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 September 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 November 11, 1994:
Common Stock, $5 Par Value . . . . . . . . . . . 13,929,155 Shares
<PAGE>
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of September 30,
1994 and December 31, 1993. . . . . . . . . . . . 1
Consolidated Statements of Income for the
Three Months and Nine Months Ended September 30,
1994 and 1993 . . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Cash Flows for the
Nine Months Ended September 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 . . . . . . . . . . . . . . . . 21
Item 2. Changes in Securities . . . . . . . . . . . . . . 21
Item 3. Defaults upon Senior Securities . . . . . . . . . 21
Item 4. Submission of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . . . . 21
Item 5. Other Information . . . . . . . . . . . . . . . . 21
Item 6. Exhibit and Reports on Form 8-K . . . . . . . . . 21
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . 22
EXHIBITS:
Statements RE: Computation of Per Share Earnings. . . . . Exhibit 11
Financial Data Schedule. . . . . . . . . . . . . . . . . . Exhibit 27
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
REPUBLIC BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Unaudited)
(Dollars in thousands) Sept. 30, Dec. 31,
1994 1993
---------- ----------
<S> <C> <C>
ASSETS
Cash and due from banks . . . . . . . . . . $ 20,402 $ 23,508
Other cash investments. . . . . . . . . . . 4,414 4,517
---------- ----------
Cash and cash equivalents . . . . . . . . . 24,816 28,025
Mortgage loans held for sale. . . . . . . . 184,748 507,795
Securities:
Held to maturity (aggregate market value
of $263,430, 1994 and $108,360, 1993) . 272,577 107,398
Available for sale (amortized cost of
$260,311 at September 30, 1994) . . . . 254,526 -
Held for sale (aggregate market value of
$51,794 at December 31, 1993) . . . . . - 51,044
Loans . . . . . . . . . . . . . . . . . . . 519,113 407,117
Less allowance for loan losses . . . . . 5,851 7,214
---------- ----------
Net loans . . . . . . . . . . . . . . . . . 513,262 399,903
Premises and equipment, net . . . . . . . . 16,416 16,295
Purchased mortgage servicing rights . . . . 56,464 18,428
Other assets. . . . . . . . . . . . . . . . 47,542 41,706
---------- ----------
Total assets. . . . . . . . . . . . . $1,370,351 $1,170,594
========== ==========
LIABILITIES
Deposits:
Non-interest bearing . . . . . . . . . . $ 116,731 $ 153,474
Interest bearing . . . . . . . . . . . . 770,125 680,260
---------- ----------
Total deposits. . . . . . . . . . . . 886,856 833,734
Federal funds purchased and reverse
repurchase agreements . . . . . . . . . . 184,049 35,572
Short-term borrowings . . . . . . . . . . . 20,193 101,273
FHLB advances . . . . . . . . . . . . . . . 51,500 23,000
Accrued and other liabilities . . . . . . . 59,225 45,123
Long-term debt. . . . . . . . . . . . . . . 48,347 19,970
---------- ----------
Total liabilities. . . . . . . . . . . . 1,250,170 1,058,672
---------- ----------
Minority Interest . . . . . . . . . . . . . 583 489
---------- ----------
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; 13,929,155 and
13,747,771 shares issued and outstanding,
respectively. . . . . . . . . . . . . . . 69,646 68,739
Capital surplus . . . . . . . . . . . . . . 27,453 27,229
Unrealized loss on securities available
for sale. . . . . . . . . . . . . . . . . (3,760) -
Retained earnings . . . . . . . . . . . . . 26,259 15,465
---------- ----------
Total shareholders' equity. . . . . . . . 119,598 111,433
---------- ----------
Total liabilities and shareholders'
equity . . . . . . . . . . . . . $1,370,351 $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 Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
INTEREST INCOME ------- ------- ------- -------
<S> <C> <C> <C> <C>
Loans, including fees . . . . . . . . . $13,998 $17,132 $39,840 $48,876
Securities:
Held to maturity . . . . . . . . . . 4,111 1,435 8,750 7,327
Available for sale . . . . . . . . . 3,446 - 7,859 -
Held for sale. . . . . . . . . . . . - 637 - 1,588
Money market investments. . . . . . . . 65 297 399 1,374
------- ------- ------- -------
Total interest income . . . . . . . 21,620 19,501 56,848 59,165
------- ------- ------- -------
INTEREST EXPENSE
Demand deposits . . . . . . . . . . . . 568 441 1,762 1,323
Savings and time deposits . . . . . . . 6,663 7,072 18,424 24,033
Short-term borrowings . . . . . . . . . 3,828 2,154 7,532 4,543
FHLB advances . . . . . . . . . . . . . 559 313 1,552 1,188
Long-term debt. . . . . . . . . . . . . 912 485 2,286 1,305
------- ------- ------- -------
Total interest expense. . . . . . . 12,530 10,465 31,556 32,392
------- ------- ------- -------
