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
June 30, 1997 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 August 7, 1997, 9,496,245 shares.
<PAGE>
First Republic Bancorp Inc.
Form 10-Q
June 30, 1997
Index
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheet -
June 30, 1997 and December 31, 1996 3
Consolidated Statement of Income - Six Months and
Quarter Ended June 30, 1997 and 1996 5
Consolidated Statement of Cash Flows -
Six Months Ended June 30, 1997 and 1996 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 28
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 29
2
<PAGE>
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>
June 30, December 31,
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
Cash $ 17,636,000 $ 26,398,000
Federal funds sold and short term investments 52,215,000 2,900,000
Investment securities at cost 47,613,000 52,899,000
Investment securities at market 94,207,000 103,673,000
Federal Home Loan Bank Stock, at cost 33,663,000 32,649,000
---------- ----------
245,334,000 218,519,000
Loans
Single family (1-4 unit) mortgages 1,231,044,000 1,224,542,000
Multifamily (5+ units) mortgages 322,836,000 320,715,000
Commercial real estate mortgages 292,199,000 285,141,000
Commercial business loans 2,070,000 2,434,000
Single family construction 37,655,000 36,686,000
Multifamily/commercial construction 17,624,000 7,347,000
Equity lines of credit 48,259,000 35,497,000
Other loans 17,309,000 2,651,000
Loans held for sale 11,368,000 8,436,000
---------- ---------
1,980,364,000 1,923,449,000
Less
Unearned loan fee income (3,016,000) (3,116,000)
Reserve for possible losses (18,501,000) (17,520,000)
----------- -----------
Net loans 1,958,847,000 1,902,813,000
Accrued interest receivable 13,890,000 13,084,000
Mortgage servicing rights 3,141,000 1,397,000
Prepaid expenses and other assets 9,757,000 11,964,000
Premises, equipment and leasehold improvements,
net of accumulated depreciation 4,214,000 4,509,000
Real estate owned (REO) 2,850,000 4,313,000
--------- ---------
$ 2,238,033,000 $ 2,156,599,000
=============== ===============
</TABLE>
See notes to financial statements.
3
<PAGE>
FIRST REPUBLIC BANCORP INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Customer deposits
Passbook, MMA and NOW checking accounts $ 346,855,000 $ 293,844,000
Certificates of deposit 1,057,737,000 1,059,304,000
------------- -------------
Total customer deposits 1,404,592,000 1,353,148,000
Interest payable 13,978,000 14,592,000
Other liabilities 7,450,000 10,086,000
Federal Home Loan Bank advances 621,530,000 591,530,000
Other borrowings 500,000 667,000
------- -------
Total senior liabilities 2,048,050,000 1,970,023,000
Senior subordinated debentures 9,966,000 9,966,000
Subordinated debentures 19,461,000 19,515,000
Convertible subordinated debentures -- 30,685,000
---------- ----------
Total liabilities 2,077,477,000 2,030,189,000
------------- -------------
Stockholders' equity
Common stock 105,000 81,000
Capital in excess of par value 111,160,000 79,369,000
Retained earnings 61,487,000 53,115,000
Deferred compensation -- ESOP (500,000) (667,000)
Treasury shares, at cost (11,880,000) (4,763,000)
Unrealized gain (loss)-available for sale securities 184,000 (725,000)
------- --------
Total stockholders' equity 160,556,000 126,410,000
----------- -----------
$2,238,033,000 $2,156,599,000
============== ==============
</TABLE>
See notes to financial statements.
4
<PAGE>
FIRST REPUBLIC BANCORP INC.
CONSOLIDATED STATEMENT OF INCOME
(unaudited)
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
June 30, June 30,
-------- --------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income:
Interest on real estate and other loans $39,007,000 $35,802,000 $ 77,087,000 $70,975,000
Interest on investments 3,826,000 3,522,000 7,201,000 7,007,000
--------- --------- --------- ---------
Total interest income 42,833,000 39,324,000 84,288,000 77,982,000
---------- ---------- ---------- ----------
Interest expense:
Interest on customer deposits 19,457,000 17,391,000 38,448,000 34,551,000
Interest on FHLB advances and borrowings 8,888,000 8,692,000 17,517,000 17,492,000
Interest on debentures 751,000 1,449,000 1,577,000 2,891,000
------- --------- --------- ---------
Total interest expense 29,096,000 27,532,000 57,542,000 54,934,000
---------- ---------- ---------- ----------
Net interest income 13,737,000 11,792,000 26,746,000 23,048,000
Provision for losses -- 1,815,000 500,000 3,588,000
---------- --------- ------- ---------
Net interest income after provision for losses 13,737,000 9,977,000 26,246,000 19,460,000
---------- --------- ---------- ----------
Non-interest income:
Servicing fees, net 491,000 458,000 979,000 1,100,000
Loan and related fees 320,000 368,000 515,000 801,000
Gain on sale of loans 1,162,000 76,000 2,252,000 248,000
Gain on investment securities 48,000 -- 48,000 --
Other income 73,000 44,000 96,000 64,000
------ ------ ------ ------
Total non-interest income 2,094,000 946,000 3,890,000 2,213,000
--------- ------- --------- ---------
Non-interest expense:
Salaries and related benefits 3,163,000 2,296,000 6,389,000 4,510,000
Occupancy 884,000 841,000 1,755,000 1,625,000
Advertising 659,000 544,000 1,125,000 1,040,000
Professional fees 412,000 405,000 638,000 634,000
FDIC insurance premiums 44,000 82,000 86,000 160,000
REO costs and losses 1,201,000 160,000 1,845,000 886,000
Other general and administrative 2,028,000 1,554,000 3,986,000 3,037,000
--------- --------- --------- ---------
Total non-interest expense 8,391,000 5,882,000 15,824,000 11,892,000
--------- --------- ---------- ----------
Income before income taxes 7,440,000 5,041,000 14,312,000 9,781,000
Provision for income taxes 3,088,000 2,040,000 5,940,000 4,010,000
--------- --------- --------- ---------
Net income $ 4,352,000 $ 3,001,000 $ 8,372,000 $ 5,771,000
=========== =========== =========== ===========
Net income adjusted for effect of convertible
issue, used for fully diluted EPS $ 4,352,000 $ 3,397,000 $ 8,389,000 $ 6,563,000
=========== =========== =========== ===========
Primary earnings per share $ 0.41 $ 0.39 $ 0.84 $ 0.76
=========== =========== =========== ===========
Weighted average shares - primary 10,643,526 7,655,491 9,975,268 7,625,556
========== ========= ========= =========
Fully diluted earnings per share $ 0.41 $ 0.33 $ 0.79 $ 0.64
=========== =========== =========== ===========
Weighted average shares - fully diluted 10,710,972 10,238,497 10,691,008 10,179,192
========== ========== ========== ==========
</TABLE>
See notes to financial statements.
