-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, qnwdPvjbr0k1BnqC3QHkVJ0akyXezc+n27w1pqFBL3Hkc6CyfnX/JtjAQAV8Bah+ SO2DSkKFds2QLSCbYsZN9Q== 0000354647-94-000006.txt : 19940713 0000354647-94-000006.hdr.sgml : 19940713 ACCESSION NUMBER: 0000354647-94-000006 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940624 ITEM INFORMATION: Acquisition or disposition of assets FILED AS OF DATE: 19940708 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CVB FINANCIAL CORP CENTRAL INDEX KEY: 0000354647 STANDARD INDUSTRIAL CLASSIFICATION: 6022 IRS NUMBER: 953629339 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10394 FILM NUMBER: 94538341 BUSINESS ADDRESS: STREET 1: 701 N HAVEN AVE STE 350 CITY: ONTARIO STATE: CA ZIP: 91764 BUSINESS PHONE: 9099804030 MAIL ADDRESS: STREET 1: 701 N. HAVEN AVENUE CITY: ONTARIO STATE: CA ZIP: 91764 8-K 1 ______________________ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________ FROM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 _______________ Date of Report (Date of earliest event reported): June 24, 1994 CVB Financial Corp. (Exact name of registrant as specified in its charter) CALIFORNIA (State or other jurisdiction of incorporation) 1-10394 (Commission File Number) 95-3629339 (IRS Employer Identification No.) 701 North Haven Avenue, Suite 350, Ontario, California 91764 (Address of principal executive offices)(Zip Code) Registrant's telephone number, including area code: (909) 980-4030 Not Applicable (Former name or former address, if changed since last report) __________________________________________________ THIS REPORT INCLUDES A TOTAL OF 37 PAGES EXHIBIT INDEX ON PAGE 31 Item 1. Changes in Control of Registrant. None. Item 2. Acquisition or Disposition of Assets. On June 24, 1994, CVB Financial Corp. (the "Company"), acquired Western Industrial National Bank, which was merged into Chino Valley Bank, the Company's wholly owned subsidiary pursuant to the Agreement and Plan of Reorganization, as amended (the "Agreement") by and between CVB Financial Corp., Chino Valley Bank and Western Industrial National Bank. Pursuant to the Agreement, the purchase price was $14,796,738.00, and the funds used to consummate the acquisition were derived from a cash dividend paid to the Company by Chino Valley Bank. Item 3. Bankruptcy or Receivership. None. Item 4. Changes in Registrant's Certifying Accountant. None. Item 5. Other Events. None. Item 6. Resignations of Registrant's Directors. None. Item 7. Financial Statements and Exhibits. (a) Financial Statements of Business Acquired. Index to Consolidated Financial Statements Page Independent Auditors Report 4 Consolidated Statements of Financial Condition 5 December 31, 1993 and 1992 Consolidated Statements of Income 6 Years Ended December 31, 1993 and 1992 Consolidated Statement of Changes in Shareholders' Equity 7 Years Ended December 31, 1993 and 1992 Consolidated Statements of Cash Flows 8 Years Ended December 31, 1993 and 1992 Notes to Consolidated Financial Statements 10 Unaudited Statements of Financial Condition March 31, 1994 23 Unaudited Consolidated Statements of Income Three Months Ended March 31, 1994 and 1993 24 Unaudited Consolidated Statements of Cash Flows Three Months Ended March 31, 1994 and 1993 25 Independent Auditors' Report To Board of Directors and Shareholders Western Industrial National Bank South El Monte, California We have audited the accompanying consolidated statements of financial condition of Western Industrial National Bank and subsidiary as of December 31, 1993 and 1992, and the related consolidated statements of income, changes in shareholders' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Bank's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Western Industrial National Bank and subsidiary as of December 31, 1993 and 1992, and the results of their operations and their cash flows for the years then ended, in conformity with generally accepted accounting principles. As discussed in Notes 1 and 8 to the consolidated financial statements, Western Industrial National Bank changed its method of accounting for income taxes for the year ended December 31, 1993. /s/Deloitte & Touche -------------------- Deloitte & Touche January 17, 1994 Los Angeles, California WESTERN INDUSTRIAL NATIONAL BANK AND SUBSIDIARY CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION DECEMBER 31, 1993 AND 1992
1993 1992 ASSETS EARNING ASSETS: Federal funds sold $ 1,000,000 $ 5,000,000 Interest-bearing deposits in other financial institutions 3,055,000 2,362,000 Investment securities - market value of $523,533 (1993) and $529,672 (1992) (Note 2) 523,372 525,014 Loans, net (Notes 3 and 6) 36,188,739 35,988,561 ------------ ----------- Total earning assets 40,767,111 43,875,575 Cash and due from banks 2,222,562 4,514,864 Premises and equipment, net (Note 4) 1,101,980 1,189,734 Real estate owned 446,029 Accrued interest receivable and other assets 247,804 249,376 ----------- ----------- TOTAL $44,785,486 $49,829,549 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES: Deposits: (Note 5) Noninterest-bearing $13,356,812 $15,770,624 Interest-bearing 22,922,146 26,451,895 ----------- ----------- Total deposits 36,278,958 42,222,519 Accrued interest payable and other liabilities 93,721 127,612 ----------- ----------- Total Liabilities 36,372,679 42,350,131 ----------- ----------- SHAREHOLDERS' EQUITY(Notes 7, 9 and 10): Common stock, $5 par value; 500,000 shares authorized; issued and outstanding, 374,134 shares in 1993 and 1992 1,870,670 1,870,670 Additional paid-in capital 2,333,221 2,333,221 Retained earnings 4,208,916 3,275,527 ----------- ----------- Total shareholders' equity 8,412,807 7,479,418 ----------- ----------- TOTAL $44,785,486 $49,829,549 =========== ===========