Net interest income . . . . . . . . . . 9,090 9,036 25,292 26,773
Provision for loan losses . . . . . . . 20 190 84 511
------- ------- ------- -------
Net interest income after provision
for loan losses . . . . . . . . . . . 9,070 8,846 25,208 26,262
------- ------- ------- -------
NON-INTEREST INCOME
Service charges . . . . . . . . . . . . 337 390 1,006 1,109
Mortgage banking. . . . . . . . . . . . 13,704 22,250 58,527 60,188
Gain on sale of securities. . . . . . . 49 1,135 568 1,516
Gain on sale of commercial loans. . . . - 517 470 1,571
Gain on sale of SBA loans . . . . . . . 212 243 593 243
Other . . . . . . . . . . . . . . . . . 114 285 409 882
------- ------- ------- -------
Total non-interest income . . . . . 14,416 24,820 61,573 65,509
------- ------- ------- -------
NON-INTEREST EXPENSE
Salaries and employee benefits. . . . . 10,366 14,504 37,088 38,864
Occupancy expense of premises . . . . . 1,514 1,170 4,157 3,257
Equipment expense . . . . . . . . . . . 933 774 3,011 2,166
Other . . . . . . . . . . . . . . . . . 6,080 7,450 21,228 20,765
Minority interest . . . . . . . . . . . - 106 - 236
------- ------- ------- -------
Total non-interest expense. . . . . 18,893 24,004 65,484 65,288
------- ------- ------- -------
Income before income taxes. . . . . . . 4,593 9,662 21,297 26,483
Provision for income taxes. . . . . . . 1,568 3,586 7,183 9,214
------- ------- ------- -------
Net income before cumulative effect of
change in accounting principle. . . . 3,025 6,076 14,114 17,269
Cumulative effect of change in
accounting principle. . . . . . . . . - - - 950
------- ------- ------- -------
NET INCOME. . . . . . . . . . . . . . . $ 3,025 $ 6,076 $14,114 $18,219
======= ======= ======= =======
NET INCOME PER COMMON SHARE
Income before cumulative effect of
change in accounting principle. . . . $ .21 $ .43 $ .99 $ 1.24
Cumulative effect of change in
accounting principle. . . . . . . . . - - - .07
------- ------- ------- -------
Net income per common shares
outstanding - primary and fully
diluted . . . . . . . . . . . . . . . $ .21 $ .43 $ .99 $ 1.31
======= ======= ======= =======
Avg. common shares outstanding-fully
diluted . . . . . . . . . . . . . . . 14,365 14,110 14,321 13,947
======= ======= ======= =======
Cash dividend declared per common share $ .08 $ .06 $ .24 $ .17
======= ======= ======= =======
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
REPUBLIC BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(Dollars in thousands)
Nine Months Ended
September 30,
1994 1993
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . . . . . . . . $ 14,114 $ 18,219
Adjustments to reconcile net income to net cash
provided by/(used in) operating activities:
Depreciation and amortization . . . . . . . . . 3,079 2,134
Amortization of purchased mortgage servicing
rights. . . . . . . . . . . . . . . . . . . . 3,465 3,389
Provision for loan losses . . . . . . . . . . . 84 511
Provision for loss on real estate . . . . . . . - 826
Gain on sale of other real estate . . . . . . . - (114)
Gain on sale of securities held for sale . . . - (1,516)
Gain on sale of securities available for sale . (569) -
Gain on sale of mortgage servicing rights . . . (29,128) (9,767)
Gain on sale of loans . . . . . . . . . . . . . (2,503) (1,822)
(Increase)/decrease in interest receivable. . . (3,476) 1,146
Increase/(decrease) in interest payable . . . . 1,328 (307)
Decrease in deferred loan fees. . . . . . . . . (1,482) (1,321)
Net premium amortization on securities. . . . . 565 773
Increase in other assets. . . . . . . . . . . . (2,107) (15,284)
Increase in other liabilities . . . . . . . . . 11,145 2,972
Proceeds from sale of loans held for sale . . . 2,555,421 2,948,993
Origination of loans held for sale. . . . . . . (2,232,373) (3,176,320)
Other . . . . . . . . . . . . . . . . . . . . . (349) 25
----------- -----------
Total adjustments. . . . . . . . . . . . . 303,100 (245,682)
----------- -----------
Net cash provided by/(used in) operating
activities. . . . . . . . . . . . . . . . . . . . 317,214 (227,463)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of mortgage servicing rights . . . . . . . (52,688) (14,457)
Net increase in receivable on sale of mortgage
servicing rights. . . . . . . . . . . . . . . . . 9,703 10,386
Proceeds from sale of mortgage servicing rights . . 32,285 12,988
Proceeds from sale of securities available for sale 61,310 -
Proceeds from sale of securities held for sale. . . - 63,719
Proceeds from maturities/principal payments of
securities available for sale . . . . . . . . . . 40,326 -
Proceeds from maturities/principal payments of
securities held to maturity . . . . . . . . . . . 13,956 33,065
Proceeds from maturities/principal payments of
securities held for sale. . . . . . . . . . . . . - 14,290
