0000912057-95-006556.txt : 19950815 0000912057-95-006556.hdr.sgml : 19950815 ACCESSION NUMBER: 0000912057-95-006556 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARBOR BANCORP / CENTRAL INDEX KEY: 0000708193 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 953764395 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 002-79912 FILM NUMBER: 95563808 BUSINESS ADDRESS: STREET 1: 11 GOLDEN SHORE CITY: LONG BEACH STATE: CA ZIP: 90802 BUSINESS PHONE: 3104911111 MAIL ADDRESS: STREET 1: 11 GOLDEN SHORE STREET 2: P O BOX 2040 CITY: LONG BEACH STATE: CA ZIP: 90802 FORMER COMPANY: FORMER CONFORMED NAME: HARBOR BANCORP / DATE OF NAME CHANGE: 19940520 FORMER COMPANY: FORMER CONFORMED NAME: HARBOR BANCORP DATE OF NAME CHANGE: 19920703 10QSB 1 10-QSB U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For quarter ended June 30, 1995 -------------------------------------- [ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transitions period from_________to______________ COMMISSION FILE NUMBER 2-79912 HARBOR BANCORP ---------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) California 95-3764395 ---------------------------------- ------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 11 Golden Shore Long Beach, CA 90802 ---------------------------------------------------------------- (Address of principal executive offices) (310) 491-1111 ---------------------------------------------------------------- (Issuer's telephone number) Not applicable ---------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter periods 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 ---------- ---------- Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 after the distribution of securities under a plan confirmed by a court. Yes No Other N/A --------- ----------- -------- State the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. Common stock, no par value - 1,348,021 shares as of August 5, 1995 ---------------------------------------------------------------------- HARBOR BANCORP AND SUBSIDIARIES INDEX PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements (Unaudited) Condensed consolidated balance sheets - June 30, 1995 and December 31, 1994 Condensed consolidated statements of income - three months ended June 30, 1995 and 1994; and six months ended June 30, 1995 and 1994 Condensed consolidated statements of cash flows - six months ended June 30, 1995 and 1994 Notes to condensed consolidated financial statements - June 30, 1995 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION ITEM 1. Legal Proceedings ITEM 2. Changes in Securities ITEM 3. Defaults Upon Service Securities ITEM 4. Submission of Matter to a Vote of Security Holders ITEM 5. Other Information ITEM 6. Exhibits and Reports on Form 8-K PART III. SIGNATURES 1 ITEM I: FINANCIAL INFORMATION HARBOR BANCORP AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31, 1995 1994 (000's omitted) --------------------------- ASSETS Cash and due from banks $ 18,702 $ 16,377 Federal funds sold and securities purchased under resale agreements 21,650 5,000 ------- ------- Cash and cash equivalents 40,352 21,377 Time certificates of deposit 495 495 Investment securities (market value of $11,456,181 in 1995 and $9,147,270 in 1994) 11,454 9,673 Available for sale securities 16,768 25,146 Loans 119,242 114,850 Less allowance for loan losses 3,004 3,224 ------- ------- Net loans 116,238 111,626 Bank premises and equipment: Land 159 159 Buildings and improvements 4,013 4,008 Furniture, fixtures and equipment 3,044 3,014 ------- ------- 7,216 7,181 Less accumulated depreciation and amortization 5,552 5,385 ------- ------- 1,664 1,796 Other real estate owned 1,338 2,814 Accrued interest receivable 1,045 972 Other assets 2,283 2,566 ------- ------- Total assets $191,637 $176,465 ------- ------- ------- -------
2 HARBOR BANCORP AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
JUNE 30, DECEMBER 31, 1995 1994 (000's omitted) ---------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Interest bearing $ 91,598 $ 89,963 Noninterest bearing 84,986 72,149 ------- ------- Total deposits 176,584 162,112 Accrued expenses and other liabilities 1,101 1,218 ------- ------- Total liabilities 177,685 163,330 Commitments and contingencies -- -- Stockholders' equity: Common stock, no par value; 5,000,000 shares authorized; issued and out- standing, 1,348,021 shares in 1995 and 1,348,021 shares in 1994 13,258 13,258 Retained earnings 784 143 Net unrealized security losses (90) (266) ------- ------- Total stockholders'equity 13,952 13,135 ------- ------- Total liabilities and stockholders' equity $191,637 $176,465 ------- ------- ------- -------
See notes to unaudited consolidated financial statements. 3 HARBOR BANCORP AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME
SIX MONTHS ENDED THREE MONTHS ENDED JUNE 30, JUNE 30, (000's omitted, except per share data) 1995 1994 1995 1994 ---- ---- ---- ---- Interest income: Interest and fees on loans $ 5,490 $ 5,206 $ 2,766 $ 2,537 Interest on U.S. government and agency obligations 925 544 447 245 Interest on obligations of states and political subdivisions 10 11 5 5 Interest on other investments 46 44 35 22 Interest on federal funds sold and securities purchased under agreements to resale 195 162 123 55 ------ ------ ------ ------ Total interest income 6,666 5,967 3,376 2,864 Interest expense: Interest on deposits 1,232 900 622 446 Interest on borrowed funds 41 44 5 25 ------ ------ ------ ------ Total interest expense 1,273 944 627 471 Net interest income 5,393 5,023 2,749 2,393 Provision for loan losses 50 0 25 0 Net interest income after provision for loan losses 5,343 5,023 2,724 2,393 Other operating income: Service charges on deposit accounts 432 464 216 234 Loan servicing fees and other fees and charges 81 129 42 44 Gain on sale of securities 54 (1) 53 (1) ------ ------ ------ ------ Total other operating income 567 592 311 277
(Continued) 4 HARBOR BANCORP AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Continued)
SIX MONTHS ENDED THREE MONTHS ENDED JUNE 30, JUNE 30, (000's omitted, except per share data) 1995 1994 1995 1994 ---- ---- ---- ---- Noninterest expense: Salaries, wages and employee benefits 1,728 1,652 870 806 Occupancy expenses 1,057 960 535 448 Equipment expenses 154 167 73 84 Data processing expenses 305 300 155 129 Other operating expenses 1,591 1,772 804 861 ------ ------ ------ ------ Total noninterest expense 4,835 4,851 2,437 2,328 ------ ------ ------ ------ Income before taxes based on income 1,075 764 598 342 Provision for taxes based on income 434 331 255 142 ------ ------ ------ ------ Net income $ 641 $ 433 $ 343 $ 200 ------ ------ ------ ------ ------ ------ ------ ------ Earnings per share $ 0.48 $ 0.32 $ 0.25 $ 0.15 ------ ------ ------ ------ ------ ------ ------ ------
