UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the period ended March 31, 1997
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 0-14671
-------
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, FL 33407
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code (561)
840-1200 Securities registered pursuant to Section
12(b) of the Act:
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate 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 March 31, 1997
- ----- --------------------------------
Common Stock
par value $.01 7,854,982
Outstanding
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARY
INDEX
Page
PART I: FINANCIAL INFORMATION
Item 1:
Condensed Consolidated Statements of Financial Condition
March 31, 1997 and December 31, 1996......................................1
Condensed Consolidated Statements of Income for the
three months ended March 31, 1997 and 1996................................2
Condensed Consolidated Statements of Shareholders' Equity
for the three months ended March 31, 1997
and the year ended December 31, 1996......................................3
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 1997 and 1996................................4
Notes to Condensed Consolidated Financial Statements......................5
Item 2
Management's Discussion and Analysis of Financial Condition and
Results of Operations.....................................................9
PART II: OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K..............................10
a) The following reports are included herein:
(11) Statement regarding Computation of Earnings Per Share
b) A report on Form 8-K was filed on January 7, 1997
Signatures..............................................................12
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
======================================================================================================================
MARCH 31, DECEMBER 31,
1997 1996
(amounts in thousands except share and per share data) (unaudited)
- --------------------------------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
Assets
Cash and amounts due from depository institutions $4,522 $4,874
Interest-bearing deposits in other financial institutions 21,530 34,430
Investments available-for-sale 30,963 32,917
Investments held to maturity (market value of $7,778 and $6,830 at
March 31, 1997 and December, 31, 1996, respectively) 7,782 6,782
Loans - net 267,717 243,222
Loans held for sale (Market value of $2,295 and $7,850 at March 31, 1997
and December 31, 1996, respectively) 2,260 7,773
Property and equipment - net 10,173 9,000
Other real estate owned - net 792 1,248
Goodwill - net 7,534 7,675
Loan servicing rights - net 1,904 2,032
Accrued interest receivable 1,890 1,976
Other assets 8,314 7,377
- --------------------------------------------------------------------------------- ----------------- -----------------
Total $365,381 $359,306
================================================================================= ================= =================
Liabilities and Shareholders' Equity
Deposits $262,196 $272,587
Federal Home Loan Bank advances 45,000 30,000
Securities sold under agreements to repurchase 1,936 2,076
Advances from borrowers for taxes and insurance 2,589 1,613
Bank drafts payable 4,363 3,778
Other liabilities 3,686 3,679
- --------------------------------------------------------------------------------- ----------------- -----------------
Total liabilities 319,770 313,733
- --------------------------------------------------------------------------------- ----------------- -----------------
Commitments and Contingencies
Preferred stock $10.00 stated value; 10,000,000 shares authorized: Series "C" -
1,035,000 shares issued and outstanding at March 31, 1997
and December 31, 1996 10,350 10,350
Common stock $.01 par value; 20,000,000 shares authorized;
7,854,982 shares issued and outstanding at
March 31, 1997 and December 31, 1996, respectively 79 79
Additional paid-in capital 31,101 31,101
Retained earnings 4,485 4,035
Unrealized (loss)/gain on investments available-for-sale, net of taxes (404) 8
- --------------------------------------------------------------------------------- ----------------- -----------------
Total shareholders' equity 45,611 45,573
- --------------------------------------------------------------------------------- ----------------- -----------------
Total $365,381 $359,306
================================================================================= ================= =================
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
======================================================================================================================
Three months ended March 31,
(unaudited)
(amounts in thousands except share and per share data) 1997 1996
- -------------------------------------------------------------------------------- ------------------ -----------------
<S> <C> <C>
Interest Income:
Interest and fees on loans $5,566 $5,585
Interest and dividends on investments 946 628
- -------------------------------------------------------------------------------- ------------------ -----------------
6,512 6,213
- -------------------------------------------------------------------------------- ------------------ -----------------
Interest Expense:
Interest on deposits 2,540 2,614
Interest on borrowings 390 65
- -------------------------------------------------------------------------------- ------------------ -----------------
2,930 2,679
- -------------------------------------------------------------------------------- ------------------ -----------------
Net interest income 3,582 3,534
Provision for loan losses 25 25
- -------------------------------------------------------------------------------- ------------------ -----------------
Net interest income after provision for loan losses 3,557 3,509
Non-interest Income:
Gain on sale of loans 46 37
Gain on sale of investments available-for-sale 148
