10-K/A 1 a4606836new.txt TEMECULA VALLEY BANK 10-K/A DOCUMENT UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A AMENDMENT NO. 1 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2003 TEMECULA VALLEY BANCORP INC. (Name of Registrant in its Charter) California 46-047619 (State or other jurisdiction of (I.R.S. Employer incorporate or organization) Identification No.) 27710 Jefferson Avenue - Suite A100 92590 Temecula, California (Zip Code) (Address of principal executive offices) Registrant's telephone number (909) 694-9940 Securities registered under Section 12(b) of Exchange Act: None Securities registered under Section 12(g) of Exchange Act: Common Stock, No Par Value Check whether the issuer (1) filed all reports to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 [ ] Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K contained in this form and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-K or any amendment to this Form 10-K. [X] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act) YES [ ] NO [ X ] The issuer's net revenues for its most recent fiscal year were $48,371,852. The aggregate market value of the voting stock held by non-affiliates of the issuer as of June 30, 2003 was approximately $55,593,410. Number of registrant's shares of Common Stock outstanding at March 22, 2004 was 8,308,896. Documents incorporated by reference: The information required by Part III of this Annual Report is incorporated by reference from the Registrant's definitive proxy statement to be filed with the Securities and Exchange Commission 1 of 38 pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Annual Report. Explanatory Note On March 31, 2004, Temecula Valley Bancorp Inc. (the "Company") filed with the Securities and Exchange Commission its Annual Report on Form 10-K for the year ended December 31, 2003 (the "Initial Form 10-K"). The Initial Form 10-K contained the following omissions/errors: 1. On the cover page of the Form 10-K the box should have been checked as follows: Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K contained in this form and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-K or any amendment to this Form 10-K. [X] 2. The audited financial statements should have been attached and they were not. Such audited financial statements are attached hereto. 3. References to small business issuer and Regulation S-B on the cover page were corrected as Registrant is no longer a small business issuer. 4. Each director and executive officer designated as signing the Initial Form 10-K actually signed the Initial Form 10-K and the signatures are on file at the Company. No other changes are included in this Amendment. PART II ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this item is included in "Consolidated Financial Statements", "Notes to Consolidated Financial Statements", the "Independent Auditors Report", and the "Report of Management" in our 2003 Annual Report to shareholders and such information is attached hereto. PART IV ITEM 15: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Documents Filed as Part of this Report (1) The following financial statements are incorporated by reference from Item 8 hereto and are attached hereto: Independent Auditors Report Page F-1 Consolidated Statements of Financial Condition as of December 31, 2003 and 2002 Page F-2 2 of 38 Consolidated Statements of Income for Each of the Years Ended December 31, 2003, 2002 and 2001 Page F-4 Consolidated Statement of Changes in Shareholders' Equity for the Years ended December 31, 2003, 2002 and 2001 Page F-5 Notes to Consolidated Financial Statements 2003, 2002 and 2001 Page F-7 Financial Statement Schedules Not applicable. (b) Exhibits Exhibit No. Description of Exhibit 2(i) Bank and Company Amended and Restated Plan of Reorganization dated as of April 2, 2002 filed on June 3, 2002 as an Exhibit to Form 8-A12G. 2(ii) Agreement and Plan of Merger of Temecula Merger Corporation and Temecula Valley Bancorp is an Exhibit to the Company's Definitive 14A filed November 20, 2003. 3(i) Articles of Incorporation of Temecula Valley Bancorp Inc., a California Corporation, is an Exhibit to the Company's Definitive 14A filed November 20, 2003. 3(ii) Bylaws of Temecula Valley Bancorp Inc. is an Exhibit to the Company's Definitive 14A filed November 20, 2003. 4.1 Common Stock Certificate of Temecula Valley Bancorp Inc. filed on June 3, 2002 as an Exhibit to Temecula Valley Bancorp's Form 8-A12G. 4.2 Warrant Certificate of Temecula Valley Bank, N.A. as adopted by Temecula Valley Bancorp Inc. filed on June 3, 2002 as an Exhibit to Temecula Valley Bancorp's Form 8-A12G. 10.1 Temecula Valley Bank, N.A. Lease Agreement for Main Office filed on March 11, 2003 as an Exhibit to Temecula Valley Bancorp's Form 10KSB. 10.2 Stephen H. Wacknitz Employment Agreement dated October 1, 2003. 10.3 Brian D. Carlson Employment Agreement dated December 1, 2003. 10.4 Luther J. Mohr Employment Agreement dated January 1, 2003. 10.5 Thomas P. Ivory Employment Agreement dated January 25, 2001 filed on March 11, 2003 as an Exhibit to Temecula Valley Bancorp's Form 10KSB. 10.6 1996 Incentive and Non Qualified Stock Option Plan (Employees), as amended by that certain First Amendment effective May 15, 2001 and that certain Second Amendment effective May 15, 2002 filed on March 11, 2003 as an Exhibit to Temecula Valley Bancorp's Form 10KSB. 3 of 38 10.7 1997 Non Qualified Stock Option Plan (Directors), as amended by that certain First Amendment effective May 15, 2001 and that certain Second Amendment effective May 15, 2002 filed on March 11, 2003 as an Exhibit to Temecula Valley Bancorp's Form 10KSB. 10.8 Amended and Restated Salary Continuing Agreement entered into on behalf of Stephen H. Wacknitz, as amended by that certain First Amendment effective as of December 31, 2002 filed on March 11, 2003 as an Exhibit to Temecula Valley Bancorp's Form 10KSB. 10.9 Amended and Restated Salary Continuing Agreement entered into on behalf of Luther J. Mohr, as amended by that certain First Amendment effective as of December 31, 2002 filed on March 11, 2003 as an Exhibit to Temecula Valley Bancorp's Form 10KSB. 10.10 Salary Continuing Plan entered into on behalf of Thomas M. Shepherd filed on March 11, 2003 as an Exhibit to Temecula Valley Bancorp's Form 10KSB. 10.11Salary Continuing Plan entered into on behalf of Brian Carlson filed on March 11, 2003 as an Exhibit to Temecula Valley Bancorp's Form 10KSB. 31.1 Certification of the Chief Executive Officer of Registrant submitted to the Securities and Exchange Commission pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of the Chief Financial Officer of Registrant submitted to the Securities and Exchange Commission pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of the Chief Executive Officer of Registrant submitted to the Securities and Exchange Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This Certification shall not be deemed to be "filed" with the Commission subject to the liability of Section 18 of the Exchange Act, except to the extent that the Registrant requests that such certifications incorporated by reference into a filing under the Securities Act or Exchange Act. This certification is being furnished to the Commission and accompanies this Report pursuant to SEC Release No. 33-8212. 32.2 Certification of the Chief Financial Officer of Registrant submitted to the Securities and Exchange Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This Certification shall not be deemed to be "filed" with the Commission subject to the liability of Section 18 of the Exchange Act, except to the extent that the Registrant requests that such certifications incorporated by reference into a filing under the Securities Act or Exchange Act. This certification is being furnished to the Commission and accompanies this Report pursuant to SEC Release No. 33-8212. 