-----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, EdU/TuFjvLipQ6VmHIaOAkv4VgaXnV26ugL3mO3IBeFvcpAMMSJOeEqcIpIQEoBa qCQ1nScrRl7fJ3uTCaNIzQ== 0000892569-96-000578.txt : 19960514 0000892569-96-000578.hdr.sgml : 19960514 ACCESSION NUMBER: 0000892569-96-000578 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960513 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMBANCORP CENTRAL INDEX KEY: 0000741316 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [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: 96560858 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 FOR QUARTER ENDED MARCH 31, 1996 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, 1996 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 March 31, 1996, 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 SHEET (unaudited)
March 31, 1996 December 31, 1995 -------------- ----------------- ASSETS Cash and due from banks - demand $ 5,010,455 $ 5,639,763 Federal funds sold 1,700,000 2,800,000 ----------- ----------- Cash and cash equivalents 6,710,455 8,439,763 Interest-bearing deposits with financial institutions 9,690,000 11,755,000 Investment in Federal Reserve Bank Stock 120,000 120,000 Securities available for sale 25,038,203 21,046,565 Loans 23,726,665 23,771,964 Less: Deferred loan fees and costs 64,752 65,731 Unearned discount on acquired loans 71,377 84,823 Reserve for possible loan losses 402,433 432,559 ----------- ----------- Net loans 23,188,103 23,188,851 Premises and equipment, net 3,230,626 3,291,753 Other real estate owned 106,926 106,926 Accrued interest receivable and other assets 885,304 881,171 ----------- ---------- Total assets $68,969,617 $68,830,029 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Demand non-interest bearing $22,901,300 $21,805,536 Savings and other interest bearing accounts 25,684,349 26,691,892 Time, $100,000 and over 5,407,403 5,381,974 Other time 8,530,990 8,144,395 ----------- ----------- Total deposits 62,524,042 62,023,797 Accrued interest payable and other liabilities 223,948 421,322 ----------- ----------- Total liabilities 62,747,990 62,445,119 ----------- ----------- Shareholders' equity: Common stock 4,453,300 4,453,300 Retained earnings 1,880,513 1,796,650 Unrealized gain on securities available for sale, net (112,186) 134,960 ----------- ----------- Total shareholders' equity 6,221,627 6,384,910 ----------- ----------- Total liabilities and shareholders' equity $68,969,617 $68,830,029 =========== ===========
See accompanying notes to consolidated financial statements 2 3 CONSOLIDATED STATEMENT OF INCOME (unaudited)
Three months ended March 31, ----------------------------- 1996 1995 ---------- ---------- Interest income: Interest on loans $ 650,258 $ 791,817 Interest on deposits with financial institutions 167,092 123,172 Interest on securities 352,429 255,150 Interest on Federal funds sold 40,732 156,820 ---------- ---------- Total interest income 1,210,511 1,326,959 Interest expense on deposits 305,080 280,460 ---------- ---------- Net interest income 905,431 1,046,499 Provision for loan losses (130,000) (30,000) ---------- ---------- Net interest income after provision for loan losses 775,431 1,016,499 ---------- ---------- Other income: Gain on call of securities 3,317 - Service charges and other income 147,632 177,311 ---------- ---------- Total other income 150,949 177,311 ---------- ---------- Other operating expenses: Salaries and employee benefits 375,891 400,434 Occupancy 65,697 99,809 Equipment 53,839 39,084 Professional fees 82,818 46,831 Advertising 5,815 19,005 Business promotion 16,948 14,906 Stationery and supplies 40,629 35,906 Data processing 40,741 40,389 Other 99,739 205,710 ---------- ---------- Total other operating expenses 782,117 902,074 ---------- ---------- Income before income taxes 144,263 291,736 Provision for income taxes 60,400 121,100 ---------- ---------- Net income $ 83,863 $ 170,636 ========== ========== Per share: Net income $ 0.15 $ 0.30 ========== ========== Dividends $ - $ 0.25 ========== ==========
See accompanying notes to consolidated financial statements 3 4 CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
