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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission File
December 31, 1998 No. 0-27652
REPUBLIC BANCSHARES, INC.
(Exact Name of Registrant As Specified In Its Charter)
FLORIDA 59-3347653
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
111 2nd Avenue N.E., St. Petersburg, FL 33701
(Address of Principal Office) (Zip Code)
(727) 823-7300
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
Title of each Class
Common Stock, par value $2.00
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
The aggregate market value of the registrant's Common Stock held by
non-affiliates of the Registrant, based upon the average bid and asked prices,
was approximately $206,852,000, on March 19, 1999. As of that date, there were
10,473,504 shares of the Registrant's Common Stock, par value $2.00 per share,
issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Proxy Statement for the 1999 Annual Meeting of
Stockholders are incorporated by reference into Parts I, II, III, and IV of
this report.
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TABLE OF CONTENTS
PART I
ITEM 1. BUSINESS
Background and Prior Operating History ................................ 1
Business of Republic Bancshares, Inc................................... 2
Sources of Funds....................................................... 3
Lending Activities..................................................... 3
Credit Administration.................................................. 5
Asset Quality.......................................................... 6
Investment Activities..................................................10
Employees..............................................................10
Market Area............................................................10
Market Risk............................................................11
Supervision and Regulation.............................................13
Effects of Inflation...................................................18
Year 2000 Issues.......................................................18
Changes in Accounting Standards........................................19
ITEM 2. PROPERTIES......................................................20
ITEM 3. LEGAL PROCEEDINGS...............................................28
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............28
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS............................................28
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA............................30
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Years Ended December 31, 1998 and 1997.................................32
Years Ended December 31, 1997 and 1996.................................38
Asset/Liability Management and Liquidity...............................46
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.....................49
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.......................................49
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..............49
ITEM 11. EXECUTIVE COMPENSATION..........................................50
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..50
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................50
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K............................................50
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PART I
ITEM 1. BUSINESS
Republic Bancshares, Inc. (the "Company") is a registered bank holding company
whose principal subsidiary is Republic Bank (the "Bank"), a Florida-chartered
commercial bank headquartered in St. Petersburg, Florida. The Company also has
a St. Petersburg-based thrift subsidiary, chartered in 1998 under the name
Republic Bank, F.S.B. (the "Savings Bank"). The Bank and the Savings Bank
provide a broad range of traditional commercial banking services, emphasizing
commercial real estate and business lending. Previously, the Company's
mortgage banking activities comprised a significant portion of its business,
however, at the end of 1998, the Company significantly reduced the size and
scope of its mortgage banking operations. At December 31, 1998, the Bank's
branch network consisted of 61 branches throughout Florida. The Savings Bank
has two branches, one in Florida and one in Brunswick, Georgia. At December
31, 1998, the Company's consolidated assets totaled $2.5 billion, portfolio
loans totaled $1.9 billion, deposits totaled $2.2 billion and stockholders'
equity was $163.6 million. The Company is regulated by the Federal Reserve.
The Bank is regulated by the Florida Department of Banking and Finance (the
"Department") and the Federal Deposit Insurance Corporation (the "FDIC"). The
Savings Bank is regulated by the Office of Thrift Supervision (the "OTS"). The
Bank and the Savings Bank's deposits are insured by the FDIC up to applicable
limits, and the Bank is a member of the Federal Home Loan Bank of Atlanta (the
"FHLB").
BACKGROUND AND PRIOR OPERATING HISTORY OF THE BANK
In May 1993, William R. Hough and John W. Sapanski, the Company's two
principal shareholders, acquired from the prior controlling stockholder more
than 99.0% of the Bank's outstanding common stock (the "Change in Control").
After the Change in Control, the Bank began to implement a program of
expanding its branches and lines of business. In December 1993, the Bank
acquired 12 branches from Crossland Savings, F.S.B., a federal stock savings
bank, assumed deposit liabilities of $327.7 million and purchased loans
secured by real estate and other real estate ("ORE") amounting to $201.6
million. During the latter part of 1994 and throughout 1995, the Bank
continued to pursue a strategy of increasing its retail banking presence on
the West Coast of Florida. The Bank opened 13 new branches, increasing market
presence in existing counties and expanding into Pasco County. At the same
time, the Bank undertook a program of purchasing residential mortgage loans,
primarily from the FDIC at substantial discounts from face value, as a means
of deploying the excess liquidity from new deposits until internal loan growth
was sufficient.
Following the Bank's conversion to a holding company structure in February
1996, the Company focused on increasing its residential lending capabilities
by adding loan production offices in Florida, Boston, Massachusetts, and
Irvine, California. These offices expanded the Company's product line to
include government-insured first mortgage loans, and high loan-to-value debt
consolidation and home improvement loans secured by junior liens on real
estate ("High LTV Loans"). In the fourth quarter of 1996, the Bank also added
a wholesale lending operation that purchased loans from third-party
originators for resale. The Company sold or securitized a substantial portion
of the loans it originated from its mortgage banking division, and consummated
its first securitization of High LTV Loans in December 1997.
While building its mortgage banking operation, the Company continued expanding
its commercial banking operation and in January 1997, opened a new branch in
Hernando County. In April 1997, the Company acquired Firstate Financial,
F.A., a thrift institution headquartered in Orlando, Florida, for a cash
purchase price of $5.5 million (the "Firstate Acquisition"). The Firstate
Acquisition, in which the Company acquired $71.1 million in assets, $67.9
million in deposits, and a branch in each of Orange and Seminole Counties,
increased the Company's presence in central Florida, where the Company
previously operated a commercial loan production facility but had no branches.
In September 1997, F.F.O. Financial Group, Inc. ("FFO"), St. Cloud, Florida,
the holding company parent of First Federal Savings and Loan Association of
Osceola County, was merged into the Company in a stock-for-stock transaction
(the "FFO Merger"). The FFO Merger further increased the Company's presence
in central Florida by adding 11 branches in Brevard, Orange and Osceola
Counties. At the time of the merger, FFO had total assets of
$328.4 million, total loans of $222.4 million and total deposits of $281.3
million.
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In June 1998, the Company acquired three branch offices of NationsBank, N.A.
and four branch offices of NationsBank's then affiliate, Barnett Bank, N.A.,
all of which were located in Florida, including the loans and other assets
recorded at such offices. At acquisition, the seven branches had deposit
liabilities of $199.9 million and loans of $114.4 million. On August 20,
1998, the Company acquired an additional branch of Barnett located in
Brunswick (Glynn County), Georgia, with the office becoming an interstate
branch of the Company's newly-chartered Savings Bank. At acquisition, the
Georgia Branch had deposit liabilities of $16.9 million and loans of $7.5
million. The Company paid a combined deposit and loan premium of $24.0
million for all of the branches that were acquired.
On August 13, 1998, the Company purchased a branch office in Deerfield Beach
(Broward County), Florida from the Dime Savings Bank, F.S.B. In the
transaction, the Company acquired $61,000 of loans and $100,000 of personal
property and equipment located at the branch and assumed $206.7 million of
deposits. The Company's purchase price for the Dime Branch was $9.8 million.
On November 5, 1998, Bankers Savings Bank, F.S.B., Coral Gables, Florida
("BSB"), was acquired by the Company in a stock-for-stock transaction. At the
date of acquisition, BSB had total assets of $70.0 million, total loans of
$46.2 million, total deposits of $61.1 million and operated two branches in
Dade County.
On November 5, 1998, Lochaven Federal Savings and Loan Association, Orlando,
Florida, was also acquired by the Company in a stock-for-stock transaction. At
the date of acquisition, Lochaven had total assets of $56.5 million, total
loans of $44.8 million, total deposits of $54.0 million and operated one branch
in Orange County.
In the fourth quarter of 1998 the Company significantly reduced the size and
scope of its mortgage banking activities. Turmoil in financial markets,
particularly the High LTV and nonconforming mortgage loan segments, reduced
liquidity levels in the high LTV sector of the asset-backed securities markets
which in turn adversely affected the volume and pricing of mortgage loans in
the secondary markets. During the second half of November 1998, the Company's
normal conduits for sale and/or securitization of its High LTV Loans and
nonconforming first mortgage loans became unavailable due to those liquidity
problems. Rather than dispose of High LTV Loans and nonconforming mortgages at
distressed prices resulting from the illiquid market, the Company elected
during such period to forego sales or securitizations of those loans in the
fourth quarter of 1998 and to hold those loans in its portfolio. The Company
also ceased originating High LTV Loans and substantially reduced its
originations of nonconforming first mortgage loans. The Company also closed its
out-of-state loan production offices and ceased all telemarketing efforts that
were the source of the majority of the loan originations from its mortgage
banking unit. A restructuring charge of $6.7 million was recorded, primarily
for severance benefits payable to mortgage banking employees whose positions
were eliminated and an $818,000 charge was recorded for legal and other costs
not includable as part of the restructuring charge.
BUSINESS OF REPUBLIC BANCSHARES, INC.
Following the recent restructuring of its mortgage lending operations (the
"Restructuring"), the Company revised its principal business strategy to
include: (i) increasing the amount of its consumer and business loans held in
portfolio, with continued emphasis on commercial real estate and multifamily
residential loans; (ii) increasing market share and expanding its market area
primarily through de novo branching and internal growth; (iii) emphasizing
commercial and retail checking relationships; and (iv) increasing its range of
commercial banking and retail-oriented products and services. While pursuing
this strategy, management remains committed to improving asset quality,
managing interest rate risk and enhancing profitability.
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SOURCES OF FUNDS
Deposit accounts are the Company's primary source of funds for lending,
investment, and other general business purposes. In addition to deposits, funds
are derived principally from loan repayments. Scheduled loan payments on the
residential loan portfolio are a relatively stable source of funds, while
residential loan prepayments, deposit in-flows and out-flows are significantly
influenced by general interest rate and money market conditions. Additional
funding needs may be met through borrowings from the FHLB, which are secured by
a blanket lien on the Company's portfolio of residential loans. Current
funding requirements can be met through retail deposits, without reliance on
brokered deposits. To the extent there is a requirement for short-term
financing beyond liquid assets, the Company intends to rely on repurchase
agreements, FHLB advances, and other traditional money market sources of
funding. For additional discussion of asset/liability management policies and
strategies, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Asset/Liability Management."
