-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OPdZjslHF46dxH3HsflNfh8N4E+ISwQC/rNNN08DuQiwm2M9kmNN7ZQn1bYLDHQZ JW6x5NaQsfhu+8vtUg8yOw== 0000892569-95-000672.txt : 19951119 0000892569-95-000672.hdr.sgml : 19951119 ACCESSION NUMBER: 0000892569-95-000672 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: ELDORADO BANCORP CENTRAL INDEX KEY: 0000351991 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 953642383 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09709 FILM NUMBER: 95592480 BUSINESS ADDRESS: STREET 1: 17752 E 17TH ST CITY: TUSTIN STATE: CA ZIP: 92680 BUSINESS PHONE: 7148324204 MAIL ADDRESS: STREET 1: 19100 VON KARMAN AVE SUITE 550 CITY: IRVINE STATE: CA ZIP: 92715 10-Q 1 ELDORADO BANCORP FORM 10-Q (ENDED 9/30/95) 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (Mark One) [ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period ended September 30, 1995 ------------------------------------------------------------ or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______________________ to _______________________ Commission File Number: 1-9709 -------------------------------------------------------- ELDORADO BANCORP - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) CALIFORNIA 95-3642383 - -------------------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number) 17752 EAST SEVENTEENTH STREET, TUSTIN, CALIFORNIA 92680 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code)
(714) 798-1100 - -------------------------------------------------------------------------------- Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. [ X ] Yes [ ] No APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDING DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. [ ] Yes [ ] No There were 2,762,008 shares of common stock for the registrant outstanding as of September 30, 1995. 2 Part I. Financial Information Item I. Financial Statements Eldorado Bancorp and Its Subsidiary Eldorado Bank CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in Thousands)
ASSETS September 30, 1995 December 31, 1994 ------------------ ----------------- Cash and due from banks $ 24,641 $ 23,950 Investment securities available-for-sale 79,709 86,107 Investment securities held-to-maturity 5,089 586 Federal funds sold 10,300 9,000 Commercial loans held for sale 3,029 3,274 Loans and direct lease financing 176,624 171,874 Less allowance for possible credit losses 5,752 5,564 -------- -------- Net loans and direct lease financing 170,872 166,310 Deferred income taxes 250 696 Premises and equipment, net 7,415 7,433 Accrued interest receivable and other assets 7,227 5,693 Other real estate owned 2,036 973 -------- -------- $310,568 $304,022 ======== ======== Investment securities held-to maturity - approximate market value 5,138 562 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Deposits Demand, non-interest bearing $ 85,288 $ 79,347 Savings and money market 130,568 145,958 Time certificates under $100,000 29,443 23,102 Time certificates of $100,000 or more 24,486 22,919 -------- -------- Total deposits 269,785 271,326 Other liabilities 3,059 2,572 Federal funds purchased 5,488 1,030 -------- -------- Total liabilities $278,332 $274,928 Shareholders' equity Preferred stock, no par value; authorized 5,000 shares, none issued --- --- Common stock, no par value; authorized 12,500,000 shares, issued and outstanding 2,762,008 shares in 1995 and 2,756,728 shares in 1994 17,506 17,462 Retained earnings 14,428 11,977 Securities valuation allowance, net 302 (345) -------- -------- 32,236 29,094 -------- -------- Total shareholders' equity and liabilities $310,568 $304,022 ======== ========
2 3 Part I. Financial Information Item I. Financial Statements (continued) Eldorado Bancorp and Its Subsidiary Eldorado Bank CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (Dollars in Thousands except for earnings per share and weighted average number of shares outstanding)
