-----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, VCToJXVZY815gnBYYq3hpuwuf0Y2BGl1V0YqIWgvvYNo5iW7/3WHy+BZlTBkWcQn mVsn7Nx0+tDhxa3GeqUsgA== 0000940401-96-000018.txt : 19961118 0000940401-96-000018.hdr.sgml : 19961118 ACCESSION NUMBER: 0000940401-96-000018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BAY AREA BANCSHARES CENTRAL INDEX KEY: 0000701153 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 942779021 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 002-76003 FILM NUMBER: 96665191 BUSINESS ADDRESS: STREET 1: 900 VETERANS BLVD CITY: REDWOOD CITY STATE: CA ZIP: 94063 BUSINESS PHONE: 4153671600 MAIL ADDRESS: STREET 1: 900 VETERANS BLVD CITY: REDWOOD CITY STATE: CA ZIP: 94063 FORMER COMPANY: FORMER CONFORMED NAME: AREA FINANCIAL CORP DATE OF NAME CHANGE: 19890612 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED September 30, 1996 Commission File Number 2-76003 BAY AREA BANCSHARES California #94-2779021 900 Veterans Blvd., Redwood City, CA 94063 Telephone (415) 367-1600 The registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act during the preceding 12 months, and x Yes No (2) has been subject to such filing requirements for the past 90 days. x Yes No 837,138 Shares of Common Stock Outstanding as of September 30, 1996 Part 1 Item 1 BAY AREA BANCSHARES & SUBSIDIARIES CONSOLIDATED BALANCE SHEET (UNAUDITED, IN THOUSANDS)
ASSETS 9/30/96 12/31/95 Cash and due from banks $11,948 $8,276 Federal Funds Sold 9,000 9,800 ________ _______ Cash and cash equivalents 20,948 18,076 Time deposits with other financial institutions 100 103 Investment securities available for sale (market value approximates book value) 2,585 3,111 Investment securities held to maturity (market value of $12,067 in 1996 and $10,269 in 1995) 11,886 10,133 Loans, net of reserve for possible loan losses of $1,447 in 1996 and $1,516 in 1995 64,185 59,209 Loans held for sale 976 772 Premises and equipment, net 800 948 Real estate owned 100 0 Interest receivable and other assets 2,626 1,463 ________ ________ Total assets $104,206 $93,815 LIABILITIES AND SHAREHOLDERS' EQUITY - - Deposits Demand $27,339 $22,998 Interest-bearing transaction 42,540 40,480 Savings 5,285 4,376 Time 18,744 16,125 ________ ________ Total Deposits 93,908 83,979 Interest payable and other liabilities 1,316 758 Federal funds purchased 0 1,000 Federal Home Loan Bank advances 0 0 _________ ________ Total liabilities 95,224 85,737 _________ Shareholders' equity: Preferred stock, $10 stated value; 6% Series A, convertible and redeemable: Authorized - 10,000,000 shares; issued & outstanding- none in 1996 and 1,000 in 1995 0 10 Common stock, no par value: Authorized - 20,000,000 shares; issued & 4,125 4,053 outstanding- 837,138 in 1996 and 821,829 in 1995 Unrealized (loss) gain on securities held for sale (7) 10 Retained earnings 4,864 4,005 ________ _______ Total shareholders' equity 8,982 8,078 _________ ________ Total liabilities and shareholders' equity $104,206 $93,815 _________ ________
(1) Part 1 Item 1 BAY AREA BANCSHARES & SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED, IN THOUSANDS)
Three Months Three Months Ended Ended 9/30/96 9/30/95 _____________ _____________ Interest Income: Interest and fees on loans $1,815 $1,584 Interest on investment securities 211 171 Interest on federal funds sold 123 171 Interest on time deposits with other financial 1 2 institutions _______________ _______________ Total Interest Income 2,150 1,928 Interest Expense: _______________ ________________ Interest on interest-bearing transaction amounts 338 328 Interest on savings deposits 55 51 Interest on time deposits 251 206 Interest on short-term borrowing 7 0 Interest on notes payable and redeemable 0 0 debentures ________________ ________________ Total Interest Expense 651 585 Net interest income 1,499 1,343 Provision for possible loan losses 150 15 ________________ ________________ Net interest income after provision for 1,349 1,328 possible loan losses Noninterest income: ________________ _________________ Service charges on deposit accounts 56 64 Net loss on sales of securities 0 (16) Net gain on disposal of assets 0 8 Net gain on sale of loans held for sale 56 133 Other Mortgage Banking Revenue 26 51 ATM network revenue 532 437 Other 32 43 _______________ _________________ Total noninterest income 702 720 Noninterest expense: _______________ _________________ Salaries and related benefits 635 685 Occupancy 95 93 Equipment 139 137 Professional fees 65 74 Stationery and supplies 26 31 Other 457 399 ________________ ________________ Total noninterest expense 1,417 1,419 ________________ ________________ Income before provision for income taxes 634 629 Provision for income taxes 261 266 ________________ ________________ Net Income $373 $363 ________________ ________________ Earnings per share: Average common and equivalent shares outstanding- 940,000 878,000 Primary ________________ ________________ Average common and equivalent shares outstanding- 940,000 919,000 Fully Diluted ________________ _________________ Primary Net income per share $0.40 $0.41 ________________ _________________ Fully Diluted Net income per share $0.40 $0.39 ________________ _________________
(2) Part 1 Item 1 BAY AREA BANCSHARES & SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED, IN THOUSANDS)
Nine Months Nine Months Ended Ended 9/30/96 9/30/95 _____________ ______________ Interest Income: Interest and fees on loans $5,429 4,662 Interest on investment securities 611 464 Interest on federal funds sold 229 389 Interest on time deposits with other financial 4 5 institutions _______ Total Interest Income 6,273 5,520 Interest Expense: ______ ______ Interest on interest-bearing transaction amounts 982 919 Interest on savings deposits 167 154 Interest on time deposits 715 545 Interest on short-term borrowing 16 0 Interest on notes payable and redeemable 0 0 debentures Total Interest Expense 1,880 1,618 ______ ______ Net interest income 4,393 3,902 Provision for possible loan losses 385 95 _______ _______ Net interest income after provision for 4,008 3,807 possible loan losses Noninterest income: _______ ________ Service charges on deposit accounts 162 196 Net loss on sales of securities 0 (16) Net gain on disposal of assets 2 7 Net gain on sale of loans held for sale 364 368 Other Mortgage Banking Revenue 118 154 ATM network revenue 1,374 1,124 Other 107 101 ______ _______ Total noninterest income 2,127 1,934 Noninterest expense: _______ ________ Salaries and related benefits 2,004 1,963 Occupancy 290 281 Equipment 407 422 Professional fees 178 183 Stationery and supplies 90 107 Other 1,343 1,233 ________ _________ Total noninterest expense 4,312 4,189 _________ __________ Income before provision for income taxes 1,823 1,552 Provision for income taxes 761 646 _________ __________ Net Income $1,062 $906 __________ __________ Earnings per share: Average common and equivalent shares outstanding- 940,000 878,000 Primary _________ ____________ Average common and equivalent shares outstanding- 940,000 919,000 Fully Diluted ________ _________ Primary Net income per share $1.13 $1.03 _________ __________ Fully Diluted Net income per share $1.13 $0.99 _________ __________
(3) Part 1 Item 1 BAY AREA BANCSHARES CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED, IN THOUSANDS)
Nine Months Nine Months Ended Ended 9/30/96 9/30/95 ___________ ___________ Cash flows from operating activities: Net Income $1,062 $906 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of premises and equipment 336 319 Provision for possible loan losses 385 95 Net gain loss on sale of assets (2) (7) Funding of loans held for sale (11,192) (11,746) Proceeds from the sale of loans held for sale 11,020 10,554 Net gain on sale of loans held for sale (376) (368) Net loss on sale of investment securities 0 16 Net ammortization and accretion of investment premiums and discounts 50 35 Net decrease in interest receivable and other assets (1,163) (70) Net increase in interest payable and other liabilities 558 259 Net increase (decrease) in deferred loan fees 35 (37) __________ _______________ Total adjustments (349) (950) __________ _______________ Net cash provided by (used in) operating 713 (44) activities Cash flows from investing activities: Net decrease in time deposits with other financial institutions 3 95 Proceeds from sale of investment securities 0 0 Proceeds from the maturity of investment securities held to maturity 1,755 2,054 Mortgage backed securities principal payments 899 216 Purchase of investment securities held to maturity (3,952) (3,595) Purchase of investment securities held for sale 0 (499) Net (increase) decrease in gross loans (4,976) 1,653 Proceeds from the sale of Real Estate Owned 0 