UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
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.)
450 South Australian Avenue, West Palm Beach, FL 33401
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code (561) 650-2500
---------------
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
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 May 5, 1999
- ----- -----------------------------
Common Stock 50,543,990
par value $.01 per share
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARY
INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
Page
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
for Forward-Looking Information....................................................................1
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements:
Condensed Consolidated Statements of Financial Condition
March 31, 1999 and December 31, 1998..................................................2
Condensed Consolidated Statements of Income for the
three months ended March 31, 1999 and 1998............................................3
Condensed Consolidated Statements of Comprehensive Income for the
three months ended March 31, 1999 and 1998............................................4
Condensed Consolidated Statements of Shareholders' Equity
for the three months ended March 31, 1999
and the year ended December 31, 1998..................................................5
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 1999 and 1998............................................6
Notes to Condensed Consolidated Financial Statements..................................7
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................................10
Item 3: Quantitative and Qualitative Disclosures about Market Risk...........................13
PART II: OTHER INFORMATION
Item 1: Legal Proceedings....................................................................15
Item 2: Changes in Securities and Use of Proceeds............................................15
Item 3: Defaults Upon Senior Securities......................................................15
Item 4: Submission of Matters to a Vote of Security Holders..................................16
Item 5: Other Information....................................................................16
Item 6 Exhibits and Reports on Form 8-K.....................................................16
Signatures...........................................................................17
</TABLE>
<PAGE>
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
for Forward-Looking Information
Information in this report contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 that
are subject to risks and uncertainties that could cause the Company's actual
results to differ materially from those projected in forward-looking statements.
The use of forward-looking statements can be identified by statements that
express or involve discussions as to expectations, beliefs, plans, objectives,
assumptions or future events or performance (often, but not always, through the
use of words or phrases such as "will likely result," "are expected to," "will
continue," "is anticipated," "estimated," "projection," or "outlook"), are not
historical facts and may be forward-looking. Such statements involve estimates,
assumptions, and uncertainties which include, but are not limited to, overall
business conditions, particularly in the business markets in which Republic
Security Financial Corporation and its wholly owned subsidiary, Republic
Security Bank, operate; general economic conditions, changes in interest rates,
deposit flows, loan demand, real estate values, and competition; changes in
accounting principles, policies, or guidelines; changes in legislation or
regulation; and other economic, competitive, governmental, regulatory, and
technological factors that affect the Company's operations, pricing, products,
and services. Other factors, such as the general state of the economy, could
also cause actual results to vary materially from the future results covered in
such forward-looking statements. Accordingly, any such statements are qualified
in their entirety by reference to, and are accompanied by, the above mentioned
important factors that could cause the Company's actual results to differ
materially from those contained in the forward-looking statements of the Company
made by or on behalf of the Company.
All such factors are difficult to predict, contain uncertainties
which may materially affect actual results and are beyond the control of the
Company.
1
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1:
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
======================================================================================================================
March 31, December 31,
(amounts in thousands except share and per share data) 1999 1998
- ---------------------------------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
Assets (unaudited)
Cash and amounts due from depository institutions $67,160 $46,575
Interest-bearing deposits in other financial institutions 154,961 114,471
Federal funds sold 3,390 1,120
- ---------------------------------------------------------------------------------- ----------------- -----------------
Cash and cash equivalents 225,511 162,166
Investments available-for-sale 722,912 722,913
Investments held to maturity (Market value of $6,398 and $6,422 at
March 31, 1999 and December 31, 1998, respectively) 6,366 6,363
Loans receivable - net 1,853,006 1,959,300
Loans held for sale (Market value of $91,959 and $16,272 at March 31, 1999
and December 31, 1998, respectively) 90,600 16,000
Property and equipment - net 56,513 51,008
Other real estate owned - net 3,112 2,463
Federal Home Loan Bank Stock 22,192 23,754
Goodwill - net 11,719 11,961
Accrued interest receivable 15,453 15,378
Other assets 39,670 36,426
- ---------------------------------------------------------------------------------- ----------------- -----------------
Total $3,047,054 $3,007,732
================================================================================== ================= =================
Liabilities and Shareholders' Equity
Liabilities:
Deposits $2,346,880 $2,304,855
Federal Home Loan Bank advances and other borrowings 404,269 410,368
Securities sold under agreements to repurchase 8,714 9,144
Senior debentures, net of unamortized issuance costs 25,532 27,518
Advances from borrowers for taxes and insurance 13,259 7,677
Bank drafts payable 16,553 27,706
Other liabilities 19,585 22,062
- ---------------------------------------------------------------------------------- ----------------- -----------------
Total liabilities 2,834,792 2,809,330
- ---------------------------------------------------------------------------------- ----------------- -----------------
Commitments and contingencies
Shareholders' equity:
Common stock $.01 par value; 500,000,000 shares authorized; 50,531,862 and
47,370,265 shares issued and outstanding at
March 31, 1999 and December 31, 1998, respectively 505 474
Additional paid-in capital 132,649 120,800
Retained earnings 80,264 75,423
Accumulated other comprehensive (loss) income, net of taxes (1,156) 1,705
