Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934
For the period ended: June 30, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934
For the transition period from ______________ to __________________
Commission File Number: 0-14671
REPUBLIC SECURITY FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
FLORIDA 59-2335075
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4400 Congress Avenue, West Palm Beach, Florida 33402
(Address of principal executive offices)(Zip Code)
(407) 840-1200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 1 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.
[ X ] YES [ ] NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Class Outstanding as of August 1, 1996
- - ----- --------------------------------
Common Stock
par value $.01 7,815,519
outstanding
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX
Page
Number
Part I: Financial Information
Item 1:
Condensed Consolidated Statements of Financial
Condition - June 30, 1996 and December 31, 1995.........................1
Condensed Consolidated Statements of Income
for the three months ended June 30, 1996 and 1995.......................2
Condensed Consolidated Statements of Income for
the six months ended June 30, 1996 and 1995.............................3
Condensed Consolidated Statements of Shareholders'
Equity for the nine months ended December 31, 1995 and for the
six months ended June 30, 1996..........................................4
Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 1996 and 1995.........................5
Notes to Condensed Consolidated Financial Statements..................6-7
Item 2:
Management's Discussion and Analysis.................................8-10
Part II: Other Information
Item 6: Exhibits and Reports Filed...................................11
Exhibit 11 - Computation of Per Share Earnings....................12
Signatures.............................................................13
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
====================================================================================================================================
JUNE 30, DECEMBER 31,
(amounts in thousands except share and per share data) 1996 1995
- - ------------------------------------------------------------------------------------------------------------------------------------
Assets (unaudited)
<S> <C> <C>
Cash and amounts due from depository institutions $19,704 $ 3,211
Interest-bearing deposits in other financial institutions 25,296 51,162
Investments held to maturity (market value of $4,524 and $10,779 at
June 30, 1996 and December 31, 1995, respectively) 4,502 10,622
Loans receivable - net 247,632 216,756
Property and equipment - net 8,137 7,192
Other real estate owned - net 1,591 1,340
Goodwill - net 7,956 2,994
Loan servicing rights - net 2,289 2,546
Accrued interest receivable 1,674 1,796
Other assets 7,273 6,042
- - ------------------------------------------------------------------------------------------------------------------------------------
Total $326,054 $303,661
====================================================================================================================================
Liabilities and Shareholders' Equity
Liabilities:
Deposits $263,880 $225,059
Federal Home Loan Bank advances 5,000 25,000
Securities sold under agreements to repurchase 1,833 2,350
Advances from borrowers for taxes and insurance 1,849 581
Bank drafts payable 4,616 3,155
Other liabilities 3,526 3,682
- - ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 280,704 259,827
- - ------------------------------------------------------------------------------------------------------------------------------------
Commitments and Contingencies
Shareholders' equity:
Preferred stock $10.00 stated value; 10,000,000 shares authorized: Series "A" -
378,000 and 401,500 shares issued and outstanding
at June 30, 1996 and December 31, 1995, respectively. 3,780 4,015
Series "C" - 1,035,000 shares issued and outstanding at June 30, 1996 and
and December 31, 1995. 10,350 10,350
Common stock $.01 par value; 20,000,000 shares authorized;
6,922,824 and 6,587,653 shares issued and outstanding at
June 30, 1996 and December 31, 1995, respectively 69 66
Additional paid-in capital 27,341 26,035
Retained earnings 3,810 3,368
- - ------------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 45,350 43,834
- - ------------------------------------------------------------------------------------------------------------------------------------
Total $326,054 $303,661
====================================================================================================================================
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
====================================================================================================================================
Three Months Ended June 30
(amounts in thousands except per share data) 1996 1995
- - ------------------------------------------------------------------------------------------------------------------------------------
INTEREST INCOME: (Unaudited)
<S> <C> <C>
Interest on loans $5,678 $4,979
Interest and dividends on investments 427 341
- - ------------------------------------------------------------------------------------------------------------------------------------
6,105 5,320
- - ------------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on deposits 2,620 2,432
