Edgar Filing: REPUBLIC BANCORP INC

Republic Bancorp Inc.

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 14, 2003

REPUBLIC BANCORP INC.
(Exact name of registrant as specified in its charter)


Michigan (State or other jurisdiction of incorporation)		0-15734 (Commission File No.)		38-2604669 (IRS Employer Identification No.)

1070 East Main Street, Owosso, Michigan 48867
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (989) 725-7337

(Former name or former address, if changed since last report)

TABLE OF CONTENTS


CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF INCOME
SUMMARY OF SELECTED FINANCIAL DATA
SIGNATURES

Item 9. Regulation F-D Disclosure

On January 13, 2003, the Company released its fourth quarter and year end results. On January 14, 2003, the Company held a conference call to discuss the earnings release. A recording of the call is available on the Internet at www.republicbancorp.com. The press release is attached as Exhibit A to this Item 9.

REPUBLIC BANCORP LOGO


		NEWS
		Nasdaq: RBNC

www.republicbancorp.com

FOR FURTHER INFORMATION:


Thomas F. Menacher		Kristine D. Brenner
Exec. V.P., Treasurer & CFO		Director of Investor Relations
tmenacher@republicbancorp.com		kbrenner@republicbancorp.com
(989) 725-7337		(989) 725-7004

REPUBLIC BANCORP REPORTS FOURTH QUARTER RESULTS
AND RECORD EARNINGS IN 2002

2002 Highlights Include:

	•		Record net income of $56.7 million
	•		Earnings per share of $.96, up 11%
	•		Return on equity of 17.52%
	•		Loan portfolio growth of 6%
	•		Strong core deposit growth of 11%

ANN ARBOR, Michigan—January 13, 2003—Republic Bancorp Inc., (Nasdaq: RBNC), today announced record net income for the year ended December 31, 2002 of $56,677,000, an increase of 8% over the net operating income of $52,460,000 earned in 2001. Diluted earnings per share were $.96, up 11% from $.87 earned in 2001. Net income generated returns of 1.24% on average assets and 17.52% on average shareholders’ equity for the year ended December 31, 2002. These compare to returns of 1.14% on average assets and 17.25% on average equity for the year ended December 31, 2001.

“We are pleased with the Company’s results for the year,” commented Dana M. Cluckey, President and Chief Executive Officer. “We saw significant growth in core deposits during 2002 which funded growth in all of our targeted lending areas of commercial real estate, home equity and residential mortgages. We also had an outstanding year in residential mortgage lending which contributed to very strong mortgage banking income. Our long-term focus on providing distinctive personal service and emphasis on real estate secured lending continues to produce consistent and above peer group financial results”, added Mr. Cluckey.

Net income for the fourth quarter was a record $13,742,000, an increase of 12% over the $12,300,000 earned for the fourth quarter of 2001. Diluted earnings per share were $.24 for the fourth quarter of 2002, up 15% from the $.21 for the same quarter of 2001.

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Results for 2002 reflect strong performance for the Company’s three business lines:

	•		The commercial loan portfolio grew $106 million, or 8% over 2001. SBA closings for the year were $42 million, up 23% from 2001.

	•		The Company had an outstanding year in mortgage banking. During 2002, the Company originated $3.9 billion in single-family residential mortgages. At December 31, 2002, the Company’s mortgage loan pipeline of applications in process was $545 million.

	•		Retail banking results were also strong during the year. The consumer loan portfolio grew $60 million, or 12% over 2001. The Company had excellent growth in core deposits, which increased $129 million, or 11% for the year.

Net interest income increased $4.1 million, or 3% for the year ended December 31, 2002 compared to 2001 primarily due to a higher net interest margin. For the year ended December 31, 2002, the Company’s net interest margin was 3.44%, an increase of 13 basis points over 2001.

The Company recorded an incremental loan loss provision to reflect higher levels of non-performing assets during the quarter. For the quarter ended December 31, 2002, the Company recorded a provision for loan losses of $5.0 million, an increase of $2.6 million over the same period in 2001. Net charge-offs to total average loans were 19 basis points for the quarter and remain below the Company’s peer group. The Company’s allowance for loan losses to loans ratio was .99% at December 31, 2002, an increase of 15 basis points over December 31, 2001.