0 Capital expenditures (188) (275) ____________ __________ Net cash (used in) provided by investing activities (6,459) (351) Cash flows from financing activities: Net increase in demand deposits,transaction and savings 7,310 9,948 Net increase in time deposits 2,619 2,024 Repayment of Federal Funds Purchased (1,000) 0 Net proceeds of Federal Home Loan Bank advances 0 0 Proceeds from stock warrants and options exercised 62 51 Cash Dividends paid (134) (118) ______________ ____________ Net cash provided by financing activities 8,857 11,905 ______________ ____________ Net increase in cash and cash equivalents 3,111 11,510 Cash and cash equivalents,beginning of period 18,076 14,761 ______________ ___________ Cash and cash equivalents,end of period $21,187 $26,271 _____________ ___________
There were $136 and $0 in loans transferred to Real Estate Owned in 1996 and 1995 respectively. (4) BAY AREA BANCSHARES & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS All adjustments, which in the opinion of management are necessary for a fair statement of the Company's financial condition at September 30, 1996, results of operations for the three and six month periods ended September 30, 1996 and the statement of cash flows for the nine month period ended September 30, 1996 have been included. These adjustments are of a normal and recurring nature. The results of operations and statement of cash flows are not necessarily indicative of the results for a full year's activity. The accompanying unaudited financial statements have been prepared on a basis consistent with the accounting principles and policies reflected in the Company's Annual Report for the year ended December 31, 1995. All references to the "Bank" are in reference to the Company's sole, and wholly owned, subsidiary Bay Area Bank. (5) BAY AREA BANCSHARES & SUBSIDIARIES ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations Item 2A Financial Condition Liquidity Liquid assets (Cash, Federal Funds Sold, Time Deposits with other Financial Institutions and Investments) increased $4.1 million or 13% to $35.5 million over the nine month period from December 31, 1995 to September 30, 1996. At year-end, total liquid assets as a percentage of total assets was 33.5% whereas on September 30, 1996 it had increased to 34.1%. The increase in percentage of liquid assets to total assets was tempered by an increase of $10.4 million or 11.1% in total assets. Cash & due from banks increased $3.7 million over the first nine months of 1996 to $11.9 million at September 30, 1996. During the first nine months of 1996 cash and due from banks averaged $10.5 million. The portion of the total cash & due from banks representing ATM ("Automatic Teller Machine") network cash inventory has averaged approximately $3.3 million during 1996 and at September 30, 1996 ATM cash was approximately $3.5 million . At December 31, 1995, there was approximately $2.7 in ATM network cash inventory. This increase in ATM cash can be attributed to an 10% (approximate) increase in the number of ATM machines since year end to 59 machines and a seasonal cash increase during the summer months in which peak demand occurs. The increase in total liquid assets, during the first nine months of 1996, was a result of an increase in deposits of $9.9 million or 11.9% offset in part by anincrease in total net loans outstanding (including loans held for sale) of $5.2million (8.6%) to $65.2 million at September 30, 1996. Deposits have averaged $87.1 million thus far in 1996 while they averaged $74.6 million during the first nine months of 1995. Gross loans outstanding have averaged $65.9 million thus far in 1996 as compared to $53.6 million averaged in the first nine months of 1995. Management believes current liquid assets and current available credit lines are adequate to cover the working capital requirements of the Company and any reasonable needs arising from deposit withdrawals. Capital Consolidated equity capital plus reserves increased $835,000 in the first nine months of 1996 from $9.6 million or 10.06% of total gross assets at December 31, 1995 to $10.4 million or 9.87% of total gross assets at September 30, 1996. Bank capital plus reserves totaled $10.4 million on September 30, 1996 or 9.85% of total adjusted assets as compared to capital plus reserves of $9.6 million or 10.03% of total adjusted assets