Interest on borrowings 26 280
- - ------------------------------------------------------------------------------------------------------------------------------------
2,646 2,712
- - ------------------------------------------------------------------------------------------------------------------------------------
Net interest income 3,459 2,608
Provision for loan losses 30 25
- - ------------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 3,429 2,583
- - ------------------------------------------------------------------------------------------------------------------------------------
NON-INTEREST INCOME:
Gain on sale of loans 266 184
Service charges on deposit accounts 475 296
Other income 464 434
- - ------------------------------------------------------------------------------------------------------------------------------------
1,205 914
- - ------------------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Employee compensation and benefits 1,593 1,215
Occupancy and equipment 576 489
Professional fees 214 199
Advertising and promotions 109 60
Communications 98 106
Data processing 201 111
Insurance 157 153
Other 564 346
- - ------------------------------------------------------------------------------------------------------------------------------------
3,512 2,679
- - ------------------------------------------------------------------------------------------------------------------------------------
Income before taxes 1,122 818
Provision for income taxes 467 291
- - ------------------------------------------------------------------------------------------------------------------------------------
Net income $655 $527
- - ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA:
Primary earnings per common share $.06 $.10
Dividends per common share $.03 $.02
Avg. common shares and common stock equivalents outstanding 7,065 4,459
====================================================================================================================================
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
====================================================================================================================================
Six Months Ended June 30
(amounts in thousands except per share data) 1996 1995
- - ------------------------------------------------------------------------------------------------------------------------------------
INTEREST INCOME: (Unaudited)
<S> <C> <C>
Interest on loans $11,156 $9,853
Interest and dividends on investments 1,055 719
- - ------------------------------------------------------------------------------------------------------------------------------------
12,211 10,572
- - ------------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on deposits 5,234 4,577
Interest on borrowings 91 623
- - ------------------------------------------------------------------------------------------------------------------------------------
5,325 5,200
- - ------------------------------------------------------------------------------------------------------------------------------------
Net interest income 6,886 5,372
Provision for loan losses 55 50
- - ------------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 6,831 5,322
- - ------------------------------------------------------------------------------------------------------------------------------------
NON-INTEREST INCOME:
Mortgage trading income 45
Gain on sale of loans 303 281
Service charges on deposit accounts 907 544
Other income 1,008 845
- - ------------------------------------------------------------------------------------------------------------------------------------
2,218 1,715
- - ------------------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Employee compensation and benefits 3,206 2,548
Occupancy and equipment 1,146 1,041
Professional fees 362 414
Advertising and promotions 190 152
Communications 226 214
Data processing 344 209
Insurance 239 303
Other 1,072 902
- - ------------------------------------------------------------------------------------------------------------------------------------
6,785 5,783
- - ------------------------------------------------------------------------------------------------------------------------------------
Income before taxes 2,264 1,254
Provision for income taxes 940 449
- - ------------------------------------------------------------------------------------------------------------------------------------
Net income $1,324 $805
- - ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA:
Primary earnings per common share $ .12 $.16
Dividends per common share $.055 $.04
Avg. common shares and common stock equivalents outstanding 7,036 4,089
====================================================================================================================================
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(amounts in thousands except share and per share data)
====================================================================================================================================
Additional
Preferred Common Paid-in Retained
Stock Stock Capital Earnings
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, March 31, 1995 $4,025 $37 $14,362 $2,022
Exercise of equity contracts - 634,476 shares 6 1,745
Exercise of warrants - 211,300 shares 2 818
Exercise of stock options - 2,668 shares 7
Issuance of stock grants - 12,000 shares 52
