SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 1994 Commission File Number 0-15734
REPUBLIC BANCORP INC.
(Exact name of registrant as specified in its charter)
Michigan 38-260-4669
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1070 East Main Street, Owosso, Michigan 48867
(Address of principal executive offices)
(517) 725-7337
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
YES __X__ NO_____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock Outstanding as of August 9, 1994:
Common Stock, $5 Par Value . . . . . . . . . . . 13,913,189 Shares
<PAGE>
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of June 30,
1994 and December 31, 1993. . . . . . . . . . . 1
Consolidated Statements of Income for the
Three Months and Six Months Ended June 30,
1994 and 1993 . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1994 and 1993 . . . . 3
Notes to Unaudited Consolidated Financial
Statements. . . . . . . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations. . . . . . . . . . . . . . . . . . . 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . 20
Item 2. Changes in Securities . . . . . . . . . . . . . 20
Item 3. Defaults upon Senior Securities . . . . . . . . 20
Item 4. Submission of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . . . 20
Item 5. Other Information . . . . . . . . . . . . . . . 20
Item 6. Exhibit and Reports on Form 8-K . . . . . . . . 20
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . 21
Statements RE: Computation of Per Share Earnings . . . . Exhibit A
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
REPUBLIC BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Unaudited)
(Dollars in thousands) June 30, Dec. 31,
1994 1993
---------- ----------
<S> <C> <C>
ASSETS
Cash and due from banks . . . . . . . . . . $ 17,598 $ 23,508
Other cash investments. . . . . . . . . . . 1,701 4,517
---------- ----------
Cash and cash equivalents . . . . . . . . . 19,299 28,025
Mortgage loans held for sale. . . . . . . . 213,547 507,795
Securities:
Held to maturity (aggregate market value
of $258,493, 1994 and $108,360, 1993) . 266,027 107,398
Available for sale (amortized cost of
$282,092 at June 30, 1994). . . . . . . 277,819 -
Held for sale (aggregate market value of
$51,794 at December 31, 1993) . . . . . - 51,044
Loans . . . . . . . . . . . . . . . . . . . 508,610 407,117
Less allowance for loan losses . . . . . 5,896 7,214
---------- ----------
Net loans . . . . . . . . . . . . . . . . . 502,714 399,903
Premises and equipment, net . . . . . . . . 16,730 16,295
Purchased mortgage servicing rights . . . . 22,749 18,428
Other assets. . . . . . . . . . . . . . . . 54,772 41,706
---------- ----------
Total assets. . . . . . . . . . . . . $1,373,657 $1,170,594
========== ==========
LIABILITIES
Deposits:
Non-interest bearing . . . . . . . . . . $ 126,491 $ 153,474
Interest bearing . . . . . . . . . . . . 680,139 680,260
---------- ----------
Total deposits. . . . . . . . . . . . 806,630 833,734
Federal funds purchased and reverse
repurchase agreements . . . . . . . . . . 260,301 35,572
Short-term borrowings . . . . . . . . . . . 37,952 101,273
FHLB advances . . . . . . . . . . . . . . . 65,000 23,000
Accrued and other liabilities . . . . . . . 39,845 45,123
Long-term debt. . . . . . . . . . . . . . . 44,554 19,970
---------- ----------
Total liabilities. . . . . . . . . . . . 1,254,282 1,058,672
---------- ----------
Minority Interest . . . . . . . . . . . . . 835 489
---------- ----------
SHAREHOLDERS' EQUITY
Preferred stock, $25 stated value;
5,000,000 shares authorized, none issued
and outstanding . . . . . . . . . . . . . - -
Common stock, $5 par value, 20,000,000
shares authorized; 13,907,856 and
13,747,771 shares issued and outstanding,
respectively. . . . . . . . . . . . . . . 69,539 68,739
Capital surplus . . . . . . . . . . . . . . 27,432 27,229
Unrealized loss on securities available
for sale. . . . . . . . . . . . . . . . . (2,777) -
Retained earnings . . . . . . . . . . . . . 24,346 15,465
---------- ----------
Total shareholders' equity. . . . . . . . 118,540 111,433
---------- ----------
Total liabilities and shareholders'
equity . . . . . . . . . . . . . $1,373,657 $1,170,594
========== ==========
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
REPUBLIC BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
INTEREST INCOME ------- ------- ------- -------
<S> <C> <C> <C> <C>
Loans, including fees . . . . . . . . . $12,952 $16,893 $25,842 $31,744
Securities:
Held to maturity . . . . . . . . . . 3,282 2,935 4,639 5,892
Available for sale . . . . . . . . . 3,056 - 4,413 -
Held for sale. . . . . . . . . . . . - 583 - 951
Money market investments. . . . . . . . 42 394 334 1,077
------- ------- ------- -------
Total interest income . . . . . . . 19,332 20,805 35,228 39,664
------- ------- ------- -------
INTEREST EXPENSE
Demand deposits . . . . . . . . . . . . 601 465 1,194 882
Savings and time deposits . . . . . . . 5,911 8,344 11,761 16,961
Short-term borrowings . . . . . . . . . 2,545 1,405 3,704 2,389
FHLB advances . . . . . . . . . . . . . 691 439 993 875
Long-term debt. . . . . . . . . . . . . 915 444 1,374 820
------- ------- ------- -------
Total interest expense. . . . . . . 10,663 11,097 19,026 21,927
------- ------- ------- -------
Net interest income . . . . . . . . . . 8,669 9,708 16,202 17,737
Provision for loan losses . . . . . . . 17 204 64 321
------- ------- ------- -------
Net interest income after provision
for loan losses . . . . . . . . . . . 8,652 9,504 16,138 17,416
------- ------- ------- -------
NON-INTEREST INCOME
Service charges . . . . . . . . . . . . 317 363 669 719
Mortgage banking. . . . . . . . . . . . 16,587 22,742 44,410 37,938
Gain on sale of securities. . . . . . . 36 381 519 381
Gain on sale of commercial loans. . . . 470 1,054 470 1,054
Gain on sale of SBA loans . . . . . . . 147 - 381 -
Other . . . . . . . . . . . . . . . . . 200 334 708 597
------- ------- ------- -------
Total non-interest income . . . . . 17,757 24,874 47,157 40,689
------- ------- ------- -------
NON-INTEREST EXPENSE
Salaries and employee benefits. . . . . 9,850 14,941 26,722 24,360
Occupancy expense of premises . . . . . 1,344 1,078 2,643 2,087
Equipment expense . . . . . . . . . . . 1,034 734 2,078 1,392
