FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended Commission
September 30, 1994 File No. 0-15882
- - ------------------ ----------------
FIRST REPUBLIC BANCORP INC.
---------------------------
(Exact name of registrant as
specified in its charter)
Delaware 94-2964497
- - -------- ----------
State or other jurisdiction (IRS Employer
of incorporation or organization Identification No.)
388 Market Street
San Francisco, California 94111
-------------------------------
(Address of principal executive offices) (Zip Code)
(415) 392-1400
--------------
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address, and former fiscal year,
if changed since last report)
Indicate by check 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
----- -----
Common Stock , par value $.01 per share, of First Republic
Bancorp Inc. outstanding at November 4, 1994, 7,554,207 shares.
<PAGE>
First Republic Bancorp Inc.
Form 10-Q
September 30, 1994
Index
<TABLE>
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PAGE
PART I - FINANCIAL INFORMATION ----
<S> <C>
Item 1 - Financial Statements
Consolidated Balance Sheet -
September 30, 1994 and December 31, 1993 3
Consolidated Statement of Income - Nine Months
and Quarters Ended September 30, 1994 and 1993 5
Consolidated Statement of Cash Flows -
Nine Months ended September 30, 1994 and 1993 6
Notes to Consolidated Financial
Statements 7
Item 2 - Management's Discussion and
Analysis of Financial Condition
and Results of Operations 8
PART II - OTHER INFORMATION 27
Item 1 - Legal Proceedings
Item 2 - Changes in Securities
Item 3 - Defaults Upon Senior Securities
Item 4 - Submission of Matters to a Vote of Security Holders
Item 5 - Other Information
Item 6 - Exhibits and Reports on Form 8-K
SIGNATURES 28
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2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following interim consolidated financial
statements are unaudited. However, they reflect all adjustments
(which included only normal recurring adjustments) which are, in
the opinion of management, necessary for a fair presentation of
financial position, results of operations and cash flows for the
interim periods presented.
FIRST REPUBLIC BANCORP INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash $ 13,114,000 $ 19,903,000
Federal funds sold and short term investments 23,000,000 18,883,000
Interest bearing deposits at other financial institutions 297,000 592,000
Investment securities (net) 125,533,000 84,208,000
Federal Home Loan Bank Stock, at cost 27,277,000 22,927,000
----------- -----------
189,221,000 146,513,000
Loans
Single family (1-4 unit) mortgages 724,576,000 546,232,000
Multifamily (5+ units) mortgages 384,483,000 387,757,000
Commercial real estate mortgages 248,675,000 229,914,000
Commercial business loans 6,236,000 8,346,000
Multifamily construction 18,359,000 5,707,000
Single family construction 12,491,000 14,512,000
Equity lines of credit 30,582,000 31,213,000
Leases, contracts and other 698,000 1,333,000
Loans held for sale 8,481,000 31,044,000
------------- -------------
1,434,581,000 1,256,058,000
Less
Unearned loan fee income (7,484,000) (9,406,000)
Reserve for possible losses (14,306,000) (12,657,000)
------------- --------------
Net loans 1,412,791,000 1,233,995,000
Accrued interest receivable 9,660,000 8,110,000
Purchased servicing and premium on sale of loans 908,000 1,154,000
Prepaid expenses and other assets 15,017,000 13,786,000
Premises, equipment and leasehold improvements,
net of accumulated depreciation 3,774,000 3,674,000
Real estate owned (REO) 7,295,000 9,961,000
--------------- --------------
$ 1,638,666,000 $1,417,193,000
=============== ==============
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3
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FIRST REPUBLIC BANCORP INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
-------------- --------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Thrift certificates
Passbook and MMA accounts $ 127,088,000 $ 117,161,000
Investment certificates 775,208,000 634,510,000
-------------- -------------
Total thrift certificates 902,296,000 751,671,000
Interest payable 9,807,000 8,105,000
Custodial receipts on loans serviced for others 1,751,000 1,046,000
Other liabilities 4,288,000 8,358,000
Federal Home Loan Bank advances 545,530,000 468,530,000
Other borrowings 788,000 13,580,000
------------- -------------
Total senior liabilities 1,464,460,000 1,251,290,000
Senior subordinated debentures 9,978,000 9,981,000
Subordinated debentures 19,419,000 16,476,000
Convertible subordinated debentures 34,500,000 34,500,000
------------- -------------
Total liabilities 1,528,357,000 1,312,247,000
------------- -------------
Stockholders' equity
Common stock 78,000 77,000
Capital in excess of par value 74,643,000 71,124,000
Retained earnings 37,878,000 35,296,000
Deferred compensation -- ESOP (788,000) (1,200,000)
Treasury shares, at cost (982,000) (351,000)
Unrealized loss-available for sale securities (520,000) -
------------- --------------
Total stockholders' equity 110,309,000 104,946,000
------------- --------------
$1,638,666,000 $1,417,193,000
============= ==============
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4
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FIRST REPUBLIC BANCORP INC.
CONSOLIDATED STATEMENT OF INCOME
(unaudited)
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
September 30, September 30,
------------- -----------------
1994 1993 1994 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest income:
Interest on real estate and other loans $ 25,688,000 $ 23,309,000 $ 73,355,000 $ 69,638,000
Interest on investments 2,436,000 1,425,000 5,870,000 3,669,000
----------- ----------- ----------- -----------
Total interest income 28,124,000 24,734,000 79,225,000 73,307,000
----------- ----------- ----------- -----------
Interest expense:
Interest on thrift accounts 10,708,000 8,897,000 29,148,000 26,607,000
Interest on notes, debentures and other borrowings 8,146,000 5,392,000 21,107,000 15,907,000
----------- ----------- ----------- -----------
Total interest expense 18,854,000 14,289,000 50,255,000 42,514,000
----------- ----------- ----------- -----------
Net interest income 9,270,000 10,445,000 28,970,000 30,793,000
Provision for losses 1,502,000 1,030,000 7,182,000 3,615,000
----------- ----------- ----------- -----------
Net interest income after provision for losses 7,768,000 9,415,000 21,788,000 27,178,000
----------- ----------- ----------- -----------
Non-interest income:
Servicing fees, net 719,000 303,000 1,709,000 757,000
Loan and related fees 309,000 398,000 1,147,000 1,145,000
Gain on sale of loans 356,000 987,000 482,000 2,019,000
Other income 47,000 1,000 290,000 4,000
----------- ----------- ----------- -----------
Total non-interest income 1,431,000 1,689,000 3,628,000 3,925,000
----------- ----------- ----------- -----------
Non-interest expense:
Salaries and related benefits 1,551,000 1,501,000 5,197,000 4,317,000
Occupancy 625,000 456,000 1,841,000 1,291,000
Advertising 429,000 315,000 1,434,000 936,000
Professional fees 129,000 168,000 405,000 470,000
FDIC insurance premiums 476,000 456,000 1,332,000 1,361,000
REO costs and losses 315,000 846,000 862,000 2,566,000
Other general and administrative 1,376,000 1,387,000 4,509,000 3,555,000
Defeasance costs 0 0 0 1,132,000
----------- ----------- ----------- -----------
Total non-interest expense 4,901,000 5,129,000 15,580,000 15,628,000
----------- ----------- ----------- -----------
Income before income taxes 4,298,000 5,975,000 9,836,000 15,475,000
Provision for income taxes 1,746,000 2,548,000 4,095,000 6,457,000
----------- ----------- ----------- -----------
Net income $2,552,000 $3,427,000 $5,741,000 $9,018,000
=========== =========== =========== ===========
Net income adjusted for effect of convertible
issue, used in fully diluted EPS $2,951,000 $3,823,000 $6,939,000 $10,218,000
=========== =========== =========== ============
Primary earnings per share $ 0.32 $ 0.43 $ 0.71 $ 1.13
=========== =========== =========== ============
Weighted average shares - primary 8,026,378 8,030,256 8,043,858 7,988,372
=========== =========== =========== ============
Fully diluted earnings per share $ 0.28 $ 0.36 $ 0.66 $ 0.97
=========== =========== =========== ============
Weighted average shares - fully diluted 10,551,059 10,658,028 10,574,606 10,556,467
=========== =========== =========== ============
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5
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FIRST REPUBLIC BANCORP INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Nine Months ended
-----------------
September 30,
-------------
1994 1993
----------- -----------
<S> <C> <C>
Operating Activities
Net Income $ 5,741,000 $ 9,018,000
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Provision for losses 7,182,000 3,615,000
Provision for depreciation and amortization 1,898,000 1,401,000
Amortization of loan fees (3,312,000) (3,503,000)
Amortization of investment securities discounts (5,000) (1,000)
Amortization of investment securities premiums 156,000 96,000
Loans originated for sale (82,799,000) (233,709,000)
Loans sold into commitments 84,854,000 215,042,000
Decrease in deferred taxes 486,000 824,000
Net gains on sale of loans (482,000) (2,019,000)
Increase in interest receivable (2,343,000) (999,000)
Increase (decrease) in interest payable 1,702,000 (339,000)
Increase in other assets (1,306,000) (2,464,000)
Increase (decrease) in other liabilities (3,852,000) 1,439,000
----------- ------------
Net Cash Provided (Used) By Operating Activities 7,920,000 (11,599,000)
Investment Activities
Loans originated (540,964,000) (392,586,000)
Loans purchased -- (4,020,000)
Other loans sold 131,408,000 85,822,000
Principal payments on loans 213,929,000 198,352,000
Purchase of investment securities (48,133,000) (12,926,000)
Repayments of investment securities 8,307,000 3,461,000
Net decrease in short term investments 295,000 981,000
Additions to fixed assets (767,000) (1,207,000)
Net proceeds from sale of real estate owned 7,417,000 4,504,000
------------ -------------
Net Cash (Used) by Investing Activities (228,508,000) (117,619,000)
Financing Activities
Net increase in thrift passbook and MMA accounts 9,927,000 16,498,000
Issuance of investment certificates 305,467,000 232,005,000
Repayments of investment certificates (164,769,000) (204,490,000)
Increase in long-term FHLB advances 87,000,000 50,000,000
Repayments of other long-term borrowings (412,000) (356,000)
Net decrease in short-term borrowings (22,380,000) ---
Decrease in deferred compensation - ESOP 412,000 356,000
Repayment of subordinated debentures (25,000) (10,569,000)
Issuance of subordinated debentures 2,965,000 14,428,000
Proceeds from employee stock purchase plan 98,000 58,000
Proceeds from common stock options exercised 264,000 108,000
Purchase of Treasury Stock (631,000) ---
------------ ------------
Net Cash Provided by Financing Activities 217,916,000 98,038,000
Decrease in Cash and Cash Equivalents (2,672,000) (31,180,000)
Cash and Cash Equivalents at Beginning of Period 38,786,000 98,301,000
------------ ------------
Cash and Cash Equivalents at End of Period $ 36,114,000 $ 67,121,000
============ ============
</TABLE>
6
<PAGE>
FIRST REPUBLIC BANCORP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The consolidated financial statements of First Republic Bancorp
Inc. ("First Republic") include its subsidiaries, First Republic
Thrift & Loan ("First Thrift"), First Republic Mortgage Inc. and
First Republic Savings Bank. First Republic and its subsidiaries
are collectively referred to as the "Company." All material
intercompany transactions and balances are eliminated in
consolidation. Certain reclassifications have been made to the
1993 financial statements in order for them to conform with the
1994 presentation.
