First Republic Bancorp Inc.
Form 10-Q
June 30, 1996
Index
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheet -
June 30, 1996 and December 31, 1995 3
Consolidated Statement of Income - Six Months and
Quarter Ended June 30, 1996 and 1995 5
Consolidated Statement of Cash Flows -
Six Months Ended June 30, 1996 and 1995 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
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June 30, December 31,
1996 1995
-------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Cash $ 15,114,000 $ 15,918,000
Federal funds sold and short term investments 4,500,000 15,000,000
Interest bearing deposits at other financial institutions 196,000 200,000
Investment securities at cost 44,926,000 33,974,000
Investment securities at market 110,196,000 106,939,000
Federal Home Loan Bank Stock, at cost 31,135,000 30,321,000
------------ -----------
206,067,000 202,352,000
Loans
Single family (1-4 unit) mortgages 1,108,117,000 977,220,000
Multifamily (5+ units) mortgages 329,743,000 350,507,000
Commercial real estate mortgages 284,611,000 286,824,000
Commercial business loans 2,743,000 3,663,000
Single family construction 29,805,000 19,349,000
Multifamily/commercial construction 8,977,000 9,013,000
Equity lines of credit 29,149,000 26,572,000
Leases, contracts and other 913,000 933,000
Loans held for sale 40,349,000 8,182,000
------------- -------------
1,834,407,000 1,682,263,000
Less
Unearned loan fee income (3,322,000) (4,380,000)
Reserve for possible losses (19,318,000) (18,068,000)
------------- -------------
Net loans 1,811,767,000 1,659,815,000
Accrued interest receivable 13,279,000 12,582,000
Purchased servicing and premium on sale of loans 610,000 449,000
Prepaid expenses and other assets 14,035,000 14,677,000
Premises, equipment and leasehold improvements,
net of accumulated depreciation 4,150,000 4,180,000
Real estate owned (REO) 14,301,000 10,198,000
------------- -------------
$ 2,064,209,000 $ 1,904,253,000
============= =============
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FIRST REPUBLIC BANCORP INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------- --------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Customer deposits
Passbook and MMA accounts $ 244,147,000 $ 180,205,000
Certificates of deposit 1,010,376,000 960,236,000
------------- -------------
Total customer deposits 1,254,523,000 1,140,441,000
Interest payable 13,974,000 14,813,000
Other liabilities 5,678,000 6,156,000
Federal Home Loan Bank advances 611,530,000 570,530,000
Other borrowings -- --
------------- -------------
Total senior liabilities 1,885,705,000 1,731,940,000
Senior subordinated debentures 9,966,000 9,974,000
Subordinated debentures 19,509,000 19,579,000
Convertible subordinated debentures 34,500,000 34,500,000
------------- -------------
Total liabilities 1,949,680,000 1,795,993,000
------------- -------------
Stockholders' equity
Common stock 78,000 78,000
Capital in excess of par value 75,242,000 74,919,000
Retained earnings 46,379,000 40,608,000
Deferred compensation -- ESOP -- --
Treasury shares, at cost (5,763,000) (5,763,000)
Unrealized loss-available for sale securities (1,407,000) (1,582,000)
------------ -------------
Total stockholders' equity 114,529,000 108,260,000
------------ -------------
$2,064,209,000 $1,904,253,000
============= =============
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FIRST REPUBLIC BANCORP INC.
CONSOLIDATED STATEMENT OF INCOME
(unaudited)
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
June 30, June 30,
-------------- -----------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest income:
Interest on real estate and other loans $35,802,000 $31,423,000 $70,975,000 $60,321,000
Interest on investments 3,522,000 2,837,000 7,007,000 5,895,000
----------- ----------- ----------- -----------
Total interest income 39,324,000 34,260,000 77,982,000 66,216,000
----------- ----------- ----------- -----------
Interest expense:
Interest on customer deposits 17,391,000 15,259,000 34,551,000 28,628,000
Interest on FHLB advances and borrowings 8,692,000 9,910,000 17,492,000 18,838,000
Interest on debentures 1,449,000 1,441,000 2,891,000 2,884,000
----------- ----------- ----------- -----------
Total interest expense 27,532,000 26,610,000 54,934,000 50,350,000
----------- ----------- ----------- -----------
Net interest income 11,792,000 7,650,000 23,048,000 15,866,000
Provision for losses 1,815,000 8,750,000 3,588,000 10,215,000
----------- ----------- ----------- -----------
Net interest income after provision for losses 9,977,000 (1,100,000) 19,460,000 5,651,000
----------- ----------- ----------- -----------
Non-interest income:
Servicing fees, net 458,000 669,000 1,100,000 1,381,000
Loan and related fees 368,000 356,000 801,000 545,000
Gain (loss) on sale of loans 76,000 (47,000) 248,000 (45,000)
Gain on investment securities -- 141,000 -- 141,000
Other income 44,000 14,000 64,000 33,000
----------- ----------- ----------- -----------
Total non-interest income 946,000 1,133,000 2,213,000 2,055,000
----------- ----------- ----------- -----------
Non-interest expense:
Salaries and related benefits 2,296,000 1,569,000 4,510,000 3,596,000
Occupancy 841,000 750,000 1,625,000 1,498,000
Advertising 544,000 443,000 1,040,000 783,000
Professional fees 405,000 151,000 634,000 253,000
FDIC insurance premiums 82,000 530,000 160,000 1,060,000
REO costs and losses 160,000 595,000 886,000 1,008,000
Other general and administrative 1,554,000 1,354,000 3,037,000 2,532,000
----------- ----------- ----------- -----------
Total non-interest expense 5,882,000 5,392,000 11,892,000 10,730,000
----------- ----------- ----------- -----------
Income (loss) before income taxes 5,041,000 (5,359,000) 9,781,000 (3,024,000)
Provision for (benefit from) income taxes 2,040,000 (2,219,000) 4,010,000 (1,268,000)
----------- ----------- ----------- -----------
Net income (loss) $ 3,001,000 $(3,140,000) $ 5,771,000 $(1,756,000)
=========== =========== =========== ===========
Net income adjusted for effect of convertible
issue, used for fully diluted EPS $ 3,397,000 $ -- $ 6,563,000 $ --
=========== =========== =========== ===========
Primary earnings per share $ 0.39 $ (0.41) $ 0.76 $ (0.23)
=========== =========== =========== ===========
Weighted average shares - primary 7,655,491 7,589,397 7,625,556 7,589,115
=========== =========== =========== ===========
Fully diluted earnings per share $ 0.33 $ (0.41) $ 0.64 $ (0.23)
=========== =========== =========== ===========
Weighted average shares - fully diluted 10,238,497 10,122,912 10,179,192 10,126,185
=========== =========== =========== ===========
</TABLE>
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FIRST REPUBLIC BANCORP INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
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Six Months ended
----------------
June 30,
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1996 1995
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Operating Activities
Net Income (loss) $ 5,771,000 $(1,756,000)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Provision for losses 3,588,000 10,215,000
Provision for depreciation and amortization 2,144,000 1,938,000
Amortization of loan fees (1,069,000) (1,967,000)
Amortization of loan servicing rights 234,000 160,000
Amortization of investment securities discounts (26,000) (17,000)
Amortization of investment securities premiums 136,000 168,000
Loans originated for sale (33,336,000) (40,881,000)
Loans sold into commitments 39,841,000 31,365,000
Increase in deferred taxes (1,043,000) --
Net (gains) losses on sale of loans (248,000) 45,000
Increase in interest receivable (1,511,000) (1,719,000)
Increase (decrease) in interest payable (839,000) 1,809,000
Increase in other assets (668,000) (1,843,000)
Increase (decrease) in other liabilities (255,000) 570,000
----------- ----------
Net Cash Provided (Used) By Operating Activities 12,719,000 (1,913,000)
Investment Activities
Loans originated (386,384,000) (237,675,000)
Loans purchased -- (2,845,000)
Other loans sold 12,989,000 --
Principal payments on loans 202,401,000 123,993,000
Purchases of investment securities (24,569,000) (9,674,000)
Repayments of investment securities 10,261,000 5,189,000
Additions to fixed assets (510,000) (764,000)
Net proceeds from sale of real estate owned 6,517,000 6,630,000
----------- -----------
Net Cash Used by Investing Activities (179,295,000) (115,146,000)
Financing Activities
Net increase in passbook and MMA accounts 63,942,000 5,573,000
Issuance of certificates of deposit 216,738,000 241,423,000
Repayments of certificates of deposit (166,598,000) (144,338,000)
Increase (decrease) in long-term FHLB advances 25,000,000 (4,000,000)
Repayments of other long-term borrowings -- (325,000)
Net increase in short-term borrowings 16,000,000 11,130,000
Decrease in deferred compensation - ESOP -- 325,000
Repayments of subordinated debentures (78,000) (54,000)
Proceeds from employee stock purchase plan 101,000 51,000
Proceeds from common stock options exercised 167,000 36,000
Purchase of treasury stock -- (1,198,000)
----------- -----------
Net Cash Provided by Financing Activities 155,272,000 108,623,000
Decrease in Cash and Cash Equivalents (11,304,000) (8,436,000)
Cash and Cash Equivalents at Beginning of Period 30,918,000 32,420,000
----------- -----------
Cash and Cash Equivalents at End of Period $ 19,614,000 $ 23,984,000
=========== ===========
</TABLE>
6
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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"), 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 1995 financial statements in order for them to
conform with the 1996 presentation.
