-----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, Nwm0F2r6YrKnYioDIOmiRjRhoxCfWOAhSlclShTpD1o9o/K8DqfORbdaTLfWKO5B hvMBBREnkryIlx/aTFQsFw== 0000353650-97-000011.txt : 19970801 0000353650-97-000011.hdr.sgml : 19970801 ACCESSION NUMBER: 0000353650-97-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970731 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: 97648618 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 6-30-1997 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, 1997. 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, 1997, 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
June 30, December 31, ASSETS 1997 1996 Cash and Due From Banks $12,158,000 $15,383,000 Federal Funds Sold 9,100,000 -- Other Short Term Investments 1,423,000 26,000 Total Cash and Cash Equivalents 22,681,000 15,409,000 Investment Securities: Available for Sale 22,352,000 10,399,000 Held to Maturity (approximate market value of $8,165,000 in 1997 and $8,765,000 in 1996) 8,132,000 8,726,000 Loans, Net of Allowance for Credit Losses of $2,380,000 in 1997 and $1,893,000 in 1996. 146,176,000 138,878,000 Bank Premises and Equipment, Net 1,484,000 1,522,000 Interest Receivable and Other Assets 2,734,000 2,439,000 $203,559,000 $177,373,000 Total Assets LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Deposits: Noninterest-bearing $48,351,000 $41,766,000 Interest-bearing: Money Market Accounts 35,053,000 29,561,000 Savings and NOW Accounts 26,977,000 25,189,000 Time Deposits: Under $100,000 39,263,000 34,167,000 $100,000 or more 34,377,000 25,208,000 Total Interest-bearing 135,670,000 114,125,000 Total Deposits 184,021,000 155,891,000 Federal Funds Purchased -- 3,600,000 Interest Payable and Other Liabilities 1,895,000 1,472,000 Total Liabilities 185,916,000 160,963,000 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 - 1,121,280 shares in 1997 and 1,016,598 in 1996. 14,685,000 12,172,000 Retained Earnings 2,963,000 4,231,000 Capital adjustment on available-for-sale securities (5,000) 7,000 Total Shareholders' Equity 17,643,000 16,410,000 Total Liabilities and Shareholders' Equity 203,559,000 $177,373,000 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, 1997 1996 1997 1996 (Unaudited) (Unaudited) (Unaudited) (Unaudited) INTEREST INCOME Loans, Including Fees $3,895,000 $2,682,000 $7,506,000 $5,302,000 Investment Securities: Taxable 247,000 274,000 404,000 559,000 Non-taxable 100,000 133,000 206,000 262,000 Federal Funds Sold 135,000 40,000 188,000 70,000 Other Short Term Investments 23,000 7,000 24,000 7,000 Total Interest Income 4,400,000 3,136,000 8,328,000 6,200,000 INTEREST EXPENSE Deposits 1,402,000 864,000 2,580,000 1,750,000 Federal Funds Purchased -- 3,000 3,000 9,000 Total Interest Expense 1,402,000 867,000 2,583,000 1,759,000 NET INTEREST INCOME 2,998,000 2,269,000 5,745,000 4,441,000 PROVISION FOR CREDIT LOSSES 300,000 150,000 525,000 300,000 NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 2,698,000 2,119,000 5,220,000 4,141,000 NONINTEREST INCOME Service Charges on Deposit Accounts 190,000 170,000 374,000 310,000 Income from Real Estate Brokerage Subsidiary 38,000 53,000 60,000 93,000 Gain on SBA Loan Sales and Servicing Fees 56,000 19,000 121,000 62,000 Accounts Receivable Factoring - Servicing Fees 26,000 17,000 53,000 27,000 Investment Securities Gains (losses), Net -- (1,000) -- 44,000 Other 78,000 68,000 177,000 138,000 Total Noninterest Income 388,000 326,000 785,000 674,000 NONINTEREST EXPENSE Salaries and Related Benefits 1,125,000 909,000 2,279,000 1,808,000 Occupancy 202,000 192,000 398,000 375,000 Furniture and Equipment 128,000 120,000 256,000 278,000 Other 599,000 535,000 1,138,000 1,008,000 Total Noninterest Expense 2,054,000 1,756,000 4,071,000 3,469,000 INCOME BEFORE INCOME TAXES 1,032,000 689,000 1,934,000 1,346,000 Provision for Income Taxes 365,000 204,000 676,000 398,000 NET INCOME $667,000 $485,000 $1,258,000 $948,000 NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE $0.52 $0.39 $0.98 $0.77 Average common and common equivalent shares 1,283,463 1,241,312 1,281,352 1,236,227 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, 1997 1996 OPERATING ACTIVITIES: Net Income $1,258,000 $948,000 Adjustments to reconcile net income to net cash provided(used): Amortization of loan fees (593,000) (408,000) Provision for possible credit losses 525,000 300,000 Depreciation and amortization 192,000 205,000 Gain on sale of securities available for sale -- 44,000 (Increase)decrease in accrued interest receivable and other assets (295,000) (207,000) Increase in accrued interest payable and other liabilities 423,000 (171,000) Net Cash Provided(Used) by Operating Activities 1,510,000 711,000 INVESTING ACTIVITIES: Proceeds from maturities of investment securities 2,465,000 447,000 Proceeds from the sales of investment securities -- 10,537,000 Purchase of investment securities (13,836,000) (5,216,000) Loans originated, net of collections (7,229,000) (5,483,000) Purchase of bank premises and equipment (155,000) (236,000) Net Cash Used by Investing Activities (18,755,000) 49,000 FINANCING ACTIVITIES: Net increase(decrease) in deposits 28,130,000 (2,542,000) Decrease in Fed Funds Purchases (3,600,000) -- Proceeds from issuance of common stock 29,000 -- Cash paid for the repurchase of common stock (37,000) (316,000) Cash paid in lieu of fractional shares (5,000) -- Net Cash Provided(Used) by Financing Activities 24,517,000 (2,858,000) CASH AND CASH EQUIVALENTS: Increase(decrease)in cash and cash equivalents 7,272,000 (2,098,000) Cash and cash equivalents at beginning of year 15,409,000 12,617,000 Cash and Cash Equivalents at period end $22,681,000 $10,519,000 ADDITIONAL CASH FLOW INFORMATION: Interest Paid $2,156,000 $898,000 Income Taxes Paid $714,752 $438,000 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, 1997 and the results of operations for the six months ended June 30, 1997 and 1996 and cash flows for the six months ended June 30, 1997 and 1996. 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 1996 Annual Report to Shareholders, which is incorporated by reference in the Company's 1996 annual report on Form 10-K. The results of operations for the six months ended June 30, 1997 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, 1997 are as follows: Gross Amortized Unrealized Market Cost Gain(Loss) Value Held-to-maturity Obligations of State and Political Subdivisions $ 8,132,000 $ 33,000 $ 8,165,000 Available-for-sale Taxable Obligations of State & Political Subdivisions $ 4,097,000 $ (47,000) $ 4,050,000 Available-for-sale U.S. Treasury Securities $11,084,000 $ 29,000 $11,113,000 Available-for-sale U.S. Government Agencies $ 7,178,000 $ 11,000 $ 7,189,000 For the six months ended June 30, 1997, the Bank did not sell any investment securities. The following table shows the amortized cost and estimated market value of investment securities by contractual maturity at June 30, 1997. Held-to-Maturity Available-for-Sale Amortized Market Amortized Market Cost Value Cost Value Within one year $ 1,766,000 $1,772,000 $ 4,009,000 $ 4,015,000 After one but within five years $ 6,366,000 $6,393,000 $17,087,000 $17,096,000 Over five years $ -- $ -- $ 1,263,000 $ 1,241,000 3. ALLOWANCE FOR CREDIT LOSSES For the Six months Ended June 30, 1997 1996 Allowance for credit losses at beginning of period $1,893,000 $1,529,000 Chargeoffs (63,000) (34,000) Recoveries 25,000 21,000 Net chargeoffs (38,000) (13,000) Provisions 525,000 300,000 Allowance for credit losses at end of period $2,380,000 $1,816,000 Ratio of allowance for credit losses to loans 1.60% 1.70% MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS Net Income Net income for the first six months in 1997 of $1,258,000 was $310,000 greater than the first six months in 1996. This represented a return on average assets during this period of 1.36% and