See notes to consolidated financial statements. WESTERN INDUSTRIAL NATIONAL BANK AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 1993 AND 1992 INTEREST INCOME: Loans, including origination fees $3,807,258 $3,950,511 Investment securities 25,012 21,188 Federal funds sold 99,244 236,793 Deposits in financial institutions 133,901 35,857 ---------- --------- Total interest income 4,065,415 4,244,349 INTEREST EXPENSE ON DEPOSITS (Note 5) 669,575 938,102 ----------- ---------- NET INTEREST INCOME BEFORE PROVISION FOR CREDIT LOSSES 3,395,840 3,306,247 PROVISION FOR CREDIT LOSSES (Note 5) 330,000 180,000 NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 3,065,840 3,126,247 OTHER OPERATING REVENUE - Service charges and other fees 997,352 1,025,431 Salaries and related benefits 1,292,054 1,326,137 Occupancy (Note 6) 225,805 234,519 Data processing 243,190 258,722 Directors 118,500 126,000 FDIC assessments 90,733 89,297 Professional fees 130,554 97,781 Other 297,037 290,365 ---------- ---------- Total other operating expenses 2,379,873 2,422,821 ---------- ---------- INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES 1,683,319 1,728,857 INCOME TAXES (Note 8) 693,200 724,350 ---------- --------- NET INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES 990,119 1,004,507 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES (Note 8) (56,730) ---------- ---------- NET INCOME $ 933,389 $1,004,507 ========= ========== EARNINGS PER SHARE: Net earnings before cumulative effect of change in accounting for income taxes $ 2.60 $ 2.65 Cumulative effect of change in accounting for income taxes (0.15) -------- -------- TOTAL EARNINGS PER SHARE $ 2.45 $ 2.65 ======= ======== See notes to consolidated financial statements. WESTERN INDUSTRIAL NATIONAL BANK AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1993 AND 1992
Common Stock Number of Additional Shares Paid-in Retained Outstanding Amount Capital Earnings Total BALANCE, JANUARY 1, 1992 373,036 $1,865,180 $2,331,211 $2,271,020 $6,467,411 Stock options exercised 1,098 5,490 2,010 7,500 Net income 1,004,507 1,004,507 ------- ---------- ---------- ---------- ---------- BALANCE, DECEMBER 31, 1992 374,134 1,870,670 2,333,221 3,275,527 7,479,418 Net income 933,389 933,389 ------- ---------- ---------- ---------- ---------- BALANCE, DECEMBER 31, 1993 374,134 $1,870,670 $2,333,221 $4,208,916 $8,412,807 ======= ========== ========== ========== ==========
See notes to consolidated financial statements. WESTERN INDUSTRIAL NATIONAL BANK AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1993 AND 1992 1993 1992 CASH FLOWS FROM OPERATING ACTIVITIES: Interest received $3,991,458 $4,147,138 Other fees and charges 997,352 1,025,432 Interest paid (672,886) (958,519) Cash paid to suppliers and employees (2,488,378) (2,531,317) Income taxes paid (789,702) (849,653) ------------ ----------- Net cash provided by operating activities 1,037,844 833,081 ------------ ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from maturities of investment securities 250,000 250,000 Purchase of investment securities (250,100) (359,808) Net increase in interest-bearing deposits with other financial institutions (693,000) (2,362,000) Net increase in loans (694,727) (190,133) Net increase in premises and equipment (5,461) Net decrease (increase) in other assets 1,242 (10,939) ----------- ------------ Net cash used in investing activities (1,386,585) (2,678,341) CASH FLOWS FROM FINANCING ACTIVITIES: Net (decrease) increase in demand, NOW and savings deposits (5,094,911) 3,287,362 Net decrease in certificates of deposit (848,650) (2,196,310) Proceeds from exercise of stock options 7,500 ------------ ------------ Net cash (used in) provided by financing activities (5,943,561) 1,098,552 ----------- ----------- NET DECREASE IN CASH AND CASH EQUIVALENTS (6,292,302) (746,708) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 9,514,864 10,261,572 ----------- ---------- CASH AND CASH EQUIVALENTS, END OF YEAR $3,222,562 $9,514,864 ========== ========== NONCASH ACTIVITIES - Transfer of loans to real estate owned 446,029 ========== See notes to consolidated financial statements. (Continued) WESTERN INDUSTRIAL NATIONAL BANK AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1993 AND 1992
1993 1992 RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net income $ 933,389 $ 1,004,507 ---------- ----------- Adjustments to reconcile net income to net cash provided by operating activities: Premium amortization (discount accretion) on investments 1,742 (4,397) Provision for credit losses 330,000 180,000 Accretion of deferred loan fees and costs (281,480) (331,726) Depreciation and amortization 87,754 93,150 Decrease in accrued interest receivable 330 27,812 Cumulative effect in change in accounting for income taxes 56,730 Decrease in accrued interest payable (3,311) (20,417) Deferred tax benefit (121,321) (83,104) Increase (decrease) in accrued taxes on income 24,819 (42,199) Increase in other liabilities 9,192 9,455 ---------- --------- Total adjustments 104,455 (171,426) ---------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES $1,037,844 $ 833,081 ========== =========