These interim financial statements should be read in conjunction
with the Company's 1995 Annual Report to Stockholders and Consolidated
Financial Statements and Notes thereto. Results for the
quarter and six months ended June 30, 1996 should not be considered
indicative of results to be expected for the full year.
2. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1996, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities." SFAS No. 125
provides guidance for distinguishing transfers of financial assets that
are "sales" from transfers that are "secured borrowings." This Statement,
which supersedes or amends numerous existing guidelines, is effective
January 1, 1997 and is to be applied prospectively. Earlier implementation
of SFAS No. 125 is not permitted.
Under SFAS No. 125, a transfer of financial assets in which control is
surrendered over those assets is accounted for as a sale to the extent that
consideration other than beneficial interests in the transferred assets is
received in the exchange. Liabilities and derivatives incurred or obtained
by the transfer of financial assets are required to be measured at fair value,
if practicable. Also, any servicing assets and other retained interests in the
transferred assets must be measured by allocating the previous carrying value
between the asset sold and the interest retained, if any, based on their
relative fair values at the date of transfer. For each servicing contract in
existence before January 1, 1997, previously recognized servicing rights and
excess servicing receivables that do not exceed contractually specified
servicing are required to be combined, net of any previously recognized
servicing obligations under that contract, as a servicing asset or liability.
Previously recognized servicing receivables that exceed contractually
specified servicing fees are required to be reclassified as interest-only
strips receivable.
The Statement also requires an assessment of interest-only strips, loans,
other receivables or retained interests in securitizations. If these assets
can be contractually prepaid or otherwise settled such that the holder would
not recover substantially all of its recorded investment, the asset will be
measured like available-for-sale securities or trading securities, under
SFAS No. 115. This assessment is required for financial assets held on or
acquired after January 1, 1997.
7
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2. RECENT ACCOUNTING PRONOUNCEMENTS (Continued)
In accordance with the above, the Company will apply the requirements of
this Statement beginning January 1, 1997. The Company has not historically
entered into transactions which meet the new definitions of transfers that
are secured borrowings. However, the Company has not completed the complex
analysis required to determine the future impact on its financial statements
related to existing financial assets and servicing contracts.
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, a Nevada-chartered,
FDIC-insured thrift and loan subsidiary (collectively, the
"Thrifts"). First Thrift and First Republic Savings Bank are
members of the FDIC's Bank Insurance Fund ("BIF"), not the Savings
Association Insurance Fund ("SAIF").
The Company is actively preparing for the merger of its two thrift
and loan subsidiaries, First Thrift and First Republic Savings
Bank, in order to achieve certain operational efficiencies. During
the second quarter of 1996, the Board of Directors of First
Republic approved a plan of merger wherein First Thrift would merge
into First Republic Savings Bank, with First Republic Savings Bank
surviving the merger as a Nevada state chartered industrial bank,
subject to regulatory approvals. The Company has obtained approval
from the State of Nevada's Commissioner, Financial Institutions
Division and has filed application with the FDIC for the merger of First
Thrift and First Republic Savings Bank. Under the plan of merger,
First Republic Savings Bank will continue to operate in both Nevada
and California in substantially the same manner as each subsidiary
is currently operating. The Company anticipates that this merger
will be completed on September 30, 1996.
Additionally, the Company may in the future pursue a change in the
legal charter of its subsidiaries from a thrift and loan charter to
a commercial bank charter. Such a charter change would allow the
Company to provide additional services, including traditional
checking accounts, to its customers. The Company is also considering
merging the parent company into the merged operating subsidiary,
if such subsidiary is converted to a commercial bank. Each of
these potential corporate reorganizations is subject to regulatory
approval and the Company's review of various business considerations
and federal and state laws; the holding company merger is
also subject to stockholder approval. There can be no assurance
that any of the foregoing contemplated reorganizations will be
accomplished.
The Company is primarily engaged in originating residential real
estate secured loans on single family residences. The Company's
loan portfolio also contains loans secured by commercial properties and
8
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GENERAL (Continued)
- -------------------
multifamily properties. Currently, the Company's strategy in
California is to emphasize the origination of single family loans
and to limit the origination of multifamily 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, Las Vegas, and San Diego
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
closing of new loans.
During the first six months of 1996, the Company continued its
focus on single family lending, and the level of loan originations
increased from the prior year as a result of average interest rates
being lower and improved secondary market conditions allowing the
amount of loans sold or originated for sale to investors to be
higher. Total loans of all types originated by the Company in 1995
were $584.4 million, and loan sales were $99.2 million in 1995.
For the six months ended June 30, 1996, the Company originated
$419.7 million of loans and loan sales were $52.8 million, as
compared to loan originations of $278.6 million and loan sales of
$35.4 million for the six months ended June 30, 1995.
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 $767.7 million in loans at June
30, 1996.
The following table presents certain performance ratios and share
data information for the Company for the last periods indicated:
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At or for the six months At or for the Year
Ended June 30, Ended December 31,
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1996 1995 1995 1994 1993
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<S> <C> <C> <C> <C> <C>
Performance Ratios:
Return on average assets* 0.58% (0.20)% 0.07% 0.47% 0.97%
Return on average equity* 10.34 (3.24) 1.08 6.77 12.65
Average equity to average assets 5.65 6.17 6.00 6.94 7.63
Leverage ratio 5.70 5.91 5.84 6.43 7.65
Total risk-based capital ratio 14.79 15.00 15.00 16.32 17.62
Net interest margin* 2.34 1.85 1.97 2.47 3.25
Non-interest expense to average assets* 1.12 1.11 1.07 1.28 1.33
Nonaccruing assets to total assets 2.08 2.83 2.46 2.41 1.55
Nonaccruing assets and performing restructured
loans to total assets 2.44 3.72 3.13 3.43 2.00
Net loan chargeoffs to average loans* 0.27 0.98 0.69 0.58 0.44
Reserve for possible losses to total loans 1.05 1.06 1.07 0.96 1.01
Reserve for possible losses to nonaccruing loans 68% 44% 49% 44% 109%
Share Data:
Common shares outstanding 7,352,991 7,344,267 7,330,400 7,444,703 7,718,791
Tangible book value per common share $15.56 $14.33 $14.76 $14.40 $13.58
</TABLE>
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*Six months data is annualized
9
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GENERAL (Continued)
- -------------------
First Thrift's retail deposits and FHLB advances are the Company's
principal source of funds with loan principal repayments, sales of
loans, the retail deposits of First Republic Savings Bank, 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 $782 million
of FHLB advances at June 30, 1996. Such advances are collateralized
by real estate mortgage loans and $611.5 million has been advanced at
June 30, 1996. First Republic Savings Bank became a member of the
FHLB on July 26, 1996 upon the purchase of $540,000 of FHLB stock, and
has been approved for $23.3 million of FHLB advances. Membership in
the FHLB provides the Thrifts with an alternative funding source for
its loans.