These interim financial statements should be read in conjunction
with the Company's 1993 Annual Report to Stockholders and
Consolidated Financial Statements and Notes thereto. Results for
the quarter and nine months ended September 30, 1994 should not
be considered indicative of results to be expected for the full
year.
2. RECENT ACCOUNTING PRONOUNCEMENTS
In May 1993, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 115 "Accounting For Certain Investments in
Debt and Equity Securities" addressing the accounting and
reporting for investments in equity securities that have readily
determinable fair values and for all investments in debt
securities. Those investments would be classified in three
categories and accounted for as follows: (i) debt securities that
the entity has the positive intent and ability to hold to
maturity would be classified as "held to maturity" and reported
at amortized cost; (ii) debt securities that are held for current
resale would be classified as trading securities and reported at
fair value, with unrealized gains and losses included in
operations; and (iii) debt securities not classified as either
securities held to maturity or trading securities would be
classified as securities available for sale, and reported at fair
value, with unrealized gains and losses excluded from operations
and reported as a separate component of stockholders' equity.
The Company implemented SFAS No. 115 in the first quarter of
1994, at which time substantially all of the Company's
investments were classified as held to maturity upon adoption.
At September 30, 1994, the Company owned $13,921,000 of
securities classified as available for sale, substantially all
which were adjustable rate preferred stocks without a stated
maturity. These securities had a market value of $13,401,000 at
September 30, 1994 and, accordingly, the Company's stockholders'
equity has been reduced by $520,000.
In May 1993, the FASB issued SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan." Under the provisions of
SFAS No. 114, a loan is considered impaired when, based on
current information and events, it is probable that a creditor
will be unable to collect all amounts due according to the
contractual terms of the loan agreement. SFAS No. 114 requires
creditors to measure impairment of a loan based on one of the
following: (i) the present value of expected future cash flows
discounted at the loan's effective interest rate, (ii) the fair
value of the underlying collateral
7
<PAGE>
or (iii) the fair value of the loan. If the measure of the impaired
loan is less than the recorded investment in the loan, a creditor shall
recognize an impairment by creating a valuation allowance with a
corresponding charge to the provision for losses. SFAS No. 114 applies to
financial statements for fiscal years beginning after December
15, 1994. Earlier implementation is permitted. The Company plans
to implement SFAS No. 114 for the year ended December 31, 1995.
The impact of the statement on the Company's results of
operations and financial position is expected to be immaterial.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
First Republic is a financial services company operating in
California and Nevada as a thrift and loan holding company and as
a mortgage banking company, originating, holding or selling, and
servicing mortgage loans. First Republic owns and operates First
Thrift, a California-chartered, FDIC-insured, thrift and loan
subsidiary, and First Republic Savings Bank (collectively, "the
Thrifts").
The Company is primarily engaged in originating residential real
estate secured loans on single family residences and multifamily
properties. The Company's loan portfolio also contains loans
secured by commercial properties. Currently, the Company's
strategy is to emphasize the origination of single family and to
limit the origination of multifamily mortgage loans and
commercial real estate mortgage loans. Lending activities in Las
Vegas are primarily focused on single family and multifamily
residential construction projects and permanent mortgage loans on
income properties. The Company emphasizes its real estate
lending activities in San Francisco, Los Angeles and Las Vegas
because of the proximity of its loan offices and the experience
of executive management with real estate in these areas. In
addition to the Company performing an underwriting analysis on
each borrower and obtaining independent property appraisals, an
officer of the Company generally visits each property or project
prior to the loan closing.
During the first nine months of 1994, the Company continued its
focus on single family lending begun in 1992, but mortgage
banking activity has been reduced as a result of higher interest
rates. Total loans of all types originated by the Company in
1993 were $944.8 million, and loan sales were $425.5 million in
1993. For the nine months ended September 30, 1994, the Company
originated $623.8 million of loans and loan sales were $216.3
million, as compared to loan originations of $626.3 million and
loan sales of $300.9 million for the nine months ended September
30, 1993. The Company either retains the loans it originates in
its loan portfolio or sells the loans to institutional investors
in the secondary market. The Company has retained the servicing
rights for substantially all loans sold in the secondary market,
thereby generating ongoing servicing fees. The Company's
mortgage servicing portfolio consisted of $882.0 million in loans
at September 30, 1994.
The following table presents certain performance ratios and share
data information for the Company for the last three years and the
first nine months of the current and prior years.
8
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GENERAL (Continued)
- - -------------------
<TABLE>
<CAPTION>
At or for the nine months At or for the Year
Ended September 30, Ended December 31,
-------------------------- ----------------------------------
1994 1993 1993 1992 1991
----------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Performance Ratios:
Return on average assets* 0.50% 0.95% 0.97% 1.06% 0.96%
Return on average equity* 7.12 12.44 12.65 14.10 17.22
Average equity to average assets 7.08 7.65 7.51 7.51 5.55
Leverage ratio 6.91 7.73 7.65 7.58 6.81
Total risk-based capital ratio 16.52 17.06 17.62 16.90 13.60
Net interest margin* 2.57 3.28 3.25 3.30 3.45
Non-interest expense to average assets* 1.29 1.35 1.33 1.30 1.44
Nonaccruing assets to total assets 2.98 2.29 1.55 1.54 1.50
Nonaccruing assets and restructured performing
loans to total assets 3.62 2.77 2.00 1.81 1.86
Net loan chargeoffs to average loans* 0.56 0.43 0.44 0.74 0.30
Reserve for possible losses to total loans 1.00 1.09 1.01 1.19 1.34
Reserve for possible losses to nonaccruing loans 34% 98% 109% 133% 88%
Share Data:
Common and equivalent shares outstanding 7,713,030 7,735,576 7,718,791 7,716,086 6,182,260
Tangible book value per fully-diluted common share $14.29 $13.14 $13.58 $11.94 $9.59
</TABLE>
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*Nine months data is annualized
First Thrift's retail deposits and FHLB advances are the
Company's principal source of funds with loan principal
repayments, sales of loans, and the proceeds from debt and equity
financings as supplemental sources. The Company's deposit
gathering activities are conducted in the San Francisco Bay Area,
Los Angeles, and San Diego County, California and in Las Vegas,
Nevada.
First Thrift is an approved voluntary member of the Federal Home
Loan Bank of San Francisco (FHLB). First Thrift is currently
approved for approximately 40% of its total assets or
approximately $633 million of FHLB advances at September 30,
1994. Such advances are collateralized by real estate mortgage
loans and $545.5 million has been advanced at September 30, 1994.
Membership in the FHLB provides First Thrift with an alternative
funding source for its loans and creates opportunities for the
Company to improve the matching of assets with liabilities.
First Thrift, whose thrift certificates are insured by the FDIC,
operates three branches in San Francisco, a branch in Los
Angeles, a branch in Beverly Hills, and three branches in San
Diego County. As of September 30, 1994, First Thrift had total
assets of $1,584,182,000, tangible shareholder's equity of
$125,562,000 and total capital, consisting of tangible
shareholder's equity, subordinated capital notes and reserves of
$154,527,000. At September 30, 1994, First Thrift's tangible
shareholder's equity as a percentage of total assets was 7.93%
and its total capital as a percentage of risk adjusted assets was
14.01%, compared to a risk adjusted capital ratio requirement of
8.0%. Under FDIC regulations, First Thrift calculates its
Leverage Ratio at 8.12%, using Tier 1 capital ( as defined under
the FDIC's risk- based capital definitions) and average total
assets for the most recent quarter.