Three Months Ended Nine Months Ended September 30 September 30 ------------------------ ---------------------- 1995 1994 1995 1994 Interest Income Loans $ 4,454 $ 4,166 $ 12,914 $ 12,045 Investment securities 1,376 977 3,956 2,588 Interest bearing deposits with banks 0 1 0 10 Federal funds sold 188 241 644 665 Direct lease financing 25 51 96 184 ------- ------- -------- -------- 6,043 5,436 17,610 15,492 Interest Expense Savings, NOW and money market deposits 656 781 2,088 2,331 Time deposits of $100,000 or more 325 171 819 535 Time deposits under $100,000 375 191 924 575 Other 86 2 216 4 ------- ------- -------- -------- Total interest expense 1,442 1,145 4,047 3,445 ------- ------- -------- -------- Net interest income 4,601 4,291 13,563 12,047 Provision for loan lease losses 152 302 755 1,705 ------- ------- -------- -------- Net interest income after provision for loan and lease losses 4,449 3,989 12,808 10,342 Other Income Service charges on deposit accounts 493 558 1,524 1,581 Loan servicing income 210 213 639 670 Bank card discounts 36 197 372 618 Gain on sale of SBA loans 14 (36) 4 151 Investment security gains (losses) 50 (1) 48 (51) Other 163 190 417 537 ------- ------- -------- -------- 966 1,121 3,004 3,506 Other Expense Salaries 1,079 1,063 3,228 3,251 Employee benefits 485 511 1,506 1,505 Net occupancy of bank premises 401 391 1,163 1,133 Furniture and equipment expense 214 220 658 616 Other real estate owned writedowns/expense 24 274 125 286 Other 1,174 1,354 3,830 4,059 ------- ------- -------- -------- 3,377 3,813 10,510 10,850 ------- ------- -------- -------- Earnings before taxes 2,038 1,297 5,302 2,998 Income Taxes 842 529 2,189 1,216 ------- ------- -------- -------- Net Earnings $ 1,196 $ 768 $ 3,113 $ 1,782 ======= ======= ======== ======== Earnings per common share $ .43 $ .28 $ 1.13 $ .65 ======= ======= ======== ======== Weighted average common shares outstanding 2,760,543 2,753,755 2,758,221 2,752,994
3 4 Part I. Financial Information Item I. Financial Statements (continued) Eldorado Bancorp and Its Subsidiary Eldorado Bank CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in Thousands)
Nine Months Ended Nine Months Ended September 30, 1995 September 30, 1994 ------------------ ------------------ Cash Flows from operating activities: Net earnings $ 3,113 $ 1,782 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 638 783 Amortization of goodwill 83 82 Provision for possible credit losses 755 1,703 Provision for possible losses on other real estate owned 58 29 (Gain) loss on sale of SBA loans (4) (151) (Gain) loss on sale of securities available-for-sale (48) 51 Amortization of deferred income, costs, discounts and fees (58) (377) Loan fees collected 259 466 (Gain) loss on sale of other real estate owned (51) 194 (Increase) decrease in market value of securities (1,091) 92 Unrealized gain (loss) on securities, net of tax 647 (55) (Gain) loss on sale of premises and equipment (6) 7 Change in assets and liabilities net of effects from acquisitions of banks: (Increase) decrease in accrued interest receivable (963) (148) (Increase) decrease in other assets/current tax receivable and other real estate owned (2,391) 221 Increase (decrease) in other liabilities 487 378 (Increase) decrease in deferred income taxes 446 (37) -------- -------- Total adjustments (1,239) 3,238 -------- -------- Net cash provided by operating activities 1,874 5,020 Cash flows from investing activities: Proceeds from maturity of securities available-for-sale 68,910 59,458 Proceeds from sale of securities available-for-sale 569 2,223 Purchase of securities available-for-sale (61,962) (77,108) Purchase of securities held-to-maturity (4,503) (585) Net (increase) decrease in interest bearing deposits with banks --- 495 Net (increase) decrease in loans and leases (5,518) 21,047 Purchases of premises and equipment (599) (1,142) Proceeds from sale of other real estate owned 667 3,090 Proceeds from sale of loans 1,732 3,524 Net (increase) decrease in commercial loans held for sale (1,483) (2,841) Proceeds from sale of premises and equipment 5 12 Purchase of loans --- (11,665) -------- -------- Net cash used in investing activities $ (2,182) $ (3,492) -------- --------
4 5 Part I. Financial Information Item I. Financial Statements (continued) Eldorado Bancorp and Its Subsidiary Eldorado Bank CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in Thousands)
Nine Months Ended Nine Months Ended September 30, 1995 September 30, 1994 ------------------ ------------------- Cash Flows from operating activities: Net increase (decrease) in deposits $(1,541) $(13,037) Net increase (decrease) in federal funds purchased 4,458 (788) Dividends paid (662) (220) Proceeds from stock options exercised 44 34 ------- -------- Net cash provided by financing activities 2,299 (14,011) ------- -------- Increase (decrease) in cash and cash equivalents 1,991 (12,483) Cash and cash equivalents at beginning of year 32,950 60,803 Cash and cash equivalents at September 30 $34,941 $ 48,320 ======= ========
5 6 Part I. Financial Information Item I. Financial Statements (continued) Eldorado Bancorp and Its Subsidiary Eldorado Bank CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY For nine months ended September 30, 1995 and For years ended December 31, 1994, 1993, and 1992 (Unaudited)
