UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Periods Ended: March 31, 1997
Commission File Number: 0-17007
First Republic Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Pennsylvania #23-2486815
(State or other jurisdiction of IRS Employer Identification
incorporation or organization) Number
1608 Walnut Street, Philadelphia, Pennsylvania 19103
(Address of principal executive offices) (Zip code)
215-735-4422
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report)
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
filing requirements for the past 90 days.
YES _X_ NO ___
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the Issuer's classes
of common stock, as of the latest practicable date.
3,417,509 shares of Issuer's Common Stock, par value
$.01 per share, issued and outstanding as of April 30, 1997
Page 1 of 24
Exhibit index appears on page 16
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Table of Contents
Page
Part I: Financial Information
Item 1: Financial Statements 3
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations 4
Part II: Other Information
Item 1: Legal Proceedings 15
Item 2: Changes in Securities 15
Item 3: Defaults Upon Senior Securities 15
Item 4: Submission of Matters to a Vote of Security Holders 15
Item 5: Other Information 15
Item 6: Exhibits and Reports on Form 8-K 16
2
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PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
See Annex "A" on page 18
3
<PAGE>
Item 2:
Management's Discussion and Analysis of Financial
Condition and Results of Operations
------------------------------------------------------------------
1. Organization:
First Republic Bancorp, Inc. ("the Company") is a one-bank holding
company organized and incorporated under the laws of the Commonwealth of
Pennsylvania. Its wholly-owned subsidiary, First Republic Bank (the "Bank"),
offers a variety of banking services to individuals and businesses throughout
the Greater Philadelphia and South Jersey area through its offices and branches
in Philadelphia and Montgomery Counties.
On June 7, 1996 Republic Bancorporation ("Republic"), parent company of
Republic Bank, its sole subsidiary, merged with and into ExecuFirst Bancorp,
Inc., ("ExecuFirst") parent company of First Executive Bank, its sole
subsidiary. Republic exchanged all of its common stock, for approximately
1,925,293 shares (approximately 56% of the combined total) of ExecuFirst's
common stock. Effective upon the merger, ExecuFirst changed its name to First
Republic Bancorp, Inc. Upon completion of the merger, Republic's shareholders
owned a majority of the outstanding shares of the consolidated Company's stock.
As a result, the transaction was accounted for as a reverse acquisition of
ExecuFirst by Republic solely for accounting and financial reporting purposes.
Therefore, Consolidated Statements of Income and Consolidated Statements of Cash
Flows for the prior year periods are those of Republic only, and may not be
comparable to the current year Consolidated Statements. The operations of
ExecuFirst have been included in the Company's financial statements since the
date of acquisition. Historical shareholders' equity and earnings per share of
Republic prior to the merger have been retroactively restated (a
recapitalization) for the equivalent number of shares received in the merger
after giving effect to any differences in par value of the respective stock of
ExecuFirst and Republic.
The March 31, 1997 and December 31, 1996 Consolidated Balance Sheets
reflect the effect of the merger on a purchase accounting basis based on the
fair market value of ExecuFirst's common stock at a price of $5.75 per share,
the estimated market value of the stock for a reasonable period before and after
November 17, 1995, the announcement date of the merger. The purchase price
calculated for accounting purposes amounted to $7,052,000, which is the result
of multiplying the $5.75 per share market value of ExecuFirst by the outstanding
share of ExecuFirst of approximately 1,226,000 (prior to subsequent dividends)
at the announcement date of the merger, plus acquisition expenses incurred by
Republic, as a result of the merger, in the amount of $1,193,000.
4
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The purchase price has been allocated to the respective assets acquired
and the liabilities based on their estimated fair market values, net of
applicable income tax effects. Negative goodwill in the amount of $1,045,000 was
generated for the purchase accounting purposes and was applied against (i) bank
premises and equipment in the amount of $276,000, (ii) other real estate owned
in the net amount of $84,000, and (iii) the net deferred tax asset in the amount
of $685,000. No negative goodwill remains after application to these non-current
assets.
Financial Condition:
For the three months ended March 31, 1997 the Bank's total assets
increased $8.0 million to $281.8 million from approximately $273.8 million at
December 31, 1996. This increase was primarily due to the increase in the net
loan portfolio in addition to a temporary increase in other assets associated
with the Refant Tax Program (the "Refant Program").
As of March 31, 1997 net loans totaled approximately $176.3 million
representing an increase of approximately $6.3 million compared to $170.0
million at December 31, 1996. The increase in commercial loans was attributable
to a more aggressive loan origination program, consistent with the Bank's
strategic plan.
Total deposits decreased to approximately $246.6 million during the
three months ended March 31, 1997 from $250.1 million at December 31, 1996. This
was primarily the result of allowing higher priced retail certificates of
deposit to run off, partially offset by short term advances from the Federal
Home Loan Bank of Pittsburgh. This decline in retail certificates of $11.1
million was partially offset by funds provided by the Refant Program, which were
invested in short term jumbo certificates. It is anticipated that these
certificates in the amount of approximately $5.0 million will mature by April
30, 1997.