5
<PAGE>
FIRST REPUBLIC BANCORP INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Six Months ended
----------------
June 30,
--------
1997 1996
---- ----
<S> <C> <C>
Operating Activities
Net Income $ 8,372,000 $ 5,771,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for losses 500,000 3,588,000
Provision for depreciation and amortization 1,520,000 2,144,000
Amortization of loan fees (756,000) (1,069,000)
Amortization of mortgage servicing rights 367,000 234,000
Amortization of investment securities discounts (20,000) (26,000)
Amortization of investment securities premiums 181,000 136,000
Loans originated for sale (83,588,000) (33,336,000)
Loans sold into commitments 80,644,000 39,841,000
Increase in deferred taxes (854,000) (1,043,000)
Gain on sale of investment securities (48,000) --
Net gains on sale of loans (2,252,000) (248,000)
Noncash cost of benefit plans 849,000 --
Increase in interest receivable (1,820,000) (1,511,000)
Decrease in interest payable (614,000) (839,000)
Increase in other assets (14,000) (668,000)
Decrease in other liabilities (2,408,000) (255,000)
---------- --------
Net Cash Provided By Operating Activities 59,000 12,719,000
Investment Activities
Loans originated (412,330,000) (386,384,000)
Other loans sold 137,385,000 12,989,000
Principal payments on loans 219,493,000 202,401,000
Purchases of investment securities (4,083,000) (24,569,000)
Sale of investment securities 10,566,000 --
Repayments of investment securities 10,051,000 10,261,000
Additions to fixed assets (314,000) (510,000)
Net proceeds from sale of real estate owned 4,165,000 6,517,000
--------- ---------
Net Cash Used by Investing Activities (35,067,000) (179,295,000)
Financing Activities
Net increase in passbook, MMA and NOW checking accounts 53,011,000 63,942,000
Issuance of certificates of deposit 123,087,000 216,738,000
Repayments of certificates of deposit (124,654,000) (166,598,000)
Increase in long-term FHLB advances -- 25,000,000
Repayments of other long-term borrowings (167,000) --
Net increase in short-term borrowings 30,000,000 16,000,000
Decrease in deferred compensation - ESOP 167,000 --
Repayments of subordinated debentures (54,000) (78,000)
Proceeds from employee stock purchase plan 95,000 101,000
Proceeds from common stock options exercised 1,193,000 167,000
Purchases of treasury stock (7,117,000) --
---------- -----------
Net Cash Provided by Financing Activities 75,561,000 155,272,000
Increase (decrease) in Cash and Cash Equivalents 40,553,000 (11,304,000)
Cash and Cash Equivalents at Beginning of Period 29,298,000 30,918,000
---------- ----------
Cash and Cash Equivalents at End of Period $ 69,851,000 $ 19,614,000
============ ============
</TABLE>
See notes to financial statements.
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 Nevada chartered thrift company subsidiary, First
Republic Savings Bank ("the Bank"). First Republic and its subsidiary are
collectively referred to as the "Company." All material intercompany
transactions and balances are eliminated in consolidation. Certain
reclassifications have been made to the 1996 financial statements in order for
them to conform with the 1997 presentation.
These interim financial statements should be read in conjunction with the
Company's 1996 Annual Report to Stockholders and Consolidated Financial
Statements and Notes thereto. Results for the quarter and six months ended June
30, 1997 should not be considered indicative of results to be expected for the
full year.
2. RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS
No. 128"). SFAS No. 128 establishes standards for computing and presenting
earnings per share ("EPS") and applies to entities with publicly held common
stock or potential common stock. SFAS No. 128 simplifies the standards for
computing earnings per share previously found in APB Opinion No. 15, Earnings
per Share, and replaces the presentation of primary EPS with a presentation of
"basic EPS." SFAS No. 128 makes modest revisions to the fully diluted EPS
calculation which will be designated as "diluted EPS." It also requires dual
presentation of a basic and diluted EPS on the face of the income statement and
requires a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS computation.
SFAS No. 128 is effective for financial statements issued for periods ending
after December 15, 1997, including interim periods; earlier application is not
permitted. This statement requires restatement of all prior-period EPS data
presented.
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income. This
Statement establishes standards for reporting and displaying comprehensive
income and its components in the financial statements. It requires that a
company classify items of other comprehensive income, as defined by accounting
standards, by their nature (e.g., unrealized gains or losses on securities) in a
financial statement, but does not require a specific format for that statement.
The Company is in the process of determining its preferred format. The
accumulated balance of other comprehensive income is to be displayed separately
from retained earnings and additional paid-in capital in the equity section of
the balance sheet. This Statement is effective with the year-end 1998 financial
statements; however, a total for comprehensive
7
<PAGE>
2. RECENT ACCOUNTING PRONOUNCEMENTS (Continued)
income is required in the financial statements of 1998 interim periods.
Reclassification of financial statements for earlier periods provided for
comparative purposes is required.
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information. The Statement requires that a public
business enterprise report financial and descriptive information about its
reportable operating segments on the basis that is used internally for
evaluating segment performance and deciding how to allocated resources to
segments. This statement is effective with the year-end 1998 financial
statements.
The Securities and Exchange Commission (SEC) has approved rule amendments to
clarify and expand existing disclosure requirements for derivative financial
instruments. The amendments require enhanced disclosure of accounting policies
for derivative financial instruments in the footnotes to the financial
statements. In addition, the amendments expand existing disclosure requirements
to include quantitative and qualitative information about market risk inherent
in market risk sensitive instruments. The required quantitative and qualitative
information should be disclosed outside the financial statements and related
notes thereto. The enhanced accounting policy disclosure requirements are
effective for the quarterly period ended June 30, 1997. As the Company believes
that the derivative financial instrument disclosures contained within the notes
to the financial statements of its 1996 Form 10-K substantially conform with the
accounting policy requirements of these rule amendments, no further interim
period disclosure has been provided. The rule amendments that require expanded
disclosure of quantitative and qualitative information about market risk are
effective with the 1997 Form 10-K.
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 Republic Savings Bank, a Nevada-chartered, FDIC-insured
thrift company subsidiary. First Republic Savings Bank is a member of the FDIC's
Bank Insurance Fund ("BIF").
On October 31, 1996, the Company completed the merger of its two thrift and loan
subsidiaries, with the merger of First Republic Thrift & Loan into First
Republic Savings Bank, in order to achieve certain operational efficiencies.
Subsequent to the merger, First Republic Savings Bank is the surviving legal
entity and continues to operate in both Nevada and California in substantially
the same manner as each subsidiary had been operating.