- ---------------------------------------------------------------------------------- ----------------- -----------------
Total shareholders' equity 212,262 198,402
- ---------------------------------------------------------------------------------- ----------------- -----------------
Total $3,047,054 $3,007,732
================================================================================== ================= =================
See notes to condensed consolidated financial statements.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
=======================================================================================================================
Three Months Ended
March 31,
(amounts in thousands except per share data) 1999 1998
- ------------------------------------------------------------------------- --------------------- --------------------
<S> <C> <C>
Interest Income: (unaudited)
Interest and fees on loans $39,891 $40,251
Interest and dividends on investments 12,398 12,362
- ------------------------------------------------------------------------- --------------------- --------------------
52,289 52,613
- ------------------------------------------------------------------------- --------------------- --------------------
Interest Expense:
Interest on deposits 22,587 22,567
Interest on borrowings 5,758 7,435
- ------------------------------------------------------------------------- --------------------- --------------------
28,345 30,002
- ------------------------------------------------------------------------- --------------------- --------------------
Net interest income 23,944 22,611
Provision for loan losses 500 2,913
- ------------------------------------------------------------------------- --------------------- --------------------
Net interest income after provision for loan losses 23,444 19,698
- ------------------------------------------------------------------------- --------------------- --------------------
Non-interest Income:
Service charges on deposit accounts 3,117 2,546
Net gain on sales of loans 952 2,636
Net gain on sales of investments available-for-sale 96 359
Other income 1,809 1,694
- ------------------------------------------------------------------------- --------------------- --------------------
5,974 7,235
- ------------------------------------------------------------------------- --------------------- --------------------
Operating Expenses:
Employee compensation and benefits 9,010 9,810
Occupancy and equipment 4,422 3,536
Professional fees 416 508
Advertising and promotion 298 478
Communications 715 611
Insurance 462 518
Other 2,979 2,710
Merger expenses 2,381 103
- ------------------------------------------------------------------------- --------------------- --------------------
20,683 18,274
- ------------------------------------------------------------------------- --------------------- --------------------
Income before income taxes 8,735 8,659
Income tax expense 3,183 3,283
- ------------------------------------------------------------------------- --------------------- --------------------
Net income $5,552 $5,376
========================================================================= ===================== ====================
Income applicable to common stock $5,552 $5,197
========================================================================= ===================== ====================
Per share data:
Basic earnings $0.11 $0.11
Diluted earnings $0.11 $0.11
Dividends $0.06 $0.05
- ------------------------------------------------------------------------- --------------------- --------------------
Weighted average common shares and common stock equivalents outstanding:
Basic 50,500 45,017
Diluted 51,236 46,415
========================================================================= ===================== ====================
See notes to condensed consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
====================================================================================================================
Three Months Ended
March 31,
1999 1998
(amounts in thousands except per share data) (unaudited)
- ----------------------------------------------------------------------------------------- ------------- ------------
<S> <C> <C>
Net income $5,552 $5,376
Other comprehensive income, net of tax:
Unrealized loss on investments available-for-sale arising during the period,
net of taxes of ($1,907) and ($445) in 1999 and 1998, respectively. (2,801) (441)
Reclassification adjustment for amounts realized on sale of investments
included in net income, net of taxes of ($36)
and ($133) in 1999 and 1998, respectively. (60) (226)
- ----------------------------------------------------------------------------------------- ------------- ------------
Comprehensive income $2,691 $4,709
- ----------------------------------------------------------------------------------------- ------------- ------------
See notes to condensed consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
==================================================================================================================================
Common Accumulated
Additional Stock Comprehensive
Preferred Common Paid-in Retained Purchased Income,
(amounts in thousands except share data) Stock Stock Capital Earnings ESOP Net of Taxes
- ----------------------------------------------- ------------ --------- ------------------------- -------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1997, as restated $10,286 $449 $103,655 $94,244 ($955) ($467)
- ----------------------------------------------- ------------ --------- ------------------------- -------------- ------------------
Exercise of stock options and warrants
- 952,061 shares 9 4,170
Purchase of common stock
by 401(k) plan - 4,474 shares 43
Conversion of preferred stock series "C"
into common stock - 1,463,347 shares (9,440) 15 9,425
Cash redemption of preferred stock series "C" (50)
Conversion of pooled company preferred stock
into common stock - 111,660 shares (796) 1 795
Cash dividends - common stock (6,795)
Cash dividends paid by pooled company
- common stock (2,669)
Cash dividends - preferred stock series "C"
($27 paid by pooled company) (229)
Amortization of deferred compensation
- ESOP & RRP 2,712 955
Net loss (11,659)
Net income of pooled Company for three months
ended December 31, 1997 2,531
Changes in accumulated other comprehensive
income, net of taxes 2,172
- ----------------------------------------------- ------------ --------- ------------------------- -------------- ------------------
Balance December 31, 1998 474 120,800 75,423 1,705
=============================================== ============ ========= ========================= ============== ==================
Acquisition of pooled company 24 7,494 2,465
Exercise of stock options and warrants - 693,641 7 4,355
Cash dividends - common stock (2,887)
Cash dividends paid by pooled company
- common stock (289)
Net income 5,552
Changes in accumulated other comprehensive
income, net of taxes (2,861)
- ----------------------------------------------- ------------ --------- ------------------------- -------------- ------------------
Balance March 31, 1999 (unaudited) $505 $132,649 $80,264 ($1,156)