4 of 38 (c) Reports on Form 8-K The following reports on Form 8-K were filed with the Securities and Exchange Commission by the Company during the last quarter of the period covered by this Report. (1) A current report on Form 8-K dated December 18, 2003 that reported the effectiveness of a change in the Company's state of incorporation from Delaware to California. (2) A current report on Form 8-K dated December 10, 2003 that reported a press release concerning the addition of a loan production office in the Rancho Bernardo area of San Diego, California and the employment of Carl R. Kruse as Senior Vice President. (3) A current report on Form 8-K dated December 8, 2003 that reported a press release concerning the employment of Ronald R. Bradley as Senior Vice President. (4) A current report on Form 8-K dated November 19, 2003 that reported a press release concerning the naming of Temecula Valley Bank as the nation's eighth largest SBA lender. (5) A current report on Form 8-K dated November 3, 2003 that reported a press release concerning the seeking of shareholder approval of a two-for-one stock split and a reincorporation into California. (6) A current report on Form 8-K dated October 20, 2003 that reported a press release concerning earnings for the third quarter of 2003. SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Bank has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. TEMECULA VALLEY BANCORP INC. DATE: March 31, 2004 BY: /s/ Stephen H. Wacknitz ---------------------------------------- Stephen H. Wacknitz, President/CEO, Chairman of the Board BY: /s/ Donald A. Pitcher ---------------------------------------- Donald A. Pitcher, Executive Vice President Chief Financial Officer 5 of 38 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date --------- ----- ---- Director March 31, 2004 /s/- Dr. Steven W. Aichle ------------------------- Dr. Steven W. Aichle Director March 31, 2004 /s/- Dr. Robert P. Beck ----------------------- Dr. Robert P. Beck Director March 31, 2004 /s/- Neil M. Cleveland ---------------------- Neil M. Cleveland Director and March 31, 2004 /s/- Luther J. Mohr Chief Operating Officer ------------------- Luther J. Mohr President/CEO/ March 31, 2004 /s/ Stephen H. Wacknitz Chairman of the Board ----------------------- Stephen H. Wacknitz Director March 31, 2004 /s/- Richard W. Wright ---------------------- Richard W. Wright 6 of 38 Vavrinek, Trine, Day & Co., LLP Certified Public Accountants & Consultants Board of Directors and Shareholders of Temecula Valley Bancorp Inc. and Subsidiary We have audited the accompanying consolidated statements of financial condition of Temecula Valley Bancorp Inc. and Subsidiary as of December 31, 2003 and 2002 and the related consolidated statements of income, changes in shareholders' equity, and cash flows for the three years ended December 31, 2003. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Temecula Valley Bancorp Inc. and Subsidiary as of December 31, 2003 and 2002, and the results of its operations and its cash flows for the three years ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America. /s/ Vavrinek, Trime, Day + Co., LLP Laguna Hills, California January 28, 2004 25231 Paseo De Alicia, Suite 100 Laguna Hills, CA 92653 Tel: 949.768.0833 Fax: 949.768.8408 www.vtdcpa.com FRESNO o LAGUNA HILLS o PLEASANTON o RANCHO CUCAMONGA o SAN JOSE F-1 TEMECULA VALLEY BANCORP INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION December 31, 2003 and 2002
2003 2002 -------------- -------------- ASSETS Cash and Due from Banks $ 9,348,013 $ 12,180,415 Federal Funds Sold 21,400,000 - -------------- -------------- TOTAL CASH AND CASH EQUIVALENTS 30,748,013 12,180,415 Loans Held for Sale 17,005,198 22,916,776 Loans: Commercial 33,008,385 44,975,966 Real Estate - Construction 113,846,726 61,568,251 Real Estate - Other 195,991,515 138,849,220 Consumer 3,194,582 4,455,377 -------------- -------------- TOTAL LOANS 346,041,208 249,848,814 Net Deferred Loan Fees ( 2,297,015) ( 1,339,764) Allowance for Loan Losses ( 3,607,833) ( 3,017,395) -------------- -------------- NET LOANS 340,136,360 245,491,655 Federal Reserve and Federal Home Loan Bank Stock, at Cost 1,145,000 1,460,050 Premises and Equipment 2,185,543 2,335,139 Other Real Estate Owned 485,036 - Cash Surrender Value of Life Insurance 5,740,729 3,983,183 Deferred Tax Assets 2,393,000 1,728,000 Servicing Assets 6,116,679 3,763,779 Interest-Only Strips Receivable 20,495,511 13,120,093 Accrued Interest and Other Assets 4,761,049 3,527,007 -------------- -------------- $431,212,118 $310,506,097 ============== ==============
The accompanying notes are an integral part of these consolidated financial statements. F-2 TEMECULA VALLEY BANCORP INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION December 31, 2003 and 2002
2003 2002 ------------- ------------- LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest-Bearing Demand $112,367,018 $ 85,324,384 Money Market and NOW 61,340,428 62,160,520 Savings 35,180,027 29,958,463 Time Deposits, Under $100,000 88,771,099 40,489,348 Time Deposits, $100,000 and Over 85,828,794 51,388,505 ------------- ------------- TOTAL DEPOSITS 383,487,366 269,321,220 Federal Home Loan Bank Advances - 10,000,000 Junior Subordinated Debt Securities 12,372,000 7,217,000 Accrued Interest and Other Liabilities 5,669,687 4,351,674 ------------- ------------- TOTAL LIABILITIES 401,529,053 290,889,894 Commitments and Contingencies - Notes C and M - - Shareholders' Equity: Common Stock No Par Value; 40,000,000 Shares Authorized; 8,151,914 and 7,446,646 Shares Issued and Outstanding at December 31, 2003 and 2002 14,082,278 11,869,755 Retained Earnings 15,600,787 7,746,448 ------------- ------------- TOTAL SHAREHOLDERS' EQUITY 29,683,065 19,616,203 ------------- ------------- $431,212,118 $310,506,097 ============= =============
The accompanying notes are an integral part of these consolidated financial statements. F-3 TEMECULA VALLEY BANCORP INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION December 31, 2003 and 2002
2003 2002 2001 ------------ ------------ ------------ INTEREST INCOME Interest and Fees on Loans $23,738,166 $16,369,293 $11,298,931 Interest on Investment Securities 336 3,651 10,247 Interest on Federal Funds 151,998 136,497 693,700 Other Interest Income 63,791 46,477 19,332 ------------ ------------ ------------ TOTAL INTEREST INCOME 23,954,291 16,555,918 12,022,210 INTEREST EXPENSE Interest on Money Market and NOW 555,883 645,911 593,591 Interest on Savings Deposits 192,313 228,373 621,491 Interest on Time Deposits 3,727,584 1,910,417 1,519,325 Interest on Junior Subordinated Debt Securities and Other Borrowings 470,773 339,981 - ------------ ------------ ------------ TOTAL INTEREST EXPENSE 4,946,553 3,124,682 2,734,407 ------------ ------------ ------------ NET INTEREST INCOME 19,007,738 13,431,236 9,287,803 Provision for Loan Losses 1,022,000 2,460,000 400,000 ------------ ------------ ------------ NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 17,985,738 10,971,236 8,887,803 NONINTEREST INCOME Service Charges and Fees 792,292 965,067 786,142 Gain on Sale of Loans 15,798,959 11,389,023 4,739,335 Mortgage Fees 3,882,234 2,943,730 2,004,254 Servicing Income 1,693,836 1,129,328 339,060 Construction Fund Control Fees 840,003 395,581 213,396 Other Income 1,410,237 1,072,436 870,122 ------------ ------------ ------------ 24,417,561 17,895,165 8,952,309 ------------ ------------ ------------ 42,403,299 28,866,401 17,840,112 NONINTEREST EXPENSE Salaries and Employee Benefits 20,484,132 14,866,458 10,051,392 Occupancy Expenses 1,183,460 1,044,391 840,008 Furniture and Equipment 892,154 807,779 738,461 Data Processing 988,280 891,906 613,043 Marketing and Business Promotion 723,429 455,253 376,981 Legal and Professional 411,537 419,011 217,236 Regulatory Assessments 137,506 128,279 85,760 Loan Funding Expense 1,821,320 1,253,018 499,068 Office Expenses 1,589,448 1,404,963 1,026,397 Other Expenses 889,805 529,779 383,167 ------------ ------------ ------------ 29,121,071 21,800,837 14,831,513 ------------ ------------ ------------ INCOME BEFORE INCOME TAXES 13,282,228 7,065,564 3,008,599 Income Taxes 5,427,889 2,874,510 1,205,018 ------------ ------------ ------------ NET INCOME $ 7,854,339 $ 4,191,054 $ 1,803,581 ============ ============ ============ Per Share Data : Net Income - Basic $1.00 $0.57 $0.28 Net Income - Diluted $0.89 $0.50 $0.25
The accompanying notes are an integral part of these consolidated financial statements. F-4 TEMECULA VALLEY BANCORP INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION December 31, 2003 and 2002
Common Retained Shares Stock Earnings Total ------------- ------------- ------------- ------------- Balance at January 1, 2001 5,505,322 $ 7,185,369 $ 1,751,813 $ 8,937,182 Exercise of Stock Options, Including the Realization of Tax Benefits of $19,908 215,944 391,826 391,826 Exercise of Warrants 5,058 12,645 12,645 Stock Offering, net of Expenses of $41,290 1,600,000 3,958,710 3,958,710 Net Income 1,803,581 1,803,581 ------------- ------------- ------------- ------------- Balance at December 31, 2001 7,326,324 11,548,550 3,555,394 15,103,944 Exercise of Stock Options, Including the Realization of Tax Benefits of $32,123 53,694 154,635 154,635 Exercise of Warrants 66,628 166,570 166,570 Net Income 4,191,054 4,191,054 ------------- ------------- ------------- ------------- Balance at December 31, 2002 7,446,646 11,869,755 7,746,448 19,616,203 Exercise of Stock Options, Including the Realization of Tax Benefits of $424,910 380,670 1,401,026 1,401,026 Exercise of Warrants 324,598 811,497 811,497 Net Income 7,854,339 7,854,339 ------------- ------------- ------------- ------------- Balance at December 31, 2003 8,151,914 $14,082,278 $15,600,787 $29,683,065 ============= ============= ============= =============
