-----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, CMFe3FuzGcvQijoSDFtjLcVzcu5BVi8l/Tj0RQNwIblMET/rBocWFEvncah2nA5U /eG0rbzmvBaTfiRID1Tb1A== 0000892569-95-000664.txt : 19951201 0000892569-95-000664.hdr.sgml : 19951201 ACCESSION NUMBER: 0000892569-95-000664 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 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: 95591837 BUSINESS ADDRESS: STREET 1: 6001 E WASHINGTON BLVD CITY: CITY OF COMMERCE STATE: CA ZIP: 90040 BUSINESS PHONE: 2137248800 MAIL ADDRESS: STREET 1: PO BOX 911070 STREET 2: 6001 E WASHINGTON BLVD CITY: CITY OF COMMERCE STATE: CA ZIP: 90091 10-Q 1 FORM 10-Q ENDED SEPTEMBER 30, 1995 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 endedSeptember 30, 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 (IRS Employer) incorporation or organization) 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 September 30, 1995, there were 565,789 outstanding shares of the issuer's Common Stock, no par value. 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements CONSOLIDATED BALANCE SHEETS (unaudited)
September 30, 1995 December 31, l994 ------------------ ----------------- ASSETS Cash and due from banks - demand $ 3,904,691 $ 5,745,356 Federal funds sold 6,080,000 11,605,000 ----------- ----------- Cash and cash equivalents 9,984,691 17,350,356 Interest bearing deposits with financial institutions 10,369,000 8,102,000 Securities held to maturity 120,000 120,000 Securities available for sale 18,386,061 16,830,404 Loans 24,625,833 25,809,010 Deferred loan fees and costs (40,514) (59,280) Unearned discount on acquired loans (102,971) (285,827) Allowance for loan losses (566,116) (498,827) ----------- ----------- Net loans 23,916,232 24,965,076 ----------- ----------- Premises and equipment, net 3,298,592 2,526,677 Other real estate owned 125,922 371,013 Accrued interest receivable and other assets 821,436 922,922 ----------- ----------- Total assets $67,021,934 $71,188,448 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Demand - non-interest bearing $21,369,684 $23,439,082 Savings and other interest bearing accounts 25,929,746 28,870,686 Time, $100,000 and over 4,832,205 4,329,934 Other time 8,089,246 8,259,595 ----------- ----------- Total deposits 60,220,881 64,899,297 Accrued interest payable and other liabilities 458,711 342,524 ----------- ----------- Total liabilities 60,679,592 65,241,821 ----------- ----------- Shareholders' equity: Common stock 4,453,300 4,453,300 Retained earnings 1,848,125 1,609,002 Unrealized gain (loss) on securities available for sale, net 40,917 (115,675) ----------- ----------- Total shareholders' equity 6,342,342 5,946,627 ----------- ----------- Total liabilities and shareholders' equity $67,021,934 $71,188,448 =========== ===========
See accompanying notes to consolidated financial statements. 2 3 CONSOLIDATED STATEMENT OF INCOME (unaudited)
Three months Nine months ended September 30, ended September 30, ----------------------------- ----------------------------- 1995 1994 1995 1994 ---------- ---------- ---------- ---------- Interest income: Interest on loans $ 668,092 $ 693,134 $2,197,293 $1,788,001 Interest on deposits with financial institutions 161,555 89,143 432,347 229,135 Interest on securities 283,182 187,856 783,983 464,128 Interest on Federal funds sold 144,967 118,787 494,219 231,960 ---------- ---------- ---------- ---------- Total interest income 1,257,796 1,088,920 3,907,842 2,713,224 Interest expense on deposits 305,888 240,264 883,236 610,944 ---------- ---------- ---------- ---------- Net interest income 951,908 848,656 3,024,606 2,102,280 Provision for loan losses 182,000 105,000 252,000 232,800 ---------- ---------- ---------- ---------- Net interest income after provision for loan losses 769,908 743,656 2,772,606 1,869,480 ---------- ---------- ---------- ---------- Other income: Gain (loss) on the sale of OREO -- -- (9,824) (9,824) Other 135,004 168,637 474,219 443,529 ---------- ---------- ---------- ---------- Total other income 135,004 168,637 464,395 433,705 ---------- ---------- ---------- ---------- Other operating expenses: Salaries and employee benefits 383,176 311,301 1,141,064 873,396 Occupancy expense 70,525 69,934 260,895 205,276 Equipment and utilities expense 62,035 33,130 163,057 76,272 Professional fees 98,835 19,459 188,086 74,612 Advertising expense 7,238 19,093 44,537 47,260 Business promotion 18,395 20,633 53,772 46,406 Stationery and supplies 42,161 32,300 133,022 77,008 Data processing 41,649 27,991 110,746 90,536 Other expenses 113,017 161,088 486,752 409,914 ---------- ---------- ---------- ---------- Total other operating expenses 837,031 694,929 2,581,931 1,900,680 ---------- ---------- ---------- ---------- Net income before income taxes 67,881 217,364 655,070 412,329 Provision for income taxes 31,500 83,400 274,500 167,200 ---------- ---------- ---------- ---------- Net income 36,381 133,964 380,570 245,129 ========== ========== ========== ========== Per share: Net income $0.06 $0.24 $0.67 $0.44 ========== ========== ========== ==========
