $1 million over December
31, 1997. A decline of $15.5 million in time deposits was offset by an increase
of $7.8 million in non-interest bearing deposits, an increase of $6.3 million in
NOW and money market accounts, and an increase of $2.4 million in savings. End
of period borrowings at March 31, 1998 increased by $6.8 million from December
31, 1997.
Average deposits for the first quarter of 1998 declined by 2%, or $29 million,
from a year ago. The decrease was centered in average time deposits which
declined by $43 million over the same period. Average short-term borrowings
declined by $9 million during that period. The decline in funding corresponded
to the decrease in loan volume during the same period and was centered in rate
sensitive funding sources.
Market Risk, Interest Rate Sensitivity and Liquidity
Net interest income, Republic's primary source of revenue, is affected by
changes in interest rates as well as the mix of interest earning assets and
interest bearing liabilities comprising the balance sheet. Interest rate risk
and balance sheet mix is managed within policy guidelines. The Asset/Liability
Management Committee reviews Republic's interest rate risk and balance sheet mix
position on a regular basis.
<PAGE>
The following table sets forth an interest rate sensitivity analysis. The table
presents projected cash flows and related weighted average rates by expected
repayment dates at March 31, 1998 and GAP analysis information.
<TABLE>
<CAPTION>
VOLUMES SUBJECT TO REPRICING WITHIN
--------------------------------------------------------------------------
1 YEAR 1-2 YEARS 2-3 YEARS 3-4 YEARS 4-5 YEARS
----------- ----------- ----------- ----------- -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Federal funds sold and other
temporary investments ........ $ 75,876 $ -- $ -- $ -- $ --
Average interest yield ........ 6.38% -- -- -- --
Taxable securities ................ 158,341 175,433 21,483 200 100
Average interest yield ....... 6.40% 6.22% 6.05% 7.10% 6.75%
Tax-exempt securities ............. 8,609 551 1,781 2,424 2,907
Average interest yield ....... 4.89% 5.32% 5.14% 5.25% 5.37%
Total loans ....................... 513,607 56,369 43,394 87,257 82,976
Average interest yield ....... 8.85% 8.97% 9.02% 8.84% 8.73%
----------- ----------- ----------- ----------- -----------
Total interest earning asset ...... 756,433 232,353 66,658 89,881 85,983
----------- ----------- ----------- ----------- -----------
INTEREST BEARING LIABILITIES:
Demand, money market and
savings deposits ............. 313,810 -- -- -- --
Average interest rate ........ 2.77% -- -- -- --
Certificates of deposit and other
time deposits ................ 675,687 41,241 1,432 299 1,249
Average interest rate ........ 5.51% 5.80% 6.26% 5.61% 6.02%
----------- ----------- ----------- ----------- -----------
Total interest bearing deposits ... 989,497 41,241 1,432 299 1,249
----------- ----------- ----------- ----------- -----------
Securities sold under
repurchase agreements ........ 53,743 -- -- -- --
Average interest rate ........ 4.87% -- -- -- --
Other borrowings .................. 9,196 -- -- -- --
Average interest rate ........ 5.56% -- -- -- --
----------- ----------- ----------- ----------- -----------
Total interest bearing liabilities 1,052,436 41,241 1,432 299 1,249
----------- ----------- ----------- ----------- -----------
Period GAP ........................ (296,003) 191,112 65,226 89,582 84,734
Cumulative GAP .................... (296,003) (104,891) (39,665) 49,917 134,651
Period GAP to total assets ........ (19.18%) 12.38% 4.23% 5.80% 5.49%
Cumulative GAP to total assets .... (19.18%) (6.80%) (2.57%) 3.23% 8.72%
Cumulative interest earning assets
to cumulative interest bearing
liabilities .................. 71.87% 90.41% 96.38% 104.56% 112.28%
----------- ----------- ----------- ----------- -----------
</TABLE>
VOLUMES SUBJECT TO REPRICING WITHIN
-----------------------------------------
OVER ESTIMATED
5 YEARS TOTAL FAIR VALUE
----------- ----------- -----------
(Dollars in Thousands)
INTEREST EARNING ASSETS:
Federal funds sold and other
temporary investments ........ $ -- 75,876 $ 75,876
