0000898430-95-001625.txt : 19950821 0000898430-95-001625.hdr.sgml : 19950821 ACCESSION NUMBER: 0000898430-95-001625 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 DATE AS OF CHANGE: 19950818 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALIFORNIA COMMERCIAL BANKSHARES CENTRAL INDEX KEY: 0000704886 STANDARD INDUSTRIAL CLASSIFICATION: 6022 IRS NUMBER: 953819471 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 002-78788 FILM NUMBER: 95564399 BUSINESS ADDRESS: STREET 1: 4100 NEWPORT PLACE CITY: NEWPORT BEACH STATE: CA ZIP: 92660 BUSINESS PHONE: 7148632300 MAIL ADDRESS: STREET 1: 4100 NEWPORT PLACE CITY: NEWPORT BEACH STATE: CA ZIP: 92660 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------------------------------------------------------------- FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934. FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995 ----------------- COMMISSION FILE NUMBER 2-78788 ----------- CALIFORNIA COMMERCIAL BANKSHARES -------------------------------------------------------------------------------- CALIFORNIA 95-3819471 -------------------------------------------------------------------------------- (STATE OF OTHER JURISDICTION OF (IRS EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) 4100 NEWPORT PLACE, NEWPORT BEACH, CA 92660 -------------------------------------------------------------------------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) REGISTRANT'S TELEPHONE NUMBER (714) 863-2300 ------------------- -------------------------------------------------------------------------------- FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR IF CHANGED FROM LAST REPORT INDICATE BY CHECK (X) WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OF 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 CORPORATE ISSUERS: INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE 2,425,000. ------------- 1 CALIFORNIA COMMERCIAL BANKSHARES INDEX PART 1. FINANCIAL INFORMATION _________________________________________________________________ ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED CONDENSED STATEMENTS OF INCOME FOR THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1995 AND 1994. CONSOLIDATED CONDENSED BALANCE SHEETS JUNE 30, 1995 AND DECEMBER 31, 1994. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, JUNE 30, 1995. ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 2 CALIFORNIA COMMERCIAL BANKSHARES AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (000'S OMITTED) (UNAUDITED)
SIX MONTHS ENDED THREE MONTHS ENDED JUNE 30 JUNE 30 1995 1994 1995 1994 INTEREST AND FEE INCOME: LOANS AND LEASES 10,219 8,941 5,151 4,541 INVESTMENT SECURITIES 1,539 1,759 729 1,027 FEDERAL FUNDS SOLD 419 262 341 142 ------ ------ ----- ----- TOTAL INTEREST AND FEE INCOME 12,177 10,962 6,221 5,710 INTEREST EXPENSE: DEPOSITS 3,360 2,981 1,734 1,525 SECURITIES SOLD UNDER AGREEMENT TO REPURCHASE 8 2 0 2 NOTE PAYABLE 95 108 52 51 ------ ------ ----- ----- TOTAL INTEREST EXPENSE 3,463 3,091 1,786 1,578 NET INTEREST INCOME 8,714 7,871 4,435 4,132 