Mortgage trading income 38
Other income 811 869
- -------------------------------------------------------------------------------- ------------------ -----------------
1,043 906
Operating Expenses:
Employee compensation and benefits 1,493 1,613
Occupancy and equipment 649 570
Professional fees 160 148
Advertising and promotions 60 81
Communications 119 128
Data processing 182 143
Insurance 13 82
Goodwill amortization 142 54
Other 408 454
- -------------------------------------------------------------------------------- ------------------ -----------------
TOTAL 3,226 3,273
Income before taxes 1,374 1,142
Provision for income taxes 508 473
- -------------------------------------------------------------------------------- ------------------ -----------------
Net income $866 $669
================================================================================ ================== =================
Income applicable to common stock $685 $417
================================================================================ ================== =================
PER SHARE DATA:
Primary earnings per common share $.09 $.06
Fully diluted earnings per common share $.09 $.06
Dividends per common share $0.03 $.025
Average common shares and common stock equivalents outstanding 8,034 7,008
================================================================================ ================== =================
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
==========================================================================================================================
Unrealized
Gain
(Loss) On
Investments
Additional Investments
Preferred Common Paid-in Retained Available-for-Sale,
(amounts in thousands except share and per share Stock Stock Capital Earnings net of taxes
data)
- -------------------------------------------- ------------- ------------- ------------- ------------- -------------------
<S> <C> <C> <C> <C> <C>
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 - 982,995 shares (3,980) 10 3,970
Issuance of stock grants - 9,000 shares 32
Issuance of stock for Dividend Reinvestment and
Optional Stock Purchase Plan - 2,586 shares 13
Exercise of stock options - 4,622 shares 12
Cash redemption of preferred stock series "A" (35)
Cash dividends - common stock (847)
Cash dividends - preferred stock series "A" and "C" (886)
Net income 2,400
Change in appreciation on investments
available-for-sale, net of taxes $8
- -------------------------------------------- ------------- ------------- ------------- ------------- -------------------
Balance December 31, 1996 10,350 79 31,101 4,035 8
Cash dividends - common stock (235)
Cash dividends - preferred stock series "C" (181)
Net income 866
Change in net unrealized gain/loss on investments
available-for-sale, net of taxes (412)
- -------------------------------------------- ------------- ------------- ------------- ------------- -------------------
Balance, March 31, 1997 $10,350 $79 $31,101 $4,485 $(404)
==========================================================================================================================
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
===================================================================================================================
THREE MONTHS ENDED MARCH 31,
(unaudited)
(amounts in thousands) 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating Activities:
Net income $866 $669
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 25 25
Depreciation 200 159
Amortization of goodwill 141 54
Gain on sale of investments available-for-sale (148)
Gain on sale of loans -trading, loans and servicing (84) (37)
Loan costs deferred (100) (43)
Loans originated for sale (4,222) (3,622)
Sale of loans and loan participation certificates 9,856 3,659
Other - net 845 907
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 7,379 1,771
- -------------------------------------------------------------------------------------------------------------------
Investing Activities:
Cash and cash equivalents acquired in merger-net 15,235
Proceeds from sale of investments available-for-sale 10,856
Purchases of investments available-for-sale (9,733)
Maturities and calls of investments held to maturity 500 5,492
Purchases of investments held to maturity (1,494) (500)
Loans purchased for investment (16,155 )
Loans originated for investment (19,404) (5,834)
Principal collected on loans 10,227 7,617
Other - net 519 145
- -------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities (24,684) 22,155
- -------------------------------------------------------------------------------------------------------------------
Financing Activities:
Net decrease in demand deposits, NOW accounts,
Money Market accounts and savings accounts (1,434) (4,234)
Net decrease in certificates of deposits (8,957) (10,987)
Increase (decrease) in FHLB advances 15,000 (25,000)
Other - net (556) 153
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 4,053 (40,068)
- -------------------------------------------------------------------------------------------------------------------
Decrease in cash and cash equivalents (13,252) (16,142)
Cash and cash equivalents at beginning of period 39,304 54,373
- -------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $26,052 $38,231
===================================================================================================================
<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 $2,500 and $130,000
in income taxes during the three months ended March 31, 1997 and 1996,
respectively. The Company paid $3,518,000 and $2,864,000 interest on deposits
and other borrowings during the three months ended March 31, 1997 and 1996,
respectively. The Company had $27,000 and $128,000 of transfers from loans to
OREO during the three months ended March 31, 1997 and 1996, respectively. Assets
of $62 million were acquired and $62 million liabilities assumed related to the
merger of Banyan Bank during the three months ended March 31, 1996.