The accompanying notes are an integral part of these consolidated financial statements. F-5 TEMECULA VALLEY BANCORP INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION December 31, 2003 and 2002
OPERATING ACTIVITIES 2003 2002 2001 -------------- -------------- -------------- Net Income $ 7,854,339 $ 4,191,054 $ 1,803,581 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and Amortization 4,946,316 2,132,475 1,047,884 Provision for Loan Losses 1,022,000 2,460,000 400,000 Deferred Taxes ( 665,000) ( 909,000) ( 299,000) Gain on Sale of Loans ( 15,798,959) ( 11,389,023) ( 4,739,335) Loans Originated for Sale ( 246,036,807) ( 202,264,842) ( 115,408,177) Proceeds from Loan Sales 257,672,323 196,781,986 106,595,716 Loss (Gain) on Sale of Other Real Estate Owned ( 19,880) - - Net Increase in Cash Surrender Value of Life Insurance ( 205,546) ( 150,929) ( 124,925) Net Change in Accrued Interest, Other Assets and Other Liabilities 399,990 50,241 ( 1,047,445) -------------- -------------- -------------- NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 9,168,776 ( 9,098,038) ( 11,771,701) INVESTING ACTIVITIES Purchases of Held-to-Maturity Investments ( 299,664) ( 955,939) ( 251,758) Purchases of Federal Reserve and Federal Home Loan Bank Stock ( 224,950) ( 924,500) ( 302,550) Proceeds from Maturities of Held-to-Maturity Securities 300,000 950,000 450,000 Proceeds from Sale of Federal Home Loan Bank Stock 571,900 - - Net Increase in Loans ( 100,889,635) ( 116,172,110) ( 48,382,205) Purchase of Cash Surrender Value Life Insurance ( 1,552,000) ( 1,000,000) ( 548,000) Proceeds from Sale of Premises and Equipment 29,000 57,477 16,175 Proceeds from Sale of Other Real Estate Owned 870,880 - - Purchases of Premises and Equipment ( 515,468) ( 701,446) ( 1,110,919) -------------- -------------- -------------- NET CASH USED BY INVESTING ACTIVITIES ( 101,709,937) ( 118,746,518) ( 50,129,257) FINANCING ACTIVITIES Net Increase in Demand Deposits and Savings Accounts 31,444,106 41,796,778 45,927,480 Net Increase in Time Deposits 82,722,040 54,596,217 19,694,009 Net Change in Federal Home Loan Bank Advances ( 10,000,000) 10,000,000 - Proceeds from Issuance of Junior Subordinated Debt Securities 5,155,000 7,217,000 - Proceeds from Issuance of Common Stock - - 3,958,710 Proceeds from Exercise of Warrants 976,116 166,570 12,645 Proceeds from Exercise of Stock Options 811,497 122,512 371,918 -------------- -------------- -------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 111,108,759 113,899,077 69,964,762 -------------- -------------- -------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 18,567,598 ( 13,945,479) 8,063,804 Cash and Cash Equivalents at Beginning of Year 12,180,415 26,125,894 18,062,090 -------------- -------------- -------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 30,748,013 $ 12,180,415 $ 26,125,894 ============== ============== ============== Supplemental Disclosures of Cash Flow Information: Interest Paid $ 4,895,119 $ 3,029,930 $ 2,729,574 Income Taxes Paid $ 7,117,636 $ 3,155,090 $ 1,877,948 Transfer of Loans to Other Real Estate Owned $ 1,336,036 $ - $ -
The accompanying notes are an integral part of these consolidated financial statements. F-6 TEMECULA VALLEY BANCORP INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003, 2002 and 2001 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation --------------------------- The consolidated financial statements include the accounts of Temecula Valley Bancorp Inc. and its wholly-owned subsidiary, Temecula Valley Bank (the "Bank"), collectively referred to herein as the "Company". All significant intercompany transactions have been eliminated. Nature of Operations -------------------- The Company has been organized as a single operating segment and operates five branches in Temecula, Murrieta, Fallbrook, El Cajon and Escondido, California. In addition, the Company operates business loan centers in California, North Carolina, Florida, Tennessee, Georgia, Illinois and Washington. The Bank's primary sources of revenue are providing loans to customers, who are predominately small and middle-market businesses and individuals and originating mortgage and government guaranteed loans for sale to institutional investors in the secondary market. The Company also generates fee income by servicing the government guaranteed loans. Use of Estimates in the Preparation of Financial Statements ----------------------------------------------------------- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents ------------------------- For purposes of reporting cash flows, cash and cash equivalents include cash, due from banks and federal funds sold. Generally, federal funds are sold for one day periods. Cash and Due From Banks ----------------------- Banking regulations require that all banks maintain a percentage of their deposits as reserves in cash or on deposit with the Federal Reserve Bank. The Bank complied with the reserve requirements as of December 31, 2003. The Company maintains amounts due from banks which exceed federally insured limits. The Company has not experienced any losses in such accounts. Investment Securities --------------------- Bonds, notes, and debentures for which the Company has the positive intent and ability to hold to maturity are reported at cost, adjusted for premiums and discounts that are recognized in interest income using the interest method over the period to maturity. F-7 TEMECULA VALLEY BANCORP INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003, 2002 and 2001 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Investment Securities - Continued --------------------------------- Investments not classified as trading securities nor as held to maturity securities are classified as available-for-sale securities and recorded at fair value. Unrealized gains or losses on available-for-sale securities are excluded from net income and reported as an amount net of taxes as a separate component of other comprehensive income included in shareholders' equity. Premiums or discounts on held-to-maturity and available-for-sale securities are amortized or accreted into income using the interest method. Realized gains or losses on sales of held-to-maturity or available-for-sale securities are recorded using the specific identification method. Loans ----- Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their outstanding unpaid principal balances reduced by any charge-offs or specific valuation accounts and net of any deferred fees or costs on originated loans, or unamortized premiums or discounts on purchased loans. Loan origination fees and certain direct origination costs are capitalized and recognized as an adjustment of the yield of the related loan. The accrual of interest on impaired loans is discontinued when, in management's opinion, the borrower may be unable to meet payments as they become due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received. For impairment recognized in accordance with Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment of a Loan", as amended by SFAS No. 118, the entire change in the present value of expected cash flows is reported as either provision for loan losses in the same manner in which impairment initially was recognized, or as a reduction in the amount of provision for loan losses that otherwise would be reported. The Bank has adopted SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". The Statement provides accounting and reporting standards for transfers and servicing of financial assets and extinguishments of liabilities. Under this Statement, after a transfer of financial assets, an entity recognizes the financial and servicing assets it controls and liabilities it has incurred, derecognizes financial assets when control has been surrendered, and derecognizes liabilities when extinguished. To calculate the gain (loss) on sale of loans, the Bank's investment in the loan is allocated among the retained portion of the loan, the servicing retained, the interest-only strip and the sold portion of the loan, based on the relative fair market value of each portion. The gain (loss) on the sold portion of the loan is recognized at the time of sale based on the difference between the sale proceeds and the allocated investment. As a result of the relative fair value allocation, the carrying value of the retained portion is discounted, with the discount accreted to interest income over the life of the loan. F-8 TEMECULA VALLEY BANCORP INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003, 2002 and 2001 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Loans - Continued ----------------- Servicing assets are amortized over an estimated life using a method that is in proportion to the estimated future servicing income; in the event future prepayments exceed Management's