See accompanying notes to consolidated financial statements. 3 4 CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
Nine-month period ended September 30, --------------------------------- 1995 1994 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 380,570 $ 245,129 CASH FLOWS FROM OPERATING ACTIVITIES Adjustments to reconcile net income to net cash provided by operating activities Loss on sale of premises and equipment and other real estate owned 9,824 20,383 Depreciation and amortization 170,999 95,305 Write down of other real estate owned 20,000 - Provision for possible loan losses 252,000 232,800 Amortization of deferred loan fees (43,422) (67,725) Net accretion of discount on securities (208,122) (247,964) Accretion of unearned discount on acquired loans (151,464) (106,123) Net increase in accrued income receivable and other assets (51,937) (839,500) Increase in taxes payable 61,350 55,989 Net increase in accrued interest payable and other liabilities 54,837 57,965 ------------ ------------ Net cash provided by (used in) operating activities 494,635 (553,741) ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Net increase in Interest bearing deposits with other financial institutions (2,267,000) (323,126) Proceeds from sale of other real estate owned 361,189 28,453 Proceeds from maturities and calls of securities 9,851,063 20,959,907 Purchases of securities (10,931,303) (24,753,671) Loan principal collections (disbursements), net 845,808 (4,380,559) Purchases of premises and equipment (900,194) (1,584,645) ------------ ------------ Net cash provided by investing (3,040,437) (10,053,641) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Net increase (decrease) in deposits (4,678,416) 23,970,346 Premium paid for the acquisition of Capital Bank's deposits - (185,000) Dividends paid (141,447) - ------------ ------------ Net cash provided by financing activities (4,819,863) 23,785,346 ------------ ------------ Increase in cash and cash equivalents (7,365,665) 13,177,964 CASH AND CASH EQUIVALENTS Beginning of period 17,350,356 7,324,373 ------------ ------------ End of period $ 9,984,691 $ 20,502,337 ============ ============
See accompanying notes to consolidated financial statements 4 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 1995 (unaudited) Note 1. Basis of Presentation The accounting and reporting policies of COMBANCORP (the "Company") and its subsidiary, Commerce National Bank (the "Bank"), 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 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 September 30, 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 September 30, 1995, the Bank has classified approximately $798,000 of its loans with a specific loss reserve of $141,450. Of the classified loans, approximately $754,000 are designated as impaired with a specific loss reserve of $140,200. There was no impact on the financial statements as a result of the adoption of Statement No. 114 as the existing allowance was considered to be adequate for this amount of classified loans. 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 how the instruments are reported in financial statements. At September 30, 1995, the Bank had no material derivative financial instruments. 5 6 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 September 30, 1995 reflected a decrease of 5.9% and 7.2% in total assets and deposits, respectively, from December 31, 1994. As a result of continued slow loan demand, the Bank experienced a decrease of 4.6% in gross loans during this period. The components of the changes in loans are as follows:
Decrease compared to December 31, 1994 -------------------- Commercial loans (0.3%) Real estate - construction (4.0%) Real estate - primarily loans for acquisition or improvement of owner occupied offices and industrial property (10.3%) Real estate - mortgage loans acquired (1.7%) Installment loans (7.0%)