Securities Total Common Stock Valuation Retained Shareholders' Shares Amount Allowance, Net Earnings Equity ------------------------------------------ ----------------------- -------------- ----------- ------------ Balance, December 31, 1992 2,745,634 $17,400,000 --- $11,810,000 $29,210,000 Cash dividends declared ($0.08 per share) --- --- --- (221,000) (221,000) Stock options exercised (note 8) 12,621 86,000 --- --- 86,000 Stock repurchased and canceled (6,000) (59,000) --- --- (59,000) Net loss --- --- --- (1,727,000) (1,727,000) ------------------------------------------ ----------------------- ----------- ----------- ----------- Balance, December 31, 1993 2,752,255 17,427,000 --- 9,862,000 27,289,000 Net unrealized holding gain on securities available-for-sale as of January 1, 1994 --- --- $ 1,179,000 --- 1,179,000 Cash dividends declared ($0.16 per share) --- --- --- (441,000) (441,000) Stock options exercised (note 8) 4,473 35,000 --- --- 35,000 Change in securities valuation allowance, net --- --- (1,524,000) --- (1,524,000) Net earnings --- --- --- 2,556,000 2,556,000 ------------------------------------------ ----------------------- ----------- ----------- ----------- Balance, December 31, 1994 2,756,728 $17,462,000 $ (345,000) $11,977,000 $29,094,000 Stock options exercised 5,280 44,000 --- --- 44,000 Cash dividends declare ($0.24per share) --- --- --- (662,000) (662,000) Change in securities valuation allowance, net --- --- 647,000 --- 647,000 Net earnings --- --- --- 3,113,000 3,113,000 ------------------------------------------ ----------------------- ----------- ----------- ----------- Balance, September 30, 1995 2,762,008 $17,506,000 $ 302,000 $14,428,000 $32,236,000 ------------------------------------------ ----------------------- ----------- ----------- -----------
6 7 Part I. Financial Information Item I. Financial Statements (continued) Eldorado Bancorp and Its Subsidiary Eldorado Bank NOTE OF CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ------------------------ NOTE A - BASIS OF PRESENTATION The financial statements for interim periods are unaudited. In the opinion of management, all material adjustments necessary for fair presentation of the interim financial statements have been included. Interim period financial statements are not necessarily indicative of results to be expected for the entire year. NOTE B - EARNINGS PER SHARE Net earnings per common share are based upon the weighted average number of shares outstanding during each period. 7 8 Part I. Financial Information Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Condition Total assets at September 30, 1995 were $310.6 million compared to $304.0 million at December 31, 1994. The increase in total assets was primarily due to an increase in federal funds purchased largely deployed into loans. Investment securities available-for-sale declined to $79.7 million at September 30, 1995 from $86.1 million at December 31, 1994 due to maturities in the relatively short-term portfolio. Investment securities held-to-maturity increased to $5.1 million at September 30, 1995 from $586 thousand at year end 1994 due to the purchase of securities classified in this category since year end. The following table summarizes the components of total gross loans outstanding in each category at the date indicated (in thousands):
Septem- ber 30, December 31, -------- ----------------------------------------------------------- 1995 1994 1993 1992 1991 1990 -------- -------- -------- -------- -------- -------- LOANS Commercial, Secured and Unsecured $ 77,153 $ 66,987 $ 66,987 $ 74,603 $ 83,937 $ 74,377 Interim Construction -- 4,789 4,789 21,595 28,770 31,165 Real Estate 77,762 78,607 78,607 90,985 98,373 68,366 Installment 19,685 18,945 18,945 21,374 28,229 28,927 Credit Card 1,229 1,298 1,298 1,456 1,491 1,422 Lease Financing 899 1,286 1,286 3,515 3,853 4,351 Less: Unearned Income (104) (38) (38) (739) (1,208) (1,888) -------- -------- -------- -------- -------- -------- Total Gross Loans $176,624 $171,874 $182,465 $212,789 $243,445 $206,720
Total gross loans increased to $176.6 million at September 30, 1995 from $171.9 million at December 31, 1994 due to increased demand in the commercial loan sector. The Company had experienced declining loan balances from 1991 to 1994 largely due to more stringent underwriting criteria, fewer borrowers in the recessionary environment meeting the underwriting criteria, loan payoffs and reduced demand for new credit as a result of a lower level of economic activity. Additionally, the Company eliminated its interim construction lending department in order to reduce its exposure to the real estate market during the recession. 8 9 The following tables show the maturities of loans and their sensitivities to changes in interest rates at December 31, 1994. Lease financing is not included in this table:
Due in Due after One Year One Year to Due after Or Less Five Years Five Years Total -------- ----------- ---------- -------- Commercial, Secured and Unsecured $ 51,358 $12,264 $3,365 $ 66,987 Interim Construction 3,672 877 240 4,789 Real Estate 60,713 14,392 3,502 78,607 Installment 14,525 3,468 952 18,945 Credit Card 1,298 0 0 1,298 -------- ------- ------ -------- $131,566 $31,001 $8,059 $170,626 ======== ======= ====== ========
Maturing Within After One Year One Year Total --------------------------------------------- Loans with Predetermined Interest Rates $42,305 $17,146 $59,451 Loans with Floating or Adjustable Interest Rates 89,261 21,914 111,175
The following table provides information with respect to the components of the Company's nonperforming assets at the dates indicated (amounts in thousands):
SEPTEM- DECEMBER 31, BER 30, ------------------------------------------------------- 1995 1994 1993 1992 1991 1990 ------ ------- ------- ------- ------- ------- Non-Accrual Loans (1) $2,287 $ 3,161 $ 2,092 $ 2,927 $ 8,364 $ 6,108 Loans More Than 90 Days Past Due 17 246 56 361 349 74 Troubled Debt Restructured (2) 6,651 7,069 1,431 -- -- -- ------ ------- ------- ------- ------- ------- Total Nonperforming Loans $8,955 $10,476 $ 3,579 $ 3,288 $ 8,713 $ 6,182 ====== ======= ======= ======= ======= =======
(1) Reflects loans for which there has been no payment of interest and/or principal due for 90 days or more. Ordinarily, the accrual of interest ceases when no payment of interest or principal has been made for 90 days or if the Company has reason to believe that continued payment of interest and principal is unlikely. Accrued interest, if any, is reversed at the time such loans are placed on nonaccrual status. If these loans had be current throughout their terms, interest and fees on loans would have increased by approximately $55,000 for the nine months ended September 30, 1995 and $144,000, $108,000, $103,000, $166,000, and $157,000, for 11994, 1993, 1992, 1991, and 1990, respectively. (2) Troubled debt restructured loans consist primarily of loans for which the interest rate was reduced or the interest payment provisions were modified because of the inability of the borrower to service the obligation under the original terms of the agreement. Income is accrued at the lower effective rate so long as the borrower is current under the revised terms and conditions of the agreement. Under the original terms of the restructured loans, interest earned would have totaled approximately $723 thousand for the nine months ended September 30, 1995. Under the restructured terms, interest income recorded amounted to $608 thousand for the nine months ended September 30, 1995. 9 10 At September 30, 1995, the carrying value of loans that are considered to be impaired under SFAS 114 totaled $1.8 million. At September 30, 1995, the allowance for possible credit losses determined in accordance with the provisions of SFAS 114, related to loans considered to be impaired under SFAS 114 totaled $133 thousand. The carrying value of loans considered impaired under SFAS 114 for which there is no related allowance for possible credit losses was zero at September 30, 1995. The average recorded investment in impaired loans during the six months ended September 30, 1995 was approximately $2.8 million. For the six months ended September 30, 1995, the Company recognized interest income on those impaired loans of $118 thousand, all of which was recognized using the cash basis method of income. The following table summarizes, for the periods indicated, changes in the allowance for possible credit losses arising from loans charged off, recoveries on loans previously charged off, and additions to the allowance which have been charged to operating expenses and certain ratios relating to the allowance for possible credit losses (amounts in thousands):