estimates and future expected cash flows are inadequate to cover the unamortized servicing asset, additional amortization would be recognized. The portion of servicing fees in excess of the contractual servicing fees is reflected as interest-only (I/O) strips receivable, which are classified as available for sale and are carried at fair value. Loans Held for Sale ------------------- Mortgage loans and SBA loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated market value in the aggregate. Net unrealized losses are recognized through a valuation allowance by charges to income. Allowance for Loan Losses ------------------------- The allowance for loan losses is increased by charges to income and decreased by charge-offs (net of recoveries). Quarterly detailed reviews are performed to identify the risks inherent in the loan portfolio, assess the overall quality of the loan portfolio and to determine the adequacy of the allowance for loan losses and the related provision for loan losses to be charged to expense. Loans identified as less than "acceptable" are reviewed individually to estimate the amount of probable losses that need to be included in the allowance. These reviews include analysis of financial information as well as evaluation of collateral securing the credit. Additionally, the Company considers the inherent risk present in the "acceptable" portion of the loan portfolio taking into consideration historical losses on pools of similar loans, adjusted for trends, conditions and other relevant factors that may affect repayment of the loans in these pools. Premises and Equipment ---------------------- Land is carried at cost. Premises and equipment are carried at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives, which ranges from three to ten years for furniture and fixtures and ten to thirty years for buildings. Leasehold improvements are amortized using the straight-line method over the estimated useful lives of the improvements or the remaining lease term, whichever is shorter. Expenditures for betterments or major repairs are capitalized and those for ordinary repairs and maintenance are charged to operations as incurred. Advertising ----------- The Bank expenses the costs of advertising in the period incurred. F-9 TEMECULA VALLEY BANCORP INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003, 2002 and 2001 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Income Taxes ------------ Deferred income taxes are computed using the asset and liability method, which recognizes a liability or asset representing the tax effects, based on current tax law, of future deductible or taxable amounts attributable to events that have been recognized in the consolidated financial statements. A valuation allowance is established to reduce the deferred tax asset to the level at which it is "more likely than not" that the tax asset or benefits will be realized. Realization of tax benefits of deductible temporary differences and operating loss carryforwards depend on having sufficient taxable income of an appropriate character within the carryforward periods. Comprehensive Income -------------------- Beginning in 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income", which requires the disclosure of comprehensive income and its components. For the years ending December 31, 2003, 2002 and 2001, the Company had no accumulated other comprehensive income and there were no significant components of comprehensive income with the exceptions of net income for 2003, 2002 and 2001. Financial Instruments --------------------- In the ordinary course of business, the Company has entered into off-balance sheet financial instruments consisting of commitments to extend credit, commitments under credit card arrangements, commercial letters of credit, and standby letters of credit. Such financial instruments are recorded in the financial statements when they are funded or related fees are incurred or received, as described in Note M. Disclosure About Fair Value of Financial Instruments ---------------------------------------------------- SFAS No. 107 specifies the disclosure of the estimated fair value of financial instruments. The Company's estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to develop the estimates of fair value. Accordingly, the estimates are not necessarily indicative of the amounts the Company could have realized in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since the balance sheet date and, therefore, current estimates of fair value may differ significantly from the amounts presented in the accompanying notes. F-10 TEMECULA VALLEY BANCORP INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003, 2002 and 2001 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Earnings Per Share (EPS) ------------------------ Basic EPS excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. Stock-Based Compensation ------------------------ SFAS No. 123, "Accounting for Stock-Based Compensation", encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans at fair value. The Bank accounts for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees", and related Interpretations. Accordingly, compensation cost for stock options will be measured as the excess, if any, of the quoted market price of the Bank's stock at the date of the grant over the amount an employee must pay to acquire the stock. Had compensation cost for the Bank's stock option plans been determined based on the fair value at the grant dates for awards under those plans consistent with the method of SFAS No. 123, the Bank's net income and earnings per share would have been reduced to the pro forma amounts indicated below: 2003 2002 2001 ----------- ----------- ----------- Net Income: As reported $7,854,339 $4,191,054 $1,803,581 Stock-Based Compensation Using the Intrinsic Value Method 10,677 10,677 10,677 Stock-Based Compensation That Would Have Been Reported Using the Fair Value Method of SFAS 123 ( 505,457) ( 314,714) ( 547,283) ------------ ------------------------ Pro Forma Net Income $7,359,559 $3,887,017 $ 708,401 =========== =========== =========== Per Share Data: Net Income - Basic As Reported $ 1.00 $ 0.57 $ 0.28 Pro Forma $ 0.94 $ 0.53 $ 0.20 Net Income - Diluted As Reported $ 0.89 $ 0.50 $ 0.25 Pro Forma $ 0.82 $ 0.46 $ 0.17 F-11 TEMECULA VALLEY BANCORP INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003, 2002 and 2001 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Current Accounting Pronouncements --------------------------------- In May 2003, FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 requires an issuer to classify a financial instrument that is within its scope as a liability. Many of those instruments were previously classified as equity. SFAS No. 150 is generally effective for financial instruments entered into or modified after May 31, 2003, and otherwise effective at the beginning of the first interim period beginning after June 15, 2003; however, management does not believe adoption will have a material impact on the Bank's financial statements. In December 2003, FASB issued FASB Interpretation (FIN) No. 46, "Consolidation of Variable Interest Entities, an interpretations of ARB No.51." This interpretation addresses the consolidation of variable interest entities as defined in the Interpretations. This Interpretation will require companies that have issued trust preferred securities to deconsolidate the related entities. The Company has deconsolidated its trust preferred securities as of December 31, 2003, which did not have a material impact on the Company's financial statements. Reclassifications ----------------- Certain reclassifications were made to prior year's presentation to conform to the current year. These classifications are of a normal recurring nature. F-12 TEMECULA VALLEY BANCORP INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003, 2002 and 2001 NOTE B - LOANS The Bank's loan portfolio consists primarily of loans to borrowers within Temecula, California, its surrounding communities, and the surrounding communities of the other business loan centers. Although the Bank seeks to avoid concentrations of loans to a single industry or based upon a single class of collateral, real estate and real estate associated businesses are among the principal industries in the Bank's market area and, as a result, the Bank's loan and collateral portfolios are, to some degree, concentrated in those industries. The Bank also originated mortgage and SBA loans for sale to institutional investors. A substantial portion of the Bank's revenues are from origination of loans guaranteed by the Small Business Administration under its Section 7a program and sale of the guaranteed portions of those loans. Funding for the Section 7a program depends on annual appropriations by the U.S. Congress. At December 31, 2003 and 