================================================================================
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 SEPTEMBER 30, 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
October 31, 1998 was 21,271,399
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<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
Republic Banking Corporation of Florida 2
<PAGE>
PART I
ITEM 1.
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
--------------------------------
1998 1997
- -------------------------------------------------------------------------------------------------
(UNAUDITED)
-------------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C>
ASSETS
Cash and federal funds sold:
Non-interest earning ....................................... $ 40,757 $ 49,362
Federal funds sold ......................................... 35,013 76,038
- ------------------------------------------------------------------------------------------------
75,770 125,400
Interest earning deposits in other banks ................... 4,731 873
Held-to-maturity securities (market value of $ 250,141 at
September 30, 1998, and $214,555
at December 31, 1997) ................................... 246,384 213,060
Available-for-sale securities .............................. 129,042 159,928
Loans receivable, net ...................................... 990,257 917,411
Premises and equipment, net ................................ 55,816 58,737
Bank premises held for sale, net ........................... 2,200 --
Customers' acceptance liability ............................ 3,113 3,313
Accrued interest receivable ................................ 12,943 12,941
Other real estate owned .................................... 2,032 2,047
Deferred taxes ............................................. 3,701 3,852
Other assets ............................................... 4,873 4,829
Goodwill and other intangibles ............................. 11,796 12,615
- ------------------------------------------------------------------------------------------------
Total assets ............................................... $1,542,658 $1,515,006
================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing ....................................... $ 250,456 $ 261,675
Interest bearing:
NOW and money market ....................................... 181,366 177,539
Savings .................................................... 125,894 127,597
Time ....................................................... 739,099 735,406
- ------------------------------------------------------------------------------------------------
1,296,815 1,302,217
Securities sold under repurchase agreements ................ 56,956 45,594
Other short-term borrowings ................................ 7,772 10,573
Acceptances outstanding .................................... 3,113 3,313
Accrued interest payable ................................... 3,983 2,763
Income taxes payable ....................................... 390 383
Other liabilities .......................................... 2,945 2,684
- ------------------------------------------------------------------------------------------------
Total liabilities .......................................... 1,371,974 1,367,527
- ------------------------------------------------------------------------------------------------
Minority interest in consolidated subsidiary ............... 1,380 1,348
- ------------------------------------------------------------------------------------------------
Stockholders' equity:
Common stock-authorized 50,000,000 shares of
$0.01 par value: 21,271,399 shares issued and outstanding
at Sept. 30, 1998, and 20,093,129
at Dec. 31, 1997 ........................................ 213 201
Capital surplus ............................................ 114,897 99,240
Retained earnings .......................................... 53,297 46,311
Accumulated other comprehensive income ..................... 897 379
- ------------------------------------------------------------------------------------------------
Total stockholders' equity ................................. 169,304 146,131
- ------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity ................. $1,542,658 $1,515,006
================================================================================================
</TABLE>
See condensed notes to consolidated financial statements.
3 Republic Banking Corporation of Florida
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- ---------------------------
1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------------
(UNAUDITED)
-------------------------------------------------------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans ........................ $21,897 $22,383 $64,031 $66,933
Investment securities:
Taxable interest .................................. 5,671 5,372 16,787 13,980
Tax exempt interest ............................... 309 454 1,044 1,480
Interest on deposits in other banks ............... 46 28 328 175
Interest on federal funds sold .................... 548 764 2,019 3,323
- ------------------------------------------------------------------------------------------------------------------
Total interest income ............................. 28,471 29,001 84,209 85,891
- ------------------------------------------------------------------------------------------------------------------
Interest expense:
Deposits .......................................... 12,272 12,168 36,081 35,793
Securities sold under repurchase agreements ....... 648 665 1,775 1,828
Other borrowings .................................. 104 106 346 423
- ------------------------------------------------------------------------------------------------------------------
Total interest expense ............................ 13,024 12,939 38,202 38,044
- ------------------------------------------------------------------------------------------------------------------
Net interest income ............................... 15,447 16,062 46,007 47,847
Provision for loan losses ......................... 822 1,473 6,317 3,604
- ------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 14,625 14,589 39,690 44,243
- ------------------------------------------------------------------------------------------------------------------
Non-interest income:
Service charges on deposit accounts ............... 3,064 2,935 9,052 9,037
Other charges, commissions and fees ............... 2,849 2,893 8,461 8,926
Gain (loss) on sale of securities ................. -- -- 53 --
- ------------------------------------------------------------------------------------------------------------------
Total non-interest income ......................... 5,913 5,828 17,566 17,963
- ------------------------------------------------------------------------------------------------------------------
Non-Interest expenses:
Salaries and wages ................................ 5,576 5,361 15,809 15,870
Employee benefits ................................. 1,390 1,400 4,284 4,274
Occupancy expense ................................. 1,406 1,487 4,697 4,378
Furniture and equipment expense ................... 755 767 2,279 2,035
Other real estate owned expense ................... 37 41 143 267
Other ............................................. 4,305 4,486 12,755 12,975
- ------------------------------------------------------------------------------------------------------------------
Total non-interest expense ........................ 13,469 13,542 39,967 39,799
- ------------------------------------------------------------------------------------------------------------------
Income before provision for income taxes .......... 7,069 6,875 17,289 22,407
Provision for income taxes ........................ 2,604 2,082 5,802 7,243
- ------------------------------------------------------------------------------------------------------------------
Income before minority interest ................... 4,465 4,793 11,487 15,164
Minority interest ................................. 42 334 108 1,058
- ------------------------------------------------------------------------------------------------------------------
Net income ........................................ $ 4,423 $ 4,459 $11,379 $14,106
- ------------------------------------------------------------------------------------------------------------------
Basic and diluted earnings per share .............. $ 0.21 $ 0.24 $ 0.54 $ 0.75
==================================================================================================================
</TABLE>
See condensed notes to consolidated financial statements.
