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 JUNE 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 June 30,
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
Item 4. Submission of Matters to a Vote of Security Holders
<PAGE>
PART I
ITEM 1.
CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31,
--------------------------
1998 1997
- --------------------------------------------------------------------------------
(UNAUDITED)
-----------
(IN THOUSANDS,
EXCEPT SHARE AMOUNTS)
ASSETS
Cash and federal funds sold:
Non-interest earning ............................. $ 54,240 $ 49,362
Federal funds sold ............................... 58,011 76,038
---------- ----------
112,251 125,400
Interest earning deposits in other banks ......... 721 873
Hold-to-maturity securities (market value of
$275,956 at June 30, 1998, and $214,555
at December 31, 1997 .......................... 274,726 213,060
Available-for-sale securities .................... 125,163 159,928
Loans receivable, net ............................ 912,288 917,411
Premises and equipment, net ...................... 58,382 58,737
Customers' acceptance liability .................. 3,770 3,313
Accrued interest receivable ...................... 12,144 12,941
Other real estate owned .......................... 2,089 2,047
Deferred taxes ................................... 3,641 3,852
Other assets ..................................... 7,040 4,829
Goodwill and other intangibles ................... 12,080 12,615
---------- ----------
Total assets ..................................... $1,524,295 $1,515,006
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing ............................. $ 262,548 $ 261,675
Interest bearing:
NOW and money market ............................. 181,214 177,539
Savings .......................................... 128,865 127,597
Time ............................................. 709,625 735,406
---------- ----------
1,282,252 1,302,217
Securities sold under repurchase agreements ...... 46,796 45,594
Other short-term borrowings ...................... 18,678 10,573
Acceptances outstanding .......................... 3,770 3,313
Accrued interest payable ......................... 2,669 2,763
Income taxes payable ............................. -- 383
Other liabilities ................................ 2,408 2,684
---------- ----------
Total liabilities ................................ 1,356,573 1,367,527
---------- ----------
Minority interest in consolidated subsidiary ..... 1,376 1,348
---------- ----------
Stockholders' equity:
Common stock-authorized 50,000,000 shares of
%0.01 par value: 21,326,399 shares issued
and outstanding at June 30, 1998, and
and 20,093,129 at Dec. 31, 1997 ............... 213 201
Capital surplus .................................. 115,532 99,240
Retained earnings ................................ 50,366 46,311
Net unrealized gain on available-for-sale
securities, net of tax ........................ 233 379
---------- ----------
Total stockholders' equity ....................... 166,344 146,131
---------- ----------
Total liabilities and stockholders' equity ....... $1,524,295 $1,515,006
========== ==========
See condensed notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -------------------
1998 1997 1998 1997
- -------------------------------------------------------------------------------------
(UNAUDITED)
---------------------------------------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans ................ $21,150 $22,631 $42,134 $44,548
Investment securities:
Taxable interest .......................... 5,630 4,368 11,116 8,605
Tax exempt interest ....................... 366 496 734 1,026
Interest on deposits in other banks ....... 192 73 282 147
Interest on federal funds sold ............ 666 1,180 1,471 2,560
------- ------- ------- -------
Total interest income ..................... 28,004 28,748 55,737 56,886
------- ------- ------- -------
Interest expense:
Deposits .................................. 11,839 11,932 23,809 23,620
Securities sold under repurchase agreements 616 615 1,127 1,163
Other borrowings .......................... 140 181 240 317
------- ------- ------- -------
Total interest expense .................... 12,595 12,728 25,176 25,100
------- ------- ------- -------
Net interest income ....................... 15,409 16,020 30,561 31,786
Provision for loan losses ................. 3,995 1,231 5,495 2,131
------- ------- ------- -------
Net interest income after provision for
loan loses ............................. 11,414 14,789 25,066 29,655
------- ------- ------- -------
Non-interest income:
Service charges on deposit accounts ....... 3,004 2,974 5,988 6,112
Other charges, commissions and fees ....... 2,943 3,080 5,612 6,023
Gain (loss) on sale of securities ......... -- -- 53 --
------- ------- ------- -------
5,947 6,054 11,653 12,135
------- ------- ------- -------
Non-Interest expenses:
Salaries and wages ........................ 5,048 5,317 10,241 10,508
Employee benefits ......................... 1,490 1,379 2,886 2,874
Occupancy expense ......................... 1,626 1,561 3,291 2,889
Furniture and equipment expense ........... 770 710 1,524 1,268
Other real estate owned expense ........... 58 13 105 208
Other ..................................... 4,389 4,608 8,452 8,511
------- ------- ------- -------
13,381 13,588 26,499 26,258
------- ------- ------- -------
Income before provision for income taxes .. 3,980 7,255 10,220 15,532
Provision for income taxes ................ 1,267 2,254 3,198 5,162
------- ------- ------- -------
Income before minority interest ........... 2,713 5,001 7,022 10,370
Minority interest ......................... 26 347 67 722
------- ------- ------- -------
Net income ................................ $ 2,687 $ 4,654 $ 6,955 $ 9,648
------- ------- ------- -------
Basic and diluted earnings per share ...... $ 0.13 $ 0.25 $ 0.33 $ 0.51
======= ======= ======= =======
</TABLE>
See condensed notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
--------------------- UNREALIZED
SHARES GAIN (LOSS) ON TOTAL
ISSUED AND PAR CAPITAL RETAINED AVAILABLE-FOR-SALE STOCKHOLDERS'
OUTSTANDING VALUE SURPLUS EARNINGS SECURITIES, NET EQUITY
- ------------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 1, 1996 .................. 18,873 $ 9,437 $ 77,221 $ 37,785 $ 250 $ 124,693
Cash dividend ................................ -- -- -- (9,814) -- (9,814)
Net income ................................... -- -- -- 18,340 -- 18,340
Shares issued to acquire shares of minority
interest in subsidiary .................. 1,220 610 12,173 -- 29 12,812
Net change in unrealized gain on
available-for-sale securities, net of tax -- -- -- -- 100 100
Change in par value .......................... -- (9,846) 9,846 -- -- --
------ --------- --------- --------- --------- ---------
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 ................................ -- -- -- (1,494) -- (1,494)
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 $ 50,366 $ 233 $ 166,344
====== ========= ========= ========= ========= =========
See condensed notes to consolidated financial statements.