Purchase of securities available for sale . . . . . (238,926) -
Purchase of securities held to maturity . . . . . . (250,950) (36,357)
Purchase of securities held for sale. . . . . . . . - (21,413)
Proceeds from sale of other real estate . . . . . . 1,742 761
Recoveries on loans previously charged off. . . . . 170 203
Proceeds from sale of loans . . . . . . . . . . . . 66,469 49,074
Net increase in loans made to customers . . . . . . (176,191) (4,533)
Premises and equipment expenditures . . . . . . . . (2,469) (5,617)
----------- -----------
Net cash provided by/(used in) investing
activities. . . . . . . . . . . . . . . . . . . . (495,263) 102,109
----------- -----------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
REPUBLIC BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(Dollars in thousands)
Nine Months Ended
September 30,
(continued) 1994 1993
--------- ---------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits, NOW accounts
and savings accounts. . . . . . . . . . . . . . . 8,628 66,895
Net increase/(decrease) in certificates of deposit. 44,494 (111,048)
Net increase in short-term borrowings . . . . . . . 95,897 97,686
Net proceeds from issuance of common shares . . . . 1,049 3,386
Dividends paid. . . . . . . . . . . . . . . . . . . (3,320) (1,922)
Payments on long-term debt. . . . . . . . . . . . . (620) (4,183)
Proceeds from issuance of long-term debt. . . . . . 4,000 2,080
Proceeds from issuance of subordinated notes,
net of issuance cost. . . . . . . . . . . . . . . - 16,492
Proceeds from issuance of senior debentures,
net of issuance cost. . . . . . . . . . . . . . . 24,712 -
---------- ---------
Net cash provided by financing activities . . . . . 174,840 69,386
---------- ---------
Net decrease in cash and cash equivalents . . . . . (3,209) (55,968)
Cash and cash equivalents at beginning of period. . 28,025 97,855
---------- ---------
Cash and cash equivalents at end of period. . . . . $ 24,816 $ 41,887
========== =========
Cash paid during the period for:
Interest. . . . . . . . . . . . . . . . . . . . . $ 30,228 $ 32,698
Income taxes. . . . . . . . . . . . . . . . . . . 9,780 8,133
<FN>
Non-cash investing activities:
- - - During the nine months ended September 30, 1994 and 1993, the Company
incurred charge-offs on portfolio loans of $1,267,000 and $386,000,
respectively.
- - - During the nine months ended September 30, 1993, the Company
securitized residential real estate portfolio loans into mortgage-
backed securities held for sale of $26.3 million.
</TABLE>
4
<PAGE>
REPUBLIC BANCORP INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
For the Nine Months Ended September 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 September 30, 1994 and 1993 and for
the nine months ended September 30, 1994 and 1993, as well as the financial
position at September 30, 1994 and cash flows for the nine months ended
September 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
September 30, 1994 Unrealized Unrealized Fair
(in thousands) Cost Gains Losses Value
-------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury Obligations . - - - -
U.S. Government Agency
Obligations . . . . . . . $ 4,012 $ 23 $ 217 $ 3,818
Collateralized Mortgage
Obligations . . . . . . . 4,998 - 138 4,860
Mortgage-Backed Securities. 232,072 82 5,034 227,120
Other Securities. . . . . . 19,229 - 501 18,728
-------- ------ ------ --------
$260,311 $ 105 $5,890 $254,526
======== ====== ====== ========
<CAPTION>
Held to Maturity Securities
------------------------------------------
Gross Gross Estimated
September 30, 1994 Unrealized Unrealized Fair
(in thousands) Cost Gains Losses Value
-------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury Obligations . $ 81,385 $ - $1,696 $ 79,689
U.S. Government Agency
Obligations . . . . . . . 72,285 - 1,483 70,802
Collateralized Mortgage
Obligations . . . . . . . 104,178 4 5,350 98,832
Mortgage-Backed Securities. 12,989 34 629 12,394
Other Securities. . . . . . 1,740 14 41 1,713
-------- ---- ------ --------
$272,577 $ 52 $9,199 $263,430
======== ==== ====== ========
</TABLE>
The gross realized gains and losses on sales of available for sale
securities totaled $67,000 and $18,000, respectively, for the quarter ended
September 30, 1994, and $586,000 and $18,000, respectively, for the nine
months ended September 30, 1994.
6
<PAGE>
The following tables detail the components of the securities held to
maturity and securities available for sale portfolio and the amortized cost
and market value of the portfolio classified by maturity at September 30,
1994. Expected maturities will differ from contractual maturities because
the issuers of the securities may have the right to prepay obligations
without prepayment penalties.