In 1992, the Company implemented procedures requiring annual or
more frequent asset reviews of its multifamily and commercial
real estate loans. As part of these asset review procedures,
recent financial
9
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GENERAL (Continued)
- - -------------------
statements on the property and/or borrower are analyzed to determine
the current level of occupancy, revenues and expenses as well as to
investigate any deterioration in the value of the real estate collateral
or in the borrower's financial condition since origination or the last
review. Upon completion, an evaluation or grade is assigned to each such
loan. These asset review procedures provide management with additional
information for assessing asset quality.
LIQUIDITY
- - ---------
Liquidity refers to the ability to maintain a cash flow adequate
to fund operations and to meet present and future obligations of
the Company either through the sale or maturity of existing
assets or by the acquisition of funds through liability
management. The Company maintains a portion of its assets in a
diversified portfolio of marketable investment securities, which
includes U.S. Government securities and mortgage backed
securities. At September 30, 1994, the investment securities
portfolio of $125,533,000, plus cash and short term investments
of $36,411,000, amounted to $161,944,000, or 9.9% of total
assets. At September 30, 1994, substantially all of the
Company's investments mature within twelve months or are
adjustable rate in nature. At September 30, 1994, the Company
owned no investments of a trading nature.
Additional sources of liquidity at September 30, 1994 are
provided by borrowings collateralized by investment securities of
approximately $95,000,000 and available unused FHLB advances of
approximately $88,000,000. Management believes that the sources
of available liquidity are adequate to meet the Company's
reasonably foreseeable short-term and long-term demands.
ASSET AND LIABILITY MANAGEMENT
- - ------------------------------
Management seeks to manage its asset and liability portfolios to
earn a satisfactory level of net interest income while minimizing
the potential impact of fluctuating interest rates. To achieve
this objective, the Company's strategy is to manage the rate
sensitivity and maturity of its interest-earning assets and
interest-bearing liabilities by emphasizing the origination of
adjustable interest rate or short-term fixed rate loans and the
matching of adjustable rate asset repricings with short- and
intermediate-term investment certificates and adjustable rate
borrowings. The Company's profitability may be adversely
affected by rapid changes in interest rates. Institutions with
long-term assets (both loans and investments) can experience a
decrease in profitability and in the value of such assets if the
general level of interest rates rises. While substantially all
of the Company's assets are adjustable rate mortgage loans and
investments, at September 30, 1994 approximately 60% of these
assets which adjust within one year were assets based on an
interest rate index which generally lags increases and decreases
in market rates (the 11th District Cost of Funds Index or "COFI").
Additionally, most of the Company's loans adjust every six
months and contain interim caps or limitations to the amount
that rates may increase, both of which factors contribute to
a further lagging of rates earned on loans. Therefore,
management believes that interest rates on the Company's
liabilities may tend to rise more quickly in a continued
rising interest rate environment than rates on these assets,
which could cause a further decrease in the Company's net
interest margin. Conversely, the Company could experience
a decrease in its net interest income if the general
10
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ASSET AND LIABILITY MANAGEMENT (Continued)
- - ------------------------------------------
level of interest rates were to drop quickly because the
average maturity of its deposits may be longer than the average
maturity (or length of time before repricing of variable rate
assets) of its loan and investment portfolios, both evaluated on
a periodic basis.
The following table summarizes the differences between the
Company's maturing or rate adjusting assets and liabilities, or "GAP"
position, at September 30, 1994. Generally, an excess of maturing or
rate adjusting assets over maturing or rate adjusting liabilities during
a given period, will serve to enhance earnings in a rising rate environment
and inhibit earnings when rates decline. Conversely, when maturing or rate
adjusting liabilities exceed maturing or rate adjusting assets during
a given period, a rising rate environment will inhibit earnings and
declining rates will serve to enhance earnings. As of September 30, 1994,
approximately 87% of the Company's interest earning assets and
57% of interest bearing liabilities will reprice within the next
six months and the Company's one-year cumulative GAP, or ratio of
repricing assets to repricing liabilities is positive 24.1%.
Generally, this means its assets would be expected to reprice
more quickly than its liabilities which could result in the
Company's net interest spread declining if interest rates decline
rapidly or increasing if interest rates rise rapidly. See
"-Results of Operations" for a discussion of the reduction in the
Company's net interest spread for the quarter ended September
30, 1994. During the generally declining interest rate
environment of 1992 and 1993, the Company maintained a relatively
stable net interest margin. Although the Company's one-year
cumulative gap was positive during this period, the majority of
its loans reprice based on an interest rate index which lags
market rates and a portion of the Company's loans carry minimum
interest rates, or floors, which became effective as rates
declined. The following table illustrates projected maturities
or interest rate adjustments based upon the contractual
maturities or adjustment dates at September 30, 1994:
11
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ASSET AND LIABILITY MANAGEMENT (Continued)
- - ------------------------------------------
ASSET & LIABILITY REPRICING SENSITIVITY
FIRST REPUBLIC BANCORP CONSOLIDATED
September 30, 1994
(000's)
<TABLE>
<CAPTION>
3 Months 3 to 6 to 1 to 2 to Over Non Interest
Immediate or Less 6 Months 12 Months 2 Years 5 Years 5 Years Sensitive TOTAL
--------- -------- -------- --------- ------- ------- ------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Loans 0 636,335 591,231 148,565 9,913 21,605 26,932 0 1,434,581
Securities 0 131,084 10,004 11,707 0 0 15 0 152,810
Cash & short-term
investments 13,114 23,297 0 0 0 0 0 0 36,411
Non-interest bearing
assets, net 0 0 0 0 0 0 0 14,864 14,864
------ ------- ------- ------- ----- ------ ------ ------ ---------
TOTAL 13,114 790,716 601,235 160,272 9,913 21,605 26,947 14,864 1,638,666
LIABILITIES AND
STOCKHOLDERS' EQUITY:
Passbooks & MMA's (1) 0 104,380 12,528 7,412 2,768 0 0 0 127,088
Investment Certificates:
100K or greater 0 8,277 6,054 6,531 13,269 6,221 100 0 40,452
< 100K 0 117,850 156,886 226,472 168,553 61,699 3,296 0 743,756
FHLB advances - long term 0 119,000 276,530 102,000 0 8,000 40,000 0 545,530
ESOP debt 788 0 0 0 0 0 0 0 788
Other short-term debt 0 0 0 0 0 0 0 0 0
Other liabilities 0 0 0 0 0 0 0 15,846 15,846
Subord debt 0 0 0 0 0 986 62,911 0 63,897
Equity 0 0 0 0 0 0 0 110,309 110,309
---- ------- ------- ------- ------- ------ ------- ------- ---------
TOTAL 788 349,507 451,998 342,415 184,590 76,906 106,307 126,155 1,638,666
Repricing Assets
over (under) liab 12,326 441,209 149,237 (182,143) (174,677) (55,301) (79,360) (111,291) 0
Effect of swaps 0 45,000 20,000 (40,000) 0 0 (25,000) 0 0
------ ------- ------- -------- ------- ------- ------- -------- ---------
Hedged gap 12,326 396,209 129,237 (142,143) (174,677) (55,301) (54,360) (111,291) 0
====== ======= ======= ======== ======== ======= ======= ======== =========
Gap as % of
Total assets 0.75% 24.18% 7.89% -8.67% -10.66% -3.37% -3.32% -6.79% 0.00%
====== ======= ======= ======== ======== ======= ======= ======== ========
Cumulative gap 12,326 408,535 537,772 395,629 220,952 165,651 111,291 0 0
====== ======= ======= ======== ======== ======= ======= ======== ========
Cumulative gap 0.75% 24.93% 32.82% 24.14% 13.48% 10.11% 6.79% 0.00% 0.00%
as % of assets ====== ======= ======= ======== ======== ======= ======= ======== ========
</TABLE>
(1) Passbook amounts are allocated based on management's
experience of historical interest rate volatility and passbook
erosion rates. However, all passbook accounts are contractual
subject to immediate withdrawal and immediate repricing.
12
<PAGE>
ASSET AND LIABILITY MANAGEMENT (Continued)
- - ------------------------------------------
In evaluating the Company's exposure to interest rate risk,
certain shortcomings inherent in the method of analysis presented
in the foregoing table must be considered. For example, although
certain assets and liabilities may have similar maturities or
periods to repricing, they may react differently to changes in
market interest rates. Additionally, the interest rates on
certain types of assets and liabilities may fluctuate in advance
of changes in market interest rates, while interest rates on
other types may lag behind changesin market rates. Further,
certain assets, such as adjustable rate mortgages and mortgage
related investments, have features which restrict changes in
interest rates on a short-term basis and over the life of the
asset. The Company considers the anticipated effects of these
various factors in implementing its interest rate risk management
activities, including the utilization of interest rate caps.