The Company offers a full range of deposit services, including checking and
other transaction accounts, savings accounts, and time deposits. At December
31, 1998, the Company had no brokered deposits; time deposits in amounts of
$100,000 or more constituted 13.18% of total deposits.
The following table sets forth the principal types of deposit accounts offered
and the aggregate amounts of such accounts at December 31, 1998 (in thousands):
Weighted
Average Percent of
Interest Rate Amount Total Deposits
------------- ------------ --------------
Noninterest bearing 0.00% $ 138,934 6.35%
Interest checking .75 189,392 8.66
Passbook savings 4.25 292,324 13.36
Statement savings 1.98 74,493 3.41
Money market 3.48 159,868 7.31
Time deposits with original maturities of:
One year or less 4.87 146,659 6.70
Over 1 year through 5 years 5.55 1,010,031 46.17
Over 5 years 6.17 175,711 8.03
------ -------------- -------
Total time deposits (1) 5.55 1,332,401 60.91
====== ============== =======
Total deposits 4.63% $2,187,412 100.00%
====== ============== =======
(1) Includes time deposits in amounts of $100,000 or more of $288.3
million.
At December 31, 1998, scheduled maturities of total time deposits were as
follows (in thousands):
Year ended Percent of
December 31, Amount Total Time Deposits
------------ ------------ -------------------
1999 $ 993,455 74.6%
2000 212,031 15.9
2001 58,423 4.4
2002 19,957 1.5
2003 46,714 3.5
Thereafter 1,821 .1
------------ ------------------
Total time deposits $1,332,401 100.0%
============ ==================
LENDING ACTIVITIES
The Company originates a full range of lending products for its portfolio. The
Company's origination of High LTV and real estate-secured loans for sale in the
secondary market has been significantly reduced in amount and product selection
as a result of the Restructuring. Portfolio lending efforts are now focused on
customers located throughout
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Florida and in Brunswick, Georgia. The Company's portfolio objective has been
revised to reduce, over time, the reliance on residential mortgage loans and to
increase its consumer and business loans. The Company will also continue to
emphasize commercial real estate and multifamily residential lending.
For 1998, originations of first and second lien mortgage loans totaled $1.4
billion, including $1.3 billion in fixed-rate loans and $94.0 million of
adjustable-rate loans. Sales of first and second lien loans totaled $952.0
million for 1998. Residential mortgage loan originations are expected to amount
to less than $200.0 million in 1999. Originations of commercial real estate and
commercial (business) loans totaled $538.0 million for 1998 and are expected to
remain at this level in 1999.
The following tables set forth information concerning the loan portfolio, based
on total dollars and percent of portfolio, by collateral type as of the dates
indicated (in thousands):
Based on total dollars: At December 31,
---------------------------------------------------------
1998 1997 1996 1995 1994
-------- ---------- -------- ------- -------
Real estate mortgage loans:
One-to-four family residential $973,538 $686,661 $532,692 $512,751 $417,041
Multifamily residential 92,209 84,863 89,129 94,242 107,054
High LTV Loans 116,764 - - - -
Commercial real estate 379,797 278,951 234,043 184,050 144,233
Construction/land development 130,415 51,511 32,245 26,268 27,189
Home equity loans 75,707 47,365 15,014 7,939 7,568
---------- ---------- ---------- -------- --------
Total real estate mortgage loans 1,768,430 1,149,351 903,123 825,250 703,085
Commercial (business) loans 84,002 39,119 40,747 36,272 32,894
Consumer loans and other loans 43,857 27,430 32,352 24,320 17,383
---------- ---------- ---------- -------- --------
Total portfolio loans 1,896,289 1,215,900 976,222 885,842 753,362
Allowance for loan losses (28,077) (22,023) (19,774) (21,097) (16,322)
---------- ---------- ---------- -------- --------
Portfolio loans, net of allowance 1,868,212 1,193,877 956,448 864,745 737,040
Loans held for sale:
Residential first mortgage loans 184,176 141,556 92,838 84,311 61,214
High LTV Loans - 45,670 5,511 - -
---------- ---------- ---------- -------- --------
Loans held for sale 184,176 187,226 98,349 84,311 61,214
---------- ---------- ---------- -------- --------
Total loans $2,052,388 $1,381,103 $1,054,797 $949,056 $798,254
========== ========== ========== ======== ========
Based on percent of portfolio: December 31,
------------------------------------------
1998 1997 1996 1995 1994
------ ------- ------ ------ -----
Real estate mortgage loans:
One-to-four family residential 51.34% 56.47% 54.57% 57.88% 55.36%
Multifamily residential 4.86 6.98 9.13 10.64 14.21
Commercial real estate 20.03 22.94 23.97 20.78 19.14
High LTV Loans 6.16 0.00 0.00 0.00 0.00
Construction/land development 6.88 4.24 3.30 2.97 3.61
Home equity loans 3.99 3.90 1.54 0.89 1.00
------- ---------------- ------- -------
Total real estate mortgage loans 93.26 94.53 92.51 93.16 93.32
Commercial (business) loans 4.43 3.22 4.17 4.10 4.37
Consumer loans and other loans 2.31 2.25 3.32 2.74 2.31
------- ------- ------- ------- -------
Total portfolio loans 100.00% 100.00% 100.00% 100.00% 100.00%
======= ======= ======= ======= =======
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The following table sets forth the contractual amortization of real estate and
commercial loans at December 31, 1998 and 1997. Loans having no stated schedule
of repayments and no stated maturity are reported as due in one year or less.
The table also sets forth the dollar amount of loans scheduled to mature after
one year, according to their interest rate characteristics (in thousands):
December 31, 1998 December 31, 1997
------------------------------------------------------------------
Type of loan: Real Estate Commercial Real Estate Commercial
--------------- --------------- --------------------------------
Amounts due:
One year or less $ 361,236 $13,369 $90,381 $15,597
After one through five years 296,670 55,375 281,528 20,142
More than five years 1,110,524 15,258 777,442 3,380
--------------- --------------- --------------- ---------------
Total $1,768,430 $84,002 $1,149,351 $39,119
=============== =============== =============== ===============
Interest rate terms on
amounts due after one year:
Adjustable $ 688,040 $51,229 $691,743 $9,220
Fixed 719,154 19,404 367,227 14,302
--------------- --------------- --------------- ---------------
Total $1,407,194 $70,633 $1,058,970 $23,522
=============== =============== =============== ===============
CREDIT ADMINISTRATION
The Company's loan approval process provides for various levels of lending
authority to loan officers, the Officers' Loan Committee, and the Chairman and
Chief Executive Officer. In addition, loans in excess of $1.5 million require
the approval of the Board of Directors' Loan Committee or a majority of the
full Board prior to funding. Loan purchases are made subject to the same
underwriting standards as loan originations. All loan purchases must be
approved in advance of funding by the Chief Executive Officer and are reported
to the full Board following purchase. To achieve consistency in underwriting
policies and procedures, the Company has centralized the supervision of all
credit decision functions.
The Company's real estate lending consists of extensions of credit secured by
liens on interests in real estate or made for the purpose of financing the
construction of a building or other improvements to real estate, regardless of
whether a lien has been taken on the property. Under applicable regulations,
the Company is required to adopt and maintain comprehensive written real estate
lending policies that are consistent with safe and sound banking practices.
These lending policies must reflect consideration of the Interagency Guidelines
for Real Estate Lending Policies adopted by the federal banking agencies in
December 1992 (the "Guidelines"). The Guidelines set forth regulations
prescribing standards for real estate lending, which the Company has
incorporated into its lending policy.
The Company's lending policy addresses certain lending considerations set forth
in the Guidelines, including loan-to-value ("LTV") limits, loan administration
procedures, underwriting standards, portfolio diversification standards and
documentation, approval and reporting requirements. The LTV ratio framework,
with a LTV ratio being the total amount of credit to be extended divided by the
appraised value or purchase price of the property at the time the credit is
originated, has been established for each category of real estate loans. The
Company's policy, subject to certain approval exceptions, establishes, among
other things, the following LTV limits: raw land (65%); land development (75%);
construction (commercial, multifamily and non-residential) (80%); and improved
property (85%). For portfolio purposes, loans on one-to-four family
residential (owner occupied) mortgages where the LTV exceeds 95% are not made,
and any LTV ratio in excess of 80% generally requires appropriate insurance or
additional security from readily marketable collateral. Originations of High
LTV Loans has been discontinued. The Board of Directors reviews and approves
the Company's lending policies at least annually.
The Company's commercial (business) lending is based on a strategy of extending
credit to the Florida business community, with commercial loans being made to
corporate and commercial loans to borrowers with satisfactory cash flows.
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The Company manages its loan portfolio on an ongoing basis following written
portfolio management strategies, guidelines for underwriting standards and risk
assessment, and procedures for ongoing identification and management of credit
deterioration. Management undertakes regular portfolio reviews to estimate
loss exposure and ascertain compliance with policies (see -- "Asset Quality").
ASSET QUALITY
ALLOWANCE/PROVISION FOR LOAN LOSSES
The allowance for loan losses represents management's estimate of an amount
adequate to provide for probable losses inherent in the loan portfolio based on
historical data for the Company and the current status of the loan portfolio.
However, there may be additional risks of losses in the future, which cannot be
quantified precisely or attributed to particular loans or classes of loans.
Because those risks include general economic trends, as well as available
information about conditions affecting individual borrowers, management's
estimate of the allowance needed is necessarily approximate and imprecise. The
allowance is also subject to regulatory examinations and determinations as to
adequacy, which may take into account such factors as the methodology used to
calculate the allowance and the size of the allowance in comparison to peers
identified by the regulatory agencies.
Management conducts an ongoing evaluation and grading of its loan portfolio
according to an eight-point rating system. The loan ratings serve as a
guideline in assessing the risk level of a particular loan and provide a basis
for the estimation of the overall allowance necessary based on historical
experience. The Loan Review Department independently rates loans and, on a
quarterly basis, meets with senior management and the loan officers to discuss
all loans which have been identified for potential credit quality problems.
The Loan Review Department also reports its findings to the Directors' Audit
Committee to ensure independence of the loan grading function.
