-----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, FbOSg8iHtVNQUFQXxYoR7tG1D1P8mErZcD6Egzyk/rOhuasTzjZ6MCt0983Qtu0F 8wCMgq96x40UaXsbWyBOuQ== 0000353650-96-000010.txt : 19961024 0000353650-96-000010.hdr.sgml : 19961024 ACCESSION NUMBER: 0000353650-96-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961023 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: 96646626 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 9-30-1996 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 September 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 September 30, 1996, there were 1,004,343 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
September 30, December 31, ASSETS 1996 1995 Cash and Due From Banks $7,710,000 $11,377,000 Federal Funds Sold 1,200,000 1,230,000 Other Short Term Investments 15,000 10,000 Total Cash and Cash Equivalents 8,925,000 12,617,000 Investment Securities: Available for Sale 10,835,000 23,500,000 Held to Maturity (approximate market value of $9,234,000 in 1996 and $11,061,000 in 1995) 9,211,000 10,971,000 Loans, Net of Allowance for Credit Losses of $2,012,000 in 1996 and $1,528,000 in 1995. 118,187,000 99,776,000 Bank Premises and Equipment, Net 1,546,000 1,475,000 Interest Receivable and Other Assets 2,369,000 2,258,000 $151,073,000 $150,597,000 Total Assets LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Deposits: Noninterest-bearing $36,761,000 $36,854,000 Interest-bearing: Money Market Accounts 27,899,000 33,917,000 Savings and NOW Accounts 23,838,000 21,224,000 Time Deposits: Under $100,000 21,901,000 21,733,000 $100,000 or more 23,392,000 20,873,000 Total Interest-bearing 97,030,000 97,747,000 Total Deposits 133,791,000 134,601,000 Interest Payable and Other Liabilities 1,422,000 1,103,000 Total Liabilities 135,213,000 135,704,000 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. 10,222,000 10,508,000 Retained Earnings 5,682,000 4,257,000 Capital adjustment on available-for-sale securities (44,000) 128,000 Total Shareholders' Equity 15,860,000 14,893,000 Total Liabilities and Shareholders' Equity 151,073,000 150,597,000 The accompanying notes are an integral part of these consolidated statements.
BWC FINANCIAL CORP. CONSOLIDATED STATEMENTS OF INCOME
For the Nine Months For the Nine Months Ended Sepember 30, Ended September 30, 1996 1995 1996 1995 (Unaudited) (Unaudited) (Unaudited) (Unaudited) INTEREST INCOME Loans, Including Fees $2,960,000 $2,371,000 $8,262,000 $6,945,000 Investment Securities: Taxable 243,000 382,000 802,000 943,000 Non-taxable 122,000 88,000 384,000 261,000 Federal Funds Sold 13,000 77,000 83,000 160,000 Other Short Term Investments 0 21,000 7,000 75,000 Total Interest Income 3,338,000 2,939,000 9,538,000 8,384,000 INTEREST EXPENSE Deposits 881,000 917,000 2,631,000 2,477,000 Federal Funds Purchased 7,000 -- 16,000 1,000 Total Interest Expense 888,000 917,000 2,647,000 2,478,000 NET INTEREST INCOME 2,450,000 2,022,000 6,891,000 5,906,000 PROVISION FOR CREDIT LOSSES 200,000 90,000 500,000 240,000 NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 2,250,000 1,932,000 6,391,000 5,666,000 NONINTEREST INCOME Service Charges on Deposit Accounts 162,000 142,000 472,000 392,000 Income from Real Estate Brokerage Subsidiary -4,000 29,000 89,000 47,000 Gain on SBA Loan Sales and Servicing Fees 27,000 89,000 89,000 130,000 Accounts Receivable Factoring - Servicing Fees 38,000 12,000 55,000 18,000 Investment Securities Gains (losses), Net -23,000 -- 21,000 -- Other 130,000 60,000 278,000 198,000 Total Noninterest Income 330,000 332,000 1,004,000 785,000 NONINTEREST EXPENSE Salaries and Related Benefits 962,000 835,000 2,770,000 2,410,000 Occupancy 197,000 181,000 572,000 550,000 Furniture and Equipment 119,000 122,000 397,000 332,000 Other 562,000 436,000 1,570,000 1,458,000 Total Noninterest Expense 1,840,000 1,574,000 5,309,000 4,750,000 INCOME BEFORE INCOME TAXES 740,000 690,000 2,086,000 1,701,000 Provision for Income Taxes 260,000 273,000 658,000 604,000 NET INCOME $480,000 $417,000 $1,428,000 $1,097,000 NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE $0.42 $0.37 $1.26 $1.02 Average common and common equivalent shares 1,153,499 1,126,499 1,134,050 1,078,114 The accompanying notes are an intergral part of these consolidated statements.