Additionally, the Company is pursuing a change in the legal charter of First
Republic Savings
8
<PAGE>
GENERAL (Continued)
- -------------------
Bank from a thrift company charter to a commercial bank charter. Such a charter
change would allow the Company to provide additional services, including
traditional demand deposit checking accounts, to its customers. The Company is
also considering merging the parent company into the merged operating
subsidiary, concurrent with the conversion of such subsidiary to a commercial
bank. These remaining potential corporate reorganizations are subject to
regulatory approval; the holding company merger is also subject to stockholder
approval at a special meeting expected to be held prior to September 30, 1997.
There can be no assurance that 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 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 1997, the Company continued its focus on single
family lending, and the level of loan originations were increased from to the
prior year as a result of strong customer demand for home purchases and improved
secondary market conditions allowing the amount of loans sold or originated for
sale to investors to be higher. For the six months ended June 30, 1997, the
Company originated $495.9 million of loans and loan sales were $218.0 million,
as compared to loan originations of $419.7 million and loan sales of $52.8
million for the six months ended June 30, 1996. Total loans of all types
originated by the Company in 1996 were $848.3 million, and loan sales were
$172.8 million in 1996.
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
portfolio of mortgage loans serviced for secondary market investors consisted of
$934.0 million in loans at June 30, 1997.
9
<PAGE>
GENERAL (Continued)
- -------------------
The following table presents certain performance asset quality and capital
ratios and share data information for the Company for the periods indicated:
<TABLE>
<CAPTION>
At or for the six months At or for the Year
Ended June 30, Ended December 31,
-------------- ------------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Selected Ratios:
Return on average assets* 0.77% 0.58% 0.61% 0.07% 0.47%
Return on average equity* 10.95 10.34 10.86 1.08 6.77
Average equity to average assets 7.00 5.65 5.63 6.00 6.94
Leverage ratio 7.29 5.70 5.90 5.84 6.43
Tier 1 risk-based capital ratio 10.87 8.56 9.17 8.53 9.42
Total risk-based capital ratio 14.12 14.79 14.80 15.00 16.32
Net interest margin* 2.43 2.34 2.32 1.97 2.47
Non-interest expense to average assets* 1.28 1.12 1.17 1.07 1.28
Nonaccruing assets to total assets 1.01 2.08 1.32 2.46 2.41
Nonaccruing assets and performing restructured
loans to total assets 1.12 2.44 1.66 3.13 3.43
Net loan chargeoffs (recoveries) to average loans* (0.05) 0.27 0.35 0.69 0.58
Reserve for possible losses to total loans 0.93 1.05 0.91 1.07 0.96
Reserve for possible losses to nonaccruing loans 94% 68% 72% 49% 44%
Share Data:
Common shares outstanding 9,692,934 7,352,991 7,716,258 7,330,400 7,444,703
Tangible book value per common share $16.56 $15.56 $16.46 $14.76 $14.40
- ----------
*Six months data is annualized
The Bank's retail deposits are the Company's principal source of funds with FHLB
advances, 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 Republic Savings Bank is an approved voluntary member of the Federal Home
Loan Bank of San Francisco (FHLB). The Bank is currently approved for 40% of its
total assets or approximately $891.0 million of FHLB advances at June 30, 1997.
Such advances are collateralized by real estate mortgage loans and $621.5
million has been advanced at June 30, 1997. Membership in the FHLB provides the
Bank with an alternative funding source for its loans.
The Bank, 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 San Mateo south of San Francisco, a branch in Los Angeles, a branch in
Beverly Hills, three branches in San Diego County and two branches in Las Vegas,
Nevada. As of June 30, 1997, the Bank had total assets of $2,227,611,000,
tangible shareholder's equity of $154,127,000 and total capital (consisting of
tangible shareholder's equity, subordinated capital notes and reserves) of
$182,608,000. At June 30, 1997, the Bank's leverage ratio was 7.05%, its ratio
of Tier 1 capital to risk-adjusted assets was 10.48% and its ratio of total
capital to risk adjusted assets was 12.42%. This compares to minimum leverage,
Tier 1 and total capital ratios of 5%, 6% and 10%, respectively, to be
considered "well capitalized" under FDIC regulations.
10
<PAGE>
LIQUIDITY
- ---------
Liquidity refers to the ability to maintain a cash flow adequate to fund
operations and to meet present and future funding 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,
1997, the investment securities portfolio of $141,820,000, plus cash and short
term investments of $69,851,000, amounted to $211,671,000, or 9.5% of total
assets. At June 30, 1997, 92 % of the Company's investments mature within twelve
months or are adjustable rate in nature. At June 30, 1997, the Company owned no
investments of a trading nature.
Additional sources of liquidity at June 30, 1997 could be provided by
approximately $110,000,000 of borrowings collateralized by investment securities
and available unused FHLB advances of approximately $269,000,000. 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
- ------------------------------
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 certificates
of deposit 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, 1997 approximately 66% 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, 1997, approximately 89% of the
Company's interest-earning assets and 83 % of interest-bearing liabilities will
reprice within the next year and the Company's one-year cumulative GAP is
positive 9.8%. Despite the Company's positive repricing position, the Company's
net interest margin decreased following the rapid increase in interest rates
during 1994, but began to recover gradually in the third and fourth quarters of
1995. For most of 1996 and the first six months of 1997, market rates of
interest were relatively stable and the Company's net interest margin was higher
and more stable, averaging 2.50% in the second quarter of 1997, 2.36% in the
first quarter of 1997 and 2.32% for all of 1996 versus 1.97% for all of 1995.
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, and the Company's strategy to increase
its home loans which carry lower margins
11
<PAGE>
ASSET AND LIABILITY MANAGEMENT (Continued)
- ------------------------------------------
than other types of real estate secured loans that the Company originates.
The following table summarizes the differences between the Company's maturing or
rate adjusting assets and liabilities, or "GAP" position, at June 30, 1997.
