-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, CBzh5CvtOZLKpyc9Ef6tb3cJkNJq6iDRp1snaVoSn93Tye9OBhI/P++wKeZBZJ0k 6Em4v/oTWnMRfueQQpi/4A== 0000892569-95-000217.txt : 19950620 0000892569-95-000217.hdr.sgml : 19950620 ACCESSION NUMBER: 0000892569-95-000217 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950512 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMBANCORP CENTRAL INDEX KEY: 0000741316 STANDARD INDUSTRIAL CLASSIFICATION: 6022 IRS NUMBER: 953737171 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15984 FILM NUMBER: 95537933 BUSINESS ADDRESS: STREET 1: 420 N MONTEBELLO BLVD CITY: MONTEBELLO STATE: CA ZIP: 90640 BUSINESS PHONE: 2137240444 MAIL ADDRESS: STREET 1: PO BOX 911070 STREET 2: 6001 E WASHINGTON BLVD CITY: CITY OF COMMERCE STATE: CA ZIP: 90091 10-Q 1 COMBANCORP -- FORM 10-Q ENDING 3/31/95 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X Quarterly report pursuant to Section 13 or 15(d) of the - - --- Securities Exchange Act of 1934 For the quarterly period ended March 31, 1995 or -------------- - - --- Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to ---------- ----------- Commission file number: 0-15984 ------------------------------------------------------- COMBANCORP - - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) California 95-3737171 - - ----------------------------------------------------------------------------------------------------------------------- (State or other jurisdiction of incorporation or organization) (IRS Employer Identification Number) 6001 E. Washington Blvd., City of Commerce, CA 90040 - - ----------------------------------------------------------------------------------------------------------------------- (Address of Principal executive offices) (Zip Code)
(213) 724-8800 - - ------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Not Applicable - - ------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 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 ----- ----- As of March 31, 1995, there were 565,789 outstanding shares of the issuer's Common Stock, no par value. ================================================================================ 2 Item 1. Financial Statements CONSOLIDATED BALANCE SHEET (unaudited)
ASSETS March 31, 1995 December 31, 1994 -------------- ----------------- Cash and due from banks - demand $ 6,563,575 $ 5,745,356 Federal funds sold 8,950,000 11,605,000 ----------- ----------- Cash and cash equivalents 15,513,575 17,350,356 Interest-bearing deposits with financial institutions 8,699,000 8,102,000 Investment in Federal Reserve Bank Stock 120,000 120,000 Securities available for sale 18,356,764 16,830,404 Loans 24,689,143 25,809,010 Less: Deferred loan fees and costs (48,657) (59,280) Unearned discount on acquired loan (183,436) (285,827) Reserve for possible loan losses (528,827) (498,827) ----------- ----------- Net loans 23,928,223 24,965,076 Premises and equipment, net 2,519,179 2,526,677 Other real estate owned 371,013 371,013 Accrued interest receivable and other assets 790,406 922,922 ----------- ----------- Total assets $70,298,160 $71,188,448 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Demand non-interest bearing $24,196,500 $23,439,082 Savings and other interest bearing accounts 27,826,200 28,870,686 Time, $100,000 and over 3,837,403 4,329,934 Other time 7,940,891 8,259,595 ----------- ----------- Total deposits 63,800,994 64,899,297 Accrued interest payable and other liabilities 410,328 342,524 ----------- ----------- Total liabilities 64,211,322 65,241,821 ----------- ----------- Shareholders' equity: Common stock 4,453,300 4,453,300 Retained earnings 1,638,192 1,609,002 Unrealized gain on securities available for sale, net (4,654) (115,675) ----------- ----------- Total shareholders' equity 6,086,838 5,946,627 ----------- ----------- Total liabilities and shareholders' equity $70,298,160 $71,188,448 =========== ===========
See accompanying notes to consolidated financial statements. 2 3 CONSOLIDATED STATEMENT OF INCOME (unaudited)
Three months ended March 31, ---------------------------- 1995 1994 ---------- ---------- Interest income: Interest on loans $ 791,817 $518,271 Interest on deposits with financial institutions 123,172 71,720 Interest on securities 255,150 123,742 Interest on Federal funds sold 156,820 42,126 ---------- -------- Total interest income 1,326,959 755,859 Interest expense on deposits 280,460 180,012 ---------- -------- Net interest income 1,046,499 575,847 Provision for loan losses (30,000) (72,800) ---------- -------- Net interest income after provision for loan losses 1,016,499 503,047 ---------- -------- Other income: Service charges and other income 177,311 135,992 ---------- -------- Total other income 177,311 135,992 ---------- -------- Other operating expenses: Salaries and employee benefits 400,434 289,146 Occupancy expense 99,809 66,176 Equipment expense 39,084 24,897 Professional fees 46,831 23,833 Advertising expense 19,005 8,424 Business promotion 14,906 13,485 Stationery and supplies 35,906 19,946 Data processing 40,389 32,770 Other expenses 205,710 133,714 ---------- -------- Total other operating expenses 902,074 612,391 ---------- -------- Income before income taxes 291,736 26,648 Provision for income taxes 121,100 9,600 ---------- -------- Net income $ 170,636 $ 17,048 ========== ======== Per share: Net income $ 0.30 $ 0.03 ========== ======== Dividends $ 0.25 $ - ========== ========