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------
1998 1997
- ------------------------------------------------------------------------------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income ................................................ $ 6,955 $ 9,648
--------- ---------
Adjustments to reconcile net income to net cash
provided by operating activities:
Minority interest in consolidated subsidiary .............. 67 722
Depreciation and amortization ............................. 1,641 1,124
Investment (accretion) amortization, net .................. (72) (448)
Amortization of goodwill and other intangibles ............ 568 473
Provision for loan losses ................................. 5,495 2,131
Gain on sale of securities ................................ (53) --
Construction period interest credit ....................... -- (390)
Other real estate write down .............................. 15 184
Changes in assets and liabilities:
Decrease in unearned income ............................... (80) (1,286)
Decrease (increase) in accrued interest receivable ........ 797 (1,224)
Decrease in other assets .................................. (1,906) (770)
Increase in income taxes payable .......................... (383) (970)
Decrease (increase) in accrued interest payable ........... (94) 31
Decrease in other liabilities ............................. (276) (482)
--------- ---------
Total adjustments ......................................... 5,719 (905)
--------- ---------
Net cash provided by operating activities ................. 12,674 8,743
--------- ---------
Cash flows from investing activities:
Proceeds from redemptions of held-to-maturity securities .. 63,124 28,041
Purchases of held-to-maturity securities .................. (68,461) (56,843)
Proceeds form sales or redemptions of available-for-sale
securities .............................................. 103,047 41,480
Purchases of available-for-sale securities ................ (124,726) (32,523)
Net loan payments (originations) .......................... (353) 5,991
Investment in premises and equipment ...................... (1,287) (7,832)
Other ..................................................... 118 193
--------- ---------
Net cash provided by (used in) investing activities ....... (28,538) (21,493)
--------- ---------
Cash flows from financing activities:
Net increase in demand deposits, NOW, money market and
savings account ......................................... 5,816 17,517
Net (decrease) increase in time deposits .................. (25,781) 7,225
Net increase in securities sold under repurchase agreements 1,202 20,539
Net increase (decrease) in other borrowings ............... 8,105 (2,582)
Issuance of common stock .................................. 16,304 --
Dividend paid by subsidiary to minority interest .......... (31) (734)
Cash dividends paid ....................................... (2,900) (9,814)
--------- ---------
Net cash provided by financing activities ................. 2,715 32,151
--------- ---------
Net increase in cash and cash equivalents ................. (13,149) 19,401
Cash and cash equivalents at beginning of the year ........ 125,400 129,180
--------- ---------
Cash and cash equivalents at end of the year .............. $ 112,251 $ 148,581
========= =========
</TABLE>
(continued)
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS---(CONTINUED)
SIX MONTHS ENDED
JUNE 30,
----------------
1998 1997
- --------------------------------------------------------------------------
(IN THOUSANDS)
(UNAUDITED)
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest ............................................. $25,270 $25,069
======= =======
Income taxes ......................................... 4,790 6,149
======= =======
Supplemental schedule of noncash investing activities:
Transfers from loans to other real estate owned ...... $ 61 $ 58
======= =======
See condensed notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
1998 1997 1998 1997
- ------------------------------------------------------------------------------------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C>
Net Income ..................................... $ 2,687 $ 4,654 $ 6,955 $ 9,648
------- ------- ------- -------
Other comprehensive income, net of tax:
Unrealized gain (loss) arising during period 6 470 (113) (58)
Less: reclassification adjustment for
gains included in net income ........... -- -- 33 --
------- ------- ------- -------
Other comprehensive income ..................... 6 470 (146) (58)