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 ended June 30, 1997. A portion of the Company's adjustable loans carry
minimum interest rates, or floors, which have historically become the effective
loan yield as rates declined from the levels in prior periods and approximately
$184,018,000 of such loans remain at these minimum interest rates as of June 30,
1997. The following table illustrates maturities or interest rate adjustments
based upon the contractual maturities or adjustment dates at June 30, 1997:
12
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
FIRST REPUBLIC BANCORP
ASSET & LIABILITY REPRICING SENSITIVITY
June 30, 1997
(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 1,080,488 533,816 134,193 42,856 144,836 44,175 0 1,980,364
Securities 0 99,817 41,951 13,912 0 0 19,803 0 175,483
Cash & short-term
investments 67,351 2,500 0 0 0 0 0 0 69,851
Non-interest bearing
assets, net 0 0 0 0 0 0 0 12,335 12,335
------ --------- ------- ------- ------ ------- ------ ------ ---------
TOTAL 67,351 1,182,805 575,767 148,105 42,856 144,836 63,978 12,335 2,238,033
LIABILITIES AND
STOCKHOLDERS' EQUITY:
NOW, Passbooks & MMA's 0 299,982 27,254 13,750 5,869 0 0 0 346,855
Certificates of deposit:
$100,000 or greater 0 24,244 32,096 34,133 16,778 3,946 100 0 111,297
less than $100,000 0 226,878 258,548 286,675 143,737 30,517 85 0 946,440
FHLB advances, long-term 0 244,170 165,000 87,360 0 72,500 22,500 0 591,530
FHLB advances, short-term 0 30,000 0 0 0 0 0 0 30,000
ESOP debt 500 0 0 0 0 0 0 0 500
Other liabilities 0 0 0 0 0 0 0 21,428 21,428
Subordinated debt 0 0 0 0 0 1,475 27,952 0 29,427
Equity 0 0 0 0 0 0 0 160,556 160,556
------ ------- ------- -------- ------- ------- ------ ------- ---------
TOTAL 500 825,274 482,898 421,918 166,384 108,438 50,637 181,984 2,238,033
Repricing Assets
over (under) liab 66,851 357,531 92,869 (273,813) (123,528) 36,398 13,341 (169,649) 0
Effect of swaps 0 0 (25,000) 0 0 25,000 0 0 0
------ ------- ------- -------- -------- ------ ------ -------- ------
Hedged gap 66,851 357,531 67,869 (273,813) (123,528) 61,398 13,341 (169,649) 0
====== ======= ====== ======== ======== ====== ====== ======== ======
Gap as % of
Total assets 2.99% 15.98% 3.03% -12.23% -5.52% 2.74% 0.60% -7.58% 0.00%
==== ===== ==== ===== ==== ==== ==== ==== ====
Cumulative gap 66,851 424,372 492,251 218,438 94,910 156,308 169,649 0 0
====== ======= ======= ======= ====== ======= ======= ====== ======
Cumulative gap 2.99% 18.96% 21.99% 9.76% 4.24% 6.98% 7.58% 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 FHLB 11th District Cost
of Funds Index (COFI), the One Year Treasury Constant Maturity Index, the
Twelve Month Moving Average One Year Treasury Index or the Prime rate,
subject generally to a maximum increase of 2% annually and 5% over the
lifetime of the loan.
(2) NOW, 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 NOW, passbook and MMA accounts are
contractually subject to immediate withdrawal.
13
<PAGE>
ASSET AND LIABILITY MANAGEMENT (Continued)
- ------------------------------------------
In evaluating the Company's exposure to interest rate risk, certain limitations
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 $1,215,000,000 which terminate in periods ranging
from July 1997 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 8.5% 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, at June 30, 1997, $37,400,000 of the Bank's advances with the FHLB
contained interest caps of 12.0% as part of the borrowing agreements. The cost
of interest rate cap transactions is amortized over their lives and totaled
$764,000 and $814,000 for the six months ended June 30, 1997 and 1996,
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, 1997, 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
specific long-term FHLB advances to semi-annual adjustable liabilities. The
Company's long-term FHLB advances, with a weighted average maturity of
approximately 10 years at June 30, 1997, have provided an alternative funding
source to the Company's retail deposits, which generally have a shorter maturity
than the contractual life of mortgage loans. 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.
From 1990 to 1995, the Company utilized FHLB advances as a substantial
supplement to deposit gathering to fund its asset growth. 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 the Bank. At June 30, 1997, total FHLB advances outstanding
were $621,530,000. Of this amount, $520,830,000 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
14
<PAGE>
ASSET AND LIABILITY MANAGEMENT (Continued)
- ------------------------------------------
for its real estate secured loans which generally carry a contractual maturity
of from 10 to 30 years. First Republic Savings Bank is subject to the provisions
of the Nevada Thrift Companies Act, which requires that the amount of customer
deposits be in compliance with FDIC guidelines.
CAPITAL RESOURCES
- -----------------
The Company continues to maintain a strong capital base. At June 30, 1997, the
Company's total capital, including total stockholders' equity, debentures and
reserves was $208,484,000. Total stockholders' equity at June 30, 1997 has
increased by $34,146,000 since December 31, 1996. This increase results
primarily from the Company's conversion during the first quarter of all of its
outstanding 7 1/4% convertible subordinated debentures due 2002 into shares of
common stock. As a result, the number of shares outstanding at June 30, 1997
increased approximately 2,245,000 from that at December 31, 1996, at which time
$30,685,000 of these convertible debentures were outstanding. Net income was
$8,372,000 for the first six months of 1997 and there was an increase of
$909,000 in the market value of that portion of the Company's portfolio of
securities which are classified as available for sale. During the second quarter
of 1997, the Company purchased 345,100 shares of its common stock, for a total
cost of $7,117,000.
First Republic is not a bank holding company, and unlike 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's leverage ratio would have been 7.29%,
its Tier 1 risk-based capital ratio would have been 10.87% and its total risk
based capital ratio would have been 14.12% at June 30, 1997.
As of June 30, 1997, the Company held 770,494 shares of common stock as treasury
stock. The Company purchased 345,100 of these shares in June 1997 and 425,394 of
these shares in 1995 and prior years, with a total cost of $11,880,000. As of
June 30, 1997, 324,900 shares were remaining under the Company's authorized
stock repurchase plan.
During the first six months of 1997, First Republic received from the Bank
dividends of $8,000,000 representing approximately 25% of the Bank's earnings
for the fourth quarter of 1996 and the first quarter of 1997 and a retroactive
increase of the dividend from approximately 25% to 50% of earnings from January
1, 1996 to March 31, 1997. First Republic also received interest payments of
$527,000 from the Bank for the six months ended June 30, 1997. The ability of
First Republic to receive future dividends and other payments from the Bank
depends upon the operating results and capital level of the Bank, restrictions
upon such payments imposed by creditors of the Bank, FDIC regulations and other
governmental regulations governing the Bank.
15
<PAGE>
RESULTS OF OPERATIONS - Quarter Ended June 30, 1997 Compared to Quarter Ended
- ----------------------- -----------------------------------------------------
June 30, 1996
-------------
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 1997, First Republic's total assets grew to
$2,238,033,000 at June 30, 1997 from $2,183,453,000 at March 31, 1997, primarily
as a result of an increase in single family mortgage loans. The Company's loan
originations for the second quarter of 1997 were $295,345,000, compared to
$200,573,000 for the first quarter of 1997 and $220,779,000 for the second
quarter of 1996. Single family loans originated in the second quarter of 1997
were $211 million compared to $154 million for the first quarter of 1997 and
$173 million in the second quarter of 1996.
Mortgage banking activity resulted in the sale of $131,783,000 of single family
loans to secondary market investors during the second quarter of 1997, compared
with $10,456,000 in the second quarter of 1996. The Company's portfolio of real
estate loans serviced for secondary market investors increased to $934,014,000
at June 30, 1997 from $799,500,000 at December 31, 1996. 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 strength of
the general economy and the housing industry, and conditions in the secondary
loan sale markets.