a return on average equity of 14.82%. The return on average assets during the first six months of 1996 was 1.28% and a return on average equity was 12.59%. Net income for the three months ending June 30, 1997, of $667,000 was $182,000 over the comparable period in 1996. The return on average assets during the second quarter was 1.37% and the return on average equity was 15.44%. The return on average assets during the second quarter of 1996 was 1.32% and the return on average equity was 12.81%. Earning assets averaged $172,222,000 during the six months ended June 30, 1997, as compared to $135,158,000 for the comparable period in 1996. Earning assets averaged $181,129,000 during the second quarter of 1997 as compared to $136,584,000 during the second quarter of 1996. Earnings per average common and common equivalent shares, adjusted for the 10% stock dividend declared March 31, 1997 and on July 23, 1996 (this includes any dilutive effect of unexercised options outstanding) was $0.98 for the first six months of 1997 as compared to $0.77 for the first six months of 1996. For the second quarter of 1997, earnings per average common and common equivalent shares was $0.52 as compared to $0.39 for the second quarter of 1996. 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 1997 was $5,745,000 or $1,304,000 greater than the comparable period in 1996. This increase was primarily the result of an increase in the volume of loans outstanding during the 1997 period as compared to 1996. Of this increase 96% was the result of increased volume and only 4% to an increase in the net interest rate spread. Net interest income during the three months ending June 30, 1997 was $2,998,000 or $729,000 greater than the comparable period in 1996. As with the six months results, the change is related to volume increases rather than net interest margin changes. Of the increase, 94% was related to volume and 6% to rates. 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 and is in accordance with SFAS 114. 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, 1997 was 1.60% as compared to 1.70% for the period ending June 30, 1996. 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 $38,000 during the first six months of 1997 as compared to a net loss of $13,000 during the comparable period in 1996. The following table provides information on past due and nonaccrual loans: For the Six months Ended June 30, 1997 1996 Loans Past Due 90 Days or More $ 479,000 $ -- Nonaccrual Loans 428,000 92,000 Total $ 907,000 $ 92,000 As of June 30, 1997 and 1996, no loans were outstanding that had been restructured. No interest earned on nonaccrual loans that was recorded in income during 1997 remains uncollected. Interest foregone on nonaccrual loans was approximately $24,000 and $15,000 as of June 30, 1997 and 1996 respectively. Noninterest Income Noninterest income during the first six months of 1997 of $785,000 was $111,000 greater than earned during the comparable period of 1996. This was reflected in increases in most areas of noninterest income and fees and is commensurate with the Corporation's growth. During the second quarter of 1997 noninterest income of $388,000 was $62,000 greater than earned during the comparable quarter of 1996. The same reasons applicable for the first six months apply to the second quarter results. Noninterest Expense Total noninterest expenses of $4,071,000 during the first six months of 1997 are $602,000 over the comparable period in 1996. The major categories of this are detailed below. Salaries and related benefits are $471,000 greater during the first six months of 1997 as compared to 1996. This increase is related to award bonuses paid to staff and officers plus staffing increases and general merit increases related to the Corporation's growth and expanding operations. Staff FTE (full time equivalency) averaged 78.8 during the first six months of 1997 as compared to 68.5 for