=============================================== ============ ========= ========================= ============== ==================
See notes to condensed consolidated financial statements.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
================================================================================================================
Three Months Ended March 31,
(Unaudited)
(amounts in thousands except per share data) 1999 1998
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating Activities: (Restated)
Net income $5,552 $5,376
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for loan losses 500 2,913
Depreciation and amortization 2,014 1,563
Amortization of deferred loan fees and costs 229 726
Gain on sales of loans (952) (2,636)
Loans originated for sale (26,900) (5,235)
Purchase of loans for sale (7,986)
Sale of loans and loan participation certificates 68,301 170,802
Purchase of trading securities (31,601)
Sale of trading securities 36,211
Net gain on sale of investments available-for-sale (96) (359)
Other - net (4,193) 14,064
- ----------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 36,469 191,824
- ----------------------------------------------------------------------------------------------------------------
Investing Activities:
Cash and cash equivalents acquired from pooled company 18,975
Purchase of investments available-for-sale (71,787) (163,054)
Proceeds from sales of investments available- for- sale 37,430 80,320
Maturities and calls of investments held to maturity 540
Principal payments on securities 40,551 18,239
Loans purchased for investment (14,831) (35,275)
Net decrease (increase) in loans 48,908 (50,058)
Purchases of property and equipment (5,334) (1,131)
Proceeds from the sales of repossessed automobiles 831 1,270
Other - net 507 3,029
- ----------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 55,320 (146,120)
- ----------------------------------------------------------------------------------------------------------------
Financing Activities:
Net increase in demand deposits, NOW accounts, Money Market accounts
and savings accounts 265,648 38,104
Net decrease in time deposits (287,128) (4,150)
Decrease in FHLB advances (6,099) (6,139)
Repurchase of senior debentures (2,027)
Net decrease in securities sold under agreements to repurchase (430) (15,186)
Cash dividends - common and preferred (3,176) (2,190)
Other - net 4,768 (407)
- ----------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (28,444) 10,184
- ----------------------------------------------------------------------------------------------------------------
Increase in cash and cash equivalents 63,345 55,888
Adjustments to reconcile for different year ends of pooled companies:
Net income for three months ended December 31, 1997 2,531
Cash dividends paid by pooled companies (912)
Other cash flows - net 30,022
Cash and cash equivalents at beginning of year 162,166 243,934
- ----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $225,511 $331,463
- ----------------------------------------------------------------------------------------------------------------
Supplemental Disclosure of Cash Flow Information:
Cash paid for income taxes $165 $1,550
Cash paid for interest on deposits and other borrowings $27,598 $27,857
Supplemental schedule of non-cash investing activities:
Repossessed automobiles acquired in settlement of loans $1,580 $1,961
Real estate acquired in settlement of loans $1,442 $503
================================================================================================================
See notes to condensed consolidated financial statements.
</TABLE>
6
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
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" or
"Republic"). 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, 1999 and December
31, 1998, and the results of operations, comprehensive income and
cash flows for the three months ended March 31, 1999.
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, 1999 are not necessarily
indicative of the results that may be expected for the year ending
December 31, 1999. 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, 1998.
The balance sheet at December 31, 1998 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.
The condensed consolidated financial statements include
the accounts of the Company and its wholly owned subsidiary, and
include the accounts and results of operations of Northside Bank of
Tampa ("Northside") since January 1, 1999. The merger between the
Company and Northside, which was accounted for as a pooling of
interests, did not meet the conditions of a significant subsidiary
as stated in Article 11 of Regulation S-X; therefore, prior periods
have not been restated to include the accounts and results of
operations of Northside.
2. Merger and Branch Purchase
On February 26, 1999, RSFC consummated the acquisition of
Northside and RSFC issued 2,467,956 shares of its common stock for
all outstanding shares of Northside. Northside shareholders
received 3.64 shares of RSFC stock for each share of Northside
common stock. The transaction was accounted for as a pooling of
interests and resulted in RSFC acquiring assets of approximately
$74.6 million, including total loans of $39.6 million, total
deposits of $63.6 million and equity of $9.9 million.
On March 29, 1999, Republic executed a definitive
agreement to acquire nine in-store branches from First National
Bank of Central Florida ("FNBCF"). Under the terms of the
agreement, Republic will acquire nine branches operating in Kash 'N
Karry supermarkets and assume approximately $28.3 million in
deposits. The transaction is subject to approval by the State of
Florida Banking Department and the Federal Reserve Bank and is
expected to close in June 1999.
3. Non-Performing Assets and Allowance for Loan Losses
At March 31, 1999, the Bank had $20.5 million in non-performing assets
compared to $16.6 million at December 31, 1998(loans 90 days or more
past due, other real estate owned and repossessed assets)primarily due
to an increase in residential mortgage loans. Non performing loans are
not expected to continue to increase in future periods as the increase
at March 31, 1999 is related to issues associated with a transition in
the collections manager and the integration of the collection areas of
First Bank and Republic. The provision for loan losses was $500,000
and $2.9 million for the three months ended March 31, 1999 and 1998,
respectively. The provision for loan losses includes a charge of
$300,000 for the three months ended March 31, 1999 to conform
Northside's accounting and credit policies to those of Republic. A
$2.2 million additional provision was recorded in the quarter ended
March 31, 1998, relating primarily to a pooled company's indirect
automobile loan portfolio which began originating indirect automobile
loans in large volumes in August 1995 and continued through September
1996, at which time the pooled company ceased its originations of
indirect automobile loans. The additional provision was based on an
evaluation of the portfolio's remaining term to maturity, historical
loss experience, related delinquency rates and the value of the
underlying collateral.