First Thrift, whose deposits are insured by the FDIC BIF, operates
four branches in San Francisco, a branch in San Rafael in Marin County
north of San Francisco, a branch in Los Angeles, a branch in Beverly
Hills, and three branches in San Diego County. As of June 30, 1996,
First Thrift had total assets of $1,955,006,000, tangible shareholder's
equity of $133,515,000 and total capital (consisting of
tangible shareholder's equity, subordinated capital notes and
reserves) of $161,672,000. At June 30, 1996, First Thrift's tangible
shareholder's equity as a percentage of total assets was 6.83% and its
total capital as a percentage of risk adjusted assets was 12.66%,
compared to a risk adjusted capital ratio requirement of 8.0%. Under
FDIC regulations, First Thrift calculates its Leverage Ratio at 7.01%,
using Tier 1 capital (as defined under the FDIC's risk-based capital
definitions) and average total assets for the most recent quarter.
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 June 30, 1996, the
investment securities portfolio of $155,122,000, plus cash and short
term investments of $19,810,000, amounted to $174,932,000, or 8.5% of
total assets. At June 30, 1996, 91% of the Company's investments
mature within twelve months or are adjustable rate in nature. At June
30, 1996, the Company owned no investments of a trading nature.
Additional sources of liquidity at June 30, 1996 could be provided by
approximately $125,000,000 of borrowings collateralized by investment
securities and available unused FHLB advances of approximately
$170,000,000. Management believes that the sources of available
liquidity are adequate to meet the Company's reasonably foreseeable
short-term and long-term demands.
10
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ASSET AND LIABILITY MANAGEMENT
- ------------------------------
The Company seeks to manage its asset and liability portfolios to help
reduce any adverse impact on its net interest income caused by
fluctuating interest rates. To achieve this objective, the Company
emphasizes 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 June 30, 1996 approximately 70% 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, the Company's
loans contain interim rate increase caps or limitations which can
contribute to a further lagging of rates earned on loans. At June 30,
1996, approximately 88% of the Company's interest-earning assets and
80% of interest-bearing liabilities will reprice within the next year
and the Company's one-year cumulative GAP is positive 11.7%. Despite
the Company's positive repricing position, the Company's net interest
margin decreased in the first and second quarters of 1995 as a result
of the rapid rise in rates in 1994. The Company's net interest margin
has increased gradually since the second quarter of 1995, as a result
of lower and relatively more stable short term interest rates and
increases in adjustable rate loan yields compared to liability costs.
Important factors affecting the Company's net interest margin include
competition and conditions in the home loan market which affect loan
yields, the cost of the Company's FHLB advances, mortgage loan
repricings being subject to interim limitations on asset repricings,
the Company's strategy to increase its home loans which carry lower
margins and the lagging nature of COFI.
The following table summarizes the differences between the Company's
maturing or rate adjusting assets and liabilities, or "GAP" position,
at June 30, 1996. 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. See "-Results of
Operations" for a discussion of the change in the Company's net
interest spread for the quarter and six months ended June 30, 1996.
A portion of the Company's adjustable loans carry minimum interest
rates, or floors, which became the effective loan yield as rates
declined from the levels in prior periods and approximately $161,754,000
of such loans remain at these minimum interest rates as of June 30, 1996.
The following table illustrates projected maturities or interest
rate adjustments based upon the contractual maturities or adjustment
dates at June 30, 1996:
11
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<TABLE>
<CAPTION>
FIRST REPUBLIC BANCORP
ASSET & LIABILITY REPRICING SENSITIVITY
June 30, 1996
(000's)
3 Months 3 to 6 to 1 to 2 to Over Non Interest
ASSETS: 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>
Loans (1) 0 908,406 517,998 171,535 18,331 179,362 38,775 0 1,834,407
Securities 0 108,245 44,401 19,996 0 0 13,615 0 186,257
Cash & short-term
investments 15,114 4,500 196 0 0 0 0 0 19,810
Non-interest bearing
assets, net 0 0 0 0 0 0 0 23,735 23,735
------ --------- ------- ------- ------- ------- ------ ------ ---------
TOTAL 15,114 1,021,151 562,595 191,531 18,331 179,362 52,390 23,735 2,064,209
LIABILITIES AND
STOCKHOLDERS' EQUITY:
Passbooks & MMA's 0 206,752 22,739 10,193 4,463 0 0 0 244,147
Certificates of deposit:
100K or greater 0 16,815 12,378 13,270 7,116 4,267 0 0 53,846
< 100K 0 245,105 220,834 268,137 165,545 56,904 5 0 956,530
FHLB advances - long term 0 244,170 165,000 79,360 8,000 72,500 22,500 0 591,530
FHLB advances - short-term 0 20,000 0 0 0 0 0 0 20,000
ESOP debt 0 0 0 0 0 0 0 0 0
Other short-term debt 0 0 0 0 0 0 0 0 0
Other liabilities 0 0 0 0 0 0 0 19,652 19,652
Subord debt 0 0 0 0 0 1,482 62,493 0 63,975
Equity 0 0 0 0 0 0 0 114,529 114,529
------ ------- ------- ------- ------- ------- ------ ------- ---------
TOTAL 0 732,842 420,951 370,960 185,124 135,153 84,998 134,181 2,064,209
Repricing Assets
over (under) liab 15,114 288,309 141,644 (179,429) (166,793) 44,209 (32,608) (110,446) 0
Effect of swaps 0 0 25,000 0 0 (25,000) 0 0 0
------ ------- ------- -------- ------- ------- ------ ------- ---------
Hedged gap 15,114 288,309 116,644 (179,429) (166,793) 69,209 (32,608) (110,446) 0
====== ======= ======= ======== ======= ======= ====== ======= =========
Gap as % of
Total assets 0.73% 13.97% 5.65% -8.69% -8.08% 3.35% -1.58% -5.35% 0.00%
====== ======= ======= ======== ======= ======= ======= ======= =========
Cumulative gap 15,114 303,423 420,067 240,638 73,845 143,054 110,446 0 0
====== ======= ======= ======== ======= ======= ======= ======= =========
Cumulative gap 0.73% 14.70% 20.35% 11.66% 3.58% 6.93% 5.35% 0.00% 0.00%
as % of assets ====== ======= ======= ======== ======= ======= ======= ======= =========
</TABLE>
(1) Adjustable rate loans consist principally of real estate
secured loans with a maximum term of 30 years. Such loans
are generally adjustable monthly, semiannually, or annually
based upon changes in the One Year Treasury Constant Maturity
Index, the Federal Reserve's Six Month CD Index, or the FHLB
11th District Cost of Funds Index (COFI), subject generally
to a maximum increase of 2% annually and 5% over the lifetime
of the loan.
(2) Passbook and MMA account maturities and rate adjustments are
allocated based upon management's experience of historical
interest rate volatility and erosion rates. However, all
passbook and MMA accounts are contractually subject to
immediate withdrawal.
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 changes in
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 $1,252,400,000 which terminate
in periods ranging from August 1996 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 12.5% 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. At June 30, 1996,
First Thrift also owned $50,000,000 of interest rate caps which carry
a strike rate of 8% until maturity in December 1996. The cost of
interest rate cap transactions is amortized over their lives and
totaled $814,000 and $858,000 for the six months ended June 30, 1996
and 1995, 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 June 30, 1996, the Company had entered into interest rate swaps
with the FHLB in the notional principal amount of $25,000,000 to
convert the fixed rate on certain long-term FHLB advances to semi-annual
adjustable liabilities. The availability of long-term FHLB
advances, with a weighted average maturity of approximately 10 years
at June 30, 1996, has reduced 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 market loss
if the counterparties to its interest rate cap and swap agreements
fail to perform; however, the Company does not anticipate such
nonperformance.