Conversion of preferred stock into common stock-
2,469 shares (10) 10
401(k) plan - 1,997 shares 8
Issuance of series "C" preferred stock -
1,035,000 shares 10,350 (850)
Issuance of common stock - 2,070,000 shares 21 9,883
Cash dividends - common stock (302)
Cash dividends-preferred stock series "A" and "C" (329)
Net income for nine months ended December 31, 1995 1,977
- - ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 14,365 66 26,035 3,368
Exercise of warrants - 268,126 shares 3 1,039
Conversion of preferred stock series "A"
into common stock - 58,045 shares (235) 235
Issuance of stock grants - 9,000 shares 32
Cash dividends - common stock (379)
Cash dividends - preferred stock series "A" and "C" (503)
Net income for six months ended June 30, 1996 1,324
- - ------------------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1996 $14,130 $69 $27,341 $3,810
====================================================================================================================================
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
====================================================================================================================================
(amounts in thousands)
SIX MONTHS JUNE 30,
(unaudited)
1996 1995
- - ------------------------------------------------------------------------------------------------------------------------------------
Operating Activities:
<S> <C> <C>
Net income $1,324 $805
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 55 50
Provision for depreciation 331 488
Amortization of goodwill 180 55
Gain on sale of loans -trading, loans and servicing (303) (326)
Loan costs deferred (113) (130)
Loans originated for sale (7,014) (13,763)
Purchase of loans for sale (938)
Sale of loans and loan participation certificates 15,313 19,087
Other - net 1,876 1,390
- - ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 11,649 6,718
- - ------------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Cash and cash equivalents acquired in merger-net 15,235
Maturities and calls of investments 6,742 4,200
Purchases of investments held-to-maturity (500)
Loans purchased for investment (2,014) (1,053)
Loans originated for investment (28,469) (50,101)
Principal collected on loans 26,193 33,485
Other - net (266) (2,380)
- - ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 16,921 (15,849)
- - ------------------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Net decrease in demand deposits, NOW accounts,
Money Market accounts and savings accounts (3,952) (5,221)
Proceeds from sales of certificates of deposit 13,372 38,392
Payment for maturing certificates of deposits (27,038) (24,548)
Decrease in FHLB advances (20,000) (5,000)
Other - net (325) (653)
- - ------------------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (37,943) 2,970
- - ------------------------------------------------------------------------------------------------------------------------------------
Decrease in cash and cash equivalents (9,373) (6,161)
Cash and cash equivalents at beginning of period 54,373 21,192
- - ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $45,000 $15,031
====================================================================================================================================
<FN>
For purposes of reporting cash flows, cash and cash equivalents include cash on
hand, amounts due from banks and federal funds sold. Generally, federal funds
are purchased and sold for one-day periods. The Company paid $818,000 and
$225,000 in income taxes during the six months ended June 30, 1996 and 1995,
respectively. The Company paid $5,498,000 and $5,065,000 in interest on deposits
and other borrowings during the six months ended June 30, 1996 and 1995,
respectively. The Company had $404,000 and $466,000 of transfers from loans to
OREO during the six months ended June 30, 1996 and 1995, respectively. Assets of
$62 million were acquired and $57 million liabilities assumed related to the
merger of Banyan Bank during the six months ended June 30, 1996.
- - ------------------------------------------------------------------------------------------------------------------------------------
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
5
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements include the accounts of Republic Security Financial
Corporation (the "Company" or "RSFC") and its wholly-owned subsidiary,
Republic Security Bank (the "Bank"). In the opinion of the Company's
management, the financial statements contain all adjustments
(consisting of normal recurring accruals) considered necessary to
present fairly the consolidated financial position of Republic Security
Financial Corporation and its subsidiary as of June 30, 1996 and
December 31, 1995, and the results of operations for the three and six
months ended June 30, 1996 and 1995, and changes in cash flows for the
six months then ended.
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulations S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. Operating results for the three and six months
ended June 30, 1996 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1996. For further
information, refer to the consolidated financial statements and
footnotes thereto included in Republic Security Financial Corporation's
annual report on Form 10K-T for the nine month transition period ended
December 31, 1995.