7
<PAGE>
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 totaled $25.9
million at March 31, 1999.
The allowance for loan losses is maintained at a level
believed adequate by management to absorb estimated probable loan
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. 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, 1999, the Bank had adjustable rate
commitments to extend credit of approximately $295.6 million,
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. In the opinion of
management of the Company, amounts accrued for awards or
assessments in connection with these matters are adequate and the
ultimate resolution of these matters will not have a material
effect on the Company's consolidated financial position, results of
operations or cash flows.
8
<PAGE>
5. Earnings per Common Share
The following table sets forth the computation of basic
and diluted earnings per share:
<TABLE>
<CAPTION>
================================================================================================
Three Months Ended
March 31,
(unaudited)
(In thousands except per share data) 1999 1998
- -------------------------------------------------------------- ----------------- ---------------
<S> <C> <C>
Numerator:
Net income $5,552 $5,376
Preferred stock dividends (179)
- -------------------------------------------------------------- ----------------- ---------------
Numerator for basic earnings per share 5,552 5,197
Effect of dilutive securities:
Preferred stock dividends
- -------------------------------------------------------------- ----------------- ---------------
Numerator for diluted earnings per share $5,552 $5,197
============================================================== ================= ===============
Denominator:
Denominator for basic earnings per share - weighted-average shares 50,500 45,017
Effective of dilutive securities:
Employee stock options 736 1,398
- -------------------------------------------------------------- ----------------- ---------------
Dilutive potential common shares 736 1,398
- -------------------------------------------------------------- ----------------- ---------------
Denominator for diluted earnings per share 51,236 46,415
============================================================== ================= ===============
Basic earnings per share $0.11 $0.11
Diluted earnings per share $0.11 $0.11
============================================================== ================= ===============
</TABLE>
9
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Comparison of the Three months ended March 31, 1999 and 1998
Results of Operations
The Company had net income of $5.6 million or $0.11 diluted
earnings per common share for the three months ended March 31, 1999, compared to
$5.4 million or $0.11 diluted earnings per common share for the three months
ended March 31, 1998. Excluding merger related expenses the Company's net income
was $7.9 million or $0.16 diluted earnings per common share for the three months
ended March 31, 1999, compared to $5.4 million or $0.11 diluted earnings per
common share for the three months ended March 31, 1998. Net income for the three
months ended March 31, 1999 included pretax merger related expenses of
approximately $2.4 million primarily associated with the acquisition of
Northside Bank of Tampa on February 26, 1999. Net interest income increased $1.3
million or 6% for the three months ended March 31, 1999 compared to the three
months ended March 31, 1998. Non-interest income decreased $1.3 million while
operating expenses (excluding merger expenses) increased $131,000 or .72% for
the three months ended March 31, 1999 compared to the three months ended March
31, 1998.
Net Interest Income
Net interest income for the three months ended March 31, 1999
increased $1.3 million compared to the three months ended March 31, 1998 due to
a decrease of $324,000 in interest income offset by a decrease of $1.7 million
in interest expense. Interest income decreased due to a decrease in loan yield
of 34 basis points for the three months ended March 31, 1999 compared to the
three months ended March 31, 1998. The prime interest rate decreased from 8.50%
at the beginning of 1998 to 7.75% by year end, which resulted in an increase in
residential loan refinancings and to a lesser extent refinancings of commercial
loans (business and real estate) as well as repricing of adjustable rate assets.
Interest expense decreased due to the declining rate environment, the Bank's
strategy to reduce overall rates paid on certificate of deposits, and decreasing
the balance of certificates of deposit outstanding and increasing the balances
of non interest-bearing and low interest-bearing deposits. Since the acquisition
of First Palm Beach Bancorp ("FPBB"), the Bank has lowered interest rates
offered in the former First Bank of Florida ("First Bank") offices on new and
renewed certificate of deposit accounts to become more aligned with rates
offered by commercial banks. During the three months ended March 31, 1999
certificate of deposit balances from the former First Bank deposit base
decreased approximately $53.0 million. In addition, the Company has repurchased
$6.5 million of its 10.35% senior debentures due June 2002 in an effort to
further reduce the cost of interest-bearing liabilities.
Provision for Loan Losses
The provision for loan losses decreased $2.4 million for the three
months ended March 31, 1999 compared to the three months ended March 31, 1998,
due primarily to a $2.2 million additional provision made in the quarter ended
March 31, 1998, relating primarily to a pooled company's indirect automobile
loan portfolio which began originating indirect automobile loans in large
volumes in August 1995 and continuing through September 1996, at which time the
pooled company ceased its originations of indirect automobile loans. The
additional provision was based on an evaluation of the portfolio's remaining
term to maturity, historical loss experience, related delinquency rates and the
value of the underlying collateral. For the three months ended March 31, 1999
the Bank recorded $300,000 in merger related provision adjustments to conform
Northside's credit policies to those of the Bank.