Since 1990, the Company has utilized FHLB advances as a supplement to
deposit gathering to fund its assets. FHLB advances require no
deposit insurance premiums and operational overhead costs are less
than for deposits. FHLB advances must be collateralized by the
pledging of mortgage loans which are assets of First Thrift. At June
30, 1996, total FHLB advances outstanding were $611,530,000. Of this
amount, $503,330,000 had an original maturity of 10 years or more and
$23,200,000 had an original maturity of two years subsequently
extended for a period of 8 years to 10 years. The longer term advances
provide the Company with an assured level of funding for its term real
estate assets with longer
13
<PAGE>
ASSET AND LIABILITY MANAGEMENT (Continued)
- ------------------------------------------
lives.
First Thrift is subject to the provisions of the California Industrial
Loan Law, which limits the amount of customer deposit balances which
may be raised to twenty times its shareholder's equity. At June 30,
1996, based on the amount of deposits outstanding, First Thrift was
required to maintain minimum shareholder's equity of approximately
$58,600,000, compared with actual shareholder's equity of
$133,515,000.
CAPITAL RESOURCES
- -----------------
The Company continues to maintain a strong capital base. At June 30,
1996, the Company's total capital, including total stockholders'
equity, debentures and reserves was $197,822,000. Total stockholders'
equity at June 30, 1996 has increased by $6,269,000 since December 31,
1995. This increase results primarily from the net income of
$5,771,000 for the first six months of 1996 and an increase of
$175,000 in the market value of the Company's portfolio of securities, which
are classified as available for sale.
First Republic is not a bank holding company, and unlike First Thrift
and First Republic Savings Bank, is not directly regulated or
supervised by the FDIC, nor is it regulated by 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 June 30, 1996
its leverage ratio would have been 5.70%, and its total risk based
capital ratio would have been 14.8%, as calculated by management
assuming, however, all of the Company's subordinated debentures
constitute Tier 2 capital and are not limited to 50% of Tier 1
capital.
During the first quarter of 1995, the Company acquired 53,603 treasury
shares which completed the repurchase of 406,000 shares of common
stock previously approved for repurchase by the Board of Directors.
In March 1995, the Company's Board of Directors authorized for
repurchase from time to time up to an additional 250,000 shares of
common stock. There were repurchases of an aggregate additional 80,000
shares of common stock in March, April and November 1995, bringing total
treasury shares repurchased to 486,000 at June 30, 1996.
During the first six months of 1996, First Republic received from
First Thrift dividends of $1,874,000 representing approximately 25%
of First Thrift's earnings. First Republic also received interest
payments of $527,000 from First Thrift for the six months ended June
30, 1996. Also, First Republic has received dividends of $150,000
from First Republic Savings Bank, related to that subsidiary's
earnings for the fourth quarter of 1995 and the first quarter of 1996;
dividends of $100,000, or approximately 25% of earnings for the second
quarter of 1996, will be paid in August 1996. 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 June 30, 1996 Compared to Quarter
- --------------------- -----------------------------------------------
Ended June 30, 1995
-------------------
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 second quarter of 1996, First Republic's total assets
grew to $2,064,209,000 at June 30, 1996 from $1,972,611,000 at
March 31, 1996, primarily as a result of an increase in single
family mortgage loans. The Company's loan originations for the
second quarter of 1996 were $220,779,000, compared to $198,941,000
for the first quarter of 1996 and $171,287,000 for the second
quarter of 1995. The amount of single family loans originated in
the second quarter of 1996 was $12 million higher than those
originated in the first quarter of 1996, and there was a $15
million increase in construction lending from the prior quarter.
Single family loans originated in the second quarter of 1996 were
$173 million compared to $102 million in the second quarter of 1995
and $413 million for all of 1995.
Mortgage banking activity resulted in the sale of $10,456,000 of
single family loans to secondary market investors during the second
quarter of 1996, compared with $24,821,000 in the second quarter of
1995. At June 30, 1996, there was approximately $35 million of
single family loans held for sale to one specific investor; these
loans are expected to close in the third quarter of 1996. The
Company's portfolio of real estate loans serviced for secondary
market investors decreased to $767,710,000 at June 30, 1996 from
$804,856,000 at December 31, 1995, as prepayments of existing loans
serviced exceeded loan sales. 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.
The Company reported net income of $3,001,000 for the second
quarter of 1996 as compared to a net loss of ($3,140,000) in the
same quarter of 1995. Fully diluted earnings per share was $0.33
for the second quarter of 1996, compared to a loss per share of
($0.41) for the similar period in 1995. First Republic's pretax operating
results for the quarter ended June 30, 1996 were higher than a year
ago primarily due to a provision of loan losses of $8,750,000 in
1995 compared to a provision of $1,815,000 in the second quarter of
1996. Additionally, the Company's net interest income for the
second quarter was $4,142,000 higher in 1996 than 1995.
Total interest income increased to $39,324,000 for the second
quarter of 1996 from $34,260,000 for the second quarter of 1995.
Interest income on real estate and other loans increased to
$35,802,000 for the second quarter of 1996, compared to $31,423,000
in 1995. The average yield on loans was 8.04% in the second
quarter of 1996 compared to 8.22% for the first quarter of 1996 and
was 7.93% for the second quarter of 1995. The Company's yield on
loans is affected by market rates, the level of adjustable rate
loan indexes, the effect of new single family loans earning lower
initial rates of interest and the level of nonaccrual loans. The
Company's net loans receivable outstanding increased from
$1,731,192,000 at March 31, 1996 to $1,834,407,000 at June 30,
1996. As a percentage of the
15
<PAGE>
RESULTS OF OPERATIONS - Quarter Ended June 30, 1996 Compared to Quarter
- --------------------- -----------------------------------------------
Ended June 30, 1995 (Continued)
-------------------------------
Company's permanent loan portfolio, loans secured by single family
residences increased to 62% at June 30, 1996 from 58% at June 30,
1995.
Interest income on cash, short-term investments and investment
securities increased as a result of a higher average portfolio for
the quarter earning a slightly higher average rate. Such interest
income was $3,522,000 in the second quarter of 1996 compared to
$2,837,000 in the same period of 1995. The average investment
position was $207,703,000 during the second quarter of 1996 and
earned 6.98% compared to an average position of $179,611,000
earning 6.55% during the second quarter of 1995. 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 second quarter has increased to
$27,532,000 in 1996 from $26,610,000 in 1995. Total interest
expense consists of two components - 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 certificates of deposit),
increased to $17,391,000 in the second quarter of 1996 from
$15,259,000 in the second quarter of 1995. The average rate paid
on deposits was 5.72% for the second quarter of 1996, compared to
5.90% for the first quarter of 1996 and 5.97% for the second
quarter of 1995. Interest expense on other borrowings decreased to
$10,141,000 in the second quarter of 1996 from $11,351,000 in the
second quarter of 1995, as a result of a lower average rate paid on
a higher average level of FHLB advances. The average rate paid on
the Company's other borrowings and FHLB advances, excluding longer
term debentures, was 5.92% for the second quarter of 1996, compared
to 6.13% for the first quarter of 1996, and 6.92% for the second
quarter of 1995; thus the average rate paid on these liabilities,
primarily FHLB advances, decreased 21 basis points (.21%) from the
first quarter of 1996 to the second quarter of 1996 and 100 basis points
(1.00%) from the second quarter of 1995 to the second quarter of 1996.