at December 31, 1995. At September 30, 1996 the Bank maintained a tier one capital ratio of 12.30% and a tier two capital ratio of 13.55% as compared to a tier one capital ratio of 12.44% and a tier two capital ratio of 13.69% at December 31, 1995. The decrease in the percentage is due to the increase in total assets during the period, offset in part by an increase in retained earnings. (6) The Bank's capital level continues to exceed State and Federal Deposit Insurance Corporation requirements and satisfies the Federal Reserve Board's current risk-based capital Guidelines. The Bank has declared $175,000 in dividends to the Parent company in the first nine months of 1996 and the Company also declared cash dividends to common shareholders of $.08 per share in each of March, June and September of 1996. The third quarter dividend represents twenty consecutive quarterly cash dividends declared by the Parent company to shareholders. Item 2B Results of Operations Results of Operations Consolidated operating profits were $373,000 ($.40 per fully diluted share vs. $.39 in the prior year) for the third quarter of 1996, the highest third quarter in the company's history. This represents a $10,000 or 2.8% increase over the third quarter of 1995. Consolidated operating profits were $1,062,000 ($1.13 per fully diluted share vs. $.99 in the prior year) for the first nine months of 1996, the highest first nine months in the company's history. This represents a $156,000 or 17% increase over the first nine months of 1995. The increase in third quarter earnings in 1996 versus the third quarter of 1995 is comprised of: an increase in net interest income of $156,000, a decrease in noninterest expense of $2,000; offset in part by a decrease in non interest income of $18,000 and an increase in loan loss provisions of $135,000. The increase in earnings in the first nine months of 1996 versus the first nine of 1995 is a result of an increase in pretax earnings of $271,000 comprised of: an increase in net interest income of $491,000, an increase in non interest income of $193,000; offset in part by a an increase in noninterest expense of $123,000 and an increase in loan loss provisions of $290,000. The growth in net interest income of 11.6% in the third quarter of 1996 as compared to the third quarter of 1995 is primarily a result of growth in total earning assets throughout 1996, offset in part by a decrease in net interest margin. Average earning assets in the first nine months of 1996 were $85.4 million, a $12.2 million or 16.7% increase over the first nine months of 1995 when earning assets averaged $73.1 million. The $156,000 increase in net interest margin for the third quarter of 1996, as compared to the 3rd quarter of 1995, was comprised of a $222,000 increase in interest income offset in part by a $66,000 increase in interest expense. Year to date net interest income to total average earning assets (net interest margin) has been 6.86% in the first nine months of 1996 as compared to 7.11% in the first nine months of 1995. The interest margin compression has been primarily caused by increasing competition for quality loans and the resulting pricing concessions the Bank has made to grow the loan portfolio in this competitive environment. (7) The increase in loan loss provisions in 1996 as compared to 1995 is primarily a result of loan growth of $5.2 million or 8.6%, an increase in nonperforming assets and an increase in loan charge-offs. Non performing assets (consisting entirely of nonaccrual loans) at September 30, 1996 were $1.0 million or 1.54% of total gross loans and 70% of loan loss reserves. Non performing assets at December 31, 1995 were $495,000 or .81% of total gross loans and 33% of loan loss reserves. Loans charged off during the first nine months of 1996 have totaled $467,000 as compared to $167,000 during the first nine months of 1995. Loan loss reserves of $1.48 million at September 30, 1996 represent a ratio of 2.16% of gross loans outstanding as compared to a loan loss reserve of $1.52 million or 2.47% of gross loans at December 31, 1995. The increase in nonperforming assets and loan charge-offs in the first nine months of 1996 is primarily attributable to $837,000 in lease receivables and notes reclassified as nonperforming assets during March of 1996. In September of 1996, $313,000 (67% of 1996 charge-offs