Average interest yield ........ -- 6.38%
Taxable securities ................ 2,217 357,774 357,911
Average interest yield ....... 6.35% 6.29%
Tax-exempt securities ............. 12,425 28,697 29,552
Average interest yield ....... 5.32% 5.18%
Total loans ....................... 155,054 938,657 942,240
Average interest yield ....... 8.37% 8.77%
----------- ----------- -----------
Total interest earning asset ...... 169,696 1,401,004 1,405,579
----------- ----------- -----------
INTEREST BEARING LIABILITIES:
Demand, money market and
savings deposits ............. -- 313,810 313,810
Average interest rate ........ -- 2.77%
Certificates of deposit and other
time deposits ................ 25 719,933 722,171
Average interest rate ........ 5.15% 5.53%
----------- ----------- -----------
Total interest bearing deposits ... 25 1,033,743 1,035,981
----------- ----------- -----------
Securities sold under
repurchase agreements ........ -- 53,743 53,743
Average interest rate ........ -- 4.87%
Other borrowings .................. -- 9,196 9,196
Average interest rate ........ -- 5.56%
----------- ----------- -----------
Total interest bearing liabilities 25 1,096,682 1,098,920
----------- ----------- -----------
Period GAP ........................ 169,671 304,322
Cumulative GAP .................... 304,322
Period GAP to total assets ........ 10.99%
Cumulative GAP to total assets .... 19.72%
Cumulative interest earning assets
to cumulative interest bearing
liabilities .................. 127.75%
----------- ----------- -----------
<PAGE>
Republic uses GAP analysis as an analytical tool but recognizes that
shortcomings are inherent in GAP analysis since certain assets and liabilities
may not move proportionately as interest rates change. Consequently, in addition
to GAP analysis, Republic uses a simulation model to shock and test the interest
rate sensitivity of net interest income and the balance sheet. Based on the
March 31, 1998 simulation analysis, Republic estimates that a 200 basis point
rise or decline in interest rates over the next twelve month period would have
an impact of less than 3% on its net interest income for the same period.
Republic meets its liquidity needs through its asset and liability management
process. Temporary investments and debt securities are the primary sources of
liquidity. Additional liquidity is provided by loan repayments and available
funding sources.
Capital Resources
In February 1998, Republic completed an initial public offering of its common
stock. As a result, 2,300,000 shares were sold in the public market. Of these,
1,233,270 were issued by Republic. The balance of the shares sold to the public
were sold by existing shareholders. Net proceeds received by Republic amounted
to $16.3 million.
Republic is subject to capital adequacy requirements imposed by the Federal
Reserve Board and its subsidiary bank is subject to similar requirements imposed
by the Office of the Comptroller of the Currency.
The following table provides a comparison of Republic's leverage and risk-based
capital ratios as of March 31, 1998 to the minimum and well capitalized
regulatory standards.
<TABLE>
<CAPTION>
ACTUAL RATIO
MINIMUM REQUIRED WELL-CAPITALIZED AT MARCH 31, 1998
---------------- ---------------- -----------------
<S> <C> <C> <C>
Leverage ratio 3.00% (1) N/A % 10.23%
Tier 1 risk-based capital ratio 4.00 6.00 16.93
Risk-based capital ratio 8.00 10.00 18.18
<FN>
- ----------
(1) The FRB may require Republic to maintain a leverage ratio of up to 200
basis points above the required minimum.
</FN>
</TABLE>
<PAGE>
Taxes
Republic's income tax expense in interim reporting periods is determined by
estimating the effective federal and state tax rates and applying them to its
taxable income. The effective tax rate is principally affected by tax exempt
income. Republic's effective tax rate for the first quarter of 1998 was 31%, and
for 1997 it was 35%. The effective rate for the first quarter of 1998 was
favorably affected by adjustments resulting from the completion of a tax audit.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations".
