-----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, D7EJ8xx7QjJYL71xaxNhkxq38hzCOTKuPCbee2vE0EV7Bzqw7oDcQM4sa1WPwIm9 rfjOoQdf4nuYG8JxpDzYJg== 0000353650-96-000008.txt : 19960729 0000353650-96-000008.hdr.sgml : 19960729 ACCESSION NUMBER: 0000353650-96-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960726 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BWC FINANCIAL CORP CENTRAL INDEX KEY: 0000353650 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 942621001 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-10658 FILM NUMBER: 96599161 BUSINESS ADDRESS: STREET 1: 1400 CIVIC DR CITY: WALNUT CREEK STATE: CA ZIP: 94596 BUSINESS PHONE: 5109325353 MAIL ADDRESS: STREET 1: P O BOX 8080 STREET 2: 1400 CIVIC DRIVE CITY: WALNUT CREEK STATE: CA ZIP: 94596-8080 10-Q 1 PERIOD ENDING 6-30-1996 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended June 30, 1996. Commission File Number 0-10658 BWC FINANCIAL CORP. (Exact name of registrant as specified in its charter) CALIFORNIA 94-262100 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 1400 Civic Drive, Walnut Creek, California _ 94596 __ (Address of principal executive officer) (510) 932-5353 (Registrant's Telephone Number, including area code) N/A (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 requirements for the past 90 days. Yes X No _____ APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS 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 1924 subsequent to the distribution of securities under a plan confirmed by court. Yes No _____ APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock as the latest practicable date. As of June 30, 1996, there were 930,548 shares of common stock, no par value outstanding. TABLE OF CONTENTS PART I - FINANCIAL INFORMATION PAGE Item 1 Consolidated Balance Sheets 3 Consolidated Statements of Income 4 Consolidated Statements of Cash Flows 5 Notes to Consolidated Financial Statements 6-7 Item 2 Management's Discussion and Analysis of Results of Operations 8-11 Interest Rate Sensitivity Table 12 PART II - OTHER INFORMATION Item 1 Legal Proceedings 13 Item 2 Changes in Securities 13 Item 3 Defaults Upon Senior Securities 13 Item 4 Submission of Matters to a Vote of Security Holders 13 Item 5 Other Materially Important Events 13 Item 6 Exhibits and Reports on Form 8-K 13 Signatures 14 BWC FINANCIAL CORP. CONSOLIDATED BALANCE SHEETS
June 30, December 31, ASSETS 1996 1995 Cash and Due From Banks $9,417,000 $11,377,000 Federal Funds Sold 1,085,000 1,230,000 Other Short Term Investments 17,000 10,000 Total Cash and Cash Equivalents 10,519,000 12,617,000 Investment Securities: Available for Sale 18,063,000 23,500,000 Held to Maturity (approximate market value of $9,869,000 in 1996 and $7,848,000 in 1995) 10,784,000 10,971,000 Loans, Net of Allowance for Credit Losses of $1,816,000 in 1996 and $1,561,000 in 1995. 105,078,000 99,776,000 Bank Premises and Equipment, Net 1,506,000 1,475,000 Interest Receivable and Other Assets 2,465,000 2,258,000 $148,415,000 $150,597,000 Total Assets LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Deposits: Noninterest-bearing $36,449,000 $36,854,000 Interest-bearing: Money Market Accounts 28,854,000 33,917,000 Savings and NOW Accounts 23,043,000 21,224,000 Time Deposits: Under $100,000 20,770,000 21,733,000 $100,000 or more 22,943,000 20,873,000 Total Interest-bearing 95,610,000 97,747,000 Total Deposits 132,059,000 134,601,000 Interest Payable and Other Liabilities 932,000 1,103,000 Total Liabilities 132,991,000 135,704,000 COMMITMENTS AND CONTINGENT LIABILITIES SHAREHOLDERS' EQUITY Preferred Stock, no par value: 5,000,000 shares authorized, none outstanding. -- -- Common Stock, no par value: 25,000,000 shares authorized; issued and outstanding - 1,011,084 shares in 1996 and 1,029,498 in 1995. 10,368,000 10,508,000 Retained Earnings 5,205,074 4,257,000 Capital adjustment on available-for-sale securities (149,074) 128,000 Total Shareholders' Equity 15,424,000 14,893,000 Total Liabilities and Shareholders' Equity 148,415,000 150,597,000 The accompanying notes are an integral part of these consolidated statements.