See notes to unaudited consolidated financial statements. 5 HARBOR BANCORP AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, (000'S OMITTED) 1995 1994 ---- ---- Operating activities: Net income $ 641 $ 433 Adjustments to reconcile net income to net cash provided by operating activities: Provision for depreciation and amortization 252 274 Provision for loan losses 50 0 (Increase) decrease in interest receivable (73) 104 (Decrease) in interest payable (7) (5) Other (250) (622) ------ ------ Net cash provided by operating activities 613 184 Investing activities: Proceeds from maturities, sales and calls of investment securities 14,101 41,262 Purchases of investment securities (6,991) (14,824) Net increase in short- term securities 0 99 Net (increase) decrease in loans (4,662) 2,885 Capital expenditures (34) (181) Other real estate 1,476 (521) ------ ------ Net cash used in investing activities 3,890 28,720
(Continued) 6 HARBOR BANCORP AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
SIX MONTHS ENDED JUNE 30, (000's omitted) 1995 1994 ---- ---- Financing activities: Net increase in commercial and other demand deposits, savings and money market deposits and certificates of deposit 14,472 (17,352) ------ ------ Net cash provided by financing activities 14,472 (17,352) Increase in cash and cash equivalents 18,975 11,552 Cash and cash equivalents at beginning of period 21,377 21,872 ------ ------ Cash and cash equivalents at end of period $40,352 $33,424 ====== ======
See notes to unaudited consolidated financial statements. 7 HARBOR BANCORP AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 1995 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: 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-QSB 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 month period ended June 30, 1995 are not necessarily indicative of the results that may be expected for the year ending December 31, 1995. Certain reclassifications have been made in the 1994 financial statements to conform to the presentations used in 1995. The balance sheet on December 31, 1994 has been derived from the audited financial statements at that date. The accompanying notes are an integral part of these financial statements. PRINCIPLES OF CONSOLIDATION Harbor Bancorp ("HB") was formed on July 23, 1982. The unaudited condensed consolidated financial statements include all the accounts of HB and its wholly-owned subsidiaries, Harbor Bank and Harbor Bank Properties. All intercompany accounts and transactions have been eliminated. INVESTMENT SECURITIES The Company adopted Statement of Financial Accounting Standard No. 115 "Accounting for Certain Investments in Debt and Equity Securities" as of January 1, 1994. 8 Investment securities are securities which the Company has the ability and intent to hold until maturity. Accordingly, these securities are stated at cost adjusted for amortization of premiums and accretion of discounts. Unrealized gains and losses are not reported in the financial statements until realized or until a decline in fair value below cost is deemed to be other than temporary. Available for sale securities include debt securities and mutual funds. These securities are stated at fair value with unrealized gains and losses reflected as a component of stockholders' equity, net of income taxes. Gains and losses are determined on the specific identification method. Any decline in the fair value of the investments which is deemed to be other than temporary is charged against current earnings. ALLOWANCE FOR LOAN LOSSES The allowance for loan losses represents management's recognition of the quality of the loan portfolio. The allowance is maintained at a level considered to be adequate for potential loan losses based on management's assessment of various factors affecting the loan portfolio, which includes a review of problem loans, business conditions and the overall quality of the loan portfolio. The allowance is increased by the provision for loan losses charged to operations and reduced by loans charged off to the allowance, net of recoveries. OTHER REAL ESTATE Other real estate ("ORE) is stated at the lower of cost or fair market value, net of estimated selling costs. BANK PREMISES AND EQUIPMENT Bank premises and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the related assets which range from 10 to 30 years for buildings and improvement and 3 to 10 years for furniture, fixtures and equipment. EARNINGS PER SHARE Earnings per share was computed by dividing net income by the weighted average number of common stock and common stock equivalents (stock options) outstanding during each period. The number of shares used in the per share calculations for the periods ended June 30, 1995 and 1994 were 1,348,021 and 1,348,021 respectively. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Harbor Bancorp's ("Company") performance during the first six months of 1995 shows continued improvement which is supported by improvement in the local and national economic environment. The purpose of the following discussion is to focus on the above mentioned performance improvements and other information about the Company's financial condition and results of operations which is not otherwise apparent from the consolidated financial statements included in this quarterly report. Reference should be made to those statements and the condensed financial data presented herein for an understanding of the following discussion and analysis. FINANCIAL CONDITION Since December 31, 1994, the Company has experienced an increase in loan volume and cash and cash equivalents which has resulted in total assets of the Company increasing from $176,465,000 at December 31, 1994 to $191,637,000 at June 30, 1995. This increase of $15,172,000, or 8.6%, in total assets occurred primarily in cash and cash equivalents and loans. Cash and cash equivalents which increased $18,975,000, or 88.76%, from $21,377,000 at December 31, 1994 to $40,352,000 at June 30, 1995, has been offset with a corresponding decrease in total investment and available for sale securities. Investment securities and available for sale securities decreased $6,597,000 from $34,819,000 at December 31, 1994 to $28,222,000 at June 30, 1995. Generally, the net increase in liquidity is the result of seasonal and economically-generated fluctuations in escrow and title company demand account balances and growth in core deposits. Loans increased $4,392,000, or 3.82%, from $114,850,000 