The Company has entered into interest rate cap transactions in
the aggregate notional principal amount of $1,210,000,000 which
terminate in periods ranging from January 1995 through September
2000. Under the terms of these transactions, which have been
entered into with nine unrelated commercial or investment banking
institutions or their affiliates, the Company will be reimbursed
quarterly for increases in the three-month London Inter-Bank
Offer Rate ("LIBOR") for any quarter during the term of the
applicable transaction in which such rate exceeds a rate ranging
from 9.0% to 13% as established for the applicable transaction.
The interest rate cap transactions are intended to act as hedges
for the interest rate risk created by restrictions on the maximum
yield of certain variable rate loans and investment securities
held by the Company which may, therefore, at times be exposed to
the effect of unrestricted increases in the rates paid on the
liabilities which fund these assets. Additionally, $37,400,000
of First Thrift's advances with the FHLB contain interest caps of
12.0% as part of the borrowing agreements. The cost of interest
rate cap transactions is amortized over their lives and totalled
$841,000 and $649,000 for the nine months ended September 30,
1994 and 1993, respectively. Although these costs reduce
current earnings, the Company believes that the cost is justified
by the protection these interest rate cap transactions provide
against significantly increased interest rates. The effect of
these interest rate cap transactions is not factored into the
determination of interest rate adjustments provided in the table
above.
At September 30, 1994, the Company had entered into interest rate
swaps with the FHLB for $45,000,000 and with an investment
banking firm for $20,000,000 to convert the fixed rate on
long-term FHLB advances to semi-annual adjustable liabilities.
The availability of long-term FHLB advances, with a weighted
average maturity of over 10 years at September 30, 1994, reduces
the Company's dependence upon retail deposits, which generally
have a shorter maturity than the contractual life of mortgage
loans. The Company will continue to consider the alternative of
FHLB advances as an integral part of its asset and liability
management program. The Company is exposed to credit and market
losses if the counterparties to its interest rate cap and swap
agreements fail to perform; however, the Company is not aware of
any reason which should cause it to anticipate such
nonperformance.
Since August 1990, the Company has utilized FHLB advances as a
supplement to deposit gathering to fund its assets. FHLB
advances must be collateralized by the pledging of mortgage loans
which are assets of First Thrift. At September 30, 1994, total
FHLB advances outstanding were $545,530,000. Of this amount,
$478,330,000 had an original maturity of 10 years or more and
$40,000,000 had an original maturity of five years. Also,
$23,200,000 had an original maturity of two years subsequently
extended for a period of 8 years to 10 years. The remaining
$4,000,000 was due in three years. The longer term advances
provide the Company with an assured level of funding for its term
real estate assets with longer lives.
13
<PAGE>
ASSET AND LIABILITY MANAGEMENT (Continued)
- - ------------------------------------------
First Thrift is subject to the provisions of the California
Industrial Loan Law, which limits the amount of thrift balances
which may be raised to twenty times its shareholder's equity. At
September 30, 1994, based on the amount of thrift certificates
outstanding, First Thrift was required to maintain shareholder's
equity of approximately $43,800,000, compared with actual
shareholder's equity of $125,562,000.
CAPITAL RESOURCES
- - -----------------
The Company continues to maintain a strong capital base. At
September 30, 1994 the Company's total capital, including total
stockholders' equity, senior subordinated debentures, convertible
subordinated debentures and reserves was $188,512,000. Total
stockholders' equity at September 30, 1994 has increased by
$5,363,000 since December 31, 1993. This increase is the result
of net income of $5,741,000, the repayment of $412,000 of the
Company's ESOP notes payable during the nine month period, and an
increase of $361,000 from proceeds received upon the exercise of
options on common stock or sales of common stock under the
Company's Employee Stock Purchase Plan. The Company also
purchased 46,900 treasury shares at a cost of $631,000 and
recorded an unrealized loss of $520,000 on securities held for
sale, both of which reduced stockholders' equity.
First Republic is not a bank holding company and unlike First
Thrift, is not directly regulated or supervised by the FDIC, the
Federal Reserve Board, or any other bank regulatory agency.
Thus, First Republic is not subject to the risk-based capital or
leverage requirements. If such regulations applied, the Company
calculates that at September 30, 1994 its leverage ratio would
have been 6.91% and, its total risk based capital ratio would
have been 16.52%, as calculated by management assuming, however,
all of the Company's subordinated debentures constitute Tier 2
capital, are not limited to 50% of Tier 1 capital and the reserve
for possible losses is not limited to 1.25% of risk-adjusted
assets.
During the second quarter of 1993, the Company's Board of
Directors approved a stock repurchase program under which the
Company may repurchase from time to time up to 206,000 shares of
its common stock, either in open market transactions or in block
purchases. As of September 30, 1994, 72,797 shares have been
repurchased under this program. On October 27, 1994, the Company
announced a 200,000 increase in the number of shares of common
stock authorized for repurchase. As of November 4, 1994, the
Company had repurchased 232,150 shares under this program.
First Republic has used, and expects to continue to use, the
proceeds from the issuance of common stock and subordinated
debentures to, in part, provide capital to its thrift and loan
subsidiaries, First Thrift and First Republic Savings Bank. For
the first nine months of 1994, First Republic contributed
$1,000,000 of additional capital to First Republic Savings Bank
and received from First Thrift dividends of $1,355,000
representing approximately 17% of First Thrift's earnings plus
interest payments of $1,165,000. The ability of First Republic
to receive future dividends and other payments from the Thrifts
depends upon the operating results and capital levels of the
Thrifts, restrictions upon such payments imposed by creditors of
the Thrifts, FDIC regulations and other governmental regulations
governing the Thrifts.
14
<PAGE>
RESULTS OF OPERATIONS - Quarter Ended September 30, 1994 Compared to Quarter
- - --------------------- ----------------------------------------------------
Ended September 30, 1993
------------------------
The Company derives its income from three principal areas of
business: (1) net interest income which is the difference between
the interest income the Company receives on interest-earning
portfolio loans and investments and the interest expense it pays
on interest-bearing liabilities such as customer deposits and
borrowings; (2) mortgage banking operations involving the
origination and sale of real estate secured loans; and (3)
servicing fee income which results from the ongoing servicing of
such loans for investors and the servicing of other loans
pursuant to purchased servicing rights.
During the third quarter of 1994, First Republic's total assets
grew to $1,638,666,000 at September 30, 1994 from $1,544,687,000
at June 30, 1994, primarily as a result of an increase in single
family mortgage loans. The Company's loan originations for the
third quarter of 1994 were $172,209,000, compared to loan
originations for the second quarter of 1994 of $222,954,000
and for the third quarter of 1993 of $238,075,000. The level of
loan originations for the third quarter of 1994 reflects a
comparable level of single family originations and lower
non-single family originations, as compared to the prior quarter.
Single family loan volume was at a higher level in the third
quarter of 1993. For all of 1993 and through the first nine
months of 1994, loan originations have been concentrated
primarily in single family lending due to the Company's reduced
emphasis on multifamily and commercial real estate loans. Single
family loans originated in the first nine months of 1994 were
$481,800,000 compared to $525,200,000 in the first nine months of
1993 and $757,100,000 for all of 1993. More than 53% of the
loans in the Company's portfolio were secured by single family
mortgages at September 30, 1994.
Mortgage banking activity resulted in the sale of $25,071,000 of
single family loans to secondary market investors during the
third quarter of 1994, compared with $123,753,000 in the third
quarter of 1993. For the nine months, loan sales were
$216,262,000 in 1994, compared to $300,864,000 in 1993. The
Company's portfolio of real estate loans serviced for secondary
market investors increased to $882,024,000 at September 30, 1994
from $814,453,000 at December 31, 1993, as loan sales exceed
prepayments of existing loans serviced. The level of future loan
originations, loan sales and loan repayments is dependent in part
on overall credit availability and the interest rate environment,
the recovery in the general economy and housing industry, and
conditions in the secondary loan sale markets.
Net income of $2,552,000 for the third quarter in 1994 decreased
$875,000 from net income of $3,427,000 in the same quarter of
1993. Significant components effecting net income were a
decrease in net interest income of $1,175,000, an increase of
$472,000 in provision for losses, lower non-interest income of
$258,000 resulting from a lower gain on sale of loans in 1994 and
lower other non-interest expenses of $228,000. Fully diluted
earnings per share (EPS) were $0.28 for the third quarter of
1994, compared to $0.36 for the similar period in 1993.
Total interest income increased to $28,124,000 for the third
quarter of 1994 from $24,734,000 for the third quarter of 1993.
Interest income on real estate and other loans increased to
$25,688,000 for the third quarter of 1994, compared to
$23,309,000 in 1993. The average yield on loans increased to
7.35% in the third quarter of 1994, from 7.16% for the second
quarter of 1994, but declined compared to 7.97% for the same
quarter of 1993. Originations of new adjustable rate loans in
the last six months of 1993 and the first six months of 1994 were
generally at lower interest rates due to lower market interest
rates and greater competition. Many of the Company's ARM loans
are scheduled to reprice in the next two quarters. The Company's
yield on loans is affected by market rates, the effect of an
increased percentage
15
<PAGE>
RESULTS OF OPERATIONS - Quarter Ended September 30, 1994 Compared to Quarter
- - --------------------- ----------------------------------------------------
Ended September 30, 1993
------------------------
of single family loans earning relatively low initial rates of interest and
the level of nonaccrual loans. The Company's net loans receivable outstanding
increased from $1,256,058,000 at December 31, 1993 to $1,434,581,000 at
September 30, 1994. As a percentage of the Company's permanent loan
portfolio, single family loans increased to 53% at September 30, 1994
from 45% at September 30, 1993.