Deposit Breakdown Table
<TABLE>
<CAPTION>
As of As of
March 31, December 31,
1997 1996
Type of Account % of % of
Balance Total Balance Total
<S> <C> <C> <C> <C>
Demand: non-interest bearing $36,743,000 14.9% $32,611,000 13.0%
Demand: interest bearing 7,771,000 3.2 10,181,000 4.1
Money Market and Savings 26,846,000 10.9 27,240,000 10.9
Time deposits under $100,000 139,672,000 56.6 150,800,00 60.3
Time deposits over $100,000 35,602,000 14.4 29,227,000 11.7
------------------------ --------------------------
Total deposits $246,634,000 100% $250,059,000 100%
======================== ==========================
</TABLE>
5
<PAGE>
Allowance for Loan Losses
The Allowance for Loan Losses for the Bank was $2,162,000 as of March
31, 1997. The Bank has a policy of increasing its Allowance for Loan Losses by
0.60% of net new loans receivable. Based on numerous factors including, but not
limited to, the Bank's existing loan portfolio, the size of its Allowance for
Loan Losses, results of regularly scheduled bank regulatory field examinations,
and Management's internal loan review decisions, the Bank may make additions to
the Allowance for Loan Losses other than the percentage additions made in the
ordinary course of business. Additionally, the Board of Directors reviews
reserve adequacy on a quarterly basis. Management believes that the Allowance
for Loan Losses is reasonable and adequate to cover any known losses and any
losses reasonably expected in the portfolio.
The Bank recorded a Provision for Loan Losses of $30,000 during the
quarter ended March 31, 1997 compared to a charge of $0 in the quarter ended
March 31, 1996, as loan growth was higher during the first quarter of 1997
compared to the first quarter of 1996. As a result of this provision for
potential loan losses and following certain recoveries net of charge-offs
credited to the reserve for potential loan losses as detailed below, the Bank's
aggregate reserve for potential loan losses increased to $2,162,000 at March 31,
1997 from $2,092,000 at December 31, 1996. Listed below is an analysis of the
loan loss reserve account:
Allowance for Loan Losses
Rollforward
Balance at December 31, 1996 $2,092,000
Charge-offs
Commercial Loans 6,000
----------
Total charge-offs 6,000
Recoveries
Commercial Loans 34,000
Real Estate Loans 10,000
Installment Loans 2,000
----------
Total Recoveries 46,000
Additions charged to operations 30,000
Balance at March 31, 1997 $2,162,000
----------
6
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As of March 31, 1997, the Bank had loans outstanding placed in a
non-accrual status totaling approximately $2,734,000 compared to $1,892,000 at
December 31, 1996. This increase was mainly due to an addition of a credit
totaling $838,000. This credit is in the early stages of foreclosure and the
Bank is unable to determine the extent of the loss, if any, from this credit.
The loan is secured by a second lien on real estate, and the Bank believes it
has adequate reserves for potential losses on the loan. The remaining balance of
non-performing loans represents commercial and consumer credits. There was no
interest income recorded on non-accrual loans for the three months ended March
31, 1997. Management is actively pursuing the collection of all troubled loans.
It is uncertain as to the amount of any potential loss that may be incurred in
connection with the remaining non-accruing loans. The Bank has a policy of
generally placing on non-accrual status any loan for which payment of either
principal or interest, on a contractual basis, is not received or is unlikely to
be received for a period of 90 days. Such loans include those classified by
either the Bank or its regulators such that collection of the full amount of
principal and interest are considered doubtful.
Listed below is a schedule of gross loans receivable at March 31, 1997.
The loans are categorized based on bank regulatory requirements, which
categorizations are not necessarily indicative of the actual type or purpose of
the loan.
The majority of the loans receivable earn interest at rates that vary
overnight with changes in the Bank's prime rate. Other loans receivable earn
interest at rates that are fixed at a specific spread over the rate being paid
on certificates of deposit either pledged as collateral on the loans or placed
in the Bank for funding purposes. Approximately $79.6 million in loans
receivable are comprised of fixed rate loans that will mature in the next five
years.
Loan Breakdown Table
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
% of % of
Loan Type Balance Total Balance Total
<S> <C> <C> <C> <C>
Loans collateralized by Real Estate:
One-to-four family residential $61,060,000 34.2% $58,908,000 34.2%
Multi-family residential 1,828,000 1.0 2,332,000 1.4
Commercial and other 65,690,000 36.8 62,016,000 36.0
Total loans collateralized by Real Estate 128,578,000 72.0 123,256,000 71.6
-------------------------- ------------------------
Commercial business loans 44,056,000 24.7 45,007,000 26.2
Other loans 5,828,000 3.3 3,831,000 2.2
========================== ========================
Total loans $178,462,000 100% $172,094,000 100%
========================== ========================
</TABLE>
Since its founding, the Bank's primary focus has been to service the
borrowing and deposit needs of small businesses and commercial real estate
investors. Many of the
7
<PAGE>
loans made to all of these categories of customers have been collateralized by
real estate, as set forth on the above chart.
Of the approximately $61.0 million at March 31, 1997, in loans
collateralized by "one-to-four residential" properties only $5.2 million
represent traditional residential mortgages. The remainder includes loans made
to investors who own small rental properties or business loans secured by liens,
often junior liens, on the residences of the principals. The risk in business
loans collateralized by liens on residential properties lies more in the success
or failure of the borrower's businesses than the real estate market, although
the value of the collateral is affected by variations in the real estate market.
Generally, housing prices in the Bank's market area fell during the late 1980s
and early 1990s, but more recently have been relatively stable.