------- ------- ------- -------
Comprehensive income ........................... $ 2,693 $ 5,124 $ 6,809 $ 9,590
======= ======= ======= =======
</TABLE>
See condensed 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 and six-month period ended
June 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 June 30, 1998 and December 31, 1997, and
the results of operations and cash flows for the periods ended June 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 SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
--------------------- ---------------------
1998 1997 1998 1997
--------------------- ----------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Balance at beginning of period ... $ 13,166 $ 12,105 $ 11,999 $ 11,578
Provision charged to operations .. 3,995 1,231 5,495 2,131
-------- -------- -------- --------
17,161 13,336 17,494 13,709
-------- -------- -------- --------
Loans charged-off ................ (6,213) (670) (6,893) (1,666)
Less recoveries .................. 414 218 761 841
-------- -------- -------- --------
Net charge-offs ............. (5,799) (452) (6,132) (825)
-------- -------- -------- --------
Balance at end of period ......... $ 11,362 $ 12,884 $ 11,362 $ 12,884
======== ======== ======== ========
Loans not accruing interest at end
of period ................... $ 7,054 $ 9,183 $ 7,054 $ 9,183
======== ======== ======== ========
</TABLE>
<PAGE>
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
C. EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- ------------------------
1998 1997 1998 1997
- ------------------------------------------------------------------------- ------------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Basic Shares:
Weighted average common shares outstanding . 21,326,399 18,872,904 21,006,158 18,872,904
Earnings per common share .................. $ 0.13 $ 0.25 $ 0.33 $ 0.51
Diluted Shares:
Weighted average common shares outstanding . 21,326,399 18,872,904 21,006,128 18,872,904
Weighted average common shares assumed
outstanding to reflect dilutive effect
of common stock options................ 59,190 N/A 47,318 N/A
Total dilutive average common
shares outstanding .................... 21,385,589 18,872,904 21,053,446 18,872,904
Diluted earnings per share ................. $ 0.13 $ 0.25 $ 0.33 $ 0.51
</TABLE>
D. TAX EFFECT OF OTHER COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1998 JUNE 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 ..................... $ 10 $ (4) $ 6 $(184) $ 71 $(113)
Less: reclassification adjustment for
gains included in net income ...... -- -- -- 53 (20) 33
----- ----- ----- ----- ----- -----
Comprehensive income ...................... $ 10 $ (4) $ 6 $(237) $ 91 $(146)
===== ===== ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1997
---------------------------------- ---------------------------------
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 ..................... $ 765 $(295) $ 470 $ (94) $ 36 $ (58)
----- ----- ----- ----- ----- -----
Comprehensive income ...................... $ 765 $(295) $ 470 $ (94) $ 36 $ (58)
===== ===== ===== ===== ===== =====
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
PART I
ITEM 2.
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 second quarter
1998 net income of $2.7 million or $0.13 per average basic and diluted share,
compared to $4.7 million or $0.25 per average basic and diluted share in the
second quarter of 1997.
Second quarter 1998 results represent a return on average assets of 0.71%
compared to 1.22% for the second quarter of 1997 . Return on average
shareholders' equity was 6.53% for the second quarter of 1998 compared to 15.32%
for the second quarter of 1997.
The decline in net income, as compared to the second quarter of 1997, is
primarily a result of a higher provision for loan losses and a reduction in net
interest income.
Second quarter 1998 net income was also below first quarter of 1998 net income
of $4.3 million or $0.21 per average basic and diluted share.
Net income for the six month period ended on June 30, 1998 was $7.0 million or
$0.33 per average basic and diluted share, compared to $9.6 million or $0.51 per
average basic and diluted share for the comparable period in 1997.
Results for the six month period in 1998 represent a return on average assets of
0.92% compared to 1.27% for the comparable period in 1997. Return on average
shareholders' equity was 8.68% for the first six months of 1998 compared to
16.12% for the first six months of 1997.