PROVISION FOR LOAN / LEASE LOSSES 1,000 1,620 225 1,020 NET INTEREST INCOME AFTER PROVISION FOR LOAN / LEASE LOSSES 7,714 6,251 4,210 3,112 OTHER INCOME: ESCROW FEES 86 186 59 91 SERVICE CHARGES 476 464 223 225 SECURITIES GAINS (72) 0 0 0 OTHER INCOME 449 382 248 197 ------ ------ ----- ----- TOTAL OTHER INCOME 939 1,032 530 513 OTHER EXPENSES: SALARIES AND EMPLOYEE BENEFITS 3,703 3,369 1,875 1,619 OCCUPANCY, FURNITURE AND EQUIPMENT 1,031 970 508 489 DATA PROCESSING 139 144 68 66 SUPPLIES 168 126 74 63 LEGAL FEES 494 311 376 156 REGULATORY ASSESSMENTS 415 496 207 265 LOSSES (GAIN) ON OREO 861 588 649 442 OTHER 1,139 950 631 499 ------ ------ ----- ----- TOTAL OTHER EXPENSES 7,950 6,954 4,388 3,599 INCOME BEFORE INCOME TAXES 703 329 352 26 INCOME TAXES 280 115 139 13 NET INCOME 423 214 213 13 EARNINGS PER COMMON SHARE $0.17 $0.08 $0.09 $ 0.01
3 CALIFORNIA COMMERCIAL BANKSHARES CONSOLIDATED CONDENSED BALANCE SHEETS (000'S OMITTED) ASSETS
JUNE 30 DECEMBER 31 1995 1994 -------- ----------- CASH AND DUE FROM BANKS NON INTEREST BEARING $ 22,894 $ 21,069 INTEREST BEARING 25 246 INVESTMENT SECURITIES - AVAILABLE FOR SALE 61,436 72,075 FEDERAL FUNDS SOLD 30,000 2,000 LOANS, NET OF UNEARNED INTEREST: COMMERCIAL 74,101 82,600 REAL ESTATE - CONSTRUCTION 33,187 29,792 REAL ESTATE - EQUITY LINE 7,768 8,691 REAL ESTATE - MORTGAGE 68,361 66,102 INSTALLMENT AND OTHER 12,801 10,845 LEASE CONTRACTS RECEIVABLE 3,484 3,6152 -------- -------- 199,702 201,645 LESS: DEFERRED LOAN FEES & COSTS (949) (782) -------- -------- 198,753 200,863 LESS: RESERVE FOR LOAN LOSS (4,999) (5,660) -------- -------- TOTAL LOANS, NET 193,754 195,203 -------- -------- REAL ESTATE OWNED 5,868 2,676 BANK PREMISES, FURNITURE & EQUIPMENT 1,064 988 ACCRUED INTEREST RECEIVABLE 2,718 2,846 DEFERRED INCOME TAXES 1,400 1,400 PREPAID EXPENSES AND OTHER ASSETS 1,907 2,162 -------- -------- TOTAL ASSETS $321,066 $300,665 ======== ======== LIABILITIES AND SHAREHOLDERS EQUITY DEPOSITS: DEMAND DEPOSIT NON INTEREST BEARING $108,979 $ 98,733 INTEREST BEARING 79,288 79,695 SAVINGS DEPOSITS 44,605 40,504 TIME CERTIFICATES $100,000 AND OVER 31,060 28,896 OTHER TIME DEPOSITS 31,550 29,561 -------- -------- TOTAL DEPOSITS 295,482 277,389 NOTE PAYABLE 2,351 2,351 INTEREST PAYABLE 175 149 OTHER LIABILITIES 1,715 1,048 SHAREHOLDERS EQUITY: CAPITAL STOCK - AUTHORIZED 10,000,000 SHARES; ISSUED AND OUTSTANDING 2,423,000 IN 1993 AND 1994 10,790 10,782 PAID IN CAPITAL 475 475 RETAINED EARNINGS 10,213 9,789 UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES AVAILABLE FOR SALE (NET OF TAX) (135) (1,318) -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 321,066 300,665 ======== ========
4 CALIFORNIA COMMERCIAL BANKSHARES CONSOLIDATED STATEMENT OF CASH FLOW FOR THE SIX MONTHS ENDED JUNE 30 (000'S OMITTED) (UNAUDITED)