The Company believes that its loan loss allowance policy is both consistent
with policies established by federal and state regulatory agencies and
commensurate with historical loss experience. Provisions for loan losses
charged to expense during each period are made based on management's assessment
of the adequacy of the allowance when compared to the inherent risk of the
existing portfolio. As part of the risk assessment for loans purchased from
Crossland in 1993 and for loans purchased from 1994 through 1997, management
allocated a portion of the discount on such loan purchases to the allowance in
amounts which are consistent with the Company's loan loss allowance policy
guidelines. Amounts resulting from discount allocation or loss provision to
the allowance related to specific pools of purchased loans are available to
absorb potential losses only on those purchased loans and are not available to
cover losses on other loans. At December 31, 1998, $1.2 million was allocated
to the March 1995 Purchase, $539,000 was allocated to loans purchased from
Crossland, $543,000 was allocated to the July 1997 Purchase, $1.0 million was
allocated to other loan purchases, and $24.8 million was allocated to
originated loans. At December 31, 1998, the amount of unearned discount on
purchased loans, which had not been allocated to the allowance, totaled $3.9
million.
Activity to the allowance during 1998 included a $14.3 million provision for
loan losses. Of this, $10.0 million represented provisions necessary to
maintain the adequacy of the allowance considering transfer of High LTV and
nonconforming residential loans to the portfolio. Other activity to the
allowance during 1998 included $3.9 million of loan charge-offs (net of
recoveries), and $4.3 million reallocated from the allowance to loan discounts
as a result of lower than expected charge-offs in these portfolios. Activity
to the allowance during 1997 included a $3.2 million provision for loan losses,
loan charge-offs (net of recoveries) of $1.2 million, $132,000 of reserves
related to the Firstate acquisition, and $39,000 transferred to unearned
discount.
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The following table sets forth information concerning the activity in the
allowance for loan losses during the periods indicated (in thousands):
Years Ended December 31,
------------------------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
Allowance at beginning
of period: $22,023 $19,774 $21,097 $16,322 $17,346
Allowance from Firstate
Acquisition - 132 - - -
Loan discount (net) allocated
to/(from) the allowance for:
Loans purchased from Crossland (805) - - - (757)
Loans purchased in 1994 (689) - (202) - 1,400
Loans purchased in 1995 (2,605) (773) (1,541) 7,658 -
Loans purchased in 1996 - - 11 - -
Loans purchased in 1997 (204) 812 - - -
------- ------- ------ ------- -----
Total loan discount allocated
to/(from) the allowance (4,303) 39 (1,732) 7,658 643
Charge-offs:
Residential loans (1-4 family) (1,481) (974) (1,934) (553) (796)
Commercial real estate/
multi-family (266) (15) (170) (4,054) (1,612)
Commercial (business) (1,450) (125) (249) (1,000) (320)
Consumer and other loans (1,197) (288) (292) (207) (141)
------- ------- ------ ------ -----
Total charge-offs (4,394) (1,402) (2,645) (5,814) (2,869)
Recoveries:
Residential loans (1-4 family) 112 3 31 65 83
Commercial real estate/
multi-family 183 54 35 379 113
Commercial loans (business) 48 152 168 53 64
Consumer and other loans 147 24 62 10 1
------- ------- ------ ------ -----
Total recoveries 490 233 296 507 261
Net charge-offs (3,904) (1,169) (2,349) (5,307) (2,608)
Reclassification of allowance for
in substance foreclosures under
adoption of SFAS Nos.114 and 118 - - - - 537
Provisions for loan losses 14,261 3,247 2,758 2,424 404
------- ------- ------- ------- --------
Allowance at end of period $28,077 $22,023 $19,774 $21,097 $16,322
======= ======= ======= ======= ========
Charges to allocated loan discount 0.03% 0.04% 0.15% 0.09% 0.20%
Other net charge-offs 0.19 0.06 0.10 0.54 0.21
------- ------- ------ ----------- -----
Total net charge-offs to
average loans 0.22% 0.10% 0.24% 0.63% 0.40%
======= ======= ====== ====== =====
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The following table sets forth the allocation of the allowance based on
management's subjective estimates and the percent of the loan portfolio for
each category presented. The amount allocated to a particular segment should
not be construed as the only amount available for future charge-offs that might
occur within that segment. In addition, the amounts allocated by segment may
not be indicative of future charge-off trends. The allocation of the allowance
may change from year to year should management determine that the risk
characteristics of the loan portfolio and off-balance sheet commitments have
changed.
1998 1997
--------------------- ------------------
Allowance Allocation Percent of Percent of
Amount Portfolio Amount Portfolio
------- ---------- ------ ----------
(in thousands)
Performing/not classified:
Residential loans:
arch 1995 Purchase $ 49 1.2% $3,421 2.1%
All other residential 1,976 55.5 1,427 58.9
Debt consolidation & subprime loans 4,621 8.4 - -
Commercial (business) 830 4.0 358 2.5
Commercial real estate 3,602 19.2 3,481 27.6
Consumer & other 1,995 7.9 1,416 5.3
----- ---- ------ ----
Subtotal 13,073 96.2 10,103 96.4
Nonperforming/classified:
Special mention 587 1.4 200 .7
Substandard & nonperforming 7,272 2.3 5,663 2.7
Doubtful 871 .1 722 .1
Loss - - 992 .1
----- ---- ------ ----
Subtotal 8,730 3.8 7,577 3.6
Off balance sheet risk 1,553 - 946 -
Unallocated 4,721 - 3,397 -
----- ---- ------ ----
Total $28,077 100.0% $22,023 100.0%
======= ====== ======= ======
NONPERFORMING ASSETS
- --------------------
Nonperforming assets include: (i) loans which are 90 days or more past due and
have been placed into non-accrual status; (ii) restructured loans that have not
yet demonstrated a sufficient payment history to warrant return to performing
status and therefore, are not accruing interest; (iii) accruing loans that are
90 days or more delinquent that are deemed by management to be adequately
secured and in the process of collection; and (iv) ORE (i.e., real estate
acquired through foreclosure or deed in lieu of foreclosure). All delinquent
loans are reviewed on a regular basis and are placed on non-accrual status
when, in the opinion of management, the possibility of collecting additional
interest is deemed insufficient to warrant further accrual. As a matter of
policy, interest is not accrued on loans past due 90 days or more unless the
loan is both well secured and in process of collection. When a loan is placed
in non-accrual status, interest accruals cease and uncollected accrued interest
is reversed and charged against current income. Additional interest income on
such loans is recognized only when received.
Loans classified as non-accrual totaled $36.6 million at December 31, 1998,
compared with $30.4 million at December 31, 1997, an increase of $6.2 million.
Nonperforming one-to-four family residential loans at year-end 1998 increased
$7.0 million and commercial real estate and multifamily loans increased
$482,000, while nonperforming commercial (business) loans declined $1.0
million. The increase in residential nonperforming loans was primarily the
result of a $4.1 million increase in nonperforming loans originated by the
mortgage banking unit which were transferred to portfolio due to underwriting
weaknesses which caused the quality of the loans to fall below investor
standards. The loans later became delinquent. At December 31, 1998 and 1997,
the Company had nonperforming assets (including loans classified as
non-accrual) of $42.8 million or 1.71% of total assets and $38.8 million or
2.31% of total assets, respectively. Accruing loans, which were 90 days past
due amounted to $1.2 million at December 31, 1998 and $196,000 at December 31,
1997, and primarily consisted of loans in process of renewal. (See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Comparison of Balance Sheets at December 31, 1998 and 1997.")
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The following table sets forth information regarding the components of
nonperforming assets at the dates indicated (in thousands):
At December 31,
--------------------------------------------------
1998 1997 1996 1995 1994
---------------------------------------------------
Non-accrual loans:
Residential loans (1-4 family) $24,149 $17,101 $12,495 $13,394 $12,134
Multi-family residential 183 194 55 129 1,160
Commercial real estate 9,614 9,121 8,140 4,119 3,907
Commercial (business) 1,027 2,031 1,604 1,059 1,179
Home equity and consumer 619 638 164 495 632
Other nonperforming receivables 1,010 1,319 - - -
------- ------- --------- --------- -----
Total non-accrual loans 36,602 30,404 22,458 19,196 19,012
ORE acquired through foreclosure 4,951 8,191 9,477 13,465 18,436
Accruing loans 90 days
past due 1,232 196 113 1,876 293
------- ------- --------- --------- -------
Nonperforming assets $42,785 $38,791 $32,048 $34,537 $37,741
======= ======= ========= ========= =======
Nonperforming loans
to loans 2.02% 2.52% 2.31% 2.38% 2.56%
Nonperforming assets
to total assets 1.71% 2.31% 2.35% 2.78% 3.64%
OTHER REAL ESTATE ACQUIRED THROUGH FORECLOSURE
All ORE assets are recorded at the lower of cost or estimated fair market value
less selling costs based on appraisal information that is updated when a
property is taken into ORE and, thereafter, when determined appropriate by
management but no less than annually. As of December 31, 1998, in no case did
the book value of any ORE property exceed 90% of the most recent appraisal.
The following table sets forth information regarding the Company's ORE
balances, net of allowances, as of the dates indicated (in thousands):
At December 31,
--------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------- -------
Vacant undeveloped residential land $ 6 $1,145 $1,334 $ 1,755 $ 2,444
Vacant developed residential lots 785 254 260 265 434
Residential houses 2,258 2,613 3,442 1,779 1,464
Vacant commercial undeveloped land 640 855 821 1,357 6,419
Commercial land developed for sale 890 2,835 3,450 4,823 6,771
Income-producing commercial buildings 310 427 12 2,801 80
Vacant commercial buildings 62 62 - 685 824
------ ------ ------ ------- -------
Total ORE $4,951 $8,191 $9,319 $13,465 $18,436
====== ====== ====== ======= =======
ORE to total assets 0.20% 0.49% 0.69% 1.08% 1.78%
====== ====== ====== ======= =======
The ORE amount has been reduced from $18.4 million at the end of 1994, which
includes assets acquired from Crossland, to $5.0 million at the end of 1998.
The largest ORE property is a tract of land in Holiday, Florida, currently
carried at $884,000. During 1998, the Company recorded $1.4 million of
valuation allowances on this property. The Company will be required to
write-off the remaining book value of this property, for regulatory purposes,
if it has not been sold by March 31, 1999. A contract for the sale of this
property has been approved by the Company and the purchaser for closing before
March 31, 1999 at a sales price of $1.5 million.