Non-Interest Income
Non-interest income decreased $1.3 million for the three months
ended March 31, 1999 compared to the three months ended March 31, 1998 due to a
decrease of $1.7 million in gain on sale of loans, an increase of $571,000 in
service charges on deposit accounts and a decrease of $263,000 in gain on sale
of investments. The increase in service charges on deposit accounts is primarily
due to an increased volume in transaction accounts and an increase in the usage
of products subject to service charges. In addition, certain deposit fees were
increased in March of 1998 contributing slightly to the increase in service
charges on deposits. The decrease in gain on sale of loans is due to a decrease
in the amount of loans sold during the three months ended March 31, 1999
compared to the three months ended March 31, 1998. The decrease in gain on sale
of investments is due to a decrease in the volume of investments sold during the
three months ended March 31, 1999 compared to the three months ended March 31,
1998.
10
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations (Continued)
- --------------------------------------------------------------------------------
Operating Expenses
Operating expenses (excluding merger expenses) increased $131,000
for the three months ended March 31, 1999 compared to the three months ended
March 31, 1998. The increase in operating expenses is primarily due to decreases
of $800,000 in employee compensation and benefits, $92,000 in professional fees
, $180,000 in advertising and promotions and $56,000 in insurance expense offset
by an increase of $104,000 in communications expense, an increase of $886,000 in
occupancy expenses and an increase of $269,000 in other expenses. The decrease
in employee compensation and benefits is due to a decrease of $340,000 related
to the expense for Stock Appreciation Rights (SARs) accrual for the three months
ended March 31, 1999 compared to the three months ended March 31, 1998, plus
cost savings realized as a result of the First Bank merger in October 1998. SARs
expense was lower for the three months ended March 31, 1999 compared to the
three months ended March 31, 1998 as no additional accrual was necessary because
the market price of RSFC's common stock has declined since December 31, 1998.
Professional fees decreased for the three months ended March 31, 1999 compared
to the three months ended March 31, 1998 primarily due to decreases in legal
expenses relating to legal matters and problem loans. The increase in
communications expense is primarily due to the duplication of data lines
utilized prior to the data conversion of First Bank in April 1999 as well as
expansion of the banking center network. Occupancy expense increased for the
three months ended March 31, 1999 compared to the three months ended March 31,
1998 primarily due to the opening of ten new branches located in Palm Beach,
Broward, Dade, Martin and Alachua counties during 1998. Other operating expenses
increased for the three months ended March 31, 1999 compared to the three months
ended March 31, 1998 primarily due to the Bank's overall growth and franchise
expansion.
Provision for Income Taxes
The provision for income taxes decreased $100,000 for the three
months ended March 31, 1999 compared to the three months ended March 31, 1998
due to an increase in income before income taxes of $76,000 offset by a decrease
in the effective tax rate.
Liquidity, Sources of Capital and Capital Requirements
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory, and possible additional
discretionary, action by regulators that, if undertaken, could have a direct
material effect on the Bank's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Bank
must meet specific capital guidelines that involve quantitative measures of the
Bank's assets, liabilities and certain off-balance-sheet items as calculated
under regulatory accounting practices. The Bank's capital amounts and
classification are also subject to judgements by the regulators about
components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Company and the Bank to maintain minimum amounts and ratios
of total and Tier 1 capital (as defined in the regulations) to risk-weighted
assets (as defined), and of Tier 1 capital (as defined) to average assets (as
defined). As of March 31, 1999, the Bank exceeded all capital adequacy
requirements to which it is subject.
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 increased by approximately $63.3 million
during the three months ended March 31, 1999. The increase in cash is due
primarily to decreases in loans from loan sales and pay downs offset by a
decrease in FHLB advances offset by a $42.0 million increase in deposits.
11
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations (Continued)
- --------------------------------------------------------------------------------
The following table shows the capital amounts and ratios of the
Bank at March 31, 1999:
<TABLE>
<CAPTION>
====================================================================================================================
(Dollars in thousands) Amount Ratio
- ------------------------------------------------------------------------- --------------------- --------------------
<S> <C> <C>
Total risk based capital $229,756 13.63%
Tier 1 risk based capital $203,481 12.08%
Leverage capital $203,481 6.74%
- ------------------------------------------------------------------------- --------------------- --------------------
</TABLE>
The most recent notification from the Federal Reserve Bank
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action. At March 31, 1999, the Bank exceeded each of the
regulatory capital requirements and was considered a "well capitalized"
institution for regulatory purposes.
Financial Condition
As of March 31, 1999, total assets increased approximately $39.3 million from
December 31, 1998. The acquisition of Northside on February 26, 1999,
contributed $74.6 million in total assets, $39.6 million in net loans, $9.8
million in investments, $18.9 million in cash and $6.4 million in property and
equipment and other assets. Loans-net and loans held for sale decreased
approximately $31.7 million, investments remained unchanged and cash and cash
equivalents increased $63.3 million. Excluding the effects of the Northside
acquisition, total assets decreased $35.5 million primarily due to certificate
of deposit run-off. Consistent with managements plan to reduce the amount of
certificate of deposits and income transaction accounts. Advances from borrowers
for taxes and insurance increased $5.6 million due to the accumulation of escrow
payments related primarily to residential loans, and bank drafts payable
decreased $11.2 million related to an increased amount of loan funding checks
issued at the end of December 1998.