The balance sheet at December 31, 1995 has been derived from
the audited financial statements at that date but does not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
2. Non-Performing Assets and Allowance for Loan Losses
At June 30, 1996, the Bank had $4,124,000 in non-performing
assets (loans 90 days or more past due, other real estate owned and
repossessed assets). The provision for loan losses was $55,000 and
$50,000 for the six months ended June 30, 1996 and 1995, respectively.
The allowance for loan losses is maintained at a level
believed adequate by management to absorb estimated probable credit
losses. Management's periodic evaluation of the adequacy of the
allowance is based on the Company's past loan loss experience, known
and inherent risks in the portfolio, adverse situations that may affect
the borrower's ability to repay (including the timing of future
payments), the estimated value of any underlying collateral,
composition of the loan portfolio, current economic conditions, and
other relevant factors. This evaluation is inherently subjective as it
requires material estimates including the amounts and timing of future
cash flows expected to be received on impaired loans that may be
susceptible to significant change.
3. Merger
On January 19, 1996, the Company acquired Banyan Bank
("Banyan") for $9,701,320, plus $60,000 in merger related costs. The
purchase price which was paid in the form of cash was determined based
upon a multiple of Banyan's equity balance, limited to a specified
amount, as of the last day of the month prior to closing.
Banyan was a state chartered commercial bank headquartered in
Boca Raton, Florida. Banyan had total assets at January 19, 1996 of
approximately $62,000,000, total deposits of approximately $56,000,000
and two full
6
<PAGE>
service branches located in Boca Raton, and Boynton Beach, Florida.
The acquisition was accounted for as a purchase and
approximately $5,000,000 in goodwill was recognized representing the
purchase price in excess of the fair value of the net assets acquired.
Goodwill will be amortized over 15 years using the straight-line
method.
4. Redemption of 7.5% Cumulative Convertible Preferred Stock, Series A
On June 21, 1996, the Company called the 7.5% Cumulative
Convertible Preferred Stock Series A (the "Preferred Stock") for
redemption on July 26, 1996 ("Redemption Date"). The Preferred Stock
will be due and payable and cease to accrue dividends on that date, and
upon surrender of the stock certificates for redemption, the holder
will be entitle to receive the redemption price of $10 per share, or
alternatively, the holder can surrender each of their shares of
Preferred Stock for conversion into 2.47 shares of the Company's common
stock.
At June 30, 1996, 378,000 shares of the Company's Preferred
Stock Series A were outstanding which would result in the issuance of
933,660 shares of the Company's Common Stock if all Preferred shares
are converted. As of August 12, 1996, approximately 374,000 shares have
been redeemed for approximately 924,000 shares of the Company's common
stock. The remaining shares were redeemed for cash or have not been
surrendered.
5. Commitments and Contingencies
Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any condition established
in the contract. Commitments generally have fixed expiration dates or
other termination clauses and may require the payment of a fee. The
total commitment amounts do not necessarily represent future cash
requirements as some commitments expire without being drawn upon. The
Bank evaluates each customer's credit worthiness on a case by case
basis. The amount of collateral obtained, if deemed necessary by the
Bank, upon extension of credit is based on management's credit
evaluation of the counterparty.
At June 30, 1996, the Bank had adjustable rate commitments to
extend credit of $23,500,000 excluding the undisbursed portion of
loans-in-process. These commitments are primarily for commercial lines
of credit secured by commercial real estate or other business assets
and for one-to-four family residential properties .
The United States House and Senate have passed legislation
which provides for a charge to member of the Savings Association
Insurance Fund (the "SAIF") in order to bring the SAIF to the
regulatory mandated level and for the eventual merger of the SAIF with
the Bank Insurance Fund. The amount the Bank will be assessed if the
legislation is enacted as currently drafted is estimated to be
approximately $960,000 net of an assumed tax effect at 37%.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Net income for the three months ended June 30, 1996 was $655,000 or
$.06 per common share compared to $527,000 or $.10 per common share for the
three months ended June 30, 1995. Net income for the three months ended June 30,
1996 increased $128,000 or 24% compared to the three months ended June 30, 1995.