<PAGE>
SELECTED QUARTERLY DATA
<TABLE>
<CAPTION>
AS OF AND FOR THE AS OF AND FOR THE
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, MARCH 31,
---------------------------- -----------------------------
1998 1997 1998 1997
- ---------------------------------------------------------------------------------------- -----------------------------
(UNAUDITED) (UNAUDITED)
-----------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income .................................... $ 28,004 $ 28,748 $ 27,734 $ 28,138
Interest expense ................................... 12,595 12,728 12,581 12,372
---------- ---------- ---------- ----------
Net interest income ................................ 15,409 16,020 15,153 15,766
Provision for loan losses .......................... 3,995 1,231 1,500 900
---------- ---------- ---------- ----------
Net interest income after provision for loan losses 11,414 14,789 13,653 14,866
Non-interest income ................................ 5,947 6,054 5,704 6,081
Non-interest expenses .............................. 13,381 13,588 13,115 12,669
---------- ---------- ---------- ----------
Net income before taxes ............................ 3,980 7,255 6,242 8,278
Provision for income tax expense ................... 1,267 2,254 1,932 2,909
Minority interest .................................. 26 347 41 375
---------- ---------- ---------- ----------
Net income ......................................... $ 2,687 $ 4,654 $ 4,269 $ 4,994
========== ========== ========== ==========
PER SHARE DATA:
Net income (quarter) ............................... $ 0.13 $ 0.25 $ 0.21 $ 0.26
Book value ......................................... 7.80 6.60 7.74 6.32
Tangible book value ................................ 7.23 6.13 7.16 5.85
Cash dividends ..................................... 0.07 -- 0.07 0.52
Weighted average common and common equivalent
shares outstanding (in thousands) ............. 21,326 18,873 20,682 18,873
BALANCE SHEET DATA:
Total assets ....................................... $1,524,295 $1,554,063 $1,543,577 $1,535,935
Securities ......................................... 399,889 351,414 386,471 302,095
Total Loans ........................................ 923,650 968,040 938,657 996,477
Allowance for loan losses .......................... 11,362 12,884 13,166 12,105
Total deposits ..................................... 1,282,252 1,344,868 1,303,190 1,332,532
Total shareholders' equity ......................... 166,344 124,469 165,145 119,345
AVERAGE BALANCE SHEET DATA:
Total assets ....................................... $1,516,761 $1,535,251 $1,516,697 $1,531,868
Securities ......................................... 387,286 307,637 379,668 308,578
Total Loans ........................................ 935,655 1,003,422 930,644 980,181
Allowance for loan losses .......................... 13,355 12,557 12,348 11,737
Total deposits ..................................... 1,278,899 1,328,275 1,298,918 1,328,359
Total shareholders' equity ......................... 165,148 121,830 154,699 119,574
PERFORMANCE RATIOS:
Return on average assets ........................... 0.71% 1.22% 1.14% 1.32%
Return on average equity ........................... 6.53 15.32 11.19 16.94
Net interest margin ................................ 4.48 4.58 4.47 4.56
Efficiency ratio ................................... 62.66 61.56 62.88 57.99
ASSET QUALITY RATIOS:
Non-performing assets to total loans
and other real estate ......................... 1.01% 0.94% 1.43% 1.57%
Net loan charge-offs to average loans .............. 2.49 0.18 0.15 0.16
Allowance for loan losses to total loans ........... 1.23 1.33 1.40 1.21
Allowance for loan losses to non-performing loans .. 156.93 192.73 115.17 89.74
CAPITAL RATIOS:
Leverage ratio (Tier 1 capital-to-total assets) .... 10.25% 7.53% 10.23% 7.85%
Average shareholders' equity to average total assets 10.89 7.94 10.20 7.81
Tier 1 risk-based capital ratio .................... 17.01 12.80 16.93 13.41
Total risk-based capital ratio ..................... 18.25 14.05 18.18 14.66
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS--(CONTINUED)
NET INTEREST INCOME
Net interest income declined by 3.8% from the second quarter of 1997 reflecting
a decline in interest earning asset volume and in net interest spread. Average
loan volume declined 6.8% and average interest earning assets declined by 1.5%.
The decline in loan volume was offset by increased investment volume and a
decrease in interest bearing liabilities of 3.8%.
Net interest margin decreased from 4.58% in the second quarter of 1997 to 4.48%
in the second quarter of 1998, and net interest spread decreased from 3.68% to
3.46%.
Net interest spreads were affected by a decline in the yield on earning assets
of 9 basis points resulting from the change in earning asset mix. Spreads were
also affected by an increase in the rate on interest bearing liabilities which
increased 13 basis points. This resulted from higher costs on a premium money
market product and growth in longer term public fund deposits.