See notes to condensed consolidated financial statements.
4
</FN>
</TABLE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
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 March 31, 1997 and December 31,
1996, and the results of operations for the three months ended March
31, 1997 and March 31, 1996, and changes in cash flows for the three
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 Regulation 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 months ended March 31, 1997 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1997. For further information, refer to the
consolidated financial statements and footnotes thereto included in
Republic Security Financial Corporation's annual report on Form 10-K
for the year ended December 31, 1996.
The balance sheet at December 31, 1996 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. Loans Receivable - Net
<TABLE>
<CAPTION>
Loan receivable-net is summarized as follows:
===================================================================================================================
March 31, December 31
1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Residential mortgage $115,351 $102,266
Commercial mortgage 64,333 58,842
Real estate construction and lot 27,779 29,793
Installment loans to individuals 45,094 43,760
Commercial and financial 27,602 23,845
- -------------------------------------------------------------------------------------------------------------------
Total loans 280,159 258,506
- -------------------------------------------------------------------------------------------------------------------
Deferred loan fees 48 (98)
Undisbursed portion of loans-in-process (9,890) (12,913)
Allowance for loan losses (2,600) (2,273)
$267,717 $243,222
===================================================================================================================
</TABLE>
3. Non-Performing Assets and Allowance for Loan Losses
At March 31, 1997, the Bank had $4,017,000 in non-performing
assets (loans 90 days or more past due, other real estate owned and
repossessed assets). The provision for loan losses was $25,000 for the
three months ended March 31, 1997 and 1996.
5
<PAGE>
<TABLE>
<CAPTION>
The following table details the Bank's non-performing assets:
===================================================================================================================
March 31, December 31,
1997 1996
- ---------------------------------------------------------------------------------------------- --------------------
<S> <C> <C>
Loans:
Residential mortgage $1,734 $1,911
Commercial mortgage 294 294
Real estate construction and lot 190 183
Installment loans to individuals 173 157
Commercial and financial 614 583
- ---------------------------------------------------------------------------------------------- --------------------
Total non-performing loans 3,005 3,128
- ---------------------------------------------------------------------------------------------- --------------------
Other real estate owned:
Residential mortgage 549 898
Commercial mortgage 199 243
Real estate construction and lot 44 107
- ---------------------------------------------------------------------------------------------- --------------------
Total other real estate owned 792 1,248
- ---------------------------------------------------------------------------------------------- --------------------
Repossesssed automobiles 220 196
- ---------------------------------------------------------------------------------------------- --------------------
Total non-performing assets $4,017 $4,572
============================================================================================== ====================
</TABLE>
Interest income not recognized on non performing loans was approximately $60,000
and $40,000 during the three months ended March 31, 1997 and 1996, respectively.
At March 31, 1997, the recorded investment in loans that are considered to
be impaired under SFAS No. 114 was $906,000, which approximates the average
investement for the three months ended March 31, 1997. The related allowance for
credit losses for such loans is $142,000 at March 31, 1997. For the three months
ended March 31, 1997 and 1996, no interest was recognized on impaired loans.
Although management uses its best judgement in underwriting each loan, industry
experience indicates that a portion of the Bank's loans will become delinquent.
Regardless of the underwriting criteria utilized by financial institutions,
losses may be experienced as a result of many factors beyond their control
including, among other things, changes in market conditions affecting the value
of security and unrelated problems affecting the credit of the borrower. Due to
the concentration of loans in South Florida, adverse economic conditions in this
area could result in a decrease in the value of a significant portion of the
Bank's collateral.
In the normal course of business, the Bank has recognized and will continue to
recognize losses resulting from the inability of certain borrowers to repay
loans and the insufficient realizable value of collateral securing such loans.
