To Our Shareholders
We are pleased to report that Republic Bancorp had an outstanding year in 1998. Net income was $22.9 million, up 22% over 1997. The Company's earnings per share increased 22% to $.96, almost double our peer growth rate. Return on average shareholders' equity increased to 16.20% in 1998 and return on average assets was 1.15%.
Strong Revenue Growth
Net revenues grew 32% in 1998, reflecting solid increases in both net interest income and non-interest income. Net interest income increased 27% over 1997 due to our continued growth in earning assets and a decline in our average cost of funds. Republic's increase compares very favorably to an average increase of 2% in net interest income for the top 50 banks in the country.
Noninterest income rose 40% in 1998 through record retail residential mortgage loan closings. During 1998, the Company originated $6.1 billion in residential mortgage loans, an increase of 57% over 1997. Overall, 1998 was a banner year for the mortgage banking industry.
The Company continued to build on its strength in retail mortgage lending and now ranks as the 21st largest retail mortgage lender in the country.
Asset Growth
Total assets grew 17% to $2.2 billion at December 31, 1998, reflecting significant growth in mortgage loans held for sale and portfolio loans. Mortgage loans held for sale grew $248 million, or 48%, reflecting our record mortgage loan production in 1998. Our continued lending emphasis on real estate-secured commercial loans resulted in a $137 million increase in commercial loans at year end and an overall increase in our portfolio loan balance of 11%. We are also pleased to report that for the 5th consecutive year, Republic Bank was named the #1 SBA Lender in Michigan.
Branch Expansion
This strong revenue and asset growth was generated by the Company's expanding retail and mortgage banking networks. During 1998, Republic opened 13 retail and mortgage banking offices in Michigan, Ohio and Indiana plus 10 mortgage loan offices throughout the country. The Company continues to evaluate additional opportunities to expand its retail and mortgage business and anticipates opening several offices in growth-oriented markets during 1999.
Superior Asset Quality
The Company's asset quality remains exceptionally strong and continues to rank among the best in the nation. This is evidenced by our historically low levels of net loan charge-offs, which totaled only .05% of average total loans in 1998. The average net loan charge-off ratio for our peer group of bank holding companies was .26% in 1998. The high quality of the Company's loan portfolio is due to our focus on real estate-secured lending and our adherence to conservative underwriting standards.
D&N Merger
In December 1998, we announced an agreement to merge with D&N Financial Corporation whereby D&N will become part of the Republic Bancorp team. The merger with D&N is focused on increasing income and shareholder value by following a "best practices" approach to leverage the strengths of both organizations.
Highlights of the combined organization include:
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We wish to thank Republic Bancorp's employees, whose skill, hard work, and dedication have enabled us to grow the Company and achieve our business goals. We also wish to express appreciation to our directors for sharing their knowledge and experience in the guidance of the Company. Finally, we thank you, our shareholders, for your continued support.
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 Jerry D. Campbell
Jerry D. Campbell, Chairman and Chief Executive Officer |