The Company reported net income of $4,352,000 for the second quarter of 1997 as
compared to $3,001,000 in the same quarter of 1996. Fully diluted earnings per
share was $0.41 for the second quarter of 1997, compared to $0.33 for the
similar period in 1996. First Republic's pretax operating results for the
quarter ended June 30, 1997 were higher than a year ago primarily because the
Company's net interest income for the second quarter was $1,945,000 higher in
1997 than 1996, the provision for loan losses was $1,815,000 lower and the gain
on sale of loans was $1,086,000 higher, offset in part by higher REO related
expenses of $1,041,000 and higher operating costs from operating a larger
company.
Total interest income increased to $42,833,000 for the second quarter of 1997
from $39,324,000 for the second quarter of 1996. Interest income on real estate
and other loans increased to $39,007,000 for the second quarter of 1997,
compared to $35,802,000 in 1996. The average yield on loans was 7.99% in the
first quarter of 1997 compared to 7.83% for the first quarter of 1997 and was
8.04% for the second quarter of 1996. The Company's yield on loans is affected
by market rates, portfolio mix, 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 total loans receivable outstanding
increased from $1,939,153,000 at March 31, 1997 to $1,980,364,000 at June 30,
1997. As a percentage of the Company's permanent loan portfolio, loans secured
by single family residences increased to 65% at June 30, 1997 from 62% at June
30, 1996.
16
<PAGE>
RESULTS OF OPERATIONS - Quarter Ended June 30, 1997 Compared to Quarter Ended
- ----------------------- -----------------------------------------------------
June 30, 1996 (Continued)
-------------------------
Interest income on cash, short-term investments and investment securities
increased as a result of a higher average portfolio for the quarter. The
increase was partially offset by a slightly lower average rate earned on the
portfolio. Such interest income was $3,826,000 in the second quarter of 1997
compared to $3,522,000 in the same period of 1996. The average investment
position was $232,355,000 during the second quarter of 1997 and earned 6.60%
compared to an average position of $207,703,000 earning 6.92% during the second
quarter of 1996. 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 $29,096,000 in
1997 from $27,532,000 in 1996. 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,
money market (MMA) and NOW checking accounts and certificates of deposit),
increased to $19,457,000 in the second quarter of 1997 from $17,391,000 in the
second quarter of 1996. The average rate paid on deposits was 5.62% for the
second quarter of 1997, compared to 5.63% for the first quarter of 1997 and
5.72% for the second quarter of 1996.
Interest expense on other borrowings decreased to $9,639,000 in the second
quarter of 1997 from $10,141,000 in the second quarter of 1996, as a result of a
higher average rate paid on a higher average level of FHLB advances offset by
the full conversion of the Company's outstanding 7 1/4% convertible subordinated
debentures by March 31, 1997. The average rate paid on the Company's other
borrowings and FHLB advances, excluding longer term debentures, was 6.00% for
the second quarter of 1997, compared to 5.91% for the first quarter of 1997, and
5.92% for the second quarter of 1996; thus the average rate paid on these
liabilities, primarily FHLB advances, increased 9 basis points (0.09%) from the
first quarter of 1997 to the second quarter of 1997 and 8 basis points (0.08%)
from the second quarter of 1996 to the second quarter of 1997.
The Company's net interest income was $13,737,000 for the second quarter of
1997, compared to $11,792,000 for the second quarter of 1996, as a result of
earning a higher margin on a higher average balance of assets. The net interest
margin, calculated as net interest income divided by total average interest
earning assets, was 2.50% for the second quarter of 1997, compared to 2.36% for
the second quarter of 1996 and 2.32% for all of 1996.
Non-interest income for the second quarter of 1997 increased to $2,094,000 from
$946,000 in the second quarter of 1996, primarily due to increased gains on sale
of loans. Service fee revenue, net of amortized costs on the Company's mortgage
servicing rights, was $491,000 for the second quarter of 1997 compared to
$458,000 for the same period of 1996, primarily due to lower average servicing
fees on a higher average servicing portfolio and higher amortization costs. The
average balance of the servicing portfolio increased to $875,210,000 for the
second quarter of 1997 compared to $774,593,000 for the second quarter of 1996.
Total loans serviced were $934,014,000 at June 30, 1997 and $799,500,000 at
December 31, 1996. The percentage of
17
<PAGE>
RESULTS OF OPERATIONS - Quarter Ended June 30, 1997 Compared to Quarter Ended
- ----------------------- -----------------------------------------------------
June 30, 1996 (Continued)
-------------------------
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 0.31% for the six months of 1997 compared to 0.34% for all of
1996.
For the second quarter, loan and related fee income was $320,000 in 1997 and
$368,000 in 1996. This income category includes miscellaneous fees collected
from borrowers 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
$131,783,000 for the second quarter of 1997 and $10,456,000 for the second
quarter of 1996. The Company computes a gain or loss on sale at the time of sale
by comparing sales proceeds with the carrying value of the loans and by
calculating the fair value of servicing rights retained. The majority of the
loans sold in the second quarter of 1997 were adjustable rate mortgages based on
the COFI index. The sale of loans resulted in net gains of $1,162,000 for the
second quarter of 1997, compared to $76,000 for the same period of 1996. The
gain on the sale of loans includes the value attributed to mortgage loan
servicing rights under SFAS No. 125, which was $1,296,000 for the second quarter
of 1997 and $83,000 for the second quarter of 1996.
The Company's mortgage banking activities are 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 $8,391,000 for the second quarter of 1997, compared
to $5,882,000 for the same period in 1996. In 1997, the Company reported higher
personnel costs related to higher loan volume and higher corporate
profitability, increased advertising and from operating a larger company and
higher other operating costs. The Company also incurred or accrued approximately
$400,000 of nonrecurring costs, including those related to the Company's planned
corporate reorganization, introduction of a new corporate identity and ultimate
conversion to a commercial bank. The Company's non-interest expense for the
second quarter of 1997 included $1,201,000 related to results of operating REO
properties and writedowns from changes in value of REO properties, compared to
$160,000 of REO related expenses, net of gains on sold REO, in the second
quarter of 1996.
As a percentage of total assets, general and administrative expenses, excluding
REO related
18
<PAGE>
RESULTS OF OPERATIONS - Quarter Ended June 30, 1997 Compared to Quarter Ended
- ----------------------- -----------------------------------------------------
June 30, 1996 (Continued)
-------------------------
costs, was 1.31% for the second quarter of 1997, compared to 1.14%
for the second quarter of 1996, and 1.17% for all of 1996. The Company's
operating efficiency ratio, or net non-interest expense as a percentage of net
interest income and recurring non-interest income, was 49% for the second
quarter of 1997, compared to 41% for the same period in 1996 and 47.0% for all
of 1996.