2002, the Bank was servicing approximately $306,252,000 and $177,075,000, respectively, in loans previously sold. A summary of the changes in the related servicing assets and interest-only strips receivable are as follows: Servicing Assets --------------------------------------- 2003 2002 2001 ------------ ------------- ------------ Balance at Beginning of Year $ 3,763,779 $ 1,538,437 $ 708,401 Increase from Loan Sales 3,251,793 2,708,148 929,465 Amortization Charged to Income ( 898,893) ( 425,806) ( 91,429) Increase in Valuation Allowance - ( 57,000) ( 8,000) ------------ ------------- ------------ Balance at End of Year $ 6,116,679 $ 3,763,779 $1,538,437 ============ ============= ============ Interest-Only Strips Receivable --------------------------------------- 2003 2002 2001 ------------ ------------- ------------ Balance at Beginning of Year $13,120,093 $ 4,136,809 $1,381,098 Increase from Loan Sales 10,710,121 10,034,996 3,145,725 Amortization Charged to Income ( 3,334,703) ( 1,036,212) ( 311,014) Writedown of Interest-Only Strips Receivable - ( 15,500) ( 79,000) ------------ ------------- ------------ Balance at End of Year $20,495,511 $13,120,093 $4,136,809 ============ ============= ============ F-13 TEMECULA VALLEY BANCORP INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003, 2002 and 2001 NOTE B - LOANS - Continued The estimated fair value of the servicing assets approximated the carrying amount at December 31, 2003, 2002 and 2001. Fair value is estimated by discounting estimated future cash flows from the servicing assets using discount rates that approximate current market rates over the expected lives of the loans being serviced. Management has estimated the expected life of these loans to be approximately 25% to 30% of the remaining life at the time of sale. For purposes of measuring impairment, the Bank has identified each servicing asset with the underlying loan being serviced. A valuation allowance is recorded where the fair value is below the carrying amount of the asset. At December 31, 2003 and 2002, the Bank had a valuation allowance of $390,000. The Bank may also receive a portion of subsequent interest collections on loans sold that exceed the contractual servicing fee. In that case the Bank records an interest-only strip based on the relative fair market value of it and the other components of the loan. At December 31, 2003, 2002 and 2001, the Bank had interest-only strips of $20,495,511, $13,120,093 and $4,136,809, respectively, which approximates fair value. Fair value is estimated by discounting estimated future cash flows from the interest-only strips using assumptions similar to those used in valuing servicing assets. At December 31, 2003, key economic assumptions used to fair value the servicing assets and interest-only strips on SBA loans sold, along with the potential decline in the fair value of these assets due to an immediate 10 percent and 20 percent adverse change in those assumptions are as follows: SBA Loans Sold ------------- Carrying Value of Servicing Assets and I/O Strips - Fair Value $26,612,000 Weighted-Average Life (in months) 60 Repayment Speed Assumption (annual rate) 15.67% Decline in Fair Value from a 10% Adverse Change 1,774,000 Decline in Fair Value from a 20% Adverse Change 3,359,000 Discount Rate (annual rate) 9.50% Decline in Fair Value from a 10% Adverse Change 903,000 Decline in Fair Value from a 20% Adverse Change 1,750,000 The declines in fair value due to changes in the assumptions are hypothetical and should be used with caution. For purposes of this table, the effect of an adverse change is calculated for each assumption without changing any other assumptions; however, in reality changes in one factor may result in positive or negative changes in another factor, which might magnify or counteract the sensitivities. F-14 TEMECULA VALLEY BANCORP INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003, 2002 and 2001 NOTE B - LOANS - Continued A summary of the changes in the allowance for loan losses as of December 31 follows:
2003 2002 2001 ------------ ------------ ------------ Balance at Beginning of Year $3,017,395 $1,239,308 $927,509 Additions to the Allowance Charged to Expense 1,022,000 2,460,000 400,000 Recoveries on Loans Charged Off 74,024 25,542 - ------------ ------------ ------------ 4,113,419 3,724,850 1,327,509 Less Loans Charged Off ( 505,586) ( 707,455) ( 88,201) ------------ ------------ ------------ $3,607,833 $3,017,395 $1,239,308 ============ ============ ============
The following is a summary of the investment in impaired loans, the related allowance for loan losses, and income recognized thereon as of December 31:
2003 2002 2001 ----------- ----------- ----------- Recorded Investment in Impaired Loans $4,160,000 $1,908,000 $ 99,000 Related Allowance for Impaired Loans $ 368,000 $ 172,000 10,000 Average Recorded Investment in Impaired Loans $3,437,000 $1,443,000 $292,000 Interest Income Recognized for Cash Payments None None None Total Nonaccrual Loans $4,160,000 $1,908,000 $ 99,000 Total Loans Past-Due Nintey Days or More and Still Accruing $ - $ - $100,000 Guaranteed Portion of Nonaccrual Loans $3,378,000 $1,077,000 $100,000
F-15 TEMECULA VALLEY BANCORP INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003, 2002 and 2001 NOTE C - PREMISES AND EQUIPMENT A summary of premises and equipment as of December 31 follows: 2003 2002 ------------ ------------ Land $ 500,000 $ 500,000 Buildings and Leasehold Improvements 542,567 532,967 Autos 1,032,446 849,800 Furniture, Fixtures, and Equipment 2,337,729 2,130,792 ------------ ------------ 4,412,742 4,013,559 Less Accumulated Depreciation ( 2,227,199) ( 1,678,420) ------------ ------------ $ 2,185,543 $ 2,335,139 ============ ============ Depreciation and amortization expense for premises and equipment was $643,615 in 2003, $597,957 in 2002 and $558,441 in 2001. The Bank has entered into several leases for its branches and loan production offices, which expire at various dates through 2009. These leases include provisions for periodic rent increases as well as payment by the lessee of certain operating expenses. Rental expense relating to these leases was approximately $811,000 in 2003, $701,000 in 2002 and $502,000 in 2001. The approximate future minimum annual payments for these leases by year are as follows: Year Amount -------------- ----------- 2004 $ 862,423 2005 591,055 2006 511,781 2007 493,203 2008 472,648 Thereafter 22,314 ----------- $2,953,424 =========== The minimum rental payment shown above are given for the existing lease obligations and are not a forecast of future rental expense. F-16 TEMECULA VALLEY BANCORP INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003, 2002 and 2001 NOTE D - DEPOSITS At December 31, 2003 the schedule maturities of time deposits are as follows: Year Amount -------------- ------------- 2004 $164,022,297 2005 9,827,061 Thereafter 750,535 ------------- $174,599,893 ============= The five largest depositors with the Bank had approximately $12,928,000 on deposit at December 31, 2003. NOTE E - FHLB ADVANCES AND OTHER BORROWINGS As of December 31, 2002, Federal Home Loan Bank Advances consist of a $10,000,000 advance with a maturity date of January 2, 2003 and a fixed rate of 1.05%. The Bank is required to pledge a certain amount of loans with the Federal Home Loan Bank for collateralization purposes. As of December 31, 2003, approximately $50,000,000 in loans was pledged for an aggregate borrowing line of $25,554,000. The Bank had no Federal Home Loan Bank Advances as of December 31, 2003. The Bank maintains unused federal lines of credit with three financial institutions in the aggregate amount of $13,000,000 as of December 31, 2003. As of December 31, 2003, no amounts were outstanding under these arrangements. NOTE F - JUNIOR SUBORDINATED DEBT SECURITIES On June 26, 2002, the Company issued $7,217,000 of junior subordinated debt securities (the "debt securities") to Temecula Valley Statutory Trust I, a statutory trust created under the laws of the State of Connecticut. These debt securities are subordinated to effectively all borrowings of the Company and are due and payable on June 26, 2032. Interest is payable quarterly on these debt securities at 3-Month LIBOR plus 3.45% for an effective rate of 4.59% as of December 31, 2003. The debt securities can be redeemed for 107.5% of the principal balance through June 26, 2007 and at par thereafter. The debt securities can also be redeemed at par if certain events occur that impact the tax treatment or the capital treatment of the issuance. F-17 TEMECULA VALLEY BANCORP INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003, 2002 and 2001 NOTE F - JUNIOR SUBORDINATED DEBT SECURITIES - Continued On September 17, 2003, the Company issued $5,155,000 of junior subordinated debt securities (the "debt securities") to