"Multi-family residential, Commercial and other" loans primarily
represent loans made to real estate investors and/or developers. This market
suffered dramatic declines in value during the late 1980s and early 1990s, but
has shown signs of stability in recent years. The degree of recovery, however,
is dependent on the type of property and its location. The Bank has strengthened
its ability to analyze and service such loans, and intends to continue its
penetration of this market, which it believes to be under-served, with a
resultant expectation of satisfactory interest rates, fees, and deposits.
Underwriting of such loans will continue to be performed in a conservative
manner.
"Commercial business loans" include loans to professionals and other
businesses not collateralized by real estate. $15.2 million of such loans were
collateralized by liquid collateral as of March 31, 1997. Another $9.9 million
were unsecured, made to borrowers considered to be of sufficient strength to
merit unsecured financing. The balance consists primarily of loans
collateralized by business assets, such as accounts receivable, inventory and/or
equipment. The risk in business loans is generally a function of local market
and industry conditions, with any collateral serving as the source of repayment.
The Bank intends to continue its lending focus on professionals while
expanding its commercial real estate and small business efforts. Additionally,
in a further attempt to diversify its portfolio and increase its market
penetration, the Bank has begun to emphasize consumer lending. All such plans
are highly dependent upon the strength of the economic recovery in the Bank's
market area, as well as the specific industries on which it focuses.
Capital Resources:
During the three months ended March 31, 1997, the Company reported net
income of $2,004,000. Total regulatory capital increased to $20,038,000 at March
31, 1997 from $18,034,000 at year end 1996.
8
<PAGE>
The Bank's ratio of Tier I Capital to total Risk-Weighted Assets
increased to 10.73% as of March 31, 1997 from 10.08% as of December 31, 1996.
The Company's ratio of Tier I Leverage Capital to total average quarterly assets
was 5.89% compared to 6.65% as of December 31, 1996. This is attributable to the
temporary increase in quarterly assets during the first quarter of 1997 due to
the Refant Program.
Regulatory Capital Requirements:
The following table presents the Bank's capital ratios at March 31, 1997:
Tier I Capital $20,038,000
Tier II Capital 2,162,000
---------
Total Capital 22,200,000
Total Average Quarterly Assets 340,358,000
Total Risk-Weighted Assets (1) 186,712,000
Tier I Risk-Based Capital Ratio (2) 10.73%
Required Tier I Risk-Based Capital Ratio 4.00%
-----
Excess Tier I Risk-Based Capital Ratio 6.73%
Total Risk-Based Capital Ratio (3) 11.89%
Required Total Risk-Based Capital Ratio 8.00%
-----
Excess Total Risk-Based Capital Ratio 3.89%
Tier I Leverage Ratio (4) 5.89%
Required Tier I Leverage Ratio 5.00%
-----
Excess Tier I Leverage Ratio 0.89%
- ------------------------------------------------------------
(1) Includes off-balance sheet items at credit-equivalent values.
(2) Tier I Risk-Based Capital Ratio is defined as the ratio of Tier I Capital
to Total Risk-weighted Assets.
(3) Total Risk-Based Capital Ratio is defined as the ratio of Tier I and Tier
II Capital to Total Risk-Weighted Assets.
(4) Tier I Leverage Ratio is defined as the ratio of Tier I Capital to Total
Average Quarterly Assets.
The Bank's ability to maintain the required level of capital is
substantially dependent upon the success of the Bank's capital and business
plans, the impact of future economic events on the Bank's loan customers, the
Bank's ability to manage its interest rate risk and control its growth and other
operating expenses.
9
<PAGE>
In addition to the above minimum capital requirements, effective on
December 19, 1992, the Federal Reserve Bank implemented a statutory requirement
that federal banking regulators take specified "prompt corrective action" when
an insured institution's capital level falls below certain levels. The rule
defines five capital categories based on several of the above capital ratios.
The Bank currently exceeds the levels required for a bank to be classified as
"well capitalized". However, the Federal Reserve Bank may consider other
criteria in the future when determining such classifications that could result
in a downgrading in such classifications.
Liquidity:
The Bank's target and actual liquidity levels are determined and
managed based on Management's comparison of the maturities and marketability of
the Bank's interest-earning assets with its projected future maturities of
deposits and other liabilities. As of March 31, 1997, the Bank maintained $6.0
million in cash and cash equivalents in the form of cash and due from banks
(after reserve requirements) and overnight federal funds sold. This represented
2.1% of the total assets at March 31, 1997 as compared to 5.7% at December 31,
1996. Of the Bank's investment securities, approximately $4.8 million are
pledged to secure public funds deposits and, therefore, are not available for
liquidity purposes.
Additionally, the Bank has established three collateralized lines of
credit totaling $99.0 million to assist in managing the Bank's liquidity
position. $8.1 million was outstanding as of March 31, 1997, on the
aforementioned lines.
Both liquidity and interest sensitivity are managed by the
Finance Committee of the Bank's Board of Directors. This Committee's primary
objective is to oversee and assist Management in various financial aspects of
the Bank's activities including asset/liability management.
Investment Securities:
The Company classifies certain investments under one of the following
categories: "held- to-maturity" which is accounted for at historical cost,
adjusted for accretion of discounts and amortization of premiums;
"available-for-sale" which is accounted for at fair market value, with
unrealized gains and losses reported as a separate component of shareholders'
equity; or "trading" which is accounted for at fair market value, with
unrealized gains and losses reported as a component of net income. The Bank does
not hold "trading" securities.