The Company's net interest income was $11,792,000 for the second
quarter of 1996, compared to $7,650,000 for the second quarter of
1995, as a result of earning a higher 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 2.36% for the second quarter of 1996, compared to 2.33% for the
first quarter of 1996, 1.97% for all of 1995 and 1.76% for the
second quarter of 1995. The Company's net interest margin has
gradually increased each quarter since the second quarter of 1995.
From early 1994, through March 31, 1995, the cost of FHLB advances
increased more rapidly than the yield on the Company's loans and
more rapidly than the cost of the Company's deposits, due to
rapidly rising short term interest rates. The Company's advances
have interest rates which generally adjust semiannually and to a
lesser extent annually, with repricing points spread throughout the
year. There are no interim caps on the amount that the interest rate on
FHLB advances may increase. Thus, at each repricing point, the cost of an
FHLB advance fully reflects market rates. Most of the Company's adjustable
mortgage loans have interim rate increase limitations. This adverse trend
began a reversal in the third quarter of 1995, as the weighted average cost
of the Company's FHLB advances decreased as a result of a general
decline in market rates. The Company has experienced increased
yields on its ARM loans, as a result of loan repricings, and during
the first six months of
16
<PAGE>
RESULTS OF OPERATIONS - Quarter Ended June 30, 1996 Compared to Quarter
- --------------------- -----------------------------------------------
Ended June 30, 1995 (Continued)
-------------------------------
1996, net interest spread has increased as liability costs have moderated
due to more stable interest rates.interest rates.
Non-interest income for the second quarter of 1996 decreased to
$946,000 from $1,133,000 in the second quarter of 1995, primarily
due to lower net servicing revenue. Service fee revenue, net of
amortized costs on the Company's premium on sale of loans and
mortgage servicing rights, was $458,000 for the second quarter of
1996 compared to $669,000 for the same period of 1995, primarily
due to a lower average balance of mortgage servicing rights. The
average balance of the servicing portfolio decreased to $774,593,000
for the second quarter of 1996 compared to $824,625,000 for
the second quarter of 1995. Total loans serviced were $767,710,000
at June 30, 1996 and $804,856,000 at December 31, 1995. 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, on the
outstanding loan balances serviced, which averaged approximately
0.34% for the six months of 1996 compared to 0.37% for all of 1995.
For the second quarter, loan and related fee income was $368,000 in
1996 and $356,000 in 1995. This income category includes miscellaneous fees
which vary with market conditions, late charge income which generally varies
with the size of the loan and servicing portfolios and economic conditions,
and prepayment penalty income which generally varies with loan activity and
market conditions.
The Company sells whole loans and loan participations in the
secondary market under several specific programs. The amount of loans sold
is dependent upon conditions in both the mortgage origination and secondary
loan sales markets, and the level of gains on loan sales will fluctuate.
Loan sales were $10,456,000 for the second quarter of 1996 and $24,821,000
for the second quarter of 1995. The Company computes a gain or loss on sale
at the time of sale by comparing sales proceeds with carrying value and by
valuing servicing rights retained. The gain on the sale of loans for 1996
includes the value attributed to mortgage loan servicing rights under
SFAS No. 122, which was $80,000 for the second quarter of 1996. Many of the
loans sold in the second quarter of 1996 carried fixed rates for initial
periods of 3 to 7 years before becoming adjustable. The sale of loans
resulted in net gains of $76,000 for the second quarter of 1996, compared to
a net loss of $47,000 for the same period of 1995.
The Company's mortgage banking activities have been focused on entering 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.
Non-interest expense totaled $5,882,000 for the second quarter of
1996, compared to $5,392,000 for the same period in 1995. Because
the Company's subsidiaries are insured by the FDIC's Bank Insurance
Fund ("BIF"), the premiums charged for the second quarter of 1996
were reduced from $530,000 in the second quarter of 1995 to $82,000
in the second quarter of 1996. The Company's non-interest expense
for the second quarter of 1996 included $160,000 related to results
of operating REO properties and losses on disposition or changes in value
of REO properties, net, compared to
17
<PAGE>
RESULTS OF OPERATIONS - Quarter Ended June 30, 1996 Compared to Quarter
- --------------------- -----------------------------------------------
Ended June 30, 1995 (Continued)
-------------------------------
$595,000 in the second quarter of 1995.
As a percentage of total assets, recurring general and administra-
tive expenses, excluding REO related costs, was 1.14% for the
second quarter of 1996, compared to 1.09% for the first quarter of
1996, 1.08% for the second quarter of 1995, and 1.07% for all of 1995.
RESULTS OF OPERATIONS - Six Months Ended June 30, 1996 Compared to
- --------------------- ------------------------------------------
Six Months Ended June 30, 1995
------------------------------
The following comments are made regarding the results of operations
for the six months ended June 30, 1996 compared to the six months
ended June 30, 1995. The trend in income and expense items is
generally consistent with the comparison of the second quarter of
1996 with the same quarter of 1995, including a decrease in the provision
for losses and an increase in net interest income. Total interest income
and interest expense have increased on a year-to-date basis, as a result of
an increased average balance sheet and increased yields earned on
assets and rates paid on liabilities, as presented in the following
table. Net interest income has increased due to the increased
level of assets earning a higher interest rate spread, as the rates
paid on liabilities has decreased 0.12% while yields earned on
loans has increased 0.37%.
Non-interest income was $2,213,000 for the first six months of 1996
as compared to $2,055,000 for the same period in 1995. Decreases
in net servicing fees were offset, primarily by an increase in loan
and related fees and a net gain on sale of loans of $248,000. Non-interest
expense increased slightly from $10,730,000 in 1995 to $11,892,000 in 1996.
A decrease in REO related costs to $886,000 for the six months ended
June 30, 1996 from $1,008,000 in the same period 1995 was offset by an
increase in general and administrative expenses. As a percentage of average
assets, noninterest expenses increased to 1.12% for the first six months of
1996 from 1.11% for the first six months of 1995.
The following table presents for the first six months of 1996 and
1995, 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 on nonaccrual loans is included only to the extent recognized on a
cash basis. 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%.
18
<PAGE>
RESULTS OF OPERATIONS - Six Months Ended June 30, 1996 Compared to Six Months
- --------------------- -----------------------------------------------------
Ended June 30, 1995
-------------------
<TABLE>
<CAPTION>
Six months Ended June 30,
----------------------------------------------------------------------
1996 1995
------------------------------- --------------------------------
Average Yields/ Average Yields/
Balance Interest Rates Balance Interest Rates
------- -------- ------ ------- -------- -----
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-bearing deposits with other institutions $ 2,179 $ 48 4.43% $ 1,247 $ 32 5.13%
Short-term investments 25,462 718 5.58 21,545 683 6.34
Investment securities 181,270 6,383 7.09 161,507 5,379 6.66
Loans 1,746,067 70,975 8.13 1,553,037 60,321 7.77
---------- ------- ---------- -------
Total earning assets 1,954,978 78,124 8.02 1,737,336 66,415 7.65
------ ------
Non interest-earning assets 20,167 18,069
------ ------
Total average assets $1,975,145 $1,755,405
========== ==========
Liabilities and Stockholders' Equity:
Passbooks & MMA's $ 212,915 $ 5,092 4.81% $ 136,008 $ 3,354 4.93%
Certificates of deposit 983,045 29,459 6.03 862,037 25,275 5.86
---------- ------- ---------- -------
Total customer deposits 1,195,960 34,551 5.81 998,045 28,629 5.74
Other borrowings 583,960 17,492 6.02 570,700 18,839 6.60
Subordinated debentures 64,015 2,891 9.03 64,160 2,883 8.99
---------- ------- ---------- -------
Total interest-bearing liabilities 1,843,935 54,934 6.05 1,632,905 50,351 6.17
------ ------
Non interest-bearing liabilities 19,596 14,149
Stockholders' equity 111,614 108,351
------- -------
Total average liabilities and stockholders' equity $1,975,145 $1,755,405
========== ==========
Net interest spread 1.97% 1.48%
Net interest income and net interest margin $23,190 2.34% $16,064 1.85%
======= =======
</TABLE>
The Company's balance sheet at June 30, 1996 is generally comparable
to that at December 31, 1995. Total assets have increased
$159,956,000 to $2,064,209,000. Loans held for sale increased
$32,167,000 and there was a net increase in the Company's portfolio
of $119,977,000, including an increase of $130,897,000 in single
family mortgages. Funds were raised primarily by retail deposits
which increased $114,082,000 and by an increase of $41,000,000 in
FHLB advances. The Company's reserve for possible losses was
$19,318,000 at June 30, 1996, and there were sixteen foreclosed real
estate properties resulting in other real estate owned with a net
book value of $14,301,000.