The increase in net income is primarily due to a 33% increase in net interest
income offset by an increase in operating expenses.
The Company had net income of $1,324,000 or $.12 per common share for
the six months ended June 30, 1996, compared to net income of $805,000 or $.16
per common share for the six months ended June 30, 1995. The increase in net
income is due to an increase of $1,509,000 in net interest income after
provision for loan losses and an increase of $503,000 in non-interest income,
offset by an increase of $1,002,000 in operating expenses and a $491,000
increase in provision for income taxes.
Earnings per share for the three and six months ended June 30, 1996
were impacted by the $9.8 million common equity offering in November 1995 which
resulted in an increase of 2,070,000 of common shares outstanding.
Net Interest Income
Net interest income for the quarter ended June 30, 1996 increased
$851,000 compared to the quarter ended June 30, 1995 due to a $33 million
increase in average interest-earning assets offset by a $5 million increase in
average interest-bearing liabilities. In addition, the net interest margin
increased from 4.12% for the quarter ended June 30, 1995 to 4.84% for the
quarter ended June 30, 1996. The Banyan Bank acquisition is the primary
contributor to the increases in interest-earning assets and interest-bearing
liabilities. In addition, the compositions of the Bank's loan and deposit
portfolios have changed since June 30, 1995 to reflect an increase in commercial
purpose and commercial real estate loans and an increase in business and
personal transaction deposit accounts.
Net interest income increased $1,514,000 or 28% for the six months
ended June 30, 1996 compared to the six months ended June 30, 1995 due to a 12%
increase in interest-earning assets offset by a 2% increase in interest-bearing
liabilities as well as an increase in net interest margin of 60 basis points for
the six months ended June 30, 1996 compared to the six months ended June 30,
1995.
Non-Interest Income
Non-interest income increased $291,000 or 32% primarily due to an
increase in service charges on deposit accounts for the three months ended June
30, 1996 compared to the three months ended June 30, 1995. The increase in
service charges on deposit accounts is due to an increase in the volume of
transaction accounts and a minimal increase in fees.
Non-interest income for the six months ended June 30, 1996 increased
$503,000 or 29% compared to the six months ended June 30, 1995 due to an
increase of $363,000 in service charges on deposit accounts, $163,000 in other
non-interest income and $22,000 in gain on sale of loans offset by a $45,000
decrease in mortgage trading income. Increase in service charges on deposit
accounts is due to an increase in the volume of transaction accounts largely due
to the Banyan Bank acquisition and a slight increase in fees charged. The
increase in other non-interest income represents increases in fees related to
loan accounts and ATM charges due to increases in volume.
8
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations (Continued)
- - --------------------------------------------------------------------------------
Operating Expense
Operating expenses increased $833,000 or 31% for the three months ended
June 30, 1996 compared to the three months ended June 30, 1995. The increase in
operating expenses is primarily related to employee compensation and benefits,
data processing expenses and other operating expenses. Compensation expense
increased due to the Banyan Bank merger which increased the banking center
network by two full-service offices and "de novo" growth. In addition, non
recurring employee compensation and benefits of approximately $80,000 were
incurred during the three months ended June 30, 1996 due to the absorption of
Banyan Bank into the Bank. Data processing expenses increased $90,000 for the
three months ended June 30, 1996 compared to three months ended June 30, 1995
due to an increase in the number of deposit and loan accounts and a $50,000
charge associated with the conversion of data service bureaus. Other operating
expenses increased $218,000 for the three months ended June 30, 1996 compared to
the three months ended June 30, 1995 due to an increase of $165,000 in goodwill
amortization associated with the Banyan Bank acquisition and the Century Bank
branch purchase. The remaining increase of $53,000 is largely due to increased
expenses associated with an increase in total assets.