to date) of these assets were charged against the Company's allowance for loan loss reserve. These assets are collateralized by approximately 150 lease receivables purchased in 1994 from Bennett Group Funding Inc. ("Bennett"), which declared chapter 11 bankruptcy in March of 1996. The Company continues to vigorously seek collection of these funds. While the Bank's management believes that the Bank will ultimately prevail in this case, it reclassified all Bennett assets to nonperforming status and charged off a portion of such assets, given the potential protracted nature of such litigation and the potential for recovery of less than the full face amount of the receivables. While the Bank is not currently receiving any payments with respect to these assets, it has been informed by the bankruptcy trustee that as of September 30, 1996, approximately 70% of the underlying assets which support the Bank's notes and receivables from Bennett were current, 5% were less than 30 days delinquent, 10% were 30 to 90 days delinquent and 15% were greater than 91 days delinquent. The payments are being held by order of the bankruptcy court in an escrow account. However, the Bank does not know whether or when it will ultimately be able to recover the underlying assets, and whether such assets will continue to have value. Non interest expense is up 2.9% thus far in 1996 but was down slightly in the third quarter as compared to the prior year. The decrease in noninterest income of $18,000 in the third quarter was primarily a result of the Bank's mortgage department. The Bank's Electronic Funds Transfer (EFT) department operates approximately 60 ATM's throughout the state. The Bank's ATM revenues were up $95,000 or 21.7%, to $532,000 in the third quarter, and were up $250,000 or 22%, to $1,374,000, for the first nine months of 1996. The department has contributed $158,000 to pretax profits in 1996 as compared to $101,000 in the first nine months of 1995. The Bank's mortgage department revenues for the first nine months of 1996 totaled $747,000 (which includes $252,000 in interest income) as compared to $719,000 (including $152,000 in interest income) in the first nine months of 1995. Revenues in the third quarter of 1996 were $160,000 as compared to $236,000 in the third quarter of 1995 primarily as a result of a management transition in the department. Part 2, Item 4 (a) The 1996 Annual Meeting of the Shareholders of the Registrant was held on May 21, 1996. (b) The following table shows the votes for, against or withheld, and the broker nonvotes as to each candidate for director. Each candidate was elected.
Name Votes For Votes Against or Withheld Broker Nonvotes Mario A. Biagi 488,458 33,307 0 John O. Brooks 521,765 0 0 Gary S. Goss 521,205 560 0 Robert R. Haight 487,898 33,867 0 Stanley A. Kangas 521,765 0 0 David J. MacDonald 487,619 34,146 0 Thorwald A. Madsen 521,765 0 0 Dennis W. Roger 521,765 0 0
(8) ITEM 6 (a) Exhibits. 3.1 Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.1 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1988). 3.2 Amendment to Restated Articles of Incorporation (incorporated by reference to Exhibit 3.2 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989). 3.3 Bylaws of the Company, as amended (incorporated by reference to Exhibit 3.2 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1987). 3.4 Amendment to Bylaws of Company (incorporated by reference to Exhibit 3.3 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1987). 27 Financial Data Schedule (filed herewith) 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. BAY AREA BANCSHARES Registrant Dated: November 12, 1996 /s/Robert R. Haight - ---------------------------------------- Robert R. Haight President and Chief Executive Officer /s/Anthony J. Gould - ---------------------------------------- Anthony J. Gould Chief Accounting Officer (9) EX-27 2 FDS--
9 This schedule contains summary financial information extracted from the Balance Sheet, and Statement of Income, and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS DEC-31-1996 SEP-30-1996 11,948 100 9,000 0 2,585 11,886 11,967 65,161 1,447 104,206 93,908 0 1,316 0 0 0 4,125 4,857 104,206 5,429 611 233 6,273 1,864 1,880 4,393 385 0 4,312 1,823 1,823 0 0 1,062 $1.13 $1.13 6.86 1,005 8 0 0 1,447 467 13 1,447 1,447 0 0
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