At March 31, 1997, the Bank had identified certain investment
securities that are being held for indefinite periods of time, including
securities that will be used as part of the Bank's asset/liability management
strategy and that may be sold in response to changes in interest rates,
prepayments and similar factors. The securities are classified as
"available-for-
10
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sale" and are intended to increase the flexibility of the Bank's
asset/liability management. Available-for-sale securities consist of US
Government Treasury and US Government Agency securities. The book and market
values of securities available-for-sale was $10,581,000 and $10,587,000
respectively, as of March 31, 1997. The net unrealized gain on securities
available-for-sale, as of this date, was $6,000.
The following table represents the carrying and estimated fair values of
Investment Securities at March 31, 1997.
Gross Gross
Amortized Unrealized Unrealized
Available-for-Sale ($000) Cost Gain Loss Fair Value
US Treasury 999 0 (3) 996
US Government Agencies 3,675 12 (3) 3,684
Other 5,907 0 0 5,907
------ -- -- ------
Total Available-for-Sale 10,581 12 (6) 10,587
------ -- -- ------
Gross Gross
Amortized Unrealized Unrealized
Held-to-Maturity ($000) Cost Gain Loss Fair Value
US Government Agencies 68,906 0 (324) 68,582
Other 1,010 0 0 1,010
------ -- -- ------
Total Held-to-Maturity 69,916 0 (324) 69,592
------ -- -- ------
Interest Rate Sensitivity:
The possible effect upon the Company and the Bank of any future
sustained rise in interest rates is believed by Management to have a negative
effect on net interest income, since the Bank does not have the ability to
respond to any such changes by quickly raising rates on many of its
interest-earning assets, which are comprised chiefly of fixed rate commercial
loans. However, a sustained decrease in interest rates generally could have a
positive effect on the Bank, due to a timing difference in repricing the Bank's
liabilities, primarily certificates of deposit, and its interest-earning assets
noted above. The Bank has the ability to reprice 16% of its total interest
bearing deposits, reflecting Money Market, NOW and Savings accounts, on a weekly
basis. As of March 31, 1997, 27% of the Bank's time deposits were to mature and
be repriceable within three months of such date, and an additional 34% were to
be repriceable within three to six months.
11
<PAGE>
The cumulative 12-month Interest Rate Sensitivity Gap at March 31, 1997
was a negative 13.1% compared to a negative 9.4% at December 31, 1996, both of
which are within management's guidelines of +/- 20%.
<TABLE>
<CAPTION>
Interest Sensitive Gap
March 31, 1997
0 - 90 91 - 180 181 - 365 1 - 5 5 Yrs &
Days Days Days Years Over Total
Interest Sensitive Assets:
<S> <C> <C> <C> <C> <C> <C>
Interest Bearing Balances
Due From Banks $61 $0 $0 $0 $0 $61
Federal Funds Sold 0 0 0 0 0 0
Investment Securities 11,291 5,906 12,407 42,798 8,101 80,503
Loans 85,910 4,920 11,936 69,911 5,785 178,462
--------- ---------- ---------- ---------- ---------- ---------
Totals 97,262 10,826 24,343 112,709 13,886 259,026
========= ========== ========== ========== ========== =========
Cumulative Totals $ 97,262 $ 108,088 $ 132,431 $ 245,140 $ 259,026
========= ========== ========== ========== ========== =========
Interest Sensitive Liabilities:
Demand Interest Bearing $ 3,886 $ 0 $ 0 $ 1,943 $ 1,942 $7,771
Savings Accounts 1,387 0 0 0 1,387 2,774
Money Market Accounts 12,036 0 0 6,018 6,018 24,072
FHLB Borrowings 8,095 0 0 0 0 8,095
Time Deposits 47,948 59,187 33,855 34,261 23 175,274
--------- ---------- ---------- ---------- ---------- ---------
Totals $ 73,352 $ 59,187 $ 33,855 $ 42,222 $ 9,370 $ 217,986
Cumulative Totals $ 73,352 $ 132,539 $ 166,394 $ 208,616 $ 217,986
========= ========== ========== ========== ==========
GAP $ 23,910 $ (48,361) $ (9,512) $ 70,487 $ 4,516 $ 41,040
Cumulative GAP $ 23,910 $ (24,451) $ (33,963) $ 36,524 $ 41,040
--------- ---------- ---------- ---------- ----------
Interest Sensitive Assets/
Interest Sensitive Liabilities 1.3 0.8 0.8 1.2 1.2
--------- ---------- ---------- ---------- ----------
Cumulative GAP/
Total Earning Assets 9.2% (9.4)% (13.1)% 14.1% 15.8%
Total Earning Assets $259,026
</TABLE>
Notes to interest sensitivity analysis:
Callable securities are reported at their contractual maturity dates.
Reflects managerial assumptions regarding expected repricing or maturity
behavior of various products.
12
<PAGE>
Results of Operations for the Three Months Ended March 31, 1997 vs. 1996:
The Company's net income for the quarter ended March 31, 1997, was
$2,004,000, or approximately $0.53 per share of common stock, compared to a net
income of $1,526,000 or approximately $0.70 per share of common stock, during
the comparable quarter of 1996.