Other . . . . . . . . . . . . . . . . . 6,892 7,887 15,148 13,315
Minority interest . . . . . . . . . . . - 119 - 130
------- ------- ------- -------
Total non-interest expense. . . . . 19,120 24,759 46,591 41,284
------- ------- ------- -------
Income before income taxes. . . . . . . 7,289 9,619 16,704 16,821
Provision for income taxes. . . . . . . 2,282 3,225 5,615 5,628
------- ------- ------- -------
Net income before cumulative effect of
change in accounting principle. . . . 5,007 6,394 11,089 11,193
Cumulative effect of change in
accounting principle. . . . . . . . . - - - 950
------- ------- ------- -------
NET INCOME. . . . . . . . . . . . . . . $ 5,007 $ 6,394 $11,089 $12,143
======= ======= ======= =======
NET INCOME PER COMMON SHARE
Income before cumulative effect of
change in accounting principle. . . . $ .35 $ .46 $ .78 $ .81
Cumulative effect of change in
accounting principle. . . . . . . . . - - - .07
------- ------- ------- -------
Net income per common shares outstanding
- primary and fully diluted . . . . . $ .35 $ .46 $ .78 $ .88
======= ======= ======= =======
Avg. common shares outstanding-fully
diluted . . . . . . . . . . . . . . . 14,302 13,879 14,298 13,864
======= ======= ======= =======
Cash dividend declared per common share $ .08 $ .06 $ .16 $ .11
======= ======= ======= =======
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
REPUBLIC BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(Dollars in thousands)
Six Months Ended
June 30,
1994 1993
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . . . . . . . . $ 11,089 $ 12,143
Adjustments to reconcile net income to net cash
provided by/(used in) operating activities:
Depreciation and amortization . . . . . . . . . 2,135 1,373
Amortization of purchased mortgage servicing
rights. . . . . . . . . . . . . . . . . . . . 2,361 1,580
Provision for loan losses . . . . . . . . . . . 64 321
Provision for loss on real estate . . . . . . . - 505
Gain on sale of other real estate . . . . . . . - (86)
Gain on sale of securities held for sale . . . - (381)
Gain on sale of securities available for sale . (519) -
Gain on sale of mortgage servicing rights . . . (24,122) (6,362)
Gain on sale of loans . . . . . . . . . . . . . (850) -
(Increase)/decrease in interest receivable. . . (3,063) 597
Increase/(decrease) in interest payable . . . . 263 (168)
Decrease in deferred loan fees. . . . . . . . . (688) (257)
Net premium amortization on securities. . . . . 201 305
(Increase)/decrease in other assets . . . . . . 26,481 (1,091)
Increase/(decrease) in other liabilities. . . . (6,196) 16,736
Proceeds from sale of loans held for sale . . . 2,033,456 1,767,975
Origination of loans held for sale. . . . . . . (1,739,208) (1,907,220)
Other . . . . . . . . . . . . . . . . . . . . . (919) -
----------- -----------
Total adjustments. . . . . . . . . . . . . 289,396 (126,173)
----------- -----------
Net cash provided by/(used in) operating
activities. . . . . . . . . . . . . . . . . . . . 300,485 (114,030)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of mortgage servicing rights . . . . . . . (16,354) (7,802)
Net increase in receivable on sale of mortgage
servicing rights. . . . . . . . . . . . . . . . . (17,224) (2,204)
Proceeds from sale of mortgage servicing rights . . 16,616 7,167
Proceeds from sale of securities available for sale 32,648 -
Proceeds from sale of securities held for sale. . . - 18,943
Proceeds from maturities/principal payments of
securities available for sale . . . . . . . . . . 28,463 -
Proceeds from maturities/principal payments of
securities held to maturity . . . . . . . . . . . 11,026 34,436
Proceeds from maturities/principal payments of
securities held for sale. . . . . . . . . . . . . - 4,227
Purchase of securities available for sale . . . . . (219,913) -
Purchase of securities held to maturity . . . . . . (241,486) (40,698)
Purchase of securities held for sale. . . . . . . . - (17,071)
Proceeds from sale of other real estate . . . . . . - 681
Recoveries on loans previously charged off. . . . . 153 119
Proceeds from sale of loans . . . . . . . . . . . . 14,377 25,169
Net increase in loans made to customers . . . . . . (115,894) (8,453)
Premises and equipment expenditures . . . . . . . . (1,311) (4,133)
----------- -----------
Net cash provided by/(used in) investing
activities. . . . . . . . . . . . . . . . . . . . (508,899) 10,381
----------- -----------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
REPUBLIC BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(Dollars in thousands)
Six Months Ended
June 30,
(continued) 1994 1993
----------- -----------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase/(decrease) in demand deposits,
NOW accounts and savings accounts . . . . . . . . (3,356) 36,161
Net decrease in certificates of deposit . . . . . . (23,748) (29,730)
Net increase in short-term borrowings . . . . . . . 203,406 49,241
Net proceeds from issuance of common shares . . . . 949 1,920
Dividends paid. . . . . . . . . . . . . . . . . . . (2,209) (1,197)
Net increase/(decrease) in minority interest. . . . 346 (183)
Payments on long-term debt. . . . . . . . . . . . . (413) (3,988)
Proceeds from issuance of subordinated notes,
net of issuance cost. . . . . . . . . . . . . . . - 16,492
Proceeds from issuance of senior debentures,
net of issuance cost. . . . . . . . . . . . . . . 24,713 -
----------- -----------
Net cash provided by financing activities . . . . . 199,688 68,716
----------- -----------
Net decrease in cash and cash equivalents . . . . . (8,726) (34,933)
Cash and cash equivalents at beginning of period. . 28,025 97,855
----------- -----------
Cash and cash equivalents at end of period. . . . . $ 19,299 $ 62,922
=========== ===========
Cash paid during the period for:
Interest. . . . . . . . . . . . . . . . . . . . . $ 18,764 $ 22,095
Income taxes. . . . . . . . . . . . . . . . . . . 5,814 4,503
<FN>
Non-cash investing activities:
- - - During the six months ended June 30, 1994 and 1993, the Company incurred
charge-offs on portfolio loans of $1,185,000 and $324,000, respectively.
- - - During the six months ended June 30, 1993, the Company securitized
residential real estate portfolio loans into mortgage-backed securities
held for sale of $18.6 million.