at December 31, 1994 to $119,242,000 at June 30, 1995. The increase in loan volume continues to be moderate as a result of the Company's decision to maintain a conservative posture with respect to lending in view of the current economic environment. Effective January 1, 1994, the Company adopted the provisions of Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities". As of June 30, 1995, the bank had $16,768,000 in securities classified as available for sale. Substantially all of the Company's deposits are local, core deposits. The Company does not have any out-of-area brokered deposits included in the deposit base. Total deposits increased $14,472,000, or 8.93%, 10 for the first six months of 1995. The primary component of this increase is noninterest bearing deposits which increased $12,837,000 or 17.8%, from $72,149,000 at December 31, 1994 to $84,986,000 at June 30, 1995. As a result of the Federal Deposit Insurance Corporation examination at December 31, 1993, the Bank and the Federal Deposit Insurance Corporation executed a Memorandum of Understanding ("FDIC Memorandum") dated August 3, 1994. In accordance with the terms of the FDIC Memorandum, the Bank has agreed to take certain actions including the following: maintaining capital requirements; reducing classified assets in accordance with the reduction schedule; revise, adopt and implement policy and procedures; and review and maintain an adequate allowance for loan losses. The Bank believes it is currently in compliance with the FDIC Memorandum. LIQUIDITY AND INTEREST RATE SENSITIVITY MANAGEMENT The primary functions of asset/liability management are to assure adequate liquidity and maintain an appropriate balance between interest sensitive earning assets and interest bearing liabilities. Liquidity management involves the ability to meet the cash flow requirements of customers who may be either depositors wanting to withdraw funds or borrowers who may need assurance that sufficient funds will be available to meet their credit needs. Interest rate sensitivity management seeks to avoid fluctuating interest margins and to enhance consistent growth of net interest income through periods of changing interest rates. Historically, the overall liquidity of the Company has been enhanced by a significant aggregate amount of core deposits. As described in the analysis of financial condition, the Bank has not relied on large-denomination time deposits. To meet short-term liquidity needs, the Bank has maintained adequate balances in federal funds sold, certificates of deposits with other financial institutions and investment securities having maturities of five years or less. Liquid assets (cash, federal funds sold and securities purchased under agreements to resale, deposits in other financial institutions and investment securities) as a percent of total deposits are 39% and 35% as of June 30, 1995 and December 31, 1994, respectively. The Bank's goal is to maintain federal funds sold at a level of at least $5 to $7 million on average with minimum daily investments monitored closely. 11 Interest rate sensitivity varies with different types of interest-earning assets and interest-bearing liabilities. Harbor Bank intends to maintain interest-earning assets, comprised primarily of both loans and investments, and interest-bearing liabilities, comprised primarily of deposits, maturing or repricing evenly in order to eliminate any impact from interest rate changes. In this way, both assets and liabilities can be substantially repriced simultaneously with interest rate changes. The impact of inflation on a financial institution differs significantly from that exerted on an industrial concern, primarily because its assets and liabilities consist primarily of monetary items. The relatively low proportion of the Company's fixed assets to total assets reduces both the potential of inflated earnings resulting from understated depreciation charges and the potential of significant understatement of absolute asset values. However, inflation does have a considerable indirect impact on banks, including increased loan demand, as it becomes necessary for producers and consumers to acquire additional funds to maintain the same levels of production, consumption and new investments. Inflation also frequently results in high interest rates which can affect both yields on earning assets and rates paid on deposits and other interest-bearing liabilities. The Company monitors inflation rates to insure that ongoing programs are compatible with fluctuations in inflation and resultant changes in interest rates. RESULTS OF OPERATIONS The Company reported net income of $641,000, or $0.48 per share, for the six months ended June 30, 1995, compared to net income of $433,000, or $0.32 per share, for the same period in 1994. For the three months ended June 30, 1995, the Company generated net income of $343,000, or $0.25 per share, compared to $200,000, or $0.15 per share, for the three months ended June 30, 1994. Net interest income is an effective measurement of how well Management has balanced the Company's interest rate sensitive assets and liabilities as well as optimizing the allocation of resources. Net interest income of $5,393,000 for the six months ended June 30, 1995, reflects an increase of $370,000, or 7.37%, from $5,023,000 for the same period of 1994. Net interest income of $2,749,000 for the second quarter in 1995 reflects an increase of $356,000, or 14.88%, from $2,393,000 for the same quarter in 1994. Rising interest rates and increased net interests earning assets are the primary reasons for the improvement in net interest income. The Company made $50,000 in provision for loan losses during the first six months of 1995 compared to no provision for the six months ended June 30, 1994. The Company made a moderate provision in the first two 12 quarters of 1995 because of the current balance in the allowance for loan and lease losses and the improvement in the quality of the loan portfolio. During the first six months of 1995, the Company maintained a strict focus on controlling noninterest expense. The focus on noninterest expense control began with a corporate commitment in 1989 and, today, the commitment continues to be emphasized and enforced. As a result of this continued effort, total noninterest expense cate- gories of salaries, wages and employee benefits, occupancy expense, equipment expense and data processing expense increased $165,000, or 5.35%, during the six months ended June 30, 1995 over the same period in 1994. Other operating expense decreased $181,000 during the six months ended June 30, 1995 compared