<TABLE>
<CAPTION>
SECURITIES AVAILABLE FOR SALE
Maturity Distribution
($ in thousands)
September 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 - - - - - - - - $19,229 $18,728 $ 19,229 $ 18,728
One to five years - - $ 3,077 $ 2,867 - - - - - - 3,077 2,867
Five to ten years - - 663 673 - - - - - - 663 673
After ten years - - 272 278 $4,998 $4,860 $232,072 $227,120 - - 237,342 232,258
----- ----- ------- ------- ------ ------ -------- -------- ------- ------- -------- --------
- - $ 4,012 $ 3,818 $4,998 $4,860 $232,072 $227,120 $19,229 $18,728 $260,311 $254,526
===== ===== ======= ======= ====== ====== ======== ======== ======= ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
SECURITIES HELD TO MATURITY
Maturity Distribution
($ in thousands)
September 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 $ 1,030 $ 1,025 - - - - - - $ 45 $ 46 $ 1,075 $ 1,071
One to five years 80,355 78,664 $72,285 $70,802 - - $ 5,005 $ 4,848 518 526 158,163 154,840
Five to ten years - - - - $ 11,372 $10,915 7,984 7,546 207 215 19,563 18,676
After ten years - - - - 92,806 87,917 - - 970 926 93,776 88,843
------- ------- ------- ------- -------- -------- ------- ------- ------ ------ -------- --------
$81,385 $79,689 $72,285 $70,802 $104,178 $98,832 $12,989 $12,394 $1,740 $1,713 $272,577 $263,430
======= ======= ======= ======= ======== ======= ======= ======= ====== ====== ======== ========
</TABLE>
7
<PAGE>
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
MORTGAGE BANKING
During the third quarter and first nine months of 1994, the Company closed
$556 million and $2.36 billion, respectively, in single-family, owner
occupied, residential mortgage loans, compared to $1.30 billion and $3.22
billion closed during the third quarter of 1993 and first nine months 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 $8.6 million, from $22.3 million in the third quarter of
1993 to $13.7 million in 1994. Mortgage banking income decreased $1.7
million from $60.2 million during the first nine months of 1993 to $58.5
million for the first nine months of 1994. A breakdown of income from
mortgage banking activities is summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
1994 1993 1994 1993
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net mortgage loan
servicing fees . . . . . . $ 1,779 $ 1,203 $ 4,769 $ 3,649
Origination fee income . . 5,576 9,583 21,124 23,198
Gain on sale of mortgages . 1,342 8,058 3,506 23,574
Gain on sale of servicing . 5,007 3,406 29,128 9,767
------- ------- ------- -------
Total mortgage
banking income . . . . . $13,704 $22,250 $58,527 $60,188
======= ======= ======= =======
</TABLE>
The Company generates origination fee income primarily through its retail
mortgage loan operation. The Company's retail mortgage loan closings were
$1.42 billion for the first three quarters of 1994 compared to $1.54
billion for 1993. The decrease in retail mortgage closings resulted in a
decrease in origination fee income of $2.1 million over the first three
quarters of 1993. Retail mortgage loan closings for the third quarter of
1994 were $403 million, compared to $616 million for the third quarter of
1993, resulting in a corresponding decrease in origination fee income of
$4.0 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 third quarter
and first nine months ended September 30, 1994, the Company's gain on sale
of mortgages totaled $1.3 million and $3.5 million, respectively, compared
to $8.1 million and $23.6 million, respectively, for the same periods in
1993. The decrease in the gain on sale of mortgages was due to the decline
in margins caused from rising interest rates.
8
<PAGE>
During the third quarters of 1994 and 1993, the Company sold both purchased
and originated mortgage servicing rights on loans with principal balances
of $589 million and $1.1 billion, respectively, resulting in gains of $5.0
million and $3.4 million, respectively. During the nine months ended
September 30, 1994 and 1993, the Company sold mortgage servicing rights on
loans with principal balances of $4.0 billion and $2.1 billion,
respectively, resulting in gains of $29.1 million and $9.8 million,
respectively.
On October 31, 1994, Republic Bancorp Mortgage Inc., a subsidiary of
Republic, purchased the assets and mortgage origination network of Home
Funding, Inc. with seven offices in the states of New York, Connecticut and
Massachusetts. The offices are expected to close approximately $200
million in residential mortgage loans in 1994.
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 $9.1 million and $25.3 million for the third
quarter and first nine months of 1994, respectively, compared to $9.0
million and $26.8 million, respectively, for the same periods in 1993. The
slight increase in net interest income in the third quarter was comprised
of increases in both interest income and interest expense. The increase in
both interest income and interest expense was due to an increase of
interest earning assets and interest bearing liabilities over the last
twelve months. The net interest margin for the third quarter and first
nine months of 1994 decreased to 2.90% and 2.99%, respectively, from 3.20%
and 3.24%, for the same periods in 1993. The decrease in net interest
margin for both periods is a result of a decrease of mortgage loans held
for sale and subsequent redeployment of assets into lower yielding
investment securities.
Although the yield earned on securities and commercial loans increased 153
and 103 basis points, respectively during third quarter 1994 versus third
quarter 1993, yield on average earning assets remained flat at 6.89% versus
6.90% during the same period experienced during 1994, the average balance
of mortgage loan originations to be sold in the secondary market has
decreased from $430 million in third quarter 1993 to $175 million in third
quarter 1994. While this reduction was reinvested in the securities
portfolio, which average balance increased $337 million over third quarter
1993, the average rate earned on the securities portfolio in third quarter
1994 is 198 basis points less than the mortgage loans held for sale
portfolio.