Republic Banking Corporation of Florida 4
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
------------------------- ACCUMULATED
SHARES OTHER TOTAL
ISSUED AND PAR CAPITAL RETAINED COMPREHENSIVE STOCKHOLDERS'
OUTSTANDING VALUE SURPLUS EARNINGS INCOME EQUITY
- ------------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 ................. 20,093 $ 201 $ 99,240 $ 46,311 $ 379 $ 146,131
Cash dividend ................................ -- -- -- (1,407) -- (1,407)
Net income ................................... -- -- -- 4,269 -- 4,269
Initial public offering, net of offering
expenses ................................ 1,233 12 16,292 -- -- 16,304
Net change in unrealized gain on
available-for-sale securities, net of tax -- -- -- -- (152) (152)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1998 .................... 21,326 $ 213 $ 115,532 $ 49,173 $ 227 $ 165,145
Change in par value .......................... -- -- -- -- -- --
Cash dividend ................................ -- -- -- (1,493) -- (1,493)
Net income ................................... -- -- -- 2,687 -- 2,687
Net change in unrealized gain on
available-for-sale securities, net of tax -- -- -- -- 6 6
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1998 ..................... 21,326 $ 213 $ 115,532 $ 50,367 $ 233 $ 166,345
Stock repurchase ............................. (55) -- (635) -- -- (635)
Change in par value .......................... -- -- -- -- -- --
Cash dividend ................................ -- -- -- (1,493) -- (1,493)
Net income ................................... -- -- -- 4,423 -- 4,423
Net change in unrealized gain on
available-for-sale securities, net of tax -- -- -- -- 664 664
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1998 ................ 21,271 $ 213 $ 114,897 $ 53,297 $ 897 $ 169,304
================================================================================================================================
</TABLE>
See condensed notes to consolidated financial statements.
5 Republic Banking Corporation of Florida
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1998 1997
- ---------------------------------------------------------------------------------------------------------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income ...................................................................... $ 11,379 $ 14,106
- ---------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net cash provided by operating activities:
Minority interest in consolidated subsidiary .................................... 108 1,058
Depreciation and amortization ................................................... 2,414 1,886
Investment (accretion) amortization, net ........................................ (1) (589)
Amortization of goodwill and other intangibles .................................. 856 710
Provision for loan losses ....................................................... 6,317 3,604
Gain on sale of securities ...................................................... (53) --
Bank premises write down ........................................................ 113 --
Deferred tax benefit ............................................................ (176) (421)
Other ........................................................................... (5) (247)
Changes in assets and liabilities:
Decrease (increase) in unearned income .......................................... 561 (1,074)
Decrease (increase) in accrued interest receivable .............................. (2) 627
Increase in other assets ........................................................ (44) (1,009)
Increase (decrease) in income taxes payable ..................................... 7 (1,015)
Increase (decrease) in accrued interest payable ................................. 1,220 (22)
Increase (decrease) in other liabilities ........................................ 230 (425)
- ---------------------------------------------------------------------------------------------------------------
Total adjustments ............................................................... 11,545 3,083
- ---------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities ....................................... 22,924 17,189
- ---------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Net decrease (increase) in interest earning deposits in other banks ............. (3,858) 5,007
Proceeds from redemptions of held-to-maturity securities ........................ 106,054 35,692
Purchases of held-to-maturity securities ........................................ (139,346) (102,824)
Proceeds from sales or redemptions of available-for-sale securities ............. 103,421 46,749
Purchases of available-for-sale securities ...................................... (71,662) (32,523)
Net loan payments (originations) ................................................ (79,724) 18,639
Investment in premises and equipment ............................................ (1,810) (11,313)
Other ........................................................................... (19) 275
- ---------------------------------------------------------------------------------------------------------------
Net cash used in investing activities ........................................... (86,944) (40,298)
- ---------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net decrease in demand deposits, NOW, money market and savings accounts ......... (9,095) (18,174)
Net increase (decrease) in time deposits ........................................ 3,693 (3,417)
Net increase in securities sold under repurchase agreements ..................... 11,362 21,980
Net increase (decrease) in other borrowings ..................................... (2,801) 2,306
Issuance of common stock ........................................................ 16,304 --
Repurchase of common stock ...................................................... (635) --
Dividend paid by subsidiary to minority interest ................................ (45) (736)
Cash dividends paid ............................................................. (4,393) (9,814)
- ---------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities ............................. 14,390 (7,855)
- ---------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents ....................................... (49,630) (30,964)
Cash and cash equivalents at beginning of the period ............................ 125,400 129,180
- ---------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of the period .................................. $ 75,770 $ 98,216
===============================================================================================================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest ........................................................................ $ 36,982 $ 38,061
===============================================================================================================
Income taxes .................................................................... $ 5,828 $ 8,750
===============================================================================================================
Supplemental schedule of noncash investing activities:
Transfers from loans to other real estate owned ................................. $ -- $ 50
Transfers from premises held for use to premises held for sale .................. 2,200 --
Dividends payable by subsidiary to minority interest ............................ 31 --
===============================================================================================================
</TABLE>
See condensed notes to consolidated financial statements.
Republic Banking Corporation of Florida 6
<PAGE>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- -----------------------
1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C>
Net Income .............................................. $ 4,423 $ 4,459 $11,379 $14,106
- ------------------------------------------------------------------------------------------------------------
Other comprehensive income, net of tax:
Unrealized gain (loss) on available for sale securities 664 223 551 165
Less: reclassification adjustment for
gains included in net income .................. -- -- 33 --
- ------------------------------------------------------------------------------------------------------------
Other comprehensive income .............................. 664 223 518 165
- ------------------------------------------------------------------------------------------------------------
Comprehensive income .................................... $ 5,087 $ 4,682 $11,897 $14,271
============================================================================================================
</TABLE>
See condensed notes to consolidated financial statements.
7 Republic Banking Corporation of Florida
<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 and nine-month period ended
September 30, 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 September 30, 1998 and December 31, 1997,
and the results of operations and cash flows for the periods ended September 30,
1998 and 1997, all of which are of a normal and recurring nature, have been
included.
B. ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses are as follows (in thousands):
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ -----------------------
1998 1997 1998 1997
- ------------------------------------------------------------------------------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Balance at beginning of period ... $ 11,362 $ 12,884 $ 11,999 $ 11,578
Provision charged to operations .. 822 1,473 6,317 3,604
- ------------------------------------------------------------------------------------------
12,184 14,357 18,316 15,182
- ------------------------------------------------------------------------------------------
Loans charged-off ................ (625) (2,364) (7,518) (4,030)
Less recoveries .................. 712 216 1,473 1,057
- ------------------------------------------------------------------------------------------
Net charge-offs ............. 87 (2,148) (6,045) (2,973)
- ------------------------------------------------------------------------------------------
Balance at end of period ......... $ 12,271 $ 12,209 $ 12,271 $ 12,209
==========================================================================================
Loans not accruing interest at end
of period ................... $ 8,137 $ 14,058 $ 8,137 $ 14,058
==========================================================================================
</TABLE>
Republic Banking Corporation of Florida 8
<PAGE>
- --------------------------------------------------------------------------------
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
C. EARNINGS PER COMMON SHARE
- --------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- --------------------------
1998 1997 1998 1997
- --------------------------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Basic Shares:
Weighted average common shares outstanding ............ 21,310,910 18,872,904 21,108,858 18,872,904
Earnings per common share ............................. $ 0.21 $ 0.24 $ 0.54 $ 0.75
Diluted Shares:
Weighted average common shares outstanding ............ 21,310,910 18,872,904 21,108,858 18,872,904
Weighted average common shares assumed outstanding
to reflect dilutive effect of common stock options -- N/A -- N/A
Total dilutive average common shares outstanding ...... 21,310,910 18,872,904 21,108,858 18,872,904
Diluted earnings per common share ..................... $ 0.21 $ 0.24 $ 0.54 $ 0.75
</TABLE>
D. TAX EFFECT OF OTHER COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1998
------------------------------------- ----------------------------------
TAX TAX
BEFORE-TAX (EXPENSE) NET-OF-TAX BEFORE-TAX (EXPENSE) NET-OF-TAX
AMOUNT BENEFIT AMOUNT AMOUNT BENEFIT AMOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Unrealized loss on securities:
Unrealized holding gains (losses) arising
during the period.................................. $1,081 $ (417) $ 664 $ 897 $ (346) $ 551
Less: recalssification sdjustment for
gains included in net income....................... -- -- -- 53 (20) 33
- -----------------------------------------------------------------------------------------------------------------------------------
Comprehensive income................................... $1,081 $ (417) $ 664 $ 844 $ (326) $ 518
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1998
------------------------------------- ----------------------------------
TAX TAX
BEFORE-TAX (EXPENSE) NET-OF-TAX BEFORE-TAX (EXPENSE) NET-OF-TAX
AMOUNT BENEFIT AMOUNT AMOUNT BENEFIT AMOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Unrealized loss on securities:
Unrealized holding gains (losses) arising
during the period.................................. $ 363 $ (140) $ 223 $ 269 $ (104) $ 165
- -----------------------------------------------------------------------------------------------------------------------------------
Comprehensive income................................... $ 363 $ (140) $ 22
3 $ 269 $ (104) $ 165
===================================================================================================================================
</TABLE>
<PAGE>
PART I
ITEM 2.
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
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 third quarter 1998
net income of $4.4 million or $0.21 per average basic and diluted share,
compared to $4.5 million or $0.24 per average basic and diluted share in the
third quarter of 1997.
Third quarter 1998 results represent a return on average assets of 1.15%,
matching the return for the third quarter of 1997. Return on average
shareholders' equity was 10.52% for the third quarter of 1998 compared to 13.99%
for the third quarter of 1997. Net income per average basic and diluted share in
the third quarter of 1998 was below the level for the comparable quarter in 1997
due to lower net interest income, driven by a reduced net interest margin, and
due to an increase in the number of common shares outstanding in 1998.
Net income in the third quarter of 1998 increased from second quarter net income
of $2.7 million or $0.13 per average basic and diluted share. Second quarter
results were impacted by a high provision for loan losses due to a $5.1 million
charge-off on a large commercial loan. Recoveries on prior loan losses during
the third quarter of 1998 exceeded loan charge-offs for the quarter, resulting
in a lower loan loss provision in that quarter. The provision for loan losses in
the third quarter of 1998 was $0.8 million as compared to $1.5 million for the
same quarter in 1997 and $4 million for the second quarter of 1998.
Net income for the nine month period ended on September 30, 1998 was $11.4
million or $0.54 per average basic and diluted share, compared to $14.1 million
or $0.75 per average basic and diluted share for the comparable period in 1997.
Results for the nine month period in 1998 represent a return on average assets
of 1.00% compared to 1.23% for the comparable period in 1997 . Return on average
shareholders' equity was 9.32% for the first nine months of 1998 compared to
15.42% for the first nine months of 1997.
Republic Banking Corporation of Florida 10
<PAGE>
SELECTED QUARTERLY DATA
<TABLE>
<CAPTION>
AS OF AND FOR THE AS OF AND FOR THE
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, JUNE 30,
--------------------------------------------------------------
1998 1997 1998 1997
- -----------------------------------------------------------------------------------------------------------------------
(UNAUDITED) (UNAUDITED)
--------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income .................................... $ 28,471 $ 29,001 $ 28,004 $ 28,748
Interest expense ................................... 13,024 12,939 12,595 12,728
--------------------------------------------------------------
Net interest income ................................ 15,447 16,062 15,409 16,020
Provision for loan losses .......................... 822 1,473 3,995 1,231
--------------------------------------------------------------
Net interest income after provision for loan losses 14,625 14,589 11,414 14,789
Non-interest income ................................ 5,913 5,828 5,947 6,054
Non-interest expenses .............................. 13,469 13,542 13,381 13,588
--------------------------------------------------------------
Net income before taxes ............................ 7,069 6,875 3,980 7,255
Provision for income tax expense ................... 2,604 2,082 1,267 2,254
Minority interest .................................. 42 334 26 347
--------------------------------------------------------------
Net income ......................................... $ 4,423 $ 4,459 $ 2,687 $ 4,654
==============================================================
PER SHARE DATA:
Net income (quarter) ............................... $ 0.21 $ 0.24 $ 0.13 $ 0.25
Book value ......................................... 7.96 6.84 7.80 6.60
Tangible book value ................................ 7.40 6.39 7.23 6.13
Cash dividends ..................................... 0.07 -- 0.07 --
Weighted average common and common equivalent
shares outstanding (in thousands) ............. 21,311 18,873 21,326 18,873
BALANCE SHEET DATA:
Total assets ....................................... $ 1,542,658 $ 1,517,529 $ 1,524,295 $ 1,554,063
Securities ......................................... 375,426 384,988 399,889 351,414
Total Loans ........................................ 1,002,528 953,052 923,650 968,040
Allowance for loan losses .......................... 12,271 12,209 11,362 12,884
Total deposits ..................................... 1,296,815 1,298,535 1,282,252 1,344,868
Total shareholders' equity ......................... 169,304 129,150 166,344 124,469
AVERAGE BALANCE SHEET DATA:
Total assets ....................................... $ 1,530,588 $ 1,533,800 $ 1,516,761 $ 1,535,251
Securities ......................................... 386,462 373,355 387,286 307,637
Total Loans ........................................ 967,588 965,827 935,655 1,003,422
Allowance for loan losses .......................... 12,005 12,514 13,355 12,557
Total deposits ..................................... 1,293,273 1,323,246 1,278,899 1,328,275
Total shareholders' equity ......................... 166,832 126,421 165,148 121,830
PERFORMANCE RATIOS:
Return on average assets ........................... 1.15% 1.15% 0.71% 1.22%
Return on average equity ........................... 10.52 13.99 6.53 15.32
Net interest margin ................................ 4.39 4.57 4.48 4.58
Efficiency ratio ................................... 63.06 61.86 62.66 61.56
ASSET QUALITY RATIOS:
Non-performing assets to total loans
and other real estate ......................... 1.06% 1.82% 1.01% 0.94%
Net loan charge-offs to average loans .............. (0.01) 0.22 0.62 0.05
Allowance for loan losses to total loans ........... 1.22 1.28 1.23 1.33
Allowance for loan losses to non-performing loans .. 143.04 79.70 156.93 192.73
CAPITAL RATIOS:
Leverage ratio (Tier 1 capital-to-total assets) .... 10.35% 8.52% 10.25% 7.53%
Average shareholders' equity to average total assets 10.90 8.24 10.89 7.94
Tier 1 risk-based capital ratio .................... 16.92 14.14 17.01 12.80
Total risk-based capital ratio ..................... 18.17 15.39 18.25 14.05
</TABLE>
11 Republic Banking Corporation of Florida
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS--(CONTINUED)
NET INTEREST INCOME
Net interest income declined by 3.8% from the third quarter of 1997 reflecting
principally a decline in net interest margin resulting primarily from a decline
in loan portfolio yield and an increase in the cost of money market deposit
accounts.