Total noninterest income increased $9.4 million for the quarter ended December 31, 2002, compared to the same period in 2001. The increase was primarily due to higher levels of service charges, gain on sales of securities and mortgage loan production revenue. Additionally, the Company had income from its third quarter 2002 purchase of $85 million of separate account bank owned life insurance, which is used to fund future employee benefit costs.

During the fourth quarter of 2002, the Company repurchased 488,000 shares at an average price of $11.47 per share under the 2001 Stock Repurchase Program. The 2001 Stock Repurchase Program allows for the repurchase of up to 4,300,000 shares, of which a total of 3,132,000 shares have been repurchased through December 31, 2002. For the year ended December 31, 2002, the Company repurchased 1,467,000 shares at an average price of $11.73 per share under the 2001 Stock Repurchase Program. At December 31, 2002, 1,168,000 shares are available for repurchase under the 2001 Stock Repurchase Program.

Net operating income in 2001 excludes the gain on sale of Market Street Mortgage Corporation and the restructuring costs to exit the mortgage servicing business. Including these items, the Company reported net income of $47,910,000, or $.79 per share, for the year ended December 31, 2001.

As recently announced, in January 2003, Republic Bancorp was named to FORTUNE’s “100 Best Places to Work in America” for the third year. The Company was rated the 17th Best Place to Work in the country.

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About the Company
Republic Bancorp Inc., with $4.8 billion in assets, is the third largest bank holding company headquartered in Michigan and the 80th largest bank holding company in the country. Its subsidiary, Republic Bank, serves customers in Michigan, Ohio and Indiana with 96 retail, commercial and mortgage banking offices and 103 ATMs. The Company is the #1 Small Business Administration bank lender based in Michigan for the 9th consecutive year and one of the Midwest’s top ten retail mortgage lenders. Republic has been ranked three times on FORTUNE’s “100 Best Places to Work in America” and twice named to Working Mother magazine’s list of “100 Best Companies for Working Mothers”.

Information about Republic Bancorp’s financial results and its products and services, including on-line mortgage applications and its Internet banking system, ExpressNet, can be accessed at www.republicbancorp.com.

Cash Dividend
The Company currently pays an annual cash dividend of $.34 per common share, which represents a yield of approximately 2.7% based on the Company’s current stock price.

Safe Harbor Statement
As with any statements other than those reflecting historical facts, forward-looking statements contained in this announcement involve risk, and, as such, future financial performance may differ from current expectations due to a variety of marketplace factors. These factors include, without limitation, those disclosed in Republic Bancorp’s 2001 Form 10-K filing with the Securities and Exchange Commission.

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REPUBLIC BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)


			Dec. 31,			Sept. 30,			June 30,			Dec. 31,
			2002			2002			2002			2001

						(Unaudited)			(Unaudited)
ASSETS
Cash and cash equivalents			$	75,625		$	83,750		$	73,303		$	76,734
Mortgage loans held for sale				660,999			541,256			197,448			748,463
Securities available for sale				248,931			373,841			466,135			364,648
Loans				3,656,543			3,772,670			3,551,626			3,458,381
	Less allowance for loan losses			(36,077	)		(33,124	)		(29,870	)		(29,157	)

Net loans				3,620,466			3,739,546			3,521,756			3,429,224

Premises and equipment				27,790			28,228			29,006			30,858
Bank owned life insurance				87,192			85,874			—			—
Other assets				57,192			62,390			69,502			90,678

		Total assets	$	4,778,195		$	4,914,885		$	4,357,150		$	4,740,605

LIABILITIES
Noninterest-bearing deposits			$	260,634		$	245,547		$	239,680		$	245,395
Interest-bearing deposits:
		NOW accounts		176,366			163,868			159,354			153,839
		Savings and money market accounts		910,863			888,275			865,279			819,674
		Certificates of deposit		1,440,409			1,531,569			1,410,075			1,534,560

		Total interest-bearing deposits		2,527,638			2,583,712			2,434,708			2,508,073

	Total deposits			2,788,272			2,829,259			2,674,388			2,753,468

Federal funds purchased and other short-term borrowings				209,070			225,500			183,500			176,500
FHLB advances				1,307,943			1,368,670			1,017,670			1,300,718
Accrued expenses and other liabilities				76,682			96,929			61,926			112,783
Long-term debt				13,500			13,500			13,500			13,500

