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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| (Mark One) | ||
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2002
Or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ____________ to ____________
Commission File Number: 0-15734
REPUBLIC BANCORP INC.
| Michigan | 38-2604669 | |
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| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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| 1070 East Main Street, Owosso, Michigan | 48867 | |
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| (Address of principal executive offices) | (Zip Code) |
(989) 725-7337
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 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.
Common Stock Outstanding as of October 31, 2002:
| Common Stock, $5 Par Value | 52,462,000 Shares |
INDEX
| PART I. | FINANCIAL INFORMATION | |||||
| Item 1. | Financial Statements (Unaudited) | |||||
| Consolidated Balance Sheets as of September 30, 2002 and December 31, 2001 | 3 | |||||
| Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2002 and 2001 | 4 |
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| Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2002 and 2001 | 5 | |||||
| Notes to Consolidated Financial Statements | 6 - 9 | |||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 9 - 18 | ||||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 19 | ||||
| Item 4. | Controls and Procedures | 19 | ||||
| PART II. | OTHER INFORMATION | |||||
| Item 1. | Legal Proceedings | 20 | ||||
| Item 2. | Changes in Securities and Use of Proceeds | 20 | ||||
| Item 3. | Defaults Upon Senior Securities | 20 | ||||
| Item 4. | Submission of Matters to a Vote of Security Holders | 20 | ||||
| Item 5. | Other Information | 20 | ||||
| Item 6. | Exhibits and Reports on Form 8-K | 20 | ||||
| SIGNATURE | 21 | |||||
| Certifications | 22 - 23 |
2
PART I — FINANCIAL INFORMATION
ITEM 1 — Financial Statements
REPUBLIC BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
| September 30, | December 31, | ||||||||||
| (Dollars in thousands) | 2002 | 2001 | |||||||||
ASSETS |
|||||||||||
Cash and cash equivalents |
$ | 83,750 | $ | 76,734 | |||||||
Mortgage loans held for sale |
541,256 | 748,463 | |||||||||
Securities available for sale (amortized cost of
$368,172 and $369,492, respectively) |
373,841 | 364,648 | |||||||||
Loans |
3,772,670 | 3,458,381 | |||||||||
Less allowance for loan losses |
(33,124 | ) | (29,157 | ) | |||||||
Net loans |
3,739,546 | 3,429,224 | |||||||||
Premises and equipment |
28,228 | 30,858 | |||||||||
Mortgage servicing rights |
2,801 | 2,482 | |||||||||
Bank owned life insurance |
85,874 | — | |||||||||
Other assets |
59,589 | 88,196 | |||||||||
Total assets |
$ | 4,914,885 | $ | 4,740,605 | |||||||
LIABILITIES |
|||||||||||
Noninterest-bearing deposits |
$ | 245,547 | $ | 245,395 | |||||||
Interest-bearing deposits: |
|||||||||||
NOW accounts |
163,868 | 153,839 | |||||||||
Savings and money market accounts |
888,275 | 819,674 | |||||||||
Certificates of deposit |
1,531,569 | 1,534,560 | |||||||||
Total interest-bearing deposits |
2,583,712 | 2,508,073 | |||||||||
Total deposits |
2,829,259 | 2,753,468 | |||||||||
Federal funds purchased and other short-term borrowings |
225,500 | 176,500 | |||||||||
FHLB advances |
1,368,670 | 1,300,718 | |||||||||
Accrued expenses and other liabilities |
96,929 | 112,783 | |||||||||
Long-term debt |
13,500 | 13,500 | |||||||||
Total liabilities |
4,533,858 | 4,356,969 | |||||||||
Trust preferred securities and preferred stock of
subsidiary |
50,000 | 78,719 | |||||||||
SHAREHOLDERS’ EQUITY |
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Preferred stock, $25 stated value: $2.25 cumulative
and convertible; 5,000,000 shares authorized,
none issued and outstanding |
— | — | |||||||||
Common stock, $5 par value, 75,000,000 shares
authorized; 52,629,000 and 53,166,000 issued
and outstanding, respectively |
263,144 | 265,831 | |||||||||
Capital surplus |
31,229 | 38,693 | |||||||||
Retained earnings |
32,969 | 3,542 | |||||||||
Accumulated other comprehensive income (loss) |
3,685 | (3,149 | ) | ||||||||
Total shareholders’ equity |
331,027 | 304,917 | |||||||||
Total liabilities and shareholders’ equity |
$ | 4,914,885 | $ | 4,740,605 | |||||||
See notes to consolidated financial statements.