Interest income on cash, short-term investments and investment
securities increased as a result of a higher average portfolio
for the quarter earning a higher average rate. Such interest
income was $2,436,000 in the third quarter of 1994 compared to
$1,425,000 in 1993. The average investment position was
$186,653,000 during the third quarter of 1994 and earned 5.23%
compared to an average position of $129,807,000 earning 4.40%
during the third quarter of 1993. In 1994, the Company has
decreased its short-term liquidity position and increased its
investment securities. To the extent that the Company's
investment portfolio increases as a proportion of total assets,
there could be an adverse effect on the Company's net interest
margin, since rates earned on investments tend to be lower than
rates earned on loans.
Total interest expense for the third quarter has increased to
$18,854,000 in 1994 from $14,289,000 in 1993. Total interest
expense consists of interest expense on deposits and interest
expense on FHLB advances, other borrowings and debentures.
Interest expense on deposits (comprised of passbook and
money market (MMA) accounts and investment certificates),
increased to $10,708,000 in the third quarter of 1994 from
$8,897,000 in the third quarter of 1993. The average rate paid on
deposits was 4.83% for the third quarter of 1994, compared to
4.89% for the third quarter of 1993. Interest expense
on other borrowings increased to $8,146,000 in the third quarter
of 1994 from $5,392,000 in the third quarter of 1993, as a result
of a higher average rate paid on a higher average level of FHLB
advances. The average rate paid on non-deposit interest-bearing
liabilities increased to 5.51% for 1994's third quarter from
4.91% for 1994's second quarter and 4.52% for 1993's third
quarter.
In mid-1990, the Company implemented a funding strategy which
resulted in a lower average total cost of funds on a year-to-year
basis until 1994 and reduced certain noninterest expenses such as
advertising costs. First Thrift became the first voluntary
member of the San Francisco FHLB in 1990 and began to
utilize FHLB advances as an alternative source of funds for asset
growth. The Company's total outstanding FHLB advances were
$545,530,000 and $468,530,000 at September 30, 1994 and December
31, 1993, respectively. The total cost of FHLB advances had been
lower than the total costs of deposits, due in part to the fact
that such advances require no deposit insurance premiums and
operational overhead costs are less than those associated with
deposits. In the rising interest rate environment experienced in
1994, the interest rates paid on First Thrift's FHLB advances
have increased faster than rates paid on the Company's deposits
because the underlying indices in which these adjustable rate
advances reprice tends to be more sensitive to conditions in the
general interest rate environment. Management believes that this
trend will continue if market rates continue to rise. Advances
from the FHLB must be collateralized by the pledging of mortgage
loans which are assets of First Thrift and, although First Thrift
may substitute other loans for such pledged loans, First Thrift
is restricted in its ability to sell or otherwise pledge these
loans without substituting collateral or prepaying a portion of
the FHLB advances. Currently, First Thrift has an approved
borrowing capacity with the FHLB equal to approximately 40% of
the First Thrift's total assets at September 30, 1994 representing
$88,000,000 of additional borrowings. The Company expects that
deposits will fund a greater percentage of future asset
16
<PAGE>
RESULTS OF OPERATIONS - Quarter Ended September 30, 1994 Compared to Quarter
- - --------------------- ----------------------------------------------------
Ended September 30, 1993
------------------------
growth and, as a result, the average total cost of funds may
increase as the costs of expanding the Company's retail deposit base
are incurred.
The Company's net interest income was $9,270,000 for the third
quarter of 1994, compared to $10,445,000 for the third quarter of
1993, primarily as a result of earning a lower spread on a higher
average balance of assets. The net interest margin, calculated
as net interest income divided by total average interest earning
assets, was 2.34% for the third quarter of 1994, compared to
3.22% for the same period of 1993. The change in net interest
margin resulted from the reduced yields on new single family
adjustable rate loans, the level of nonearning loans and a
continued emphasis on gathering deposits with maturities of one
year or more in the face of increasing interest rates.
The Company's net interest margin has been adversely impacted
in 1994 as a result of the lagging of the 11th District Cost of
Funds Index ("COFI"). While market rates of interest have increased
200 basis points (2.0%) or more in the past twelve months, COFI
remained virtually unchanged. In addition to the COFI lag impact
on net interest margin, the difference between average COFI and the
marginal cost of deposits is extremely wide (currently at about
150-200 basis points). Until COFI increases to a level more
consistent with market rates, the Company's net interest margin will
adversely impacted. Also, in the period of low interest rates
prior to 1994, the Company's earned a premium rate of interest
on some of its mortgage loans because the interest rate was at a
floor, or minimum rate, which was above market. As rates rise,
these loans do not adjust upwards immediately, but do increase
once the floor is no longer in effect. Additionally, in 1994
the Company's FHLB advances have repriced upward more rapidly
than the Company's yield on loans.
Non-interest income for the third quarter of 1994 decreased to
$1,431,000 from $1,689,000 in the third quarter of 1993, due to a
lower net gain on sale of loans offset by higher net service fee
revenue and increased other income. Service fee revenue, net of
amortized costs on the Company's premium on sale of loans and
purchased mortgage servicing rights, was $719,000 for the third
quarter of 1994 compared to $303,000 for the same period of 1993,
as a result of lower amortization on the Company's purchased
mortgage servicing rights which have been fully amortized at
September 30, 1994 and a higher average servicing portfolio. The
average balance of the servicing portfolio increased to
$848,076,000 for the first nine months of 1994 compared to
$789,071,000 for all of 1993.
Total loans serviced were $882,024,000 at September 30, 1994 and
$814,453,000 at December 31, 1993. The percentage of servicing
fees received depends upon the terms of the loans as originated
and conditions in the secondary market when loans are sold. The
Company receives servicing fees ranging from 0.125% to 1.25% of
the outstanding loan balance which averaged approximately 0.38%
for the third quarter of 1994 compared to 0.38% for all of 1993.
For the third quarter, loan and related fee income was $309,000
in 1994 and $398,000 in 1993. This category includes
documentation and processing fees which vary with loan volume and
market conditions, late charge income which generally increases
as the loan and servicing portfolios grow, and prepayment penalty
income which generally varies with loan activity.
The Company sells whole loans and loan participations in the
secondary market under several specific programs. Loan sales
were $25,071,000 for the third quarter of 1994 and $123,753,000
for the third
17
<PAGE>
RESULTS OF OPERATIONS- Quarter Ended September 30, 1994 Compared to Quarter
- - ---------------------- ----------------------------------------------------
Ended September 30, 1993
------------------------
quarter of 1993. During the period of relatively
low interest rates and the popularity of fixed rate loan
refinancings, which occurred until about April 1994, the focus of
the Company's mortgage banking activities was to enter into
formal commitments and informal agreements with institutional
investors to originate on a direct flow basis single family
mortgages which are priced and underwritten to conform to
previously agreed upon criteria prior to loan funding and are
delivered to the investor shortly after funding. Also, the
Company has historically identified, from time-to-time, secondary
market sources which have particular needs which can be filled
primarily with adjustable rate single family loans held in its
portfolio.
The amount of loans sold is dependent upon conditions in both the
mortgage origination and secondary loan sales markets, and the level of
gains will fluctuate. The Company computes a gain or loss on sale at
the time of sale by comparing sales price with carrying value and by
calculating a capitalized premium, if any. A premium results when the
interest rate on the loan, adjusted for a normal service fee, exceeds
the pass-through yield to the buyer. The sale of loans resulted in
net gains of $356,000 for the third quarter of 1994, compared to net
gains of $987,000 for the same period of 1993. As a result of the
increases during 1994 in mortgage interest rates, the Company began to
originate in the second and third quarters of 1994, and expects to continue
to originate in the immediate future, primarily adjustable rate
mortgages for the Company's balance sheet. Additionally, the mix
of such lending is expected to reflect reduced refinance activity
by borrowers and increased home loan purchase activity in the
Company's markets. Depending on market conditions and other
factors, the Company expects a decrease in the future level of
loan sales, resulting in minimal gains on the sale of loans.
Non-interest expense totalled $4,901,000 for the third quarter of
1994, compared to $5,129,000 for the same period in 1993. The
Company's non-interest expense for the third quarter of 1994
included $315,000 related to results of operating REO properties
and losses on disposition or changes in value of REO properties
compared to $846,000 in the third quarter of 1993. Since January
1, 1993, the Company has followed the AICPA's Statement of
Position ("SOP") 92-3 which requires chargeoffs to the reserve
for possible losses to be recorded upon foreclosure and for
expenses or losses on REO, including subsequent decreases in
estimated fair values, to be expensed as incurred.
While the Company implemented a number of cost control measures
in the second quarter of 1994, the dollar amount of costs to
manage larger balance sheet and expanded operations increased for
the third quarter of 1994 compared to the third quarter of 1993.