Year 2000 Matters
The Bank relies heavily on information technology ("IT") systems
which are primarily provided by third party vendors and other systems and
facilities such as telecommunications, utilities, electronic clearinghouses and
building access control systems to conduct its business. The Bank also has
business relationships with other financial institutions, regulators and
customers who are also reliant on IT and embedded systems to conduct their
businesses. The Bank utilizes and is dependent upon a third-party vendor for its
primary data processing functions. The Bank also utilizes other purchased
software packages which operate on in-house computer networks. The Bank faces
the risk that one or more of its critical service providers will not be able to
provide services to the Bank due to the third party's inability to resolve its
own Year 2000 issues, including those associated with its own external
relationships.
State of Readiness
In 1997, the Bank's Electronic Data Processing Committee (the "EDP
Committee") started work on the Bank's Year 2000 Project. The EDP Committee is
comprised of members from each area of the Bank. The EDP Committee developed and
is currently executing a comprehensive plan designed to ensure the Bank's
mission critical IT systems and mission critical service providers are Year 2000
compliant. The Bank's plan consists of five phases: (1) awareness phase, to
define the Year 2000 issue and obtain senior management and Board of Directors
support, (2) inventory phase, to identify all IT systems and service providers
and assign risk ratings in accordance with its potential business impact,
available alternatives and cost of substitution, (3) assessment phase, to
evaluate the identified mission critical systems, including those systems
provided by third-party vendors, for Year 2000 functionality and readiness, (4)
remediation phase, to replace or upgrade inventoried items to ensure Year 2000
compliance and (5) testing and certification phase, to test all remediated
systems including testing with vendors, to ensure successful operation in the
post-1999 environment. In addition, the Bank's Year 2000 plan includes assessing
the impact of the Year 2000 issue on borrowers' ability to repay loans.
As of March 31, 1999, the Bank had completed the awareness,
inventory and assessment phases and has substantially completed the remediation
and testing phases. The majority of the testing was substantially complete by
March 31, 1999. The Bank is utilizing both internal and external resources to
upgrade, replace and test hardware, software and third party vendor programs.
Through formal communication, the Bank's primary data processing vendor and the
majority of other critical vendors have indicated their IT systems are or will
be Year 2000 compliant and tested before Year 2000. The Bank has also contacted
all of its significant commercial loan customers to determine the borrower's
ability and readiness to become Year 2000 compliant. Approximately 60%
12
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations (Continued)
- --------------------------------------------------------------------------------
of the loan customers contacted have responded and the Bank has not identified
any significant issues with those customers. The Bank anticipates completing all
the phases within three months but no later than October 31, 1999.
Year 2000 Costs
Year 2000 expenses primarily include costs associated with internal
and external personnel, upgrade packages and disposal of non-compliant hardware
and software. To date, the Bank has not incurred any significant expenses and
does not expect to incur any significant expenses other than internal personnel
resources associated with the Year 2000 project. Costs to purchase new compliant
hardware and software are estimated to be approximately $2.0 million, which will
be capitalized. The cost of the Year 2000 project will be funded through
operating cash flows. While management does not anticipate the cost of the Year
2000 project to have a material impact on the Company's financial condition,
operations or cash flows, the project is not yet complete and is dependent on
third parties.
Risks and Contingency
If the Bank's or other third party vendors fail to resolve Year
2000 issues by December 31, 1999, potential consequences would include, among
other possibilities, the inability to accurately and timely process withdrawals,
deposits and payments, update customers' accounts, process financial
information, bill customers, accommodate customer's financial needs, determine
or meet liquidity requirements or report accurate data to management, customers,
shareholders, regulators and others as well as business interruptions or branch
closings, financial losses, reputational harm, increased scrutiny by regulators
and litigation related to Year 2000 issues. The Bank is attempting to limit the
potential impact of the Year 2000 by monitoring the progress of its Year 2000
Project and those of its critical vendors and by developing contingency plans.
There can be no assurance that the Bank will be completely successful in its
efforts to resolve Year 2000 issues. Any critical unresolved Year 2000 issues at
the Bank or its critical vendors could have a material adverse effect on the
Company's results of operations, financial condition or liquidity.
The Bank has begun developing comprehensive contingency plans designed to
ensure the continuity of critical business processes before and after December
31, 1999. The contingency plans will include reasonably likely Year 2000 failure
scenarios for its critical business processes, procedures designed to reduce the
impact on the Bank and methods of returning to normal operations. The Bank
expects contingency planning to be substantially complete by July 31,1999.
The foregoing Year 2000 discussion contains "forward-looking
statements"within the meaning of the Private Securities Litigation Reform Act of
1995. Such statements, including without limitation, anticipated costs and the
dates by which the Bank expects to complete certain actions, are based on
management's best current estimates, which were derived utilizing numerous
assumptions about future events, including the continued availability of certain
resources, representations received from third parties and other factors.