See notes to consolidated financial statements. (Concluded) WESTERN INDUSTRIAL NATIONAL BANK AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1993 AND 1992 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting and reporting policies of Western Industrial National Bank (the "Bank") conform with generally accepted accounting principles and general practices within the banking industry. The following are descriptions of the more significant of those policies adopted by the Bank: Principles of Consolidation - The accompanying consolidated financial statements include the accounts of Western Industrial National Bank and its wholly owned subsidiary, Western WIN Corporation, after appropriate intercompany eliminations. Investment Securities - Investment securities are carried at cost, adjusted for amortization of premiums and accretion of discounts on a straight-line basis. Gains and losses on the sale of investment securities are determined using the specific identification method. It is management's intent to hold investment securities until maturity. In May 1993, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities." This statement addresses the accounting and reporting for investments in equity securities that have readily determinable fair values and all investments in debt securities. Under this statement, debt securities will be classified into three categories as follows: Held-to-Maturity Securities - Debt securities that the Bank has the positive intent and ability to hold to maturity. These securities are to be reported at amortized cost. Trading Securities - Debt and equity securities that are bought and held principally for the purpose of selling them in the near term. These securities are to be reported at fair value with unrealized gains and losses included in earnings. Available-for-Sale Securities - Debt and equity securities not classified as either held-to-maturity or trading securities. These securities are to be reported at fair value, with unrealized gains and losses excluded from earnings and reported as a separate component of stockholders' equity (net of tax effects). The Bank must adopt this standard by 1994. The Bank has determined the impact of the adoption of this statement to be immaterial to its financial statements. Loans - Loans are reported at the principal amounts outstanding, net of unearned income, net deferred loan origination fees and allowance for credit losses. Interest income on loans is accrued monthly on a simple- interest basis on the daily balance of the principal amounts outstanding. Interest income is not recognized on loans receivable if collection of the interest is deemed by management to be unlikely. Nonrefundable fees and certain direct costs associated with the origination or purchase of loans are deferred and netted against outstanding loan balances. The net deferred fees and costs are recognized in interest income over the loan term using methods that generally produce a level yield on the unpaid loan balance. Provision and Allowance for Credit Losses - The allowance for credit losses is based on estimates, and ultimate losses may vary from current estimates. These estimates are revised periodically, and, as adjustments become necessary, they are reported in earnings in the periods in which they become known. The allowance is increased by provisions charged to expense and reduced by net charge-offs. Management makes periodic credit reviews of the loan portfolio and considers current economic conditions, historical loan loss experience and other factors in determining the adequacy of the allowance. In May 1993, the FASB issued SFAS No. 114, "Accounting by Creditors for Impairment of a Loan." This statement prescribes that a loan is impaired when it is probable that a creditor will be unable to collect all amounts due (principal and interest) according to the contractual terms of the loan agreement. Measurement of the impairment can be based on the expected future cash flows of an impaired loan, which are to be discounted at the loan's effective interest rate, or impairment can be measured by reference to an observable market price, if one exists, or the fair value of the collateral for a collateral-dependent loan. Creditors may select the measurement method on a loan-by-loan basis, except that collateral-dependent loans for which foreclosure is probable must be measured at the fair value of the collateral. Additionally, the statement prescribes measuring impairment of a restructured loan by discounting the total expected future cash flows at the loan's effective rate of interest in the original loan agreement. Finally, the impact of initially applying the statement is reported as a part of the provision for credit losses. The Bank must adopt this standard by 1995. The Bank has not yet determined the impact of the adoption of this statement, or when the Bank will adopt this statement. Real Estate Owned - Real estate owned, which represents real estate acquired through foreclosure in satisfaction of commercial and real estate loans, is stated at the lower of cost or the estimated fair value of the real estate less cost to sell. Loan balances in excess of fair value of the real estate acquired at the date of acquisition are charged against the allowance for credit losses. Any subsequent operating expenses or income, reduction in estimated values, and gains or losses on disposition of such properties are charged to current operations. Premises and Equipment - Premises and equipment are carried at cost, less accumulated depreciation and amortization. Depreciation is computed on the straight- line method over the estimated useful lives of the assets. Amortization is computed on the straight-line method over the useful lives of the leasehold improvements or the term of the lease, whichever is shorter. Income Taxes - Effective January 1, 1993, the Bank adopted SFAS No. 109, "Accounting for Income Taxes." Accordingly, income tax expense for 1993 was computed using the liability method, which recognizes a liability or asset representing the tax effects, based on current tax law, of future deductible or taxable amounts attributable to events that have been recognized in the consolidated financial statements. The principal temporary differences relate to different methods used for tax and financial reporting purposes to account for credit losses and depreciation. For years prior to 1993, the provision for income taxes is based on income reported for consolidated financial statement purposes and differs from the amount of taxes currently paid or payable. Prior years' financial statements have not been restated for the accounting change. Earnings per Share - Earnings per share are computed based on the weighted average number of common shares outstanding during each year, including the dilutive effect of common stock options accounted for under the treasury stock method. The weighted average number of shares used in the computation was 380,902 and 379,758 for 1993 and 1992, respectively. Statements of Cash Flows - Cash and cash equivalents as reported in the statements of cash flows include cash and due from banks and federal funds sold. 2. INVESTMENT SECURITIES The book and market values of investment securities were as follows:
December 31 ------------------------------------------------ 1993 1992 -------------------- ------------------------ Book Market Book Market Value Value Value Value U.S. Treasury securities $ 247,222 $ 247,049 $ 248,964 $ 249,288 Federal Reserve Bank stock 126,150 126,150 126,050 126,050 Municipal securities 150,000 150,334 150,000 154,334 --------- --------- --------- --------- $ 523,372 $ 523,533 $ 525,014 $ 529,672 ========= ========= ========= =========
At December 31, 1993, the gross unrealized loss on U.S. Treasury securities was $173 and the gross unrealized gain on municipal securities was $334. At December 31, 1992, gross unrealized gains on U.S. Treasury securities and on municipal securities were $324 and $4,334, respectively. There were no sales of investment securities in 1993 or 1992. At December 31, 1993, U.S. Treasury securities held mature within one year, and municipal securities held mature in one to two years. At December 31, 1993, certain U.S. Treasury securities carried at $247,222 were pledged as collateral for public funds on deposit with the Bank. 3. LOANS The loan portfolio consisted of the following:
December 31 ----------------------- 1993 1992 Commercial $ 5,704,646 $ 5,105,367 Real estate 22,587,430 19,900,764 Installment 4,656,544 6,144,052 Equity lines of credit 4,321,238 5,663,940 ----------- ------------ 37,269,858 36,814,123 Allowance for credit losses (875,668) (614,465) Deferred loan fees, net of costs (205,451) (211,097) ----------- ------------ Net loans $36,188,739 $35,988,561 =========== ===========
The Bank primarily grants commercial, consumer and real estate loans to light industrial companies in South El Monte, California and adjoining cities. A substantial portion of the borrowers' ability to honor their debts is dependent on the economy in this region, which has recently experienced adverse conditions. Additional declines in the economy may result in higher levels of loan losses and larger provisions to the allowance for loan losses. Although management believes the allowance at December 31, 1993 is adequate, the allowance is an estimate which is inherently uncertain and depends on the outcome of future events that cannot reasonably be predicted. An analysis of the activity in the allowance for credit losses is as follows:
Year Ended December 31 ------------------------- 1993 1992 Balance, beginning of year $ 614,465 $ 536,386 Recoveries on loans previously charged off 26,635 21,648 Provision for credit losses 330,000 180,000 Loans charged off (95,432) (123,569) ---------- ---------- Balance, end of year $ 875,668 $ 614,465 ========== =========
Loans past due but still accruing interest were approximately as follows at December 31, 1993: Past Due Past Due 30-89 day 90 or More Commercial $500,657 $34,684 Installment 68,452 2,553 Equity lines of credit 417,603 -------- ------- $986,712 $37,237 ======== ======= Loans on nonaccrual status at December 31, 1993 and 1992 totaled $196,000 and $222,454, respectively. Interest income not recognized in the consolidated financial statements for loans on nonaccrual status at December 31, 1993 and 1992 was $17,096 and $19,764, respectively. Certain officers, directors and employees of the Bank, and companies with which directors of the Bank are associated, had loans outstanding of $3,067,604 and $2,858,411 at December 31, 1993 and 1992, respectively. These loans were made in the ordinary course of the Bank's business and, in management's opinion, were made at prevailing rates and terms. An analysis of the activity for such loans is as follows: Balance, beginning of year $2,858,411 Payments received (208,091) Disbursements 417,284 ----------- Balance, end of year $3,067,604 =========== 4. PREMISES AND EQUIPMENT Premises and equipment consisted of the following:
December 31 --------------------- 1993 1992 Land $ 294,000 $ 294,000 Furniture, fixtures and equipment 664,003 664,003 Leasehold improvements 64,729 64,729 Building 934,123 934,123 --------- ---------- 1,956,855 1,956,855 Accumulated depreciation and amortization (854,875) (767,121) ---------- ---------- $1,101,980 $1,189,734 ========== ==========
The amount of depreciation included in operating expenses was $87,754 and $93,150 in 1993 and 1992, respectively, and is based on the following estimated asset lives: Furniture, fixtures and equipment 5 years Leasehold improvements 40 years Building 40 years 5. DEPOSITS Deposits of the Bank included time certificates of deposit greater than $100,000 of $5,388,681 and $5,883,556 at December 31, 1993 and 1992, respectively. Interest expense for such deposits totaled $186,147 in 1993 and $313,164 in 1992. 