Net Interest Income
Net interest income, the difference between interest earned on loans
and other investments and the interest paid on deposits and borrowings,
increased to $2.6 million during the quarter ended March 31, 1997, from $1.2
million in the quarter ended March 31, 1996. The increase was mainly due to the
1996 merger with ExecuFirst Bancorp, Inc. ("ExecuFirst"), resulting in a full
three months of income from the acquired Bank's inclusion in the Company's
financial statements, for the quarter ended March 31, 1997, with no such
operating results being included in the comparable period in 1996.
Management believes that profitable operations in the future will be
contingent on both external and internal factors. Internal factors include
Management's ability to (i) attract additional deposits to allow further
expansion of the Bank's loan and investment programs; (ii) make accurate credit
analyses upon origination of loans; (iii) deal expeditiously and efficiently
with non-performing assets; and (iv) control or reduce non-interest expenses.
Management has increased its emphasis on business development through the hiring
of additional lending staff and targeting the Bank's niche market segment of
small businesses and professionals. Additionally, media advertising is employed
to obtain deposit funding required to support the increases in loan production.
The utilization of internal loan review and workout activities in conjunction
with the strengthening of credit standards has facilitated the identification
and disposition of problem loans.
External factors, over which the Company has little or no control,
include the interest rate environment and the strength or weakness in the local
economy. Management believes that the general economy in its market area will
not experience a decline to any material extent in the near term. Interest rate
changes are caused, in part, by the actions of the Federal Reserve Bank and
cannot be predicted in advance with any certainty.
Interest and fees on loans was $3.8 million, or 70% of total interest
income, for the quarter ended March 31, 1997 compared with $1.9 million, or 59%
of total interest income reported during the comparable quarter of 1996. This
increase, on an absolute dollar basis of $1.9 million, was mainly due to the
merger with ExecuFirst, effective June 7, 1996 in addition to increased loan
volume generated through business development efforts. On a percentage basis,
this increase is attributable to the increase in total loans as a percentage of
total earning assets during 1997.
13
<PAGE>
Interest on federal funds sold was $289,000, or 5.3% of total interest
income during the quarter ended March 31, 1997, compared to $811,000 or 24.9% of
total interest income reported in the comparable quarter of 1996. This decrease
was due to higher average balances of federal funds outstanding during the first
quarter of 1996. Interest on investments was $1,342,000 or 24.7% of total
interest income in the quarter ended March 31, 1997, compared to $515,000, or
15.8% of total interest income reported during the comparable quarter of 1996.
This was due to lower than expected loan demand during the latter part of 1996
which resulted in a shift of excess liquidity into investment securities.
Non-interest income is comprised of charges on deposit accounts, plus
or minus any gains or losses on sales of securities and the participation of the
Company's subsidiary, First Republic Bank, in a tax refund program with a
national tax preparation service company. As these loans are repaid, the Bank
recognizes a fee per refund, which is paid by the borrower/taxpayer. Fees
recognized on this program were approximately $2.0 million net of expenses for
the first quarter of 1997. Total non-interest income increased to $2,135,000 for
the quarter ended March 31, 1997 compared to $2,068,000 for the quarter ended
March 31, 1996. The increase is primarily due to the non-interest income derived
from additional service charges on deposit accounts, due to the merger with
ExecuFirst.
Interest expense for the quarter ended March 31, 1997 was $2.8 million
compared to $2.1 million for the quarter ended March 31, 1996. Such increase is
attributable to the increase in deposits as a result of the merger with
ExecuFirst. Additionally, the Company had only 80% of its quarterly average
deposit base in certificate of deposits during 1997 compared with 90% for the
same period in 1996. Certificates of deposit traditionally represent higher
costing deposits, compared to interest earning and non-interest earning demand
deposits.
The Company's largest non-interest expense is salaries and employee
benefits, which totaled $945,000, or approximately 51.6% of total non-interest
expenses for the quarter ended March 31, 1997, compared to $477,000, or
approximately 52.2% of total expenses, in the quarter ended March 31, 1996. The
year-to-year dollar increase is due primarily to new staff as a result of the
merger with ExecuFirst. Mr. Muscal, who was the President of the Company, and
Chairman of the Bank, resigned as an officer and Director of the Company and
Bank, and terminated his employment agreement effective February 28, 1997. Mr.
Muscal has executed a consulting agreement with the Bank effective February 28,
1997. The Board has determined to fill Mr. Muscal's director vacancy by
nominating Mr. Zeev Shenkman. Mr. Shenkman was elected to the Board of Directors
at the Company's annual meeting on April 29, 1997. Additionally, Mr. John
O'Donnell, Ph.D. has resigned from the Board of Directors effective March 31,
1997. Mr. O'Donnell's term as a Director would have expired in 1998. The
Board has not made a final determination as to whether or not to fill this
vacancy. Mr. Allen L. Krammer has decided not to stand for re-nomination to the
Board of the Company. Mr. Krammer's term expired in 1997. The Board has
determined not to fill this vacancy.
14
<PAGE>
Occupancy expense consists primarily of rent expense for the lease of
the Company's principal offices. Occupancy expenses were $252,000 for the
quarter ended March 31, 1997, or 13.7% of total expenses, compared to $155,000,
or 17.0% of total expenses, for the comparable quarter of 1996. These
disparities were attributable to the merger with ExecuFirst.
Other operating expenses during the quarter ended March 31,
1997 were $636,000 or 34.7% of total non interest expenses, compared to $282,000
or 30.1% of such expenses, for the quarter ended March 31, 1996. Major
components of this category include data processing, printing and supplies,
advertising, travel and entertainment, Fidelity insurance premiums, and Federal
Deposit Insurance premiums.