to the same period in 1994 with most of the decrease in the area of legal and professional fees and FDIC insurance premiums. RISK ELEMENTS The policy of Harbor Bank is that all loans that are past due for ninety (90) days must be placed on non-accrual status. At June 30, 1995, loans on non-accrual status were $4,675,000, or 3.9%, compared to $3,364,000, or 2.9%, of total loans on non-accrual status at December 31, 1994. Accruing loans which are contractually past due ninety (90) days or more were $14,000 at June 30, 1995 compared to $535,000 at December 31, 1994. At June 30, 1995, the management was not aware of information regarding performing loans which would cause them to have serious doubts as to the ability of the borrowers to comply with loan repayment terms, nor are they aware of any trends which might have a material impact on future operating results. CAPITAL RESOURCES Management seeks to maintain a level of capital adequate to support anticipated asset growth and credit risks and to ensure that the Company is within established regulatory guidelines and industry standards. In 1994, stockholders' equity increased $38,978 due to retention of the Company's 1994 net income. The Company's capital plan for 1995 contemplates continued growth in stockholders' equity through the retention of net income. Minimum capital ratios required under the final 1994 risk-based capital regulations are 6.0% for Tier 1 Capital and 8.0% for Total Capital. At December 31, 1994 the Company had Tier 1 Capital of 9.94% and Total Capital of 11.19% and at June 30, 1995 the Company had Tier 1 Capital of 10.07% and Total Capital of 11.32%. 13 HARBOR BANCORP AND SUBSIDIARIES PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Due to the nature of their business, the Company, the Bank, and their subsidiaries are subject to legal action threatened or filed which arise from the normal course of their business. Management believes that the eventual outcome of all currently pending legal proceedings against the Bank will not be material to the Company's or the Bank's financial position or results of operations. ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS UPON SERVICE SECURITIES None ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K Exhibit 1 - Proxy 1995 14 PART III. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant duly caused this report to be signed on its behalf by the undersigned thereto duly authorized. HARBOR BANCORP Dated: August 10, 1995 /s/ ----------------------- -------------------------- JAMES H. GRAY President Dated: August 10, 1995 /s/ ----------------------- -------------------------- MELISSA LANFRE' Vice President & CFO 15 EX-1 2 EXHIBIT 1 [LOGO] HARBOR BANCORP 11 Golden Shore Long Beach, California 90802 (310) 491-1111 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JUNE 27, 1995 TO THE SHAREHOLDERS OF HARBOR BANCORP: NOTICE IS HEREBY GIVEN that, pursuant to its Bylaws and the call of its Board of Directors, the 1995 Annual Meeting of Shareholders (the "Meeting") of Harbor Bancorp (the "Company") will be held at Harbor Bank, 11 Golden Shore, Long Beach, California 90802 on Tuesday, June 27, 1995 at 2:00 p.m., for the purpose of considering and voting upon the following matters: 1. ELECTION OF DIRECTORS. Electing ten (10) persons to the Board of Directors to serve until the 1996 Annual Meeting of Shareholders and until their successors are elected and have qualified. The following persons are the Board of Directors' nominees: James H. Gray Dorothy K. Matteson John W. Hancock H.E. Nance Dallas E. Haun Malcolm C. Todd, M.D. Kermit Q. Jones James A. Willingham Robert E. Leslie Margaret E. Wilson 2. OTHER BUSINESS. Transacting such other business as may properly come before the Annual Meeting and any adjournment or adjournments thereof. The Board of Directors has fixed the close of business on May 9, 1995, as the record date for determination of shareholders entitled to notice of, and the right to vote at, the Meeting. WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. THE ENCLOSED PROXY IS SOLICITED BY THE COMPANY'S BOARD OF DIRECTORS. ANY SHAREHOLDER GIVING A PROXY MAY REVOKE IT PRIOR TO THE TIME IT IS VOTED BY NOTIFYING THE SECRETARY OF THE COMPANY IN WRITING OF REVOCATION OF SUCH PROXY, BY FILING A DULY EXECUTED PROXY BEARING A LATER DATE, OR BY ATTENDING THE MEETING AND VOTING IN PERSON. PLEASE INDICATE ON THE PROXY WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING SO THAT WE CAN ARRANGE FOR ADEQUATE ACCOMMODATIONS. Dated: May 26, 1995 BY ORDER OF THE BOARD OF DIRECTORS Dorothy K. Matteson, Secretary HARBOR BANCORP 11 Golden Shore Long Beach, California 90802 (310) 491-1111 _______________ PROXY STATEMENT _______________ ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JUNE 27, 1995 INTRODUCTION This Proxy Statement is furnished in connection with the solicitation of Proxies for use at the 1995 Annual Meeting of Shareholders (the "Meeting") of Harbor Bancorp (the "Company") to be held at Harbor Bank, 11 Golden Shore, Long Beach, California 90802 at 2:00 p.m., on Tuesday, June 27, 1995, and at any and all adjournments thereof. It is anticipated that this Proxy Statement and the accompanying notice will be mailed on or about May 26, 1995 to shareholders eligible to receive notice of and vote at the Meeting. The matters to be considered and voted upon at the Meeting will be: 1. ELECTION OF DIRECTORS. Electing ten (10) persons to the Board of Directors to serve until the 1996 Annual Meeting of Shareholders and until their successors are elected and have qualified. The following persons are the Board of Directors' nominees: James H. Gray Dorothy K. Matteson John W. Hancock H.E. Nance Dallas E. Haun Malcolm C. Todd, M.D. Kermit Q. Jones James A. Willingham Robert E. Leslie Margaret E. Wilson 2. OTHER BUSINESS. Transacting such other business as may properly come before the Annual Meeting and any adjournment or adjournments thereof. REVOCABILITY OF PROXIES A form of proxy for voting your shares at the Meeting is enclosed. Any shareholder who executes and delivers such a Proxy has the right to revoke it at any time before it is exercised by filing with the Secretary of the Company an instrument revoking it or a duly-executed Proxy bearing a later date. In addition, the powers of the proxy holders will be revoked if the person executing the Proxy is present at the meeting and elects to vote in person by advising the Chairman of such election. Subject to such revocation, all shares represented by a properly executed Proxy received in time for the Meeting will be voted by the proxy holders in accordance with the instructions specified on the Proxy. IF NO INSTRUCTION IS SPECIFIED WITH RESPECT TO A PROPOSAL TO BE ACTED UPON, THE SHARES REPRESENTED BY YOUR EXECUTED PROXY WILL BE VOTED FOR THE ELECTION OF THE BOARD OF DIRECTORS' NOMINEES AS DIRECTORS. IF ANY OTHER BUSINESS IS PROPERLY PRESENTED AT THE MEETING, THE PROXY WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE COMPANY'S BOARD OF DIRECTORS. 