In 1994, the Company's expenses include the occupancy, personnel
and advertising costs of three new deposit branches, higher
payroll taxes and other employee benefit costs, and increased
expenses resulting from the origination of single family loans on
which processing fees or points were not collected from the
borrowers. As a percentage of total assets, recurring general
and administrative expenses, excluding REO related costs, were
1.15% for the third quarter of 1994, compared to 1.28% for the
second quarter of 1994, 1.47% for the first quarter of 1994, and
1.33% for all of 1993. The decline in this ratio in 1994 results
from asset growth and successful cost control measures began
during the second quarter of 1994.
18
<PAGE>
RESULTS OF OPERATIONS - Nine Months Ended September 30, 1994 Compared to Nine
- - --------------------- -----------------------------------------------------
Months Ended September 30, 1993
-------------------------------
The following comments are made regarding the results of
operations for the nine months ended September 30, 1994 compared
to the nine months ended September 30, 1993. The trend in income
and expense items is generally consistent with the comparison of
the third quarter of 1994 with the same quarter of 1993. Total
interest income and interest expense have increased on a
year-to-date basis, primarily as a result of an increased average
balance sheet offset in part by a decline in yields earned on
assets and rates paid on liabilities, as more fully described
below and presented in the table on the following page. Net
interest income has decreased due to the increased level of
assets earning a lower interest rate spread and increased rates
paid on FHLB advances.
Non-interest income has decreased from $3,925,000 for the first
nine months of 1993 to $3,628,000 for 1994. This decrease
results from a decrease in gain on sale of loans offset in part
by increases in net servicing fees, loan and related fees and a
$177,000 refund from the Thrift Guaranty Corporation received
in the second quarter in 1994. Non-interest expense decreased to
$15,580,000 in 1994 from $15,628,000 in 1993, primarily due to
the absence of defeasance costs of $1,132,000 which were recorded
in June 1993 upon the early redemption of the Company's 11%
senior subordinated debentures. This category also includes
increases in occupancy costs related to expanded facilities,
advertising expense for loans and deposits, and other general and
administrative expenses related to operating a larger company in
1994. As a percentage of average assets, noninterest expenses
were 1.29% for the first nine months of 1994 compared to 1.35%
for the first nine months of 1993.
The following table presents for the nine months of 1994 and
1993, the distribution of consolidated average assets,
liabilities, and stockholders' equity as well as the total dollar
amounts of interest income, average interest-earning assets and
the resultant yields, and the dollar amounts of interest expense,
average interest-bearing liabilities, and rates paid. Nonaccrual
loans are included in the calculation of the average balances of
loans and interest not accrued is excluded. The yield on
short-term investments has been adjusted upward to reflect the
effects of certain income thereon which is exempt from federal
income tax, assuming an effective rate of 35% for 1993 and for 1994.
19
<PAGE>
RESULTS OF OPERATIONS - Nine Months Ended September 30, 1994 Compared to Nine
-----------------------------------------------------
Months Ended September 30, 1993
-------------------------------
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-----------------------------------------
1994 1993
----------------------------- -----------------------------
Average Yields/ Average Yields/
Balance Interest Rates Balance Interest Rates
------- -------- ------- ------- -------- -------
(In thousands)
Assets:
<S> <C> <C> <C> <C> <C> <C>
Interest-bearing deposits with other institutions $ 731 $ 28 5.11% $ 665 $ 29 5.81%
Short-term investments 36,261 1,142 4.20 49,902 1,201 3.21
Investment securities 119,721 4,713 5.25 68,944 2,465 4.77
Loans 1,346,642 73,355 7.26 1,135,052 69,638 8.18
---------- ------- ---------- -------
Total earning assets 1,503,355 79,238 7.03 1,254,563 73,333 7.79
------- -------
Non interest-earning assets 13,863 9,032
---------- ----------
Total average assets $1,517,218 $1,263,595
========== ==========
Liabilities and Stockholders' Equity:
Passbooks & MMA's $ 118,875 $ 2,970 3.33% $ 117,250 $ 2,909 3.31%
Investment certificates 716,079 26,178 4.87 589,937 23,698 5.36
---------- ------- ---------- -------
Total thrift certificates 834,954 29,148 4.65 707,187 26,607 5.02
Other borrowings 501,410 16,893 4.49 393,991 12,024 4.07
Subordinated debentures 62,598 4,215 8.98 56,070 3,883 9.23
---------- ------- ---------- -------
Total interest-bearing liabilities 1,398,962 50,256 4.79 1,157,248 42,514 4.90
------- -------
Non interest-bearing liabilities 10,790 9,706
Stockholders' equity 107,466 96,641
---------- ----------
Total average liabilities and stockholders' equity $1,517,218 $1,263,595
========== ==========
Net interest spread 2.24% 2.89%
Net interest income and net interest margin $ 28,982 2.57% $30,819 3.28%
======== =======
</TABLE>
The Company's balance sheet at September 30, 1994 is generally
comparable to that at December 31, 1993. Total assets have
increased $221,473,000 to $1,638,666,000. Loans held for sale
decreased $22,563,000 and other loans in the Company's portfolio
increased $201,086,000, including an increase of $178,344,000 in
single family mortgages. Funds were raised primarily by higher
deposits of $150,625,000. The Company's reserve for possible
losses was $14,306,000 at September 30, 1994, and there were four
foreclosed real estate properties resulting in other real estate
owned with a value of $7,295,000.
20
<PAGE>
RESULTS OF OPERATIONS - Nine Months Ended September 30, 1994 Compared to Nine
- - --------------------- -----------------------------------------------------
Months Ended Spetember 30, 1993
-------------------------------
ASSET QUALITY AND PROVISION FOR POSSIBLE LOSSES
- - -----------------------------------------------
The level of the Company's provision for losses and reserve for
losses are related to the size and composition of the loan
portfolio and conditions affecting the real estate markets in
which the Company conducts lending activities. The following
table sets forth by category the total loan portfolio of the
Company at the dates indicated. As indicated below, the Company
has increased the dollar amount and relative percentage of its
loans secured by single family residences.
<TABLE>
<CAPTION>
September 30, December 31,
-----------------------
1994 1993 1992
Loans: -------------- -------------- --------------
<S> <C> <C> <C>
Single family (1-4 units) $730,951,000 $577,276,000 $375,757,000
Multifamily (5+ units) 384,483,000 387,757,000 405,399,000
Commercial real estate 248,675,000 229,914,000 204,611,000
Multifamily construction 18,359,000 5,707,000 19,574,000
Single family construction 12,491,000 14,512,000 14,703,000
Home equity credit lines 30,582,000 31,213,000 35,255,000
------------- ------------- -------------
Real estate mortgages subtotal 1,425,541,000 1,246,379,000 1,055,299,000
Commercial business and other 9,040,000 9,679,000 12,486,000
------------- ------------- -------------
Total loans 1,434,581,000 1,256,058,000 1,067,785,000
Unearned fee income (7,484,000) (9,406,000) (12,621,000)
Reserve for possible losses (14,306,000) (12,657,000) (12,686,000)
------------- ------------- -------------
Loans, net $1,412,791,000 $1,233,995,000 $1,042,478,000
============== ============== ==============
</TABLE>
The following table presents an analysis of the Company's loan
portfolio at September 30, 1994 by property type and geographic
location:
<TABLE>
<CAPTION>
San Francisco Los Angeles Other CA Las Vegas Percent
Bay Area County Areas Nevada Other Total By Type
------------ ------------ ----------- ------------ ----------- -------------- -------
Property Type:
<S> <C> <C> <C> <C> <C> <C> <C>
Single family (1-4 units)(1) $514,479,000 $194,189,000 $32,836,000 $ 9,724,000 $10,306,000 $ 761,534,000 53.1%
Multifamily (5+ units) 157,694,000 97,138,000 22,776,000 106,875,000 --- 384,483,000 26.8%
Commercial real estate 174,887,000 28,766,000 10,559,000 32,482,000 915,000 247,609,000 17.3%
Construction loans 1,065,000 --- --- 30,850,000 --- 33,915,000 2.2%
Commercial Business and other 115,000 5,709,000 2,853,000 335,000 28,000 9,040,000 0.6%
------------ ------------ ---------- ----------- ------------ -------------- ------
Total $848,240,000 $325,802,000 $69,024,000 $180,266,000 $11,249,000 $1,434,581,000 100.0%
============ ============ =========== ============ =========== ============== ======
Percent by location 59.1% 22.7% 4.8% 12.6% 0.8% 100.0%
</TABLE>
(1) Includes equity lines of credit secured by single family residences and
single family loans held for sale.
The Company places an asset on nonaccrual status when one of the
following events occurs: any installment of principal or interest
is over 90 days past due (except for single family loans which
are judged by management to be well secured and in the process of
collection), management determines the ultimate collection of
principal or interest to be unlikely, or the Company takes
possession of the collateral. Additionally, loans modified to
defer or waive interest equal to more than four payments are
placed on nonaccrual status and generally will continue in this
status until at least six payments have been received.
21
<PAGE>
RESULTS OF OPERATIONS - Nine Months Ended September 30, 1994 Compared to Nine
- - --------------------- -----------------------------------------------------
Months Ended September 30, 1993
-------------------------------
The following table presents nonaccruing loans and investments,
REO, restructured performing loans and accruing single family loans
over 90 days past due at the dates indicated.
