-----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, DjT3wi2I6QcJ8vqNUy+eZUJhqQtY9qQnaE84YfkvvdUumCcnaC6LOPCVwo2yYC9X Zmdblle8Fs2oQN9wvCBWUg== 0000912057-95-009950.txt : 19951119 0000912057-95-009950.hdr.sgml : 19951119 ACCESSION NUMBER: 0000912057-95-009950 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 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: 95592255 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 September 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 November 7, 1995 - ------------------------------------------------------------------------------- HARBOR BANCORP AND SUBSIDIARIES INDEX PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements (Unaudited) Condensed consolidated balance sheets -- September 30, 1995 and December 31, 1994 Condensed consolidated statements of income -- three months ended September 30, 1995 and 1994; and nine months ended September 30, 1995 and 1994 Condensed consolidated statements of cash flows -- nine months ended September 30, 1995 and 1994 Notes to condensed consolidated financial statements -- September 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
September 30, December 31, 1995 1994 (Unaudited) (000's omitted) --------------------------------------- ASSETS Cash and due from banks $ 18,689 $ 16,377 Federal funds sold and securities purchased under resale agreements 15,300 5,000 -------- -------- Cash and cash equivalents 33,989 21,377 Time certificates of deposit 495 495 Investment securities (market value of $17,255,163 in 1995 and $9,298,038 in 1994) Held to maturity securities 17,237 9,673 Available for sale securities 23,777 25,146 Loans 125,601 114,850 Less allowance for loan losses 3,010 3,224 -------- -------- Net loans 122,591 111,626 Bank premises and equipment: Land 159 159 Buildings and improvements 4,021 4,008 Furniture, fixtures and equipment 3,142 3,014 -------- -------- 7,322 7,181 Less accumulated depreciation and amortization 5,638 5,385 -------- -------- 1,684 1,796 Other real estate owned 896 2,814 Accrued interest receivable 1,212 972 Other assets 2,278 2,566 -------- -------- Total assets $204,159 $176,465 -------- -------- -------- --------
(Continued) 2 HARBOR BANCORP AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
September 30, December 31, 1995 1994 (Unaudited) (000's omitted) --------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Interest bearing $ 93,514 $ 89,963 Noninterest bearing 95,450 72,149 -------- -------- Total deposits 188,964 162,112 Accrued expenses and other liabilities 888 1,218 -------- -------- Total liabilities 189,852 163,330 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 1,155 143 Net unrealized security losses (106) (266) -------- -------- Total stockholders'equity 14,307 13,135 -------- -------- Total liabilities and stockholders' equity $204,159 $176,465 -------- -------- -------- --------
See notes to unaudited consolidated financial statements. 3 HARBOR BANCORP AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Nine Months Ended Three Months Ended September 30, September 30, (000's omitted, except per share data) 1995 1994 1995 1994 ------- ------- ------- ------- Interest income: Interest and fees on loans $ 8,411 $ 7,770 $ 2,921 $ 2,564 Interest on U.S. government and agency obligations 1,320 749 395 205 Interest on obligations of states and political subdivisions 16 17 10 6 Interest on other investments 67 65 21 21 Interest on federal funds sold and securities purchased under agreements to resale 490 303 291 141 ------ ------ ------ ------ Total interest income 10,304 8,904 3,638 2,937 Interest expense: Interest on deposits 1,918 1,386 686 486 Interest on mortgage payable 17 55 2 16 Interest on borrowed funds 26 6 0 1 ------ ------ ------ ------ Total interest expense 1,961 1,447 688 503 Net interest income 8,343 7,457 2,950 2,434 Provision for loan losses 217 60 167 60 Net interest income after provision for loan losses 8,126 7,397 2,783 2,374 Other operating income: Service charges on deposit accounts 645 683 213 219 Loan servicing fees and other fees and charges 174 188 93 59 Gain on sale of securities 54 (1) -- -- ------ ------ ------ ------ Total other operating income 873 870 306 278
(Continued) 4 HARBOR BANCORP AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (Continued)
Nine Months Ended Three Months Ended September 30, September 30, (000's omitted, except per share data) 1995 1994 1995 1994 ------- ------ ------ ------ Noninterest expense: Salaries, wages and employee benefits 2,671 2,454 943 802 Occupancy expenses 1,582 1,467 525 507 Equipment expenses 225 252 71 85 Data processing expenses 460 438 155 138 Other operating expenses 2,477 2,739 886 967 ------- ------- ------- ------- Total noninterest expense 7,415 7,350 2,580 2,499 ------- ------- ------- ------- Income before taxes based on income 1,584 917 509 153 Provision for taxes based on income 573 400 139 69 ------- ------- ------- ------- Net income $ 1,011 $ 517 $ 370 $ 84 ------- ------- ------- ------- ------- ------- ------- ------- Earnings per share $ 0.75 $ 0.38 $ 0.27 $ 0.06 ------- ------- ------- ------- ------- ------- ------- -------
See notes to unaudited consolidated financial statements. 5 HARBOR BANCORP AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended September 30, (000's omitted) 1995 1994 --------- -------- Operating activities: Net income $ 1,011 $ 517 Adjustments to reconcile net income to net cash provided by operating activities: Provision for depreciation and amortization 140 408 Provision for loan losses 217 60 (Increase) decrease in interest receivable (240) 96 Increase (decrease) in interest payable 54 (11) Other (360) (828) ------- ------- Net cash provided by operating activities 822 242 Investing activities: Proceeds from maturities, sales and calls of investment securities 25,291 46,946 Purchases of investment securities (30,951) (19,771) Net decrease in short-term securities 0 396 Net (increase) decrease in loans (11,181) 7,702 Capital expenditures (140) (214) Other real estate 1,918 (42) ------- ------- Net cash (used in) provided by investing activities (15,063) 35,017