On August 26, 1994, the Bank, as part of a consortium, entered into an Insured Deposit Purchase and Assumption Agreement with the Federal Deposit Insurance Corporation ("FDIC") for the purchase and assumption of certain assets and liabilities of Capital Bank. The Bank purchased $674,000 of cash assets and assumed deposits of $22,536,000 which included approximately $2 million of uninsured deposits payable to the FDIC for a premium of $185,000, including expenses, which amount is being amortized over 7 years on the straight line method. The $2 million in uninsured deposits were wired to the FDIC on June 29, 1995. As of September 30, 1995, the Bank has approximately $13 million in deposits which are attributable to the acquisition. The components of the outstanding deposits attributable to the acquisition are as follows:
August 26, 1994 September 30, 1995 --------------- ------------------ Demand deposits $ 8,200,638 $ 5,427,104 Interest-bearing deposits 4,915,937 3,718,629 Time certificates of deposit 5,667,724 2,289,061 Savings deposits 3,697,787 1,877,792 Accrued interest payable 53,476 17,216 ----------- ----------- Total $22,535,562 $13,329,804 =========== ===========
In addition to the Purchase and Assumption transaction, the Bank obtained a month-to-month lease on Capital Bank's Downey Branch facility with an option to purchase. On May 23, 1995, the Bank exercised its option to purchase the Downey Branch facility for $650,000, which was the primary factor in the Company's 30.6% increase in premises and equipment when compared to the amount at December 31, 1994, from $2.5 million to $3.3 million. 7 8 As part of the Purchase and Assumption transaction, the Bank separately purchased approximately $7,784,000 in face value loans, net of participations sold of $2,035,000, from various pools of loans. The commercial loans were purchased at a discount of $332,000 and the real estate loans at a discount of $203,000. The remaining discounts totaled approximately $84,000 at September 30, 1995 are being amortized over the remaining contractual terms of the loans purchased. As of September 30, 1995, the Bank has approximately $4.6 million in net loans outstanding which are attributable to this transaction. The components of the outstanding loans attributable to the acquisition are as follows:
August 26, 1994 September 30, 1995 --------------- ------------------ Commercial loans $3,222,676 $2,463,139 Real Estate - primarily for acquisition or improvement of owner occupied offices and industrial properties 2,124,541 1,728,084 Installment loans 401,599 448,328 ---------- ---------- Total $5,748,816 $4,639,551 ========== ==========
At September 30, 1995, the loan to deposit ratio was 40.9%, compared to 39.8% at December 31, 1994. Non-performing loans (i.e., those past due 90 days and/or on non-accrual) at September 30, 1995, amounted to approximately $798,000, as compared to approximately $397,000 at December 31, 1994, a 100.8% increase. Non-performing loans at September 30, 1995 consisted of the following: o Loan totaling approximately $104,000 secured by commercial real estate. A notice of foreclosure was filed on June 9, 1995 and the borrower subsequently filed for bankruptcy on October 12, 1995. o Loan totaling approximately $98,000 which is secured by UCC filings on equipment. Interest on this loan has been brought current and the loan subsequently rewritten to mature on October 15, 1997. o Loan totaling approximately $202,000 which is unsecured. The borrower has subsequently filed for bankruptcy and the loan is to be charged off in November 1995. The Bank has reserved $100,000 for this loan as of September 30, 1995. o Construction loan in the amount of $350,490 on which notice of default has been filed. Interest was brought current on November 13, 1995, with the principal portion of the loan to be rewritten to mature in 3 years. The balance of non-performing loans totaling approximately $43,000 at September 30, 1995, consists of three installment loans and four credit card receivables. At October 26, 1995, although not formally notified, the Bank became aware of the possibility of a bankruptcy filing by the borrower on a $358,000 commercial loan classified as unsecured even though the Bank holds three second trust deeds on 1-4 family residences securing this loan in part. This loan is not reflected as non performing on September 30, 1995 totals, nor was it on the Bank's watch list. Other Real Estate Owned ("OREO") at September 30, 1995 decreased from $371,000 at December 31, 1994 to $125,900 at September 30, 1995, reflecting the market value of the commercial property held at December 31, 1994 which was sold at a loss of approximately $9,800 8 9 and an addition of one parcel in the amount of $145,900 which was written down to approximately $125,900 to reflect current fair value.