1995 1994 ------ ------ CASH FLOWS FROM OPERATING ACTIVITIES: NET INCOME 423 214 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: DEPRECIATION AND AMORTIZATION 251 301 NET AMORT. OF SECURITY DISCOUNTS AND PREMIUMS 402 412 PROVISION FOR LOAN AND LEASE LOSSES 1,000 1,620 PROVISION FOR LOSSES ON OTHER REAL ESTATE OWNED 118 223 LOSS (GAIN) ON SALE OF PROPERTY (12) LOSS (GAIN) ON SALE OF OTHER REAL ESTATE OWNED 163 180 DECREASE (INCREASE) IN ACCRUED INTEREST RECEIVABLE 128 (265) DECREASE (INCREASE) IN OTHER ASSETS (381) (293) NET INCREASE (DECREASE) IN INTEREST AND ACCRUED COMPENSATION PAYABLE, AND OTHER LIABILITIES 692 (221) ------- ------- TOTAL ADJUSTMENTS 2,373 1,945 ------- ------- NET CASH PROVIDED BY OPERATING ACTIVITIES 2,796 2,159 CASH FLOWS FROM INVESTING ACTIVITIES: PROCEEDS FROM MATURITY OF INVESTMENT SECURITIES 4,084 18,404 PURCHASE OF INVESTMENT SECURITIES (13,114) (62,304) PROCEEDS FROM SALE OF INVESTMENT SECURITIES 21,088 19,978 NET (INCREASE) DECREASE IN LOANS AND LEASES (4,046) 12,365 INCREASE / (DECREASE) IN DEFERRED LOAN FEES 166 (114) INCREASE / (DECREASE) IN UNEARNED LEASE INCOME (51) 12 RECOVERIES OF LOANS AND LEASES CHARGED OFF 137 439 PURCHASES OF PROPERTY (331) (142) PROCEEDS FROM SALE OF PROPERTY 4 19 PROCEEDS FROM SALE OF OTHER REAL ESTATE OWNED 770 2,321 ADDITIONS TO REAL ESTATE OWNED (80) ------- ------- NET CASH USED IN INVESTING ACTIVITIES 8,707 (9,102) CASH FLOWS FROM FINANCING ACTIVITIES: NET INCREASE / (DECREASE) IN DEPOSITS 18,093 9,997 INCREASE / (DECREASE) IN SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE PROCEEDS FROM EXERCISE OF COMMON STOCK OPTIONS 8 ------- ------- NET CASH PROVIDED BY FINANCING ACTIVITIES 18,101 9,997 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 29,604 3,054 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 23,315 26,781 ------- ------- CASH AND CASH EQUIVALENTS ON JUNE 30, 1994 52,919 29,835 ======= =======
5 CALIFORNIA COMMERCIAL BANKSHARES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS: ----------------------------------------------------- NOTE 1 - BASIS OF PRESENTATION THE ACCOMPANYING UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS HAVE BEEN PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES FOR INTERIM FINANCIAL INFORMATION AND WITH THE INSTRUCTIONS TO FORM 10-Q AND RULE 10-01 OF REGULATION S-X. ACCORDINGLY, THEY DO NOT INCLUDE ALL OF THE INFORMATION AND FOOTNOTES REQUIRED BY GENERALLY ACCEPTED ACCOUNTING PRINCIPLES FOR COMPLETE FINANCIAL STATEMENTS. IN THE OPINION OF MANAGEMENT, ALL ADJUSTMENTS (CONSISTING OF NORMAL RECURRING ACCRUALS) CONSIDERED NECESSARY FOR A FAIR PRESENTATION HAVE BEEN INCLUDED. OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 1995 ARE NOT NECESSARILY INDICATIVE OF THE RESULTS THAT MAY BE EXPECTED FOR THE YEAR ENDED DECEMBER 31, 1995. NOTE 2 - EARNINGS PER SHARE WERE COMPUTED BASED ON THE FOLLOWING WEIGHTED AVERAGE OUTSTANDING SHARES: SIX MONTHS ENDED JUNE 30, 1995..........2,459,000 SIX MONTHS ENDED JUNE 30, 1994..........2,423,000 6 CALIFORNIA COMMERCIAL BANKSHARES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS. THE PURPOSE OF THIS DISCUSSION IS TO PROVIDE ADDITIONAL INFORMATION ABOUT THE COMPANY'S FINANCIAL CONDITION AND RESULTS OF OPERATIONS WHICH IS NOT OTHERWISE APPARENT FROM THE CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN THIS INTERIM REPORT. SINCE THE BANKING SUBSIDIARY REPRESENTS MOST OF THE COMPANY'S ACTIVITY AND INVESTMENT, THE FOLLOWING DISCUSSION RELATES PRIMARILY TO THE FINANCIAL CONDITION AND OPERATIONS OF THE BANK. IT SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY AND THE NOTES THERETO. THE FOLLOWING CHART SHOWS COMPARATIVE DATA FOR SELECTED ITEMS OF THE FINANCIAL STATEMENTS: AVERAGES FOR THE THREE MONTHS ENDED