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 JUNE 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.............................. $ 935,655 $ 21,150 9.07% $ 1,003,422 $ 22,631 9.05%
Taxable securities....................... 359,185 5,630 6.29 272,557 4,368 6.43
Tax-exempt securities.................... 28,101 366 5.22 35,080 496 5.67
Federal funds sold and other
temporary investments............... 57,374 858 6.00 90,629 1,253 5.55
----------- -------- ---- ----------- --------- ----
Total interest earning assets............ 1,380,315 28,004 8.14 1,401,688 28,748 8.23
-------- ---- --------- ----
Less allowance for loan losses........... 13,355 12,557
----------- -----------
Total interest earning assets, net of
allowance........................... 1,366,960 1,389,131
Non-earning assets....................... 149,801 146,120
----------- -----------
Total assets............................. $ 1,516,761 $ 1,535,251
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
Interest bearing demand deposits......... $ 56,974 $ 199 1.40% $ 64,222 $ 235 1.47%
Savings and money market accounts........ 255,055 2,098 3.30 256,345 1,801 2.82
State, county and municipal
certificates of deposit............. 62,381 886 5.70 29,026 396 5.47
Certificates of deposit.................. 643,884 8,656 5.39 708,392 9,500 5.38
Federal funds purchased and securities
sold under repurchase agreements.... 52,729 646 4.91 54,444 671 4.94
Other borrowings......................... 8,027 110 5.50 8,892 125 5.64
----------- -------- ---- ----------- --------- ----
Total interest bearing liabilities....... 1,079,050 12,595 4.68 1,121,321 12,728 4.55
-------- ---- --------- ----
Non-interest bearing demand deposits..... 260,605 270,290
Other liabilities........................ 10,589 12,753
----------- -----------
Total liabilities........................ 1,350,244 1,404,364
Minority interest........................ 1,369 9,057
Shareholders' equity..................... 165,148 121,830
----------- -----------
Total liabilities and shareholders'
equity.............................. $ 1,516,761 $ 1,535,251
=========== ===========
Net interest income...................... $ 15,409 $ 16,020
======== ========
Net interest spread...................... 3.46% 3.68%
==== ====
Net interest margin...................... 4.48% 4.58%
==== ====
</TABLE>
<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
JUNE 30, 1998 V. 1997
---------------------------------------
INCREASE (DECREASE)
DUE TO
------------------------
VOLUME RATE TOTAL
- ---------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Interest earning assets:
Total loans ....................................... $(1,529) $ 48 $(1,481)
Securities ........................................ 1,259 (127) 1,132
Federal funds sold and other temporary investments (460) 65 (395)
------- ------- -------
Total increase (decrease) in interest income ...... (730) (14) (744)
------- ------- -------
Interest bearing liabilities:
Interest bearing demand deposits .................. (27) (9) (36)
Savings and money market accounts ................. (9) 306 297
State, county and municipal certificates of deposit 455 35 490
Certificates of deposit and other time deposits ... (865) 21 (844)
Federal funds purchased and securities sold under
repurchase agreements ........................ (21) (4) (25)
Other borrowings .................................. (12) (3) (15)
------- ------- -------
Total increase (decrease) in interest expense ..... (479) 346 (133)
------- ------- -------
Increase (decrease) in net interest income ........ $ (251) $ (360) $ (611)
======= ======= =======
</TABLE>
Net interest income for the second quarter of 1998 increased by 1.7% as compared
to the first quarter of 1998. This increase was primarily a result of one more
interest bearing day in the second quarter. Net interest margin remained level
in the second quarter at 4.48% as compared to 4.47% for the first quarter of
1998.
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 second quarter of 1998 increased to $4.0 million from $1.2 million in
the second quarter of 1997, a 225% increase. At June 30, 1998 the allowance for
loan losses, at $11.4 million, represented 1.2% of total loans and 156.9% of
non-performing loans.
Net charge-offs for the 1998 second quarter were $5.8 million, or 0.62% of
average loans, as compared to $0.5 million, or 0.05% of average loans, in the
second quarter of 1997. Net interest income for the six month period ended June
30, 1998 declined by 3.9% from the comparable period in 1997. Net interest
margin for the six months in 1998 was 4.48% as compared to 4.57% for the first
six months of 1997. The decline in net interest income reflects a decline in
earning assets of 1.7% and a narrowing of the net interest margin.
A partial loss on one large commercial loan, which was placed in non-performing
status at the end of the first quarter, affected the provision for loan losses
for the second quarter. The partial charge-off on this loan was $5.1 million.
The provision for the second quarter of 1998 was also higher than the provision
for the first quarter of 1998 of $1.5 million.
The provision for the six month period of $5.5 million represents a 162%
increase from the $2.1 million provision for the first six month of 1997.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS--(CONTINUED)
NON-INTEREST INCOME
Non-interest income, excluding securities transactions, declined by 1.8% from
the second quarter of 1997. 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.
Non interest income for the second quarter of $5.9 million was 4% above the $5.7
million in non interest income for the first quarter of 1998. Non interest
income for the six month period of $11.7 million is 4% below the $12.1 million
reported for the first six months of 1997.
The following table represents, for the periods indicated, the major categories
of non-interest income.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
1998 1997 1998 1997
- -----------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Service charges on deposit accounts $ 3,004 $ 2,974 $ 5,988 $ 6,112
Merchant credit card discounts .... 2,019 2,094 3,809 4,155
Letter of credit fees ............. 258 270 470 516
Gains on sale of securities ....... -- -- 53 --
Other non-interest income ......... 666 716 1,333 1,352
------- ------- ------- -------
Total non-interest income.... $ 5,947 $ 6,054 $11,653 $12,135
======= ======= ======= =======
</TABLE>
NON-INTEREST EXPENSE
Non-interest expense for the second quarter of 1998 decreased by 1.5% from the
second quarter of 1997. Personnel costs declined by 2.4% in the same period.
Occupancy and furniture and equipment costs increased 5.5% for the same period.
This reflects the impact of the move into Republic's corporate offices during
the second quarter of 1997, an increase in related property tax costs in 1998,
and an increase in furniture and equipment expenses associated with the
corporate move and computer operations. Other non-interest expenses declined by
4.0%.
Non-interest expense for the second quarter of 1998 increased by 1% from the
first quarter of 1998.