1 If you hold your shares of common stock in "street name" and you fail to instruct your broker or nominee as to how to vote your common stock, your broker or nominee may, at its discretion, vote your common stock "FOR" the election of the Board of Directors' nominees. PERSONS MAKING THE SOLICITATION This solicitation of proxies is being made by the Board of Directors of the Company. The expense of preparing, assembling, printing and mailing this Proxy Statement and the material used in the solicitation of proxies for the Meeting will be borne by the Company. It is contemplated that proxies will be solicited principally through the use of the mail, but officers, directors, and employees of the Company and its subsidiary, Harbor Bank (the "Bank"), may solicit proxies personally or by telephone, without receiving special compensation therefor. Although there is no formal agreement to do so, the Company may reimburse banks, brokerage houses, and other custodians, nominees and fiduciaries for their reasonable expense in forwarding these Proxy Materials to shareholders whose stock in the Company is held of record by such entities. In addition, the Company may utilize the services of individuals or companies not regularly employed by the Company in connection with the solicitation of proxies if Management of the Company determines it advisable. VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF There were issued and outstanding 1,348,021 shares of the Company's common stock on May 9, 1995, which has been fixed as the record date for the purpose of determining the shareholders entitled to notice of and to vote at the meeting (the "Record Date"). On any matter submitted to the vote of the shareholders, each holder of common stock will be entitled to one vote, in person or by the proxy, for each share of common stock held of record on the books of the Company as of the Record Date for the Meeting. In connection with the election of directors, the shares may be voted cumulatively if a shareholder present at the meeting has given notice at the meeting prior to the voting of his or her intention to so vote and such candidate or candidates' names have been placed in nomination prior to the meeting. If any shareholder has given such notice, all shareholders may cumulate their votes for candidates in nomination. Cumulative voting allows a shareholder to cast a number of shares held in his or her name as of the Record Date, multiplied by the number of directors to be elected. This total number of votes may be cast for one nominee, or distributed among as many nominees or in such proportions as the shareholders sees fit. If cumulative voting is declared at the Meeting, votes represented by proxies delivered pursuant to this Proxy Statement may be cumulated at the discretion of the proxy holders, in accordance with the recommendations of the Board of Directors. In the election of directors, the ten (10) nominees receiving the highest number of votes will be elected. SHAREHOLDERS OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Management of the Company knows of no person who owns, beneficially or of record, either individually or together with associates, 5 percent or more of the outstanding common stock, except as set forth in the table below. The following table sets forth certain information as of May 9, 1995 concerning the beneficial ownership of the Company's outstanding common stock by each of the directors of the Company, the named executives (as defined below) and by all directors and executive officers of the Company as a group. Management is not aware of any change in control of the Company or of any arrangement which may, at a subsequent date, result in a change of control of the Company. 2
Common Stock Name and Title Beneficially Percent Other than Director Owned(1) of Class(2) ------------------- ------------ ----------- James H. Gray 118,300(3) 8.78% President of Company, Chairman of the Board, President and Chief Executive Officer of Bank c/o Harbor Bank 11 Golden Shore Long Beach, California 90802 John W. Hancock 4,169 .31% Dallas E. Haun 32,502(4) 2.41% Kermit Q. Jones 52,943 3.93% Robert E. Leslie 798 .06% Dorothy K. Matteson 36,897 2.74% H.E. Nance 10,313 .77% Malcolm C. Todd, M.D. 45,853 3.40% James A. Willingham 77,642 5.76% Margaret E. Wilson 54,304(5) 4.03% ALL DIRECTORS AND OFFICERS (12 IN NUMBER)(6) 555,641(7) 41.22% ------------------------- (1) Beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (a) voting power, which includes the power to vote, or to direct the voting of such security; and/or (b) investment power which includes the power to dispose, or to direct the disposition of such security. Beneficial owner also includes any person who has the right to acquire beneficial ownership of such security as defined above within 60 days of the Record Date. (2) Shares subject to options held by directors and executive officers (or group) are treated as issued and outstanding for the purpose of computing the percent of the class owned by such person (or group), but not for computing the percent of the class owned by any other person (or group). (3) Includes 5,788 shares of stock options granted to Mr. Gray but not exercised. (4) Includes 27,365 shares of stock options granted to Mr. Haun but not exercised. (5) Shares are held by the Wilson Family Trust of which Mrs. Wilson is a Co-Trustee. (6) As used throughout this Proxy Statement, the terms "officer" and "executive officer" mean the President of Harbor Bancorp and Chairman of the Board of Directors and President/Chief Executive Officer of the Bank, the Executive Vice President of the Bank, the Senior Vice President and Chief Financial Officer of the Bank and Vice President and Chief Financial Officer of the Company, and the Vice President and Director of Operations of the Bank. The Secretary of the Company is not an executive officer. (7) Includes 44,729 shares of stock options granted to all directors and executive officers as a group but not exercised. Includes 110,344 shares owned by the Harbor Bank Employee Stock Ownership Plan of which Melissa Lanfre, Vice President and Chief Financial Officer of the Company serves as Trustee and over which Ms. Lanfre has sole voting and investment power.