Accordingly, management has established an allowance for loan losses, which
totalled $2,600,000 at March 31, 1997, which is allocated according to the
following table:
<TABLE>
<CAPTION>
============================================================================================== ====================
Allowance % of loans
for loan losses to total loans
- ---------------------------------------------------------------------------------------------- --------------------
<S> <C> <C>
Residential mortgage $603 41%
Commercial mortgage 467 23
Real estate construction and lot 36 10
Installment loans to individuals 490 16
Commercial and financial 294 10
Unallocated 710
- ---------------------------------------------------------------------------------------------- --------------------
Total $2,600 100%
============================================================================================== ====================
</TABLE>
6
<PAGE>
An analysis of the changes in the allowance for loan losses is summarized as
follows:
<TABLE>
<CAPTION>
============================================================================================== ====================
Three months Three months
ended ended
March 31, 1997 March 31, 1996
- ---------------------------------------------------------------------------------------------- --------------------
<S> <C> <C>
Beginning balance $2,273 $2,431
Reserves acquired in connection
with merger 374
Charge-offs:
Real estate mortgage 15 18
Consumer 141 156
Commercial and financial 26 2
- ---------------------------------------------------------------------------------------------- --------------------
Subtotal- Charge-offs 182 176
- ---------------------------------------------------------------------------------------------- --------------------
Recoveries:
Real estate mortgage 2 5
Consumer 30 12
Commercial and financial 452 4
- ---------------------------------------------------------------------------------------------- --------------------
Subtotal- Recoveries 484 21
- ---------------------------------------------------------------------------------------------- --------------------
Net (recoveries)/charge-offs (302) 155
- ---------------------------------------------------------------------------------------------- --------------------
Provisions for losses 25 25
- ---------------------------------------------------------------------------------------------- --------------------
Ending balance $2,600 $2,675
============================================================================================== ====================
</TABLE>
The allowance for credit 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.
4. Potential Mergers
On January 7 1997, the Bank entered into a definitive
agreement whereby Family Bank, a Florida state chartered, commercial
bank, will merge with Republic Security Bank. The definitive agreement
provides for a fixed exchange ratio whereby shareholders of Family Bank
will receive 13 shares of Republic Security Financial Corporation
common stock for each share of Family Bank common stock. The Company
will issue approximately 7.7 million shares of Republic Security
Financial Corporation common stock for all outstanding common shares of
Family Bank stock in a tax free exchange. Management anticipates the
transaction will be accounted for as a pooling-of-interests. Family
Bank is headquartered in Hallandale, Florida with six branch locations
in Broward County and has total assets, loans and deposits of
approximately $248 million, $159 million and $216 million,
respectively, at December 31, 1996. At March 31, 1997, the Bank had
$105,000 of capitalized charges associated with the merger which will
be expensed in the period in which the transaction is consummated.
On May 2, 1997, a Florida depository institution (the
"Institution") entered into a Standstill Agreement (the "Agreement")
with Republic Security Financial Corporation whereas the Institution
and the Company are interested in discussions and possible negotiations
regarding an acquisition of the Institution. The Agreement is in effect
for thirty days and allows for the Company to perform due diligence
procedures and the Institution agrees not to solicit discussions
concerning any acquisition of its assets with another party.
The Institution is a financial services company located in
Florida with two branch locations. At December 31, 1996, the
Institution had total assets of $143 million, total loans of $118
million, total deposits of $126 million and total equity of $8 million.
The transaction is subject to satisfactory due diligence and
negations as well as regulatory approvals and approval by the
Institution's shareholders. The consideration paid will be a mixture of
7
<PAGE>
cash and RSFC's common stock, which is subject to shareholder
preference and negotiation. If the transaction is consummated,
management anticipates the transaction to be accounted for under the
purchase method of accounting for business combinations.
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 counter party.
At March 31, 1997, the Bank had adjustable rate commitments to
extend credit of approximately $27,000,000 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 .
In addition to the above commitments and contingencies, there
are various matters of litigation pending against the Company that
management has reviewed with legal counsel. At March 31, 1997, $344,000
related to pending litigation was accrued and included in other
liabilities. In the opinion of management of the Company, amounts
accrued for awards of assessments in connection with these matters are
adequate and ultimate resolution of these matters will not have a
material effect on the Company's consolidated financial position,
results of operations or cash flow.
6. Income per Common Share
Primary income per common share is computed by dividing net
income less preferred stock dividends by the weighted average number of
shares of common stock and common stock equivalents outstanding during
the period. Fully diluted net income per common share is calculated by
dividing net income by the average number of common stock and common
stock equivalents outstanding during the year, plus the assumed
conversion of all outstanding convertible preferred shares to common
shares to the extent those shares are dilutive. Common stock
equivalents for both primary and fully diluted net income per share
include stock options, warrants, and equity contracts and are included
in the computation of earnings per share using the treasury stock
method. Convertible preferred stock is computed using the "if
converted" method, which assumes the conversion of all outstanding
convertible preferred shares into common shares.