RESULTS OF OPERATIONS - Six Months Ended June 30, 1997 Compared to Six Months
- ----------------------- -----------------------------------------------------
Ended June 30, 1996
-------------------
The trend in income and expense items for the comparable six month periods is
generally consistent with the comparison of the second quarter of 1997 with the
same quarter of 1996, 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, as presented in the following table. Net interest income has increased
due to a higher average equity level resulting from the conversion of
convertible debentures and an increased level of assets earning a slightly
higher interest rate spread. The rates paid on liabilities has decreased 0.22%
while yields earned on interest-earning assets has decreased 0.21%.
Non-interest income was $3,890,000 for the first six months of 1997 as compared
to $2,213,000 for the same period in 1996. An increase in gain on sale of loans
of $2,004,000 was partially offset by decreases in net servicing fees and loan
and related fees.
Non-interest expense increased to $15,824,000 in 1997 from $11,892,000 in 1996.
Salaries and related benefits have increased as a result of higher personnel
costs related to higher loan volume, higher corporate profitability and
increased personnel to provide expanded deposit services. Also, the increase in
the Company's common stock price has increased the non-cash expenses related to
the Company's variable rate stock option plans, the Employee Stock Ownership
Plan ("ESOP") and the 1997 Restricted Stock Plan. REO related writedowns and
costs increased to $1,845,000 for the six months ended June 30, 1997 from
$886,000 in the same period 1996. Other general and administrative expenses have
increased due to the costs incurred or accrued in connection with the Company's
planned reorganization and conversion to a commercial bank. As a percentage of
average assets, noninterest expenses increased to 1.28% for the first six months
of 1997 from 1.12% for the first six months of 1996.
The following table presents for the first six months of 1997 and 1996, 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%.
19
<PAGE>
RESULTS OF OPERATIONS - Six Months Ended June 30, 1997 Compared to Six Months
- ----------------------- -----------------------------------------------------
Ended June 30, 1996 (Continued)
-------------------------------
<TABLE>
<CAPTION>
Six months Ended June 30,
-----------------------------------------------------------------
1997 1996
---------------------------- ---------------------------
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 $ 953 $ 22 4.66% $ 2,179 $ 48 4.43%
Short-term investments 36,717 1,083 5.87 25,462 718 5.58
Investment securities 182,476 6,182 6.78 181,270 6,383 7.05
Loans 1,949,561 77,087 7.91 1,746,067 70,975 8.13
--------- ------ --------- ------
Total earning assets 2,169,707 84,374 7.78 1,954,978 78,124 7.99
------ ------
Non interest-earning assets 14,838 20,167
------ ------
Total average assets $2,184,545 $1,975,145
========== ==========
Liabilities and Stockholders' Equity:
Passbooks, MMA's and NOW checking $326,412 7,807 4.82% $212,915 $ 5,092 4.81%
Certificates of deposit 1,052,092 30,642 5.87 983,045 29,459 6.03
--------- ------ ------- ------
Total customer deposits 1,378,504 38,449 5.62 1,195,960 34,551 5.81
Other borrowings 593,519 17,517 5.95 583,960 17,492 6.02
Subordinated debentures 37,858 1,577 8.33 64,015 2,891 9.03
------ ----- ------ -----
Total interest-bearing liabilities 2,009,881 57,543 5.77 1,843,935 54,934 5.99
------ ------
Non interest-bearing liabilities 21,801 19,596
Stockholders' equity 152,863 111,614
------- -------
Total average liabilities and stockholders' equity $2,184,545 $1,975,145
========== ==========
Net interest spread 2.01% 2.00%
Net interest income and net interest margin $26,831 2.43% $ 23,190 2.34%
======= ========
</TABLE>
The Company's balance sheet at June 30, 1997 is generally comparable to that at
December 31, 1996. Total assets have increased $81,434,000 to $2,238,033,000,
while there was a net increase in the Company's loan portfolio of $56,915,000.
Funds were raised primarily by retail deposits which increased $51,444,000. The
Company's reserve for possible losses was $18,501,000 at June 30, 1997, and
there were two foreclosed real estate properties resulting in other real estate
owned with a net book value of $2,850,000.
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 1996 and the first six months
of 1997. Substantially, all of the Company's net loan growth since December 31,
1995 is represented by growth in single family home loans.
20
<PAGE>
ASSET QUALITY AND PROVISION FOR POSSIBLE LOSSES (Continued)
- -----------------------------------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
--------------------------------
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Loans:
Single family (1-4 units) $1,240,676,000 $1,231,230,000 $983,331,000
Multifamily (5+ units) 322,836,000 320,715,000 350,507,000
Commercial real estate 292,199,000 285,141,000 286,824,000
Multifamily/commercial construction 17,624,000 7,347,000 9,013,000
Single family construction 37,655,000 36,686,000 19,349,000
Home equity credit lines 48,259,000 35,497,000 26,572,000
------------- ------------- -------------
Real estate mortgages subtotal 1,959,249,000 1,916,616,000 1,675,596,000
------------- ------------- -------------
Commercial business and other 21,115,000 6,833,000 6,667,000
------------- ------------- -------------
Total loans 1,980,364,000 1,923,449,000 1,682,263,000
Unearned fee income (3,016,000) (3,116,000) (4,380,000)
Reserve for possible losses (18,501,000) (17,520,000) (18,068,000)
------------- ------------- -------------
Loans, net $1,958,847,000 $1,902,813,000 $1,659,815,000
============== ============== ==============
</TABLE>
The following table presents an analysis of the Company's loan portfolio at June
30, 1997 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) $811,425 $264,130 $38,932 $102,118 $ 9,054 $ 63,276 $1,288,935 65.1%
Multifamily (5+ units) 149,090 66,115 434 15,245 91,951 --- 322,836 16.3%
Commercial real estate 196,696 34,289 1,050 11,824 46,016 2,323 292,199 14.7%
Construction loans 16,734 15,525 1,050 1,277 20,018 675 55,279 2.8%
Business loans --- 1,949 1,736 121 --- --- 3,806 0.2%
Other loans 13,833 1,115 84 31 52 2,194 17,309 0.9%
---------- -------- ------- -------- -------- ------- ---------- -----
Total $1,187,778 $383,123 $43,286 $130,616 $167,091 $68,470 $1,980,364 100.0%
========== ======== ======= ======== ======== ======= ========== =====
Percent by location 60.0% 19.3% 2.2% 6.6% 8.4% 3.5% 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 earlier if 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).