</TABLE>
4
<PAGE>
REPUBLIC BANCORP INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
For the Six Months Ended June 30, 1994 and 1993
1. BASIS OF PRESENTATION
The unaudited consolidated financial statements of Republic Bancorp Inc.
("Republic" or the "Company") and subsidiaries are prepared in accordance with
generally accepted accounting principles for interim financial information, the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all normal, recurring adjustments necessary to present fairly
the consolidated operating results of the Company and its subsidiaries for the
three months ended June 30, 1994 and 1993 and for the six months ended June 30,
1994 and 1993, as well as the financial position at June 30, 1994 and cash flows
for the six months ended June 30, 1994 and 1993.
Certain reclassifications have been made in the consolidated financial
statements for 1993 to conform with the 1994 presentation.
2. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Republic Bancorp
Inc., and the accounts of three wholly owned subsidiaries: Republic Bank,
Republic Bancorp Mortgage Inc. and Republic Savings Bank (formerly Horizon
Savings Bank). The consolidated financial statements also include the accounts
of Market Street Mortgage Corporation and CUB Funding Corporation, of which the
Company owns an 80% majority interest in both entities. All significant
intercompany transactions and balances have been eliminated in consolidation.
3. ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES
In May 1993, the Financial Accounting Standards Board issued Statement No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," effective
for fiscal years beginning after December 15, 1993. Republic Bancorp Inc.
adopted Statement No. 115 for the financial period beginning January 1, 1994.
In accordance with Statement No. 115, Securities Held to Maturity include only
those securities which the Company has the positive intent and ability to hold
until maturity. Such securities are carried at cost adjusted for amortization
of premium and accretion of discount, computed in a manner which approximates
the effective interest method. Securities held to maturity consist primarily
of U.S. Treasuries and U.S. Government Agency obligations, and fixed rate
mortgage-backed securities and collateralized mortgage obligations.
5
<PAGE>
In accordance with Statement No. 115, Securities Available for Sale include only
those securities available to be sold prior to final maturity. The Company
classifies securities available for sale based on management of its asset and
liability position and liquidity needs. Using the specific identification
method such securities are carried at market value, with a corresponding market
value adjustment carried, net of tax, as a separate component of shareholders'
equity. The adjusted cost of each security sold is used to compute realized
gains or losses on the sales of these securities. Securities available for sale
consist primarily of adjustable rate mortgage-backed securities.
The following is a summary of available for sale securities and held to
maturity securities:
<TABLE>
<CAPTION>
Available for Sale Securities
------------------------------------------
Gross Gross Estimated
Unrealized Unrealized Fair
June 30, 1994 (in thousands) Cost Gains Losses Value
-------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury Obligations . - - - -
U.S. Government Agency
Obligations . . . . . . . $ 4,120 $ 10 $ 213 $ 3,917
Collateralized Mortgage
Obligations . . . . . . . 5,308 - 58 5,250
Mortgage-Backed Securities. 253,496 234 3,875 249,855
Other Securities. . . . . . 19,168 - 371 18,797
-------- ------ ------ --------
$282,092 $ 244 $4,517 $277,819
======== ====== ====== ========
<CAPTION>
Held to Maturity Securities
-------------------------------------------
Gross Gross Estimated
Unrealized Unrealized Fair
June 30, 1994 (in thousands) Cost Gains Losses Value
-------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury Obligations . $ 82,361 $ - $1,422 $ 80,939
U.S. Government Agency
Obligations . . . . . . . 60,625 - 908 59,717
Collateralized Mortgage
Obligations . . . . . . . 108,268 7 4,632 103,643
Mortgage-Backed Securities. 13,411 42 604 12,849
Other Securities. . . . . . 1,362 9 26 1,345
-------- ---- ------ --------
$266,027 $ 58 $7,592 $258,493
======== ==== ====== ========
</TABLE>
The gross realized gains and losses on sales of available for sale
securities totaled $36,000 and $0, respectively, for the quarter ended
June 30, 1994, and $519,000 and $0, respectively, for the six months ended
June 30, 1994.
6
<PAGE>
The following tables detail the components of the securities held to
maturity and securities available for sale portfolio and the amortized
cost and market value of the portfolio classified by maturity at June 30,
1994. Expected maturities will differ from contractual maturities because
the issuers of the securities may have the right to prepay obligations
without prepayment penalties.
<TABLE>
<CAPTION>
SECURITIES AVAILABLE FOR SALE
Maturity Distribution
($ in thousands)
June 30, 1994
U.S. Govt. Collateralized Mortgage-
U.S. Treas. Agency Mortgage Backed Other
Obligations Obligations Obligations Securities Securities Total
------------- ---------------- --------------- ------------------- --------------- ------------------
Book Mkt. Book Mkt. Book Mkt. Book Mkt. Book Mkt. Book Mkt.
Value Value Value Value Value Value Value Value Value Value Value Value
----- ----- ------- ------- ------ ------ -------- -------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Due within one year - - - - - - - - $19,168 $18,797 $ 19,168 $ 18,797
One to five years - - $ 3,170 $ 2,967 - - - - - - 3,170 2,967
Five to ten years - - 675 679 - - - - - - 675 679
After ten years - - 275 271 $5,308 $5,250 $253,496 $249,855 - - 259,079 255,376
----- ----- ------- ------- ------ ------ -------- -------- ------- ------- -------- --------
- - $ 4,120 $ 3,917 $5,308 $5,250 $253,496 $249,855 $19,168 $18,797 $282,092 $277,819
===== ===== ======= ======= ====== ====== ======== ======== ======= ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
SECURITIES HELD TO MATURITY
Maturity Distribution
($ in thousands)
June 30, 1994
U.S. Govt. Collateralized Mortgage-
U.S. Treas. Agency Mortgage Backed Other
Obligations Obligations Obligations Securities Securities Total
---------------- ---------------- ------------------ ---------------- --------------- ------------------
Book Mkt. Book Mkt. Book Mkt. Book Mkt. Book Mkt. Book Mkt.