BWC FINANCIAL CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1996 1995 OPERATING ACTIVITIES: Net Income $1,428,000 $1,097,000 Adjustments to reconcile net income to net cash provided(used): Amortization of loan fees 640,000 (481,000) Provision for credit losses 500,000 240,000 Depreciation and amortization 244,000 224,000 Gain on sale of securities available for sale 21,000 -- Increase in accrued interest receivable and other assets (111,000) (634,000) Increase (decrease) in accrued interest payable and other liabilities 319,000 784,000 Net Cash Provided by Operating Activities 3,041,000 1,230,000 INVESTING ACTIVITIES: Proceeds from maturities of investment securities 1,930,000 9,656,000 Proceeds from the sale of available-for-sale investment securities 16,417,000 -- Purchase of investment securities (5,216,000) (17,679,000) Loans originated, net of collections (18,271,000) (2,633,000) Purchase of bank premises and equipment (315,000) (241,000) Net Cash Used by Investing Activities (5,455,000) (10,897,000) FINANCING ACTIVITIES: Net increase (decrease) in deposits (810,000) 7,423,000 Proceeds from issuance of common stock -- 196,000 Cash paid for the repurchase of common stock (463,000) -- Cash paid in lieu of fractional shares (5,000) (4,000) Net Cash Provided by Financing Activities (1,278,000) 7,615,000 CASH AND CASH EQUIVALENTS: Increase (decrease) in cash and cash equivalents (3,692,000) (2,052,000) Cash and cash equivalents at beginning of year 12,617,000 14,871,000 Cash and Cash Equivalents at period end $8,925,000 $12,819,000 ADDITIONAL CASH FLOW INFORMATION: Interest Paid $2,568,000 $2,148,000 Income Taxes Paid $412,000 $558,000 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 September 30, 1996 and the results of operations for the nine months ended September 30, 1996 and 1995 and cash flows for the nine months ended September 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 nine months ended September 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 September 30, 1996 are as follows: Gross Amortized Unrealized Market Cost Gain(Loss) Value Held-to-maturity Obligations of State and Political Subdivisions $ 9,211,000 $ 23,000 $ 9,234,000 Available-for-sale Taxable Obligations of State & Political Subdivisions $ 3,351,000 $ (70,000) $ 3,281,000 Available-for-sale U.S. Treasury Securities $ 6,048,000 $ 12,000 $ 6,060,000 Available-for-sale U.S. Government Agencies $ 1,503,000 $ (9,000) $ 1,494,000 For the nine months ended September 30, 1996, the Bank had proceeds of $16,417,000 from sale of investment securities. The following table shows the amortized cost and estimated market value of investment securities by contractual maturity at September 30, 1996. Held-to-Maturity Available-for-Sale Amortized Market Amortized Market Cost Value Cost Value Within one year $ 1,659,000 $1,662,000 $ 2,999,000 $ 3,014,000 After one but within five years $ 7,430,000 $7,451,000 $ 5,629,000 $ 5,604,000 Over five years $ 122,000 $ 121,000 $ 2,274,000 $ 2,217,000 3. ALLOWANCE FOR CREDIT LOSSES For the Nine months Ended September 30, 1996 1995 Allowance for credit losses at beginning of period $1,529,000 $1,498,000 Chargeoffs (45,000) (96,000) Recoveries 28,000 14,000 Net chargeoffs (17,000) (82,000) Provisions 500,000 240,000 Allowance for credit losses at end of period $2,012,000 $1,656,000 Ratio of allowance for credit losses to loans 1.67% 1.82% MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS Net Income Net income for the first nine months in 1996 of $1,428,000 is $331,000 greater then the first nine months in 1995. This represents a return on average assets ($149,138,000 during this period) of 1.28% and a return on average equity ($15,259,000 during this period) of 12.49%. During the first nine months of 1995 the Corporation earned $1,097,000 which was a return on average assets of 1.11% and on average equity of 10.82%. Net income for the three months ending September 30, 1995, of $480,000 was $63,000 over the comparable period in 1995. The return on average assets ($149,742,000 during the third quarter) was 1.28% and the return on average equity ($15,640,000 during the third quarter) was 12.30% as compared to a return on average assets during the third quarter of 1995 of 1.21% and a return on average equity of 11.87%. Earning assets averaged $136,836,000 during the nine months ended September 30, 1996, as compared to $121,995,000 for the comparable period in 1995. Earning assets averaged $140,193,000 during the third quarter of 1996 as compared to $128,334,000 during the third quarter of 1995. Earnings per average common and common equivalent shares (this includes any dilutive effect of unexercised options outstanding) was $1.26 for the first nine months of 1996 as compared to $1.02 for the first nine months of 1995. For the third quarter of 1996, earnings per average common and common equivalent shares was $0.42 as compared to $0.37 for the third 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 nine months of 1996 was $6,891,000 or $985,000 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. Of the increase in net interest income 98% was due to volume increases and only 2% to rate