PART II - OTHER INFORMATION
Item 1: Legal Proceedings
Management is not aware of any pending or contemplated legal
action which would have a material adverse effect on the Company.
Item 2: Changes in Securities
None
Item 3: Defaults Upon Senior Securities
None
Item 4: Submission of Matters to a Vote of Security Holders
The annual meeting of shareholders of First Republic Bancorp, Inc.,
parent and sole shareholder of First Republic Bank, to take action upon the
election and re-election of certain directors of the Company was held on the
29th day of April, 1997 at 4:00 p.m., at the Pyramid Club, 1735 Market Street,
Philadelphia, Pennsylvania, after written notice of said meeting, according to
law, was mailed to each shareholder of record entitled to receive notice of said
meeting, 33 days prior thereto. As of the record date for said meeting of
shareholders, the number of shares then issued and outstanding was 2,847,969
shares of common stock, of which 2,847,969 shares were entitled to vote. A total
of 1,840,976 shares were voted. No nominee received less than 99.5% of the voted
shares. Therefore, pursuant to such approval, the said Directors were elected to
the Company.
Item 5: Other Information
None
15
<PAGE>
Item 6: Exhibits and Reports on Form 8-K Page Numbering
in Sequential
Numbering System
(a) Exhibits:
27 - Financial Data Schedule 25
(b) Form 8-K was filed by the Company on March 20, 1997 to
announce the declaration of a six for five stock split
effected in the form of a dividend to all shareholders of the
Company as of March 4, 1997.
Form 8-K was filed by the Company on April 21, 1997 to
announce the resignation of Coopers and Lybrand, the Company's
accountants.
Form 8-K/A was filed by the Company on April 29, 1997 to
announce the resignation of Coopers and Lybrand, the Company's
accountants.
Form 8-K/A was filed by the Company on May 6, 1997 to announce
the resignation of Coopers and Lybrand, the Company's
accountants.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Issuer has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
First Republic Bancorp, Inc.
/Rolf Stensrud/
Rolf Stensrud
President and Chief Executive Officer
/George S. Rapp/
George S. Rapp
Chief Financial Officer
Dated: May 12, 1997
17
<PAGE>
ANNEX "A"
Financial Statements
18
<PAGE>
First Republic Bancorp, Inc. and Subsidiary
Consolidated Balance Sheets
March 31, 1997 and December 31, 1996
<TABLE>
<CAPTION>
ASSETS: 1997 1996
<S> <C> <C>
Cash and due from banks $6,517,000 $7,716,000
Interest - bearing deposits with banks 61,000 665,000
Federal funds sold 0 7,115,000
------------ ------------
Total cash and cash equivalents 6,578,000 15,496,000
Securities available for sale, at fair value 10,587,000 5,900,000
Securities held to maturity, at amortized cost 69,916,000 75,054,000
Loans receivable, net 176,300,000 170,002,000
Premises and equipment, net 1,334,000 711,000
Real estate owned, net 295,000 295,000
Accrued income and other assets 16,809,000 6,337,000
------------ ------------
Total Assets $281,819,000 $273,795,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Deposits:
Demand - non-interest-bearing $36,743,000 $32,611,000
Demand - interest-bearing 7,771,000 10,181,000
Money market and savings 26,846,000 27,240,000
Time 139,672,000 150,800,000
Time over $100,000 35,602,000 29,227,000
------------ ------------
Total Deposits 246,634,000 250,059,000
Other Borrowings 8,095,000 0
Accrued expenses and other liabilities 6,712,000 5,365,000
------------ ------------
Total Liabilities 261,441,000 255,424,000
------------ ------------
Shareholders' Equity:
Common stock, par value $.01 per share; 25,000,000 shares authorized; 28,000 28,000
shares issued and
outstanding 3,417,509 as of March 31, 1997 and December 31, 1996
respectively
Additional paid in capital 13,687,000 13,687,000
Retained earnings 6,657,000 4,653,000
Unrealized gain on securities available for sale, net of
deferred taxes 6,000 3,000
------------ ------------
Total Shareholders' Equity 20,378,000 18,371,000
------------ ------------
Total Liabilities and Shareholders' Equity $281,819,000 $273,795,000
============ ============
</TABLE>
(See notes to consolidated financial statements)
19
<PAGE>
First Republic Bancorp, Inc. and Subsidiary
Consolidated Statements of Operations
Three Months Ended March 31,
(unaudited)
1997 1996
Interest Income:
Interest and fees on loans $3,806,000 $1,930,000
Interest on federal funds sold 289,000 811,000
Interest on investments 1,342,000 515,000
---------- ----------
Total InterestIncome 5,437,000 3,256,000
---------- ----------
Interest expense:
Demand - interest-bearing 65,000 9,000
Money market and savings 215,000 107,000
Time 1,032,000 1,378,000
Time over $100,000 1,457,000 534,000
Subordinated Debt 0 69,000
Other Borrowings 77,000 0
---------- ----------
Total InterestExpense 2,846,000 2,097,000
---------- ----------
Net interest income 2,591,000 1,159,000
Provision for loan losses 30,000 0
---------- ----------
Net interest income after provision for
loan losses 2,561,000 1,159,000
---------- ----------
Non-interest income:
Service fees 79,000 11,000
Other income 2,056,000 2,057,000
---------- ----------
2,135,000 2,068,000
---------- ----------
Non-interest expenses:
Salaries and Benefits 945,000 477,000
Occupancy/Equipment 252,000 155,000
Other expenses 636,000 282,000
---------- ----------