September 30, December 31, 1995 1994 ------------ ----------- ASSETS QUALITY RATIOS: Non-performing loans to gross loans 3.2% 1.5% Non-performing loans and OREO to total assets 1.4% 1.1%
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 September 30, 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 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 $566,116 at September 30, 1995, or 2.3% of outstanding loans as compared to $498,827, or 1.9% of outstanding loans at December 31, 1994. At these dates, the allowance for loan losses as a percentage of non-performing loans was 70.9% and 125.6%, respectively. Funds not required for lending activities at September 30, 1995 were invested in U.S. Treasury and Agency securities, investment grade corporate bonds, municipal bonds, interest-bearing deposits with other financial institutions and Federal funds sold. At September 30, 1995, Federal funds sold decreased by approximately $5.5 million while interest-bearing deposits with other financial institutions and securities available for sale increased by approximately $2.3 million and $1.6 million, respectively, when compared to December 31, 1994. Securities maturing were reinvested in securities maturing between 1 year through 10 years to protect against loss of income due to interest rate risk. The net unrealized gain on securities available for sale, net of deferred taxes, included in shareholders' equity increased to $40,917 at September 30, 1995 from a net loss of $115,675 at December 31, 1994, reflecting the decline in yields during the first nine months of 1995, which increased the market value of these securities from December 31, 1994. Results of Operations - - --------------------- Net income for the three months and nine months ended September 30, 1995 was $36,381, or $.06 per share, and $380,570 or $.67 per share, respectively, compared to $133,964 or $.24 per share and $245,129 or $.44 per share, respectively, reported for the comparable periods in 1994. Approximately $3,919, or $.01 per share, and approximately $116,192, or $.21 per share, respectively, were attributable to the establishment of the Downey branch resulting from the August 26, 1994 Purchase and Assumption transaction for the three and nine month periods ended September 30, 1995, respectively.. Net interest income for the three month and nine month periods ended September 30, 1995 increased approximately 12.2% and 43.9% over the comparable periods in 1994 due primarily to the increase in total average earning assets of 11.7% and 22.4% for the respective periods. Of the 12.2% and 43.9% increase in net interest income during these periods, 8.6% and 12.1%, respectively, are attributable to the establishment of the Downey branch. Average loans increased 4.5% and 9.4% when compared to the three and nine month periods in 1994, while other average interest bearing assets consisting of securities and time certificates of deposits with other institutions increased 17.0% and 32.7% during the respective periods. Interest expense 9 10 increased approximately 27.3% and 44.6%, respectively, for the three month and nine month periods ended September 30, 1995 over the comparable periods in 1994 due to the increase in average interest bearing deposits of 7.3% and 21.1% for the respective periods and the increase in yield on those deposits from 2.6% to 3.1% for the three month periods, and from 2.4% to 2.9% for the nine month periods. The annualized net interest margin on average earning assets was 6.2% and 6.1% for the three months ended September 30, 1995 and 1994, respectively, and was 4.6% and 5.5% for the nine months ended September 30, 1995 and 1994, respectively. The provision for loan losses increased $77,000, or 73.3%, during the three month period and $19,200, or 8.3%, during the nine month period ending September 30, 1995, compared to the respective periods in 1994. This reflects management's continued assessment of the potential risks in the loan portfolio, the adequacy of the underlying collateral, collectibility, and the experience of past loan losses. For analytical purposes, as part of the overall estimate of the allowance for loan losses, management attributes a portion of the allowance to each category in the loan portfolio. However, this does not imply that any part of the allowance is segregated for, or allocated to, any particular loan or group of loans. The allowance is available to absorb all loan losses originating from the loan portfolio. Other income decreased approximately $33,633, or 19.9% and increased $30,690, or 7.1% during the three month and nine month periods ending September 30, 1995 compared to the respective periods in 1994. The three month decrease of 19.9% is due primarily to the higher earnings rate allocated to the Bank's business account customers. Other operating expenses increased approximately 20.5% and 35.8% for the three month and nine month periods ending September 30, 1995 compared to the respective periods in 1994. These increases were primarily due to the following: 23.1% and 30.7% increase in salaries and employee benefits due to the acquisition and staffing of the Bank's Downey Branch and related costs; 87.3% and 113.8% in equipment expense related primarily to the upgrade in hardware and software related to the conversion to a new data processing system and to installation of a wide/local area network; 30.5% and 72.7% increase in stationery and supplies relating to the new computer system and the addition of the Downey Branch; and 407.9% and 152.1% in professional fees attributable to the acquisition of the Downey Branch, litigation involving the Bank's OREO and