9
<PAGE>
The yield on average earning assets for the nine month period ending
September 30, 1994 decreased to 6.71% from 7.16% for the same period in
1993. Primary factors in the decline in yield on interest earning assets
were a 26 basis points decline in average rates earned on mortgage loans
held for sale, and a 102 basis point decline in average rates earned on
real estate mortgage loans. These loans will reprice annually based
primarily on the one year constant maturity treasury index.
The cost of funding assets in third quarter 1994 increased slightly to
4.59% from 4.50% in third quarter 1993. As a result of the slowdown in
mortgage loans held for sale originations, average borrowings of the
Republic mortgage affiliates under the higher cost prime based warehousing
facilities decreased $72 million over third quarter 1993 while the
borrowing rate has increased from 5.73% to 6.18%. Offsetting the reduction
in these borrowings was an increase of $235 million in other short-term
borrowings of the bank affiliates. Average balances and rates on these
borrowings were $277 million and 4.79% in 1994 and $42 million and 3.91% in
1993.
Interest expense for the nine months ending September 30, 1994 decreased
$.8 million from the same period in 1993. The decrease was primarily the
result of the decrease in the average balance of time deposits which
decreased $128 million and the decrease in the average rate paid on time
deposits from 5.02% for the first nine months of 1993 to 4.59% for the
first nine months of 1994.
The following table presents an analysis of average balances and rates for
the three month and nine month periods ended September 30, 1994 and 1993.
10
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
September 30, 1994 September 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 $ 5,641 $ 65 4.61% $ 37,541 $ 297 3.16%
Mortgage loans held for sale 174,763 3,308 7.57 429,826 7,629 7.10
Securities 540,737 7,557 5.59 204,138 2,072 4.06
Commercial loans 109,777 2,705 9.86 137,933 3,046 8.83
Real estate mortgage loans 372,354 6,844 7.35 273,490 5,343 7.81
Installment loans 51,323 1,141 8.89 47,934 1,114 9.30
---------- ----- ---- ---------- ------- ----
Total loans, net of unearned
income 533,454 10,690 8.02 459,357 9,503 8.28
---------- ------ ---- -------- ------ ----
Total interest earning
assets 1,254,595 21,620 6.89 1,130,862 19,501 6.90
------ ---- ------- ----
Allowance for loan losses (5,892) (7,314)
Cash and due from banks 20,043 19,857
Other assets 98,700 72,448
---------- ----------
Total assets $1,367,446 $1,215,853
========== ==========
Average Liabilities and
Shareholders' Equity:
Deposits:
Interest bearing demand
deposits $ 85,976 568 2.64 66,155 441 2.67
Savings deposits 193,615 1,634 3.38 182,765 1,324 2.90
Time deposits 424,054 5,029 4.74 480,964 5,748 4.78
---------- ----- ---- ---------- ------- ----
Total interest bearing
deposits 703,645 7,231 4.11 729,884 7,513 4.12
Short-term borrowings 302,522 3,828 5.06 163,361 2,154 5.27
FHLB advances 41,619 559 5.37 25,000 313 5.00
Long-term debt 44,604 912 8.18 11,207 485 9.33
---------- ----- ---- ---------- ------- ----
Total interest bearing
liabilities 1,092,390 12,530 4.59 929,452 10,465 4.50
------ ---- ------- ----
Non-interest bearing deposits 117,515 136,874
Other liabilities 38,534 48,541
---------- ----------
Total liabilities 1,248,439 1,114,867
---------- ----------
Shareholders' equity 119,007 100,986
---------- ----------
Total liabilities and
shareholders' equity $1,367,446 $1,215,853
========== ==========
Net interest income $ 9,090 $ 9,036
======= =======
Net interest spread 2.30% 2.40%
===== =====
Net interest margin 2.90% 3.20%
===== =====
<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>
<TABLE>
<CAPTION> Nine Months Ended Nine Months Ended
September 30, 1994 September 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 $ 15,856 $ 370 3.11% $ 63,461 $ 1,374 2.89%
Mortgage loans held for sale 236,221 12,525 7.07 328,680 18,064 7.33
Securities 409,153 16,638 5.42 226,825 8,915 5.24
Commercial loans 118,572 8,256 9.28 152,159 10,331 9.05
Real estate mortgage loans 299,964 15,869 7.05 282,851 17,128 8.07
Installment loans 49,401 3,189 8.61 47,433 3,353 9.43
---------- ------- ----- ---------- ------- -----
Total loans, net of unearned
income 467,937 27,314 7.78 482,443 30,812 8.52
---------- ------- ----- ---------- ------- -----
Total interest earning
assets 1,129,167 56,847 6.71 1,101,409 59,165 7.16
------- ----- ------- -----
Allowance for loan losses (6,515) (7,232)
Cash and due from banks 25,640 19,591
Other assets 96,076 64,444
---------- ----------
Total assets $1,244,368 $1,178,212
========== ==========
Average Liabilities and
Shareholders' Equity:
Deposits:
Interest bearing demand
deposits $ 89,009 1,762 2.64 $ 62,475 1,323 2.82