		Total liabilities		4,395,467			4,533,858			3,950,984			4,356,969
Trust preferred securities and preferred stock of subsidiary				50,000			50,000			78,719			78,719
SHAREHOLDERS’ EQUITY
Preferred stock, $25 stated value: $2.25 cumulative and convertible; 5,000,000 shares authorized, none issued and outstanding				—			—			—			—
Common stock, $5 par value, 75,000,000 shares authorized; 57,441,000, 57,892,000, 58,540,000 and 58,483,000 issued and outstanding, respectively				287,207			263,144			266,092			265,831
Capital surplus				40,265			31,229			37,204			38,693
Retained earnings				4,373			32,969			23,177			3,542
Accumulated other comprehensive income (loss)				883			3,685			974			(3,149	)

		Total shareholders’ equity		332,728			331,027			327,447			304,917

		Total liabilities and shareholders’ equity	$	4,778,195		$	4,914,885		$	4,357,150		$	4,740,605

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REPUBLIC BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)


		Three Months Ended					Year Ended
		December 31,					December 31,
		2002			2001		2002		2001

Interest Income
Loans, including fees		$	67,997		$	71,555	$	266,432	$	316,292
Investment securities			2,846			4,802		18,272		17,084

	Total interest income		70,843			76,357		284,704		333,376

Interest Expense
Deposits			17,259			23,341		75,172		114,604
Short-term borrowings			934			925		3,582		3,460
FHLB advances			14,963			14,932		57,305		70,252
Long-term debt			241			242		965		1,451

	Total interest expense		33,397			39,440		137,024		189,767

Net interest income			37,446			36,917		147,680		143,609
Provision for loan losses			5,000			2,400		16,000		8,700

Net interest income after provision for loan losses			32,446			34,517		131,680		134,909

Noninterest Income
Service charges			2,716			1,945		9,206		7,720
Mortgage loan production revenue			11,031			6,288		34,132		46,808
Net mortgage servicing (expense) revenue			(23	)		154		295		(127	)
Gain on sale of securities			3,108			491		5,859		1,425
Income from bank owned life insurance			1,318			—		2,192		—
Other noninterest income			1,162			1,018		4,343		3,558
Gain on sale of subsidiary			—			—		—		12,000

	Total noninterest income		19,312			9,896		56,027		71,384

Noninterest Expense
Salaries and employee benefits			18,722			15,225		59,134		64,377
Occupancy expense of premises			2,487			2,410		9,926		11,427
Equipment expense			1,808			1,630		6,903		7,847
Other noninterest expense			7,802			6,517		24,552		29,562
Restructuring costs to exit mortgage servicing			—			—		—		19,000

	Total noninterest expense		30,819			25,782		100,515		132,213

Income before income taxes			20,939			18,631		87,192		74,080
Provision for income taxes			6,122			4,718		24,687		22,515

Income before dividends			14,817			13,913		62,505		51,565
Dividends on trust preferred securities and preferred stock of subsidiary			1,075			1,613		5,828		3,655

Net income		$	13,742		$	12,300	$	56,677	$	47,910

Basic earnings per share		$	.24		$	.21	$	.97	$	.80

Diluted earnings per share		$	.24		$	.21	$	.96	$	.79

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REPUBLIC BANCORP INC.

SUMMARY OF SELECTED FINANCIAL DATA
(Dollars in thousands, except operating data)


			Three Months Ended						Year Ended
			December 31,						December 31,

			2002			2001			2002			2001

Operating Data (in millions):
Residential mortgage loan closings:
	Fixed rate		$	1,196		$	1,251		$	3,017		$	3,700
	Adjustable rate			211			149			911			447

		Total residential mortgage loan closings	$	1,407		$	1,400		$	3,928		$	4,147	⁽¹⁾

	Conventional loans		$	1,121		$	1,076		$	3,001		$	3,006
	Government loans			85			116			388			492
	Jumbo and other loans			201			208			539			649