Recent Accounting Pronouncement: In March 1997, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards No. 128 ("SFAS 128"), "Earnings Per Share". SFAS 128 requires
companies with complex capital structures that have publicly held
common stock or common stock equivalents to present both basic and
diluted earnings per share ("EPS") on the face of the income statement.
The presentation of basic EPS replaces the presentation of primary EPS
currently required by Accounting Principles Board Opinion No. 15 ("APB
No. 15"), "Earnings Per Share". Basic EPS is calculated as income
available to common stockholders divided by the weighted average number
of common shares outstanding during the period. Diluted EPS (previously
referred to as fully diluted EPS) is calculated using the "if
converted" method for convertible securities and the treasury stock
method for options and warrants as prescribed by APB No. 15. This
statement is effective for financial statements issued for interim and
annual periods ending after December 15, 1997. The Company does not
believe the adoption of SFAS 128 in fiscal 1997 will have a significant
impact on the Company's reported EPS.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Comparison of the Three Months Ended March 31, 1997 and 1996
Results of Operations
The Company had net income of $866,000 or $.09 per common share for the three
months ended March 31, 1997, compared to net income of $669,000 or $.06 per
common share for the three months ended March 31, 1996. The increase in net
income is due to an increase of $48,000 in net interest income and an increase
of $137,000 in non-interest income as well as a decrease of $47,000 in operating
expenses. Earnings per share increased $.03 per common share to $.09 per common
share for the quarter ended March 31, 1997 compared to $.06 per common share for
the quarter ended March 31, 1996. The increase in earnings per common share was
due to a $197,000 increase in net income and a decrease in preferred dividends
as a result of the redemption of the Company's Series A preferred stock in July
1996.
Net Interest Income
Net interest income for the quarter ended March 31, 1997 increased $48,000
compared to the quarter ended March 31, 1996 due to an increase in
interest-earning assets offset by a decrease in net interest yield. The Bank
purchased $25,000,000 of mortgage-backed securities in December 1996 which were
funded by a $25,000,000 Federal Home Loan Bank advance. This transaction is the
primary contributor to the increases in interest-earning assets and
interest-bearing liabilities for the quarter ended March 31, 1997 compared to
the quarter ended March 31, 1996. The net interest income resulting from the
$25,000,000 transaction is approximately $112,000 for the quarter ended March
31, 1997 which was partially offset by a decrease in interest income on
interest-bearing deposits in other financial institutions. The decrease in
interest-bearing deposits in other financial institutions was due to the
decrease in non-interest bearing deposits for the quarter ended March 31, 1997
compared to the quarter ended March 31, 1996.
Non-Interest Income
Non-interest income increased $137,000 or 15% for the quarter ended
March 31, 1997 compared to the quarter ended March 31, 1996 primarily due to an
increase of $148,000 in gain on sale of investments.
Operating Expenses
Operating expenses decreased $47,000 for the quarter ended March 31, 1997
compared to the quarter ended March 31, 1996. The decrease in operating expenses
is primarily related to decreases of $120,000 in employee compensation and
benefits, $69,000 in insurance expense and $46,000 in other operating expenses
offset by increases of $79,000, $39,000, and $88,000 in occupancy and equipment,
data processing and goodwill amortization, respectively. Employee compensation
and benefits decreased for the three months ended March 31, 1997 compared to the
three months ended March 31, 1996 due to approximately $50,000 of non-recurring
costs associated with the absorption of Banyan Bank in the first quarter 1996.
In addition, employee compensation and benefits decreased due to the elimination
of certain positions which took place in June 1996. The decrease in insurance
expense is due to a $50,000 refund of Federal Deposit Insurance (FDIC) premiums
and an overall decrease in FDIC premiums beginning in January 1997. The increase
in occupancy and equipment is due to the depreciation expense and rent
associated with one new banking center which opened in June 1996 as well as
increased depreciation expense associated with new data processing equipment.
Data processing expense increased due to the change in data processing service
bureaus. Goodwill amortization increased for the quarter ended March 31, 1997
compared to the quarter ended March 31, 1996 due to an increase in goodwill
associated with the Banyan acquisition.