Net interest margin decreased from 4.57% in the third quarter of 1997 to 4.39%
in the third quarter of 1998, and net interest spread decreased from 3.61% to
3.37%.
Net interest spreads were affected by a decline in the yield on earning assets
of 15 basis points resulting primarily from lower loan portfolio yield. The
lower loan yields were due to competitive pricing pressures and changes in loan
portfolio composition. Spreads were also affected by an increase in the rate
paid on interest bearing liabilities which increased 9 basis points. This
resulted from higher costs on a premium money market product introduced in the
last year and growth in longer term public fund deposits.
Average loan volume, earning asset volume and total assets for the third quarter
of 1998 remained level from the comparable quarter in 1997. Average interest
bearing liabilities declined in volume by 1.3% while average capital funds
increased by 32.0%.
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.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------------------------------------------
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 .............................. $ 967,588 $ 21,897 8.98% $ 965,827 $ 22,383 9.19%
Taxable securities ....................... 362,543 5,671 6.21 340,568 5,372 6.26
Tax-exempt securities .................... 23,919 309 5.13 32,787 454 5.49
Federal funds sold and other
temporary investments ............... 41,564 594 5.67 56,716 792 5.54
---------- ---------- --------- ---------- ---------- ---------
Total interest earning assets ............ 1,395,614 28,471 8.09 1,395,898 29,001 8.24
---------- --------- ---------- ---------
Less allowance for loan losses ........... 12,005 12,514
---------- ----------
Total interest earning assets, net of
allowance ........................... 1,383,609 1,383,384
Non-earning assets ....................... 146,979 150,416
---------- ----------
Total assets ............................. $1,530,588 $1,533,800
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
Interest bearing demand deposits ......... $ 54,925 $ 204 1.47% $ 61,417 $ 231 1.49%
Savings and money market accounts ........ 258,896 2,123 3.25 245,082 1,705 2.76
State, county and municipal
certificates of deposit ............. 79,415 1,135 5.67 26,433 369 5.54
Certificates of deposit .................. 642,135 8,810 5.44 716,104 9,863 5.46
Federal funds purchased and securities
sold under repurchase agreements .... 53,606 672 4.97 55,542 692 4.94
Other borrowings ......................... 6,177 80 5.14 4,913 79 6.38
---------- ---------- --------- ---------- ---------- ---------
Total interest bearing liabilities ....... 1,095,154 13,024 4.72 1,109,491 12,939 4.63
---------- --------- ---------- ---------
Non-interest bearing demand deposits ..... 257,902 274,210
Other liabilities ........................ 9,321 14,277
---------- ----------
Total liabilities ........................ 1,362,377 1,397,978
Minority interest ........................ 1,379 9,401
Shareholders' equity ..................... 166,832 126,421
---------- ----------
Total liabilities and shareholders' equity $1,530,588 $1,533,800
========== ==========
Net interest income ...................... $ 15,447 $ 16,062
========== ==========
Net interest spread ...................... 3.37% 3.61%
========== =========
Net interest margin ...................... 4.39% 4.57%
========== =========
</TABLE>
Republic Banking Corporation of Florida 12
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS--(CONTINUED)
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
SEPTEMBER 30, 1998 V. 1997
-----------------------------------
INCREASE (DECREASE)
DUE TO
----------------------
VOLUME RATE TOTAL
- -------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Interest earning assets:
Total loans ....................................... $ 41 $ (527) $ (486)
Securities ........................................ 205 (51) 154
Federal funds sold and other temporary investments (212) 14 (198)
- -------------------------------------------------------------------------------------------
Total increase (decrease) in interest income ...... 34 (564) (530)
- -------------------------------------------------------------------------------------------
Interest bearing liabilities:
Interest bearing demand deposits .................. (24) (3) (27)
Savings and money market accounts ................. 96 322 418
State, county and municipal certificates of deposit 740 26 766
Certificates of deposit and other time deposits ... (1,018) (35) (1,053)
Federal funds purchased and securities sold under
repurchase agreements ........................ (24) 4 (20)
Other borrowings .................................. 20 (19) 1
- -------------------------------------------------------------------------------------------
Total increase (decrease) in interest expense ..... (210) 295 85
- -------------------------------------------------------------------------------------------
Increase (decrease) in net interest income ........ $ 244 $ (859) $ (615)
===========================================================================================
</TABLE>
Net interest income for the third quarter of 1998 increased by 0.25% as compared
to the second quarter of 1998. This increase was primarily a result of one more
interest bearing day in the third quarter. Net interest margin decreased in the
third quarter to 4.39% as compared to 4.48% for the second quarter of 1998.
Net interest income for the nine month period ended September 30, 1998 declined
by 3.8% from the comparable period in 1997. Net interest margin for the nine
months in 1998 was 4.45% as compared to 4.57% for the first nine months of 1997.