PART II.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
RECENT SALES OF REGISTERED SECURITIES
In February 1998, Republic sold 1,233,270 shares of its Common Stock and certain
selling shareholders sold 1,066,730 shares of Common Stock pursuant to a
registration statement on Form S-1 (Registration No. 333-41301) filed with the
Securities and Exchange Commission, which was declared effective on February 11,
1998 (the "Offering"). The Offering commenced on February 18, 1998 and was
terminated subsequent to the sale of all of the registered securities at a price
to the public of $15.00 per share. The Offering was underwritten by Keefe,
Bruyette & Woods, Inc. and CIBC Oppenheimer Corp. Expenses incurred by Republic
in connection with the sale of the shares of Common Stock included the
following:
SEC registration fee ........................................ $ 10,856
NASD filing fee ............................................. 4,180
Nasdaq National Market listing fee .......................... 95,000
Legal fees and expenses ..................................... 357,150
Accounting fees and expenses ................................ 260,400
Printing and engraving expenses ............................. 156,499
Transfer agent and registrar fees ........................... 3,500
Miscellaneous fees and expenses ............................. 12,479
--------
Total ....................................................... $900,064
========
<PAGE>
The net offering proceeds to Republic after deduction of the above expenses were
approximately $16.3 million and have temporarily been invested in securities
purchased under agreements to resell transactions with the Bank.
One of the selling shareholders in the Offering was Rebank Netherlands Antilles
N.V. ("Rebank"), which is owned by Roberto Isaias, Estefano Isaias and William
Isaias. Roberto, Estefano and William Isaias directly or indirectly own, in the
aggregate, 12,540,285 shares or 58.8% of the issued and outstanding Common
Stock. Roberto Isaias is the Chairman of the Board of Republic and Estefano and
William Isaias are directors of Republic. The net proceeds to Rebank from the
sale of 647,320 shares of Common Stock in the Offering were $9,030,114.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
REPUBLIC BANKING CORPORATION OF
FLORIDA
Dated: May 15, 1998 By: /s/ BERNARDO M. ARGUDIN
--------------------------------
Bernardo M. Argudin
Vice President and Chief Financial Officer
and Principal Accounting Officer
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION AT MARCH 31, 1998 AND THE
CONSOLIDATED STATEMENT OF OPERATIONS FOR THREE MONTHS ENDED IN MARCH 31, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 58,014
<INT-BEARING-DEPOSITS> 12,872
<FED-FUNDS-SOLD> 63,004
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 106,668
<INVESTMENTS-CARRYING> 279,803
<INVESTMENTS-MARKET> 280,798
<LOANS> 938,657
<ALLOWANCE> 13,166
<TOTAL-ASSETS> 1,543,577
<DEPOSITS> 1,303,190
<SHORT-TERM> 62,939
<LIABILITIES-OTHER> 10,931
<LONG-TERM> 0
0
0
<COMMON> 213
<OTHER-SE> 164,932
<TOTAL-LIABILITIES-AND-EQUITY> 1,543,577
<INTEREST-LOAN> 20,984
<INTEREST-INVEST> 5,855
<INTEREST-OTHER> 895
<INTEREST-TOTAL> 27,734
<INTEREST-DEPOSIT> 11,970
<INTEREST-EXPENSE> 12,581
<INTEREST-INCOME-NET> 15,153
<LOAN-LOSSES> 1,500
<SECURITIES-GAINS> 52
<EXPENSE-OTHER> 13,115
<INCOME-PRETAX> 6,242
<INCOME-PRE-EXTRAORDINARY> 6,242
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,269
<EPS-PRIMARY> 0.21
<EPS-DILUTED> 0.21
<YIELD-ACTUAL> 8.19
<LOANS-NON> 10,959
<LOANS-PAST> 417
<LOANS-TROUBLED> 56
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 11,999
<CHARGE-OFFS> 680
<RECOVERIES> 340
<ALLOWANCE-CLOSE> 13,166
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