However, there can be no guarantee that these estimates will be achieved, and
actual results could differ materially from those anticipated. Specific factors
that might cause such material differences include, but are not limited to, the
ability to identify and remediate all relevant systems, results of Year 2000
parties who are service providers, suppliers or customers of the Company,
unanticipated system costs, the adequacy of and ability to develop and implement
contingency plans and similar uncertainties. The "forward-looking statements"
made in the foregoing Year 2000 discussion speak only as of the date on which
such statements are made, and the Company undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of unanticipated
events.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a financial institution holding company, the Company's primary
component of market risk is interest rate volatility. Fluctuations in interest
rates will ultimately impact both the level of income and expense recorded on a
large portion of the Bank's assets and liabilities and the market value of all
interest-earning assets, other than those with short term maturities. All of the
Company's interest rate risk exposure lies at the Bank level. Accordingly,
interest rate risk management procedures are performed at the Bank level. Based
on the nature of the Bank's operations, the Bank is not subject to foreign
currency exchange or commodity price risk. The Bank's real estate portfolio,
concentrated primarily within Palm Beach, Martin, Broward, Dade and Lee counties
of Florida, is subject to risks associated with the local economy.
13
<PAGE>
The Company manages its interest rate risk exposure by limiting the
amount of long-term fixed rate loans it holds for investment, increasing
emphasis on shorter-term loans for portfolio, commitments to sell loans, and
increasing or decreasing the relative amounts of long-term and short-term
borrowings and deposits. The following table presents the Company's exposure to
interest rate risk at March 31, 1999:
<TABLE>
<CAPTION>
============================================================================================================
March 31, 19991
---------------------------------------------------------------
One Year or
Less 1 to 3 Years 3 to 5 Years Over 5 Years Total
------------- ----------- ------------ ----------- ------------
(Dollars in thousands)
============================================================================================================
<S> <C> <C> <C> <C> <C>
Total interest-earning assets $1,370,679 $507,660 $225,764 $591,209 $2,695,312
Total interest-bearing liabilities 1,949,704 309,835 162,042 76,463 2,498,044
--------- ------- ------- ------ ---------
Interest rate sensitivity gap ($579,025) $197,825 $63,722 $514,746 $197,268
========== ======== ======= ======== ========
Cumulative interest rate sensitivity gap ($579,025) ($381,200) ($317,478) $197,268
========== ========== ========== ========
Cumulative interest rate sensitivity gap
as a percent of total assets (19.1)% (12.6)% (10.5)% 6.5%
========== =========== ========== ========
===================================================== ============== =========== ============ ======================
<FN>
1 In preparing the table above, certain assumptions have been made with
regard to loan prepayments and withdrawals of transaction account
deposits. Loan prepayment rates are based upon market consensus
estimates for similar securities. Money Market and savings account
balances are included in one year or less. NOW account deposits are
included in one year or less. All other assets and liabilities have
been repriced based on the earlier of repricing or contractual
maturity. The above assumptions are based on the latest available
assumptions and on remaining balances and should not be regarded as
indicative of the actual prepayments and withdrawals that may be
experienced by the Company. Moreover, certain shortcomings are inherent
in the analysis presented by the foregoing table. For example, although
certain assets and liabilities may have similar maturities or periods
for repricing, they may react in different degrees to changes in market
interest rates. Also, interest rates on certain types of assets and
liabilities may fluctuate in advance of or lag behind changes in market
interest rates. Additionally, certain assets, such as ARM loans, have
features that restrict changes in interest rates on a short-term basis
and over the life of the assets.
</FN>
</TABLE>
In addition to the above, the Bank is committed to fund $295.6 million
in new loans and $44.9 million in construction loans-in-process at March 31,
1999. These loans and commitments are largely protected from interest rate
fluctuations because they are either adjustable rate loans or are fixed rate
loans which the Bank has obtained commitments to sell in the secondary market.
This relationship is not linear or consistent with other interest rate sensitive
assets and liabilities on the Company's balance sheet and management uses
computer modeling in its efforts to manage the effects that interest rate
fluctuations have on income.
The current potential changes in future earnings relating to financial
assets and liabilities as of March 31, 1999 are as follows:
================================================================================
Potential Change in Future Earnings 2
1999 2000
- ------------------------------------------------- ------------------------------
Interest Rate Change in Basis Points:
+ 100 1.40% 4.59%
- - 100 2.49% (1.76)%
================================================================================
2 The most significant assumptions used in this simulation relate
primarily to the repricing rates of demand and other non-maturity
deposits and loan and investment prepayment rates. Money market
and savings deposit accounts are assumed to have the following lag
characteristics in an increasing rate environment: the Bank will
recognize a 25 basis point increase at nine months and an
additional 25 basis point increase at twelve months following an
increase in the market rate. NOW accounts are considered to be
non-interest sensitive in an increasing rate environment. Money
market and savings deposit accounts are assumed to have the
following characteristics in a decreasing rate environment: the
Bank will recognize a 50 basis point decrease at three months and
an additional 50 basis point decrease at nine months following a
decrease in the market rate. Certificates of deposits will
recognize a 50 basis point increase upon repricing and a 65 basis
point decrease upon repricing following an increase or decrease in
the market rate. These lag assumptions are based on a three year
analysis of changes to the Bank's rates compared to changes in the
market rates. Loan and investment prepayment rates are based upon
market consensus estimates for similar securities. Certain
shortcomings are inherent in the simulation presented by the above
table. For example, certain financial assets and liabilities may
have similar maturities or periods for repricing, but may react in
different degrees to changes in market interest rates.
The potential changes in future earnings shown above are within the
Bank's interest rate risk policy limits.