<TABLE>
<CAPTION>
NONACCRUING ASSETS AND OTHER LOANS
September 30, December 31,
---------------------
1994 1993 1992
----------- ----------- -----------
Nonaccruing Loans
<S> <C> <C> <C>
Single family $ 1,683,000 $ --- $ ---
Multifamily 37,721,000 6,740,000 3,894,000
Commercial real estate 1,896,000 4,862,000 5,524,000
Other 250,000 16,000 140,000
----------- ----------- -----------
Nonaccruing loans 41,550,000 11,618,000 9,558,000
Real estate owned ("REO") 7,295,000 9,961,000 8,937,000
Nonaccruing investments --- 361,000 469,000
----------- ----------- -----------
Total nonaccruing assets 48,845,000 21,940,000 18,964,000
Restructured performing loans 10,538,000 6,342,000 3,366,000
----------- ----------- -----------
Total nonaccruing assets and restructured performing loans $59,383,000 $28,282,000 $22,330,000
=========== =========== ===========
Accruing single family loans more than 90 days past due $ 3,440,000 $ 1,390,000 $ 3,541,000
Percent of Total Assets:
Nonaccruing assets 2.98% 1.55% 1.54%
Nonaccruing assets and restructured performing loans 3.62% 2.00% 1.81%
Ratio of reserve for possible losses to nonaccruing loans 34% 109% 133%
</TABLE>
Commencing in late 1990 and continuing to date in 1994, the
California economy has been affected by an economic recession.
The recession has affected both the San Francisco Bay Area and
Southern California, although management believes that at present
the effects of the recession are more severe on the Company's
loans in the Los Angeles area. The recession has reduced the
ability of some of the Company's borrowers to perform under the
terms of their loan agreements and the value of some of the
properties securing the Company's loans. The recession has
primarily impacted the Company's multifamily and commercial real
estate loan portfolios, resulting in an increase in the level of
nonaccruing assets and restructured loans and in chargeoffs
against the reserve for possible losses.
On January 17, 1994, the greater Los Angeles area experienced an
earthquake which caused significant damage to the freeway system
and real estate throughout the area. As a result of this
earthquake, some of the Company's borrowers are experiencing
problems primarily among the 37+ unit multifamily loan portfolio
in Los Angeles County, which represented less than 5% of the
Company's total assets at September 30, 1994. A special
earthquake reserve of $4,000,000 was provided in the first
quarter of 1994 and an additional $1,250,000 was added to this
reserve during the third quarter. The ultimate adequacy of this
reserve amount depends in part on the outcome of additional
negotiations with borrowers, the nature and timing of local
disaster relief funding, and the general economic climate
affecting multifamily occupancy and rental rates in the Los
Angeles area. As of September 30, 1994, $3,851,000 has been
charged off against this reserve including $421,000 of interest
which was recorded as a receivable at March 31, 1994 but has been
determined to be in doubt as to its collection.
At September 30, 1994, the dollar amount of the Company's
nonaccruing assets was $48,845,000 compared to $48,394,000 at
June 30, 1994 and $21,940,000 at December 31, 1993. The increase
from December 31, 1993 is primarily due to the affects of the
January 17, 1994, Los Angeles earthquake. At September 30, 1994,
nonaccruing assets included approximately $36,000,000 of loans
and REO adversely
22
<PAGE>
RESULTS OF OPERATIONS - Nine Months Ended September 30, 1994 Compared to Nine
- - --------------------- -----------------------------------------------------
Months Ended September 30, 1993
-------------------------------
impacted by the earthquake. At September 30, 1994,
restructured performing loans totalled $10,538,000, 66% of
which were restructured as a result of the earthquake.
Nonaccruing assets at September 30, 1994 have been reduced by
chargeoffs of $3,350,000 during the first nine months of 1994 and
$1,372,000 prior to 1994. At September 30, 1994, the Company's
nonaccrual loans included $19,075,000 of loans which had been
restructured by the forgiveness of interest or the capitalization
of interest equivalent to more than four months. Additionally,
there were $9,750,000 of modified loans placed on nonaccrual at
September 30, 1994 because the borrowers have been unable to
perform under the terms of forbearance agreements. As a result
of the terms of these restructurings, although the Company has
received or expects to receive monthly payments on some of these
loans, such loans will generally continue to be reported as
nonaccrual loans until at least six payments have been received.
During the third quarter of 1994, the Company received payments on
loans included in the nonaccrual category, which resulted in the
recognition of approximately $110,000 of interest income.
Because of this earthquake, management of the Company expects
that loan delinquencies and REO will remain at the current level
for a while and possibly increase further. Some borrowers have
experienced direct property damage or loss of tenants, or could
be affected in the future as a result of lower rental revenues or
further economic difficulties. First Republic has been and is
continuing to work with those borrowers to assist them with
obtaining available disaster relief funding and has assisted some
of them by modifying the terms of loans. Such loan modifications
have included the deferral or capitalization of interest
payments, the reduction in the rate of interest collected and the
waiver of principal and interest in some cases. The Company has
also assisted many of its borrowers in the application for
federal, state, and local disaster relief funds; although the
receipt of such funds has been delayed, the Company expects
that some of its borrowers will ultimately receive such
assistance and has deferred the modification of certain
nonaccruing loans until the disaster relief process is concluded.
As of September 30, 1994, the Company has granted forbearance as
to principal and interest payments, generally amounting to two to
four months of payments, on $13,080,000 of loans; as a result of
these forbearance agreements, the Company has recorded as a
receivable at September 30, 1994, $120,000 of interest,
$23,000 of which relates to the third quarter of 1994. Such
interest was not collected but is expected to be collected over
the next one to four years, as part of regular payments which
began in the third quarter of 1994 for most of the loans. These
loans will be placed on nonaccrual status if the borrowers become
unable to perform under the terms of these forbearance
agreements. If losses result from the inability of borrowers to
comply with these agreements, such losses of principal or
forbearance interest will be charged to the Company's special
earthquake reserve.
Additionally, the Company has modified the terms of $13,480,000
of primarily multifamily loans as a result of this natural
disaster. Under these modifications, the Company has agreed to
capitalize interest payments, extend loan maturity, reduce the
contractual interest rate or waive amounts due. If the terms
of the loans, after such modifications, are below those generally
available in the current market or if any principal or
contractually due interest is forgiven, then such loan
modifications are classified as restructured loans. As of
September 30, 1994, $7,311,000 of these modified loans are
reported as restructured performing loans. In the event that the
Company's borrowers are unable to meet their obligations under
modified or restructured loans and a loss is incurred, the
Company will charge the special earthquake reserve. Additional
forbearance agreements or loan modifications, including loan
23
<PAGE>
RESULTS OF OPERATIONS - Nine Months Ended September 30, 1994 Compared to Nine
- - --------------------- -----------------------------------------------------
Months Ended September 30, 1993
-------------------------------
restructurings, are expected to be entered into with the
Company's borrowers in the fourth quarter of 1994 and, possibly,
future quarters.
During the third quarter of 1994, one loan totalling $607,000 was
transferred to REO and three REO properties with a book value
totalling $785,000 were sold. At September 30, 1994, the Company
held as REO properties one apartment building, which was
foreclosed upon as a result of the earthquake, one commercial
property, two parcels of land and one single family residential
property. One of the REO parcels of land is an 800 acre parcel
which was appraised in January 1993 at a value in excess of its
recorded value of $5,101,000; this property is owned by First
Republic, the holding company.
At the time each loan is originated, the Company establishes a
reserve for the inherent risk of potential future losses, based
on established criteria, including the type of loan and
loan-to-value or cash flow-to- debt service ratios. Management
believes that such policy enables the Company's reserves to
increase commensurate with growth in the size of the Company's
loan portfolio. In the underwriting of purchased loans,
management considers the inherent risk of loss in determining the
price to be paid. When loans are purchased, a portion of the
discount is designated as a reserve for possible losses to
reflect the inherent credit losses which could be reasonably
expected to occur in the future and is thereafter unavailable to
be amortized as an increase in interest income.
Anticipating a possible recession, the Company began to provide
additional reserves in July 1990 by establishing a newly created
recession reserve category. The provisions for the recession
reserve were not required or recommended by any regulatory
authority. These provisions reduced earnings by $1,000,000 for
each quarter of 1993, by $750,000 for the first and second
quarters of 1994 and by $250,000 for the third quarter of 1994.
Management views the recession reserve as part of its total
unallocated reserves available to absorb losses on the Company's
loans that may result from general economic conditions. If
specific loans become delinquent or property values decline, this
reserve is available to absorb losses.
Since January 1, 1993, the Company adopted the AICPA's SOP 92-3
which requires chargeoffs to the reserve for possible losses to
be recorded upon foreclosure and for expenses or losses on REO to
be expensed as incurred. The Company's reserve for possible
losses is maintained at a level estimated by management to be
adequate to provide for losses that can be reasonably anticipated
based upon specific conditions as determined by management,
historical loan loss experience, the results of the Company's
ongoing loan grading process, the amount of past due and
nonperforming loans, observations of auditors, legal
requirements, recommendations or requirements of regulatory
authorities, prevailing economic conditions and other factors.
These factors are essentially judgmental and may not be reduced
to a mathematical formula.