BWC FINANCIAL CORP. CONSOLIDATED STATEMENTS OF INCOME
For the Six Months Ended June 30, 1996 1995 1996 1995 (Unaudited) (Unaudited) (Unaudited) (Unaudited) INTEREST INCOME Loans, Including Fees $2,682,000 $2,311,000 $5,302,000 $4,574,000 Investment Securities: Taxable 274,000 280,000 559,000 561,000 Non-taxable 133,000 86,000 262,000 173,000 Federal Funds Sold 40,000 63,000 70,000 83,000 Other Short Term Investments 7,000 19,000 7,000 54,000 Total Interest Income 3,136,000 2,759,000 6,200,000 5,445,000 INTEREST EXPENSE Deposits 864,000 830,000 1,750,000 1,560,000 Federal Funds Purchased 3,000 -- 9,000 1,000 Total Interest Expense 867,000 830,000 1,759,000 1,561,000 NET INTEREST INCOME 2,269,000 1,929,000 4,441,000 3,884,000 PROVISION FOR CREDIT LOSSES 150,000 75,000 300,000 150,000 NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 2,119,000 1,854,000 4,141,000 3,734,000 NONINTEREST INCOME Service Charges on Deposit Accounts 170,000 124,000 310,000 250,000 Income from Real Estate Brokerage Subsidiary 53,000 -- 93,000 Gain on SBA Loan Sales 19,000 -- 45,000 Investment Securities Gains (losses), Net (1,000) -- 44,000 -- Other 85,000 103,000 182,000 203,000 Total Noninterest Income 326,000 227,000 674,000 453,000 NONINTEREST EXPENSE Salaries and Related Benefits 909,000 801,000 1,808,000 1,575,000 Occupancy 192,000 181,000 375,000 369,000 Furniture and Equipment 120,000 112,000 278,000 210,000 Other 535,000 559,000 1,008,000 1,022,000 Total Noninterest Expense 1,756,000 1,653,000 3,469,000 3,176,000 INCOME BEFORE INCOME TAXES 689,000 428,000 1,346,000 1,011,000 Provision for Income Taxes 204,000 139,000 398,000 331,000 NET INCOME $485,000 $289,000 $948,000 $680,000 NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE $0.43 $0.26 $0.85 $0.62 Average common and common equivalent shares 1,118,436 1,110,325 1,118,869 1,094,920 The accompanying notes are an intergral part of these consolidated statements.
BWC FINANCIAL CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1996 1995 OPERATING ACTIVITIES: Net Income $948,000 $680,000 Adjustments to reconcile net income to net cash provided(used): Amortization of loan fees (408,000) (311,000) Provision for credit losses 300,000 150,000 Depreciation and amortization 205,000 144,000 Gain on sale of securities available for sale 44,000 -- Increase in accrued interest receivable and other assets (207,000) (291,000) Increase (decrease) in accrued interest payable and other liabilities (171,000) 15,000 Net Cash Provided by Operating Activities 711,000 387,000 INVESTING ACTIVITIES: Proceeds from maturities of investment securities 447,000 7,095,000 Proceeds from the sale of available-for-sale investment securities 10,537,000 -- Purchase of investment securities (5,216,000) (4,562,000) Loans originated, net of collections (5,483,000) (1,011,000) Purchase of bank premises and equipment (236,000) (159,000) Net Cash Used by Investing Activities 49,000 1,363,000 FINANCING ACTIVITIES: Net increase (decrease) in deposits (2,542,000) 3,413,000 Proceeds from issuance of common stock -- 168,000 Cash paid for the repurchase of common stock (316,000) -- Cash paid in lieu of fractional shares -- (4,000) Net Cash Provided by Financing Activities (2,858,000) 3,577,000 CASH AND CASH EQUIVALENTS: Increase (decrease) in cash and cash equivalents (2,098,000) 5,327,000 Cash and cash equivalents at beginning of year 12,617,000 14,871,000 Cash and Cash Equivalents at period end $10,519,000 $20,198,000 ADDITIONAL CASH FLOW INFORMATION: Interest Paid $898,000 $1,420,000 Income Taxes Paid $438,000 $458,000 The accompanying notes are an integral part of these consolidated statements.