Non interest expense for the six month period ended June 30, 1998 increased by
0.9% from the comparable period in 1997 primarily from the corporate move and
computer operations as noted above.
<PAGE>
The following table represents, for the periods indicated, the major categories
of non-interest expenses.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ ------------------------
1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Employee compensation and benefits ..... $ 6,538 $ 6,696 $ 13,127 $ 13,382
-------- -------- -------- --------
Non-staff expenses:
Occupancy .............................. 1,626 1,561 3,291 2,889
Furniture and equipment ................ 770 710 1,524 1,268
Merchant credit card interchange fees .. 1,464 1,441 2,674 2,892
Professional fees ...................... 170 137 328 215
FDIC assessment ........................ 67 65 133 128
Advertising ............................ 296 538 392 698
Amortization of intangibles ............ 284 237 568 473
Printing and supplies .................. 233 206 488 472
Other real estate owned ................ 58 13 105 208
Fraud losses (recoveries), net ......... 88 67 117 181
Capitalized construction interest credit -- (76) -- (390)
Other .................................. 1,787 1,993 3,752 3,842
-------- -------- -------- --------
Total non-staff expenses ............... 6,843 6,892 13,372 12,876
-------- -------- -------- --------
Total non-interest expense ............. 13,381 13,588 26,499 26,258
======== ======== ======== ========
</TABLE>
<PAGE>
ANALYSIS OF FINANCIAL CONDITION
LOAN PORTFOLIO
End of period gross loans at June 30, 1998 declined by $5.8 million, or 0.6%,
from December 31, 1997. Loan portfolio composition shifted during this six month
period with major declines in commercial loans, down $39.0 million or 13.7%,
consumer loans, down $11.5 million or 19.9% and major increases in commercial
real estate and construction loans, up $39.9 million or 12.8% and residential
first mortgage loans, up $12.6 million or 8.1%.
End of period gross loans at June 30, 1998 declined by $15.0 million, or 1.6%,
from March 31, 1998. Commercial real estate and construction loans increased by
7.8% and residential first mortgage loans increased by 4.9% during the quarter.
Growth in the real estate lending segments was offset primarily by a decline of
12.0% in commercial loans, 8.1% in international loans, and 10.2% in consumer
and equity loans.
Growth in real estate lending reflects an increased emphasis in this type of
lending by Republic. 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.
The following table reflects the major classification of loans for the periods
indicated.
<TABLE>
<CAPTION>
JUNE 30, MARCH 31, DECEMBER 31,
--------- --------- ------------
1998 1998 1997
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial .......................... $ 246,715 $ 280,298 $ 285,733
Commercial real estate
and construction ............... 350,188 324,862 310,336
International ....................... 89,763 97,664 92,734
Residential first mortgages ......... 167,507 159,610 154,864
Residential equity lines ............ 14,702 15,867 16,487
Consumer ............................ 46,506 52,262 58,024
Overdrafts .......................... 4,712 2,514 5,352
Bankers' acceptances ................ 5,992 8,026 8,395
--------- --------- ---------
926,085 941,103 931,925
Unearned income ..................... (2,435) (2,446) (2,515)
--------- --------- ---------
923,650 938,657 929,410
Allowance for loan losses
and transfer risk .............. (11,362) (13,166) (11,999)
--------- --------- ---------
Loans, net .......................... $ 912,288 $ 925,491 $ 917,411
========= ========= =========
</TABLE>
<PAGE>
ANALYSIS OF FINANCIAL CONDITION--(CONTINUED)
NON-PERFORMING ASSETS
The following table presents information regarding non-performing assets at the
dates indicated.
<TABLE>
<CAPTION>
JUNE 30, MARCH 31, DECEMBER 31,
-------- --------- ------------
1998 1998 1997
- ----------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Non-accrual loans ............................ $7,054 $10,959 $5,863
Restructured loans ........................... 53 56 371
Accruing loans 90 days
or more past due .......................... 133 417 451
Other real estate ............................ 2,089 2,050 2,047
------ ------- ------
Total non-performing assets ............... $9,329 $13,482 $8,732
====== ======= ======
Non-performing assets to total loans
and other real estate ..................... 1.01% 1.43% 0.94%
</TABLE>
The decline in non-performing assets from March 31, 1998 to June 30, 1998 is
primarily the result of loan charge-offs in the second quarter.