ASSET QUALITY AND PROVISION FOR POSSIBLE LOSSES
- -----------------------------------------------
The levels of the Company's provision for losses and reserve for
losses are related to the size and composition of the loan portfolio,
general economic conditions, 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 primarily
the dollar amount and proportion of its loans secured by single family
residences in 1995 and the first six months of 1996. An amount equal to
97% of all net loan growth since December 31, 1994 is represented by growth
in single family home loans.
19
<PAGE>
ASSET QUALITY AND PROVISION FOR POSSIBLE LOSSES (Continued)
- -----------------------------------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
-------------------------------
1996 1995 1994
-------------- ------------ ------------
<S> <C> <C> <C>
Loans:
Single family (1-4 units) $1,146,702,000 $ 983,331,000 $820,078,000
Multifamily (5+ units) 329,743,000 350,507,000 367,750,000
Commercial real estate 284,611,000 286,824,000 249,119,000
Multifamily/commercial construction 8,977,000 9,013,000 10,658,000
Single family construction 29,805,000 19,349,000 14,227,000
Home equity credit lines 29,149,000 26,572,000 28,137,000
-------------- ------------- -------------
Real estate mortgages subtotal 1,828,987,000 1,675,596,000 1,489,969,000
-------------- -------------- --------------
Commercial business and other 5,420,000 6,667,000 8,694,000
-------------- -------------- --------------
Total loans 1,834,407,000 1,682,263,000 1,498,663,000
Unearned fee income (3,322,000) (4,380,000) (6,816,000)
Reserve for possible losses (19,318,000) (18,068,000) (14,355,000)
-------------- -------------- --------------
Loans, net $1,811,767,000 $1,659,815,000 $1,477,492,000
============== ============== ==============
</TABLE>
The following table presents an analysis of the Company's loan
portfolio at June 30, 1996 by property type and geographic location:
<TABLE>
<CAPTION>
San Francisco Los Angeles San Diego Other CA Las Vegas Percent
$ in thousands Bay Area County County Areas Nevada Other Total By Type
------------- ----------- --------- -------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Property Type:
Single family (1-4 units)(1) $ 757,947 $252,572 $36,959 $ 85,973 $ 10,598 $31,802 $1,175,851 64.1%
Multifamily (5+ units) 140,557 69,455 442 17,632 101,656 --- 329,742 18.0%
Commercial real estate 198,022 30,860 1,067 11,407 40,835 2,421 284,612 15.6%
Construction loans 9,554 5,743 --- 896 22,589 --- 38,782 2.1%
Business loans --- 2,366 1,781 360 --- --- 4,507 0.2%
CD backed loans/other 523 194 8 --- 101 87 913 0.0%
---------- -------- ------- -------- -------- ------- ---------- -----
Total $1,106,603 $361,190 $40,257 $116,268 $175,779 $34,310 $1,834,407 100.0%
========== ======== ======= ======== ======== ======= ========== =====
Percent by location 60.3% 19.7% 2.2% 6.3% 9.6% 1.9% 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 any installment
of principal or interest is 90 days or more past due (except for loans
which are judged by management to be well secured and in the process
of collection, generally applicable to single family loans), or when
management determines the ultimate collection of all contractually due
principal or interest to be unlikely. Additionally, loans restructured to
defer or waive amounts due are placed on nonaccrual status and generally
will continue in this status until a satisfactory payment history is
achieved (generally at least six payments).
20
<PAGE>
ASSET QUALITY AND PROVISION FOR POSSIBLE LOSSES (Continued)
- -----------------------------------------------------------
The following table presents nonaccruing loans, REO, performing
restructured loans and accruing single family loans over 90 days past
due at the dates indicated.
<TABLE>
<CAPTION>
June 30, December 31,
--------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Nonaccruing loans:
Single family $ 796,000 $ --- $ ---
Multifamily 18,449,000 23,664,000 29,049,000
Commercial real estate 9,218,000 12,555,000 3,400,000
Other 115,000 331,000 174,000
------------ ----------- -----------
Total nonaccruing loans 28,578,000 36,550,000 32,623,000
Real estate owned ("REO") 14,301,000 10,198,000 8,500,000
----------- ----------- -----------
Total nonaccruing assets 42,879,000 46,748,000 41,123,000
Performing restructured loans 7,397,000 12,795,000 17,489,000
----------- ----------- -----------
Total nonaccruing assets and performing restructured loans $50,276,000 $59,543,000 $58,612,000
=========== =========== ===========
Accruing single family loans more than 90 days past due $ -- $ 3,747,000 $ 2,587,000
Percent of Total Assets:
Nonaccruing assets 2.08% 2.46% 2.41%
Nonaccruing assets and performing restructured loans 2.44% 3.13% 3.43%
Ratio of reserve for possible losses to nonaccruing loans 68% 49% 44%
</TABLE>
At June 30, 1996, the dollar amount of the Company's nonaccruing loans
and REO after chargeoffs was $42,879,000 compared to $47,574,000, at
March 31, 1996 and $46,748,000 at December 31, 1995. At June 30,
1996, 55% of nonaccruing assets, or approximately $18,457,000 of loans
and $4,968,000 of REO, were adversely impacted by the Northridge
earthquake.
On January 17, 1994, the Northridge earthquake struck the Los Angeles
area, causing significant damage to the freeway system and real estate
values throughout the area. The Company's loans secured by low to
moderate income multifamily properties were primarily affected by this
event, either by direct property damage, loss of tenants, or economic
difficulties resulting from lower rental revenues and higher
vacancies. Certain earthquake affected loans remain on nonaccrual
status because of uncertainty about their ultimate collectability,
even though the loans may have been paying for as much as twelve months.
In 1994, 1995 and continuing into 1996, the Company has experienced
increased delinquencies, additional loan loss provisions and higher
partial loan chargeoffs as a result of this substantial natural
disaster. Additionally, certain loans in Northern California have
been placed on nonaccrual status because of changes in the borrower's
condition, the property's status or the loan's terms.
21
<PAGE>
ASSET QUALITY AND PROVISION FOR POSSIBLE LOSSES (Continued)
- -----------------------------------------------------------
The following table summarizes the changes in the Company's nonaccrual
loans during the second quarter of 1996. Nonaccrual loans are segmented
by major geographical region and activity.
<TABLE>
<CAPTION>
CHANGE IN NONACCRUAL
LOANS BY REGION
Los Angeles Northern
County California Nevada Total
----------- ----------- ------- -----------
<S> <C> <C> <C> <C>
Balance March 31, 1996 $22,071,000 $ 9,995,000 $ --- $32,066,000
Additions to nonaccrual loans:
New nonaccrual loans 766,000 2,209,000 --- 2,975,000
Deductions from nonaccrual loans:
Chargeoffs to reserves (1,275,000) (4,000) --- (1,279,000)
Transfer to foreclosed assets (1,729,000) (1,764,000) --- (3,493,000)
Transfer to performing status (1,072,000) --- --- (1,072,000)
Cash proceeds received (189,000) (430,000) --- (619,000)
----------- ----------- ------- -----------
Balance June 30, 1996 $18,572,000 $10,006,000 $ --- $28,578,000
=========== =========== ======= ===========
</TABLE>
Additions to nonaccrual loans during the second quarter of 1996 were
related to one apartment loan ($766,000) in Los Angeles County which
had been impacted by the earthquake, plus one commercial real estate
loan ($1,413,000) and one single family home loan ($796,000) in
Northern California.