BWC FINANCIAL CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. CONSOLIDATED FINANCIAL STATEMENTS In the opinion of management, the unaudited interim consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position at June 30, 1996 and the results of operations for the six months ended June 30, 1996 and 1995 and cash flows for the six months ended June 30, 1996 and 1995. Certain information and footnote disclosures presented in the Corporation's annual consolidated financial statements are not included in these interim financial statements. Accordingly, the accompanying unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Corporation's 1995 Annual Report to Shareholders, which is incorporated by reference in the Company's 1995 annual report on Form 10-K. The results of operations for the six months ended June 30, 1996 are not necessarily indicative of the operating results for the full year. Net income per common and common equivalent share is computed using the weighted average number of shares outstanding during the period, adjusted for the dilutive effect of stock options and stock dividends. 2. INVESTMENT SECURITIES AND OTHER SHORT TERM INVESTMENTS The amortized cost and approximate market value of investment securities at June 30, 1996 are as follows: Gross Amortized Unrealized Market Cost Gain(Loss) Value Held-to-maturity Obligations of State and Political Subdivisions $ 10,784,000 $ (17,000) $10,767,000 Available-for-sale Taxable Obligations of State & Political Subdivisions $ 5,508,000 $(154,000) $ 5,354,000 Available-for-sale U.S. Treasury Securities $ 7,610,000 $ (20,000) $ 7,590,000 Available-for-sale U.S. Government Agencies $ 5,171,000 $ (52,000) $ 5,119,000 For the six months ended June 30, 1996, the Bank had proceeds of $10,537,000 from sale of investment securities. The following table shows the amortized cost and estimated market value of investment securities by contractual maturity at June 30, 1996. Held-to-Maturity Available-for-Sale Amortized Market Amortized Market Cost Value Cost Value Within one year $2,402,000 $2,405,000 $ 2,909,000 $ 2,920,000 After one but within five years $7,657,000 $7,653,000 $12,794,000 $12,682,000 Over five years $ 725,000 $ 709,000 $ 2,586,000 $ 2,461,000 The Corporation had investments in a mutual fund, comprised of investments in short term U.S. government securities and redeemable on a one day notice, in the amount of $17,000. The yield on this investment averages slightly higher than that available on Fed Funds, and the liquidity is approximately the same. 3. ALLOWANCE FOR CREDIT LOSSES For the Six months Ended June 30, 1996 1995 Allowance for credit losses at beginning of period $1,529,000 $1,498,000 Chargeoffs (34,000) (96,000) Recoveries 21,000 9,000 Net chargeoffs (13,000) (87,000) Provisions 300,000 150,000 Allowance for credit losses at end of period $1,816,000 $1,561,000 Ratio of allowance for credit losses to loans 1.70% 1.75% 4. DECLARATION OF STOCK DIVIDEND On July 23, 1996 the Corporation's Board of Directors declared a 10% stock dividend to shareholders of record July 31, 1996. Distribution of this dividend will take place on August 15, 1996. Fractional shares will be paid in cash as a value of $21.00 per share. All shares, share equivalent and earnings per share figures in this report have been adjusted for this dividend MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS Net Income Net income for the first six months in 1996 of $948,000 is $268,000 greater then the first six months in 1995. This represents a return on average assets during this period of 1.28% and a return on average equity of 12.59%. During the first six months of 1995 the Corporation earned $680,000 which was a return on average assets of 1.06% and on average equity of 10.26%. Net income for the three months ending June 30, 1995, of $485,000 was $196,000 over the comparable period in 1995. The return on average assets during the second quarter was 1.32% and the return on average equity was 12.81% as compared to a return on average assets during the second quarter of 1995 of .90% and a return on average equity of 8.52%. Earning assets averaged $135,158,000 during the six months ended June 30, 1996, as compared to $118,825,000 for the comparable period in 1995. Earning assets averaged $136,584,000 during the second quarter of 1996 as compared to $119,732,000 during the second quarter of 1995. Earnings per average common and common equivalent shares, adjusted for the 10% stock dividend declared July 23, 1996, (this includes any dilutive effect of unexercised options outstanding) was $0.85 for the first six months of 1996 as compared to $0.62 for the first six months of 1995. For the second quarter of 1996, earnings per average common and common equivalent shares was $0.43 as compared to $0.26 for the second quarter of 1995. Net Interest Income Interest income represents the interest earned by the Corporation on its portfolio of loans, investment securities, and other short term investments. Interest expense represents interest paid to the Corporation's depositors, as well as to others from whom the Corporation borrows funds on a temporary