Savings deposits 183,953 4,375 3.17 181,524 3,828 2.81
Time deposits 408,156 14,049 4.59 536,550 20,205 5.02
---------- ------- ----- ---------- ------- -----
Total interest bearing
deposits 681,118 20,186 3.95 780,549 25,356 4.33
Short-term borrowings 201,288 7,532 4.99 112,653 4,543 5.38
FHLB advances 41,839 1,552 4.95 25,000 1,313 7.00
Long-term debt 36,916 2,285 8.25 16,013 1,180 9.83
---------- ------- ----- ---------- ------- -----
Total interest bearing
liabilities 961,161 31,555 4.38 934,215 32,392 4.62
------- ----- ------- -----
Non-interest bearing deposits 123,696 111,664
Other liabilities 42,933 38,262
---------- ----------
Total liabilities 1,127,790 1,084,141
---------- ----------
Shareholders' equity 116,578 94,071
---------- ----------
Total liabilities and
shareholders' equity $1,244,368 $1,178,212
========== ==========
Net interest income $25,292 $26,773
======= =======
Net interest spread 2.33% 2.54%
===== =====
Net interest margin 2.99% 3.24%
===== =====
<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>
12
<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 Sept. 30, Nine Months Ended Sept. 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(1) Rate(1) Change Balance(1) Rate(1) Change
------- ------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Money market investments . . . . . . . $ (327) $ 95 $ (232) $(1,101) $ 97 $(1,004)
Mortgage loans held for sale . . . . . (4,796) 475 (4,321) (4,919) (620) (5,539)
Securities . . . . . . . . . . . . . . 4,464 1,021 5,485 7,407 316 7,723
Loans, net of unearned income (2) . . 1,473 (286) 1,187 (899) (2,599) (3,498)
------- ------- ------- ------- ------- -------
Total interest income . . . . . . . 814 1,305 2,119 488 (2,806) (2,318)
------- ------- ------- ------- ------- -------
Interest expense:
Interest bearing demand deposits . . . 132 (5) 127 528 (89) 439
Savings deposits . . . . . . . . . . . 82 228 310 6 541 547
Time deposits. . . . . . . . . . . . . (671) (48) (719) (4,534) (1,622) (6,156)
------- ------- ------- ------- ------- -------
Total interest bearing deposits . . (457) 175 (282) (4,000) (1,170) (5,170)
Short-term borrowings. . . . . . . . . 1,988 (314) 1,674 3,341 (352) 2,989
Long-term debt and FHLB advances . . . 888 (215) 673 1,917 (573) 1,344
------- ------- ------- ------- ------- -------
Total interest expense. . . . . . . 2,419 (354) 2,065 1,258 (2,095) (837)
------- ------- ------- ------- ------- -------
Net interest income . . . . . . . . $(1,605) $ 1,659 $ 54 $ (770) $ (711) $(1,481)
======= ======= ======= ======= ======= =======
<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>
13
<PAGE>
NON-INTEREST EXPENSE
Non-interest expense in the third quarter and first nine months of 1994 was
$18.9 million and $65.5 million, respectively, compared to $24.0 million
and $65.3 million, respectively, for the same periods in 1993. Salaries
and employee benefits are the largest portion of non-interest expense
totaling $10.4 million and $37.1 million for the three month and nine month
periods 1994, respectively. Salaries and employee benefits decreased $4.1
million from $14.5 million in the third quarter of 1993, based in part as a
result of lower commissions and incentives paid on decreased mortgage loan
volume for the third quarter of 1994.
FINANCIAL CONDITION
- - -------------------
ASSETS
Total assets at September 30, 1994 were $1.37 billion, which represents an
increase of $200 million over the $1.17 billion at December 31, 1993. The
increase in assets since December 31, 1993 was primarily in securities and
portfolio 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 versus 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 Federal Home Loan Bank (FHLB) advances.
LOANS
Total loans, excluding loans held for sale, at September 30, 1994 increased
$112.0 million to $519.1 million from $407.1 million at December 31, 1993.
Residential real estate loans increased $127.8 million to 68.8% of total
loans at September 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 $109.9 million or 21.2% of total loans at September
30, 1994. The decline was due to a sale of $4.1 million of commercial
loans by Republic Savings Bank to another financial institution, SBA loan
sales and loan payoffs. Mortgage loans held for sale decreased to $184.7
million at September 30, 1994 from $508 million at December 31, 1993.
During the third quarter and first nine months of 1994, the Company closed
$3.0 million and $9.0 million, respectively, of Small Business
Administration (SBA) loans. The Company sold $7.9 million of SBA loans
during the first nine months of the year, resulting in gains of $593,000.
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 September 30, 1994, these loans
comprised 85.4% of the total loan portfolio, excluding loans held for sale.