Value Value Value Value Value Value Value Value Value Value Value Value
------- ------- ------- ------- -------- -------- ------- ------- ------ ------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Due within one year $ 1,000 $ 1,000 - - - - - - $ 20 $ 20 $ 1,020 $ 1,020
One to five years 81,361 79,939 $60,625 $59,717 $ 2,396 $ 2,353 $ 5,277 $ 5,122 162 164 149,821 147,295
Five to ten years - - - - 11,841 11,459 8,134 7,727 210 218 20,185 19,404
After ten years - - - - 94,031 89,831 - - 970 943 95,001 90,774
------- ------- ------- ------- -------- -------- ------- ------- ------ ------ -------- --------
$82,361 $80,939 $60,625 $59,717 $108,268 $103,643 $13,411 $12,849 $1,362 $1,345 $266,027 $258,493
======= ======= ======= ======= ======== ======== ======= ======= ====== ====== ======== ========
</TABLE>
7
<PAGE>
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
MORTGAGE BANKING
During the second quarter and first half of 1994, the Company closed $757
million and $1.8 billion, respectively, in single-family, owner occupied,
residential mortgage loans, compared to $1.27 billion and $1.93 billion
closed during the second quarter of 1993 and first half of 1993,
respectively. The decrease in mortgage loan closings was primarily
attributable to the higher interest rate environment which has
significantly reduced the number of refinanced mortgages.
The decrease in mortgage loan volume resulted in a decrease of mortgage
banking income of $6.1 million, from $22.7 million in the second quarter
of 1993 to $16.6 million in 1994. Mortgage banking income increased $6.5
million from $37.9 million during the first half of 1993 to $44.4 million
for the first half of 1994. This increase was primarily due to increased
gains on sale of servicing of $17.8 million, offset by decreased gains on
sale of mortgages of $13.4 million for the comparable period. A breakdown
of income from mortgage banking activities is summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
1994 1993 1994 1993
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net mortgage loan
servicing fees . . . . . . $ 1,537 $ 953 $ 2,990 $ 2,392
Origination fee income . . 6,516 8,128 15,135 13,667
Gain on sale of mortgages . 167 10,689 2,164 15,517
Gain on sale of servicing . 8,367 2,972 24,121 6,362
------- ------- ------- -------
Total mortgage
banking income . . . . . $16,587 $22,742 $44,410 $37,938
======= ======= ======= =======
</TABLE>
The Company generates origination fee income primarily through its retail
mortgage loan operation. The Company's retail mortgage loan closings
increased to $1.02 billion for the first half of 1994 compared to $927
million for 1993. The increase in retail mortgage closings resulted in an
increase in origination fee income of $1.5 million over the first half of
1993. Retail mortgage loan closings for the second quarter of 1994 were
$491 million, compared to $611 million for the second quarter of 1993,
resulting in a corresponding decrease in origination fee income of $1.6
million.
The majority of the Company's residential mortgage production during 1994
and 1993 has been long-term fixed rate mortgages. The Company typically
sells all of its long-term fixed rate and a significant portion of its
variable rate mortgages to the secondary market. During the second
quarter and first half of 1994, the Company's gain on sale of mortgages
totaled $167,000 and $2.2 million, respectively, compared to $10.7 million
and $15.5 million, respectively, for the same periods in 1993. The
decrease in the gain on sale of mortgages was due to the decline in
margins from rising interest rates.
8
<PAGE>
During the second quarters of 1994 and 1993, the Company sold both
purchased and originated mortgage servicing rights on loans with principal
balances of $1.3 billion and $210 million, respectively, resulting in
gains of $8.4 million and $3.0 million, respectively. During the first
half of 1994 and 1993, the Company sold mortgage servicing rights on loans
with principal balances of $3.4 billion and $624 million, respectively,
resulting in gains of $24.1 million and $6.4 million, respectively.
The remainder of the Management's Discussion and Analysis provides various
disclosures and analyses relating principally to the commercial banking
segment.
RESULTS OF OPERATIONS
- - ---------------------
NET INTEREST INCOME
Net interest income totaled $8.7 million and $16.2 million for the second
quarter and first half of 1994, respectively, compared to $9.7 million and
$17.7 million, respectively, for the same periods in 1993. The decrease
in net interest income was comprised of decreases in both interest income
and interest expense for both periods. The decrease in both interest
income and interest expense was due to general declines in interest rates
earned on interest earning assets and paid on interest bearing liabilities
over the last twelve months. In addition, the decrease of mortgage loans
held for sale and subsequent redeployment of assets into lower yielding
investment securities also resulted in a reduction of interest income.
The net interest margin for the second quarter and first half of 1994
decreased to 3.00% and 3.04%, respectively, from 3.37% and 3.26%, for the
same periods in 1993.
The yield on average earning assets for the six month period ending June
30, 1994 decreased to 6.60% from 7.29% for the same period in 1993.
Primary factors in the decline in yield on interest earning assets were a
53 basis points decline in average rates earned on mortgage loans held for
sale, and a 133 basis point decline in average rates earned on real estate
mortgage loans, which reprice annually based primarily on the one year
constant maturity treasury index.
Interest expense for the second quarter and first half of 1994 decreased
$.4 million and $2.9 million, respectively, for the same periods in 1993.
The decrease for the first half of 1994 in average rates was primarily the
result of the decrease in the average balance of time deposits which
decreased $164 million and the decrease in the average rate paid on time
deposits from 5.10% for the first half of 1993 to 4.51% for the first half
of 1994.
The following table presents an analysis of average balances and rates for
the three month and six month periods ended June 30, 1994 and 1993.
9
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
June 30, 1994 June 30, 1993
-------------------------------- --------------------------------
Average Avg. Average Avg.