The decline in net interest income reflects a narrowing of the net interest
margin and a decline in average earning assets of 1.2%.
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 third quarter of 1998 decreased to $0.8 million from $1.5 million in the
third quarter of 1997, a 46.7% decrease. At September 30, 1998 the allowance for
loan losses, at $12.3 million, represented 1.2% of total loans and 143.0% of
non-performing loans.
Third quarter 1998 recoveries exceeded charge-offs. Net recoveries were $0.1
million, or 0.01% of average loans, as compared to net charge-offs of $2.1
million, or 0.22% of average loans, in the third quarter of 1997 resulting in a
lower loan loss provision for the period.
The provision for the third quarter of 1998 of $0.8 million was lower than the
provision for the second quarter of 1998 of $4.0 million. The second quarter
provision was impacted by a $5.1 million charge-off on a large commercial loan
during that period.
The provision for the nine month period of $6.3 million represents a 75%
increase from the $3.6 million provision for the first nine months of 1997 and
was primarily impacted by the second quarter provision.
13 Republic Banking Corporation of Florida
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS--(CONTINUED)
NON-INTEREST INCOME
Non-interest income, excluding securities transactions, increased by 1.5% from
the third quarter of 1997. This is a reversal of the experience for the first
two quarters of 1998 which reflected a decline from the comparable periods in
1997, primarily as a result of improvement in deposit service charge income,
which increased by 4.4% in the third quarter of 1998 from the comparable period
in 1997.
Non-interest income for the third quarter of $5.9 million was level with non
interest income for the second quarter of 1998. Non- interest income for the
nine month period of $17.6 million is 2.2% below the $18.0 million reported for
the first nine months of 1997.
The following table represents, for the periods indicated, the major categories
of non-interest income.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------- ------------------------
1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Service charges on deposit accounts................. $ 3,064 $ 2,935 $ 9,052 $ 9,037
Merchant credit card discounts...................... 1,958 1,954 5,767 6,109
Letter of credit fees............................... 229 277 699 793
Gains on sale of securities......................... - - 53 -
Other non-interest income........................... 662 662 1,995 2,024
- ---------------------------------------------------------------------------------------------------------------
Total non-interest income................. $ 5,913 $ 5,828 $ 17,566 $ 17,963
===============================================================================================================
</TABLE>
NON-INTEREST EXPENSE
Non-interest expense for the third quarter of 1998 decreased by 0.5% from the
third quarter of 1997. Personnel costs increased by 3.0% in the same period.
Occupancy and furniture and equipment costs decreased 4.1% for the same period
reflecting the effect of leasing of space in Republic's corporate office
building and one other vacant former branch facility within the last twelve
months. Other non-interest expenses declined by 4.1% from the third quarter in
1997 primarily from lower fraud losses and advertising expenses.
Non-interest expense for the third quarter of 1998 increased by 0.7% from the
second quarter of 1998. Non-interest expense for the nine month period ended
September 30, 1998 remained level with the comparable period in 1997.
The following table represents, for the periods indicated, the major categories
of non-interest expenses.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- ---------------------------
1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Employee compensation and benefits $ 6,966 $ 6,761 $ 20,093 $ 20,144
- ------------------------------------------------------------------------------------------------------------
Non-staff expenses:
Occupancy...................................... 1,406 1,487 4,697 4,379
Furniture and equipment........................ 755 767 2,279 2,034
Merchant credit card interchange fees.......... 1,480 1,336 4,154 4,227
Professional fees.............................. 252 167 580 382
FDIC assessment................................ 65 65 199 194
Advertising.................................... 155 327 547 1,025
Amortization of intangibles.................... 284 236 852 683
Printing and supplies.......................... 202 217 690 689
Other real estate owned........................ 37 41 143 267
Fraud losses (recoveries), net................. 64 220 152 401
Capitalized construction interest credit....... - - - (390)
Other.......................................... 1,803 1,918 5,581 5,764
- --------------------------------------------------------------------------------------------- ------------
Total non-staff expenses....................... 6,503 6,781 19,874 19,655
- ------------------------------------------------------------------------------------------------------------
Total non-interest expense..................... 13,469 13,542 39,967 39,799
============================================================================================================
</TABLE>
Republic Banking Corporation of Florida 14
<PAGE>
- --------------------------------------------------------------------------------
ANALYSIS OF FINANCIAL CONDITION
LOAN PORTFOLIO
End of period gross loans at September 30, 1998 increased by $73.7 million, or
7.9%, from December 31, 1997. Loan portfolio composition shifted during this
nine month period with major declines in commercial loans, down $35.7 million or
12.5%, and consumer loans, down $15.2 million or 26.1%. These segment declines
were offset by increases in commercial real estate and construction loans, up
$55.3 million or 17.8%, international loans, up $53.9 million or 58.1%, and
residential first mortgages, up $18.4 million or 11.9%.
Growth in lending was centered in the third quarter of 1998. End of period gross
loans at September 30, 1998 increased by $79.5 million, or 8.6%, from June 30,
1998. International loans increased by 63.4% while commercial real estate and
construction loans increased by 4.4% during the quarter. Residential first
mortgage loans increased by 3.5% during the three month period.
The decline in consumer loans reflects the discontinuation of indirect auto
lending activities in 1997. The decline in commercial loans reflects a reduction
in some of the larger individual commercial lending relationships in excess of
$10 million from December 1997. Growth in real estate lending reflects an
increased emphasis in this type of lending by Republic. Growth in international
lending reflects the re-staffing of the International Lending area within the
last year and increased emphasis in this lending segment.
The following table reflects the major classification of loans for the periods
indicated.
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30, DECEMBER 31,
------------------- ------------- ----------------
1998 1998 1997
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial............................... $ 250,075 $ 246,715 $ 285,733
Commercial real estate
and construction.................... 365,629 350,188 310,336
International............................ 146,629 89,763 92,734
Residential first mortgages.............. 173,309 167,507 154,864
Residential equity lines................. 14,837 14,702 16,487
Consumer................................. 42,857 46,506 58,024
Overdrafts............................... 6,282 4,712 5,352
Bankers' acceptances..................... 5,986 5,992 8,395
- -----------------------------------------------------------------------------------------------------
1,005,604 926,085 931,925
Unearned income.......................... (3,076) (2,435) (2,515)
- -----------------------------------------------------------------------------------------------------
1,002,528 923,650 929,410
Allowance for loan losses
and transfer risk................... (12,271) (11,362) (11,999)
- -----------------------------------------------------------------------------------------------------
Loans, net............................... $ 990,257 $ 912,288 $ 917,411
=====================================================================================================
</TABLE>
15 Republic Banking Corporation of Florida
<PAGE>
- --------------------------------------------------------------------------------
ANALYSIS OF FINANCIAL CONDITION--(CONTINUED)
TOTAL CROSS-BORDER OUTSTANDINGS BY COUNTRY
The following table sets forth, at the dates indicated, the aggregate amount of
Republic's cross-border outstandings (including foreign bonds, due from bank
accounts and interest earning deposits with other banks), as well as the
percentage of such cross-border outstandings to Republic's total assets.