FOR THE NINE MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31, SEPTEMBER 30, ------------------------------- 1995 1994 1993 1992 1991 1990 ------ ------ ------ ------ ------ ------ ALLOWANCE FOR POSSIBLE CREDIT LOSSES: Balance at Beginning of Period $5,564 $4,740 $3,530 $3,757 $2,656 $2,448 Actual Charge-offs: Commercial 311 570 502 574 406 308 Credit Cards 35 36 35 66 48 30 Consumer 118 151 98 494 307 279 Real Estate 444 720 1,867 883 0 333 Direct Lease Financing 5 97 32 60 21 4 ------ ------ ------ ------ ------ ------ Total Charge-Offs 913 1,574 2,534 2,077 782 954 ------ ------ ------ ------ ------ ------ Less Recoveries: Commercial 129 118 27 54 61 250 Credit Cards 8 13 21 5 8 1 Consumer 37 30 116 50 60 87 Real Estate 172 0 11 0 0 0 Direct Lease Financing 0 8 3 6 0 0 ------ ------ ------ ------ ------ ------ Total Recoveries 33 169 168 115 129 338 ------ ------ ------ ------ ------ ------ Net Loans Charged Off 346 1,045 2,366 1,962 653 616 Provision for Credit Losses 755 2,006 3,576 1,735 1,159 824 ------ ------ ------ ------ ------ ------ Changes Incident to Acquisition of --- 223 --- --- --- --- Loans Balance at End of Period $5,752 $5,564 $4,740 $3,530 $3,757 $2,656 ====== ====== ====== ====== ====== ====== RATIOS: Net Loans Charged Off to Average 0.44% 0.79% 1.22% 0.84% 0.30% 0.29% Loans Allowance for Credit Losses to Total 3.20% 3.24% 2.60% 1.66% Gross Loans 1.54% 1.28% Allowance for Credit Losses to Non 155.81% 226.58% 48.22% 43.11% 42.96% Performing Loans 249.65%
The allowance for possible credit losses is established by a provision for possible credit losses charged against current period income. Loans and leases are charged against the allowance for possible credit losses when management believes that the collectibility of principal is unlikely. The allowance for possible credit losses is established based upon an analysis providing specific allowances for loans that management has identified to have potential loss and general allowances for unidentified losses inherent in the portfolio. The general allowance is determined by segmenting the portfolio by risk rating and loan type with allowances established based upon historical losses in each portfolio segment. The evaluations take into consideration such factors as changes in the nature and volume of the portfolio, overall portfolio quality; loan concentrations; specific problem loans, leases and commitments; and current and anticipated economic conditions that may affect the borrowers' ability to pay. 10 11 Management believes that the allowance for possible credit losses is adequate. While management uses available information to recognize losses on loans and leases, future additions to the allowance may be necessary based on changes in economic conditions. In addition, both Federal and state regulators, as an integral part of their examination process, periodically review the Bank's allowance for possible credit losses and may recommend additions based upon their evaluation of the portfolio at the time of their examination. The risk of nonpayment of loans is an inherent feature of the banking business. That risk varies with the type and purpose of the loan, the collateral which is utilized to secure payment, and ultimately, the credit worthiness of the borrower. In order to minimize this credit risk, the Bank has established lending limits for each of its officers having lending authority, in each case based upon the officer's experience level and prior performance. Whenever a proposed loan by itself, or when aggregated with outstanding extensions of credit to the same borrower, exceeds the officer's lending limits, the loan must be approved by the Bank's Chairman, President or Executive Vice President/Chief Credit Officer or by the Bank's loan committee, depending upon the dollar amount involved. The loan committee is comprised of two directors and four members of the Bank's senior management. In addition, each loan officer has primary responsibilities to conduct credit documentation reviews of all loans made by that officer. Furthermore, the Bank also maintains a program of periodic review of all existing loans and employs a specialist who reviews loans over a certain dollar amount and grades these loans based upon the dollar amount and credit worthiness using a grading system. Loans are graded from "one" to "eight" depending on credit quality, with "grade one" representing a prime loan with a definite and reliable repayment program based upon liquid collateral with adequate margin or supported by a strong up-to-date financial statement. Problem or substandard loans identified in the review process are scheduled for remedial action, and where appropriate, allowances are established for such loans. Periodically, an outside loan review consultant further reviews loans for credit quality. Additionally, the Bank is examined regularly by the FDIC and California State Banking Department at which time a further review of loans is conducted. The Company has allocated the allowance for credit losses according to the amount deemed to be reasonably necessary to provide for the possibility of losses being incurred within the categories of loans set forth in the following table:
For the Nine Months Ended For the Year Ended December 31, September 30, 1995 1994 1993 1992 1991 1990 ------------------ ---- ---- ---- ---- ---- Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent ------ ------- ------ ------- ------ ------- ------ ------- ------ ------- ------ ------- Commercial, Secured $2,515 43.7% $2,281 39.0% $2,164 37.1% $1,715 35.1% $1,296 34.5% $1,020 36.0% and Unsecured Interim Construction --- --- 310 2.8 325 7.1 440 10.1 443 11.8 385 15.1 Real Estate 2,530 44.0 2,597 45.7 1,780 43.9 1,091 42.8 1,518 40.4 845 33.0 Installment 638 11.10 271 11.0 334 9.8 245 10.0 428 11.4 345 13.5 Credit Card 40 0.7 52 0.8 101 0.8 11 0.7 23 0.6 18 0.7 Lease Financing 29 0.5 53 0.7 36 1.3 28 1.3 49 1.3 43 1.7 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Total $5,752 100.0% $5,564 100.0% $4,740 100.0% $3,530 100.0% $3,757 100.0% $2,656 100.0% ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Other real estate owned increase to $2.1 million at September 30, 1995 from $973 thousand at December 31, 1994 reflecting the foreclosure of real estate properties in satisfaction of certain loans. Total deposits declined $1.5 million at September 30, 1995 to $269.8 million compared to $271.3 million at year end 1994, however, there was a significant change in the mix of deposits. Noninterest bearing demand deposits grew $5.9 million to $85.3 million at September 30, 1995 from December 31, 1994. This was offset by a decline in savings and money market deposits of $15.4 million to $130.6 million at September 30, 1995 from $146.0 million at December 31, 1994. Time certificates of deposit under $100,000 increased $6.3 million during the first nine months of 1995 and time certificates of deposit of $100,000 or more increased $1.6 million during this same period. 11 12 Federal funds purchase increased $4.5 million to $5.5 million at September 30, 1995 compared to December 31, 1994. The Company purchases federal funds from one of its financial institution customers as an accommodation. Total shareholders' equity increased $3.1 million during the nine months ended September 30, 1995 primarily due to an increase in retained earnings and also due to an increase of $647 thousand in the net securities valuation allowance. The increase in the net securities valuation allowance reflects the overall downward trend in capital market interest rates since year end combined with favorable repricing upon maturity of the relatively short-term securities portfolio available-for-sale. Liquidity and Interest Sensitivity In order to meet periodic increases in loan demand, potential deposit withdrawals and maturities of short-term, large time certificates of deposit, the Company maintains short-term fund sources. These include cash on hand and on deposit with correspondent banks; "federal funds sold", which are essentially demand loans to other banks; and investments in marketable securities available-for-sale. Such cash and near-cash items, marketable securities available-for-sale and short-term investments totaled $114.7 million at September 30, 1995, which represented 36.9 percent of total assets. Other possible liquidity sources to meet cash requirements include federal funds purchased lines, the sale of loans, and anticipated increases in deposits. Substantially all of the Company's installment loans and leases are made on terms that require regular monthly repayments, which provides a regular flow of cash funds. The Company manages its interest rate sensitivity by matching the repricing opportunities on its earning assets to those on its funding liabilities. Management uses various asset/liability strategies to manage the repricing characteristics of its assets and liabilities to ensure that exposure to interest rate fluctuations is limited within Company guidelines of acceptable levels of risk-taking. Hedging strategies, including the terms and pricing of loans and deposits, and managing the deployment of its securities are used to reduce mismatches in interest rate repricing opportunities of portfolio assets and their funding sources. The Company does not utilize derivative financial instruments as part of its hedging strategy. One way to measure the impact that future change in interest rates will have on net interest income is through a cumulative gap measure. The gap represents the net position of assets and liabilities subject to repricing in specified time periods. The Company's cumulative gap at September 