(Continued) 6 HARBOR BANCORP AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Continued)
Nine Months Ended September 30, (000's omitted) 1995 1994 ------- ----- Financing activities: Net increase (decrease) in commercial and other demand deposits, savings and money market deposits and certificates of deposit 26,853 (17,992) ------- ------- Net cash provided by (used in) financing activities 26,853 (17,992) Increase in cash and cash equivalents 12,612 17,267 Cash and cash equivalents at beginning of period 21,377 21,872 ------- ------- Cash and cash equivalents at end of period $33,989 $39,139 ------- ------- ------- -------
See notes to unaudited consolidated financial statements. 7 HARBOR BANCORP AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) September 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 nine month period ended September 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. Investment securities are securities which the Company has the 8 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 September 30, 1995 and 1994 were 1,348,021 and 1,284,023 respectively. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Harbor Bancorp's ("Company") performance during the first nine 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 $204,159,000 at September 30, 1995. This increase of $27,694,000 or 15.69%, in total assets occurred primarily in cash and cash equivalents and loans. Cash and cash equivalents increased $12,612,000, or 59% , from $21,377,000 at December 31, 1994 to $33,989,000 at September 30, 1995. Additionally, investment securities increased 17.79% from $34,819,000 at December 31, 1994 to $41,014,000 at September 30, 1995. Generally, the 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 $10,751,000, or 9.36%, from $114,850,000 at December 31, 1994 to $125,601,000 at September 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 September 30, 1995, the bank had $23,777,000 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 $26,852,000, or 16.56%, for the first nine months of 1995. The primary component of this increase is noninterest bearing depos- 10 its which increased $23,301,000, or 32.29%, from $72,149,000 at December 31, 1994 to $95,450,000 at September 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 40% and 35% as of September 30, 1995 and December 31, 1994, respectively. The Bank's goal is to maintain federal funds sold at a level of at least $3 to $4 million on average. 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 $1,011,000, or $0.75 per share, for the nine months ended September 30, 1995, compared to net income of $517,000, or $0.40 per share, for the same period in 1994. For the three months ended September 30, 1995, the Company generated net income of $370,000, or $0.27 per share, compared to $83,000, or $0.06 per share, for the three months ended September 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 $8,343,000 for the nine months ended September 30, 1995, reflects an increase of $886,000 or 11.88%, from $7,457,000 for the same period of 1994. Net interest income of $2,950,000 for the third quarter in 1995 reflects an increase of $516,000, or 21.2%, from $2,434,000 for the same quarter in 1994. Rising interest rates and increased net interests in earning assets are the primary reason for the improvement in net 12 interest income. The Company recorded $217,000 in provision for loan losses during the first nine months of 1995 compared to $60,000 for the nine months ended September 30, 1994. During the first nine 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, continues to be emphasized and enforced. As a result of this continued effort, total noninterest expense categories of salaries, wages and employee benefits, occupancy expense, equipment expense and data processing expense increased $327,000 or 7.09%, during the nine months ended September 30, 1995 over the same period in 1994. Other operating expense decreased $262,000 during the nine months ended September 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 September 30, 1995, loans on non-accrual status were $4,348,000, or 3.46%, 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 $163,000 at September 30, 1995 compared to $535,000 at December 31, 1994. At September 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 the 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 13 capital regulations are 6.0% for Tier 1 Capital and 8.0% for Total Capital. At December 31, 1994 the Company has Tier 1 Capital of 9.94% and Total Capital of 11.19% and at September 30, 1995 the company had Tier 1 Capital of 10.04% and Total Capital of 11.29%. 14 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 None 15 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: November 13, 1995 /s/ --------------------------- ---------------------------------------- DALLAS E. HAUN President Dated: November 13, 1995 /s/ --------------------------- ---------------------------------------- MELISSA LANFRE' Vice President & CFO 16 EX-27 2 EXHIBIT 27 (FDS)
9 1,000 9-MOS DEC-31-1995 JAN-01-1995 SEP-30-1995 18,689 495 15,300 0 23,777 17,237 17,255 125,601 3,010 204,159 188,964 0 888 0 13,258 0 0 1,049 204,159 8,411 1,403 490 10,304 1,918 1,961 8,343 217 54 7,415 1,584 1,584 0 0 1,011 0 0 0 4,348 163 7,057 0 3,224 447 16 3,010 3,010 0 0
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