Provision for Income Taxes
Income tax expenses increased $35,000 for the three months ended March 31, 1997
compared to the three months ended March 31, 1996. The increase is attributable
to an increase in income before taxes of $232,000 offset by a decrease in the
effective tax rate to approximately 37% for the quarter ended March 31, 1997
from 41% for the quarter ended March 31, 1996. The effective income tax rate
decreased primarily due to an increase in taxable income which reduced the
impact of non-deductible goodwill amortization.
9
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations (Continued)
- --------------------------------------------------------------------------------
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 investments available-forsale and
deposits with the Federal Home Loan Bank of Atlanta. The Bank was in compliance
with liquidity requirements during the three months ended March 31, 1997.
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 banks and/or enter
into repurchase agreements on eligible investments.
Cash and cash equivalents decreased by approximately $13,200,000 during the
three months ended March 31, 1997 due to $35,000,000 loan originations and
purchases and $10,000,000 in deposit run-off offset by $15,000,000 in FHLB
advances, $10,000,000 in principal collected on loans and $10,000,000 in
proceeds from loan sales. A purchase of 1-4 family residential loans was made
during the quarter ended March 31, 1997 while the majority of loan originations
related to commercial business and commercial real estate loans. The decrease in
deposits is primarily attributable to lowering interest rates paid on
certificates of deposits to become aligned with the commercial bank market.
The following table shows the capital amounts and ratios of the Bank at
March 31, 1997
================================== ==================== =====================
(Dollars in thousands) Amount Ratio
- ---------------------------------- -------------------- ---------------------
Total risk based capital $31,099 12.8%
Tier 1 risk based capital $28,499 11.7%
Leverage capital $28,499 8.4%
====================================================== ======================
The Bank was in compliance with its' capital requirements at March 31, 1997.
Financial Condition
As of March 31, 1997, total assets increased approximately $6,000,000 million
from December 31, 1996. Loans net increased approximately $24,500,000 which was
funded by a decrease in interest bearing deposits in other institutions and an
increase in FHLB advances. The decrease in deposits is primarily related to the
run-off of certificate of deposits associated with lower interest rates offered
at the Bank since it's conversion to a commercial bank.
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
(27) Financial Data Schedule
(b) A report on Form 8-K was filed on January 7, 1997.
10
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11(a)
STATEMENT 11. RE: Computation of Per Share Earnings
======================================================================================================================
Three Months Ended March 31,
1997 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PRIMARY EARNINGS:
Average shares outstanding 7,854,982 6,867,550
Net effect of dilutive stock options,
warrants and equity contracts based on the modified
treasury stock method using average market price 179,130 140,556
Total weighted average number of shares outstanding 8,034,112 7,008,106
Net income $866,000 $669,000
Deduct preferred dividends (181,000) (252,000)
Net income available to common shareholders $685,000 $417,000
Earnings per share $.09 $.06
======================================================================================================================
<FN>
Note: Fully diluted earnings per share is not presented because it is the same as primary earnings per share.
</FN>
</TABLE>
11
<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: May 14, 1997 /S/ Carla H. Pollard
------------- --------------------
Carla H. Pollard
Vice President/Controller
12
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 4,522
<INT-BEARING-DEPOSITS> 21,530
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 30,963
<INVESTMENTS-CARRYING> 7,782
<INVESTMENTS-MARKET> 7,778
<LOANS> 272,577
<ALLOWANCE> 2,600
<TOTAL-ASSETS> 365,381
<DEPOSITS> 262,196
<SHORT-TERM> 21,936
<LIABILITIES-OTHER> 10,638
<LONG-TERM> 25,000
0
10,350
<COMMON> 31,180
<OTHER-SE> 4,081
<TOTAL-LIABILITIES-AND-EQUITY> 365,381
<INTEREST-LOAN> 5,566
<INTEREST-INVEST> 946
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 6,512
<INTEREST-DEPOSIT> 2,540
<INTEREST-EXPENSE> 390
<INTEREST-INCOME-NET> 3,582
<LOAN-LOSSES> 25
<SECURITIES-GAINS> 148
<EXPENSE-OTHER> 3,226
<INCOME-PRETAX> 1,374
<INCOME-PRE-EXTRAORDINARY> 1,374
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 866
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
<YIELD-ACTUAL> 4.50
<LOANS-NON> 3,005
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,273
<CHARGE-OFFS> 182
<RECOVERIES> 484
<ALLOWANCE-CLOSE> 2,600
<ALLOWANCE-DOMESTIC> 2,600
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 710
</TABLE>