1,833,000 914,000
---------- ----------
Income before income taxes 2,863,000 2,313,000
---------- ----------
Provision for income taxes 859,000 787,000
---------- ----------
Net income $2,004,000 $1,526,000
========== ==========
Net income per share:
Primary $0.53 $0.70
Fully diluted $0.53 $0.70
---------- ----------
Average common shares and CSE outstanding:
Primary 3,807,884 2,182,830
Fully diluted 3,790,036 2,182,830
(See notes to consolidated financial statements)
20
<PAGE>
First Republic Bancorp, Inc. and Subsidiary
Consolidated Statements of Cash Flows
Three Months Ended March 31,
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $2,004,000 $1,526,000
Adjustments to reconcile net income
to net cash (used)/provided by operating
activities:
Provision for loan losses 30,000 0
Depreciation and amortization 48,000 135,000
(Increase) decrease in accrued income
and other assets (10,472,000) (2,081,000)
Increase(decrease) in accrued expenses
and other liabilities 1,347,000 865,000
------------ ------------
Net cash (used)/provided by operating activities (7,043,000) 445,000
------------ ------------
Cash flows from investing activities:
Purchase of securities:
Available for sale (4,913,000) 0
Proceeds from principal receipts and maturities of securities 5,343,0001 8,057,000
Net (increase) decrease in loans (6,298,000) (303,000)
Premises and equipment expenditures (677,000) (310,000)
------------ ------------
Net cash(used)/provided by investing activities (6,545,000) 7,444,000
------------ ------------
Cash flows from financing activities:
Net increase (decrease) in demand, money
market, and savings deposits 1,328,000 35,158,000
Net increase in borrowed funds 8,095,000 0
Net increase (decrease) in time deposits (4,753,000) 23,045,000
============ ============
Net cash provided by financing activities 4,670,000 58,203,000
============ ============
Increase (decrease) in cash and cash equivalents $(8,918,000) $66,092,000
Cash and cash equivalents, beginning of period 15,496,000 3,856,000
============ ============
Cash and cash equivalents, end of period $6,578,000 $69,948,000
============ ============
Supplemental disclosure:
Interest paid $2,803,000 $2,443,000
============ ============
Non-cash transactions:
Changes in unrealized gain on securities
available for sale $3,000 $9,000
============ ============
</TABLE>
(See notes to consolidated financial statements)
21
<PAGE>
FIRST REPUBLIC BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of First Republic Bancorp, Inc., the accompanying
unaudited financial statements contain all adjustments (including normal
recurring accruals) necessary to present fairly the financial position as of
March 31, 1997, and the results of operations and cash flows for the three (3)
months ended, March 31, 1997 and 1996.
First Republic Bancorp, Inc. ("the Company") is a one-bank holding
company organized and incorporated under the laws of the Commonwealth of
Pennsylvania. Its solely-owned subsidiary, First Republic Bank (the "Bank"),
offers a variety of banking services to individuals and businesses throughout
the Greater Philadelphia and South Jersey area through its offices and branches
in Philadelphia and Montgomery Counties.
On June 7, 1996 Republic Bancorporation ("Republic"), parent company of
Republic Bank, its sole subsidiary, merged with and into ExecuFirst Bancorp,
Inc., ("ExecuFirst") parent company of First Executive Bank, its sole
subsidiary. Republic exchanged all of its common stock, for approximately
1,925,293 shares (approximately 56% of the combined total) of ExecuFirst's
common stock. Effective upon the merger, ExecuFirst changed its name to First
Republic Bancorp, Inc. Upon completion of the merger, Republic's shareholders
owned a majority of the outstanding shares of the consolidated Company's stock.
As a result, the transaction was accounted for as a reverse acquisition of
ExecuFirst by Republic solely for accounting and financial reporting purposes.
Therefore, Consolidated Statements of Income and Consolidated Statements of Cash
Flows for the prior year periods are those of Republic only, and may not be
comparable to the current year Consolidated Statements. The operations of
ExecuFirst have been included in the Company's financial statements since the
date of acquisition. Historical shareholders' equity and earnings per share of
Republic prior to the merger have been retroactively restated (a
recapitalization) for the equivalent number of shares received in the merger
after giving effect to any differences in par value of the respective stock of
ExecuFirst and Republic.
The March 31, 1997 and December 31, 1996 Consolidated Balance Sheets
reflect the effect of the merger on a purchase accounting basis based on the
fair market value of ExecuFirst's common stock at a price of $5.75 per share,
the estimated market value of the stock for a reasonable period before and after
November 17, 1995, the announcement date of the merger.. The purchase price
calculated for accounting purposes amounted to $7,052,000, which is the result
of multiplying the $5.75 per share market value of ExecuFirst by the outstanding
share of ExecuFirst of approximately 1,226,000 (prior to subsequent dividends)
at the announcement date of the merger, plus acquisition expenses incurred by
Republic, as a result of the merger, in the amount of $1,193,000.