Period ended March 31, ------------------------------- 1996 1995 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 83,863 $ 170,637 Adjustments to reconcile net income to net cash provided by operating activities: Gain on call of securities (3,317) - Provision for loan losses 130,000 30,000 Depreciation and amortization 78,651 51,718 Amortization of deferred loan fees (14,855) (20,563) Net accretion of discount on securities (14,502) (93,015) Accretion of unearned discount on acquired loans (13,446) (53,866) Net (increase) decrease in accrued income receivable and other assets (18,373) 40,320 Increase in taxes payable 60,400 32,445 Net increase (decrease) in accrued interest payable and other liabilities (79,821) 35,359 ----------- ----------- Net cash provided by operating activities 208,600 193,035 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Net (increase) decrease in interest bearing deposits with other financial institutions 2,065,000 (597,000) Proceeds from maturities and calls of securities available for sale 3,600,106 200,400 Purchases of securities available for sale (7,999,024) (1,444,768) Net (increase) decrease in loans (100,951) 1,081,282 Purchases of premises and equipment (3,284) (29,980) ----------- ----------- Net cash used in investing activities (2,438,153) (790,066) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase (decrease) in deposits 500,245 (1,098,303) Dividends paid - (141,447) ----------- ----------- Net cash provided by (used in) financing activities 500,245 (1,239,750) ----------- ----------- Decrease in cash and cash equivalents (1,729,308) (1,836,781) CASH AND CASH EQUIVALENTS Beginning of year 8,439,763 17,350,356 ----------- ----------- End of period $ 6,710,455 $15,513,575 =========== ===========
See accompanying notes to consolidated financial statements 4 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 1996 (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, 1996, 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. 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. 5 6 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, 1996 reflected a modest increase of .2% in total assets and .8% in deposits from December 31, 1995. As a result of continued slow loan demand, the Bank experienced a decrease of .2% in gross loans during this period. The components of the changes in loans are as follows:
Increase (Decrease) over December 31, 1995 ---------------------- Commercial loans 0.0% Real estate - construction 8.9% Real estate - primarily loans for acquisition or improvement of owner occupied offices and industrial property (3.1%) Real estate - mortgage loans acquired (0.5%) Installment loans 0.3%
The loan to deposit ratio at March 31, 1996 was 37.9%, compared to 38.3% at December 31, 1995. Non-performing loans (i.e., those past due 90 days and/or on non-accrual) at March 31, 1996 amounted to approximately $284,300 as compared to approximately $269,700 at December 31, 1995, a 5.4% increase. Impairment of loans having recorded investments of approximately $103,000 at March 31, 1996 has been recognized. The total allowance for loan losses related to this loan was $5,200 on March 31, 1996. The average recorded investment for all impaired loans during the first quarter of 1996 was $103,000. No interest income was recognized on this loan during this period.
===================================================================================== Loans on Loans past due over 90 non-accrual March 31, 1996 days and still accruing status - ------------------------------------------------------------------------------------- Commercial $ 1,916 $ - Real Estate: Construction - - Other - 102,575 Mortgage loans acquired 144,266 - Consumer/Installment 35,497 - - ------------------------------------------------------------------------------------- Total $181,679 $102,575 =====================================================================================
6 7 Non-performing loans at March 31, 1996 consisted of the following: - -- A loan on non-accrual status in the amount of $102,575 which is secured by a first trust deed on commercial property. The Bank has filed for a relief from "stay" with the Bankruptcy courts so that it can proceed with the sale of the property. - -- A mortgage loan on a secured single family dwelling loan in the amount of $144,266, on which the Bank has not received a payment since January 5, 1996. A demand was sent to the borrower, who has not responded, and a notice of default is to be filed In April. This loan has been habitually past due. - -- A loan in the amount of $29,531 secured by a second trust deed on a single family residence. It appears that this loan will be a probable loss. - -- The balance of the non-performing loans totals $7,881, all of which are still accruing interest, consists of one commercial loan, two credit card loans, and a reserve line of credit. Other Real Estate Owned ("OREO") at March 31, 1996 remained at $106,926 as compared to December 31, 1995. Management believes that it has adequately reserved for those loans representing an above normal degree of risk.