Deductions from nonaccrual loans during the second quarter of 1996
resulted from chargeoffs to the Company's allowance for possible
losses, actual foreclosures upon properties and the transfer of one
loan from nonaccrual to performing status as the result of the
borrower attaining a satisfactory payment history. Also, cash
proceeds of $619,000 received during the second quarter of 1996 were
used to reduce the carrying basis of nonaccrual loans. Chargeoffs on
nonaccrual loans occur when the Company determines that the collateral
value is reduced to other than temporary levels. Chargeoffs recorded
in the second quarter of 1996 related both to loans which were on
nonaccrual status at March 31, 1996 and to loans which were placed on
nonaccrual status or transferred to REO during the second quarter.
While the future collateral value of these properties may change, the
Company recorded chargeoffs to reduce the carrying basis of its
nonaccrual loans to the estimated current collateral value, net of
selling costs (See "Impaired Loans").
As of June 30, 1996, the amounts reported for REO, nonaccruing loans,
and performing restructured loans have been reduced by previous
chargeoffs of $5,192,000, $7,621,000 and $328,000, respectively.
The Company's nonaccrual loans included $16,732,000 of loans on which
interest payments were received during the quarter at an average
payment rate of 8.2% on their recorded investment. As a result of the
terms of these restructurings, such loans will be reported as
nonaccrual loans until a satisfactory payment history is achieved and
the Company believes its recorded investment in the loans is secure.
22
<PAGE>
ASSET QUALITY AND PROVISION FOR POSSIBLE LOSSES (Continued)
- -----------------------------------------------------------
As of June 30, 1996, $7,397,000 of modified loans are reported as
performing restructured loans. Additional loan modifications,
including loan restructurings, have been completed in 1996 and
additional modifications may be entered into with the Company's
borrowers in future quarters.
During the second quarter of 1996, seven loans totaling $3,493,000
were transferred to REO. Six REO properties with a remaining March
31, 1996 book value totaling $4,575,000 were sold and the Company
recovered proceeds in excess of the written down basis of these
properties by $972,000. At June 30, 1996, the Company held as REO
properties ten apartment buildings, two commercial real estate
properties, two single family homes, one partially completed single
family construction project and one parcel of land. The Company's
policy is to attempt to resolve problem assets reasonably quickly,
including the aggressive pursuit of foreclosure or other workout
procedures. It has been the Company's general policy to sell such
problem assets when acquired as promptly as possible at prices
available in the prevailing market. For certain properties, including
those acquired as a result of the Northridge earthquake, the Company
has made repairs and engaged management companies to reach stabilized
levels of occupancy prior to asset disposition. At June 30, 1996, the
Company is actively marketing or preparing its REO properties for sale
and expects to sell certain properties and to foreclose upon
additional loans in the third quarter of 1996.
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 any 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.
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 at the time
as determined by management, including past 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,
current and expected economic conditions and other factors.
Since inception through June 30, 1996, the Company has experienced a
relatively low level of losses on its single family loans in each of
its geographic market areas. The Company's cumulative single family
loan loss experience is 0.06% on all loans originated. As of June 30,
1996, the Company has not experienced any losses on its permanent loan
portfolio secured by real estate located in the Las Vegas market.
Collectively, these two categories represented 73% of the Company's
total loans at June 30, 1996.
As a percentage of nonaccruing loans, the reserve for possible losses
was 49% at December 31, 1995 and 68% at June 30, 1996. 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 and restructured loans in assessing the adequacy
of its total reserves. In addition, the Company follows procedures
for reviewing and grading
23
<PAGE>
ASSET QUALITY AND PROVISION FOR POSSIBLE LOSSES (Continued)
- -----------------------------------------------------------
all of the larger income property loans in its portfolio on a periodic basis.
Based predominately upon that continuous review and grading process, 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 will provide additional reserves when the results of its problem
loan assessment methodology or overall reserve adequacy test indicate
additional reserves are required. The review of problem loans is an
ongoing process, during which management may determine that additional
chargeoffs are required or additional loans should be placed on
nonaccrual status.
Although substantially all nonaccrual loans and loans that were
adversely affected by the earthquake have been reduced to their
currently estimated collateral fair value (net of selling costs) at
June 30, 1996, there can be no assurance that additional reserves or
chargeoffs will not be required in the event that the properties
securing the Company's existing problem loans fail to maintain their
values or that new problem loans arise.
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>
Six Months Ended Year Ended
June 30, December 31,
-----------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Reserve for Possible Losses:
Balance beginning of period $18,068,000 $14,355,000 $12,657,000
Provision charged to expense 3,588,000 14,765,000 9,720,000
Reserve from purchased loans --- --- 34,000
Chargeoffs on originated loans:
Single family (127,000) (14,000) (210,000)
Multifamily (2,781,000) (9,314,000) (7,177,000)
Commercial real estate (406,000) (2,163,000) (695,000)
Commercial business and other loans (21,000) (48,000) (79,000)
Construction loans --- (353,000) ---
Recoveries on originated loans:
Single family --- 3,000 11,000
Multifamily 170,000 765,000 119,000
Commercial real estate 784,000 30,000 ---
Commercial business and other loans 42,000 54,000 15,000
Acquired loans:
Chargeoffs --- (22,000) (47,000)
Recoveries 1,000 10,000 7,000
----------- ----------- --------------
Total chargeoffs, net of recoveries (2,338,000) (11,052,000) (8,056,000)
----------- ----------- --------------
Balance end of period $19,318,000 $18,068,000 $14,355,000
=========== =========== ==============
Average loans for the period $1,746,067,000 $1,591,827,000 $1,379,640,000
Total loans at period end 1,834,407,000 1,682,263,000 1,498,663,000
Ratios of reserve for possible losses to:
Total loans 1.05% 1.07% 0.96%
Nonaccruing loans 68% 49% 44%
Nonaccruing loans and performing restructured loans 54% 37% 29%
Net chargeoffs to average loans 0.27%* 0.69% 0.58%
</TABLE>
- --------------------------
*Annualized
24
<PAGE>
IMPAIRED LOANS
- --------------
Effective January 1, 1995, the Company adopted SFAS No. 114,
Accounting by Creditors for Impairment of a Loan, as amended by SFAS
No. 118 (collectively referred to as SFAS No. 114). These statements
address the accounting treatment of certain impaired loans and amend
SFAS No. 5 and SFAS No. 15. However, these statements do not address
the overall adequacy of the allowance for losses.
A loan within the scope of SFAS No. 114 is considered impaired when,
based on current information and events, it is probable that the
Company will be unable to collect all amounts due according to the
contractual terms of the loan agreement, including scheduled interest
payments. For a loan that has been restructured subsequent to the
January 1, 1995 adoption of SFAS No. 114 by the Company, the relevant
contractual terms refer to the contractual terms specified by the
original loan agreement, not the contractual terms specified by the
restructuring agreement. Subsequent to the adoption of SFAS No.
114, a restructured loan may be excluded from the impairment assessment and
may cease to be reported as an impaired loan in the calendar years subsequent
to the restructuring if the loan is not impaired based on the modified terms.
For loans that are impaired within the meaning of SFAS No. 114, the
Company makes an assessment of impairment when and while such loans
are on nonaccrual or the loans have been restructured. The measurement of
impairment may be based on (i) the present value of the expected future cash
flows of the impaired loan discounted at the loan's original effective
interest rate, (ii) the observable market price of the impaired loan, or
(iii) the fair value of the collateral of a collateral dependent loan. The
Company's loans are primarily real estate secured; therefore the Company
primarily bases the measurement of impaired loans on the fair value of the
collateral, reduced by costs to sell.