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TROUBLED DEBT RESTRUCTURINGS
In a troubled debt restructuring ("TDR") the creditor allows the debtor certain
concessions that would not normally be allowed, such as modifying the terms of
the debt to a basis more favorable than those offered to other creditors or
accepting third-party receivables in lieu of the debt. At December 31, 1998
and 1997, the loan portfolio included TDR's amounting to $411,000 and $7.5
million, respectively. Restructured, nonperforming loans (all in non-accrual
status), included in total TDR's for 1998 and 1997 were $0 and $4.9 million,
respectively.
INVESTMENT ACTIVITIES
State law requires that the Bank maintain a specified minimum amount of liquid
assets, based on the level of deposits, which are subject to certain
restrictions. At December 31, 1998, the amount of liquid assets maintained
exceeded the regulatory minimum.
EMPLOYEES
At December 31, 1998, there were 1,733 full-time equivalent employees, none of
whom were represented by a union or other collective bargaining agreement.
Included in this total were 997 employees assigned to the Company's commercial
banking operations and 736 employees assigned to its mortgage banking
operation. As a result of the restructuring of the mortgage banking unit
announced in December 1998, the Company expects to reduce the number of
employees assigned to this area to approximately 150.
MARKET AREA
At December 31, 1998, the Company had 61 branches throughout Florida and one
branch in Glynn County, Georgia. As a multi-branch institution, the Company's
market area encompasses all of the counties in which it operates.
Most of the Company's branches are in Metropolitan Statistical Areas ("MSA").
A MSA is defined by the U.S. Census Bureau as a geographic area with a
significant population nucleus, along with any adjacent communities that have
a high degree of economic and social integration with the nucleus. Of the
Company's branches, more than half are in the two MSA's which anchor the West
Coast of Florida: (i) Tampa-St. Petersburg-Clearwater, which includes
Hillsborough, Hernando, Pasco and Pinellas Counties; and (ii)
Sarasota-Bradenton, comprised of Manatee and Sarasota Counties. As of April
1998, the latest date estimates were available, the Tampa-St. Petersburg MSA
had a population of 2.28 million and the Sarasota-Bradenton MSA had a
population of 563,000. Together, the two MSA's had a combined population of
2.8 million residents, which would rank approximately 12th in the United
States. The economic base of the MSA's in which the Company has branches are
supported by a large and growing segment of retirees, tourism, which
contributes to the economic base throughout the year, and light industry.
Florida is a highly competitive state for financial services of all kinds.
Competition for deposits also exists from money market funds and credit unions.
Consumers can choose from a wide range of suppliers of personal credit,
including credit card companies, consumer finance companies, credit unions and
mortgage bankers, as well as from competing financial institutions.
The Company ranked 10th among banks and 15th among all depository institutions
in the state of Florida in terms of deposits held as of June 30, 1998, the
latest date for which data is available. As the table below indicates, market
share ranges from 12.5% in Osceola County to one-half of 1% in Orange County.
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Branch Deposits in Florida by County
(in millions)
At December 31, 1998,
------------------------
As of June 30, 1998
Number of ---------------------------------------
Branch Offices Amount The Company Total The Company
-------------- -------- ----------- ---------- -----------
Brevard 5 $182,338 $167,828 $4,011,965 4.2 %
Broward 4 204,749 - - -
Columbia 1 25,515 22,852 392,232 5.8
Dade 2 60,117
Hernando 1 19,806 16,108 1,669,828 1.0
Manatee 7 209,613 206,065 2,886,949 7.1
Marion 2 41,075
Monroe 3 97,868 35,988 2,520,364 1.4
Pasco 3 90,156 77,751 3,874,976 2.0
Pinellas 21 854,904 773,129 13,293,565 5.8
Osceola 5 134,330 134,637 1,077,156 12.5
Orange 3 93,092 42,142 8,470,761 .5
Sarasota 2 87,507 84,095 6,014,749 1.4
Seminole 1 42,530 42,766 2,681,015 1.6
Suwannee 1 28,239 27,719 271,667 10.2
-- ---------- ---------- ----------- -----
Total - Florida 61 $2,171,839 $1,631,080 $47,165,227 3.5%
== ========== ========== =========== =====
Glynn County, GA 1 15,573
-- ----------
Total 62 $2,187,412
== ==========
MARKET RISK
The market risk inherent in the Company's market sensitive instruments is the
potential loss arising from changes in interest rates and the changes in prices
of marketable equity securities. One of the primary objectives of the Company
is to reduce fluctuations in net interest income caused by changes in interest
rates. To manage interest rate risk, the Board of Directors has established
interest-rate risk policies and procedures which delegate to the
Asset/Liability Committee the responsibility to monitor and report on
interest-rate risk, devise strategies to manage interest-rate risk, monitor
loan originations and deposit activity, and approve pricing strategies.
Currently, all investments in the Company's portfolio are identified as
securities available for sale or as trading assets. Securities available for
sale, which are those securities that may be sold prior to maturity as part of
asset/liability management or in response to other factors, are carried at fair
value with any valuation adjustment reported in a separate component of
stockholders' equity, net of tax effect. Trading securities include mortgage-
backed securities resulting from the securitization of residential and High LTV
Loans, the resulting residual interest in cash flows from those
securitizations, where applicable, and the excess spread on interest
only-strips receivable. Trading securities are carried at market value with any
unrealized gains or losses included in the statement of operations under "Gain
on sale of securities, net".
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14
For a description of key assumptions used related to the Company's market risk,
see the discussion on interest sensitivity analysis under the caption
"Asset/Liability Management."
The table below represents principal amounts and related average interest
rates, by year of maturity, for the Company's market sensitive instruments as
of December 31, 1998 (in thousands).
Assets 1999 2000 2001 2002 2003 Thereafter Total
----- ----- ------ ------ ----- ---------- -------
Interest bearing
deposits in banks $ 3,467 $ - $ - $ - - $ - $3,467
Avg. interest rate 5.45% - - - - - 5.45%
Federal funds sold 93,000 - - - - - 93,000
Avg. interest rate 5.24% - - - - - 5.24%
U.S. treasuries and
government agencies 21,679 6,928 - - - - 28,607
Avg. interest rate 5.37% 3.74% - - - - 4.97%
Revenue bond - - 1,385 - - 1,011 2,396
Avg. interest rate - - 8.60% - - 6.23% 7.57%
Mortgage-backed
Securities - fixed 23,806 534 390 246 102 45,362 70,440
Avg. interest rate 5.85% - - - - 9.08% 7.82%
Mortgage-backed
Securities - variable 28,340 - - - - - 28,340
Avg. interest rate 6.35% - - - - - 6.35%
FHLB stock - - - - - 11,152 11,152
Avg. interest rate - - - - - 7.25% 7.25%
Loans portfolio - fixed 44,920 24,943 65,314 22,854 29,239 652,682 839,953
Avg. interest rate 8.95% 9.37% 8.73% 9.47% 8.41% 8.75 8.79%
Loans portfolio - variable 973,061 58,390 44,078 36,064 60,996 39,847 1,212,435
Avg. interest rate 8.34% 8.08% 8.63% 9.09% 8.15% 7.60 8.33%
Mortgage servicing
rights 2,350 2,063 1,814 1,598 1,411 13,694 22,930
Avg. interest rate - - - - - - -
Liabilities
Deposits 1,487,106 413,026 218,165 19,928 46,669 2,518 2,187,412
Avg. interest rate 4.34% 4.27% 3.79% 5.79% 5.81% 5.79% 4.32%
Securities sold under
agreements to repurch . 36,640 - - - - - 36,640
Avg. interest rate 4.69% - - - - - 4.69%
FHLB advances 25,000 - - - - - 25,000
Avg. interest rate 5.15% - - - - - 5.15%
Holding company senior
debt 25,000 - - - - - 25,000
Avg. interest rate 7.47% - - - - - 7.47%
Holding company
unsecured notes 7,000 - - - - - 7,000
Avg. interest rate 7.75% - - - - - 7.75%
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SUPERVISION AND REGULATION
The Company, the Bank and the Savings Bank are extensively regulated under both
federal and state law. The following is a brief summary of certain statutes,
rules, and regulations affecting the Company, the Bank and the Savings Bank.
This summary is qualified in its entirety by reference to the particular
statutory and regulatory provisions referenced below and is not intended to be
an exhaustive description of the statutes or regulations applicable to the
Company's business. Supervision, regulation, and examination of the Company,
the Bank, and the Savings Bank by the bank regulatory agencies are intended
primarily for the protection of depositors rather than stockholders.
REGULATION OF THE COMPANY
The Company is a bank holding company registered with the Federal Reserve under
the Bank Holding Company Act of 1956, as amended (the "BHC Act"). As such, the
Company is subject to the supervision, examination, and reporting requirements
of the BHC Act and the regulations of the Federal Reserve.
The BHC Act requires every bank holding company to obtain the prior approval of
the Federal Reserve before: (i) it may acquire direct or indirect ownership or
control of any voting shares of any bank if, after such acquisition, the bank
holding company will directly or indirectly own or control more than five
percent of the voting shares of the bank; (ii) it or any of its subsidiaries,
other than a bank, may acquire all or substantially all of the assets of the
bank; or (iii) it may merge or consolidate with any other bank holding company.
Similar federal statues require bank holding companies and other companies to
obtain the prior approval of the OTS before acquiring ownership or control of a
savings association.
The BHC Act further provides that the Federal Reserve may not approve any
transaction that would result in a monopoly or would be in furtherance of any
combination or conspiracy to monopolize or attempt to monopolize the business
of banking in any section of the United States, or the effect of which may be
substantially to lessen competition or to tend to create a monopoly in any
section of the country, or that in any other manner would be in restraint of
trade, unless the anti-competitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the community served. The Federal Reserve is also required to consider the
financial and managerial resources and future prospects of the bank holding
companies and banks concerned and the convenience and needs of the communities
to be served. Considerations of financial resources generally focuses on
capital adequacy, and consideration of convenience and needs issues includes
the parties' performance under the Community Reinvestment Act of 1977 (the
"CRA").
The BHC Act, as amended by the interstate banking provisions of the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate
Banking Act"), authorizes the Company, and any other bank holding company
located in Florida to acquire a bank located in any other state, and any bank
holding company located outside Florida may lawfully acquire any Florida-based
bank, regardless of state law to the contrary, in either case subject to
certain deposit-percentage, aging requirements, and other restrictions. The
Interstate Banking Act also generally provides that national and
state-chartered banks may branch interstate through acquisitions of banks in
other states, unless a state has "opted out" of the interstate branching
provisions of the Interstate Banking Act prior to June 1, 1997. Neither
Florida nor any other state in the southeastern United States has "opted out."