3 PROPOSAL 1: ELECTION OF DIRECTORS NOMINEES The Company's Articles provide for a range of eight (8) to fifteen (15) directors, and permit the exact number of directors of the Company to be fixed by Board or shareholder action. The Board of Directors has fixed the number of directors at ten (10). The persons named below, all of whom are currently members of the Company's Board of Directors, will be nominated for election as directors to serve until the 1996 Annual Meeting of Shareholders and until their successors are elected and have qualified. Votes will be cast in such a way as to effect the election of all ten (10) nominees, or as many thereof as possible under the rules of cumulative voting. In the event that any of the nominees should be unable to serve as a director, it is intended that the Proxy will be voted for the election of such substitute nominees, if any, as shall be designated by the Board of Directors. All nominees have indicated their willingness to serve if elected and the Board of Directors has no reason to believe that any of the nominees will be unavailable to serve if elected. None of the directors, nominees or executive officers of the Company were selected pursuant to any arrangement or understanding, other than with the directors and executive officers of the Company and the Bank, acting within their capacities as such. There are no family relationships between the directors and executive officers of the Company and none of the directors or executive officers of the Company serve as directors of any company which has a class of securities registered under, or which is subject to the periodic reporting requirements of, the Securities Exchange Act of 1934, as amended, or any investment company registered under the Investment Company Act of 1940, as amended. The following table sets forth the names and certain information as of May 9, 1995, concerning the persons to be nominated by the Board of Directors for election as directors of the Company:
PRESENT PRINCIPAL OCCUPATION AND PRINCIPAL OCCUPATION SERVED AS DIRECTOR NAME AGE DURING PAST FIVE YEARS SINCE(1) ---- --- ----------------------------- ------------------ James H. Gray 57 President of Harbor Bancorp, Chairman and President/ Chief Executive Officer of Harbor Bank 1982 John W. Hancock 58 Senior Vice President, Bancap Investment Group 1992 Dallas E. Haun 41 Executive Vice President, Harbor Bank 1993 Kermit Q. Jones 76 Owner, Treasure Valley Land and 1982 Cattle/Dairy Farmer Robert E. Leslie 70 Retired Fire Chief, City of Long Beach 1988 Dorothy K. Matteson 68 Uniform Sales, Retired 1982 H.E. Nance 62 Retired President, Nance Tours & Travel 1988 Malcolm C. Todd, M.D. 82 Retired Physician/Surgeon 1982 James A. Willingham 66 President, Boulevard Buick and Chairman of the 1982 Board of Harbor Bancorp Margaret E. Wilson 66 Co-trustee of the Wilson Family Trust 1993 ------------------------ (1) All the current directors were appointed to the Board of Directors by the Company's incorporator on June 24, 1982, with the exception of Robert E. Leslie and H.E. Nance who were appointed March 22, 1988, John W. Hancock who was appointed on June 23, 1992, Margaret E. Wilson who was appointed on March 23, 1993 and Dallas E. Haun who was appointed on December 21, 1993.
4 EXECUTIVE OFFICERS The following table sets forth as to each of the persons who currently serve as an executive officer of the Company, such person's age, such person's principal occupation during the past five (5) years, such person's current position with the Company, and the periods during which such person served in such capacity.
