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The St. Petersburg parent of Republic Bank takes a hit in the first quarter to protect itself against possible losses.
By AMEET SACHDEV
© St. Petersburg Times, published April 19, 2000
ST. PETERSBURG -- Republic Bancshares Inc.'s first-quarter earnings plunged 42 percent as the bank set aside $4.4-million to cover potential losses in one of its lending divisions.
The St. Petersburg parent company of Republic Bank, the largest based in the bay area with $2.6-billion in assets, said Tuesday it still has not figured out what losses, if any, its "warehouse lending" operation has suffered. Bank officials have previously said the losses would not exceed $6-million.
Republic Bank disclosed last month that it had found "operational deficiencies" in the unit, which provides mortgage companies with interim financing secured by loans held for sale.
The reserve for the loan loss was "significantly more than I had anticipated," said Roberta Probber, a bank analyst with Ryan, Beck & Co. in Livingston, N.J. "I was expecting it to be $1.5-million less."
Net income for the quarter ended March 31 fell to $1.6-million, or 15 cents a share, from $2.9-million, or 25 cents a share, a year ago.
The bank's new president and chief executive, William R. Klich, delivered the disappointing results to shareholders at the company's annual meeting Tuesday. It was not the kind of first impression he was hoping to make.
"I hope to have a much more upbeat meeting next year," said Klich, who joined Republic Bank last month after running SunTrust Bank's Gulf Coast unit, a $2.4-billion-asset operation serving Manatee, Sarasota and Charlotte counties.
Klich's goals for Republic Bank are modest after the company's disastrous foray into selling high-risk mortgages. The failure of its once-thriving Flagship Mortgage subsidiary resulted in a $12.4-million loss in 1998.
First, he plans to reduce the bank's problem loans, which totaled $23.7-million at the end of the first quarter.
As a more traditional commercial bank, Republic will focus on lending to businesses and consumers through its 81-branch network in 20 counties. The bank may add other products, such as trust services, down the road, Klich said. As for home lending, the bank will stick to first mortgages.
"It's a fairly plain vanilla approach," Klich told shareholders.
The conservative strategy may be what the doctor ordered, analysts said. "I don't think they need anything fancy," Probber said. "I've become very enamored of very boring operations."
Still, rising interest rates are putting pressure on the profits of consumer-oriented banks. Meanwhile, big money-center banks, such as Bank of America and Citigroup, are reporting robust earnings largely because of their investment banking, asset management and trading services.
Returning profit growth at Republic will depend largely on how well Klich manages the branch network, which has grown considerably in the past two years. To that end, he plans to review the network as part of a three-year business plan he's developing.
"Do we need all 81 branches or all 81 where we've got them?" Klich asked.