Accordingly, the Company would have the ability to acquire a bank in a state in
the Southeast and thereafter consolidate all of its bank subsidiaries into a
single bank with interstate branches.
The BHC Act generally prohibits the Company from engaging in activities other
than banking or managing or controlling banks or other permissible subsidiaries
and from acquiring or retaining direct or indirect control of any company
engaged in any activities other than those activities determined by the Federal
Reserve to be so closely related to banking or managing or controlling banks as
to be a proper incident thereto. While these activity restrictions are not
applicable to the Bank, they will apply to the Savings Bank. Thus, the Savings
Bank and its
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subsidiaries will not be able to engage in certain insurance and real estate
development-related activities that could otherwise be conducted if the thrift
were a stand-alone entity or were owned by a unitary savings and loan holding
company.
In determining whether a particular activity is permissible, the Federal
Reserve must consider whether the performance of such an activity reasonably
can be expected to produce benefits to the public, such as greater convenience,
increased competition, or gains in efficiency, that outweigh possible adverse
effects, such as undue concentration of resources, decreased or unfair
competition, conflicts of interest, or unsound banking practices. For example,
operating a thrift subsidiary, factoring accounts receivable, acquiring or
servicing loans, leasing personal property, conducting discount securities
brokerage activities, performing certain data processing services, acting as
agent or broker in selling credit life insurance and certain other types of
insurance in connection with credit transactions, and performing certain
insurance underwriting activities all have been determined by the Federal
Reserve to be permissible activities of bank holding companies. The BHC Act
does not place territorial limitations on permissible non-banking activities of
bank holding companies. Despite prior approval, the Federal Reserve has the
power to order a bank holding company or its non-bank subsidiaries to terminate
any activity or to terminate its ownership or control of any subsidiary when it
has reasonable cause to believe that continuation of such activity or such
ownership or control constitutes a serious risk to the financial safety,
soundness, or stability of any bank subsidiary of the holding company.
Under Federal Reserve policy, bank holding companies are expected to act as a
source of financial strength and support to their subsidiary banks. This
support may be required at times when, absent such Federal Reserve policy, the
holding company may not be inclined to provide it. In addition, any capital
loans by a bank holding company to any bank subsidiary are subordinate in right
of payment to deposits and to certain other indebtedness of such subsidiary
bank. In the event of a bank holding company's bankruptcy, any commitment by
the bank holding company to a federal bank regulatory agency to maintain the
capital of a subsidiary bank will be assumed by the bankruptcy trustee and
entitled to a priority payment.
REGULATION OF THE BANK AND THE SAVINGS BANK
The Bank is organized as a Florida-chartered commercial bank and is regulated
and supervised by the Department. In addition, the Bank is regulated and
supervised by the FDIC, which serves as its primary federal regulator and the
administrator of the fund that insures the Bank's deposits. Accordingly, the
Department and the FDIC conduct regular examinations of the Bank, reviewing the
adequacy of the loan loss reserves, quality of loans and investments, propriety
of management practices, compliance with laws and regulations, and other
aspects of the Bank's operations. In addition to these regular examinations,
the Bank must furnish to the FDIC quarterly reports containing detailed
financial statements and schedules. The Savings Bank is a nationally chartered
thrift and as such is subject to regulation, supervision and examination by the
OTS as its chartering authority and primary regulator, and by the FDIC as the
administrator of the Savings Bank's insurance fund. The OTS's examinations of
the Savings Bank are similar to the current examinations of the Bank by the
FDIC and the Department.
Federal and Florida banking laws and regulations govern all areas of the
operations of the Bank, including reserves, loans, mortgages, capital,
issuances of securities, payment of dividends, and establishment of branches.
As its primary regulators, the Department and the FDIC have authority to impose
penalties, initiate civil and administrative actions, and take other steps
intended to prevent the Bank from engaging in unsafe or unsound practices. The
Bank is a member of the Bank Insurance Fund and, as such, deposits in the Bank
are insured by the FDIC to the maximum extent permissible by law.
As a federally-chartered institution, the Savings Bank and its deposit-taking
and lending activities are governed primarily by federal law, although certain
aspects of Florida and Georgia law will be applicable to the Savings Bank and
its branch banking facility in Brunswick. The OTS exercises supervision and
enforcement authority over the Savings Bank similar to that exercised by the
FDIC with respect to the Bank. The Savings Bank is a member of the Savings
Association Insurance Fund (the "SAIF"), and deposits in the Savings Bank are
insured by the FDIC.
14
17
The Bank and the Savings Bank are subject to the provisions of the CRA. Under
the CRA, the Bank and the Savings Bank have a continuing and affirmative
obligation consistent with their safe and sound operation to help meet the
credit needs of their entire communities, including low- and moderate-income
individuals and neighborhoods. The CRA does not establish specific lending
requirements or programs for financial institutions nor does it limit the
Bank's or the Savings Bank's discretion to develop the types of products and
services that it believes are best suited to their particular communities,
consistent with the CRA. The CRA requires the appropriate federal bank
regulatory agency (in the case of the Bank, the FDIC, and in the case of the
Savings Bank, the OTS), in connection with their regular examinations, to
assess a financial institution's record in meeting the credit needs of the
community serviced by it, including low- and moderate-income neighborhoods. A
federal banking agency's assessment of a financial institution's CRA record is
made available to the public. Further, such assessment is required whenever
the institution applies to, among other things, establish a new branch that
will accept deposits, relocate an existing office or merge or consolidate with,
or acquire the assets of or assume the liabilities of, a federally-regulated
financial institution. In the case where Republic applies for approval to
acquire a bank or other bank holding company, the federal regulator approving
the transaction will also assess the CRA records of the Bank and the Savings
Bank. The Bank received a "Satisfactory" CRA rating in its most recent
examination.
In April 1995, the federal banking agencies substantially revised their CRA
regulations. Among other things, the amended CRA regulations, which became
fully effective in 1997, substitute for the prior process-based assessment
factors a new evaluation system that will rate an institution based on its
actual performance in meeting community needs. In particular, the system will
focus on three tests: (i) a lending test, to evaluate the institution's record
of making loans in its service areas; (ii) an investment test, to evaluate the
institution's record of investing in community development projects; and (iii)
a service test, to evaluate the institution's delivery of services through its
branches and other offices. The amended CRA regulations also clarify how an
institution's CRA performance will be considered in the application process.
The Company does not anticipate that the revised CRA regulations will have any
material impact on the Bank's or the Savings Bank's operations or that they
will have any impact on either institution's CRA rating.
DEPOSIT INSURANCE
The Bank and the Savings Bank are subject to FDIC deposit insurance
assessments. In 1994, the Bank became subject to a new risk-based assessment
system for insured depository institutions that takes into account the risks
attributable to different categories and concentrations of assets and
liabilities. The new system assigns an institution to one of three capital
categories: (i) well capitalized; (ii) adequately capitalized; and (iii)
undercapitalized. An institution is also assigned, by the FDIC, to one of
three supervisory subgroups within each capital group. The supervisory
subgroup to which an institution is assigned is based on a supervisory
evaluation provided to the FDIC by the institution's primary federal regulator
and information which the FDIC determines to be relevant to the institution's
financial condition and the risk posed to the deposit insurance funds (which
may include, if applicable, information provided by the institution's state
supervisor). An institution's insurance assessment rate is then determined
based on the capital category and posed to the deposit insurance funds (which
may include, if applicable, information provided by the institution's state
supervisor). An institution's insurance assessment rate is then determined
based on the capital category and supervisory category to which it is assigned.
Under the risk-based assessment system, there are nine assessment risk
classifications (i.e., combinations of capital groups and supervisory
subgroups) to which different assessment rates are applied. Assessment rates
on deposits for an institution in the highest category (i.e., "well
capitalized" and "healthy") are less than assessment rates on deposits for an
institution in the lowest category (i.e., "undercapitalized" and "substantial
supervisory concern").
The Bank, as a state-chartered commercial bank, is a member of the Bank
Insurance Fund ("BIF"). However as part of the Crossland Purchase and
Assumption, the Bank acquired $327.7 million in deposits insured by the SAIF
and thereby became a so-called "Oakar Bank". Based on the Crossland Purchase
and Assumption and the Firstate acquisition, the Bank is required to pay
insurance premiums to the FDIC on a substantial portion of its deposits at the
SAIF assessment rate notwithstanding its status as a BIF member. As of
December 31, 1998, the most recent
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18
measurement date for assessment purposes, approximately 67% of the Bank's
deposits were treated as SAIF-insured deposits, with the remaining 33% of
deposits being assessed at the BIF rate. The Savings Bank is a member of the
SAIF. However, since all of its initial deposits were deposits assumed by the
Savings Bank from Barnett, a BIF-member bank, all of the Savings Bank's
deposits will be assessed at the BIF assessment rate.
Prior to enactment of the Deposit Insurance Funds Act of 1996 ( the "Funds
Act"), only assessments were available to pay interest on the so-called "FICO
Bonds", which were issued by the Financing Corporation (the "FICO") in the late
1980's to fund the resolution of troubled thrifts. The Funds Act shifted a
portion of the FICO funding obligations to the BIF- member institutions
beginning in 1997. Through the end of 1999, the FICO assessment rate on
BIF-assessable deposits is required by the statute to be one-fifth of the SAIF
rate. Legislation has recently been proposed that would extend the current
five-to-one ratio through 2002. In the event that such legislation is not
adopted, it is currently anticipated that the FDIC will equalize the FICO
assessment rates for members of both insurance funds. In 1998, the Bank's total
FICO payment obligation was $1.2 million, $918,000 of which was attributable to
the Bank's SAIF-assessable deposits and the balance of which was attributable
to its BIF-assessable deposits.
Currently, the FICO assessment rate for BIF assessable deposits is 0.013
percent (or 1.3 basis points) and the FICO assessment rate for SAIF assessable
deposits is 0.0648 percent or (6.48 basis points). The Savings Bank did not pay
a FICO assessment in 1998.