basis. Net interest income is the difference between interest income on earning assets and interest expense on deposits and other borrowed funds. The volume of loans and deposits and interest rate fluctuations caused by economic conditions greatly affect net interest income. Net interest income during the first six months of 1996 was $4,441,000 or $557,000 greater than the comparable period in 1995. This increase is the result of an increase in the volume of loans outstanding during the 1996 period as compared to 1995. Net interest rate spreads during 1996 were relatively unchanged from the comparable 1995 period, therefore the total change in interest income was related to volume changes, not rate changes. Net interest income during the three months ending June 30, 1996 was $2,269,000 or $340,000 greater than the comparable period in 1995. As with the six months results, the change is related to volume increases rather than net interest margin changes. Provision for Credit Losses An allowance for credit losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. The allowance is increased by provisions charged to expense and reduced by net charge-offs. Management continually evaluates the economic climate, the performance of borrowers, and other conditions to determine the adequacy of the allowance. The ratio of the allowance for credit losses to total loans as of June 30, 1996 was 1.70% as compared to 1.75% for the period ending June 30, 1995. This reflects a conservative attitude on the part of management and is considered adequate to provide for potential future losses. The Corporation had net loan losses of $13,000 during the first six months of 1996 as compared to a net loss of $87,000 during the comparable period in 1995. The following table provides information on past due and nonaccrual loans: For the Six months Ended June 30, 1996 1995 Loans Past Due 90 Days or More $ -- $ 12,000 Nonaccrual Loans 92,000 313,000 Total $ 92,000 $ 325,000 As of June 30, 1996 and 1995, no loans were outstanding that had been restructured. No interest earned on nonaccrual loans that was recorded in income during 1996 remains uncollected. Interest foregone on nonaccrual loans was approximately $15,000 and $45,000 as of June 30, 1996 and 1995 respectively. Noninterest Income Noninterest income during the first six months of 1996 of $674,000 was $221,000 greater than earned during the comparable period of 1995. This was reflected in increases in most areas of noninterest income and fees and includes income from the Corporation's real estate brokerage subsidiary of $92,000 and from gains on the sale of SBA loans. During the second quarter of 1996 noninterest income of $326,000 was $99,000 greater than earned during the comparable quarter of 1995. The same reasons applicable for the first six months apply to the second quarter results. Noninterest Expense Total noninterest expenses of $3,469,000 during the first six months of 1996 are $293,000 over the comparable period in 1995. The major categories of this are detailed below. Salaries and related benefits are $233,000 greater during the first six months of 1996 as compared to 1995. This increase is related to staffing increases and general merit increases related to the Corporation's growth and expanding operations. Staff FTE (full time equivalency) averaged 68.5 during the first six months of 1996 as compared to 62.8 for the comparable 1995 period. Occupancy expense increased a modest $6,000 during the respective periods due to the expanded facilities and remodeling of the Corporation's Orinda office plus rental adjustments and operating expense increases. Total Furniture and Equipment expense increased $68,000 between the respective periods of which approximately $40,000 is related to the upgrade of the Corporation's main computer and related write off of the old system. Other Expense decreased $14,000 between the respective periods. During the 1995 period the Corporation spent approximately $32,000 for one time consulting services related to improving operating efficiencies. This expense was not repeated during the 1996 period. During the second quarter of 1996 the Corporation had a total of $1,756,000 in noninterest expense which was $103,000 over the comparable quarter of 1995. This increase was concentrated in salary and related benefits expenses for the reasons given above regarding the increase in the six month operating results. Other Real Estate Owned As of June 30, 1996 the Corporation had $123,000 in Other Real Estate Owned assets (assets acquired as the result of foreclosure on real estate collateral) on its books. Capital Adequacy In 1989, the Federal Deposit Insurance Corporation (FDIC) established risk- based capital guidelines requiring banks to maintain certain ratios of "qualifying capital" to "risk-weighted assets". Under the guidelines, qualifying capital is classified into two Tiers, referred to as Tier 1 (core) and Tier 2 (supplementary) capital. Currently, the bank's Tier 1 capital consists of shareholders' equity, while Tier 2 capital consists of the eligible allowance for credit losses. The Bank has no subordinated notes or