30, 1995 for a three month and one year period was 74 percent and 110 percent, respectively. Since interest rate changes do not affect all categories of assets and liabilities equally or simultaneously, a cumulative gap analysis alone cannot be used to evaluate the Company's interest rate sensitivity position. To supplement traditional gap analysis, the Company performs simulation modeling to estimate the potential effects of changing interest rates. The process allows the Company to explore the complex relationships within the gap over time and various interest rate environments. The simulation analysis indicates certain scenarios in which the Company may experience a decline in its net interest income despite its strategy of matching repricing opportunities of its earning assets and funding liabilities. Results of Operations - Quarter Ended September 30, 1995 Net income for the three months ended September 30, 1995 was $1.2 million, or $0.43 per share, compared to $768 thousand, or $0.28 per share, for the same period in 1994. The increase in third quarter 1995 earnings is due to higher net interest margins, lower provisions for possible credit losses and lower noninterest expenses. Net interest income increased $310 thousand in the three month period ended September 30, 1995 to $4.6 million compared to $4.3 million for the same period in 1994. The increase is due to higher yields on loans indexed to the prime lending rate, higher yields on federal funds sold and upward repricing upon reinvestment of the Company's relatively short-term investment portfolio. The higher yields on loans, federal funds sold and investment securities is a result of higher market rates of interest in the 1995 period as compared to 1994. While higher yields have been obtained on the Company's earning assets, the cost of funds on the deposits has not increased as rapidly. Additionally, lower volumes of interest-bearing liabilities funding the earning assets has further widened the net interest margin. 12 13 The provision for loan and lease losses during the three months ended September 30, 1995 was $152 thousand compared to $302 in the same period in 1994. This reduction was made based upon the Company's evaluation of the adequacy of its allowance for possible credit losses. The allowance for possible credit losses is established based upon an analysis providing specific allowances for loans that management has identified to have potential loss and general allowances for unidentified losses inherent in the portfolio. The general allowance is determined by segmenting the portfolio by risk rating and loan type with allowances established based upon historical losses in each portfolio segment. Additionally, consideration is given to loan type concentrations in the portfolio and the current and anticipated economic environment. Other income for the third quarter ended September 30, 1995 was $1.0 million compared to $1.1 million for the 1994 period. This decline was due to lower service charges on deposit accounts due to fewer accounts and lower bankcard discounts. Other expenses for the three months ended September 30, 1995 were $3.4 million compared to $3.8 million for the same period in 1994. Salaries were nearly flat in the 1995 period compared with 1994. While the Company's staffing levels were significantly lower in the 1995 period than 1994, the full impact is not reflected in the salary expense line item due to the application of Statement of Financial Accounting Standards No. 91 "Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases (SFAS 91). After reengineering its lending process, the Company, as provided for under SFAS 91, reevaluated the direct costs of specific activities performed in originating loans, which are primarily salary expense. As a result of the lower costs associated with originating loans in the new process, a lower amount of loan fees collected is offset against salary expense and a larger amount is deferred and amortized into income over the estimated life of the loan. Other real estate owned writedowns and expenses were $24 thousand in the third quarter of 1995 compared to $274 thousand for the same quarter last year. Additionally, other miscellaneous expenses were down in the 1995 period. Results of Operations - Nine Months Ended September 30, 1995 Net earnings for the nine months ended September 30, 1995 were $3.1 million, or $1.13 per share, compared to $1.8 million, or $0.65 per share, for the first nine months in 1994. The increase is due to wider interest margins and lower provisions for loan and lease losses. Net interest income