NAME AND POSITION AGE DATE ELECTED ---------- --- ------------ James H. Gray President and Chief Executive Officer 57 March 22, 1983 H. Melissa Lanfre Vice President and Chief Financial Officer 43 June 23, 1987
All executive officers of the Company are elected by, and serve at the pleasure of, the Board of Directors. Set forth above are the names and offices held by the executive officers of the Company and the date when each was elected to his/her present position with the Company. A brief account of the business experience of each is set forth below. Mr. Gray has been with the major subsidiary of the Company, Harbor Bank, since 1976. He currently holds the position of Chairman of the Board, President, and Chief Executive Officer of Harbor Bank and President of Harbor Bancorp. Ms. Lanfre joined the Company on July 13, 1987 and currently holds the position of Vice President and Chief Financial Officer. Mr. Turicchi, who has been serving as Vice President of the Company and as President of Harbor Bank, resigned effective April 30, 1995. THE BOARD OF DIRECTORS AND COMMITTEES The Board of Directors of the Company held five (5) regular meetings in 1994. In 1994, all of the Company's directors attended at least 75% of all Board meetings. The Company's Board has no standing committees, and any matters which might ordinarily be considered by an audit, compensation or nominating committee, were considered by the Board as a whole. The Company's directors also serve as members of the Bank's Board of Directors and on committees of the Bank's Board. In particular, all Company Directors are members of the Bank's Board of Directors, and they met twelve (12) times during 1994. Any matters of the Bank which might ordinarily be considered by a compensation or nominating committee were considered by the Board of the Bank as a whole. The Bank's Loan Committee met fifty-two (52) times in 1994. This committee reviews certain types of loan requests. The Bank's Audit Committee met nine (9) times in 1994. This committee is responsible for audit functions in the Bank, the appointment of an outside accounting firm and the review of reports of the accounting firm. The Bank's Loan and Investment Committee met twelve (12) times in 1994. This committee also reviews certain types of loan requests and Bank investments. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE BOARD OF DIRECTORS' NOMINEES. 5 DIRECTOR COMPENSATION Directors of the Company and Bank who are considered to be inside directors or employees of the Company, receive a director's fee of $600 per meeting attended and all other directors, who are considered to be outside directors, receive a director's fee of $1,000 per meeting attended. Non- officer directors serving on the Bank's Loan Committee receive $150 per meeting attended. EXECUTIVE OFFICERS' COMPENSATION AND OTHER INFORMATION The following table sets forth certain summary information concerning compensation paid or accrued by the Company to or on behalf of the Company's Chief Executive Officer and each of the two other executive officers of the Company (determined as of the end of the last fiscal year) whose annual salary and bonus exceeded $100,000 in 1994 (the "Named Executives") for each of the fiscal years ended December 31, 1994, 1993, and 1992. SUMMARY OF CASH AND CERTAIN COMPENSATION SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION ------------------------------------------- ANNUAL COMPENSATION AWARDS PAYOUTS ---------------------------------- -------------------- ------------------------ (A) (B) (C) (D) (E) (F) (G) (H) (I) -------------------------------- ----- ----- ----- ------ ---------- -------- -------- ------------- OTHER RESTRICTED ANNUAL STOCK LTIP ALL OTHER SALARY BONUS COMPENSATION AWARD(S) OPTIONS/ PAYOUTS COMPENSATION NAME AND PRINCIPAL POSITION YEAR ($)(1) ($)(2) ($) ($) SARS(#) ($) ($)(3) --------------------------- ------ --------- -------- ------------- --------- ---------- -------- ------------- James H. Gray 1994 $125,704 $39,550 -0- -0- -0- -0- $1,488 Chairman of the Board and Chief 1993 $128,186 $56,500 -0- -0- -0- -0- Executive Officer of Harbor Bank 1992 121,488 55,000 -0- -0- -0- -0- Robert Turicchi (4) 1994 111,321 36,050 -0- -0- -0- -0- 1,804 President and Chief Administrative 1993 111,572 51,500 -0- -0- -0- -0- Officer of Harbor Bank 1992 111,488 50,000 -0- -0- -0- -0- Dallas E. Haun 1994 98,157 30,100 -0- -0- -0- -0- 1,200 Executive Vice President of 1993 93,907 41,500 -0- -0- -0- -0- Harbor Bank 1992 82,897 40,000 -0- -0- -0- -0- ------------------------- (1) Included in this column are salaries and director's fees, where applicable, paid for services rendered to the Bank, during 1994 before any salary reduction for contributions to the Company's plan under section 401(k) of the Internal Revenue Code of 1986, as amended (the "Code"), and salary reductions for contributions for welfare plan coverages under section 125 of the Code. (2) The bonus amounts are payable pursuant to the Company's senior management compensation plan as approved annually by the Board of Directors. This column may include bonuses paid in a certain year for services rendered in the prior year. (3) "All Other Compensation" is only required to be reported for 1994. The amount represents the Company's matching contribution for the 401(k) plan. (4) Robert Turicchi resigned as an Officer and Director of the Company and as an Executive Officer of Harbor Bank as of April 30, 1995. James H. Gray has assumed the title of President of Harbor Bank.
6 The following table provides information with respect to the Named Executives concerning the exercise of options and/or stock appreciation rights ("SARs") during the fiscal year ended December 31, 1994 and unexercised options and/or SARs held by the Named Executives as of December 31, 1994. AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION/SAR VALUE
(A) (B) (C) (D) --- --- --- --- VALUE NUMBER OF UNEXERCISED UNEXERCISED IN-THE-MONEY OPTIONS/SARS OPTIONS/SARS AT YEAR AT YEAR SHARES END(#) END(#) ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/ NAME EXERCISE(#) REALIZED(1)(#) UNEXERCISABLE UNEXERCISABLE ------ ------------ -------------- -------------- -------------- James H. Gray -0- -0- -0-/ 5,788 -0- Robert Turicchi -0- -0- -0-/ 5,788 -0- Dallas E. Haun -0- -0- -0-/17,365 -0- ------------------------ (1) There are no in-the-money options.