		Total residential mortgage loan closings	$	1,407		$	1,400		$	3,928		$	4,147	⁽¹⁾

	Refinances (percent of total)			76	%		73	%		63	%		61	%
Performance Ratios (annualized for the quarter):
Return on average assets				1.14	%		1.08	%		1.24	%		1.14	%⁽²⁾
Return on average equity				16.54	%		15.88	%		17.52	%		17.25	%⁽²⁾
Net interest margin				3.28	%		3.45	%		3.44	%		3.31	%
Efficiency ratio				57.44	%		55.66	%		50.80	%		56.17	%
Per Common Share Data:
Average common shares outstanding – diluted				58,355			59,937			59,025			60,522
Cash dividends declared			$	.085		$	.077		$	.317		$	.288
Book value			$	5.79		$	5.21		$	5.79		$	5.21
Tangible book value			$	5.67		$	5.08		$	5.67		$	5.08


	Dec. 31,			Sept. 30,			June 30,			Dec. 31,
	2002			2002			2002			2001

Capital Ratios:
Shareholders’ equity to assets		6.96	%		6.74	%		7.52	%		6.43	%
Tier 1 risk-based capital		11.18	%		10.90	%		12.82	%		11.43	%
Total risk-based capital		12.26	%		11.88	%		13.78	%		12.31	%
Tier 1 leverage		7.81	%		8.12	%		9.19	%		8.34	%

⁽¹⁾		Excludes Market Street Mortgage Corporation residential mortgage loan closings of $1,194 million for the year ended December 31, 2001.
⁽²⁾		Before gain on sale of subsidiary and restructuring costs to exit mortgage servicing business.

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REPUBLIC BANCORP INC.

SUMMARY OF SELECTED FINANCIAL DATA
(Dollars in thousands, except operating data)


		Three Months Ended						Year Ended
		December 31,						December 31,

		2002			2001			2002			2001

Average Balances:
Total assets		$	4,805,484		$	4,546,836		$	4,558,868		$	4,586,436
Short-term investments			589			1,634			1,818			2,448
Mortgage loans held for sale			625,977			508,894			429,381			520,565
Securities available for sale			274,619			383,589			374,615			293,085
Portfolio loans			3,702,903			3,512,231			3,589,949			3,600,540
Total earning assets			4,604,088			4,406,348			4,395,763			4,416,638
Interest-bearing deposits			2,559,217			2,473,530			2,496,403			2,476,818
Short-term borrowings			238,427			154,443			202,129			96,430
Total FHLB advances			1,312,117			1,247,031			1,177,042			1,323,837
Long-term debt			13,500			13,500			13,500			20,125
Total interest bearing liabilities			4,123,261			3,888,504			3,889,074			3,917,210
Shareholders’ equity			332,384			309,837			323,560			304,077
Interest Margin:
Assets:
Short-term investments			1.13	%		2.12	%		2.03	%		4.17	%
Mortgage loans held for sale			6.18	%		6.69	%		6.45	%		7.28	%
Securities available for sale			4.74	%		6.26	%		5.93	%		6.88	%
Portfolio loans:
	Commercial loans		6.48	%		7.34	%		6.79	%		8.12	%
	Residential real estate mortgage loans		5.89	%		6.66	%		6.35	%		7.07	%
	Installment loans		6.56	%		7.77	%		6.89	%		8.56	%

	Total loans, net of unearned income		6.23	%		7.11	%		6.61	%		7.69	%

Total interest-earning assets			6.14	%		6.98	%		6.54	%		7.59	%
Liabilities:
Interest-bearing demand deposits			0.54	%		0.80	%		0.62	%		1.33	%
Savings deposits			1.70	%		2.05	%		1.78	%		3.07	%
Time deposits			3.51	%		4.94	%		4.00	%		5.63	%

	Total interest-bearing deposits		2.68	%		3.74	%		3.01	%		4.63	%
Short-term borrowings			1.53	%		2.34	%		1.75	%		3.54	%
FHLB advances			4.46	%		4.69	%		4.80	%		5.23	%
Long-term debt			7.15	%		7.15	%		7.15	%		7.21	%

Total interest bearing liabilities			3.19	%		4.00	%		3.50	%		4.82	%

Net interest income/rate spread (FTE)			2.95	%		2.98	%		3.04	%		2.77	%
Impact of noninterest bearing sources of funds			0.33	%		0.47	%		0.40	%		0.54	%