If the measurement of the impaired loan is less than the recorded
investment in the loan, impairment is recognized by creating or
adjusting an existing allocation of the allowance for losses. Cash
receipts on impaired loans not performing according to contractual
terms are generally used to reduce the carrying value of the loan
unless the Company believes it will recover the remaining principal
balance of the loan.
In accordance with the disclosures guidelines of SFAS No. 114, the
following table shows the recorded investment in impaired loans and
any related SFAS No. 114 allowance for losses at June 30, 1996. An
impaired loan has a specific amount of the Company's reserves
(allowance for losses) assigned to it whenever the collateral's fair
value, net of selling costs, is less than the Company's recorded
investment in the loan, after amounts charged off to reserves are
deducted. Generally, impaired loans not requiring a special allowance
under SFAS No. 114 have already been written down or have a net
collateral fair value which exceeds the loan balance.
25
<PAGE>
IMPAIRED LOANS (Continued)
- --------------------------
<TABLE>
<CAPTION>
Related
Recorded SFAS No. 114
Investment in Allowance for
Impaired Loans Losses
-------------- -------------
<S> <C> <C>
Impaired loans requiring a SFAS No. 114 allowance:
Single Family $ --- $ ---
Multifamily 8,668,000 681,000
Commercial Real Estate 1,153,000 262,000
Other 135,000 16,000
-------------- -------------
9,956,000 $ 959,000
-------------- =============
Impaired loans not requiring a SFAS No. 114 allowance:
Single Family 796,000
Multifamily 17,419,000
Commercial Real Estate 7,804,000
Other ---
--------------
26,019,000
--------------
Total $35,975,000
==============
</TABLE>
The $26,019,000 of loans reported as impaired loans not requiring a
SFAS No. 114 allowance are classified in this manner because, as of
June 30, 1996, the recorded investments in these loans have been
reduced to their collateral fair value, net of selling costs, by
$8,136,000 of specific chargeoffs to the Company's reserves. At June
30, 1996, the Company has designated $270,000 of its reserves to
protect against contingent liabilities on certain of these impaired
loans, while the ultimate amount of payment, if any, is being
contested.
Total interest income recognized on loans designated as impaired for
the second quarter and six months end June 30, 1996 was $312,000 and
$612,000 respectively, all of which was recorded using the cash
received method. The average recorded investment in impaired loans
during the second quarter of 1996 was approximately $38,000,000.
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
---------------------------------------------------
The Company's annual meeting of stockholders was held on
May 30, 1996. At the annual meeting, the stockholders
approved the following actions:
(i) Mr. Kenneth W. Dougherty, Mr. Frank J. Fahrenkopf,
Jr. and Mr. Richard Cox-Johnson were elected as directors
of the Company with terms expiring in 1999. For each of
the three nominees, the vote was approximately 6,143,000
shares for, no shares against and approximately 640,000
shares withheld. The remaining directors of the Company
and the years in which their respective terms expire are
as follows: Mr. John F. Mangan - 1998; Ms. Katherine
August-deWilde - 1998; Mr. L. Martin Gibbs - 1998; Mr.
James H. Herbert, II - 1997; Mr. James F. Joy - 1997; Mr.
Barrant Merrill - 1997; Mr. Roger O. Walther - 1997.
(ii) A proposal to approve the grant of stock options for
an aggregate of 97,500 shares of the Company's Common
Stock to the eight non-employee directors of the Company
and the five non-employee directors of the Company's
subsidiaries was approved. The vote was: 5,249,503 shares
for; 1,516,971 shares against; 17,185 shares abstain.
(iii) The selection of the firm of KPMG Peat Marwick LLP as
independent auditors to examine the financial statements
of the Company and its subsidiaries for the 1996 fiscal year
was ratified. The vote was: 6,776,121 shares for;
1,775 shares against; 5,763 shares abstain.
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 July 19, 1996, the Company filed a Form 8-K
relating to Item 5 therein, covering the registrant's
release on July 17, 1996 to the business community of its
earnings for the quarter and six months ended June 30, 1996.
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: August 13, 1996 /s/JAMES H. HERBERT, II
-------------------------
JAMES H. HERBERT, II
President and Chief Executive Officer
Date: August 13, 1996 /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 Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
1996 1995 1996 1995
----------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Primary:
Net income (loss) available to common stock $ 3,001,000 $(3,140,000) $5,771,000 $ (1,756,000)
=========== =========== ========== ============
Weighted average shares outstanding,
beginning of period including treasury shares 7,834,971 7,806,418 7,816,400 7,797,100
Effect of stock options exercised during period 1,299 0 10,390 3,575
Weighted average shares of stock purchased by employees 501 544 6,239 3,641
Weighted average shares of dilutive stock
options under treasury stock method 304,720 235,292 278,527 204,985
Weighted average shares of treasury stock (486,000) (452,857) (486,000) (420,186)
----------- ----------- ---------- ------------
Adjusted shares outstanding - primary 7,655,491 7,589,397 7,625,556 7,589,115
=========== =========== ========== ============
Net income (loss) per common share - primary $ 0.39 $ (0.41) $ 0.76 $ (0.23)
=========== =========== ========== ============
Fully Diluted:
Net income (loss) available to common stock $ 3,001,000 $(3,140,000) $ 5,771,000 $ (1,756,000)
Effect of convertible subordinated debentures,
net of taxes (1) 396,000 399,000 792,000 798,000
----------- ----------- ----------- ------------
Adjusted net income (loss) for fully diluted calculation (1) $ 3,397,000 $(2,741,000) $ 6,563,000 $ (958,000)
=========== =========== =========== ============
Adjusted shares - primary, from above 7,655,491 7,589,397 7,625,556 7,589,115
Weighted average shares issuable upon conversion
of convertible subordinated debentures 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 58,796 9,305 29,426 12,860
----------- ----------- ----------- ------------
Adjusted shares outstanding - fully diluted 10,238,497 10,122,912 10,179,192 10,126,185
=========== =========== =========== ============
Net income (loss) per share - fully diluted $ 0.33 $ (0.41)(2) $ 0.64 $ (0.23)(2)
=========== =========== =========== ============
</TABLE>
- ---------------------
(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) For the first quarter and first six months of 1995, consideration
of the conversion of the Company's convertible subordinated
debentures in the fully diluted calculation would result in lower
loss per share amounts than the primary calculations (the
convertible subordinated debentures are antidilutive). Therefore,
the primary loss per share is reported as the fully diluted
loss per share for these periods.
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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 15,114
<INT-BEARING-DEPOSITS> 196
<FED-FUNDS-SOLD> 4,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 110,196
<INVESTMENTS-CARRYING> 76,061
<INVESTMENTS-MARKET> 75,469
<LOANS> 1,834,407
<ALLOWANCE> 19,318
<TOTAL-ASSETS> 2,064,209
<DEPOSITS> 1,254,523
<SHORT-TERM> 20,000
<LIABILITIES-OTHER> 19,781
<LONG-TERM> 655,505
<COMMON> 75,320
0
0
<OTHER-SE> 39,209
<TOTAL-LIABILITIES-AND-EQUITY> 2,064,209
<INTEREST-LOAN> 70,975
<INTEREST-INVEST> 7,007
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 77,982
<INTEREST-DEPOSIT> 34,551
<INTEREST-EXPENSE> 54,934
<INTEREST-INCOME-NET> 23,048
<LOAN-LOSSES> 3,588
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 7,024
<INCOME-PRETAX> 9,781
<INCOME-PRE-EXTRAORDINARY> 9,781
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,771
<EPS-PRIMARY> 0.76
<EPS-DILUTED> 0.64
<YIELD-ACTUAL> 2.34
<LOANS-NON> 28,578
<LOANS-PAST> 0
<LOANS-TROUBLED> 7,397
<LOANS-PROBLEM> 3,000
<ALLOWANCE-OPEN> 18,068
<CHARGE-OFFS> 3,335
<RECOVERIES> 997
<ALLOWANCE-CLOSE> 19,318
<ALLOWANCE-DOMESTIC> 19,318
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 18,359
</TABLE>