the comparable 1996 period. Occupancy expense increased $23,000 during the respective periods due to the Corporation's new Fremont office, plus rental adjustments and operating expense increases on other office facilities. Total furniture and equipment expense decreased $22,000 between the respective periods. The primary reason for the higher expense in 1996, was the write down of the Bank's primary computer system and its replacement with a newer model. Other expense increased $130,000 between the respective periods and is related to general increases in growth and activity. During the second quarter of 1997 the Corporation had a total of $2,054,000 in noninterest expense which was $298,000 over the comparable quarter of 1996. This increase was primarily attributed to increases in salary and related benefits expenses for the same reasons as given above regarding the increase in the six month operating results. Other Real Estate Owned As of June 30, 1997 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 June 30, for both 1997 and 1996. 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, 1997, December 31, 1996, and June 30, 1996. Risk-based capital ratios: Capital Ratios Minimum June 30, December 31, June 30, regulatory 1997 1996 1996 requirements Tier 1 capital 10.43% 10.42% 12.66% 4.00% Total capital 11.68% 11.67% 13.91% 8.00% Leverage ratio 8.64% 9.35% 9.88% 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 26% of total assets at June 30, 1997 and 27% at June 30, 1996. 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 June 30, 1997 of $203,559,000 have increased $55,142,000 or 37% as compared to June 30, 1996. Total loans of $148,556,000 have increased $41,661,000 or 39% and total deposits of $184,021,000 have increased $52,961,000 or 39%. The Corporation's loan to deposit ratio as of June 30, 1997 and 1996 was 81% on both dates. 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, 1997. 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, 1997 ASSETS: Federal funds sold $9,100 $0 $0 $0 $0 $9,100 Investment securities $3,673 $1,002 $2,529 $23,462 $1,241 $31,907 Construction & real estate loans $53,036 $8,425 $5,939 $241 $671 $68,312 Commercial loans $44,485 $4,134 $103 $858 $36 $49,616 Consumer loans $25,665 $416 $868 $3,629 $50 $30,628 Interest-bearing assets $135,959 $13,977 $9,439 $28,190 $1,998 $189,563 Savings and Now accounts $26,977 $0 $0 $0 $0 $26,977 Money market accounts $35,053 $0 $0 $0 $0 $35,053 Time deposits <$100,000 $8,739 $17,854 $11,297 $1,323 $50 $39,263 Time deposits >$100,000 $11,903 $14,480 $7,280 $714 $0 $34,377 Interest-bearing liabilities $82,672 $32,334 $18,577 $2,037 $0 $135,670 Rate sensitive gap $53,287 ($18,357) ($9,138) $26,153 $1,998 $53,893 Cumulative rate sensitive gap $53,287 $34,930 $25,792 $51,945 $53,943 $107,836 Cumulative position to average earning assets 28.11% 18.43% 13.61% 27.40% 28.46%
PART II - OTHER INFORMATION Item 1 - Legal Proceedings At this time the Corporation is a cross-defendant in a legal proceeding. At this time the Corporation, based upon advise of counsel, does not believe that such cross-complaint will have any material adverse effect on the Corporation. Item 2 - Changes in Securities None 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) James L. Ryan ___________________________ _________________________________ Date James L. Ryan Chairman and Chief Executive Officer Leland E. Wines ______________________ ________________________________ Date Leland E. Wines CFO and Corp. Secretary EX-27 2
9 0000353650 BWC FINANCIAL CORP 6-MOS DEC-31-1997 JUN-30-1997 12158000 0 9100000 0 22352000 8132000 8165000 148556000 2380000 203559000 184021000 0 1895000 0 0 0 14685000 2958000 203559000 7506000 610000 212000 8328000 2580000 2583000 5745000 525000 0 4071000 1934000 1934000 0 0 1258000 1.12 .98 6.83 428000 479000 0 705000 1893000 63000 25000 2380000 1755000 0 625000
-----END PRIVACY-ENHANCED MESSAGE-----