PERCENT JUNE 30 JUNE 30 INCREASE/ 1995 1994 (DECREASE) -------- -------- ---------- (IN THOUSANDS) TOTAL ASSETS: $300,452 $326,225 ( 7.90) INVESTMENT SECURITIES: 52,717 82,382 (36.01) FED FUNDS SOLD: 23,178 15,356 50.94 GROSS LOANS: 200,359 201,687 ( 1.10) TOTAL DEPOSITS: 274,629 300,153 ( 8.50) INTEREST BEARING DEPOSITS 180,263 197,674 ( 8.81) OTHER INTEREST BEARING LIABILITIES: 2,351 2,463 ( 4.55)
AVERAGES FOR THE SIX MONTHS ENDED
PERCENT JUNE 30 JUNE 30 INCREASE/ (IN THOUSANDS) 1995 1994 (DECREASE) ------- ------- ---------- TOTAL ASSETS: $296,979 $320,942 ( 7.47) INVESTMENT SECURITIES: 56,992 73,014 (21.94) FED FUNDS SOLD: 14,359 16,343 (12.14) GROSS LOANS: 201,218 206,032 ( 2.34) TOTAL DEPOSITS: 270,914 295,181 ( 8.22) INTEREST BEARING DEPOSITS 178,954 198,099 ( 9.67) OTHER INTEREST BEARING LIABILITIES: 2,600 2,407 8.01
7 THE DECREASE IN AVERAGE ASSETS, AVERAGE LOANS AND AVERAGE DEPOSITS FOR THE THREE AND SIX MONTHS ENDING JUNE 30, 1995 COMPARED TO THE SAME PERIODS OF 1994 REFLECTS THE RECESSIONARY ECONOMY IN ORANGE COUNTY, INCREASED COMPETITION BY MONEY MARKET MUTUAL FUNDS AND OTHER FINANCIAL INSTITUTIONS FOR DEPOSIT BALANCES, INTENTIONAL RUNOFF OF HIGHER COST TIME DEPOSITS AND AN EMPHASIS BY THE BANK ON IMPROVING ASSET QUALITY AND COLLECTING LOANS RATHER THAN ON GENERATING NEW BUSINESS. THE FOLLOWING TABLE SHOWS AVERAGE EARNING ASSETS AND INTEREST BEARING LIABILITIES AND THEIR RELATIVE COST AND YIELD WITHOUT LOAN FEES AND LOAN COSTS. FOR THE THREE MONTHS ENDED JUNE 30
1995 1994 -------------- -------------- PERCENT INCREASE/ YIELD AMT YLD AMT YLD (DECREASE) DIFF -------- ---- -------- ---- ---------- ---- (IN THOUSANDS) AVERAGE EARNING ASSETS $276,255 8.69 $299,425 7.36 (7.74) 1.33 AVERAGE INTEREST BEARING LIABILITIES $182,614 3.92 $200,137 3.16 (8.76) .76
FOR THE SIX MONTHS ENDED JUNE 30
1995 1994 -------------- -------------- PERCENT INCREASE/ YIELD AMT YLD AMT YLD (DECREASE) DIFF -------- ---- -------- ---- ---------- ---- (IN THOUSANDS) AVERAGE EARNING ASSETS $272,569 8.70 $295,392 7.22 (7.73) .97 AVERAGE INTEREST BEARING LIABILITIES $181,554 3.85 $198,099 3.15 (8.35) .70
8 ACCORDING TO COMPANY POLICY LOANS PAST DUE 90 DAYS OR MORE AS TO INTEREST OR PRINCIPAL PAYMENTS ARE PLACED ON NON-ACCRUAL. LOANS ACCOUNTED FOR ON A NON- ACCRUAL BASIS AMOUNTED TO $11,690,000 ON JUNE 30, 1995 AS COMPARED TO $14,331,000 ON JUNE 30, 1994. OTHER REAL ESTATE OWNED TOTALED $5,868,000 ON JUNE 30, 1995 AS COMPARED TO $4,049,000 ON JUNE 30, 1994. THE FOLLOWING TABLE SHOWS THE TOTAL CHARGE OFFS, RECOVERIES AND THE NET RESULT FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994.