Balance(1) Interest Rate Balance(1) Interest Rate
---------- ------- ----- ---------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Average Assets:
Money market investments:
Federal funds sold - - - $ 42,234 $ 327 3.10%
Other $ 4,425 $ 42 3.79% 9,897 67 2.71
Mortgage loans held for sale 233,587 4,229 7.24 383,321 6,991 7.31
Securities 458,817 6,338 5.53 253,964 3,518 5.54
Commercial loans 117,736 2,778 9.44 138,009 2,990 8.67
Real estate mortgage loans 291,811 4,896 6.71 279,523 5,812 8.32
Installment loans 48,998 1,049 8.56 46,833 1,100 9.42
---------- ------- ----- ---------- ------- -----
Total loans, net of unearned
income 458,545 8,723 7.61 464,365 9,902 8.54
---------- ------- ----- ---------- ------- -----
Total interest earning
assets 1,155,374 19,332 6.69 1,153,781 20,805 7.22
------- ----- ------- -----
Allowance for loan losses (6,490) (7,803)
Cash and due from banks 28,862 15,822
Other assets 92,961 52,383
---------- ----------
Total assets $1,270,707 $1,214,183
========== ==========
Average Liabilities and
Shareholders' Equity:
Deposits:
Interest bearing demand
deposits $ 91,343 601 2.63 65,945 465 2.82
Savings deposits 197,326 1,532 3.11 180,800 1,291 2.86
Time deposits 387,148 4,379 4.52 562,600 7,053 5.01
---------- ------- ----- ---------- ------- -----
Total interest bearing
deposits 675,817 6,512 3.85 809,345 8,809 4.36
Short-term borrowings 215,109 2,545 4.73 120,829 1,405 4.60
FHLB advances 59,505 691 4.64 25,000 439 7.02
Long-term debt 44,852 915 8.16 19,037 444 9.33
---------- ------- ----- ---------- ------- -----
Total interest bearing
liabilities 995,283 10,663 4.29 974,211 11,097 4.55
------- ----- ------- -----
Non-interest bearing deposits 129,098 114,863
Other liabilities 28,219 31,710
---------- ----------
Total liabilities 1,152,600 1,120,784
---------- ----------
Shareholders' equity 118,107 93,399
---------- ----------
Total liabilities and
shareholders' equity $1,270,707 $1,214,183
========== ==========
Net interest income $ 8,669 $ 9,708
======= =======
Net interest spread 2.40% 2.67%
===== =====
Net interest margin 3.00% 3.37%
===== =====
<FN>
(1) Non-accrual loans and overdrafts are included in average balances. No
significant amounts of tax-exempt income were earned by the Company or
its subsidiaries during 1994 or 1993.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
June 30, 1994 June 30, 1993
-------------------------------- --------------------------------
Average Avg. Average Avg.
Balance(1) Interest Rate Balance(1) Interest Rate
---------- ------- ----- ---------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Average Assets:
Money market investments:
Federal funds sold $ 15,083 $ 238 3.16% $ 67,696 $ 969 2.86%
Other 5,949 96 3.22 7,236 108 2.99
Mortgage loans held for sale 268,457 9,224 6.87 280,278 10,390 7.40
Securities 342,702 9,052 5.28 238,966 6,843 5.73
Commercial loans 123,156 5,551 9.01 158,922 7,346 9.24
Real estate mortgage loans 263,533 8,994 6.83 288,242 11,767 8.16
Installment loans 48,533 2,073 8.53 46,895 2,241 9.55
---------- ------- ----- ---------- ------- -----
Total loans, net of unearned
income 435,222 16,618 7.64 494,059 21,354 8.64
---------- ------- ----- ---------- ------- -----
Total interest earning
assets 1,067,413 35,228 6.60 1,088,235 39,664 7.29
------- ----- ------- -----
Allowance for loan losses (6,828) (7,778)
Cash and due from banks 26,272 20,561
Other assets 94,533 61,966
---------- ----------
Total assets $1,181,390 $1,162,984
========== ==========
Average Liabilities and
Shareholders' Equity:
Deposits:
Interest bearing demand
deposits $ 90,545 1,194 2.64 60,249 882 2.80
Savings deposits 182,160 2,741 3.01 180,407 2,614 2.90
Time deposits 400,162 9,020 4.51 564,042 14,347 5.10
---------- ------- ----- ---------- ------- -----
Total interest bearing
deposits 672,867 12,955 3.85 804,698 17,843 4.43
Short-term borrowings 150,658 3,704 4.92 87,294 2,389 5.47
FHLB advances 41,950 993 4.73 25,000 875 7.00
Long-term debt 32,110 1,374 8.56 16,741 820 9.79
---------- ------- ----- ---------- ------- -----
Total interest bearing
liabilities 897,585 19,026 4.24 933,733 21,927 4.68
------- ----- ------- -----
Non-interest bearing deposits 126,787 98,137
Other liabilities 41,151 40,801
---------- ----------
Total liabilities 1,065,523 1,072,671
---------- ----------
Shareholders' equity 115,867 90,313
---------- ----------
Total liabilities and
shareholders' equity $1,181,390 $1,162,984
========== ==========
Net interest income $16,202 $17,737
======= =======
Net interest spread 2.36% 2.61%
===== =====
Net interest margin 3.04% 3.26%
===== =====
<FN>
(1) Non-accrual loans and overdrafts are included in average balances. No
significant amounts of tax-exempt income were earned by the Company or
its subsidiaries during 1994 or 1993.
</TABLE>
11
<PAGE>
Net interest income can be analyzed in terms of the impact of changing
rates and changing volumes of interest earning assets and interest bearing
liabilities. The following table sets forth certain information regarding
changes in net interest income due to changes in the average balance of
interest earning assets and interest bearing liabilities and due to
changes in average rates for the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1994 versus 1993 1994 versus 1993
Inc/(Dec) Due to Change In: Inc/(Dec) Due to Change In:
------------------------------- ------------------------------
Average Average Net Average Average Net
Balance Rate Change Balance Rate Change
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Money market investments . . . . . . . $ (432) $ 80 $ (352) $ (848) $ 105 $ (743)
Mortgage loans held for sale . . . . . (2,697) (65) (2,762) (432) (734) (1,166)
Securities . . . . . . . . . . . . . . 2,826 (6) 2,820 2,782 (573) 2,209
Loans, net of unearned income (2) . . (123) (1,056) (1,179) (2,402) (2,334) (4,736)
------- ------- ------- ------- ------- -------
Total interest income . . . . . . . (426) (1,047) (1,473) (900) (3,536) (4,436)
------- ------- ------- ------- ------- -------
Interest expense:
Interest bearing demand deposits . . . 169 (33) 136 367 (55) 312
Savings deposits . . . . . . . . . . . 123 118 241 26 101 127
Time deposits. . . . . . . . . . . . . (2,036) (638) (2,674) (3,810) (1,517) (5,327)
------- ------- ------- ------- ------- -------
Total interest bearing deposits . . (1,744) (553) (2,297) (3,417) (1,471) (4,888)
Short-term borrowings. . . . . . . . . 1,100 40 1,140 1,637 (322) 1,315
FHLB advances. . . . . . . . . . . . . 442 (190) 252 465 (347) 118
Long-term debt . . . . . . . . . . . . 533 (62) 471 667 (113) 554
------- ------- ------- ------- ------- -------
Total interest expense. . . . . . . 331 (765) (434) (648) (2,253) (2,901)
------- ------- ------- ------- ------- -------
Net interest income . . . . . . . . $ (757) $ (282) $(1,039) $ (252) $(1,283) $(1,535)
======= ======= ======= ======= ======= =======
<FN>
(1) Any variance attributable jointly to volume and rate changes is
allocated to volume and rate in proportion to the relationship of the
absolute dollar amount of the change in each.