Operating expenses for the six months ended June 30, 1996 increased
$1,002,000 or 17% compared to the six months ended June 30, 1995 due to an
increase in employee compensation and benefits, occupancy and equipment
expenses, data processing costs and other operating expenses. The increase in
employee compensation and benefits is a result of approximately $180,000 of
non-recurring employee compensation costs associated with the absorption of the
Banyan Bank acquisition, increased banking center network due to the Banyan Bank
acquisition and "de novo" growth. Likewise, the six months ended June 30, 1995
included non recurring costs associated with the absorption of Governors Bank
merger on December 1, 1994 and expenses associated with the closing of the
Bank's mortgage loan production offices during the quarter ended March 31, 1995
which resulted in an increase in employee compensation. Occupancy and equipment
expenses increased $105,000 for the six months ended June 30, 1996 compared to
the six months ended June 30, 1995 due to the addition of two banking centers as
a result of the Banyan Bank acquisition and an increase of approximately $2
million in property and equipment - net from December 1994 to June 1996. Data
processing costs increased for the six months ended June 30, 1996 compared to
the six months ended June 30, 1995 due to an increase in the volume of deposit
and loan accounts and a $50,000 expense associated with the conversion of data
service bureaus. The increase of $170, 000 in other operating expenses for the
six months ended June 30, 1996 compared to the six months ended June 30, 1995 is
due to an increase in amortization of goodwill as a result of the Banyan Bank
and Century Bank branch purchases. Overall, operating expenses as a percent of
total average assets has remained stable at 4.2% for the six months ended June
30, 1996 and 1995.
Provision for Income Taxes
Income tax expenses increased $176,000 and $491,000, respectively, for
the three and six months ended June 30, 1996, compared to the three and six
months ended June 30, 1995. The increase is attributable to an increase in
income before taxes of $304,000 and $1,010,000 for the three and six months
ended June 30, 1996, respectively, and an increase in the effective tax rate to
42% for the three and six months ended June 30, 1996 from 36% for the three and
six months ended June 30, 1995. The effective income tax rate increased
primarily due to an increase in non-deductible amortization of goodwill
associated with acquisitions.
Liquidity, Sources of Capital and Capital Requirements
As a member of the Federal Home Loan Bank System, the Bank is subject
to regulations which require it to maintain "long term" liquidity ratios. The
majority of the liquid assets of the bank are deposits with the Federal Home
Loan Bank of Atlanta. The Bank was in compliance with liquidity requirements
during the six months ended June 30, 1996.
On certain occasions, demand for loan funds may exceed cash available
from deposits. On such occasions, the Bank may borrow funds from the Federal
Home Loan Bank of Atlanta, draw on lines of credit with commercial
9
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations (Continued)
- - --------------------------------------------------------------------------------
banks and/or enter into repurchase agreements on eligible investments.
Cash and cash equivalents decreased by approximately $9 million during the
six months ended June 30, 1996 primarily due to the $20 million repayment of
FHLB advances and $18 million of deposit run-off, offset by proceeds from loan
sales of $15 million and cash acquired in merger. The decrease in deposits is
attributable to lowering interest rates paid on certificates of deposits since
March 1995 to become aligned with the commercial bank market.
The following table shows the capital amounts of the Bank at June 30, 1996:
================================================================================
(Dollars in thousands)
- - --------------------------------------------------------------------------------
Tier 1 capital $27,082
Tier 2 capital $2,332
Tier 1 risk adjusted capital ratio 13.04%
Total risk adjusted capital ratio 14.16%
Leverage ratio 8.72%
================================================================================
The Bank was in compliance with its' capital requirements at June 30, 1996.