FOR THE THREE FOR THE SIX MONTHS ENDED MONTHS ENDED ------------- ------------- JUNE 30 JUNE 30 1995 1994 1995 1994 ----- ----- ----- ----- CHARGE OFFS 1,178 2,829 1,798 3,174 RECOVERIES 72 174 137 439 NET CHARGE OFFS (RECOVERIES) 1,106 2,655 1,661 2,735
IN VIEW OF CONTINUED UNCERTAINTIES IN THE U.S. ECONOMY IN GENERAL AND REAL ESTATE MARKET IN SOUTHERN CALIFORNIA, IN PARTICULAR, THE COMPANY HAS CONTINUED ADDING SUBSTANTIAL AMOUNT TO ITS RESERVE FOR LOAN LOSSES. FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1995 THE COMPANY ADDED $225,000 AND $1,000,000 RESPECTIVELY TO ITS RESERVE WHICH COMPARES WITH $1,020,000 AND $1,620,000 FOR THE SAME PERIODS IN 1994. THE RESERVE BALANCE AS OF JUNE 30, 1995 WAS $4,999,000 WHICH WAS 2.52% OF TOTAL LOANS AND LEASES WHICH COMPARES WITH $6,107,000 AND 3.15%, RESPECTIVELY, ON JUNE 30, 1994. RESULTS OF OPERATIONS INTEREST INCOME AND INTEREST EXPENSE ------------------------------------ THE COMPANY'S PRIMARY SOURCE OF REVENUE IS INTEREST INCOME. THE NET YIELD WITHOUT THE LOAN FEES ON INTEREST EARNING ASSETS INCREASED TO 6.10% AND 6.14% FOR THE SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 1995 FROM 5.24% AND 5.11% DURING THE FIRST QUARTER OF 1995 FROM 4.96% FOR THE SAME PERIODS OF 1994. THE NET INTEREST INCOME WITHOUT THE LOAN FEES INCREASED FROM $3,915,000 AND $7,478,000 FOR THE THREE AND SIX MONTHS ENDING JUNE 30, 1994 TO 9 $4,198,000 AND $8,299,000 FOR THE SAME PERIODS OF 1995. THIS WAS LARGELY DUE TO IMPROVED SPREADS IN INTEREST EARNINGS. THE AVERAGE YIELD ON EARNING ASSETS INCREASED BY 1.33% FROM 7.36% IN THE SECOND QUARTER OF 1994 TO 8.69% IN 1995 AND BY 1.48% FROM 7.22% FOR THE SIX MONTHS ENDING JUNE 30, 1994 TO 8.70% FOR THE SAME PERIOD OF 1995. THE AVERAGE INTEREST RATE PAID ON INTEREST BEARING LIABILITIES INCREASED BY .72% FROM 3.20% IN THE SECOND QUARTER OF 1994 TO 3.92% IN 1995 AND BY .74% FROM 3.11% FOR THE SIX MONTHS ENDING JUNE 30, 1994 TO 3.85% FOR THE SAME PERIODS OF 1995. THIS WAS PARTLY OFFSET BY CONTINUED DECLINE IN AVERAGE OUTSTANDING LOANS AND OTHER EARNING ASSETS AS THE COMPANY FOCUSED ON MONITORING THE PERFORMANCE OF THE OUTSTANDING LOANS, IDENTIFYING POTENTIAL PROBLEMS AND COLLECTING IDENTIFIED PROBLEM LOANS AND REAL ESTATE OWNED. AT THE SAME TIME, THE COMPANY HAS MAINTAINED ITS REFINED LOAN UNDERWRITING AND APPROVAL PROCESS, SEEKING HIGHER QUALITY CREDITS WHICH REDUCED THE VOLUME OF LOANS MEETING THE TIGHTENED CRITERIA. THE FOLLOWING TABLE SHOWS THE AVERAGE BALANCES OF INTEREST EARNING ASSETS AND INTEREST BEARING LIABILITIES AND INTEREST EARNED AND PAID ON THOSE BALANCES.
THREE MONTHS ENDED JUNE 30, 1995 JUNE 30, 1994 ------------- ------------- AVERAGE INTEREST AVERAGE INTEREST ASSETS BALANCE INTEREST RATE BALANCE INTEREST RATE ------- -------- -------- ------- -------- -------- SECURITIES 52,717 730 5.55 82,382 1,027 5.00 FED FUNDS 23,178 341 5.91 15,356 143 3.74 LOANS 200,359 4,914 9.84 201,687 4,324 8.60 ------- ----- ----- ------- ------ ---- TOTAL 276,254 5,985 8.69 299,425 5,494 7.36 ------- ----- ----- ------- ------ ---- LIABILITIES SAVINGS 119,744 850 2.85 119,809 756 2.53 TIME 60,519 885 5.86 77,864 770 3.97 OTHER 2,351 52 8.88 2,463 53 8.63 ------- ----- ---- ------- ----- ---- TOTAL 182,614 1,787 3.92 200,136 1,579 3.20 -------- ----- ---- ------- ----- ---- NET INTEREST INCOME 4,198 3,915 YIELD ON EARNING ASSETS 6.10 5.24