21
<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,
-----------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Nonaccruing loans:
Single family $ --- $ --- $ ---
Multifamily 11,611,000 18,402,000 23,664,000
Commercial real estate 8,113,000 5,783,000 12,555,000
Other 40,000 69,000 331,000
---------- ---------- ----------
Total nonaccruing loans 19,764,000 24,254,000 36,550,000
Real estate owned ("REO") 2,850,000 4,313,000 10,198,000
---------- ---------- ----------
Total nonaccruing assets 22,614,000 28,567,000 46,748,000
Performing restructured loans 2,459,000 7,220,000 12,795,000
---------- ---------- ----------
Total nonaccruing assets and performing restructured loans $25,073,000 $35,787,000 $59,543,000
=========== =========== ===========
Accruing single family loans more than 90 days past due $ 3,936,000 $ 4,565,000 $ 3,747,000
Percent of Total Assets:
Nonaccruing assets 1.01% 1.32% 2.46%
Nonaccruing assets and performing restructured loans 1.12% 1.66% 3.13%
Ratio of reserve for possible losses to nonaccruing loans 94% 72% 49%
</TABLE>
At June 30, 1997, the dollar amount of the Company's nonaccruing loans and REO
after chargeoffs was $22,614,000 compared to $28,567,000 at December 31, 1996
and $46,748,000 at December 31, 1995.
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 twelve months or more. In 1995
and 1996, the Company has experienced increased delinquencies, additional loan
loss provisions and higher partial loan chargeoffs as a result of this
substantial natural disaster. During the first six months of 1997, only one new
loan in the Company's loan portfolio secured by properties in Los Angeles County
was placed on nonaccrual status. Additionally, certain loans in Northern
California have been placed on nonaccrual status because of adverse changes in
the borrower's condition, the property's status or the loan's terms.
22
<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 1997. Nonaccrual loans are segmented by major
geographical region and activity.
CHANGE IN NONACCRUAL
LOANS BY REGION
<TABLE>
<CAPTION>
Los Angeles Northern
County California Nevada Total
------ ---------- ------ -----
<S> <C> <C> <C> <C>
Balance March 31, 1997 $ 14,197,000 $8,719,000 $ --- $ 22,916,000
Additions to nonaccrual loans:
New nonaccrual loans 449,000 180,000 --- 629,000
Deductions from nonaccrual loans:
Chargeoffs to reserves, net (268,000) --- --- (268,000)
Transfer to foreclosed assets (794,000) --- --- (794,000)
Cash proceeds received (612,000) (82,000) --- (694,000)
Return to accrual status (1,321,000) (704,000) --- (2,025,000)
---------- -------- -------- ----------
Balance June 30, 1997 $ 11,651,000 $ 8,113,000 $ --- $ 19,764,000
============ =========== ========= ============
</TABLE>
Additions to nonaccrual loans during the second quarter of 1997 were related to
one commercial real estate loan in Northern California and one apartment loan in
Los Angeles County.
Deductions from nonaccrual loans during the second quarter of 1997 resulted from
$268,000 of chargeoffs to the Company's reserve for possible losses, $2,025,000
of loans (four loans) were returned to accrual status and foreclosures upon one
property ($794,000). Also, cash proceeds of $694,000 received during the second
quarter of 1997 were used to payoff, paydown or 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 1997 related to loans which were on
nonaccrual status at March 31, 1997. 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, 1997, the amounts reported for REO, nonaccruing loans, and
performing restructured loans have been reduced by previous chargeoffs of
$4,274,000, $5,050,000 and $422,000, respectively.
The Company's nonaccrual loans included $12,468,000 of loans on which interest
payments were received during the quarter at an average payment rate of over 10%
on their written down 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.
As of June 30, 1997, four loans in the amount of $2,459,000 are reported as
performing restructured loans. The increase in this category from $1,142,000 at
March 31, 1997 is a result of three loans in
23
<PAGE>
ASSET QUALITY AND PROVISION FOR POSSIBLE LOSSES (Continued)
- -----------------------------------------------------------
the amount of $1,321,000 being removed from nonaccrual as a result of achieving
satisfactory payment records. Additional loan modifications have been completed
in 1997 and additional modifications may be entered into with the Company's
borrowers in future quarters.
During the second quarter of 1997, one loan totaling $794,000 was transferred to
REO. Three REO properties with a remaining March 31, 1997 book value totaling
$1,369,000 were sold and the Company recovered proceeds in excess of the written
down basis of these properties by $88,000. At June 30, 1997, the Company held as
REO properties one apartment building 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, 1997, the
Company is actively marketing its REO properties for sale and expects to sell
certain REO properties and to foreclose upon additional loans in the third
quarter of 1997.
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.
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, 1997, 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 less than
0.06% on all loans originated. For the most recent fourteen quarters from
January 1, 1994 to June 30, 1997, net chargeoffs on single family loans as a
percentage of average single family loans was 0.02%. As of June 30, 1997, the
Company has not experienced any losses on its permanent loan portfolio secured
by real estate located in the Las Vegas market. Collectively, the single family
loan and Las Vegas permanent loan categories represented 72% of the Company's
total loans at June 30, 1997.
As a percentage of nonaccruing loans, the reserve for possible losses was 72% at
December 31, 1996 and 94% at June 30, 1997. 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 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
24
<PAGE>
ASSET QUALITY AND PROVISION FOR POSSIBLE LOSSES (Continued)
- -----------------------------------------------------------
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 have been reduced to their currently
estimated collateral fair value (net of selling costs) at June 30, 1997, 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 provision for losses as well as chargeoff and recovery
activity for the periods indicated.
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, December 31,
---------------------------------
1997 1996 1995
-------------- -------------- ---------------
<S> <C> <C> <C>
Reserve for Possible Losses:
Balance beginning of period $ 17,520,000 $ 18,068,000 $ 14,355,000
Provision charged to expense 500,000 5,838,000 14,765,000
Chargeoffs on originated loans:
Single family -- (302,000) (14,000)
Multifamily (526,000) (6,548,000) (9,314,000)
Commercial real estate -- (705,000) (2,163,000)
Commercial business and other loans -- (21,000) (48,000)
Construction loans -- -- (353,000)
Recoveries on originated loans:
Single family -- -- 3,000
Multifamily 771,000 287,000 765,000
Commercial real estate 236,000 855,000 30,000
Commercial business and other loans -- 46,000 54,000
Acquired loans:
Chargeoffs -- -- (22,000)
Recoveries -- 2,000 10,000
-------------- -------------- ---------------
Net recoveries (chargeoffs) 481,000 (6,386,000) (11,052,000)
-------------- -------------- ---------------
Balance end of period $ 18,501,0000 $ 17,520,000 $ 18,068,000
============== ============== ===============
Average loans for the period $1,949,561,000 $1,818,100,000 $ 1,591,827,000
Total loans at period end 1,980,364,000 1,923,449,000 1,682,263,000
Ratios of reserve for possible losses to:
Total loans 0.93% 0.91% 1.07%
Nonaccruing loans 94% 72% 49%
Nonaccruing loans and performing restructured loans 83% 50% 37%
Net chargeoffs (recoveries) to average loans (0.05%) 0.35% 0.69%
</TABLE>
- ----------
*Annualized
25
<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, 1997. 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.