(2) Non-accrual loans are included in average balances
</TABLE>
12
<PAGE>
NON-INTEREST EXPENSE
Non-interest expense in the second quarter and first half of 1994 was
$19.1 million and $46.6 million, respectively, compared to $24.8 million
and $41.3 million, respectively, for the same periods in 1993. Salaries
and employee benefits are the largest portion of non-interest expense
totaling $9.9 million and $26.7 million for the three month and six month
periods 1994, respectively. Salaries and employee benefits decreased $5.0
million from $14.9 million in the second quarter of 1993, primarily as a
result of lower commissions and incentives paid on decreased mortgage loan
volume for the second quarter of 1994. Salaries and employee benefits
increased $2.4 million for the first half of 1994, compared to the first
half of 1993. This is primarily due to the Company's expanded mortgage
delivery system, including the operations of CUB Funding Corporation,
which was acquired in November 1993.
FINANCIAL CONDITION
ASSETS
Total assets at June 30, 1994 were $1.37 billion, which represents an
increase of $203 million over the $1.17 billion at December 31, 1993. The
increase in assets since December 31, 1993 was primarily in securities and
loans, offset by a decline in mortgage loans held for sale. The decrease
in mortgage loans held for sale was primarily a result of rising interest
rates and a decrease in residential loan closings from the quarter ended
December 31, 1993. The corresponding increase in securities was a result
of investing funds made available due to the decrease in mortgage loans
held for sale and increased short-term borrowings through federal funds
and reverse repurchase agreements and FHLB advances.
LOANS
Total loans, excluding loans held for sale, at June 30, 1994 increased
$101.5 million to $508.6 million from $407.1 million at December 31, 1993.
Residential real estate loans increased $117.8 million to 68.2% of total
loans at June 30, 1994 from 56.3% at December 31, 1993, due primarily to
the Company increasing its portfolio of variable rate residential real
estate loans. Commercial loans, including commercial loans secured by
real estate, decreased to $110.7 million or 21.8% of total loans at June
30, 1994. The decline was due to a sale of $4.1 million of commercial
loans by Republic Savings Bank to another financial institution, $1.6
million of SBA loan sales and loan payoffs. Mortgage loans held for sale
decreased to $213.5 million at June 30, 1994 from $508 million at
December 31, 1993.
During the second quarter and first half of 1994, the Company closed $3.3
million and $5.5 million, respectively, of Small Business Administration
(SBA) loans. The Company sold $4.7 million of SBA loans during the first
six months of the year, resulting in gains of $381,000.
The Company attempts to minimize credit risk in its loan portfolio by
focusing primarily on residential real estate mortgages and real estate-
secured commercial lending. As of June 30, 1994, these loans comprised
85.1% of the total loan portfolio, excluding loans held for sale. The
Company's general policy is to originate conventional residential real
13
<PAGE>
estate mortgages with loan to value ratios of 80% or less and real estate-
secured commercial loans with loan to value ratios of 70% or less. The
substantial majority of the Company's mortgage loans comply with the
requirements for sale to or conversion to mortgage-backed securities
issued by the Federal Home Loan Mortgage Corporation ("FHLMC") or Federal
National Mortgage Association ("FNMA").
The majority of the Company's commercial loans are secured by real estate
and are made to small and medium-sized businesses. These loans or lines
of credit are generally made at rates based on the prevailing prime
interest rates of the subsidiary banks and are adjusted periodically. The
focus of the Company on real estate-secured lending with lower loan to
value ratios is generally reflected in the low net charge-off ratio
percentages.
The Company has not emphasized installment loans and, excluding home
equity loans, does not intend to emphasize these loans in the future. The
following table summarizes the composition of the Company's loan
portfolio:
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
---------------- ----------------
Amount % Amount %
(Dollars in thousands) -------- ------ -------- ------
<S> <C> <C> <C> <C>
Commercial Loans:
Secured by real estate. . . . $ 85,968 16.9% $ 94,428 23.2%
Other (generally secured) . . 24,716 4.9 32,114 7.9
-------- ------ -------- ------
Total commercial loans. . . 110,684 21.8% 126,542 31.1
Residential real estate
mortgages. . . . . . . . . . . 347,004 68.2 229,203 56.3
Installment loans. . . . . . . . 50,922 10.0 51,372 12.6
-------- ------ -------- ------
Total portfolio loans . . . $508,610 100.0% $407,117 100.0%
======== ====== ======== ======
</TABLE>
At June 30, 1994, the Company had commitments to fund residential real
estate loans of $250.3 million. These commitments are expected to settle
during the next two months. Offsetting the interest rate risk associated
with these commitments, as well as mortgage loans held for sale of $213.5
million, Republic had, at June 30, 1994, firm commitments to sell forward
$313.0 million of recently closed or committed residential real estate
loans. These sales, which will occur during the third quarter of 1994,
will not produce any material gain or loss.
14
<PAGE>
NON-PERFORMING ASSETS
Loans held in portfolio are reviewed on a regular basis and are placed on
non-accrual status when, in the opinion of management, reasonable doubt
exists as to the full, timely collection of interest or principal. Real
estate acquired by the Company as a result of foreclosure or by deed in
lieu of foreclosure is classified as other real estate owned ("OREO")
until such time as it is sold. The following table provides information
with respect to the Company's past due loans and the components of non-
performing assets at the dates indicated.
<TABLE>
<CAPTION>
June 30, Dec. 31, June 30,
1994 1993 1993
(Dollars in thousands) -------- -------- --------
<S> <C> <C> <C>
Loans past due 90 days or more and still
accruing interest:
Commercial $ 505 $ 217 $ -
Residential real estate mortgages 113 - 112
Installment 80 93 20
------ ------ ------
Total $ 698 $ 310 $ 132
====== ====== ======
Non-accrual loans:
Commercial $1,032 $1,812 $ 935
Residential real estate mortgages 1,103 803 1,041
Installment 133 108 66
------ ------ ------
Total 2,268 2,723 2,042
Restructured loans 1,788 2,140 2,140
Other real estate owned 1,131 405 1,592
------ ------ ------
Total non-performing assets $5,187 $5,268 $5,774
====== ====== ======
Non-performing assets as a percentage of:
Total loans and OREO (1) 1.02% 1.29% 1.24%
Total loans and OREO (2) .72% .58% .66%
Total assets .38% .45% .47%
<FN>
(1) Excluding mortgage loans held for sale.