14
<PAGE>
PART II. OTHER INFORMATION
ITEM 1: Legal Proceedings
Neither the Company nor its subsidiaries are involved in any
pending legal proceedings, other than routine legal matters occurring
in the ordinary course of business which in the aggregate involve
amounts which in management's opinion are not material to the
consolidated financial condition or results of operation of the
Company.
ITEM 2: Changes in Securities and Use of Proceeds
Northside
On February 26, 1999, in connection with the Agreement and Plan of
Merger, dated as of September 11, 1998, by and among the Company,
Republic Security Bank and Northside, the Company issued 2,467,956
shares of RSFC Common Stock in exchange for the 633,754 shares of
Northside common stock, par value $5.00 per share, outstanding on
February 26, 1999 (the "Northside Merger"). The Company effected the
Northside Merger in reliance on the exemption from registration
provided under Section 3(a)(10) under the Securities Act. Beginning on
February 8, 1999 and concluding on February 9, 1999, the Florida
Banking Department (the "Department") held a public hearing on the
approval of the Northside Merger during which the Department reviewed
the Northside Merger based on the following criteria: (1) the resulting
bank meets all the capital requirements of state law as to the
formation of a new state bank; (2) the capital structure of the
resulting bank, including surplus, is adequate; (3) the valuation is
fair; and (4) the merger is not contrary to public interest. On
February 25, 1999, the Department issued its Report on Public Hearing
(the February 25, 1999 Report") in which the Department stated that
"the terms and conditions of the merger are fair to all parties, the
merger valuation for each shareholder is fair to all parties, the
merger is not contrary to the public's interest and the resulting bank
meets all the capital requirements of state law as to the formation of
a new state bank and the capital structure of the resulting bank,
including surplus, is adequate." On February 25, 1999, the Department
issued a Final Order confirming the February 25, 1999 Report and
approving the Northside Merger.
ITEM 3: Defaults Upon Senior Securities
Not applicable.
15
<PAGE>
ITEM 4: Submission of Matters to a Vote of Security Holders
The annual meeting of shareholders of Republic Security Financial
Corporation was held on April 28, 1999. The following matters were
voted upon:
1. Election of seven directors, each for a term of three years,
one director for a term of one year and one director for a term of two
years.
2. Approval of an amendment to the Republic Security Financial
Corporation Performance Incentive Plan ("the Plan") increasing the
share limit on the number of stock options, restricted stock awards and
other stock-based incentive awards that may be made to any one
participant in one calendar year from 100,000 to 750,000.
The results of the votes for each of the above
matters are as follows:
<TABLE>
<CAPTION>
===============================================================================================================
Votes Cast: Broker
Matter For Against Withheld Abstain Non-vote
===============================================================================================================
<S> <C> <C> <C> <C> <C>
1. 1 year term
R. Randy Guemple 38,395,786 4,150,534 N/A
2 year term
Fred A. Greene 38,515,606 4,030,714 N/A
3 year term
Johnny Adcock 38,358,099 4,188,221 N/A
Mary Anna Fowler 38,356,380 4,189,940
Thomas J. Langan, Jr. 38,355,542 4,190,778
Carol R. Owen 38,358,199 4,188,121
Richard C. Rathke 38,356,799 4,189,521
Rudy E. Schupp 38,373,001 4,173,319
Daniel Sokoloff 38,406,553 4,139,767
2. 33,367,355 8,837,004 341,953 N/A
===============================================================================================================
</TABLE>
ITEM 5: Other Information
Not applicable.
ITEM 6: Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report:
27 Financial Data Schedule (for SEC use only).
(b) No Reports on Form 8-K were filed during the three months
ended March 31, 1999.
16
<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, 1999 /s/ Richard J. Haskins
------------ -----------------------------------
Richard J. Haskins
Executive Vice President & CFO
(Principal Financial Officer)
Date: May 14, 1999 /s/ Carla H. Pollard
------------ --------------------------
Carla H. Pollard
Vice President/Controller
(Duly Authorized Officer)
17
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 67,160
<INT-BEARING-DEPOSITS> 154,961
<FED-FUNDS-SOLD> 3,390
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 722,912
<INVESTMENTS-CARRYING> 6,366
<INVESTMENTS-MARKET> 6,398
<LOANS> 1,969,502
<ALLOWANCE> 25,896
<TOTAL-ASSETS> 3,047,054
<DEPOSITS> 2,346,880
<SHORT-TERM> 161,714
<LIABILITIES-OTHER> 49,397
<LONG-TERM> 276,801
0
0
<COMMON> 133,154
<OTHER-SE> 79,108
<TOTAL-LIABILITIES-AND-EQUITY> 3,047,054
<INTEREST-LOAN> 39,891
<INTEREST-INVEST> 12,398
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 52,289
<INTEREST-DEPOSIT> 22,587
<INTEREST-EXPENSE> 28,345
<INTEREST-INCOME-NET> 23,944
<LOAN-LOSSES> 500
<SECURITIES-GAINS> 96
<EXPENSE-OTHER> 20,683
<INCOME-PRETAX> 8,735
<INCOME-PRE-EXTRAORDINARY> 8,735
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,552
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
<YIELD-ACTUAL> 3.42
<LOANS-NON> 16,758
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 26,665
<CHARGE-OFFS> 1,713
<RECOVERIES> 443
<ALLOWANCE-CLOSE> 25,896
<ALLOWANCE-DOMESTIC> 25,896
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 5,351
</TABLE>