Temecula Valley Statutory Trust II, a statutory trust created under the laws of the State of Delaware. These debt securities are subordinated to effectively all borrowings of the Company and are due and payable on September 17, 2033. Interest is payable quarterly on these debt securities at 3-Month LIBOR plus 2.95% for an effective rate of 4.09% as of December 31, 2003. The debt securities can be redeemed for 107.5% of the principal balance through September 17, 2008 and at par thereafter. The debt securities can also be redeemed at par if certain events occur that impact the tax treatment or the capital treatment of the issuance. The Company also purchased a 3% minority interest in Temecula Valley Statutory Trusts I and II. The balance of the equity of Temecula Valley Statutory Trusts I and II is comprised of mandatorily redeemable preferred securities. Under FASB Interpretation (FIN) No. 46, "Consolidation of Variable Interest Entities, an interpretation of ARB No. 51," the Company is not allowed to consolidate Temecula Valley Statutory Trusts I and II into the Company financial statements. Prior to the issuance of FIN No. 46, Bank Holding companies typically consolidated these entities. The Federal Reserve Board had ruled that certain mandatorily redeemable preferred securities of a consolidated entity qualified as Tier 1 Capital. The Federal Reserve Board is evaluating the capital impact from FIN No. 46 but has not issued any final ruling. As of December 31, 2003, the Company has included the net junior subordinated debt in its Tier1 Capital for regulatory capital purposes. NOTE G - RELATED PARTY TRANSACTIONS In the ordinary course of business, the Bank has granted loans to certain directors and the companies with which they are associated. In the Bank's opinion, all loans and loan commitments to such parties are made on substantially the same terms including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons. The following is a summary of the activity of these loans: 2003 2002 ------------ ------------ Balance at the Beginning of Year $790,000 $880,000 Advances 149,000 173,000 Payments ( 97,000) (263,000) ------------ ------------ $842,000 $790,000 ============ ============ Deposits from related parties held by the Bank at December 31, 2003 amounted to approximately $860,000. F-18 TEMECULA VALLEY BANCORP INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003, 2002 and 2001 NOTE H - INCOME TAXES The provision for income taxes included in the statements of income as of the years ended December 31 consist of the following: 2003 2002 2001 --------------- --------------- ---------------- Current: Federal $4,504,304 $2,852,583 $1,119,830 State 1,588,585 930,927 384,188 --------------- --------------- ---------------- 6,092,889 3,783,510 1,504,018 Deferred ( 665,000) ( 909,000) ( 299,000) --------------- --------------- ---------------- $5,427,889 $2,874,510 $1,205,018 =============== =============== ================ Deferred taxes are a result of differences between income tax accounting and generally accepted accounting principles with respect to income and expense recognition. The Bank's principal timing differences are from loan loss provision accounting, deferred compensation plans, and depreciation differences. The provision for income taxes varies from the federal statutory rate as follows:
2003 2002 2001 ---------------------- ---------------------- ---------------------- Percent Percent Percent of Pretax of Pretax of Pretax Amount Income Amount Income Amount Income ----------- ---------- ----------- ---------- ----------- ---------- Federal Tax Rate $4,516,000 34.0% $2,402,000 34.0% $1,023,000 34.0% State Income Taxes, Net of Federal Income Tax Benefit 944,000 7.1 500,000 7.1 209,000 6.9 Tax Free Income ( 70,000) ( 0.5) ( 51,000) ( 0.7) ( 42,000) ( 1.4) Other Items, Net 37,889 0.3 23,510 0.3 15,018 0.5 ----------- ---------- ----------- ---------- ----------- ---------- $5,427,889 40.9% $2,874,510 40.7% $1,205,018 40.0% =========== ========== =========== ========== =========== ==========
F-19 TEMECULA VALLEY BANCORP INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003, 2002 and 2001 NOTE H - INCOME TAXES - Continued The following is a summary of the components of the net deferred tax asset accounts recognized in the accompanying statements of financial condition: 2003 2002 ------------ ------------ Deferred Tax Assets: Allowance for Loan Losses $1,260,000 $1,071,000 Depreciation Differences 51,000 41,000 Deferred Compensation Plans 571,000 332,000 State Taxes 507,000 296,000 Other Assets/Liabilities 4,000 - ------------ ------------ 2,393,000 1,740,000 Deferred Tax Liabilities: Cash Basis of Tax Reporting - ( 12,000) ------------ ------------ - ( 12,000) ------------ ------------ Net Deferred Tax Assets $2,393,000 $1,728,000 ============ ============ NOTE I - EARNINGS PER SHARE (EPS) The following is a reconciliation of net income and shares outstanding to the income and number of shares used to compute EPS:
2003 2002 2001 ---------------------- ---------------------- ---------------------- Income Shares Income Shares Income Shares ----------- ---------- ----------- ---------- ----------- ---------- Net Income as Reported $7,854,339 $4,191,054 $1,803,581 Weighted Average Shares Outstanding During the Year 7,823,951 7,372,504 6,484,108 ----------- ---------- ----------- ---------- ----------- ---------- Used in Basic EPS 7,854,339 7,823,951 4,191,054 7,372,504 1,803,581 6,484,108 Dilutive Effect of Stock Options and Warrants 1,037,755 997,536 658,182 ----------- ---------- ----------- ---------- ----------- ---------- Used in Dilutive EPS $7,854,339 8,861,706 $4,191,054 8,370,040 $1,803,581 7,142,290 =========== ========== =========== ========== =========== ==========
F-20 TEMECULA VALLEY BANCORP INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003, 2002 and 2001 NOTE J - STOCK OPTION PLAN At December 31, 2003, the Company has two fixed option plans under which 3,300,000 shares of the Company's common stock may be issued. The compensation expense that has been charged against income for these stock-based compensation plans totaled $18,097 in 2003, 2002 and 2001. During 1996, the Company established an incentive stock option plan for officers and employees. Under this plan the Company may grant options for 1,800,000 shares of common stock at not less than 100% of the fair market value at the date the options are granted. During 1997, the Company established a nonqualified stock option plan for directors of the Company. Under this plan, the Company may grant options for 1,500,000 shares of common stock at not less than 85% of the fair market value at the date the options are granted. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: risk-free rates of 3.00% in 2003, 3.75% in 2002 and 4.00% in 2001; expected lives of five years in 2003 and three years in 2002 and 2001; and volatility of 22.9% for 2003, 40.3% for 2002 and 51.6% for 2001. A summary of the status of the Bank's fixed stock option plan as of December 31, 2003 and 2002, and changes during the years ending on those dates is presented below:
2003 2002 2001 -------------------- ------------------- -------------------- Weighted- Weighted- Weighted- Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price ---------- -------- ---------- -------- ---------- --------- Outstanding at Beginning of Year 2,042,348 $ 2.79 2,028,042 $2.68 1,598,014 $ 2.48 Granted 273,000 9.26 78,000 5.35 645,972 2.86 Options Exercised ( 380,670) 2.56 ( 53,694) 2.28 ( 215,944) 1.72 Options Cancelled ( 22,004) 4.01 ( 10,000) 2.94 - - ---------- ---------- ---------- --------- Outstanding at End of Year 1,912,674 3.74 2,042,348 2.79 2,028,042 2.68 ========== ========== ========== Options Exercisible at End of Year 1,617,008 3.24 1,598,146 2.60 731,679 2.54 Weighted-Average Fair Fair Value of Options Granted During the Year 3.01 1.68 1.49
F-21 TEMECULA VALLEY BANCORP INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003, 2002 and 2001 NOTE J - STOCK OPTION PLAN - Continued The following table summarizes information about fixed options outstanding at December 31, 2003:
Options Outstanding Options Exercisable -------------------------------------------- -------------------------- Weighted- Weighted- Weighted- Average Average Average Exercise Number Remaining Exercise Number Exercise Price Outstanding Contractual Price Exercisable Price Life --------------- ----------- --------------- ------------ ----------- ------------- $1.00 to $1.99 200,686 3.15 $ 1.39 200,686 $ 1.39 $2.00 to $2.99 878,652 5.84 $ 2.61 817,788 $ 2.60 $3.00 to $3.99 480,336 5.83 $ 3.44 440,534 $ 3.44 $4.00 to $4.99 40,000 8.08 $ 4.72 18,000 $ 4.62 $5.00 to $5.99 92,000 8.75 $ 5.71 20,000 $ 5.69 $8.00 to $9.99 126,000 9.87 $ 9.29 120,000 $ 9.35 $11.00 to 11.99 95,000 9.90 $ 11.12 - $ - ----------- ----------- 1,912,674 6.21 $ 3.74 1,617,008 $ 3.24 =========== ===========