changes. Net interest income during the three months ending September 30, 1996 was $2,450,000 or $428,000 greater than the comparable period in 1995. As with the nine months results, the change is related to volume increases rather than rate changes with 92% of the increase resulting from volume increases and 8% from rate 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 September 30, 1996 was 1.67% as compared to 1.82% for the period ending September 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 $17,000 during the first nine months of 1996 as compared to a net loss of $82,000 during the comparable period in 1995. The following table provides information on past due and nonaccrual loans: For the Nine months Ended September 30, 1996 1995 Loans Past Due 90 Days or More $ 1,000 $ 41,000 Nonaccrual Loans 89,000 229,000 Total $ 90,000 $ 270,000 As of September 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 $19,000 and $15,000 as of September 30, 1996 and 1995 respectively. Noninterest Income Noninterest income during the first nine months of 1996 of $1,004,000 was $219,000 greater than earned during the comparable period of 1995. This was reflected in increases in most areas of noninterest income and fees. It includes income from the Corporation's real estate brokerage subsidiary and gains on the sale of SBA loans and from fees generated from the Accounts Receivable Factoring Department. During the third quarter of 1996 noninterest income of $330,000 was relatively unchanged from that earned during the comparable period in 1995. Noninterest Expense Total noninterest expenses of $5,309,000 during the first nine months of 1996 are $559,000 over the comparable period in 1995. The major categories of this are detailed below. Salaries and related benefits are $360,000 greater during the first nine 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. Occupancy expense increased $22,000 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 $65,000 between the respective periods which is primarily related to the upgrade of the Corporation's main computer and major additions to the Corporation's PC networks. Other Expense increased $112,000 between the respective periods, principally related to the increased volume in our lending activities. These types of expenses include such things as credit report fees, appraisal fees, origination fees, etc. During the third quarter of 1996 the Corporation had a total of $1,840,000 in noninterest expense which was $266,000 over the comparable quarter of 1995. The breakdown of expenses in the third quarter parallel those given for the nine month results. Other Real Estate Owned As of September 30, 1996 the Corporation had no 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 September 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 September 30, 1996, December 31, 1995, and September 30, 1995. * Risk-based capital ratios: Capital Ratios Minimum September 30, December 31, September 30, Regulatory 1996 1995 1995 requirements Tier 1 capital 12.08% 12.51% 13.52% 4.00% Total capital 13.34% 13.76% 14.78% 8.00% Leverage ratio 9.95% 9.51% 9.60% 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 19% of total assets at September 30, 1996 and 38% at September 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 $13,000,000. General Total assets of the Corporation at September 30, 1996 of $151,073,000 have increased $8,105,000 as compared to September 30, 1995 Total deposits of $133,791,000 have increased $6,395,000 from September 30, 1995. Total loans of $127,421,000 have increased $36,480,000 from September 30, 1995. The Corporation's loan to deposit ratio as of September 30, 1996 was 89%, as compared to 71% on September 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 September 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 September 30, 1996 ASSETS: Federal funds sold $1,200 0 0 0 0 $1,200 Other Short Term Securities 15 0 0 0 0 15 Investment securities 876 $1,976 $1,820 $13,034 $2,340 20,046 Construction & real estate loans 36,323 10,507 2,398 250 712 50,190 Commercial loans 36,033 1,521 262 964 109 38,889 Consumer loans 25,671 783 385 4,129 150 31,118 Interest-bearing assets $100,118 $14,787 $4,865 $18,377 $3,311 $141,458 Savings and Now accounts $23,839 0 0 0 0 $23,839 Money market accounts 27,899 0 0 0 0 27,899 Time deposits <$100,000 7,404 $9,970 $2,956 $1,571 0 21,901 Time deposits >$100,000 12,878 7,790 2,124 600 0 23,392 Interest-bearing liabilities $72,020 $17,760 $5,080 $2,171 0 $97,031 Rate sensitive gap $28,098 ($2,973) ($215) $16,206 $3,311 $44,427 Cumulative rate sensitiveity gap $28,098 $25,125 $24,910 $41,116 $44,427 $88,854 Cumulative position to average earning assets 19.86% 17.76% 17.61% 29.07% 31.41%
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 9-MOS DEC-31-1996 SEP-30-1996 7710000 0 1200000 0 10835000 9211000 9234000 120199000 2012000 151073000 133791000 0 1422000 0 0 0 10222000 5638000 151073000 8262000 1186000 90000 9538000 2631000 2647000 6891000 500000 21000 5309000 2086000 2086000 0 0 1428000 1.41 1.26 6.90 89000 1000 0 1178000 1529000 45000 28000 2012000 1472000 0 540000
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