See accompanying notes to consolidated financial statements. 3 4 COMBANCORP AND SUBSIDIARY CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
Period ended March 31, --------------------------- 1995 1994 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 170,637 $ 17,048 Adjustments to reconcile net income to net cash provided by operating activities: Loss on sale of premises and equipment and other real estate owned - 29,637 Depreciation and amortization 51,718 38,316 Provision for possible loan losses 30,000 72,800 Amortization of deferred loan fees (20,563) (15,978) Net accretion of discount on securities (93,015) (96,784) Accretion of unearned discount on acquired loans (53,866) (9,237) Net decrease in accrued income receivable and other assets 40,320 27,991 Increase in taxes payable 32,445 11,766 Net increase (decrease) in accrued interest payable and other liabilities 35,359 (3,729) ----------- ----------- Net cash provided by (used in) operating activities 193,035 71,830 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Net (increase) decrease in interest bearing deposits with other financial institution (597,000) 384,000 Proceeds from maturities and calls of securities available for sale 200,400 10,453,529 Purchases of securities available for sale (1,444,768) (10,258,597) Net (increase) decrease in loans 1,081,282 (134,648) Purchases of premises and equipment (29,980) (142,886) ----------- ----------- Net cash provided by investing activities (790,066) 301,398 ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase (decrease) in deposits (1,098,303) 2,743,110 Dividends paid (141,447) - ----------- ----------- Net cash provided by financing activities (1,239,750) 2,743,110 ----------- ----------- Increase (decrease) in cash and cash equivalents (1,836,781) 3,116,338 CASH AND CASH EQUIVALENTS Beginning of year 17,350,356 7,324,373 ----------- ----------- End of year $15,513,575 $10,440,711 =========== ===========
See accompanying notes to consolidated financial statements. 4 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 1995 (unaudited) Note 1. Basis of Presentation The accounting and reporting policies of the Company and its subsidiary are in accordance with generally accepted accounting principles and conform to general practices within the banking industry. The financial statements are prepared on the accrual basis of accounting with all significant income and expense items accrued at the respective statement dates. The financial statements include the accounts of the Company and its wholly-owned subsidiary, Commerce National Bank (the "Bank"). All material intercompany accounts and transactions have been eliminated. In management's opinion, the accompanying financial statements reflect all material adjustments (consisting only of normal recurring accruals) necessary to a fair statement of the results for the interim periods presented. The results for the interim period ended March 31, 1995, are not necessarily indicative of the results which will be reported for the entire year. Note 2. Income Per Share Income per share is computed using the weighted average number of shares of common stock and common stock equivalents outstanding. Stock options are considered to be common stock equivalents, except when their effect would be antidilutive or immaterial. The weighted average number of shares used to compute income per share was 565,789 for each period presented. Note 3. Reserve for Possible Loan Losses On January 1, 1995, the Bank adopted FASB Statement No. 114, Accounting by Creditors for Impairment of a Loan, as amended by FASB Statement No. 118. There was no material effect on the Bank's financial statements. Statement No. 114 generally requires impaired loans to be measured on the present value of expected future cash flows discounted at the loan's effective interest rate or, as an expedient, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. A loan is impaired when it is probable the creditor will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement. At March 31, 1995, the Bank has classified $415,500 of its loans as impaired with a specific loss reserve of $94,645. There was no impact on the financial statements as a result of the adoption of Statement No. 114 as the existing allowance was adequate for this