Cross-border exposures in which the total to one country did not exceed one
percent of total assets, on the dates indicated are aggregated under "Other".
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30, DECEMBER 31,
---------------------------- ---------------------------- -------------------------
1998 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------------
% OF TOTAL % OF TOTAL % OF TOTAL
AMOUNT ASSETS AMOUNT ASSETS AMOUNT ASSETS
------------------------- ------------------------- -------------------------
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Brazil............................. $ 48 3.11% $ 39 2.56% $ 21 1.39%
Ecuador............................ 45 2.92 18 1.18 23 1.52
Peru............................... 25 1.62 10 0.66 18 1.19
Other.............................. 86 5.57 58 3.81 50 3.30
- ----------------------------------------------------------------------------------------------------------------------------------
Total.............................. $ 204 13.22 $ 125 8.21 $ 112 7.40
==================================================================================================================================
</TABLE>
Cross-border outstandings reflect the country of domicile of the obligor . Some
of these obligations are guaranteed or secured by collateral outside the country
of domicile of the obligor. As of September 30, 1998, approximately $24 million
in loans to foreign domiciled borrowers were secured by first mortgages on
residential property in the United States and approximately $15 million were
secured by cash collateral on deposit at Republic.
NON-PERFORMING ASSETS
The following table presents information regarding non-performing assets at the
dates indicated.
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30, DECEMBER 31,
--------------- --------------- ----------------
1998 1998 1997
- ----------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Non-accrual loans.............................. $ 8,137 $ 7,054 $ 5,863
Restructured loans............................. 51 53 371
Accruing loans 90 days
or more past due............................ 391 133 451
Other real estate.............................. 2,032 2,089 2,047
- ----------------------------------------------------------------------------------------------------------
Total non-performing assets................. $ 10,611 $ 9,329 $ 8,732
==========================================================================================================
Non-performing assets to total loans
and other real estate....................... 1.06% 1.01% 0.94%
</TABLE>
At September 30, 1998, non-performing assets increased by $1.3 million from June
30, 1998 and by $1.9 million from December 31, 1997. The increase from December
31, 1997 reflects primarily the non-accrual loan status of two loans each with a
balance of $1.8 million to the same borrower on which a $5.1 million partial
loan charge-off was taken in the second quarter of 1998. One of these loans for
$1.8 million is subject to an Export/Import Bank guarantee. The increase from
June 30, 1998 to September reflects a change in the overall volume of
non-accrual loans. The ratio of non-performing assets to total loans and other
real estate has increased from 0.94% to 1.06% from December 31, 1997.
Republic Banking Corporation of Florida 16
<PAGE>
- --------------------------------------------------------------------------------
ANALYSIS OF FINANCIAL CONDITION--(CONTINUED)
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>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------------------------------------------------
1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average loans outstanding $ 967,588 $ 965,827 $ 944,764 $ 983,091
=================================================================================================================================
Total loans outstanding at end of period 1,002,528 953,052 1,002,528 953,052
=================================================================================================================================
Allowance for loan losses at beginning of period........... $ 11,362 $ 12,884 $ 11,999 $ 11,578
Provision for loan losses.................................. 822 1,473 6,317 3,604
Charge-offs:
Commercial and industrial............................. (378) (1,682) (6,608) (2,119)
Real estate........................................... (37) (26) (91) (146)
Consumer.............................................. (210) (656) (819) (1,765)
Foreign............................................... - - - -
Recoveries:
Commercial and industrial............................. 510 104 851 512
Real estate........................................... 100 1 131 14
Consumer.............................................. 102 111 452 531
Foreign............................................... - - 39 -
- ---------------------------------------------------------------------------------------------------------------------------------
Net loan recoveries (charge-offs).......................... 87 (2,148) (6,045) (2,973)
- ---------------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses at end of period................. $ 12,271 $ 12,209 $ 12,271 $ 12,209
=================================================================================================================================
Ratio of allowance to end of period loans.................. 1.22% 1.28% 1.22% 1.28%
Ratio of net loan recoveries (charge-offs) to
average loans......................................... (0.01) 0.22 0.64 0.30
Ratio of allowance to end of period
non-performing loans.................................. 143.04 79.70 143.04 79.70
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Recoveries exceeded loan charge-offs for the third quarter of 1998. Net
charge-offs for the nine month period ended September 30, 1998 were $6.0 million
as compared to $3.0 million for the comparable period in 1997. Charge-off
experience for 1998 is heavily impacted by a $5.1 million partial charge-off on
a single large commercial loan during the second quarter of 1998.
Management believes that the loss experience in the second quarter is not
indicative of overall portfolio quality.
INVESTMENT SECURITIES AND OTHER EARNING ASSETS
Average investment securities and other temporary investments represent $428.0
million, or 28.0%, of average assets for the third quarter of 1998. The
investment securities portfolio decreased by $24.5 million from June 30, 1998 to
September 30, 1998 and increased by $2.4 million from December 31, 1997 to
September 30, 1998. As of September 30, 1998, U.S. government agency securities
comprised 70.5% of investment securities and U.S. Treasury obligations comprised
21.5% of investment securities. The balance of investment securities is composed
primarily of investment grade securities, principally bank qualified municipal
obligations and equity investments in the Federal Home Loan Bank and the Federal
Reserve Bank.
Temporary investments declined by $37.2 million from December 31, 1997 to
September 30, 1998. The decline in temporary investments helped to fund the
growth in loans during the period.
17 Republic Banking Corporation of Florida
<PAGE>
- --------------------------------------------------------------------------------
ANALYSIS OF FINANCIAL CONDITION--(CONTINUED)
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.