debentures included in its capital. Risk-weighted assets are calculated by applying risk percentages specified by the FDIC to categories of both balance- sheet assets and off-balance-sheet assets. The Bank's Tier 1 and Total (which included Tier 1 and Tier 2) risk-based capital ratios surpassed the regulatory minimum of 8% at June 30, for both 1996 and 1995. At year-end 1990, the FDIC also adopted a leverage ratio requirement. This ratio supplements the risk-based capital ratios and is defined as Tier 1 capital divided by the quarterly average assets during the reporting period. The requirement established a minimum leverage ratio of 3% for the highest rated banks. The following table shows the Corporation's risk-based capital ratios and leverage ratio as of June 30, 1996, December 31, 1995, and June 30, 1995. Risk-based capital ratios: Capital Ratios Minimum June 30, December 31, June 30, regulatory 1996 1995 1995 requirements Tier 1 capital 12.66% 12.51% 12.83% 4.00% Total capital 13.91% 13.76% 14.08% 8.00% Leverage ratio 9.88% 9.51% 10.00% 3.00% Liquidity Liquidity is a key aspect in the overall fiscal health of a financial corporation. The primary source of liquidity for BWC Financial Corp. is its marketable securities and Federal Funds sold. Cash, investment securities and other temporary investments represented 27% of total assets at June 30, 1996 and 37% at June 30, 1995. The Corporation's management has an effective asset and liability management program and carefully monitors its liquidity on a continuing basis. Additionally, the Corporation has available from correspondent banks Federal Fund lines of credit totaling $9,000,000. General Total assets of the Corporation at June 30, 1996 of $148,415,000 have increased $10,482,000 as compared to June 30, 1995 Total deposits of $132,059,000 have increased $8,673,000 from June 30, 1995. The Corporation's loan to deposit ratio as of June 30, 1996 was 81%, as compared to 72% on June 30, 1995. INTEREST RATE SENSITIVITY (in thousands except share and per share data) Proper management of the rate sensitivity and maturities of assets and liabilities is required to provide an optimum and stable net interest margin. Interest rate sensitivity spread management is an important tool for achieving this objective and for developing strategies and means to improve profitability. The schedules shown below reflect the interest rate sensitivity position of the Corporation as of June 30, 1996. Management believes that the sensitivity ratios reflected in these schedules fall within acceptable ranges, and represent no undue interest rate risk to the future earnings prospects of the Corporation.
Interest Rate Sensitivity 3 3-6 12 1-5 Over 5 Repricing within: months months months years years Totals June 30, 1996 ASSETS: Federal funds sold $1,085 0 0 0 0 $1,085 Other Short Term Securities 17 0 0 0 0 17 Investment securities 1,730 $876 $2,716 $20,339 $3,186 28,847 Construction & real estate loans 27,860 6,866 4,293 254 724 39,997 Commercial loans 31,452 1,261 399 1,102 207 34,421 Consumer loans 26,991 369 741 4,210 165 32,476 Interest-bearing assets $89,135 $9,372 $8,149 $25,905 $4,282 $136,843 Savings and Now accounts $23,043 0 0 0 0 $23,043 Money market accounts 28,854 0 0 0 0 28,854 Time deposits <$100,000 6,854 $5,664 $6,682 $1,570 0 20,770 Time deposits >$100,000 10,003 7,999 4,544 397 0 22,943 Interest-bearing liabilities $68,754 $13,663 $11,226 $1,967 0 $95,610 Rate sensitive gap $20,381 ($4,291) ($3,077) $23,938 $4,282 $41,233 Cumulative rate sensitiveity gap $20,381 $16,090 $13,013 $36,951 $41,233 $82,466 Cumulative position to average earning assets 14.89% 11.76% 9.51% 27.00% 30.13%
PART II - OTHER INFORMATION Item 1 - Legal Proceedings At this time there are no pending or threatened material legal proceedings to which the corporation is a party or to which any of the corporation's properties are subject. Item 2 - Changes in Securities On July 23, 1996 the Corporation's Board of Directors declared a 10% stock dividend to shareholders of record July 31, 1996. Distribution of this dividend will take place on August 15, 1996. All shares, share equivalent and earnings per share figures in this report have been adjusted for this dividend. Item 3 - Defaults Upon Senior Securities None Item 4 - Submission of Matters to a Vote of Security Holders None Item 5 - Other Materially Important Events None Item 6 - Exhibits and Reports on Form 8-K None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BWC FINANCIAL CORP. (Registrant) ___________________________ _________________________________ Date James L. Ryan Chairman and Chief Executive Officer ______________________ ________________________________ Date Leland E. Wines CFO and Corp. Secretary EX-27 2
9 0000353650 BWC FINANCIAL CORP 6-MOS DEC-31-1996 JUN-30-1996 10519000 0 1085000 0 18063000 10784000 0 106894000 1816000 148415000 132059000 0 932000 0 0 0 10368000 5056000 148415000 5302000 898000 0 6200000 1750000 1759000 4441000 300000 44000 3469000 1346000 1346000 0 0 948000 .93 .85 6.78 93000 0 0 883000 1529000 34000 21000 1816000 1060000 0 756000
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