3
REPUBLIC BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| September 30, | September 30, | ||||||||||||||||
| (In thousands, except per share data) | 2002 | 2001 | 2002 | 2001 | |||||||||||||
Interest Income: |
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Loans, including fees |
$ | 65,120 | $ | 74,971 | $ | 198,435 | $ | 244,737 | |||||||||
Investment securities |
5,355 | 4,584 | 15,426 | 12,282 | |||||||||||||
Total interest income |
70,475 | 79,555 | 213,861 | 257,019 | |||||||||||||
Interest Expense: |
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Deposits |
18,209 | 27,453 | 57,913 | 91,263 | |||||||||||||
Short-term borrowings |
1,008 | 1,076 | 2,648 | 2,535 | |||||||||||||
FHLB advances |
14,481 | 15,727 | 42,342 | 55,320 | |||||||||||||
Long-term debt |
241 | 241 | 724 | 1,209 | |||||||||||||
Total interest expense |
33,939 | 44,497 | 103,627 | 150,327 | |||||||||||||
Net interest income |
36,536 | 35,058 | 110,234 | 106,692 | |||||||||||||
Provision for loan losses |
6,200 | 2,000 | 11,000 | 6,300 | |||||||||||||
Net interest income after provision for loan losses |
30,336 | 33,058 | 99,234 | 100,392 | |||||||||||||
Noninterest Income: |
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Service charges |
2,484 | 2,232 | 6,490 | 5,775 | |||||||||||||
Mortgage production revenue |
7,715 | 6,013 | 23,101 | 40,520 | |||||||||||||
Net mortgage servicing revenue (expense) |
42 | 153 | 318 | (281 | ) | ||||||||||||
Gain on sale of securities |
1,933 | 404 | 2,751 | 934 | |||||||||||||
Income from bank owned life insurance |
874 | — | 874 | — | |||||||||||||
Other noninterest income |
1,093 | 1,176 | 3,181 | 2,540 | |||||||||||||
Gain on sale of subsidiary |
— | — | — | 12,000 | |||||||||||||
Total noninterest income |
14,141 | 9,978 | 36,715 | 61,488 | |||||||||||||
Noninterest Expense: |
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Salaries and employee benefits |
13,535 | 12,198 | 40,412 | 49,152 | |||||||||||||
Occupancy expense of premises |
2,467 | 2,391 | 7,439 | 9,017 | |||||||||||||
Equipment expense |
1,750 | 1,464 | 5,095 | 6,217 | |||||||||||||
Other noninterest expense |
5,290 | 6,355 | 16,750 | 23,045 | |||||||||||||
Restructuring costs to exit mortgage servicing |
— | — | — | 19,000 | |||||||||||||
Total noninterest expense |
23,042 | 22,408 | 69,696 | 106,431 | |||||||||||||
Income before income taxes |
21,435 | 20,628 | 66,253 | 55,449 | |||||||||||||
Provision for income taxes |
5,910 | 6,454 | 18,565 | 17,797 | |||||||||||||
Income before preferred stock dividends |
15,525 | 14,174 | 47,688 | 37,652 | |||||||||||||
Preferred stock dividends |
1,242 | 681 | 4,753 | 2,042 | |||||||||||||
Net income |
$ | 14,283 | $ | 13,493 | $ | 42,935 | $ | 35,610 | |||||||||
Basic earnings per share |
$ | .27 | $ | .25 | $ | .81 | $ | .65 | |||||||||
Diluted earnings per share |
$ | .27 | $ | .24 | $ | .80 | $ | .64 | |||||||||
Average common shares outstanding — diluted |
53,671 | 55,265 | 53,864 | 55,199 | |||||||||||||
Cash dividends declared per common share |
$ | .085 | $ | .077 | $ | .255 | $ | .232 | |||||||||
See notes to consolidated financial statements.
4
REPUBLIC BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
| Nine Months Ended September 30 (In thousands) | 2002 | 2001 | |||||||||
Cash Flows From Operating Activities: |
|||||||||||
Net income |
$ | 42,935 | $ | 35,610 | |||||||
Adjustments to reconcile net income to net cash provided by
operating activities: |
|||||||||||
Depreciation and amortization |
7,217 | 6,020 | |||||||||
Amortization and write-down of mortgage servicing rights |
861 | 20,253 | |||||||||
Net gain on sale of mortgage servicing rights |
— | (21,521 | ) | ||||||||
Net gain on sale of securities available for sale |
(2,751 | ) | (934 | ) | |||||||
Net gain on sale of SBA and residential real estate loans |
(4,069 | ) | (1,314 | ) | |||||||
Net gain on sale of subsidiary |
— | (12,000 | ) | ||||||||
Proceeds from sales of mortgage loans held for sale |
1,756,447 | 3,322,772 | |||||||||
Origination of mortgage loans held for sale |
(1,549,240 | ) | (3,505,987 | ) | |||||||
Net decrease in other assets |
15,981 | 28,345 | |||||||||
Net decrease in other liabilities |
(15,854 | ) | (21,473 | ) | |||||||
Other, net |
1,948 | (2,094 | ) | ||||||||
Total adjustments |
210,540 | (187,933 | ) | ||||||||
Net cash provided by (used in) operating activities |
253,475 | (152,323 | ) | ||||||||
Cash Flows From Investing Activities: |
|||||||||||
Proceeds from sale of securities available for sale |
211,455 | 117,297 | |||||||||
Proceeds from maturities/payments of securities available for sale |
42,682 | 6,484 | |||||||||
Purchases of securities available for sale |
(250,529 | ) | (274,977 | ) | |||||||
Purchase of bank owned life insurance |
(85,000 | ) | — | ||||||||
Proceeds from sale of consumer loans |
— | 39,485 | |||||||||
Proceeds from sale of SBA and residential real estate loans |
158,772 | 62,423 | |||||||||
Net (increase) decrease in loans made to customers |
(463,298 | ) | 106,478 | ||||||||
Proceeds from sale of subsidiary and payments received on related
borrowings |
— | 176,184 | |||||||||
Proceeds from sale of mortgage servicing rights |
— | 94,250 | |||||||||