CAPITAL REQUIREMENTS
The Company, the Bank, and the Savings Bank are required to comply with the
capital adequacy standards established by the Federal Reserve (for the
Company), and the FDIC (for the Bank) and the OTS (for the Savings Bank). The
minimum capital requirements applicable to the Company, the Bank, and the
savings Bank are essentially the same. The only significant differences among
these requirements are that: (i) the Savings Bank must also have and maintain a
tangible capital-to-adjusted total assets ratio of at least 1.5%; and (ii) the
Savings Bank may have and maintain a leverage ratio of as low as 3.0% of
adjusted total assets if it has a composite CAMELS rating of "1". As of
December 31, 1998, the Company qualified as being "adequately capitalized" and
the Bank and the Savings Bank were "well capitalized" for purposes of the
agency's prompt corrective action guidelines.
For additional information regarding capital requirements applicable to the
Bank and the Savings Bank and their compliance with such requirements, see
"Note 16 of the Company's Consolidated Financial Statement."
PAYMENT OF DIVIDENDS
As a Florida-chartered commercial bank, the Bank is subject to the laws of
Florida as to the payment of dividends. Under the Florida Financial
Institutions Code, the prior approval of the Department is required if the
total of all dividends declared by a bank in any calendar year will exceed the
sum of a bank's net profits for that year and its retained net profits for the
preceding two years. For the years ended December 31, 1996, 1997 and 1998, the
aggregate net income of the Bank was $3.4 million while dividends paid to the
Company by the Bank for the same period totaled $4.5 million. The aggregate
retained net income for 1997 and 1998 was a $4.6 million deficit. Therefore,
the Bank will be required to obtain approval for dividend payments in 1999
until retained net income for 1999 exceeds the $4.6 million deficit.
As a federally chartered thrift institution, the Savings Bank is subject to the
OTS's regulations applicable to the payment of dividends and other capital
distributions by savings associations. Under these regulations, a thrift that
is well-capitalized (i.e., has risk-based capital of 10% or more, Tier 1
Capital of 5% or more and Tier 1 risk-based capital of 6% or more), both before
and after the proposed distribution, and that has not been designated by the
OTS as being "in need of more than normal supervision" may distribute in a
calendar year the greater of: (i) 100% of net income for the current calendar
year plus 50% of its "capital surplus"; or (ii) 75% of its net income over the
most recent four quarters. The percentages of income that may be distributed
are lower for thrifts that are "adequately capitalized". It is the Company's
current intention to maintain the Savings Bank at a "well-capitalized" level
such that it will be able to upstream as much of its net income as is not
required for the thrift's current operations and
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future growth.
Under Federal law, if, in the opinion of the federal banking regulator, a bank
or thrift under its jurisdiction is engaged in or is about to engage in an
unsafe or unsound practice (which, depending on the financial condition of the
depository institution, could include the payment of dividends), such
regulation may require, after notice and hearing, that such institution cease
and desist from such practice. The federal banking agencies have indicated
that paying dividends that deplete a depository institution's capital base to
an inadequate level would be an unsafe and unsound banking practice. Under the
Prompt Corrective Action regulations adopted by the federal banking agencies in
December 1992, a depository institution may not pay any dividend to its holding
company if payment would cause it to become "undercapitalized" or if it already
is "undercapitalized".
FEDERAL RESERVE SYSTEM
The Federal Reserve regulations require banks to maintain noninterest earning
reserves against their transaction accounts (primarily NOW and regular checking
accounts). The new Federal Reserve Board regulations, effective April 1, 1997,
generally require that reserves be maintained against aggregate transaction
accounts as follows: (i) for accounts aggregating $46.5 million or less
(subject to adjustment by the Federal Reserve) the reserve requirement is 3.0%;
and (ii) for accounts greater than $46.5 million, the reserve requirement is
$1.4 million plus 10.0% (subject to adjustment by the Federal Reserve between
8.0% and 14.0%) against that portion of total transaction accounts in excess of
$46.5 million. The first $4.9 million of otherwise reservable balances
(subject to adjustments by the Federal Reserve) are exempted from the reserve
requirements. The balances maintained to meet the reserve requirements imposed
by the Federal Reserve may be used to satisfy liquidity requirements imposed by
the Department. Because required reserves must be maintained in the form of
either vault cash, a noninterest bearing account at a Federal Reserve Bank or a
pass-through account as defined by the Federal Reserve, the effect of this
reserve requirement is to reduce the Bank's interest earning assets. FHLB
System members also are authorized to borrow from the Federal Reserve "discount
window," but Federal Reserve regulations require institutions to exhaust all
Federal Home Loan Bank sources before borrowing from a Federal Reserve Bank.
FEDERAL HOME LOAN BANK SYSTEM
The Bank and the Savings Bank are members of the FHLB system, which consists
of 12 regional Federal Home Loan Banks governed and regulated by the Federal
Housing Finance Board (the "FHFB"). The Federal Home Loan Banks provide a
central credit facility for member institutions. The Bank, as a member of the
FHLB, is required to acquire and hold shares of capital stock in the FHLB in an
amount at least equal to the greater of one percent of the aggregate principal
amount of its unpaid residential mortgage loans, home purchase contracts and
similar obligations as of the close of each calendar year, or five percent of
its borrowings from the FHLB (including advances and letters of credit issued
by the FHLB on the Bank's behalf ).
The FHLB makes advances to members in accordance with policies and procedures
periodically established by the FHFB and the Board of Directors of the FHLB.
Currently outstanding advances from the FHLB are required to be secured by a
member's shares of stock in the FHLB and by certain types of mortgages and
other assets. Interest rates charged for advances vary depending on maturity,
the cost of funds to the FHLB and the purpose of the borrowing. As of December
31, 1998, the Bank had $25.0 million of outstanding advances from the FHLB.
LIQUIDITY
Under Florida banking regulations, the Bank is required to maintain a daily
liquidity position equal to at least 15% of its total transaction accounts and
eight percent of its total non-transaction accounts, less those deposits of
public funds for which security has been pledged as provided by law. The Bank
may satisfy its liquidity requirements with cash on hand (including cash items
in process of collection), deposits held with the Federal Reserve, demand
deposits due from correspondent banks, federal funds sold, interest bearing
deposits maturing in 31 days or less and the market value of certain
unencumbered, rated, investment-grade securities and securities issued by
Florida or any
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county, municipality of other political subdivision within the State. The FDIC
also reviews the Bank's liquidity position as part of its examination and
imposes similar requirements on the Bank. Any Florida-chartered commercial
bank that fails to comply with its liquidity requirements generally may not
further diminish liquidity either by making any new loans (other than by
discounting or purchasing bills of exchange payable at sight) or by paying
dividends. At December 31, 1998, the Bank's net liquid assets exceeded the
minimum amount required under the applicable Florida regulations.
MONETARY POLICY AND ECONOMIC CONTROLS
The banking business is affected not only by general economic conditions, but
also by the monetary policies of the Federal Reserve. Changes in the discount
rate on member bank borrowing, availability of borrowing at the "discount
window," open market operations, the imposition of changes in reserve
requirements against bank deposits and the imposition of and changes in reserve
requirements against certain borrowings by banks and their affiliates are some
of the instruments of monetary policy available to the Federal Reserve. The
monetary policies have had a significant effect on the operating results of
commercial banks and are expected to continue to do so in the future. The
monetary policies of the Federal Reserve are influenced by various factors,
including inflation, unemployment and short and long-term changes in the
international trade balance and in the fiscal policies of the United States
Government. Future monetary policies and the effect of such policies on the
future business and earnings of the Bank cannot be predicted.
EFFECTS OF INFLATION
As a financial institution, the majorities of the Company's assets are monetary
in nature and, therefore, differ greatly from those of more industrial or
commercial companies that have significant investments in fixed assets. The
effects of inflation on the financial condition and results of operations,
therefore, are less significant than the effects of changes in interest rates.
The most significant effect of inflation is on noninterest expense, which tends
to rise during periods of general inflation.
YEAR 2000 ISSUES
In the next year, many companies, including financial institutions such as the
Company, will face potentially serious risks associated with the inability of
existing data processing hardware and software to appropriately recognize
calendar dates beginning in the year 2000. Many computer programs that can
only distinguish the final two digits of the year entered may read entries for
the year 2000 as the year 1900 and compute payment, interest or delinquency
based on the wrong date. If a company's critical internal systems do not
correctly recognize and process data information beyond the year 1999, there
could be a material adverse impact on business and operations.
In 1997, the Company began the process of identifying the many software
applications and hardware devices affected by Year 2000 issues. The Company
formed a Year 2000 Committee, consisting of the Bank's senior management and
essential data processing employees to address the year 2000 compliance
project. The Board of Directors is updated on the Company's progress towards
compliance on a monthly basis. In addition, as the Bank's primary federal
regulator, the FDIC conducts periodic examinations of the Bank's Year 2000
readiness.
Additional staffing for year 2000 compliance, including a full-time project
coordinator and other technically proficient employees, have been hired to
monitor the daily activities of the project for the Bank. Non-compliant
vendors have been and continue to be contacted for project progress reports.
The Bank is independently verifying significant vendors' Year 2000 readiness.
Communications with vendors, that have advised the Bank that they are already
Year 2000 compliant, to develop and implement testing plans is also ongoing.
The FDIC has set a target date of March 31, 1999 for financial institutions to
substantially complete testing of their main client loan and deposit
application systems. The Bank's systems are processed by ALLTEL Information
Services, Inc. ("ALLTEL"). As ALLTEL tests and certifies applications as year
2000 compliant, the test results are being forwarded to Bank personnel for
verification. All main client applications are expected to be compliant,
installed, and tested by the Bank and ALLTEL by March 31, 1999. The Bank's
vendors will be able to perform tests with ALLTEL during this time also. The
critical internal systems of BSB and Lochaven have been converted to the ALLTEL
loan and deposit application systems, and the day-to-day activities of BSB and
Lochaven have been fully
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integrated into those of the Bank. The Bank will continue its efforts toward
Year 2000 compliance with a goal of June 30, 1999 for completion of all testing
and Year 2000 readiness.
The Company estimates that the costs associated with replacing non-compliant
hardware and software will be approximately $1.4 million, the majority of which
will be incurred in the normal course of upgrading the Company's computer
systems. As of December 31, 1998, the Company's Year 2000 compliance
expenditures had totaled $345,000, with the balance of the $1.4 million to be
expended during 1999.
In the event that the Bank and ALLTEL's efforts are unsuccessful and/or that
one or more of the Company's critical internal systems should not properly
recognize January 1, 2000 and subsequent dates, the following could occur, any
of which could have a material adverse impact on the operations of the Bank and
the Company.