Net interest margin (FTE)			3.28	%		3.45	%		3.44	%		3.31	%

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REPUBLIC BANCORP INC.
SUMMARY OF SELECTED FINANCIAL DATA
(Dollars in thousands)


				Dec. 31,		Sept. 30,		June 30,		Dec. 31,
				2002		2002		2002		2001

Portfolio Loan Summary:
	Commercial loans:
		Commercial and industrial		$	48,509	$	58,905	$	60,365	$	68,428
		Commercial real estate mortgage			1,420,758		1,417,667		1,373,090		1,294,634

			Total commercial loans		1,469,267		1,476,572		1,433,455		1,363,062
	Residential real estate mortgages				1,593,929		1,695,120		1,526,068		1,511,831
	Installment loans:
		Consumer direct			556,507		555,367		534,882		496,972
		Consumer indirect			36,840		45,611		57,221		86,516

			Total installment loans		593,347		600,978		592,103		583,488

			Total portfolio loans	$	3,656,543	$	3,772,670	$	3,551,626	$	3,458,381

Non-performing assets:
	Non-accrual loans:
		Commercial		$	19,167	$	22,137	$	13,923	$	6,413
		Residential real estate mortgage			15,215		11,991		12,486		18,808
		Installment			2,876		2,612		2,468		2,957

			Total non-accrual loans		37,258		36,740		28,877		28,178
	Restructured loans				2,309		—		—		—
	Other real estate owned				2,904		3,568		2,485		2,978

			Total non-performing assets	$	42,471	$	40,308	$	31,362	$	31,156

Allowance for Loan Losses (for the quarter):
Balance at beginning of period				$	33,124	$	29,870	$	29,324	$	28,990
	Loans charged off:
		Commercial			1,246		2,412		692		1,159
		Residential real estate mortgage			232		127		342		126
		Installment – direct			400		308		414		329
		Installment – indirect			430		493		706		850

			Total charge-offs		2,308		3,340		2,154		2,464

	Recoveries:
		Commercial			16		134		51		38
		Residential real estate mortgage			—		—		9		—
		Installment – direct			50		79		74		68
		Installment – indirect			195		181		166		125

			Total recoveries		261		394		300		231

	Net charge-offs				2,047		2,946		1,854		2,233
	Provision charged to expense				5,000		6,200		2,400		2,400

Balance at end of period				$	36,077	$	33,124	$	29,870	$	29,157

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REPUBLIC BANCORP INC.
SUMMARY OF SELECTED FINANCIAL DATA
(Dollars in thousands)


			Dec. 31,			Sept. 30,			June 30,			Dec. 31,
			2002			2002			2002			2001

Asset Quality Ratios:
	Non-performing assets to loans and other real estate owned ⁽¹⁾			.98	%		.93	%		.84	%		.74	%
	Non-performing assets to total assets			.89	%		.82	%		.72	%		.66	%
	Allowance for loan losses to non-performing loans			91.18	%		90.16	%		103.44	%		103.47	%
	Allowance for loan losses to loans ⁽²⁾			.99	%		.88	%		.84	%		.84	%
	Allowance for loan losses to loans (excluding residential real estate mortgages) ⁽²⁾			1.75	%		1.59	%		1.47	%		1.50	%
	Net charge-offs to average loans: ^(1,3)
		Commercial loans		.33	%		.63	%		.18	%		.34	%
		Residential real estate mortgage loans		.04	%		.03	%		.08	%		.02	%
		Direct installment loans		.25	%		.17	%		.26	%		.21	%
		Indirect installment loans		2.30	%		2.44	%		3.41	%		3.03	%

		Total loans		.19	%		.30	%		.20	%		.22	%

Earnings coverage of net charge-offs ^(3,4)				10.63	x		8.30	x		12.41	x		8.48	x

⁽¹⁾		Includes mortgage loans held for sale.
⁽²⁾		Excludes mortgage loans held for sale.
⁽³⁾		Quarter-to-date, annualized.
⁽⁴⁾		Operating earnings before taxes plus the provision for loan losses divided by net charge-offs.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	REPUBLIC BANCORP INC.



Date: January 14, 2003	By:	/s/ Thomas F. Menacher

		Name:	Thomas F. Menacher
		Its:	Executive Vice President, Treasurer and Chief Financial Officer

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