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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- -------------------------
1998 1997 1998 1997
- -----------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average loans outstanding ............................ $ 935,655 $ 1,003,422 $ 907,454 $ 967,567
========= =========== ========= =========
Total loans outstanding at end of period ............. 923,650 968,040 923,650 968,040
========= =========== ========= =========
Allowance for loan losses at beginning of period ..... $ 13,166 $ 12,105 $ 11,999 $ 11,578
Provision for loan losses ............................ 3,995 1,231 5,495 2,131
Charge-offs:
Commercial and industrial ....................... (5,932) (175) (6,230) (437)
Real estate ..................................... (25) -- (54) (120)
Consumer ........................................ (256) (495) (609) (1,109)
Foreign ......................................... -- -- -- --
Recoveries:
Commercial and industrial ....................... 206 53 380 408
Real estate ..................................... 25 11 31 13
Consumer ........................................ 183 154 350 420
Foreign ......................................... -- -- -- --
--------- ----------- --------- ---------
Net loan charge-offs ................................. (5,799) (452) (6,132) (825)
--------- ----------- --------- ---------
Allowance for loan losses at end of period ........... $ 11,362 $ 12,884 $ 11,362 $ 12,884
========= =========== ========= =========
Ratio of allowance to end of period loans ............ 1.23% 1.33% 1.23% 1.33%
Ratio of net loan charge-offs to
average loans (quarter/semi) .................... 0.62 0.05 0.68 0.09
Ratio of allowance to end of period
non-performing loans ............................ 156.93 129.34 156.93 129.34
</TABLE>
<PAGE>
ANALYSIS OF FINANCIAL CONDITION--(CONTINUED)
Net charge-offs for the second quarter of 1998 of $5.8 million reflect a $5.1
million partial charge-off on a single large commercial loan. This loan was
placed on non-performing status in March 1998 with a specific allocation of $4.4
million. While a significant portion of the loss exposure was provided for in
the first quarter provision, the actual charge-off in the second quarter as well
as other smaller losses affected the overall allowance evaluation process and
resulted in a provision of $4.0 million for the second quarter.
Net charge-offs for the six month period ended June 30, 1998 were $6.1 million
as compared to $0.8 million for the comparable period in 1997. 1998 charge-off
experience is heavily impacted by the $5.1 million charge-off cited above.
Management considers the loss experience in the second quarter to not be
indicative of overall portfolio quality at June 30, 1998 and it believes the
allowance of $11.4 million to be adequate for estimated probable losses in the
loan portfolio.
INVESTMENT SECURITIES AND OTHER EARNING ASSETS
Average investment securities and other temporary investments represent $444.7
million, or 29.3%, of average assets for the second quarter of 1998. The
investment securities portfolio grew by $13.4 million from March 31, 1998 to
June 30, 1998 and by $26.9 million from December 31, 1997 to June 30, 1998.
Investment activity during the first six months of 1998 was centered on
purchasing U.S. government agency securities. As of June 30, 1998, U.S.
government agency securities comprised 69% of investment securities and U.S.
Treasury obligations comprised 23% of investment securities. The balance of
investment securities is composed of investment grade securities, primarily bank
qualified municipal obligations.
DERIVATIVES
At June 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 June 30, 1998 decreased by $20.9 million, or 1.6%,
from March 31, 1998. End of period borrowings at June 30, 1998 increased by $2.5
million, or 4.0%, from March 31, 1998.
End of period deposits at June 30, 1998 decreased by $20.0 million, or 1.5% from
December 31, 1997, End of period borrowings at June 30, 1998 increased by $9.3
million or 16.6% from December 31, 1997.
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.
<PAGE>
The following table provides a comparison of Republic's leverage and risk-based
capital ratios as of June 30, 1998 to the minimum and well capitalized
regulatory standards.
<TABLE>
<CAPTION>
ACTUAL RATIO
MINIMUM REQUIRED WELL-CAPITALIZED AT JUNE 30, 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Leverage ratio................................. 3.00%(1) N/A% 10.25%
Tier 1 risk-based capital ratio................ 4.00 6.00 17.01
Risk-based capital ratio....................... 8.00 10.00 18.25
<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>
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 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 June 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 3% on its net interest income for the same
period.
<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 June 30, 1998 and GAP analysis information.