reserve. Note 4. Securities Available for Sale Effective January 1, 1995, the Bank adopted FASB Statement No. 119, Disclosure About Derivative Financial Instruments and Fair Value of Financial Instruments, which requires the Bank to make disclosures about the purposes of the investment in derivative financial instruments and about 5 6 how the instruments are reported in financial statements. At March 31, 1995, the Bank had no material derivative financial instruments. Note 5. Availability of Funds From Bank Under Federal banking law, dividends declared by the Bank in any calendar year may not, without the approval of the Comptroller of the Currency, exceed the Bank's net income, as defined, for that year combined with its retained net income for the preceding two years. Federal banking law restricts the Bank from extending credit to the Company in excess of 10 percent of the Bank's capital stock and surplus, as defined. Any such extensions of credit are subject to strict collateral requirements. 6 7 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Financial Condition The Company's consolidated balance sheet at March 31, 1995 reflected a decrease of 1.3% in total assets and 1.7% in deposits from December 31, 1994. As a result of continued slow loan demand, the Bank experienced a decrease of 4.3% in gross loans during this period. The components of the changes in loans are as follows:
Increase (Decrease) over December 31, 1994 ---------------------- Commercial loans (5.9%) Real estate - construction (0.6%) Real estate - primarily loans for acquisition or improvement of owner occupied offices and industrial property (4.6%) Real estate - mortgage loans acquired (0.5%) Installment loans (2.3%)
The loan to deposit ratio at March 31, 1995 was 38.7%, compared to 39.8% at December 31, 1994. Non-performing loans (i.e, those past due 90 days and/or on non-accrual) at March 31, 1995, amounted to approximately $577,500 as compared to approximately $397,000 at December 31, 1994, a 45.5% increase. Of the eight non-performing loans, one loan in the amount of $145,900, or 25.3% of non-performing loans, was secured by real estate, and was taken into Other Real Estate Owned on April 19, 1995. Three loans totaling $420,400, or 72.8% of non-performing loans, are commercial loans. One of these loans in the amount of $97,900 is secured by UCC filings on equipment, which management believes provides adequate security to the Bank. This loan continues to make monthly payments which are currently being applied to interest on a cash basis. Once the interest is brought current, the Bank intends to rewrite this loan on a fully amortized basis. The second commercial loan in the amount of $150,000 is secured by approximately $200,000 in receivables, and the Bank has hired an outside consultant to audit these accounts. The third commercial loan in the amount of $172,600 is secured by a second trust deed and has been approved for a renewal, subject to a current appraisal. The balance of non-performing loans consists of an installment loan and three credit card receivables. Other Real Estate Owned ("OREO") at March 31, 1995 remained at $371,000 as compared to December 31, 1994. As of April 19, 1995, however, OREO increased to $516,900 with the addition of the aforementioned real estate secured loan in the amount of $145,900. 7 8 The allowance and provision for possible loan losses is a general reserve established by management to absorb potential losses inherent in the entire loan portfolio. The level and rate of additions to the allowance for loan losses are based on a continuing analysis of the loan portfolio and at March 31, 1995, reflected an amount which in management's judgment was adequate for known and inherent losses. In evaluating the adequacy of the allowance, management gives consideration to economic prospects and net worth of the individual borrowers and guarantors, collateral evaluation, the nature and amount of loans subject to adverse classification, the total size and mix of the loan portfolio and such other factors that deserve recognition. The allowance for loan losses aggregated $528,827 at March 31, 1995, or 2.1% of outstanding loans, as compared to $498,827, or 1.9% of outstanding loans at December 31, 1994. During the same period, the allowance for loan losses as a percentage of non-performing loans was 91.6% and 125.6%, respectively. Funds not required for lending activities at March 31, 1995 were invested in U. S. Treasury and Agency securities, investment grade corporate notes, municipal bonds, interest-bearing deposits with other financial institutions and Federal funds sold. In order to increase investment yields, Fed funds sold was reduced by approximately $2.7 million and securities available for sale was increased by approximately $2.1 million during the first quarter of 1995. The net unrealized loss