26
<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:
Multifamily $ 1,774,000 $309,000
Commercial Real Estate 1,138,000 270,000
Other 39,000 4,000
----------- --------
$ 2,951,000 $583,000
----------- ========
Impaired loans not requiring a SFAS No. 114 allowance:
Multifamily 11,159,000
Commercial Real Estate 8,113,000
----------
19,272,000
----------
Total $22,223,000
===========
</TABLE>
The $19,272,000 of loans reported as impaired loans not requiring a SFAS No. 114
allowance are classified in this manner because, as of June 30, 1997, the
recorded investments in these loans have been reduced to their collateral fair
value, net of selling costs, by $5,132,000 of specific chargeoffs to the
Company's reserves. At June 30, 1997, the Company has designated $57,000 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 quarter
and six months ended June 30, 1997 was $173,000 and $278,000, respectively, all
of which was recorded using the cash received method. The average recorded
investment in impaired loans during the second quarter of 1997 was approximately
$23,000,000.
27
<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 May 30, 1997, the Company filed a Form 8-K relating to Item 5
therein, covering the registrant's release on May 28, 1997 to
the business community of its decision to no longer search for
strategic alternatives that would result in the acquisition of
the Company by another party. The Company also announced that
its Board of Directors has increased, by up to an additional
500,000 shares, the number of shares authorized for repurchase
from time to time, either on open market transactions or in
block purchases.
C. On June 23, 1997, the Company filed a Form 8-K relating to Item
5 therein, covering the registrant's release on June 23, 1997 to
the business community of its execution of a letter of intent to
acquire, through its wholly owned subsidiary First Republic
Savings Bank, a 19.9% equity stake in Trainer, Wortham &
Company, Incorporated of New York City, an independent
investment advisory firm.
D. On July 18, 1997, the Company filed a Form 8-K relating to Item
5 therein, covering the registrant's release on July 17, 1997 to
the business community of its earnings for the quarter and six
months ended June 30, 1997.
E. On August 8, 1997, the Company filed a Form 8-K relating to Item
5 therein, covering the registrant's release on August 7, 1997
to the business community that its Board of Directors has
increased, by up to an additional 500,000 shares, the number
of shares authorized for repurchase from time to time, either
on open market transactions or in block purchases.
28
<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, 1997 /s/KATHERINE AUGUST-DEWILDE
---------------------------
KATHERINE AUGUST-DEWILDE
Executive Vice President and
Chief Operating Officer
Date: August 13, 1997 /s/WILLIS H. NEWTON, JR.
------------------------
WILLIS H. NEWTON, JR.
Sr. Vice President and
Chief Financial Officer
(Principal Financial Officer)
<PAGE>
EXHIBIT 11
FIRST REPUBLIC BANCORP INC.
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary:
Net income available to common stock $ 4,352,000 $ 3,001,000 $ 8,372,000 $ 5,771,000
=========== =========== =========== ===========
Weighted average shares outstanding,
beginning of period including treasury shares 8,208,124 7,834,971 8,141,652 7,816,400
Effect of stock options exercised during period 24,524 1,299 55,916 10,390
Weighted average shares of stock purchased by employees 552 501 3,050 6,239
Weighted average shares converted from convertible
subordinated debentures 2,245,050 - 1,588,685 -
Weighted average shares of dilutive stock
options under treasury stock method 683,294 304,720 678,031 278,527
Weighted average shares of treasury stock (482,664) (486,000) (454,187) (486,000)
Weighted average shares of unallocated ESOP (35,354) - (37,879) -
---------- --------- --------- ---------
Adjusted shares outstanding - primary 10,643,526 7,655,491 9,975,268 7,625,556
========== ========= ========= =========
Net income per common share - primary $ 0.41 $ 0.39 $ 0.84 $ 0.76
=========== =========== =========== ===========
Fully Diluted:
Net income available to common stock $ 4,352,000 $ 3,001,000 $ 8,372,000 $ 5,771,000
Effect of convertible subordinated debentures,
net of taxes (1) - 396,000 17,000 792,000
----------- ----------- ----------- -----------
Adjusted net income for fully diluted calculation (1) $ 4,352,000 $ 3,397,000 $ 8,389,000 $ 6,563,000
=========== =========== =========== ===========
Adjusted shares - primary, from above 10,643,526 7,655,491 9,975,268 7,625,556
Weighted average shares issuable upon conversion
of convertible subordinated debentures - 2,524,210 656,400 2,524,210
Additional weighted average shares of dilutive
stock options converted at period-end
stock price under the treasury stock method 67,446 58,796 59,340 29,426
---------- ---------- ---------- ----------
Adjusted shares outstanding - fully diluted 10,710,972 10,238,497 10,691,008 10,179,192
========== ========== ========== ==========
Net income per share - fully diluted $ 0.41 $ 0.33 $ 0.79 $ 0.64
=========== =========== =========== ===========
</TABLE>
- ----------
(1) Due to the existence of convertible subordinated debentures until March 31,
1997, 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 convertible
subordinated debentures, net of taxes.
<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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 17,636
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 52,215
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 94,207
<INVESTMENTS-CARRYING> 81,276
<INVESTMENTS-MARKET> 81,077
<LOANS> 1,980,364
<ALLOWANCE> 18,501
<TOTAL-ASSETS> 2,238,033
<DEPOSITS> 1,404,592
<SHORT-TERM> 30,000
<LIABILITIES-OTHER> 19,177
<LONG-TERM> 621,457
<COMMON> 111,265
0
0
<OTHER-SE> 49,291
<TOTAL-LIABILITIES-AND-EQUITY> 2,238,033
<INTEREST-LOAN> 77,087
<INTEREST-INVEST> 7,201
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 84,288
<INTEREST-DEPOSIT> 38,448
<INTEREST-EXPENSE> 57,542
<INTEREST-INCOME-NET> 26,746
<LOAN-LOSSES> 500
<SECURITIES-GAINS> 48
<EXPENSE-OTHER> 9,992
<INCOME-PRETAX> 14,312
<INCOME-PRE-EXTRAORDINARY> 14,312
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,372
<EPS-PRIMARY> 0.84
<EPS-DILUTED> 0.79
<YIELD-ACTUAL> 2.43
<LOANS-NON> 19,764
<LOANS-PAST> 3,936
<LOANS-TROUBLED> 2,459
<LOANS-PROBLEM> 3,000
<ALLOWANCE-OPEN> 17,520
<CHARGE-OFFS> 526
<RECOVERIES> 1,007
<ALLOWANCE-CLOSE> 18,501
<ALLOWANCE-DOMESTIC> 18,501
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 17,918
</TABLE>