NOTE K - EMPLOYEE RETIREMENT SAVINGS PLAN During 2000, the Bank adopted a retirement savings plan for the benefit of its employees. Contributions to the plan are determined annually by the Board of Directors. The expense for this plan was approximately $263,000 in 2003, $167,000 in 2002 and $68,000 in 2001. NOTE L - FAIR VALUE OF FINANCIAL INSTRUMENTS The fair value of a financial instrument is the amount at which the asset or obligation could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the entire holdings of a particular financial instrument. Because no market value exists for a significant portion of the financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature, involve uncertainties and matters of judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. F-22 TEMECULA VALLEY BANCORP INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003, 2002 and 2001 NOTE L - FAIR VALUE OF FINANCIAL INSTRUMENTS - Continued Fair value estimates are based on financial instruments both on and off the balance sheet without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Additionally, tax consequences related to the realization of the unrealized gains and losses can have a potential effect on fair value estimates and have not been considered in many of the estimates. The following methods and assumptions were used to estimate the fair value of significant financial instruments: Financial Assets ---------------- The carrying amounts of cash, short term investments, due from customers on acceptances, and Bank acceptances outstanding are considered to approximate fair value. Short term investments include federal funds sold, securities purchased under agreements to resell, and interest bearing deposits with Banks. The fair values of investment securities, including available-for-sale, are generally based on quoted market prices. The fair value of loans are estimated using a combination of techniques, including discounting estimated future cash flows and quoted market prices of similar instruments where available. Financial Liabilities --------------------- The carrying amounts of deposit liabilities payable on demand, commercial paper, and other borrowed funds are considered to approximate fair value. For fixed maturity deposits, fair value is estimated by discounting estimated future cash flows using currently offered rates for deposits of similar remaining maturities. The fair value of long term debt is based on rates currently available to the Bank for debt with similar terms and remaining maturities. Off-Balance Sheet Financial Instruments --------------------------------------- The fair value of commitments to extend credit and standby letters of credit is estimated using the fees currently charged to enter into similar agreements. The fair value of these financial instruments is not material. F-23 TEMECULA VALLEY BANCORP INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003, 2002 and 2001 NOTE L - FAIR VALUE OF FINANCIAL INSTRUMENTS - Continued The estimated fair value of financial instruments at December 31, 2003 and 2002 is summarized as follows: (dollar amounts in thousands)
December 31, ----------------------------------------------- 2003 2002 --------------------- ------------------------- Carrying Fair Carrying Fair Value Value Value Value ---------- ---------- ---------- ------------ Financial Assets: Cash and Due From Banks $ 9,348 $ 9,348 $ 12,180 $ 12,180 Federal Funds Sold 21,400 21,400 - - Loans Held for Sale and Loans, net 357,142 359,914 268,409 270,245 Federal Reserve and Federal Home Loan Bank Stock 1,145 1,145 1,460 1,460 I/O Strips Receivable and Servicing Assets 26,612 26,612 16,884 16,884 Cash Surrender Value - Life Insurance 5,741 5,741 3,983 3,983 Accrued Interest Receivable 1,396 1,396 1,153 1,153 Financial Liabilities: Deposits 383,487 383,574 269,321 269,345 Federal Home Loan Bank Advances - - 10,000 10,000 Junior Subordinated Debt Securities 12,372 12,372 7,217 7,217 Accrued Interest and Other Liabilities 5,670 5,670 4,352 4,352
NOTE M - COMMITMENTS AND CONTINGENCIES In the normal course of business, the Company enters into financial commitments to meet the financing needs of its customers. These financial commitments include commitments to extend credit and standby letters of credit. Those instruments involve to varying degrees, elements of credit and interest rate risk note recognized in the statement of financial position. The Company's exposure to loan loss in the event of nonperformance on commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments as it does for loans reflected in the financial statements. F-24 TEMECULA VALLEY BANCORP INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003, 2002 and 2001 NOTE M - COMMITMENTS AND CONTINGENCIES - Continued As of December 31, 2003 and 2002, the Company had the following outstanding financial commitments whose contractual amount represents credit risk: 2003 2002 ------------- ------------- Commitments to Extend Credit $171,159,000 $108,046,000 Letters of Credit 1,440,000 1,444,000 ------------- ------------- $172,599,000 $109,490,000 ============= ============= Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Standby letters of credit are conditional commitments to guarantee the performance of a Company customer to a third party. Since many of the commitments and standby letters of credit are expected to expire without being drawn upon, the total amounts do not necessarily represent future cash requirements. The Company evaluates each customer's credit worthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Company is based on management's credit evaluation of the customer. The Company is involved in various litigation which has arisen in the ordinary course of its business. In the opinion of management, the disposition of such pending litigation will not have a material effect on the Company's financial statements. The Company has entered into retirement benefit agreements with certain officers providing for future benefits aggregating approximately $6,900,000 payable in equal annual installments ranging from ten years to a lifetime benefit from the retirement dates of each participating officer. The estimated future benefits to be paid are being accrued over the period from the effective date of the agreements until the expected retirement dates of the participants. As of December 31, 2003, approximately $1,262,000 has been accrued in conjunction with these agreements. The expense incurred and accrued was $531,000, $267,000 and $166,000, for the years ended December 31, 2003, 2002 and 2001, respectively. The Company is the beneficiary of life insurance policies that have been purchased as a method of financing the benefits under the agreements. NOTE N - REGULATORY MATTERS The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory - and possibly additional discretionary - actions by regulators that, if undertaken, could have a direct material effect on the Bank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. F-25 TEMECULA VALLEY BANCORP INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003, 2002 and 2001 NOTE N - REGULATORY MATTERS - Continued Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). Management believes, as of December 31, 2003, that the Bank meets all capital adequacy requirements to which it is subject. As of December 31, 2003, the most recent notification from the Comptroller of the Currency categorized the Bank as well-capitalized under the regulatory framework for prompt corrective action (there are no conditions or events since that notification that management believes have changed the Bank's category). To be categorized as well-capitalized, the Bank must maintain minimum ratios as set forth in the table below. The following table also sets forth the Bank's actual capital amounts and ratios (dollar amounts in thousands):
To Be Well- Capitalized For Capital Under Prompt Adequacy Corrective Actual Purposes Provisions ----------------- ------------------ ------------------ Amount Ratio Amount Ratio Amount Ratio --------- ------- --------- -------- --------- -------- As of December 31, 2003: Total Capital (to Risk-Weighted $ 43,584 11.3% $ 30,964 8.0% $ 38,705 10.0% Assets) Tier 1 Capital (to Risk-Weighted $ 39,977 10.3% $ 15,482 4.0% $ 23,223 6.0% Assets) Tier 1 Capital (to Average Assets) $ 39,977 9.4% $ 17,070 4.0% $ 21,338 5.0% As of December 31, 2002: $ 29,073 10.5% $ 22,078 8.0% $ 27,598 10.0% Total Capital (to Risk-Weighted Assets) Tier 1 Capital (to Risk-Weighted $ 26,056 9.4% $ 11,039 4.0% $ 16,559 6.0% Assets) Tier 1 Capital (to Average Assets) $ 26,056 8.7% $ 12,020 4.0% $ 15,025 5.0%