Since inception through September 30, 1994, the Company has
experienced a relatively low level of losses on its single family
loans in each of its geographic market areas. As of September
30, 1994, the Company has not experienced any losses on its
portfolio of real estate secured loans, including construction
loans, located in the Las Vegas market. Collectively, these two
categories represented 65% of the Company's total loans at
September 30, 1994.
24
<PAGE>
RESULTS OF OPERATIONS - Nine Months Ended September 30, 1994 Compared to Nine
- - --------------------- -----------------------------------------------------
Months Ended September 30, 1993
-------------------------------
As a percentage of nonaccruing loans, the reserve for possible
losses was 109% at December 31, 1993 and 34% at September 30,
1994. Management's continuing evaluation of the loan portfolio
and assessment of economic conditions will dictate future reserve
levels.
The adequacy of the Company's total reserves is reviewed
quarterly. Management closely monitors all past due loans, in
assessing the adequacy of its total reserves. In addition, the
Company has instituted procedures for reviewing and grading of
all the larger income property loans in its portfolio on at least
an annual basis. Based upon that continuing review and grading
process, among other factors, the Company will determine
appropriate levels of total reserves in response to its
assessment of the potential risk of loss inherent in its loan
portfolio. Management currently anticipates that it will
continue to provide additional recession or earthquake related
reserves so long as, in its judgement, the adverse effects of
these events on its assets continue. Management expects that
additional reserve provisions in the range of $750,000 to
$1,000,000 may be necessary for the last quarter of 1994 and
possibly into 1995. When management determines that the effects
of the recessionary conditions have diminished, management
currently anticipates that it would reduce or eliminate such
future provisions to the recession reserve, although the Company
may continue to maintain total reserves at a level higher than
existed prior to this recession. Management does not intend to
increase earnings in future periods by reversing amounts in the
recession reserve.
25
<PAGE>
RESULTS OF OPERATIONS - Nine Months Ended September 30, 1994 Compared to Nine
- - --------------------- -----------------------------------------------------
Months Ended September 30, 1993
-------------------------------
The following table provides certain information with respect to
the Company's reserve position and provisions for losses as well
as chargeoff and recovery activity for the periods indicated.
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
September 30, December 31,
---------------------
1994 1993 1992
---------- ---------- ----------
Reserve for Possible Losses:
<S> <C> <C> <C>
Balance beginning of period $ 12,657,000 $ 12,686,000 $ 11,663,000
Provision charged to expense:
Regular reserve 174,000 806,000 1,649,000
Recession reserve 1,750,000 4,000,000 6,413,000
Earthquake reserve 5,250,000 --- ---
Reserve from purchased loans 33,000 200,000 466,000
Reserve of First Republic Savings Bank at acquisition --- 24,000 ---
Chargeoffs on originated loans:
Single family (100,000) (209,000) (328,000)
Multifamily (5,185,000) (3,367,000) (3,961,000)
Commercial real estate (352,000) (1,547,000) (3,750,000)
Commercial business and other loans (41,000) (76,000) (213,000)
Recoveries on originated loans:
Single family --- --- 50,000
Multifamily --- --- 5,000
Commercial real estate 120,000 92,000 654,000
Commercial business and other loans 24,000 43,000 12,000
Acquired loans:
Chargeoffs (24,000) --- ---
Recoveries --- 5,000 26,000
-------------- -------------- --------------
Total chargeoffs, net of recoveries (5,558,000) (5,059,000) (7,505,000)
-------------- -------------- --------------
Balance end of period $ 14,306,000 $ 12,657,000 $ 12,686,000
============== ============== ==============
Average loans for the period $1,346,642,000 $1,154,680,000 $1,008,783,000
Total loans at period end 1,434,581,000 1,233,995,000 1,067,785,000
Ratios of reserve for possible losses to:
Total loans 1.00% 1.01% 1.19%
Nonaccruing loans 34% 109% 133%
Nonaccruing assets and restructured performing loans 24% 45% 57%
Net chargeoffs to average loans 0.56%* 0.44% 0.74%
</TABLE>
- - -------------------------
*Annualized
26
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
A. Exhibit 11 Statement of Computation of Earnings
Per Share.
B. On October 21, 1994, the Company filed a Form 8-K
relating to Item 5 therein, covering the registrant's
release to the business community of its earnings for
the quarter and nine months ended September 30, 1994.
C. On October 27, 1994, the Company filed a form 8-K
relating to Item 5 therein, covering the registrant's
release to the business community of
an announcement that the number of shares of common
stock authorized for repurchase by the Company had
been increased by 200,000 shares.
27
<PAGE>
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.
FIRST REPUBLIC BANCORP INC.
Date:
November 11, 1994 /s/JAMES H. HERBERT, II
---------------------------------------
JAMES H. HERBERT, II
President and Chief Executive Officer
Date:
November 11, 1994 /s/WILLIS H. NEWTON, JR.
---------------------------------------
WILLIS H. NEWTON, JR.
Sr. Vice President and
Chief Financial Officer
(Principal Financial Officer)
28
EXHIBIT 11
FIRST REPUBLIC BANCORP INC.
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
1994 1993 1994 1993
---- ---- ---- ----
Primary:
<S> <C> <C> <C> <C>
Net income available to common stock $ 2,552,000 $3,427,000 $5,741,000 $ 9,018,000
Effect of convertible subordinated debentures,
net of taxes (1) 399,000 396,000 1,198,000 1,200,000
----------- ---------- ---------- -----------
Adjusted net income for fully diluted calculation (1) $ 2,951,000 $3,823,000 $6,939,000 $10,218,000
=========== ========== ========== ===========
Weighted average shares outstanding,
beginning of period excluding treasury shares 7,759,158 7,722,008 7,743,965 7,716,086
Effect of stock options exercised during period 6,951 6,442 9,247 4,293
Weighted average shares of stock purchased by employees 521 733 4,347 1,733
Weighted average shares of dilutive stock
options under treasury stock method 320,556 301,073 330,386 266,260
Weighted average shares of treasury stock (60,808) -- (44,087) --
----------- ---------- ---------- -----------
Adjusted shares outstanding - primary 8,026,378 8,030,256 8,043,858 7,988,372
=========== ========== ========== ===========
Net income per common share - primary $ 0.32 $ .43 $ 0.71 $ 1.13
=========== ========== ========== ===========
Fully Diluted:
Adjusted shares - primary, from above 8,026,378 8,030,256 8,043,858 7,988,372
Weighted average shares issuable upon conversion
of convertible subordinated debentures (1) 2,524,210 2,524,210 2,524,210 2,524,210
Additional weighted average shares of dilutive
stock options converted at period-end
stock price under the treasury stock method 471 103,562 6,538 43,885
----------- ---------- ---------- -----------
Adjusted shares outstanding - fully diluted 10,551,059 10,658,028 10,574,606 10,556,467
=========== ========== ========== ===========
Net income per share - fully diluted (1) (2) $ 0.28 $ 0.36 $ 0.66 $ 0.97
=========== ========== ========== ===========
</TABLE>
- - -----------------
Per share amounts and numbers of shares have been adjusted to
reflect the effect of the 3% stock dividend paid to stockholders
of record on February 18, 1994.
(1) Due to the existence of convertible subordinated debentures,
the fully-diluted calculation includes the number of shares which
would be outstanding if all such debentures were converted and
adjusts reported net income for the effect of interest expense on
the debentures, net of taxes.
(2) As a result of these debentures being antidilutive in the
first quarter of 1994, the calculated fully diluted EPS for the
first nine months of 1994 exceeds the sum of the calculated fully
diluted EPS for each quarter of 1994 by $0.02.
29
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
Registrant is not a Bank or Savings and Loan Holding Company.
</LEGEND>
<CIK> 0000770975
<NAME> FIRST REPUBLIC BANCORP INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<CASH> 13,114
<INT-BEARING-DEPOSITS> 297
<FED-FUNDS-SOLD> 23,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 13,401
<INVESTMENTS-CARRYING> 139,409
<INVESTMENTS-MARKET> 138,463
<LOANS> 1,434,581
<ALLOWANCE> 14,306
<TOTAL-ASSETS> 1,638,666
<DEPOSITS> 902,296
<SHORT-TERM> 0
<LIABILITIES-OTHER> 15,846
<LONG-TERM> 610,215
<COMMON> 74,721
0
0
<OTHER-SE> 35,588
<TOTAL-LIABILITIES-AND-EQUITY> 1,638,666
<INTEREST-LOAN> 73,355
<INTEREST-INVEST> 5,870
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 79,225
<INTEREST-DEPOSIT> 29,148
<INTEREST-EXPENSE> 50,255
<INTEREST-INCOME-NET> 28,970
<LOAN-LOSSES> 7,182
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 15,580
<INCOME-PRETAX> 9,836
<INCOME-PRE-EXTRAORDINARY> 9,836
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,741
<EPS-PRIMARY> 0.71
<EPS-DILUTED> 0.66
<YIELD-ACTUAL> 7.26
<LOANS-NON> 41,550
<LOANS-PAST> 3,440
<LOANS-TROUBLED> 10,538
<LOANS-PROBLEM> 5,000
<ALLOWANCE-OPEN> 12,657
<CHARGE-OFFS> 5,702
<RECOVERIES> 144
<ALLOWANCE-CLOSE> 14,306
<ALLOWANCE-DOMESTIC> 14,306
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