other problem loans, and professionals utilized in the Bank's marketing and sales training. Other expenses decreased 29.8% during the third quarter due primarily to the refund received from FDIC due to the reduction of the FDIC premium, and increased 18.7% for the nine month period due primarily to the increase in proof processing attributable to the operations of the Downey Branch. Other operating expenses as a percentage of total interest income was 66.6% and 66.1% during the three month and nine month periods ending September 30, 1995 compared to 63.8% and 70.1% during comparable periods in 1994, respectively. Total other operating expense as a percentage of total average assets was 1.4% and 4.1% during the three month and nine month periods ending September 30, 1995 compared to 1.3% and 3.7% during the comparable periods in 1994. Liquidity and Interest Rate Sensitivity - - --------------------------------------- At September 30, 1995, total earning assets were $59.6 million, or 88.9% of total assets. The Company's liquid assets were $22.6 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) decreased to 37.6% from 56.2% at December 31, 1994, primarily due to a $12.9 million decrease in liquid assets which were shifted to longer maturities and due to the 7.2% decrease in deposits. Except for commitments to lend in the amount of approximately $5.4 million at September 30, 1995, which are expected to be funded by deposits, the Company has no material unrecorded commitments for funds. 10 11 Interest-bearing deposits with financial institutions at September 30, 1995 consisted exclusively of time certificates of deposit, of which 95% mature within one year. The Company's securities consisted primarily of U.S. treasury and agency obligations, corporate bonds, and bank qualified municipal bonds, which were readily marketable. At September 30, 1995, the market value of these securities exceeded their book value by approximately $70,000, net of taxes. Securities totaling $750,000 were pledged to secure Treasury Tax and Loan deposits and public funds. The Company's loan portfolio also was relatively liquid with approximately 78.7% of the outstanding loans maturing within one year and/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 September 30, 1995, the Company was in a liability sensitive position in its 90 day gap, (i.e., the difference between assets and liabilities that reprice in that period as a percentage of total assets) at negative 3% and its cumulative gap was asset sensitive at 31%. 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 in the short term. 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. 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 $ 6,080 $ - $ - $ - $ - $ 6,080 Securities 1,988 747 802 11,604 3,365 18,506 Deposits with other institutions 3,367 3,350 3,156 496 - 10,369 Loans 17,680 215 1,490 3,870 1,371 24,626 ------- ------- ------ ------- ------- ------- TOTAL $29,115 $ 4,312 $5,448 $15,970 $ 4,736 $59,581 Interest Bearing Liabilities: Time Deposits: a) TCD's less than $100M $ 3,572 $ 1,811 $2,082 $ 624 $ - $ 8,089 b) TCD's $100M and over 1,767 1,553 1,285 227 - 4,832 Savings 8,673 - - - - 8,673 Money Market 9,150 - - - - 9,150 Now Accounts 8,106 - - - - 8,106 ------- ------- ------ ------- ------- ------- TOTAL $31,268 $ 3,364 $3,367 $ 851 $ - $38,850 Interest Sensitivity Gap: Interval $(2,153) $ 948 $2,081 $15,119 $ 4,736 Cumulative $(2,153) $(1,205) $ 876 $15,995 $20,731 $20,731 Ratio of cumulative gap to total assets -3% -2% 1% 24% 31% 31%
11 12 At September 30, 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 September 30, 1995, the Bank had a total capital-to-risk-weighted assets ratio of 19.1%, with a Tier I capital ratio of 17.9%, and a leverage ratio of 8.7%. Currently, the Company and the Bank exclude the impact of net unrealized gains (loss) on securities available for sale, net of deferred taxes, in their regulatory capital ratios. During the last two years, capital has been generated through the retention of earnings. Recent Accounting Developments - - ------------------------------ In December 1991, the Financial Accounting Standards Board ("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 September 30, 1995, the Bank has classified $754,000 of its loans as impaired with a specific loss reserve of $140,200. There was no impact on the financial statements as a result of the adoption of Statement No. 114 as the existing allowance was considered to be adequate for this amount of impaired loans. 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 September 30, 1995, the Bank had no material derivative financial instruments. 12 13 PART II. OTHER INFORMATION Items 1 - 5. Inapplicable Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (27) Financial Data Schedule (b) Reports on Form 8-K On August 18, 1995, the registrant filed Amendment No. 1 to the Current Report on Form 8-K, which was filed on August 26, 1994. 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: November 13, 1995 By: /s/ RICHARD F. DEMERJIAN --------------------------- Richard F. Demerjian Chief Executive Officer Date: November 13, 1995 By: /s/ ESTHER G. WILSON --------------------------- Esther G. Wilson Chief Financial Officer 13 EX-27 2 FINANCIAL DATA SCHEDULE
9 1 U.S. DOLLARS 3-MOS DEC-31-1994 JUL-01-1995 SEP-30-1995 1 3,904,691 10,369,000 6,080,000 0 18,386,061 120,000 0 24,625,833 (566,116) (67,021,934) 60,220,881 0 458,711 0 4,453,300 0 0 1,889,042 67,021,934 668,092 589,704 0 1,257,796 305,888 305,888 951,908 182,000 0 837,031 67,881 67,881 0 0 36,381 0 0 0 0 0 0 0 0 0 0 0 0 0 0
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