10
SIX MONTHS ENDED JUNE 30, 1995 JUNE 30, 1994 ---------------------------- ------------------------- AVERAGE INTEREST AVERAGE INTEREST ASSETS BALANCE INTEREST RATE BALANCE INTEREST RATE -------- -------- -------- ------- -------- -------- SECURITIES 56,992 1,539 5.45 73,014 1,759 4.86 FED FUNDS 14,359 419 5.89 16,343 263 3.23 LOANS 201,218 9,804 9.83 206,032 8,547 8.37 ------- ----- ---- ------- ------ ---- TOTAL 272,569 11,762 8.70 295,389 10,569 7.22 ------- ------ ---- ------- ------ ---- LIABILITIES SAVINGS 119,882 1,692 2.85 119,423 1,470 2.48 TIME 59,072 1,669 5.70 78,676 1,511 3.87 OTHER 2,600 102 7.95 2,407 110 9.25 ------- ----- ---- ------- ----- ---- TOTAL 181,554 3,463 3.85 200,506 3,091 3.11 ------- ----- ---- ------- ----- ---- NET INTEREST INCOME 8,299 7,478 YIELD ON EARNING ASSETS 6.14 5.11
OTHER INCOME AND OTHER EXPENSES - NON-INTEREST INCOME INCREASED SLIGHTLY BY ------------------------------- $17,000 TO $530,000 IN THE SECOND QUARTER OF 1995 FROM $513,000 IN THE SECOND QUARTER OF 1994. FOR THE SIX MONTHS ENDING JUNE 30, 1995, THE NON-INTEREST INCOME DECREASED BY $93,000 TO $939,000 COMPARED TO $1,032,000 FOR THE SAME PERIOD A YEAR AGO. THE DECLINE WAS LARGELY IN TWO CATEGORIES: 1. ESCROW FEES DECREASED BY $100,000 FROM $186,000 FOR THE SIX MONTHS OF 1994 TO $86,000 IN 1995. THE DECLINE WAS DUE TO CONTINUED SLOW ESCROW ACTIVITY AND REORGANIZING THE ESCROW DIVISION. 2. DURING FIRST QUARTER OF 1995 THE COMPANY SOLD SOME SECURITIES IN THE AMOUNT OF APPROXIMATELY $21,000,000 AT A LOSS OF $72,000. THESE SECURITIES WERE ORIGINALLY PURCHASED WITH VERY SHORT MATURITIES TO MEET A PROJECTED CASH OUTFLOW DURING THE FIRST QUARTER OF 1995. 11 NON-INTEREST EXPENSE INCREASED BY $789,000 FROM $3,599,000 IN THE SECOND QUARTER OF 1994 TO $4,388,000 IN 1995. FOR THE SIX MONTHS ENDING JUNE 30, 1995 THE EXPENSE INCREASED BY $996,000 FROM $6,954,000 IN 1994 TO $7,950,000 IN 1995. FOLLOWING IS A SUMMARY OF INCREASE IN VARIOUS CATEGORIES OF NON-INTEREST EXPENSE FOR THE SECOND QUARTER OF 1995 AND SIX MONTH ENDING JUNE 30, 1995 COMPARED TO THE SAME PERIODS OF 1994.
SIX MONTHS THREE MONTHS SALARIES & BENEFITS $334,000 $256,000 OCCUPANCY, FURNITURE & EQ. 61,000 19,000 DATE PROCESSING (5,000) 2,000 SUPPLIES 42,000 11,000 LEGAL FEES 183,000 220,000 REGULATORY ASSESSMENTS (81,000) (58,000) LOSSES (GAIN) ON OREO 273,000 207,000 OTHER 189,000 132,000 -------- -------- TOTAL $996,000 $789,000