The Company's general policy is to originate conventional residential real
estate mortgages with loan to value ratios of 80% or less
14
<PAGE>
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>
September 30, December 31,
1994 1993
---------------- ----------------
Amount % Amount %
(Dollars in thousands) -------- ------ -------- ------
<S> <C> <C> <C> <C>
Commercial Loans:
Secured by real estate. . . . $ 86,126 16.6% $ 94,428 23.2%
Other (generally secured) . . 23,822 4.6 32,114 7.9
-------- ------ -------- ------
Total commercial loans. . . 109,948 21.2% 126,542 31.1
Residential real estate
mortgages. . . . . . . . . . . 357,036 68.8 229,203 56.3
Installment loans. . . . . . . . 52,129 10.0 51,372 12.6
-------- ------ -------- ------
Total portfolio loans . . . $519,113 100.0% $407,117 100.0%
======== ====== ======== ======
</TABLE>
At September 30, 1994, the Company had commitments to fund residential real
estate loans of $199.6 million. These commitments are expected to result
in mortgage loan closings during the next 90 days. Offsetting the interest
rate risk associated with these commitments, as well as mortgage loans held
for sale of $184.7 million, Republic had, at September 30, 1994, firm
commitments to sell forward $261.1 million of recently closed or committed
residential real estate loans. These commitments to sell forward, which are
expected to settle in the fourth quarter of 1994, will not produce any
material gain or loss.
15
<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>
Sept. 30, Dec. 31, Sept. 30,
1994 1993 1993
(Dollars in thousands) --------- --------- ---------
<S> <C> <C> <C>
Loans past due 90 days or more and still
accruing interest:
Commercial $ 729 $ 217 $ 23
Residential real estate mortgages - - 39
Installment 66 93 43
------ ------ ------
Total $ 795 $ 310 $ 105
====== ====== ======
Non-accrual loans:
Commercial $1,431 $1,812 $ 946
Residential real estate mortgages 1,084 803 963
Installment 121 108 97
------ ------ ------
Total 2,636 2,723 2,006
Restructured loans 1,536 2,140 2,140
Other real estate owned 1,058 405 1,418
------ ------ ------
Total non-performing assets $5,230 $5,268 $5,564
====== ====== ======
Non-performing assets as a percentage of:
Total loans and OREO (1) 1.01% 1.29% 1.25%
Total loans and OREO (2) .74% .58% .60%
Total assets .38% .45% .46%
<FN>
(1) Excluding mortgage loans held for sale.
(2) Including mortgage loans held for sale.
</TABLE>
At September 30, 1994, approximately $2.2 million, or .42% 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.
16
<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 September 30, 1994, the allowance for estimated loan losses was $5.9
million or 1.13% 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
140.2% at September 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>
Nine Months Ended
September 30,
1994 1993
-------- --------
<S> <C> <C>
Allowance for estimated loan losses:
Balance at January 1 $ 7,214 $7,684
Loans charged off (1,267) (386)
Recoveries of loans previously charged off 170 203
------- ------
Net charge-offs (1,097) (183)
Provision charged to expense 84 511
Reduction due to sale of commercial loans (350) (590)
------- ------
Balance at September 30 $ 5,851 $7,422
======= ======
</TABLE>
SECURITIES
As a result, the Company's portfolio is comprised primarily of U.S.
Treasuries, U.S. 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
38.5% of the Company's assets at September 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 and other short-term borrowings.
17
<PAGE>
Certain securities, with a carrying value of approximately $164.4 million
and $25.5 million at September 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 $36.8 million, or 24.0%, from
$153.5 million at December 31, 1993 to $116.7 million at September 30,
1994, primarily due to a decrease in official checks outstanding used to
fund mortgage loans held for sale. Interest bearing deposits increased
$89.8 million, or 13.2%, from $680.3 million at December 31, 1993 to $770.1
million at September 30, 1994, due primarily to an increase of $44.5
million in jumbo certificates of deposit.
On October 12, 1994 the Company announced the signing of a definitive
agreement to sell three branches of its subsidiary Republic Bank to CB
North. The three branches had total deposits of $52 million at September
30, 1994. The sale of these offices creates an opportunity for the Bank to
expand its deposit gathering network in other areas of Michigan. The
transaction is pending regulatory approval and is expected to be completed
by December 31, 1994.
SHORT-TERM BORROWINGS
As of September 30, 1994, the Company had federal fund borrowings of $25.0
million that matured on October 3, 1994. The average interest rate paid on
federal fund borrowings for the third quarter of 1994 was 4.68%. The
Company also had $159.0 million of securities sold under agreements to
repurchase at an average rate for the quarter of 4.71%. Such agreements,
which mature in the fourth quarter of 1994, are secured by certain
securities with a carrying value of $160.9 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,
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 $16.3 million at September 30, 1994
from $85.5 million at December 31, 1993. During the first nine months of
1994, the average borrowings and interest rate paid on this warehousing
line were $39.7 million and 6.28%, respectively.
18
<PAGE>
Republic Bancorp Mortgage Inc. has a $20 million warehousing line of credit
with NBD Bank, N.A., 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 1.75%. No borrowings under this line were required at
September 30, 1994. At December 31, 1993, borrowings on this line were
$14.9 million. During the first nine months of 1994, the average
borrowings and interest rate paid on this line were $11.4 million and
5.87%, respectively.
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 September 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 September 30, 1994, borrowing under this line totaled $36.5 million with
an average interest rate paid of 5.05%.