(2) Including mortgage loans held for sale.
</TABLE>
At June 30, 1994, approximately $3.6 million, or .71% of portfolio loans
were 30-89 days delinquent.
ALLOWANCE FOR ESTIMATED LOAN LOSSES
Management is responsible for maintaining an adequate allowance for
estimated loan losses. The appropriate level of the allowance for
estimated loan losses is determined by systematically reviewing the loan
portfolio quality, analyzing economic changes, consulting with regulatory
agencies and reviewing historical loan loss experience. Actual net losses
are charged against this allowance. If actual circumstances and losses
differ substantially from management's assumptions and estimates, such
reserves for loan losses may not be sufficient to absorb all future
losses, and net earnings could be significantly and adversely affected.
15
<PAGE>
Management is of the opinion that the allowance for estimated loan losses
is adequate to meet potential losses in the loan portfolio. It must be
understood, however, that there are inherent risks and uncertainties
related to the operation of a financial institution. By necessity, the
Company's financial statements are dependent upon estimates, appraisals
and evaluations of loans. Therefore, the possibility exists that abrupt
changes in such estimates, appraisals and evaluations might be required
because of changing economic conditions and the economic prospects of
borrowers.
As of June 30, 1994, the allowance for estimated loan losses was $5.9
million or 1.16% of total loans, excluding mortgage loans held for sale,
compared with $7.2 million or 1.77% as of December 31, 1993. The
allowance for estimated loan losses as a percentage of non-performing
loans was 145.4% at June 30, 1994 versus 148.3% at December 31, 1993.
An analysis of the allowance for estimated loan losses, the amount of
loans charged off, and the recoveries on loans previously charged off is
summarized in the following table.
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1994 1993
-------- --------
<S> <C> <C>
Allowance for estimated loan losses:
Balance at January 1 $7,214 $7,684
Loans charged off (1,185) (324)
Recoveries of loans previously charged off 153 121
------ ------
Net charge-offs (1,032) (203)
Provision charged to expense 64 321
Reduction due to sale of commercial loans (350) (593)
------ ------
Balance at June 30 $5,896 $7,209
====== ======
</TABLE>
SECURITIES
The securities portfolio serves as a source of earnings with relatively
minimal principal risk. As a result, the Company's portfolio is comprised
primarily of U.S. Treasuries, Government agency obligations and
obligations collateralized by U.S. Government agencies, primarily in the
form of collateralized mortgage obligations and mortgage-backed
securities. The maturity structure of the portfolio is generally short-
term, with estimated average maturities of less than five years, or at
adjustable rates. The securities portfolio, including securities available
for sale, constituted 40.0% of the Company's assets at June 30, 1994,
compared to 13.5% at December 31, 1993. The increase in the securities
portfolio is due to the redeployment of funds received from the reduction
of mortgage loans held for sale combined with increased levels of funds
borrowed through reverse repurchase agreements.
16
<PAGE>
Certain securities, with a carrying value of approximately $262.0 million
and $25.5 million at June 30, 1994 and December 31, 1993, respectively,
were pledged to secure reverse repurchase agreements and other deposits as
required by law.
See Note 3 to the consolidated financial statements for further discussion
of the securities portfolio.
LIABILITIES
DEPOSITS
Non-interest bearing deposits decreased $27.0 million, or 17.6%, from
$153.5 million at December 31, 1993 to $126.5 million at June 30, 1994,
primarily due to a decrease in official checks outstanding. Interest
bearing deposits of $680.1 million at June 30, 1994 were nearly equal to
the December 31, 1993 balance of $680.3 million.
SHORT-TERM BORROWINGS
As of June 30, 1994, the Company had federal fund borrowings of $8.7
million that matured on July 1, 1994. The average interest rate paid on
federal fund borrowings for the second quarter of 1994 was 4.25%. The
Company also had $251.6 million of securities sold under agreements to
repurchase at an average rate of 4.51%. Such agreements, which mature in
the third quarter of 1994, are secured by certain securities with a
carrying value of $262.0 million. The proceeds from the reverse
repurchase agreements were used to fund mortgage loan closings and
securities purchases.
Market Street Mortgage Corporation has a $75 million warehousing line of
credit agreement with G.E. Capital Mortgage Services, Inc. used for the
purpose of funding the origination of mortgage loans by Market Street, and
CUB Funding Corporation, which expires in July 1995. Interest, which is
payable monthly, is calculated at 1.75% plus the monthly commercial paper
rate. Due to the decreased mortgage loan origination volume, borrowings
under this warehousing line of credit decreased to $34.3 million at June
30, 1994 from $85.5 million at December 31, 1993. During the first six
months of 1994, the average borrowings and interest rate paid on this
warehousing line were $42.0 million and 6.20%, respectively.
Republic Bancorp Mortgage Inc. has a $50 million warehousing line of
credit with NBD Bank, N.A. and Comerica, Inc., used to fund the
acquisition or origination of mortgage loans by Republic Mortgage. The
line of credit, which is payable on demand, is secured by various real
estate mortgage loans and expires in April 1995. Republic Mortgage is
required to pay interest on the unpaid principal amount on each borrowing
at either the prime rate or federal funds rate plus 175 basis points. Due
to the decreased mortgage loan volume, borrowings under this line
decreased $13.0 million, to $1.9 million at June 30, 1994 from $14.9
million at December 31, 1993. During the first six months of 1994, the
average borrowings and interest rate paid on this line were $11.6 million
and 5.55%, respectively.
17
<PAGE>
The Company has an $18 million revolving Credit Agreement with Firstar
Bank Milwaukee, N.A. with proceeds to be utilized for working capital
purposes. At June 30, 1994 no amounts were outstanding under this Credit
Agreement.
FHLB ADVANCES
Republic Savings Bank has outstanding two advances from the Federal Home
Loan Bank ("FHLB"), a $10 million advance with an interest rate of 7.15%,
maturing in February 1997, and a $5 million advance with an interest rate
of 4.45%, maturing in December 1995. These advances are secured by first
mortgage loans equal to at least 150% of the advances under a blanket
security agreement, with interest payable monthly for both advances.