Financial Condition
As of June 30, 1996, total assets increased $22 million from December 31,
1995. Assets increased $67 million due to the Banyan Bank acquisition (including
$5 million of goodwill), $1 million due to an increase in capital as a result of
the exercise of outstanding warrants and $2 million increase in other
liabilities. These increases were offset by a $20 million repayment of FHLB
advances, $18 million in deposit run-off, and a $9.7 million payment of cash for
the Banyan purchase. The decrease in deposits is attributable to lowering
interest rates paid on certificates of deposits since March 1995 to become
aligned with the commercial bank market.
10
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are included herein: (11) Statement regarding
Computation of Earnings Per Share
(b) A report on Form 8-K was filed on July 26, 1996 to report the Company's
Redemption of 7.5% Cumulative Convertible Preferred Stock Series A
11
<PAGE>
EXHIBIT 11(a)
<TABLE>
<CAPTION>
STATEMENT 11. RE: Computation of Per Share Earnings
====================================================================================================================================
Three Months Ended June 30, Six Months Ended June 30,
1996 1995 1996 1995
- - ------------------------------------------------------------------------------------------------------------------------------------
PRIMARY EARNINGS:
<S> <C> <C> <C> <C>
Average shares outstanding 6,918 4,300 6,893 3,973
Net effect of dilutive stock options,
warrants and equity contracts based on the modified
treasury stock method using average market price 147 159 143 116
- - ------------------------------------------------------------------------------------------------------------------------------------
Total weighted average number of shares outstanding 7,065 4,459 7,036 4,089
- - ------------------------------------------------------------------------------------------------------------------------------------
Net income $655 $527 $1,324 $805
Deduct preferred dividends (251) (75) (503) (151)
- - ------------------------------------------------------------------------------------------------------------------------------------
Net income available to common shareholders $404 $452 $821 $654
====================================================================================================================================
Earnings per share $.06 $.10 $.12 $.16
====================================================================================================================================
</TABLE>
12
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION
SIGNATURES
Pursuant to the requirements 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 Security Financial Corporation
(Registrant)
Date: 8/14/96 /S/ Carla H. Pollard
_______ ____________________
Carla H. Pollard
Vice President/Controller
13
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-END> JUN-30-1996 JUN-30-1996
<CASH> 19704 19704
<INT-BEARING-DEPOSITS> 25296 25296
<FED-FUNDS-SOLD> 0 0
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 0 0
<INVESTMENTS-CARRYING> 4502 4502
<INVESTMENTS-MARKET> 4524 4524
<LOANS> 249965 249965
<ALLOWANCE> 2333 2333
<TOTAL-ASSETS> 326054 326054
<DEPOSITS> 263880 263880
<SHORT-TERM> 6833 6833
<LIABILITIES-OTHER> 9991 9991
<LONG-TERM> 0 0
0 0
14130 14130
<COMMON> 27410 27410
<OTHER-SE> 3810 3810
<TOTAL-LIABILITIES-AND-EQUITY> 326054 326054
<INTEREST-LOAN> 5678 11156
<INTEREST-INVEST> 427 1055
<INTEREST-OTHER> 0 0
<INTEREST-TOTAL> 6105 12211
<INTEREST-DEPOSIT> 2620 5234
<INTEREST-EXPENSE> 26 91
<INTEREST-INCOME-NET> 3459 6831
<LOAN-LOSSES> 30 55
<SECURITIES-GAINS> 0 0
<EXPENSE-OTHER> 3512 6785
<INCOME-PRETAX> 1122 2264
<INCOME-PRE-EXTRAORDINARY> 1122 2264
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 655 1324
<EPS-PRIMARY> .06 .12
<EPS-DILUTED> .06 .12
<YIELD-ACTUAL> 4.84 4.85
<LOANS-NON> 2361 2361
<LOANS-PAST> 0 0
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 2,675 2431
<CHARGE-OFFS> 413 589
<RECOVERIES> 41 62
<ALLOWANCE-CLOSE> 2333 2333
<ALLOWANCE-DOMESTIC> 2333 2333
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 215 215
</TABLE>