During the third quarter of 1998, Republic announced a stock repurchase program
for up to 500,000 shares or 2.3% of its common stock. The Board of Directors
authorized the repurchase of common stock in the open market on a "time-to-time"
basis over an 18 month period, depending upon market conditions and subject to
compliance with all applicable securities laws. As of September 30, 1998,
Republic had repurchased 55,000 shares under this plan at an average price of
$11.52 per share.
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 September 30, 1998 to the minimum and well capitalized
regulatory standards.
<TABLE>
<CAPTION>
ACTUAL RATIO
MINIMUM REQUIRED WELL-CAPITALIZED AT SEPTEMBER 30, 1998
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Leverage ratio....................... 3.00%(1) N/A % 10.35%
Tier 1 risk-based capital ratio...... 4.00 6.00 16.92
Risk-based capital ratio............. 8.00 10.00 18.17
</TABLE>
(1) The FRB may require Republic to maintain a leverage ratio of up to 200
basis points above the required minimum.
DERIVATIVES
At September 30, 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. The
investment portfolio contains securities with callable options.
DEPOSITS AND OTHER FUNDING SOURCES
End of period deposits at September 30, 1998 increased by $14.6 million, or
1.14%, from June 30, 1998. End of period borrowings at September 30, 1998
decreased by $0.7 million, or 1.14%, from June 30, 1998.
End of period deposits at September 30, 1998 decreased by $5.4 million, or 0.4%
from December 31, 1997. End of period borrowings at September 30, 1998 increased
by $8.6 million, or 15.2%, from December 31, 1997.
Republic Banking Corporation of Florida 18
<PAGE>
- --------------------------------------------------------------------------------
ANALYSIS OF FINANCIAL CONDITION--(CONTINUED)
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.
Temporary investments and debt securities are the primary sources of liquidity.
Additional liquidity is provided by loan repayments and available funding
sources.
Republic uses GAP analysis as an analytical tool but recognizes that
shortcomings are inherent in GAP analysis because 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.
The use of modeling techniques also has limitations and may not fully reflect
market risk exposures. Republic's time deposit funding sources have contractual
penalties for early withdrawal, nonetheless, changes in interest rates and other
individual depositor considerations may affect the actual timing of fund
withdrawal and the model cash flow assumptions. Similarly, term loans are
subject to refinancing in a declining rate environment, in many instances with
small cost to the borrowers, that could affect cash flow assumptions. Republic's
modeling approach takes into consideration an assumed prepayment speed for term
residential mortgage loans. The prepayment speed is defined based on prevailing
market conditions at the time of each quarterly assessment.
The majority of Republic investment debt securities are callable at the option
of the issuer prior to the final maturity. The effect of this call feature on
future cash flows will vary depending on the coupon of the underlying security,
current market interest rates, and expected direction of interest rate movement.
The effect of a 200 basis point rise in the rate sensitivity analysis may have a
different effect on net interest income than the effect of a 200 basis point
decrease, depending on the expected maturity of the callable instruments under
each scenario. Management utilizes a valuation of the investment portfolio by a
third party in assessing the impact of a 200 basis point change on the expected
maturity of callable securities and its corresponding effect on cash flows and
net interest income.
Time deposits and other core deposit sources on which rates are set by
management such as savings deposits will not necessarily re-price in a parallel
fashion to money market interest rates. Taking this into consideration,
management has established interest rate floors for certain categories of core
deposits, such as savings and interest bearing checking accounts, in its rate
sensitivity simulation.
Based on the September 30, 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 1% on its net interest income for the
same period.
For the table below, savings deposits are reflected as re-priceable in the 0-30
days window. Republic believes that these deposits on which rates are set by
management will re-price more slowly than the GAP analysis indicates. Callable
investment securities are categorized as subject to re-pricing based on the call
date of the instruments, which is the most likely scenario in a declining rate
environment. A rapid rise in interest rates could yield a different re-pricing
result than that reflected in the table. Management considers the call date to
be the most likely re-pricing window under the current rate environment.
19 Republic Banking Corporation of Florida
<PAGE>
- --------------------------------------------------------------------------------
ANALYSIS OF FINANCIAL CONDITION--(CONTINUED)
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 September 30, 1998 and GAP analysis information.
<TABLE>
<CAPTION>
VOLUMES SUBJECT TO REPRICING WITHIN
----------------------------------------------------------------------------------------------
OVER
1 YEAR 1-2 YEARS 2-3 YEARS 3-4 YEARS 4-5 YEARS 5 YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Federal funds sold and other
temporary investments ....... $ 39,744
Average interest yield ....... 6.14%
Taxable securities ............... 209,442 128,554 5,356 -- 100 8,629
Average interest yield ...... 6.31% 6.09% 6.10% --% 6.75% 6.88%
Tax-exempt securities ............ 3,016 860 2,440 2,453 4,178 10,398
Average interest yield ...... 4.61% 4.97% 5.28% 5.32% 5.31% 5.31%
Total loans ...................... 576,282 54,347 64,900 79,303 63,171 164,525
Average interest yield ...... 8.79% 8.89% 8.80% 8.81% 8.70% 8.12%
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest earning assets .... 828,484 183,761 72,696 81,756 67,449 183,552
- -----------------------------------------------------------------------------------------------------------------------------------
INTEREST BEARING LIABILITIES:
Demand, money market and
savings deposits ............ 307,260 -- -- -- -- --
Average interest rate ....... 3.00% -- -- -- -- --
Certificates of deposit and other
time deposits ............... 644,232 92,195 617 484 1,562 9
Average interest rate ....... 5.45% 5.63% 5.46% 6.19% 5.74% 5.27%
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest bearing deposits .. 951,492 92,195 617 484 1,562 9
- -----------------------------------------------------------------------------------------------------------------------------------
Securities sold under
repurchase agreements ....... 56,956 -- -- -- -- --
Average interest rate ....... 4.76% -- -- -- -- --
Other borrowings ................. 7,772 -- -- -- -- --
Average interest rate ....... 5.55% -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest bearing liabilities 1,016,220 92,195 617 484 1,562 9
- -----------------------------------------------------------------------------------------------------------------------------------
Period GAP .......................... (187,737) 91,566 72,079 81,272 65,887 183,543
Cumulative GAP ...................... (187,737) (96,171) (24,092) 57,180 123,067 306,610
Period GAP to total assets .......... (12.17)% 5.94% 4.67% 5.27% 4.27% 11.90%
Cumulative GAP to total assets ...... (12.17)% (6.24)% (1.56)% 3.71% 7.98% 19.88%
Cumulative interest earning assets
to cumulative interest bearing
liabilities .................... 81.53% 91.32% 97.83% 105.15% 111.08% 127.60%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------
ESTIMATED
TOTAL FAIR VALUE
-----------------------------
<S> <C> <C>
INTEREST EARNING ASSETS:
Federal funds sold and other
temporary investments ....... 39,744 $ 39,744
Average interest yield ....... 6.14%
Taxable securities ............... 352,081 354,602
Average interest yield ...... 6.24%
Tax-exempt securities ............ 23,345 24,580
Average interest yield ...... 5.21%
Total loans ...................... 1,002,528 1,009,868
Average interest yield ...... 8.68%
----------------------------
Total interest earning assets .... 1,417,698 1,428,794
----------------------------
INTEREST BEARING LIABILITIES:
Demand, money market and
savings deposits ............ 307,260 307,260
Average interest rate ....... 3.00%
Certificates of deposit and other
time deposits ............... 739,099 741,790
Average interest rate ....... 5.47%
----------------------------
Total interest bearing deposits .. 1,046,359 1,049,050
----------------------------
Securities sold under
repurchase agreements ....... 56,956 56,999
Average interest rate ....... 4.76%
Other borrowings ................. 7,772 7,772
Average interest rate ....... 5.55%
----------------------------
Total interest bearing liabilities 1,111,087 1,113,821
----------------------------
Period GAP .......................... 306,610
Cumulative GAP ......................