6. COMMITMENTS AND CONTINGENCIES The Bank leases land under its main branch under an operating lease that, including renewal options, extends through 2026. Lease expense was approximately $41,915 in 1993 and 1992. At December 31, 1993, future annual lease commitments were as follows: Year Ending December 31 1994 $ 41,915 1995 41,915 1996 41,915 1997 41,915 1998 41,915 Thereafter 1,135,200 ---------- $1,344,775 ========== The Bank is a party to financial instruments with off- balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. When viewed in terms of the maximum exposure, those instruments may involve, to varying degrees, credit and interest rate risk in excess of the amount recognized in the statement of financial condition. At December 31, 1993, the Bank had commitments to extend credit of $1,389,000 and to disburse $2,487,763 of additional funds for existing loans. In addition, the Bank had obligations under standby letters of credit of $512,500. In the normal course of business, the Bank occasionally becomes a party to litigation. In the opinion of management, after consultation with legal counsel, pending or threatened litigation involving the Bank will not have a material adverse effect on the Bank's consolidated financial condition or results of operations. 7. SHAREHOLDERS' EQUITY The Bank has a stock option plan, divided into two parts (A and B), that authorizes the issuance of up to 30,250 shares (as adjusted for the effect of stock dividends) of common stock and expires November 3, 1992. Options are granted at an exercise price not less than the fair market value or par value, whichever is greater, at the date of grant. Options granted under parts A and B of the plan were exercisable beginning in 1984 and 1987, respectively, in installments as determined by the Board of Directors. All options expire ten years after the date of grant. Upon a change in control of the Bank all options become fully vested. Activity in the stock option plan for the two years ended December 31, 1993 was as follows: Options Price Options Balance - January 1, 1992 9,184 $ 6.83 to $15.00 18,455 Options granted (4,600) $20.00 4,600 Options exercised $6.83 (1,098) Options canceled 2,577 $10.52 to $13.64 (2,577) Plan termination (7,161) ------- Balance - December 31, 1992 $ 6.83 to $20.00 19,380 Options canceled $ 6.83 to $20.00 (2,386) ------ Balance - December 31, 1993 $ 6.83 to $20.00 16,994 ====== At December 31, 1993, 7,739 of the shares currently under option are exercisable at prices varying from $6.83 to $15.00. An additional 1,997 options become exercisable in 1994 at prices varying from $6.83 to $20.00 per share. 8. INCOME TAXES On January 1, 1993, the Bank adopted SFAS No. 109, "Accounting for Income Taxes." Under the provisions of SFAS No. 109, the Bank elected not to restate prior year financial statements. The provision for income taxes consisted of the following: Year Ended December 31 1993 1992 Income taxes currently paid or payable: Federal $ 579,400 $ 595,241 State 235,121 212,213 --------- --------- 814,521 807,454 --------- --------- Deferred taxes (benefit) applicable to temporary differences: Federal (92,646) (57,241) State (28,675) (25,863) --------- --------- (121,321) (83,104) --------- --------- $ 693,200 $724,350 ========= ======== The net income tax liability (asset) comprised the following: Year Ended December 31 ------------------- 1993 1992 Current Federal $ 40,612 $ 7,203 State (12,027) (3,435) -------- ------- $ 28,585 $ 3,768 ======== ======= Deferred: Federal $(17,692) 45,039 State 12,288 14,148 -------- ------- $(5,404) $59,187 ======== ======= The components of the net deferred tax liability (asset) are as follows:
Year Ended December 31, ------------------ 1993 1992 Federal: Deferred tax liabilities Depreciation $ 59,545 $66,568 Provision for credit losses 56,624 -------- ------- Gross deferred tax liability 59,545 123,192 Deferred tax assets: California franchise tax (75,833) (78,153) Provision for credit losses (1,404) --------- -------- Gross deferred tax assets (77,237) (78,153) -------- -------- Net deferred tax liability(asset) federal $(17,692) $45,039 ======== ======= State: Deferred Tax liabilities: Depreciation $14,925 $ 7,603 Provision for credit losses 6,545 ------- ------- Gross deferred tax liability 14,925 14,148 -------- ------- Deferred tax assets - Provision for credit losses (2,637) -------- ------- Gross deferred tax assets (2,637) -------- ------- Net deferred tax liability - state $12,288 $14,148 ======== =======
No valuation allowance under SFAS No. 109 is required. Deferred tax assets can be fully realized as an offset against reversing temporary differences, which create net future tax liabilities, or through loss carrybacks. Therefore, even if no future income was expected, deferred tax assets would still be fully realized. The provision for income taxes differs from the federal statutory tax rates for the following reasons: Year Ended December 31 ----------------------------------------- 1993 1992 Amount Percent Amount Percent Provision for income taxes at statutory rate 572,328 34.0% $587,811 34.0% State franchise tax, net of federal tax benefit 136,254 8.1% 125,688 7.3% Other, net (15,382) (0.9)% 10,851 0.6% ---------- ----- -------- ----- $ 693,200 41.2% 724,350 41.9% ========== ===== ======== ===== 9. REGULATORY MATTERS All depository institutions are required by law to maintain reserves on transaction accounts and nonpersonal time deposits in the form of cash balances at the Federal Reserve Bank. These reserve requirements can be offset by cash balances held at the Bank. At December 31, 1993, the Bank's cash balance was sufficient to offset the Federal Reserve requirement. The Bank is required by federal regulations to meet certain capital standards. The risk-based capital standard requires the Bank to achieve a minimum ratio of total capital to risk-weighted assets of 8% (of which at least 4% must contain Tier 1 capital, which consists primarily of common stock and retained earnings, less goodwill). At December 31, 1993, the Bank had risk- weighted and Tier 1 ratios of 20.8% and 19.6%, respectively. The Bank is also required to achieve a minimum leverage ratio of 4%, based on Tier 1 capital divided by average total assets. The leverage ratio operates in conjunction with the above risk-based capital guidelines. The Bank met both the risk-based capital standard and the minimum leverage ratio at December 31, 1993 and 1992, and management believes that the Bank will continue to meet all capital standards for 1994. At December 31, 1993, the Bank had a leverage ratio of 17.8%. 