on securities available for sale, net of deferred taxes, included in shareholders' equity decreased from $115,675 at December 31, 1994 to $4,654 at March 31, 1995, reflecting the decline in yields during the first quarter of 1995, which increased the market value of these securities from December 31, 1994. Results of Operations Net income for the quarter ended March 31, 1995 was $170,636, or $.30 per share, compared to $17,048, or $.03 per share, for the quarter ended March 31, 1994. Net interest income for the quarter ended March 31, 1995 increased approximately 81.7% over the comparable period in 1994 primarily due to the increase of 25.7% in average interest earning assets and the increase in yield on those assets from 6.2% during the first quarter of 1994 to 8.7% during the first quarter of 1995. Interest expense increased approximately 55.8% over the comparable period in 1994 due to the 27.4% increase in average interest-bearing liabilities and the increase in cost of funds from 2.2% in 1994 to 2.8% in 1995. The annualized net interest margin on average earning assets increased to 6.8% during the first quarter of 1995, compared to 4.7% during the comparable period in 1994. The provision for loan losses decreased $42,800 during the first quarter 1995, compared to the comparable period in 1994, which primarily reflects management's improved assessment of the potential risks in the loan portfolio. Other income increased approximately 30.4% during the first quarter of 1995 as compared to the same period in 1994. Many components increased by nominal amounts, but the majority of the increase was due to service charges attributable to the increase in the number of accounts. Other operating expenses increased approximately 47.3% during the first quarter of 1995 over the comparable period of 1994 due primarily to the 38.5% increase in salaries and employee benefits due to the acquisition and staffing of the Bank's Downey Branch and the costs associated with this acquisition, and the 53.8% increase in other expenses due primarily to the increased FDIC assessment for the acquired deposits 8 9 related to the Downey Branch. Other operating expenses as a percentage of total interest income decreased from 81.0% during the first quarter of 1994 to 68.0% during the first quarter of 1995. Liquidity and Interest Rate Sensitivity At March 31, 1995, total earning assets were $58.6 million, or 83.3% of total assets. The Company's liquid assets were $35.2 million and consisted of cash and due from banks, interest-bearing deposits with financial institutions, unpledged securities maturing within one year and Federal funds sold. The liquidity ratio (i.e., liquid assets to total deposits) was 55.2% compared to 56.2% at December 31, 1994. The Bank has outstanding commitments to lend in the amount of approximately $5.2 million at March 31, 1995, which are expected to be funded by deposits. The Company has no other material unrecorded commitments for funds. Interest-bearing deposits with financial institutions at March 31, 1995 consisted exclusively of time certificates of deposit, of which 97.7% mature within one year. The Company's securities available for sale consisted primarily of U.S. treasury and agency obligations, corporate bonds, and bank qualified municipal bonds, which were readily marketable. At March 31, 1995, the book value of these securities exceeded their market value by approximately $7,950. Securities totaling $400,000 were pledged to secure Treasury Tax and Loan deposits and public funds. The Company's loan portfolio also was relatively liquid with approximately 77.6% of the outstanding loans maturing within one year or sensitive to changes in interest rates. The Company believes that its position with respect to interest rate fluctuations is favorable, in that the majority of the Company's loans bear a floating rate of interest and the majority of its investments have short maturities. At March 31, 1995, the Company was in an asset sensitive position and its 90 day gap, (i.e., the difference between assets and liabilities that reprice in that period as a percentage of total assets) was 8% and its cumulative gap was 30%. Generally, an asset sensitive position will result in enhanced earnings in a rising interest rate environment and declining earnings in a falling interest rate environment because larger volumes of assets than liabilities will reprice. Conversely, a liability sensitive position will be detrimental to earnings in a rising interest rate environment and will enhance earnings in a falling interest rate environment. 9 10 The Asset and Liability Maturity Repricing Schedule below sets forth the distribution of repricing opportunities for the Company's interest earning assets and liabilities, the interest sensitivity gap and the ratio of cumulative gap to total assets. INTEREST SENSITIVITY PERIOD (in thousands)