THE MAJOR INCREASES WERE IN THE CATEGORIES OF SALARIES AND BENEFITS WHICH WAS DUE TO ADDITION TO THE STAFF TO MEET THE PROJECTED FUTURE GROWTH, AND LEGAL FEES AND LOSSES ON OREO WHICH CONTINUES TO REMAIN HIGH AS THE BANK CONTINUES TO RESOLVE PROBLEM LOANS AND DISPOSE OF FORECLOSURE PROPERTIES. ACCOUNTING PRONOUNCEMENTS ------------------------- IN MAY 1993, THE FINANCIAL ACCOUNTING STANDARDS BOARD ("FASB") ISSUED STATEMENT ON FINANCIAL ACCOUNTING STANDARDS NO. 114 ("SFAS 114"), "ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN" AS AMENDED BY SFAS 118, "ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN-INCOME RECOGNITION AND DISCLOSURES". UNDER THE PROVISIONS OF SFAS 114, A LOAN IS CONSIDERED IMPAIRED WHEN, BASED ON CURRENT INFORMATION AND EVENTS, IT IS PROBABLE THAT A CREDITOR WILL BE UNABLE TO COLLECT ALL AMOUNTS DUE ACCORDING TO THE CONTRACTUAL TERMS OF THE LOAN AGREEMENT. SFAS 114, AS AMENDED, REQUIRES CREDITORS TO MEASURE IMPAIRMENT OF A LOAN BASED ON THE PRESENT VALUE OF EXPECTED FUTURE CASH FLOWS DISCOUNTED AT THE LOAN'S EFFECTIVE INTEREST RATE. IF THE MEASURE OF THE IMPAIRED LOAN IS LESS THAN THE RECORDED INVESTMENT IN THE LOAN, A CREDITOR WILL RECOGNIZE AN IMPAIRMENT BY CREATING A VALUATION ALLOWANCE WITH A CORRESPONDING CHARGE TO BAD DEBT EXPENSE. THIS STATEMENT ALSO APPLIES TO RESTRUCTURED LOANS AND ELIMINATES THE REQUIREMENT TO CLASSIFY LOANS THAT ARE IN-SUBSTANCE FORECLOSURES AS FORECLOSED 12 ASSETS EXCEPT FOR LOANS WHERE THE CREDITOR HAS PHYSICAL POSSESSION OF THE UNDERLYING COLLATERAL, BUT NOT LEGAL TITLE. THE COMPANY ADOPTED SFAS 114 EFFECTIVE JANUARY 1, 1995. THE COMPANY DOES NOT BELIEVE ADOPTION OF THIS STATEMENT WILL HAVE A MATERIAL IMPACT ON ITS RESULTS OF OPERATIONS OR FINANCIAL POSITION. CAPITAL RESOURCES ----------------- IT IS THE COMPANY'S POLICY TO ALWAYS MAINTAIN ADEQUATE LIQUIDITY IN CASH, FEDERAL FUNDS AND IN READILY MARKETABLE GOVERNMENT SECURITIES. THE COMPANY'S TOTAL LIQUID ASSETS ON MARCH 31, 1995 WERE: CASH AND DUE FROM BANKS $22,894,000, FEDERAL FUNDS SOLD $30,000,000, AND INVESTMENT SECURITIES FREE OF COLLATERAL $61,669,000; TOTALING $114,563,000 OR 36% OF TOTAL ASSETS. ADDITIONALLY, THE MAJORITY OF THE COMPANY'S LOANS ARE ON A SHORT TERM BASIS, MATURING IN APPROXIMATELY ONE YEAR, WHICH, COMBINED WITH LINES OF CREDIT WITH CORRESPONDENT BANKS, PROVIDES ADDITIONAL LIQUIDITY. IN DECEMBER 1988, THE COMPANY OBTAINED A $3,000,000 TERM LOAN FROM ANOTHER FINANCIAL INSTITUTION FOR THE PURPOSE OF PROVIDING ADDITIONAL CAPITAL TO THE BANK. THE CREDIT AGREEMENT FOR THIS LOAN WAS AMENDED PURSUANT TO A SECOND AMENDMENT TO THE CREDIT AGREEMENT DATED AUGUST 25, 1994. THE LOAN, AS AMENDED, BEARS INTEREST AT A FLUCTUATING RATE PER ANNUM EQUAL TO .75% IN EXCESS OF THE LENDER'S REFERENCE RATE (9.00% AT MARCH 31, 1995). INTEREST IS PAYABLE MONTHLY ON THE UNPAID PRINCIPAL BALANCE OF THE LOAN. PRINCIPAL IS TO BE REPAID ON JANUARY 1, 1997. THE SECOND AMENDMENT WAIVES ALL FINANCIAL COVENANTS RELATING TO THE TERM LOAN. AT JUNE 30, 1995 AND 1994, $2,351,000 REMAINED OUTSTANDING ON THE LOAN. THE SECOND AMENDMENT IS SUPPORTED BY A SUPPORT AGREEMENT BETWEEN A SHAREHOLDER OF THE COMPANY AND THE COMPANY, WHEREBY THE SHAREHOLDER HAS GUARANTEED THE PAYMENT OF THE LOAN. TO COMPENSATE THE SHAREHOLDER FOR SIGNING THE SUPPORT AGREEMENT, THE COMPANY SIGNED A HOLDING COMPANY SUPPORT AGREEMENT WHEREBY THE COMPANY: (1) HAS PAID