10. ACQUISITION The Bank entered into a definitive agreement in December 1993 with another financial institution pursuant to which the Bank will be purchased by the other financial institution. The definitive agreement requires the approval of the Bank's shareholders and the regulatory authorities. The financial statements have been prepared on a going concern basis, and therefore no adjustments have been made for the proposed acquisitions. 11. SUBSEQUENT EVENT In January 1994, the Greater Los Angeles area was seriously affected by a major earthquake and attendant aftershocks centered in the San Fernando Valley. Although the Bank's main operations and customers are not located in the most seriously affected areas, management has initiated, but not completed, efforts to evaluate the effect of the earthquake on the Bank's operations and customers. However, based on the Bank's evaluations to date, management believes the effects of the earthquake will not be material to the Bank. The Bank's facilities and other real estate owned suffered no significant damage as a result of the earthquake. * * * * * WESTERN INDUSTRIAL NATIONAL BANK AND SUBSIDIARY CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION MARCH 31, 1994 (unaudited) dollar amounts in thousands ASSETS EARNING ASSETS Federal funds sold $ 1,500 Interest-bearing deposits in other financial institutions 2,168 Investment securities - market value of $454 454 Loans, net 34,849 ---------- Total earning assets 38,971 Cash and due from banks 4,730 Premises and equipment, net 1,082 Real estate owned, net 445 Accrued interest receivable and other assets 262 ---------- TOTAL $ 45,490 ========== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits: Noninterest-bearing $ 14,542 Interest-bearing 22,249 ---------- 36,791 Accrued interest payable and other liabilities 123 ---------- 36,914 Stockholders' Equity: Common stock, $5 par value; 500,000 shares authorized; issued and outstanding; 374,134 shares 1,871 Additional paid-in capital 2,333 Retained earnings 4,372 ---------- Total shareholders' equity 8,576 ---------- TOTAL $ 45,490 ========== WESTERN INDUSTRIAL NATIONAL BANK CONSOLIDATED STATEMENTS OF INCOME (unaudited) dollar amounts in thousands, except per share For the Three Months Ended March 31, 1994 1993 INTEREST INCOME: Loans, including fees $ 859 $ 925 Investment securities 6 6 Federal funds sold 10 36 Deposits with other financial institutions 25 24 -------- ----- Total interest income 900 991 INTEREST EXPENSE ON DEPOSITS 135 176 ------- ----- NET INTEREST INCOME BEFORE PROVISION FOR CREDIT LOSSES 765 815 PROVISION FOR CREDIT LOSSES 190 75 ------ ----- NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 575 740 ------ ----- OTHER OPERATING INCOME Service charges and other fees 239 241 ------ ----- OTHER OPERATING EXPENSES: Salaries and related benefits 287 346 Occupancy 53 56 Data processing 81 64 Directors 27 32 FDIC assessments 20 23 Professional fees 33 26 Other 33 49 ------ ----- Total other operating expenses 534 596 ------ ----- INCOME BEFORE TAXES 280 385 INCOME TAXES 116 159 ------ ----- NET INCOME $ 164 $ 226 ====== ===== Earnings per common share $0.43 $0.59 ====== ===== WESTERN INDUSTRIAL NATIONAL BANK CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) dollar amounts in thousands For the Three Months Ended March 31, 1994 1993 CASH FLOWS FROM OPERATING ACTIVITIES: Interest received $ 891 $ 975 Service charges and other fees received 239 241 Interest paid (134) (176) Cash paid to suppliers and employees (543) (560) Income taxes paid (67) (7) --------- ------- 386 473 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from the maturity of investment securities 170 250 Purchase of investment securities (100) (250) Net decrease (increase) in interest- bearing deposits with other financial institutions 887 (1,079) Net decrease in loans 1,165 1,004 Net decrease (increase) in other assets (13) (42) ------- ------ 2,109 (117) CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in transaction deposits 210 1,076 Net increase (decrease) in time deposits 302 (535) ------- ------ 512 541 NET DECREASE IN CASH AND CASH EQUIVALENTS 3,007 897 CASH AND CASH EQUIVALENTS, beginning of year 3,223 9,515 ------- ------- CASH AND CASH EQUIVALENTS, March 31 $ 6,230 $ 10,412 ======= ======== WESTERN INDUSTRIAL NATIONAL BANK CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) dollar amounts in thousands For the Three Months Ended March 31, 1994 1993 RECONCILIATION OF NET EARNINGS TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net income $ 164 $ 226 Adjustments to reconcile net earnings to net cash provided by operating activities: Discount accretion (2) (2) Provision for credit losses 190 75 Accretion of deferred loan fees and costs (21) (21) Loan origination costs capitalized (8) (6) Depreciation and amortization 20 22 Change in accrued interest receivable 14 7 Change in other assets and liabilities 29 172 ------- ------ 222 247 ------- ------ $ 386 $ 473 ======= ====== (b) Pro Forma Financial Information. On June 24, 1994, the Company consummated the Agreement and Plan of Reorganization by and between CVB Financial Corp., Chino Valley Bank and Western Industrial National Bank. Index to Pro Forma Financial Information Page Pro Forma Condensed Balance Sheet March 31, 1994 28 Pro Forma Condensed Statements of Income Year Ended December 31, 1993 29 Pro Forma Condensed Statements of Income Three Month Ended March 31, 1994 30