CERTAIN TRANSACTIONS There are no existing or proposed material transactions between the Company or the Bank and any of the Company's executive officers, directors, or beneficial owners of 5% or more of the common stock, or the immediate family or associates of any of the foregoing persons, except as indicated below. Some of the Company's directors, nominees for director, and executive officers and their immediate families, as well as the companies with which such directors and executive officers are associated, are customers of, and have had banking transactions with the Bank in the ordinary course of the Bank's business and the Bank expects to have such ordinary banking transactions with such persons in the future. In the opinion of Management of the Bank, all loans and commitments to lend included in such transactions were made in compliance with applicable laws on substantially the same terms, including interest rates and collateral, as those prevailing for comparable transactions with other persons of similar creditworthiness and did not involve more than a normal risk of collectibility or present other unfavorable features. OTHER MATTERS The firm of Ernst & Young served as independent public auditors for the Company and the Bank for 1994 and will continue to serve in that capacity for 1995. It is anticipated that a representative of Ernst & Young will be present at the Meeting to respond to appropriate questions from shareholders. On December 31, 1993, the Bank underwent examinations conducted concurrently by the Federal Deposit Insurance Corporation (the "FDIC") and the California State Banking Department (the "Department"). As a result of the FDIC examination, the Bank entered into a Memorandum of Understanding dated August 3, 1994. The Memorandum includes provisions regarding the Board of Directors, maintaining Tier 1 capital equal to or exceeding 6.5% of the Bank's total assets, credit risk management practices, reducing classified assets in accordance with stated schedules, revising policies and procedures, maintaining acceptable management, maintaining an adequate allowance for loan losses, correction of certain alleged violations, cash dividends, and reporting requirements. 7 The Bank has undertaken a number of actions designed to strengthen its management, improve its financial condition and enhance its operating efficiency. The Bank has maintained Tier 1 capital in excess of 6.5% at all times as required. Credit risk management practices have significantly been strengthened and classified assets have been reduced significantly well in advance of stated schedules. A new Senior Credit Officer will be joining the Bank in the near future to insure a continuation and expansion of credit administration that meets the requirements of the regulatory agencies and the Bank. Any shareholder desiring to submit a proposal for action at the 1996 Annual Meeting of Shareholders which is desired to be presented in the Company's Proxy Statement with respect to such meeting should submit such proposal to the Company at its principal place of business no later than January 12, 1996. The Board of Directors does not know of any matters to be presented at the Meeting other than those set forth above. However, if any other matters come before the Meeting, it is the intention of the persons named in the accompanying Proxy to vote said Proxy in accordance with the recommendations of the Board of Directors on such matters, and discretionary authority to do so is included in the Proxy. The Company's Annual Report for the year ended December 31, 1994 and first Quarterly Statement for the month ended March 31, 1995 were mailed to the shareholders on approximately May 24, 1995. The Annual Report contains consolidated financial statements of the Company and its subsidiaries and the report thereon of Ernst & Young, independent public auditors. Dated: May 26, 1995 HARBOR BANCORP Dorothy K. Matteson, Secretary 8 REVOCABLE PROXY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS HARBOR BANCORP ANNUAL MEETING OF SHAREHOLDERS JUNE 27, 1995 The undersigned shareholder of Harbor Bancorp (the "Company") hereby nominates, constitutes and appoints James H. Gray, Kermit Jones and James Willingham, and each of them, attorney(s), agent(s) and proxy of the undersigned, with full powers of substitution, to vote all stock of the Company which the undersigned is entitled to vote at the Annual Meeting of Shareholders of the Company to be held on Tuesday, June 27, 1995, at 2:00 p.m. at Harbor Bank, 11 Golden Shore, Long Beach, California 90802 and at any and all adjournment or adjournments thereof, as fully and with the same force and effect as the undersigned might or could do if personally present thereat, as follows: 1. ELECTIONS OF DIRECTORS Authority to elect the ten (10) persons named below and in the Proxy Statement dated May 26, 1995 accompanying the Notice of said Meeting, to serve until the 1996 Annual Meeting of Shareholders and until their successors are elected and have qualified: [ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote (except as indicated to the contrary for all nominees listed below). below. James H. Gray, John W. Hancock, Dallas E. Haun, Kermit Q. Jones, Robert E. Leslie, Dorothy K. Matteson, H.E. Nance, Malcolm C. Todd, M.D., James A. Willingham and Margaret E. Wilson. (INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THE NOMINEE'S NAME IN THE SPACE BELOW.) ------------------------------------------------------------------------------- 2. OTHER BUSINESS In their discretion, the proxyholders are authorized to vote upon such other business as may properly come before the Meeting, and at any and all adjournment or adjournments thereof. (CONTINUED AND TO BE SIGNED ON REVERSE SIDE) The undersigned hereby ratifies and confirms all that the proxyholders, or any of them, or their substitutes, shall lawfully do or cause to be done by virtue hereof, and hereby revokes any and all proxies heretofore given by the undersigned to vote at the Meeting. The undersigned acknowledges receipt of the Notice of Annual Meeting of Shareholders and the Proxy Statement accompanying said Notice. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS NOMINATED BY THE BOARD OF DIRECTORS. THE PROXY CONFERS AUTHORITY AND SHALL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATION OF THE BOARD OF DIRECTORS UNLESS A CONTRARY INSTRUCTION IS INDICATED, IN WHICH CASE THE PROXY SHALL BE VOTED IN ACCORDANCE WITH SUCH INSTRUCTIONS. IN ALL OTHER MATTERS, IF ANY, PRESENTED AT THE MEETING, THIS PROXY SHALL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS. PLEASE SIGN AND DATE BELOW Dated: ______________________________ Number of Shares ____________________ _____________________________________ (Signature of Shareholder) _____________________________________ (Signature of Shareholder) (Please date this Proxy and sign your name as it appears on the stock certificates. When signing as attorney, executor, administrator, trustee or guardian, please give full title. If more than one trustee, all should sign. All joint owners should sign.) I DO [ ] DO NOT [ ] EXPECT TO ATTEND THE MEETING. EX-27 3 EXHIBIT 27 (FINANCIAL DATA SCHEDULE)
9 1,000 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 18,702 495 21,650 0 16,768 11,454 11,456 119,242 3,004 191,637 176,584 0 1,101 0 13,258 0 0 694 13,952 5,490 981 195 6,666 1,232 1,273 5,393 50 54 4,835 1,075 1,075 0 0 641 0 0 0 4,675 14 7,135 0 3,224 279 9 3,004 3,004 0 0