Period GAP to total assets ..........
Cumulative GAP to total assets ......
Cumulative interest earning assets
to cumulative interest bearing
liabilities ....................
----------------------------
</TABLE>
Republic Banking Corporation of Florida 20
<PAGE>
- --------------------------------------------------------------------------------
ANALYSIS OF FINANCIAL CONDITION--(CONTINUED)
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 third quarter of 1998 was 36.8%, and for
1997 it was 30.3%. The effective tax rate for the nine months ended September
30, 1998 and September 30, 1997 was 33.6% and 32.3%, respectively. The 1997 tax
rates were affected by the closing of a federal tax audit in the second half of
1997 with a reduction in the amounts accrued for federal income taxes.
YEAR 2000
Almost all of Republic's operations are supported by accounting and
recordkeeping computerized systems and are dependent on the capability of
software applications and operating systems to function properly in the year
2000. Republic recently converted, under a license with its main existing
software vendor, all of its loan, deposit and principal accounting applications
to a year 2000 compliant system, replacing an existing licensing arrangement
which was to expire in 1999. This new software has required additional hardware
capacity. Costs associated with this endeavor are related to previously
scheduled software and hardware acquisitions and are not principally the result
of the year 2000 programming, as Republic would have incurred these costs
regardless of the year 2000 issue. Republic has evaluated the impact of the year
2000 on other smaller applications, PC computer hardware and other equipment,
including telephone systems, elevators and air conditioning systems. Republic
believes that all essential information technology and non-information
technology systems will be year 2000 compliant. To this end Republic has
substantially completed the assessment and renovation phases of its mission
critical systems, and has commenced testing of the renovated systems. Banking
regulations require completion of the testing phase by June 1999. The costs
associated with year 2000 compliance will not be material to Republic.
Republic has and continues to assess whether customers, vendors, service
providers and funds providers may have compliance issues which will affect their
interaction with Republic. It is too early to determine individual counterparts'
final state of readiness for the year 2000. This is an ongoing monitoring
process and greater knowledge as to counterpart readiness should be evident in
the first half of 1999. Republic will continue to monitor counterpart readiness,
including critical vendors and customers, and take precautions, including
terminating relationships, to minimize the effect of counterpart non-compliance.
Republic does not believe that the year 2000 issue will have a material adverse
effect on its results of operation, liquidity or on the operation of critical
data processing functions.
Republic's normal contingency plans include off-site system recovery at a
back-up facility, as well as manual processing capabilities.
PART I
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations".
21 Republic Banking Corporation of Florida
<PAGE>
- --------------------------------------------------------------------------------
OTHER INFORMATION
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
==========
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 59.0% 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.
During the third quarter of 1998, Republic announced a stock repurchase program
for up to 500,000 shares or 2.3% of its common stock. The Board of Directors
authorized the repurchase of common stock in the open market on a "time-to-time"
basis over an 18 month period, depending upon market conditions and subject to
compliance with all applicable securities laws.
As of September 30, 1998, Republic had repurchased 55,000 shares under this plan
at an average price of $11.52 per share. Shares of common stock were repurchased
at market prices ranging from $11.125 to $11.875 during the quarter ended
September 30, 1998.
Republic Banking Corporation of Florida 22
<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: November 16, 1998 By: /s/ BERNARDO M. ARGUDIN
---------------------------------------------
Vice President and Chief Financial Officer
and Principal Accounting Officer
23 Republic Banking Corporation of Florida
<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 SEPTEMBER 30, 1998 AND
THE CONSOLIDATED STATEMENT OF OPERATIONS FOR THREE MONTHS ENDED IN
SEPTEMBER 30, 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> JUL-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 40,757
<INT-BEARING-DEPOSITS> 4,731
<FED-FUNDS-SOLD> 35,013
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 129,042
<INVESTMENTS-CARRYING> 246,384
<INVESTMENTS-MARKET> 250,141
<LOANS> 1,002,528
<ALLOWANCE> 12,271
<TOTAL-ASSETS> 1,542,658
<DEPOSITS> 1,296,815
<SHORT-TERM> 64,728
<LIABILITIES-OTHER> 10,431
<LONG-TERM> 0
0
0
<COMMON> 213
<OTHER-SE> 169,091
<TOTAL-LIABILITIES-AND-EQUITY> 1,542,658
<INTEREST-LOAN> 21,897
<INTEREST-INVEST> 5,980
<INTEREST-OTHER> 594
<INTEREST-TOTAL> 28,471
<INTEREST-DEPOSIT> 12,272
<INTEREST-EXPENSE> 13,024
<INTEREST-INCOME-NET> 15,447
<LOAN-LOSSES> 822
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 13,469
<INCOME-PRETAX> 7,069
<INCOME-PRE-EXTRAORDINARY> 7,069
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,423
<EPS-PRIMARY> 0.21
<EPS-DILUTED> 0.21
<YIELD-ACTUAL> 8.09
<LOANS-NON> 8,137
<LOANS-PAST> 391
<LOANS-TROUBLED> 51
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 11,362
<CHARGE-OFFS> 625
<RECOVERIES> 712
<ALLOWANCE-CLOSE> 12,271
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