over over over 3 months 6 months 1 year 3 months through through through over or less 6 months 1 year 5 years 5 years Total -------- -------- ------ ------- ------- ----- Interest Earning Assets: Federal funds sold $ 8,950 - - - $ 8,950 Securities 7,548 1,370 2,687 6,598 274 18,477 Deposits with other institutions 4,050 2,368 2,082 199 - 8,699 Loans 17,842 510 1,158 3,718 1,461 24,689 TOTAL $38,390 4,248 5,927 10,515 1,735 $60,815 ======================================================================= Interest Bearing Liabilities: Time Deposits: a) TCD's less than $100M $ 4,049 1,742 1,811 338 1 $ 7,941 b) TCD's $100M and over 1,107 1,499 1,131 100 - 3,837 Savings 9,276 - - - - 9,276 Money Market 10,322 - - - - 10,322 Now Accounts 8,228 - - - - 8,228 TOTAL $32,982 3,241 2,942 438 - $39,604 ----------------------------------------------------------------------- Interest Sensitivity Gap: Interval $ 5,408 $1,007 $2,985 $10,077 $ 1,735 Cumulative 5,408 $6,415 $9,400 $19,477 $21,212 $21,211 ----------------------------------------------------------------------- Ratio of cumulative gap to total assets 8% 9% 13% 28% 30% 30%
At March 31, 1995, the Company was entitled to borrow on a collateralized basis at the discount window at the Federal Reserve Bank of San Francisco. In addition, the Bank has available a Federal funds line of credit in the amount of $1 million with one of its correspondent banks. Capital Resources The Company is currently exempt from the Federal Reserve Board's risk-based capital guidelines because consolidated assets are under $150 million. However, the Bank is subject to the risk-based capital guidelines adopted by the Office of the Comptroller of the Currency. These guidelines require the Bank to maintain a minimum ratio of total capital-to-risk-weighted assets of 8% (of which at least 4% must consist of tier I capital), and a leverage ratio of at least 3%. At March 31, 1995, the Bank had a total capital-to-risk-weighted assets ratio of 18.9%, with a tier I capital ratio of 17.7%, and a leverage ratio of 7.9%. 10 11 The Bank excludes the impact of the net unrealized gains on securities available for sale, net of deferred taxes in its regulatory capital ratios. Recent Accounting Developments In December 1991, the FASB issued Statement No. 107, Disclosures about Fair Value of Financial Instruments. Statement 107 requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. The disclosures include the methods and assumptions used to estimate the fair value if quoted market prices are not used. Statement 107 will first be required for the Company's fiscal year that ends December 31, 1995. On January 1, 1995, the Bank adopted FASB Statement No. 114, Accounting by Creditors for Impairment of a Loan, as amended by FASB Statement No. 118. There was no material effect on the Bank's financial statements. Statement No. 114 generally requires impaired loans to be measured on the present value of expected future cash flows discounted at the loan's effective interest rate or, as an expedient, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. A loan is impaired when it is probable the creditor will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement. At March 31, 1995, the Bank has classified $415,500 of its loans as impaired with a specific loss reserve of $94,645. There was no impact on the financial statements as a result of the adoption of Statement No. 114 as the existing allowance was adequate for this reserve. Effective January 1, 1995, the Bank adopted FASB Statement No. 119, Disclosure About Derivative Financial Instruments and Fair Value of Financial Instruments, which requires the Bank to make disclosures about the purposes of the investment in derivative financial instruments and about how the instruments are reported in financial statements. At March 31, 1995, the Bank had no material derivative financial instruments. 11 12 PART II. OTHER INFORMATION Items 1 - 5. Inapplicable Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Inapplicable (b) Reports on Form 8-K The registrant filed no reports on Form 8-K during the quarter ended March 31, 1995. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. COMBANCORP Date: May 10, 1995 By: /s/ RICHARD F. DEMERJIAN ---------------------------------- Richard F. Demerjian Chief Executive Officer Date: May 10 , 1995 By: /s/ ESTHER G. WILSON ---------------------------------- Esther G. Wilson Chief Financial Officer 12 EX-27 2 FINANCIAL DATA SCHEDULE
9 1 U.S. DOLLARS 3-MOS DEC-31-1994 JAN-01-1995 MAR-31-1995 1 6,563,575 8,699,000 8,950,000 0 18,356,764 120,000 0 24,689,143 528,827 70,298,160 63,800,994 0 410,328 0 4,453,300 0 0 1,633,538 70,298,160 791,817 535,142 0 1,326,959 280,460 280,460 1,046,499 30,000 0 902,074 291,736 291,736 0 0 170,636 .30 .30 0 0 0 0 0 0 0 0 0 0 0 0
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