increased $1.5 million to $13.6 million for the nine months ended September 30, 1995 compared to $12.0 million for the same period in 1994. Interest income increased $2.1 million in the 1995 period while interest expense on deposits and other borrowings increased only $602 thousand. The 1995 interest income was higher due to higher yields on loans, federal funds sold and investment securities as a result of higher market rates of interest and favorable repricing. The cost of deposits did not experience as large an increase during the 1995 period as compared to 1994. Additionally, a greater level of noninterest bearing deposits funded the earning assets in the first nine months of 1995. The provision for loan and lease losses for the first nine months of 1995 was $755 thousand compared to $1.7 million for the nine months ended September 30, 1994. The decrease was based upon management's assessment of the adequacy of the allowance for possible credit losses as discussed above in the quarterly discussion. Other income decreased to $3.0 million for the nine months ended September 30, 1995 compared to $3.5 million for the same period in 1994. This decrease is primarily due to lower bankcard discounts and lower gains on the sale of Small Business Administration-guaranteed (SBA) loans. The bank is retaining more of the SBA loans in 1995 as compared to 1994 as a result of a strategic decision. Other expense was $340 thousand lower in the first nine months of 1995 totaling $10.5 million compared to $10.9 million for the same period in 1994. Salary expense and employee benefit expense was flat for the 1995 period compared to 1994. While the Company's staffing levels were significantly lower in the 1995 period than 1994, the full impact is not reflected in the salary expense line item due to the application of Statement of Financial Accounting Standards No. 91 "Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases (SFAS 91). After reengineering its lending process, the Company, as provided for under SFAS 91, reevaluated the direct costs of specific activities performed in originating loans, which are primarily salary expense. As a result of the lower costs associated with originating loans in the new process, a lower amount of loan fees collected is offset against salary expense and a larger amount is deferred and amortized into income over the estimated life of the loan. Other real estate owned writedowns and expenses were $125 thousand and $286 thousand for the nine months ended September 30, 1995, respectively. Other miscellaneous expenses were $3.8 million for the first nine months of 1995 compared to $4.1 million for the same period in 1994. 13 14 Newly Issued Accounting Pronouncements In March 1995, the FASB issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121"). SFAS 121 provides guidance for recognition and measurement of impairment of long-lived assets, certain identifiable intangibles and goodwill related both to assets to be held and used by an entity and assets to be disposed of. SFAS 121 is effective for financial statements for fiscal years beginning after December 15, 1995. The Bank owns certain of its branch banking facilities. The Company expects to adopt the statement on January 1, 1996 and does not expect that the adoption of the statement will have a material impact on the Company's results of operations or financial position. 14 15 Part II. Items 1 - 4. No reportable events. Item 5. Other Information On August 16, 1995 the Board of Directors declared a cash dividend of 8 cents per share payable October 2, 1995 to Shareholders of record September 4, 1995. Item 6. Exhibits and Reports on Form 8-K - Exhibits (27) Financial Data Schedule. - Reports on Form 8-K (1) None. 15 16 SIGNATURE Pursuant to requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Eldorado Bancorp --------------------------------- (Registrant) November 13, 1995 /s/ RAYMOND E. DELLERBA - ------------------------------- --------------------------------- Date Raymond E. Dellerba President Chief Operating Officer November 13, 1995 /s/ DAVID R. BROWN - --------------------------------- --------------------------------- Date David R. Brown Executive Vice President Chief Financial Officer 16 EX-27 2 FINANCIAL DATA SCHEDULE
9 1,000 U.S. DOLLARS 9-MOS DEC-31-1995 JAN-01-1995 SEP-30-1995 1 24,641 0 10,300 0 79,709 5,089 5,138 179,653 5,753 310,568 269,785 5,488 3,059 0 17,506 0 0 14,730 310,568 12,914 3,956 740 17,610 3,831 4,047 13,563 755 48 10,510 5,302 5,302 0 0 3,113 1.13 1.13 6.81 2,287 17 6,651 1,784 5,564 913 33 5,752 5,752 0 0
-----END PRIVACY-ENHANCED MESSAGE-----