The Company is subject to similar requirements administered by its primary regulator, the Federal Reserve Board. For capital adequacy purposes, the Company must maintain total capital to risk-weighted assets and Tier 1 capital to risk-weighted assets of 8.0% and 4.0%, respectively. Its total capital to risk-weighted assets and Tier 1 capital to risk-weighted assets was 11.5% and 10.0%, respectively at December 31, 2003. Its total capital to risk-weighted assets and Tier 1 capital to risk-weighted assets was 10.6% and 9.30%, respectively at December 31, 2002. The Bank is restricted as to the amount of dividends that can be paid to the holding company. Dividends declared by national banks that exceed the net income (as defined) for the current year plus retained net income for the preceding two years must be approved by the OCC. The Bank may not pay dividends that would result in its capital levels being reduced below the minimum requirements shown above. F-26 TEMECULA VALLEY BANCORP INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003, 2002 and 2001 NOTE O - WARRANTS In connection with a stock offering that was completed in June 2001, the Bank issued 400,000 units, with each unit containing four shares of common stock and one warrant to purchase one share of common stock at an exercise price of $2.50 per share. The warrants expired June 23, 2003. NOTE P - FORMATION OF TEMECULA VALLEY BANCORP INC. On June 3, 2002, Temecula Valley Bancorp Inc. acquired all the outstanding shares of Temecula Valley Bank N.A. by issuing 3,673,203 shares of common stock in exchange for the surrender of all outstanding shares of Temecula Valley Bank N.A.'s common stock. There was no cash involved in this transaction. The acquisition was accounted for as a reverse merger. The consolidated financial statements contained herein have been restated to give full effect to this transaction. NOTE Q - STOCK SPLIT On December 22, 2003, the Bancorp's Board of Directors approved a 2-for-1 stock split of the Company's outstanding common stock. All per share data in the financial statements and related footnotes have been retroactively adjusted to reflect this split. NOTE R - CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY ONLY Temecula Valley Bancorp Inc. operates Temecula Valley Bank N.A.,. Temecula Valley Bancorp Inc. commenced operations during 2002. The earnings of the subsidiary are recognized on the equity method of accounting. Condensed financial statements of the parent company only are presented below: F-27 TEMECULA VALLEY BANCORP INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003, 2002 and 2001 NOTE R - CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY ONLY - Continued CONDENSED BALANCE SHEETS December 31, December 31, 2003 2002 ------------- ------------- ASSETS: Cash $ 825,456 $ - Investment in Temecula Valley Statutory Trust I 217,000 217,000 Investment in Temecula Valley Statutory Trust II 155,000 - Investment in Temecula Valley Bank N.A. 40,588,549 26,431,883 Other Assets 283,033 189,900 ------------- ------------- $42,069,038 $26,838,783 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY: Other Liabilities $ 13,973 $ 5,580 Junior Subordinated Debt Securities 12,372,000 7,217,000 Shareholders' Equity 29,683,065 19,616,203 ------------- ------------- $42,069,038 $26,838,783 ============= ============= F-28 TEMECULA VALLEY BANCORP INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003, 2002 and 2001 NOTE R - CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY ONLY - Continued
CONDENSED STATEMENTS OF INCOME Year Ended Year Ended Year Ended December 31, December 31, December 31, 2003 2002 2001 ------------- ------------- ------------- INCOME: Cash Dividends from Statutory Trusts $ - $ 6,012 $ 6,012 ------------- ------------- ------------- TOTAL INCOME 6,012 6,012 EXPENSES: Interest on Junior Subordinated Debt Securities 437,601 220,960 220,960 Other 155,018 23,489 23,489 Allocated Tax Benefit ( 243,889) ( 98,128) ( 98,128) ------------- ------------- ------------- TOTAL EXPENSES 348,730 146,321 146,321 ------------- ------------- ------------- LOSS BEFORE EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARY ( 348,730) ( 140,309) ( 140,309) EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARY 8,203,069 4,331,363 4,331,363 ------------- ------------- ------------- NET INCOME $ 7,854,339 $ 4,191,054 $ 4,191,054 ============= ============= =============
F-29 TEMECULA VALLEY BANCORP INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003, 2002 and 2001 NOTE R - CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY ONLY - Continued
CONDENSED STATEMENTS OF CASH FLOWS Year Ended Year Ended Year Ended December 31, December 31, December 31, 2003 2002 2001 ------------- ------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 7,854,339 $ 4,191,054 $ 4,191,054 Noncash items included in net income: Equity in income of Subsidiary ( 8,203,069) ( 4,331,363) ( 4,331,363) Other ( 84,740) ( 184,320) ( 184,320) ------------- ------------- -------------- NET CASH USED IN OPERATING ACTIVITIES ( 433,470) ( 324,629) ( 324,629) CASH FLOWS FROM INVESTING ACTIVITIES: Investment in Subsidiaries ( 5,683,687) ( 7,187,465) ( 7,187,465) Dividends received from Subsidiaries - 6,012 6,012 ------------- ------------- -------------- NET CASH USED BY INVESTING ACTIVITIES ( 5,683,687) ( 7,181,453) ( 7,181,453) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from Junior Subordinated Debt Securities 5,155,000 7,217,000 7,217,000 Proceeds from exercise of stock options 976,116 122,512 122,512 Proceeds from exercise of warrants 811,497 166,570 166,570 ------------- ------------- -------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 6,942,613 7,506,082 7,506,082 ------------- ------------- -------------- NET INCREASE IN CASH AND CASH EQUIVALENTS 825,456 - - CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR - - - ------------- ------------- -------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 825,456 $ - $ - ============= ============= ==============
F-30 TEMECULA VALLEY BANCORP INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003, 2002 and 2001 NOTE S - QUARTERLY DATA (UNAUDITED) The following table sets forth the Company's unaudited results of operations for the four quarters ended in 2003 and 2002:
For the Quarter Ended in 2003 For the year -------------------------------------------------------- Ended March 31, June 30, September 30, December 31, December 31, 2003 ------------- -------------- ------------- ------------- ------------------ Interest Income $ 5,279,705 $ 5,844,313 $ 6,367,114 $ 6,463,159 $ 23,954,291 Interest Expense ( 1,197,749) ( 1,262,567) ( 1,219,119) ( 1,267,118) ( 4,946,553) ------------- -------------- ------------- ------------- ------------------ Net Interest Income 4,081,956 4,581,746 5,147,995 5,196,041 19,007,738 Provision for Loan Losses ( 150,000) ( 350,000) ( 150,000) ( 372,000) ( 1,022,000) Noninterest Income 5,182,918 6,318,554 6,424,132 6,491,957 24,417,561 Noninterest Expense ( 6,577,879) ( 7,428,364) ( 7,399,214) ( 7,715,614) ( 29,121,071) ------------- -------------- ------------- ------------- ------------------ Income before Income Taxes 2,536,995 3,121,936 4,022,913 3,600,384 13,282,228 Income Taxes ( 1,041,716) ( 1,273,256) ( 1,643,420) ( 1,469,497) ( 5,427,889) ------------- -------------- ------------- ------------- ------------------ Net Income $ 1,495,279 $ 1,848,680 $ 2,379,493 $ 2,130,887 $ 7,854,339 ============= ============== ============= ============= ================== Per Share Data: Net Income - Basic $ .20 $ .24 $ .30 $ .26 $ 1.00 Net Income - Diluted $ .18 $ .21 $ .27 $ .23 $ .89 For the Quarter Ended in 2002 For the year -------------------------------------------------------- Ended March 31, June 30, September 30, December 31, December 31, 2002 ------------- -------------- ------------- ------------- ------------------ Interest Income $ 3,318,861 $ 3,861,979 $ 4,407,173 $ 4,967,905 $ 16,555,918 Interest Expense ( 498,284) ( 646,735) ( 946,317) ( 1,033,346) ( 3,124,682) ------------- -------------- ------------- ------------- ------------------ Net Interest Income 2,820,577 3,215,244 3,460,856 3,934,559 13,431,236 Provision for Loan Losses ( 220,000) ( 340,000) ( 375,000) ( 1,525,000) ( 2,460,000) Noninterest Income 3,022,885 3,967,224 3,842,881 7,062,175 17,895,165 Noninterest Expense ( 4,570,228) ( 5,102,259) ( 5,657,088) ( 6,471,262) ( 21,800,837) ------------- -------------- ------------- ------------- ------------------ Income before Income Taxes 1,053,234 1,740,209 1,271,649 3,000,472 7,065,564 Income Taxes ( 423,685) ( 706,730) ( 514,152) ( 1,229,943) ( 2,874,510) ------------- -------------- ------------- ------------- ------------------ Net Income $ 629,549 $ 1,033,479 $ 757,497 $ 1,770,529 $ 4,191,054 ============= ============== ============= ============= ================== Per Share Data: Net Income - Basic $ .09 $ .14 $ .10 $ .24 $ $.57 Net Income - Diluted $ .08 $ .12 $ .09 $ .21 $ $.50
F-31