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 September 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 9.75% at September 30,
1994, and is payable in twelve equal quarterly installments commencing
February 1993 with final maturity due November 30, 1995. As of September
30, 1994, $743,000 of the remaining $929,000 is classified as short-term
borrowings.
Market Street Mortgage Corporation also has a $12 million revolving credit
agreement with G.E. Capital Mortgage Services, Inc. used for the funding of
purchased mortgage servicing rights. Interest, which is payable monthly,
is calculated at 3.75% plus the monthly commercial paper rate, and is
payable in monthly installments commencing January 1995 with final maturity
due December 1999. Borrowings under this line of credit at September 30,
1994 were $4.0 million.
19
<PAGE>
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.
CAPITAL RESOURCES
Total shareholders' equity at September 30, 1994 was $119.6 million
compared to $111.4 million at December 31, 1993. The increase of $8.2
million during the first nine months was due primarily to earnings net of
dividends and the unrealized loss on securities available for sale.
The Federal Reserve Board has adopted risk-based capital guidelines for
bank holding companies. At September 30, 1994, Republic's Tier 1 Capital
and Total risk-based capital ratios were 17.93% and 21.47%, respectively,
versus 16.35% and 20.19%, respectively at December 31, 1993. These ratios
exceed minimum guidelines prescribed by regulatory agencies. As of
September 30, 1994, total risk-based capital was $139.9 million, an excess
of $87.8 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 September 30, 1994 was 8.58%, versus 8.43% at December
31, 1993.
The Company is committed to maintaining a strong capital position. As of
September 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.
20
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Republic and its subsidiaries are 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 August 16, 1994 meeting, the Board of Directors declared a
quarterly cash dividend of $.08 per share on common stock,
payable on October 7, 1994 to shareholders of record on September
9, 1994. Additionally, at the September 22, 1994 meeting, the
Board approved a 10% stock dividend to be issued December 2, 1994
to shareholders of record November 4, 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.
Item 5. Other Information
Not applicable.
Item 6. Exhibit and Reports on Form 8-K
(a) Exhibits
11. Statement RE: Computation of per share earnings
23. Financial Data Schedule
(b) Reports on Form 8-K
During the interim period covered by this report, there were
no reports filed by the Company on Form 8-K.
21
<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: November 14, 1994 By: /s/ Thomas F. Menacher
__________________________
Thomas F. Menacher
Chief Financial Officer
(Principal Financial and
Accounting Officer)
22
STATEMENT RE COMPUTATION OF EXHIBIT 11
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 the nine months ended September 30, 1994 and 1993, and for
the three months ended September 30, 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 nine months ended September 30, 1994 and 1993.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Average number of
common shares
outstanding . . . . . 13,922,335 13,276,464 13,842,695 13,135,535
Common share
equivalents on
stock options
and stock warrants
based on average
market price. . . . . 442,995 765,471 476,741 761,249
---------- ---------- ---------- ----------
Average number of
common shares
outstanding to
compute primary
earnings per share. . 14,365,330 14,041,935 14,319,436 13,896,784
Incremental common
share equivalents
on stock options
and stock warrants
based on end of
period market price . - 67,764 1,398 49,832
---------- ---------- ---------- ----------
Average number of
common shares
outstanding to
compute fully
diluted earnings
per share . . . . . . 14,365,330 14,109,699 14,320,834 13,946,616
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
The schedule contains summary financial information
extracted from the consolidated balance sheet as of
September 30, 1994 and consolidated statements of income
for the nine months ended September 30, 1994.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 20,402
<INT-BEARING-DEPOSITS> 4,414
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 254,526
<INVESTMENTS-CARRYING> 272,577
<INVESTMENTS-MARKET> 263,430
<LOANS> 703,861
<ALLOWANCE> 5,851
<TOTAL-ASSETS> 1,370,351
<DEPOSITS> 886,856
<SHORT-TERM> 240,742
<LIABILITIES-OTHER> 59,225
<LONG-TERM> 63,347
0
0
<COMMON> 69,646
<OTHER-SE> 49,952
<TOTAL-LIABILITIES-AND-EQUITY> 1,370,351
<INTEREST-LOAN> 39,840
<INTEREST-INVEST> 17,008
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 56,848
<INTEREST-DEPOSIT> 20,186
<INTEREST-EXPENSE> 31,556
<INTEREST-INCOME-NET> 25,292
<LOAN-LOSSES> 84
<SECURITIES-GAINS> 568
<EXPENSE-OTHER> 65,484
<INCOME-PRETAX> 21,297
<INCOME-PRE-EXTRAORDINARY> 21,297
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,114
<EPS-PRIMARY> .99
<EPS-DILUTED> .99
<YIELD-ACTUAL> 2.99
<LOANS-NON> 2,636
<LOANS-PAST> 795
<LOANS-TROUBLED> 1,536
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 7,214
<CHARGE-OFFS> 1,267
<RECOVERIES> 170
<ALLOWANCE-CLOSE> 5,851
<ALLOWANCE-DOMESTIC> 3,677
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,174
</TABLE>