THE SHAREHOLDER A STANDBY FEE OF $23,500, (2) WILL PAY A STANDBY FEE EQUAL TO ONE PERCENT OF THE UNPAID PRINCIPAL AMOUNT OF THE TERM LOAN ON EACH ANNIVERSARY DATE OF THE CLOSING DATE OF THE HOLDING COMPANY SUPPORT AGREEMENT (3) WILL ISSUE TO THE SHAREHOLDER ON OR PRIOR TO MARCH 31, 1997 WARRANTS TO PURCHASE 25,000 SHARES OF COMMON STOCK OF THE COMPANY AT AN EXERCISE PRICE PER SHARE EQUAL TO 80% OF THE BOOK VALUE PER SHARE OF THE COMPANY ON DECEMBER 31, 1996. 13 ON DECEMBER 31, 1990, NEW RISK BASED CAPITAL REQUIREMENTS BECAME EFFECTIVE. UNDER THE REQUIREMENTS, HOLDING COMPANIES AND BANKS ARE REQUIRED CURRENTLY TO MAINTAIN MINIMUM RATIOS OF TOTAL CAPITAL AND "CORE" (TIER 1) CAPITAL TO RISK- WEIGHTED ASSETS; HOWEVER, UNDER THE TERMS OF ITS FORMAL AGREEMENT WITH THE COMPTROLLER, THE BANK IS REQUIRED TO MAINTAIN CAPITAL IN EXCESS OF THIS MINIMUM REQUIREMENT. THE REGULATORY CAPITAL REQUIREMENTS, CAPITAL REQUIREMENTS UNDER THE FORMAL AGREEMENT AND THE BANK AND COMPANY'S ACTUAL CAPITAL RATIOS ARE SHOWN IN THE FOLLOWING TABLE AS OF THE DATES INDICATED: 14
AT JUNE 30 1995 1994 ---------------------------------------- ---------------------------------------- EXCESS EXCESS PER EXCESS TO PER EXCESS TO MINIMUM FORMAL TO FORMAL MINIMUM FORMAL TO FORMAL STATU- AGREE- STATU- AGREE- STATU- AGREE- STATU- AGREE- TORY MENT ACTUAL TORY MENT TORY MENT ACTUAL TORY MENT ------------------------------------------------------------------------------------------------------------ FOR THE BANK RISK-BASED CAPITAL: TIER 1 4.00% N/A 10.15% 6.15% N/A 4.00% N/A 10.04% 6.04% N/A TOTAL RISK-BASED 8.00% 9.00% 11.40% 3.40% 2.40% 8.00% 9.00% 11.29% 3.29% 2.29% TIER 1 LEVERAGE RATIO(1) 4.00% 6.00% 7.18% 3.18% 1.18% 4.00% 6.00% 6.38% 2.38% .38% FOR THE COMPANY RISK-BASED CAPITAL: TIER 1 4.00% N/A 9.38% 5.38% N/A 4.00% N/A 9.29% 5.29% N/A TOTAL RISK-BASED 8.00% N/A 10.62% 2.62% N/A 8.00% N/A 10.53% 2.53% N/A TIER 1 LEVERAGE RATIO 4.00% N/A 6.69% 2.69% N/A 4.00% N/A 5.94% 1.94% N/A _______________
(1) IN SOME CIRCUMSTANCES THIS MINIMUM RATIO MAY BE 3%. AS OF JUNE 30, 1995 AND 1994, THE BANK AND THE COMPANY WERE IN COMPLIANCE WITH STATUTORY RISK-BASED CAPITAL REQUIREMENTS AND THE BANK WAS IN COMPLIANCE WITH THE MORE STRINGENT CAPITAL REQUIREMENTS IMPOSED BY THE FORMAL AGREEMENT. 15 CALIFORNIA COMMERCIAL BANKSHARES SIGNATURES: PURSUANT TO THE REQUIREMENTS OF THE SECURITIES AND EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED. CALIFORNIA COMMERCIAL BANKSHARES (REGISTRANT) DATE: AUGUST 14, 1995 WILLIAM H. JACOBY ------------------ ---------------------------- WILLIAM H. JACOBY PRESIDENT, CEO DATE: AUGUST 14, 1995 ABDUL S. MEMON ----------------- ---------------------------- ABDUL S. MEMON CHIEF FINANCIAL OFFICER 16 EX-27 2 FINANCIAL DATA SCHEDULE
9 1,000 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 22,894 25 30,000 0 61,436 0 0 198,753 4,999 321,066 295,482 0 1,890 2,351 10,790 0 0 10,553 321,066 10,219 1,539 419 12,177 3,360 3,463 8,714 1,000 (72) 7,950 703 703 0 0 423 .17 .17 6.14 11,690 0 5,044 4,497 5,660 1,798 137 4,999 3,619 0 1,274