In order to provide liquidity needs for mortgage loan originations,
Republic Savings also has a $65 million line of credit with the FHLB. As
of June 30, 1994, borrowing under this line totaled $50.0 million with an
average interest rate paid of 4.11%.
LONG-TERM DEBT
Republic Bancorp Mortgage has a mortgage loan in the amount of $2.0
million with Firstar Bank Milwaukee, N.A. Principal and interest with a
fixed rate of 6.99% is payable quarterly, with a final maturity date of
October 1, 2000. As of June 30, 1994, $87,000 of the total $2.0 million
is classified as short-term borrowings.
Market Street Mortgage Corporation has a note payable with Poughkeepsie
Savings Bank, F.S.B. of $2.0 million, secured by the servicing rights
underlying the Poughkeepsie mortgages which are serviced by Market Street.
Interest is payable at the prime rate plus 2%, or 9.25% at June 30, 1994,
and is payable in twelve equal quarterly installments commencing February
1993 with final maturity due November 30, 1995. As of June 30, 1994,
$743,000 of the remaining $1.1 million is classified as short-term
borrowings.
The Company has $17.25 million of 9% Subordinated Notes outstanding which
mature in 2003. The Subordinated Notes qualify as Tier 2 Capital for the
calculation of Total risk-based capital under Federal Reserve Board
guidelines.
On March 31, 1994, Republic completed a $25 million private offering of
7.17% senior debentures which mature in April 2001. Proceeds will be used
to expand the Company's mortgage banking operations and for general
corporate purposes, including possible future acquisitions.
CAPITAL RESOURCES
Total shareholders' equity at June 30, 1994 was $118.5 million compared to
$111.4 million at December 31, 1993. The increase of $7.1 million during
the first six months was due primarily to earnings net of dividends.
18
<PAGE>
The Federal Reserve Board has adopted risk-based capital guidelines for
bank holding companies. At June 30, 1994, Republic's Tier 1 Capital and
Total risk-based capital ratios were 17.92% and 21.64%, respectively,
versus 16.35% and 20.19%, respectively at December 31, 1993. These ratios
exceed minimum guidelines prescribed by regulatory agencies. As of June
30, 1994, total risk-based capital was $134.9 million, an excess of $85.0
million over the minimum guidelines prescribed by regulatory agencies.
In addition, the Federal Reserve Board has established minimum leverage
ratio guidelines for bank holding companies. Republic's Tier 1 Capital
leverage ratio at June 30, 1994 was 10.23%, versus 8.43% at December 31,
1993.
The Company is committed to maintaining a strong capital position. As of
June 30, 1994, Republic Bank and Republic Savings Bank's Total capital to
risk-weighted assets ratio, and Tier 1 Capital to risk-weighted assets
ratio were in excess of all minimum regulatory requirements. It is
management's opinion that the Company and its subsidiaries' capital
structure is adequate and the Company does not anticipate any difficulty
in meeting these requirements on an ongoing basis.
19
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Republic and its subsidiaries are also parties to certain
ordinary routine litigation incidental to Republic's business.
In the opinion of management, liabilities arising from such
litigation would not have a material effect on Republic's
consolidated financial statements.
Item 2. Changes in Securities
At the May 19, 1994 meeting, the Board of Directors declared a
quarterly cash dividend of $.08 per share on common stock,
payable on July 8, 1994 to shareholders of record on June 10,
1994.
Item 3. Defaults upon Senior Securities
During the interim period covered by this report, there were no
defaults upon senior securities.
Item 4. Submission of Matters to Vote of Security Holders
During the interim period covered by this report, there were no
matters submitted to a vote of security holders. However,
pursuant to the Company's proxy statement dated March 25, 1994,
shareholders at the Company's April 27, 1994 annual meeting
elected the following directors of the Company:
Name Position Director Since
---- -------- --------------
Jerry D. Campbell Chairman of the Board, 1985
Chief Executive Officer
and President
Bruce L. Cook Director 1985
Richard J. Cramer Director 1991
George A. Eastman Director 1990
Howard J. Hulsman Director 1985
Gary Hurand Director 1990
Dennis J. Ibold Director 1993
Stephen M. Klein Director 1988
John J. Lennon Director 1993
Sam H. McGoun Director 1990
Kelly E. Miller Director 1990
John F. Northway Director 1988
Joe D. Pentecost Director 1985
George B. Smith Director 1987
Jeoffrey K. Stross Director 1993
Lyman H. Treadway Director 1993
Item 5. Other Information
Not applicable.
Item 6. Exhibit and Reports on Form 8-K
Not applicable.
20
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
REPUBLIC BANCORP INC.
----------------------
(Registrant)
Date: August 12, 1994 By: /s/ Thomas F. Menacher
---------------------------
Thomas F. Menacher
Chief Financial Officer
(Principal Financial and
Accounting Officer)
21
<PAGE>
EXHIBIT A
STATEMENT RE COMPUTATION OF
PER SHARE EARNINGS
Primary earnings per common share are computed by dividing net income by
the weighted average number of common shares outstanding and common
equivalent shares with a dilutive effect. Common equivalent shares are
shares which may be issuable upon exercise of outstanding stock options
and warrants. Stock options and warrants were included in earnings per
primary common share computed for both periods presented.
Fully diluted earnings per common share are determined on the assumption
that the weighted average number of common shares and common equivalent
shares outstanding is further increased by the effect of the end of period
market price on stock options and stock warrants. Stock options and stock
warrants were included in earnings per fully diluted common share
computations for 1994 and 1993.
The following table presents information necessary for the computation of
earnings per share, on both primary and fully diluted bases, for the three
and six months ended June 30, 1994 and 1993.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Average number of
common shares
outstanding . . . . . . 13,837,648 13,176,492 13,802,216 13,063,902
Common share
equivalents on
stock options
and stock warrants
based on average
market price. . . . . . 460,132 702,739 493,893 759,104
---------- ---------- ---------- ---------
Average number of
common shares
outstanding to
compute primary
earnings per share. . . 14,297,780 13,879,231 14,296,109 13,823,006
Incremental common
share equivalent
on stock options
and stock warrants
based on end of
period market price . . 4,192 - 2,108 40,716
---------- ---------- ---------- ----------
Average number of
common shares
outstanding to
compute fully
diluted earnings
per share . . . . . . . 14,301,972 13,879,231 14,298,217 13,863,722
========== ========== ========== ==========
</TABLE>