<TABLE>
<CAPTION>
VOLUMES SUBJECT TO REPRICING WITHIN
---------------------------------------------------------------------------------------------
OVER ESTIMATED
1 YEAR 1-2 YEARS 2-3 YEARS 3-4 YEARS 4-5 YEARS 5 YEARS TOTAL FAIR VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Federal funds sold and other
temporary investments ...... $ 58,732 58,732 $ 58,732
Average interest yield...... 6.01% 6.01%
Taxable securities.............. 185,114 165,726 18,466 200 100 3,098 372,704 373,066
Average interest yield..... 6.35% 6.24% 6.06% 7.10% 6.75% 6.66% 6.29%
Tax-exempt securities........... 6,855 336 2,313 2,344 4,800 10,537 27,185 28,053
Average interest yield..... 4.82% 5.34% 5.24% 5.26% 5.31% 5.31% 5.17%
Total loans..................... 490,812 51,429 62,153 70,459 91,328 157,469 923,650 928,884
Average interest yield..... 8.94% 8.91% 8.81% 8.91% 8.72% 8.18% 8.78%
-------- ------- ------ ------ ------ ------- --------- ----------
Total interest earning assets... 741,513 217,491 82,932 73,003 96,228 171,104 1,382,271 1,388,735
-------- ------- ------ ------ ------ ------- --------- ----------
INTEREST BEARING LIABILITIES:
Demand, money market and
savings deposits........... 310,079 - - - - - 310,079 310,079
Average interest rate...... 2.97% - - - - - 2.97%
Certificates of deposit and
other time deposits........ 624,490 82,576 545 524 1,482 8 709,625 712,177
Average interest rate...... 5.50% 5.77% 5.38% 6.14% 5.83% 5.27% 5.53%
-------- ------- ------ ------ ------ ------- --------- ----------
Total interest bearing deposits. 934,569 82,576 545 524 1,482 8 1,019,704 1,022,256
-------- ------- ------ ------ ------ ------- --------- ----------
Securities sold under
repurchase agreements...... 46,796 - - - - - 46,796 46,796
Average interest rate...... 4.69% - - - - - 4.69%
Other borrowings................ 18,678 - - - - - 18,678 18,678
Average interest rate...... 5.74% - - - - - 5.74%
-------- ------- ------ ------ ------ ------- --------- ----------
Total interest bearing
liabilities................ 1,000,043 82,576 545 524 1,482 8 1,085,178 1,087,730
-------- ------- ------ ------ ------ ------- --------- ----------
Period GAP......................... (258,530) 134,915 82,387 72,479 94,746 171,096 297,093
Cumulative GAP..................... (258,530) (123,615) (41,228) 31,251 125,997 297,093
Period GAP to total assets......... (16.96)% 8.85% 5.40% 4.75% 6.22% 11.22%
Cumulative GAP to total assets..... (16.96)% (8.11)% (2.70)% 2.05% 8.27% 19.49%
Cumulative interest earning assets
to cumulative interest bearing
liabilities................... 74.15% 88.58% 96.19% 102.88% 111.61% 127.38%
</TABLE>
<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 second quarter of 1998 was 32%, and for
1997 it was 31%. The effective tax rate for the six months ended June 30, 1998
and June 30, 1997 was 31% and 33%, respectively.
PART I
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations".
<PAGE>
OTHER INFORMATION
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
========
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>
OTHER INFORMATION
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual shareholders' meeting was held May 20, 1998. Three directors were
elected to three year terms. Directors John H. Blake, William Isaias and
Fernando Tamayo. The following six directors were not up for reelection and
continued to serve on the Board of Directors: Bernardo M. Argudin, Jose P.
Bared, Oscar Bustillo, Jr., Estefano Isaias, Roberto Isaias and Milton H. Lehr.
There were 126,496 shares present in person and 15,688,329 shares present by
proxy. Of the 21,326,299 shares outstanding, 74% of total shares were present.
The following table presents proposals voted upon between March 31, 1998 and
June 30, 1998.
<TABLE>
<CAPTION>
NUMBER OF VOTES
- -------------------------------------------------------------------------------------------
FOR AGAINST ABSTAINED
<S> <C> <C> <C>
(1) Election of Directors:
John H Blake ................... 15,788,885 5,940 --
William Isaias.................. 15,790,930 3,895 --
Fernando Tamayo................. 15,790,930 3,895 --
(2) Stock Option Plan..................... 15,713,801 29,280 51,744
(3) Appointment of Independent Public
Auditors of the Corporation...... 15,759,390 7,085 28,350
</TABLE>
<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: August 10, 1998 By: /s/ BERNARDO M. ARGUDIN
--------------------------------------------------
Vice President and Chief Financial Officer
and Principal Accounting Officer
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION AT JUNE 30, 1998 AND THE
CONSOLIDATED STATEMENT OF OPERATIONS FOR THREE MONTHS ENDED IN JUNE 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> APR-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 54,240
<INT-BEARING-DEPOSITS> 721
<FED-FUNDS-SOLD> 58,011
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 125,163
<INVESTMENTS-CARRYING> 274,726
<INVESTMENTS-MARKET> 275,956
<LOANS> 923,650
<ALLOWANCE> 11,362
<TOTAL-ASSETS> 1,524,295
<DEPOSITS> 1,282,252
<SHORT-TERM> 65,474
<LIABILITIES-OTHER> 8,847
<LONG-TERM> 0
0
0
<COMMON> 213
<OTHER-SE> 166,131
<TOTAL-LIABILITIES-AND-EQUITY> 1,524,295
<INTEREST-LOAN> 21,150
<INTEREST-INVEST> 5,996
<INTEREST-OTHER> 858
<INTEREST-TOTAL> 28,004
<INTEREST-DEPOSIT> 11,839
<INTEREST-EXPENSE> 12,595
<INTEREST-INCOME-NET> 15,409
<LOAN-LOSSES> 3,995
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 13,381
<INCOME-PRETAX> 3,980
<INCOME-PRE-EXTRAORDINARY> 3,980
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,687
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.13
<YIELD-ACTUAL> 8.14
<LOANS-NON> 7,054
<LOANS-PAST> 133
<LOANS-TROUBLED> 53
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 13,166
<CHARGE-OFFS> 6,213
<RECOVERIES> 414
<ALLOWANCE-CLOSE> 11,362
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