22
<PAGE>
The purchase price has been allocated to the respective assets acquired
and the liabilities based on their estimated fair market values, net of
applicable income tax effects. Negative goodwill in the amount of $1,045,000 was
generated for the purchase accounting purposes and was applied against (i) bank
premises and equipment in the amount of $276,000, (ii) other real estate owned
in the net amount of $84,000, and (iii) the net deferred tax asset in the amount
of $685,000. No negative goodwill remains after application to these non-current
assets.
2. Reclassifications:
Certain items in the 1996 financial statements were reclassified to
conform to 1997 presentation format.
Additionally, the Company declared a six for five stock split effected
in the form of a dividend on March 4, 1997 for all shareholders of record of the
Company on that date. Average common shares and common share equivalents, and
all other share presentations have been retroactively restated as if the
dividend was declared at the beginning of each respective period.
3. Earnings Per Share:
Earnings per common share, and common equivalent shares are based on
the weighted average number of common shares and common equivalent shares
outstanding during the quarter. Stock options are included as share equivalents
when dilutive. These common stock equivalents had a dilutive effect for the
quarter ended March 31, 1997 and 1996.
In February 1997 the FASB issued SFAS No. 128. "Earnings Per Share."
This Statement establishes standards for computing and presenting earnings per
share (EPS) and applies to entities with publicly held common stock or potential
common stock. This Statement simplifies the standards for computing earnings per
share previously found in APB Opinion No. 15, Earnings per Share, and makes them
comparable to international EPS standards. It replaces the presentation of
primary EPS with a presentation of basic EPS. It also requires dual presentation
of basic and diluted EPS on the face of the income statement for all entities
with complex capital structures and requires a reconciliation of the numerator
and denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation. This Statement requires restatement of all
prior-period EPS data presented upon adoption. Had the Company adopted SFAS No.
128 as of March 31, 1997, pro forma basic earnings per share would have been
$0.59 and $0.79 for the three months ended March 31, 1997 and 1996,
respectively.
23
<PAGE>
4. Investment Securities
The Company classifies certain investments under one of the following
categories: "held- to-maturity" which is accounted for at historical cost,
adjusted for accretion of discounts and amortization of premiums;
"available-for-sale" which is accounted for at fair market value, with
unrealized gains and losses reported as a separate component of shareholders'
equity; or "trading" which is accounted for at fair market value, with
unrealized gains and losses reported as a component of net income. The Bank does
not hold "trading" securities.
At March 31, 1997, the Bank had identified certain investment
securities that are being held for indefinite periods of time, including
securities that will be used as part of the Bank's asset/liability management
strategy and that may be sold in response to changes in interest rates,
prepayments and similar factors. The securities are classified as
"available-for-sale" and are intended to increase the flexibility of the Bank's
asset/liability management. Available-for-sale securities consist of US
Government Treasury and US Government Agency securities. The book and market
values of securities available-for-sale was $10,581,000 and $10,587,000
respectively, as of March 31, 1997. The net unrealized gain on securities
available-for-sale, as of this date, was $6,000.
The following table represents the carrying and estimated fair values of
Investment Securities at March 31, 1997.
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized
Available-for-Sale ($000) Cost Gain Loss Fair Value
<S> <C> <C> <C> <C>
US Treasury 999 0 (3) 996
US Government Agencies 3,675 12 (3) 3,684
Other 5,907 0 0 5,907
------ -- ---- ------
Total Available-for-Sale 10,581 12 (6) 10,587
------ -- ---- ------
Gross Gross
Amortized Unrealized Unrealized
Held-to-Maturity ($000) Cost Gain Loss Fair Value
US Government Agencies 68,906 0 (324) 68,582
Other 1,010 0 0 1,010
------ -- ---- ------
Total Held-to-Maturity 69,916 0 (324) 69,592
------ -- ---- ------
</TABLE>
24
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000834285
<NAME> FIRST REPUBLIC BANCORP INC
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 6,517,000
<INT-BEARING-DEPOSITS> 61,000
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 10,587,000
<INVESTMENTS-CARRYING> 69,916,000
<INVESTMENTS-MARKET> 0
<LOANS> 178,462,000
<ALLOWANCE> 2,162,000
<TOTAL-ASSETS> 281,819,000
<DEPOSITS> 246,634,000
<SHORT-TERM> 8,095,000
<LIABILITIES-OTHER> 6,712,000
<LONG-TERM> 0
<COMMON> 28,000
0
0
<OTHER-SE> 20,350,000
<TOTAL-LIABILITIES-AND-EQUITY> 281,819,000
<INTEREST-LOAN> 3,806,000
<INTEREST-INVEST> 1,342,000
<INTEREST-OTHER> 289,000
<INTEREST-TOTAL> 5,437,000
<INTEREST-DEPOSIT> 2,769,000
<INTEREST-EXPENSE> 2,846,000
<INTEREST-INCOME-NET> 2,591,000
<LOAN-LOSSES> 30,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,833,000
<INCOME-PRETAX> 2,863,000
<INCOME-PRE-EXTRAORDINARY> 2,863,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,004,000
<EPS-PRIMARY> 0.53
<EPS-DILUTED> 0.53
<YIELD-ACTUAL> 3.74
<LOANS-NON> 2,734,000
<LOANS-PAST> 1,489,000
<LOANS-TROUBLED> 2,734,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,092,000
<CHARGE-OFFS> 6,000
<RECOVERIES> 46,000
<ALLOWANCE-CLOSE> 2,162,000
<ALLOWANCE-DOMESTIC> 2,162,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 399,000
</TABLE>