PRO FORMA CONDENSED BALANCE SHEET MARCH 31, 1994 dollar amounts in thousands Company Western Adjustments Pro Forma ASSETS Investment securities held-to-maturity (market value of $9,915) $ 9,911 $ 0 $ 9,911 Investment securities available-for-sale (market values of $167,541 and $454) 167,541 454 167,995 Federal funds sold and interest-bearing deposits with other financial institutions 8,099 3,668 11,767 Loans and lease finance receivables, net 429,871 34,849 464,720 -------- -------- ---------- Total earning assets 615,422 38,971 654,393 Cash and due from banks 51,843 4,730 (14,547) 42,026 Premises and equipment, net 9,621 1,082 10,703 Other real estate owned, net 9,862 445 10,307 Goodwill 2,024 5,971 7,995 Other assets 11,289 262 11,551 -------- -------- ---------- ---------- $700,061 $ 45,490 $ (8,576) $ 736,975 ======== ======== ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits: Noninterest-bearing $220,716 $ 14,542 $235,258 Interest-bearing 408,324 22,249 430,573 -------- -------- -------- 629,040 36,791 665,831 Demand note issued to U.S. Treasury 6,444 0 6,444 Long-term capitalized lease 508 0 508 Other liabilities 3,943 123 4,066 -------- ------- -------- 639,935 36,914 676,849 Stockholders' Equity: Preferred stock (authorized 20,000,000 shares without par; none issued or outstanding) 0 0 0 Common stock (authorized, 50,000,000 shares without par; issued and outstanding 7,283,682 and 7,274,582) 20,683 4,204 (4,204) 20,683 Retained earnings 40,972 4,372 (4,372) 40,972 Net unrealized gains(losses) on investment securities available-for-sale (1,529) 0 (1,529) ------- ------ ------ -------- 60,126 8,576 (8,576) 60,126 -------- ------- ------- -------- $700,061 $45,490 $(8,576) $736,975 ======== ======= ======== ======== Adjustments: Purchase price Excess purchase price over asset value Elimination of Western capital accounts
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME December 31, 1993 dollar amounts in thousands, except per share Company Western Pro Forma Loans, including fees $ 37,036 $ 3,807 $40,843 Investment securities: Taxable 8,188 17 8,205 Tax-advantaged 131 9 140 -------- ------ ------- 8,319 26 8,345 Federal funds sold and interest bearing deposits with other financial institutions 455 232 687 -------- ------ -------- 45,810 4,065 49,875 Interest expense: Deposits 9,658 670 10,328 Other borrowings 220 0 220 -------- ----- ------- 9,878 670 10,548 --------- ----- ------- Net interest income 35,932 3,395 39,327 Provision for credit losses 1,720 330 2,050 --------- ----- ------- Net interest income after provision for credit losses 34,212 3,065 37,277 Other operating income: Service charges on deposit accounts 5,215 896 6,111 (Losses) Gains on sale of investment securities 3,721 0 3,721 Gains on sale of other real estate owned 6 0 6 Other 1,762 101 1,863 --------- ----- ------- 10,704 997 11,701 Other operating expenses: Salaries and employee benefits 14,439 1,292 15,731 Deposit insurance premiums 1,178 91 1,269 Occupancy 2,170 172 2,342 Equipment 1,527 53 1,580 Provision for losses on other real estate owned 2,830 0 2,830 Other 7,210 771 7,981 -------- ------ ------ 29,354 2,379 31,733 -------- ------ ------ Earnings before income taxes 15,562 1,683 17,245 Provision for income taxes 6,040 750 6,790 -------- ------ -------- Net earnings $ 9,522 $ 933 $ 10,455 ======== ====== ======== Earnings per common share $ 1.27 $ 2.45 $ 1.39 ======== ====== ======== Cash dividends per common share $ 0.29 $ 0.00 $ 0.29 ======== ====== ======== PRO FORMA CONSOLIDATED STATEMENTS OF INCOME For the three months ended March 31, 1994 dollar amounts in thousands, except per share Company Western Pro Forma Interest income: Loans, including fees $ 9,591 859 $ 10,450 Investment securities: Taxable 2,092 4 2,096 Tax-advantaged 72 2 74 -------- ------ ------- 2,164 6 2,170 Federal funds sold and interest bearing deposits with other financial institutions 85 35 120 -------- ----- ------- 11,840 900 12,740 Interest expense: Deposits 2,345 135 2,480 Other borrowings 71 0 71 ------- ----- ------- 2,416 135 2,551 ------- ----- ------- Net interest income 9,424 765 10,189 Provision for credit losses 50 190 240 ------- ----- ------- Net interest income after provision for credit losses 9,374 575 9,949 Other operating income: Service charges on deposit accounts 1,248 222 1,470 (Losses) Gains on sale of investment securities (128) 0 (128) Gains on sale of other real estate owned 5 0 5 Other 328 17 345 ------- ----- ------ 1,453 239 1,692 Other operating expenses: Salaries and employee benefits 3,576 287 3,863 Deposit insurance premiums 312 20 332 Occupancy 596 42 638 Equipment 458 11 469 Provision for losses on other real estate owned 200 0 200 Other 1,958 174 2,132 ------- ----- ------ 7,100 534 7,634 ------- ----- ------ Earnings before income taxes 3,727 280 4,007 Provision for income taxes 1,506 116 1,622 ------- ------- -------- Net earnings $ 2,221 $ 164 $ 2,385 ======= ======= ======== Earnings per common share $ 0.29 $ 0.43 $ 0.31 ======= ======= ======== Cash dividends per common share $ 0.08 $ 0.00 $ 0.08 ======= ======= ======== (c) Exhibits. Page 10.24 Agreement and Plan of Reorganization by and between CVB Financial Corp., Chino Valley Bank and Western Industrial National Bank, dated November 16, 1993. (Filed as Exhibit 10.24 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, Commission File Number 1-10394, which is incorporated * herein by this reference.) --- 10.24.1 Amendment No. 1 to Agreement and Plan of Reorganization by and between CVB Financial Corp., Chino Valley Bank and Western Industrial National Bank, dated 33 February 14, 1994. ---- 10.24.2 Amendment No. 2 to Agreement and Plan of Reorganization by and between CVB Financial Corp., Chino Valley Bank and Western Industrial National Bank, dated 35 June 23, 1994. ---- 37 23 Consent of Independent Auditors ---- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has dully caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CVB FINANCIAL CORP. ------------------- (Registrant) Date: July 8, 1994 /s/ Robert J. Schurheck ------------------------ Robert J. Schurheck Chief Financial Officer EXHIBIT 10.24.1 AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF REORGANIZATION By And Between CVB FINANCIAL CORP., CHINO VALLEY BANK And WESTERN INDUSTRIAL NATIONAL BANK February 14, 1994 This Amendment (the "Amendment") to the Agreement and Plan of Reorganization dated November 16, 1993 (the "Agreement") by and between CVB FINANCIAL CORP. ("CVB"), CHINO VALLEY BANK ("Chino Valley") and WESTERN INDUSTRIAL NATIONAL BANK ("Western") (collectively, the "Parties"), is made and entered into this 14th day of February, 1994 by and between the Parties. Terms not otherwise defined herein shall have the meaning ascribed to such terms in the Agreement. R E C I T A L S WHEREAS, the Agreement provides, among other things, for the acquisition by CVB of all of the outstanding shares of Western Stock and the merger of Chino Valley with and into Western with Chino Valley as the surviving entity; WHEREAS, the Parties have decided to amend certain of the terms of the Agreement. A G R E E M E N T NOW, THEREFORE, in consideration of the foregoing and other valuable consideration the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows: 1. Section 8.2(t) shall be amended to read in its entirety as follows: "As of the Determination Date and immediately prior to the Effective Time of the Consolidation and the Effective Time of the Merger, the Contingent Reserve shall equal that number which is equal to 20% of the principal amount of the Contingent Loans at the Effective Time of the Merger; provided, however, that such reserve shall not exceed $400,000." 2. Section 10.1(i) shall be amended to read in its entirety as follows: "Shareholder Non-Approval. By CVB and Chino Valley, at any time, if the approval of the shareholders of Western to all of the matters referred to in Section 6.7 is not obtained prior to April 10, 1994." 3. This Amendment may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each party hereto and delivered to each party hereto. IN WITNESS WHEREOF, the parties to this Amendment have duly executed this Amendment as of the day and year first above written. CVB FINANCIAL CORP. By /s/ D. Linn Wiley President and Chief Executive Officer ATTEST: /s/ Donna Marchesi Secretary CHINO VALLEY BANK By /s/ D. Linn Wiley President and Chief Executive Officer ATTEST: /s/ Donna Marchesi Secretary WESTERN INDUSTRIAL NATIONAL BANK By /s/ Thomas A. Walker President and Chief Executive Officer ATTEST: /s/ Noel Castellon Secretary EXHIBIT 10.24.2 AMENDMENT NO. 2 TO AGREEMENT AND PLAN OF REORGANIZATION By And Between CVB FINANCIAL CORP., CHINO VALLEY BANK And WESTERN INDUSTRIAL NATIONAL BANK June 23, 1994 This Amendment (the "Amendment") to the Agreement and Plan of Reorganization dated November 16, 1993 (the "Agreement") by and between CVB FINANCIAL CORP. ("CVB"), CHINO VALLEY BANK ("Chino Valley") and WESTERN INDUSTRIAL NATIONAL BANK ("Western") (collectively, the "Parties"), is made and entered into this 23rd day of June, 1994 by and between the Parties. Terms not otherwise defined herein shall have the meaning ascribed to such terms in the Agreement. R E C I T A L S WHEREAS, the definition of "Contingent Reserve", provides that such reserve shall be equal to 20% of the principal amount of the Contingent Loans; provided, however, that the amount of the reserve shall not exceed $400,000; WHEREAS, certain of the Contingent Loans have been paid in full and are no longer outstanding (the "Extinguished Loans"); WHEREAS, the Parties have agreed to change the composition of the Contingent Reserve by substituting certain loans of Western outstanding as of the date hereof for the Extinguished Loans; WHEREAS, in connection with the aforementioned change to the Contingent Reserve, the Parties have decided to amend certain provisions of the Agreement. A G R E E M E N T NOW, THEREFORE, in consideration of the foregoing and other valuable consideration the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows: 1. The definition of "Contingent Reserve" set forth in Article I of the Agreement is amended in its entirety as follows: "'Contingent Reserve' shall mean a special loan loss reserve established by Western with respect to the Contingent Loans which shall equal $400,000." 1.A. Section 8.2(t) is amended in its entirety as follows: "As of the Determination Date and immediately prior to the Effective Time of the Consolidation and the Effective Time of the Merger, the Contingent Reserve shall equal $400,000." 2. The definition of "Contingent Loans" set forth in Article I of the Agreement is amended in its entirety as follows: "'Contingent Loans' shall mean the loans of Western described on Schedule 1.1(A)." 3. This Amendment may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each party hereto and delivered to each party hereto. IN WITNESS WHEREOF, the parties to this Amendment have duly executed this Amendment as of the day and year first above written. CVB FINANCIAL CORP. By /s/ D. Linn Wiley President and Chief Executive Officer ATTEST: /s/ Donna Marchesi Secretary CHINO VALLEY BANK By /s/ D. Linn Wiley President and Chief Executive Officer ATTEST: /s/ Donna Marchesi Secretary WESTERN INDUSTRIAL NATIONAL BANK By /s/ Thomas A. Walker President and Chief Executive Officer ATTEST: /s/ Noel Castellon Secretary EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in the 1981 Stock Option Plan Registration Statement No. 2-76121 on Form S-8, the 1991 Stock Option Plan Registration Statement No. 33-41318 on Form S-8 and the Key Employee Stock Grant Plan Registration Statment No. 33-50442 on Form S-8 of CVB Financial Corp. of our report dated January 17, 1994 on the Annual Report of Western Industrial National Bank, appearing on page 4 in this current Report on Form 8-K of CVB Financial Corp. /s/ Deloitte & Touche - - --------------------- Deloitte & Touche Los Angeles, California July 8, 1994 -----END PRIVACY-ENHANCED MESSAGE-----