(a) Client service could deteriorate to the point that a substantial
number of the Bank's and Savings Bank's clients move their account
relationships to another financial institution;
(b) The Company, the Bank and the Savings Bank may be unable to provide
the public and the applicable regulatory authorities with timely and
accurate financial information; or
(c) The Company, the Bank and the Savings Bank may be unable to fulfill,
on a timely basis, their various contractual obligations.
The Bank and the Savings Bank have formulated a contingency plan for the remote
possibility that ALLTEL will not be year 2000 compliant. The plan addresses
among other things, the ability of the Bank and the Savings Bank to switch to
and utilize back-up sites for the loan and deposit application systems in a
timely fashion and the various strategies and resources available to rapidly
restore critical internal systems.
CHANGES IN ACCOUNTING STANDARDS
The Financial Accounting Standards Board ("FASB") recently adopted or issued
proposals and guidelines that may have a significant impact on the accounting
practices of commercial enterprises in general and financial institutions in
particular.
Disclosures About Pensions and Other Postretirement Benefits
In February 1998, the FASB issued Statements of Financial Accounting Standards
("SFAS") No. 132 "Employers' Disclosure about Pensions and Other Retirement
Benefits"; SFAS No. 132 revises the disclosure requirements for employees'
pensions and other postretirement benefit plans. SFAS No. 132 was effective
for fiscal years beginning after December 15, 1997, earlier application was
encouraged. Management implemented SFAS No. 132 in the year ended December 31,
1997.
Accounting for Costs of Computer Software for Internal Use
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 provides
guidance for capitalizing and expensing the costs of computer software
developed or obtained for internal use. SOP 98-1 is effective for financial
statements for fiscal years beginning after December 15, 1998. Management
believes the effect of adopting SOP 98-1 will not have a material impact on the
accompanying consolidated financial statements.
Accounting for Derivative Instruments and Hedging Activities
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, (collectively referred to as
"derivatives") and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. SFAS No. 133
is effective for all fiscal quarters of all fiscal years beginning after June
15, 1999. Management is currently assessing the financial implications of SFAS
No. 133 and has not yet determined if the adoption will have a material effect
upon the results of operations.
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Accounting for Mortgage-Backed Securities Retained After the Securitization of
Mortgage Loans Held for Sale by a Mortgage Banking Enterprise
In October 1998, the FASB issued SFAS No. 134, "Accounting for Mortgage-Backed
Securities Retained after the Securitization of Mortgage Loans Held for Sale by
a Mortgage Banking Enterprise". SFAS No. 134 amends SFAS Nos. 65, "Accounting
for Certain Mortgage Banking Activities" and SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities". SFAS No. 134 establishes
standards for the classification of securities and other beneficial interests
in accordance with SFAS No. 115. SFAS No. 134 allows an enterprise engaged in
mortgage banking activities to classify mortgage-backed securities and other
beneficial interests retained after the securitization of mortgage loans as
trading, available for sale or held to maturity, depending upon an entity's
intent and ability to hold those securities, except for those with sales
commitments in place which must be classified as trading. Previously, such
securities and beneficial interests retained after securitization of mortgage
loans held for sale by an entity engaged in mortgage banking activities were
required to be classified as trading. SFAS No. 134 is effective for periods
beginning after December 15, 1998 with early application permitted. Management
is currently assessing the financial implications of SFAS No. 134 but does not
believe the adoption will have a material financial effect on results of
operations.
ITEM 2. PROPERTIES
At December 31, 1998, the Company had 62 branch offices, of which 28 were
leased and 34 were owned. In addition, there were 11 loan production offices,
six operations centers and two facilities used for warehouse purposes, all of
which were leased. Substantially all furniture, fixtures and equipment items
are owned. The following table shows the name, location and lease expiration
date (if applicable) for each facility as of December 31, 1998:
Location Ownership/Lease Expiration Date
Florida:
Brevard County:
Causeway Office Facility Owned
450 East Eau Gallie Boulevard
Indian Harbour Beach, Florida 32937
Imperial Plaza Office September 30, 1999
6769 N. Wickham Road, Suite 100
Melbourne, Florida 32940-2019
Melbourne Office Facility Owned
1300 Babcock Street
Melbourne, Florida 32901
Melbourne Beach Office May 1, 2009
401 Ocean Avenue
Melbourne Beach, Florida 32951
Palm Bay Office May 31, 2004
6000 Babcock Street, SE
Palm Bay, Florida 32909
Broward County:
Deerfield Office April 30, 2003
1327 South Military Trail
Deerfield Beach, Florida 33442
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PROPERTIES (CONT'D)
Location Ownership/Lease Expiration Date
Hollywood Mall Office May 31, 2005
470 Hollywood Mall
Hollywood, Florida 33021
Pembroke Commons Office February 26, 2001
502 University Drive
Pembroke Pines, Florida 33024
Weston Office September 30, 2008
1290 Weston Road
Weston, Florida 33326
Lake City Office Facility Owned
100 North First Street
Lake City, Florida 32055
Dade County:
Coral Gables Office November 5, 2008
2222 Ponce DeLeon Boulevard
Coral Gables, Florida 33134
South Miami Office March 31, 2002
8211 South Dixie Highway
Miami, Florida 33143
Hernando County:
Spring Hill Office January 31, 2006
5331 Spring Hill Drive
Spring Hill, Florida 34606
Manatee County:
Pavilion Office Facility owned
1301 Sixth Avenue West
Bradenton, Florida 34205
Bayshore Office Facility owned
6204 14th Street West
Bradenton, Florida 34207
Westside Office Facility owned
5905 Manatee Avenue West
Bradenton, Florida 34209
Ironwood Office Facility owned
4302 Cortez Road West
Bradenton, Florida 34210
Mt. Vernon Office Facility owned
9819 Cortez Road West
Bradenton, Florida 34210
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PROPERTIES (CONT'D)
Location Ownership/Lease Expiration Date
53rd Avenue Office Facility owned
415 53rd Avenue, West
Bradenton, Florida 34207
Ellenton Office Facility owned
3510 U.S. Highway 301
Ellenton, Florida 34222
Orange County:
Downtown Orlando Office February 28, 2002
255 South Orange Avenue
Orlando, Florida 32801
Winter Garden Office Facility Owned
232 South Dillard Street
Winter Garden, Florida 34787
North Orange Office November 30, 2003
2415 North Orange Avenue
Orlando, Florida 32804
Osceola County:
Bermuda Office Facility Owned
1115 North Bermuda Avenue
Kissimmee, Florida 34741
Broadway Office Facility Owned
200 East Broadway
Kissimmee, Florida 34741
Mill Creek Office Facility Owned
1300 East Vine Street
Kissimmee, Florida 34744
Ninth Street Office December 31, 1999
1220 Ninth Street
St. Cloud, Florida 34769
Oak Park Office Facility Owned
4291 13th Street
St. Cloud, Florida 34769
Pasco County:
Holiday Office May 23, 1999
4649 Sunray Drive
Holiday, Florida 34691
Holiday Drive-up Facility owned
4649-A Sunray Drive
Holiday, Florida 34691
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PROPERTIES (CONT'D)
Location Ownership/Lease Expiration Date
New Port Richey Office Facility owned
6500 Massachusetts Avenue
New Port Richey, Florida 34653
Gulfview Square Mall Office April 30, 2005
9501 U.S. 19 North
Port Richey, Florida 34668
Pinellas County:
Corporate Headquarters and Branch December 13, 2004
111 Second Avenue N.E.
St. Petersburg, Florida 33701
Main Office Drive-up April 30, 2009
201 Second Avenue South
St. Petersburg, Florida 33701
Countryside Office April 30, 2005
28050 U.S. 19 North
Clearwater, Florida 33761
Northwood Office February 28, 2006
3024 Enterprise Road
Clearwater, Florida 33759
Missouri Office December 31, 2000
1235 South Missouri Avenue
Clearwater, Florida 33756
Highland Avenue Office Facility Owned
1831 Highland Avenue North
Clearwater, Florida 33755
ICOT Office December 31, 2003
5801 Ulmerton Road
Clearwater, Florida 33760
Seminole Office September 30, 2007 (Ground lease)
8000 113th Street North Facility Owned
Seminole, Florida 33772-4801
Palm Harbor Office October 31, 2002
33920 U.S. 19 North
Palm Harbor, Florida 34684
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PROPERTIES (CONT'D)
Location Ownership/Lease Expiration Date
Largo Mall Office February 28, 2004
10500 Ulmerton Road E, #816
Largo, Florida 33771
Pinellas Park Office Facility owned
7600 66th Street North
Pinellas Park, Florida 33781
St. Petersburg Office Facility owned
100 34th Street North
St. Petersburg, Florida 33713
Oldsmar Office March 31, 2001
3711 Tampa Road, Suite 101
Oldsmar, Florida 34677
Dunedin Office Facility owned
1478 Main Street
Dunedin, Florida 34698
Belleair Bluffs Office Facility owned
401 North Indian Rocks Road
Belleair Bluffs, Florida 33770
Caladesi Office Facility owned
2678 Bayshore Boulevard
Dunedin, Florida 34698
Walsingham Office Facility owned
14141 Walsingham Road
Largo, Florida 33774
Pinellas Point Office October 14, 2006 (Ground lease)
3000 54th Avenue South Facility owned
St. Petersburg, Florida 33712
Tyrone Office December 31, 2004
6900 22nd Avenue North
St. Petersburg, Florida 33710
Northeast Office December 31, 1999 (Facility)
250 37th Avenue North December 31, 2017 (Ground lease)
St. Petersburg, Florida
East Lake Woodlands March 31, 2007
3412 East Lake Road
Palm Harbor, Florida 34685
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PROPERTIES (CONT'D)
Location Ownership/Lease Expiration Date
Clearwater Loan Operations Center Facility Owned
28051 U.S. 19 North, Suite G
Clearwater, Florida 34621
Clearwater Loan Operations Center Facility Owned
28059 U.S. Highway 19 North
Suites A & E
Clearwater, Florida 34621
Bay Plaza July 31, 1999
25 Second Street North
St. Petersburg, Florida 33702
Tyrone Gardens October 31, 1999
1028 58th Street North
St. Petersburg, Florida 33710
Polk County:
Lakeland Loan Production Office October 1, 1999
1506 South Florida Avenue
Lakeland, Florida 33803
Sarasota County:
Sarasota Office & Loan Production Office Facility owned
1100 South Tamiami Trail
Sarasota, Florida 34236
Venice Office Facility owned
400 Venice By-pass North
Venice, Florida 34292
Seminole County:
Lake Howell Office Facility owned
1980 Howell Branch Road
Winter Park, Florida 32792
Suwannee County:
Live Oak Office Facility owned
535 Ohio Avenue South
Live Oak, Florida 32060
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PROPERTIES (CONT'D)
Location Ownership/Lease Expiration Date
Lee County:
Bonita Springs June 30, 2000
Loan Production Office
24830 Burnt Pine Drive, Suite 2
Bonita Springs, Florida 34134
Ft. Myers Loan Production Office October 31, 2001
12681 New Brittany Boulevard
Ft. Myers, Florida 33907
Cape Coral Loan Production Office April 30, 1999
3501 Del Prado Blvd., Suite 302
Cape Coral, Florida 33904
Marion County:
Forest Office Facility owned
15825 East Highway 40
Silver Springs, Florida 34488
Silver Springs Office Facility owned
5431-A Silver Springs Boulevard
Silver Springs, Florida 34488
Monroe County:
Key West Office Facility owned
1010 Kennedy Drive
Key West, Florida 33040
Marathon Office Facility owned
6090 Overseas Highway
Marathon, Florida 33050
Plantation Key Office Facility owned
90184 Overseas Highway
Tavernier, Florida 33070
Hillsborough County:
Tampa Loan Production Office December 1, 1999
1411 North Westshore Boulevard
Suite 300
Tampa, Florida 33607
Palm Beach County:
West Palm Beach Loan Production Office August 31, 1999
1645 Palm Beach Lakes Blvd., Suite 480
West Palm Beach, Florida 33401
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PROPERTIES (CONT'D)
Location Ownership/Lease Expiration Date
Other Florida Facilities:
Warehouse February 15, 2000
2718 24th Street North
St. Petersburg, Florida 33713
Warehouse - Midstate Month-to-Month lease
3215 13th Street, Units 13 & 19
St. Cloud, Florida 34769
Republic Bank Center Facility Owned
and Savings Bank Branch
1432 66th Street North
St. Petersburg, Florida 33710
Republic Bank Center Annex October 31, 2012
1500 66th Street North
St. Petersburg, Florida 33710
REPUBLIC SAVINGS, FSB
Georgia:
Glynn County:
Brunswick Office October 31, 2001
3420 Cypress Mill Road
Brunswick, Georgia 31520
FACILITIES CLOSED
Boston, Massachusetts:
Boston Loan Production Office July 31, 2000
137 Newbury Street
Boston, Massachusetts 02116
Boston Loan Production Office September 30, 2002
Commercial Loans
123 Moody Street
Waltham, Massachusetts 02109
Virginia Beach, Virginia:
Satellite Loan Production Office Month-to-Month lease
1206 Laskin Road
Birdneck Executive Centre, Suite 201E
Virginia Beach, Virginia 23451
Boca Raton Loan Production Office Month-to-Month lease
5355 Town Center Road, Suite 301
Boca Raton, Florida 33846
Irvine, California:
Loan Production Office March 31, 2003
18012 Sky Park Circle
Irvine, California 92614
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ITEM 3. LEGAL PROCEEDINGS
In December 1998, the Company received notice of a potential claim by certain
unnamed former directors and shareholders of BSB which alleges that the Company
failed to disclose information relating to the loss incurred by the Company in
the fourth quarter of 1998. No action has been initiated to date.
Also in December 1998, the Company received a claim from a former vendor that
provided printing and direct mailing services for the Company's mortgage
banking operation which alleges that the vendor is owed damages of
approximately $13 million for breach of contract. The claim is based on a term
contract executed by the former manager of the High LTV Loan origination unit
who was not an officer of the Company or the Bank at the time the contract was
executed. The Company has filed a lawsuit against the vendor and the former
manager alleging civil conspiracy and fraud in connection with the execution of
the contract. The vendor has, at this same time, filed an arbitration
proceeding against the Company relating to the same issues. This matter is in
the discovery phase.
The Company is also subject to various legal proceedings in the ordinary course
of its business. Based on information presently available, management does not
believe that the ultimate outcome in such proceedings, in the aggregate, would
have a material adverse effect on the Company's financial position or results
of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Information required by this item is incorporated by reference from the
Company's Proxy Statement for its 1999 Annual Meeting.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
TRADING MARKET
The Company's common stock is currently traded on the NASDAQ National Market
under the symbol "REPB." The table below sets forth, the high, low and closing
bid information for the common stock as regularly quoted on the NASDAQ National
Market for the periods indicated.
High Low Closing
-------- -------- -------
Quarter ended March 31, 1997 16 14 15 1/2
Quarter ended June 30, 1997 18 1/2 17 1/4 17 1/4
Quarter ended September 30, 1997 27 5/8 16 7/8 26 3/8
Quarter ended December 31, 1997 27 7/8 23 3/4 26 1/2
Quarter ended March 31, 1998 31 3/4 25 29 1/4
Quarter ended June 30, 1998 34 3/4 25 13/16 27 1/8
Quarter ended September 30, 1998 27 1/16 17 3/4 22 1/8
Quarter ended December 31, 1998 21 29/32 13 1/8 13 1/8
These over-the-counter market quotations reflect inter-dealer prices, without
retail mark-up, markdown or commission and may not necessarily reflect actual
transactions.
STOCKHOLDERS AND DIVIDENDS
As of December 31, 1998, the Company had approximately 5,348 beneficial owners
of common stock. As a Florida-chartered commercial bank, the Bank is subject
to the laws of Florida as to the payment of dividends. Under the
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Florida Financial Institutions Code, the prior approval of the Department is
required if the total of all dividends declared by a bank in any calendar year
will exceed the sum of the bank's net profits for that year and its retained
net profits for the preceding two years.
As a federally chartered thrift institution, the Savings Bank is subject to the
OTS's regulations applicable to the payment of dividends and other capital
distributions by savings associations. Under these regulations, a thrift that
is "well-capitalized" (i.e., has risk-based capital of 10% or more, Tier 1
Capital of 5% or more and Tier 1 risk-based capital of 6% or more), both before
and after the proposed distribution, and that has not been designated by the
OTS as being "in need of more than normal supervision" may distribute in a
calendar year the greater of: (i) 100% of net income for the current calendar
year plus 50% of its "capital surplus"; or (ii) 75% of its net income over the
most recent four quarters. The percentages of income that may be distributed
are lower for thrifts that are "adequately capitalized". It is the Company's
intention to maintain the Savings Bank as a "well-capitalized" thrift such, the
Savings Bank will be able to upstream to the Company as much of its net income
as is not required for the thrift's current operations and future growth.
Under Federal law, if, in the opinion of the federal banking regulator, a bank
or thrift under its jurisdiction is engaged in or is about to engage in an
unsafe or unsound practice (which, depending on the financial condition of the
depository institution, could include the payment of dividends), such regulator
may require, after notice and hearing, that such institution cease and desist
from such practice. The federal banking agencies have indicated that paying
dividends that deplete a depository institution's capital base to an inadequate
level would be an unsafe and unsound banking practice. Under the Prompt
Corrective Action regulations adopted by the federal banking agencies in
December 1992, a depository institution may not pay any dividend to its holding
company if payment would cause it to become undercapitalized or if it already
is undercapitalized. (See Item 1. "Business -- Supervision and Regulation --
Payment of Dividends.")
To date, the Company has paid no dividends on its common stock and has no
present plans to do so. The only dividends that the Company declared in 1998
were quarterly dividends totalling $3.52 per share on its 75,000 shares of
noncumulative convertible perpetual preferred stock. (See Note 14,
"Stockholders' Equity").
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated operating data, per share data, balance
sheet data and selected financial ratios as of and for each of the years ended
December 31, 1994 through 1998, were derived from the audited consolidated
financial statements.
The BSB and Lochaven mergers, completed on November 5, 1998, were accounted for
as poolings of interest. This accounting treatment required that all prior
period financial information be restated as if the mergers had been completed
in the four preceding years. The following information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements, related
notes and other financial information presented elsewhere.
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SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
(IN THOUSANDS, EXCEPT SHARE DATA, FINANCIAL RATIOS AND OTHER DATA)
Years Ended December 31,
-------------------------------------------------------------------
OPERATING DATA: 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
Interest income $ 172,793 $ 117,834 $ 99,058 $ 88,848 $ 66,570
Interest expense 89,609 60,742 51,245 47,232 31,364
---------- ---------- ---------- ---------- ----------
Net interest income 83,184 57,092 47,813 41,616 35,206
Loan loss provision 14,261 3,247 2,758 2,424 404
---------- ---------- ---------- ---------- ----------
Net interest income after loan loss provision 68,923 53,845 45,055 39,192 34,802
Noninterest income 56,157 29,451 10,531 8,964 9,536
Gain on sale of ORE held for investment - - 1,207 - -
General and administrative ("G&A") expenses 129,017 65,420 44,788 39,287 35,736
Merger/acquisition expenses 3,233 1,144 - - -
Restructuring costs 6,673 - - - -
SAIF special assessment - - 4,818 - -
Provision for losses on ORE 1,603 530 111 240 -
Other noninterest (income) expense (40) 396 (490) 661 4,267
Amort. of goodwill & premium on deposits 1,930 479 491 450 1,269
---------- ---------- ---------- ---------- ----------
Net income (loss) before income taxes, negative
goodwill accretion & minority interest (17,336) 15,327 7,075 7,518 3,066
Accretion of negative goodwill - - - 1,578 2,705
---------- ---------- ---------- ---------- ----------
Net income (loss) before income taxes &
minority interest (17,336) 15,327 7,075 9,096 5,771
Income tax benefit (expense) 6,602 (6,165) (2,772) (2,231) 232
Minority interest in income from subsidiary trust (1,687) (701) - - -
Minority interest in FFO - ( 674) (505) (503) (131)
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Net income (loss) $(12,421) $ 7,787 $ 3,798 $ 6,362 $ 5,872
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Earnings (loss) per share - basic $(1.34) $ 1.16 $ .59 $ 1.05 $ 1.08
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Weighted average shares outstanding - basic 9,286,813 6,693,970 6,423,130 6,057,206 5,434,167
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Earnings (loss) per share - diluted $(1.34) $ 1.01 $ .53 $ .93 $ .95