==================================================================================================== ASSET QUALITY RATIOS: March 31, 1996 December 31, 1995 - ---------------------------------------------------------------------------------------------------- Non-performing loans to gross loans 1.2% 1.1% Non-performing loans and OREO to total assets 0.6% 0.5% ====================================================================================================
The allowance and provision for 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, 1996, 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 $402,433 at March 31, 1996, or 1.7% of outstanding loans, as compared to $432,559, or 1.8% of outstanding loans at December 31, 1995. During the same period, the allowance for loan losses as a percentage of non-performing loans was 141.6% and 160.4%, respectively. Funds not required for lending activities at March 31, 1996 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. At March 31, 1996, Federal funds sold and interest bearing deposits with financial institutions decreased by approximately $1.1 million and $2.1 million, respectively, when compared to December 31, 1995, while securities available for sale increased by approximately $4.0 million during the same period. Maturing securities have been reinvested in the higher yielding callable U.S. treasury and agency securities maturing between 1 year and 10 years to protect against loss of income due to interest rate risk. The net unrealized gain or loss on securities available for sale, net of deferred taxes, included in shareholders' equity decreased from an unrealized gain of $134,960 at December 31, 1995 to an unrealized loss of $112,186 at March 31, 1996, reflecting the decrease in market value due to the increase in yields in the market during the first quarter of 1996. 7 8 Results of Operations - --------------------- Net income for the quarter ended March 31, 1996 was $83,863, or $.15 per share, compared to $270,636, or $.30 per share, for the quarter ended March 31, 1995. Net interest income for the quarter ended March 31, 1996 decreased approximately 13.5% over the comparable period in 1995 primarily due to the decrease in yield on average interest bearing assets from 8.7% during the first quarter of 1995 to 8.1% during the first quarter of 1996 as well as the 2.0% decrease in average interest earning assets. Interest expense increased approximately 8.8% over the comparable period in 1995 due to the increase in cost of funds from 2.8% in 1995 to 3.1% in 1996 which was somewhat offset by the 3.2% decrease in average interest-bearing liabilities. The annualized net interest margin on average earning assets decreased to 6.0% during the first quarter of 1996, compared to 6.8% during the comparable period in 1995. The provision for loan loss expense increased $100,000, or 333.3% during the first quarter 1996, compared to the comparable period in 1995, which primarily reflects management's recognition and charge off of certain credits that arose in the first quarter of 1996 and management's assessment of the potential risks in the loan portfolio. Other income decreased approximately $26,000, or 14.9% during the first quarter of 1996 as compared to the same period in 1995. No individual component is primarily responsible. Other operating expenses decreased approximately $120,000, or 13.3% during the first quarter of 1996 over the comparable period of 1995. Occupancy expense decreased $34,112, or 34.2% due to the fact that the Bank exercised its option to purchase the Downey Branch facility from the Federal Deposit Insurance Corporation (FDIC) and was able to significantly decrease the monthly expense on the lease by substituting it with an asset which will be depreciated over the life of that asset. Professional expenses increased $35,987, or 76.8%, due to the utilization of a marketing consultant to train the Bank's employees on the various products and a sales consultant to train the employees on how to sell those products. Other expenses decreased $105,972, or 51.5% due primarily to the decrease of $91,868, or 99.5%, in FDIC fees. Total other operating expenses as a percentage of total interest income decreased from 68.0% during the first quarter of 1995 to 64.6% during the first quarter of 1996. Liquidity and Interest Rate Sensitivity - --------------------------------------- At March 31, 1996, total earning assets were $60.3 million, or 87.4% of total assets. The Company's liquid assets were approximately $19 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 30.4% compared to 55.2% at December 31, 1995. This reflects the longer term securities in the Bank's available-for-sale portfolio as well as the $1.4 million in pledged securities. The Bank has outstanding commitments to lend in the amount of approximately $8.2 million at March 31, 1996 compared to $6.6 million at December 31, 1995. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company has no other material unrecorded commitments for funds. 8 9 Interest-bearing deposits with financial institutions at March 31, 1996 consisted exclusively of time certificates of deposit, all of which 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, 1996, the book value of these securities exceeded their market value by approximately $193,000. Securities totaling $1,400,000 were pledged to secure Treasury Tax and Loan deposits and public funds. The Company's loan portfolio was also relatively liquid with approximately 69% 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, 1996, the Company was in a liability sensitive position through its one year gap and an asset sensitive position in its over one year gap. The 90 day gap, (i.e., the difference between assets and liabilities that reprice in that period as a percentage of total assets) was negative, or liability sensitive, at 13%, and its cumulative gap was asset sensitive at 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 $ 1,700 $ - $ - $ - $ - $ 1,700 Securities 1,100 202 2,672 15,891 5,293 25,158 Deposits with other institutions 3,946 1,982 3,762 - - 9,690 Loans 15,980 81 329 5,628 1,709 23,727 - ------------------------------------------------------------------------------------------------------------ TOTAL $22,726 $ 2,265 $ 6,763 $21,519 $ 7,002 $60,275 ============================================================================================================ Interest Bearing Liabilities: Time Deposits: a) TCD's less than $100M $ 3,791 $ 1,912 $ 1,720 $ 862 $ 1 $ 8,286 b) TCD's $100M and over 2,421 1,810 1,050 371 - 5,652 Savings 9,212 - - - - 9,212 Money Market 8,723 - - - - 8,723 Now Accounts 7,749 - - - - 7,749 - ------------------------------------------------------------------------------------------------------------ TOTAL $31,896 $ 3,722 $ 2,770 $ 1,233 $ 1 $39,622 ============================================================================================================ Interest Sensitivity Gap: Interval $(9,170) $ (1,457) $ 3,993 $20,286 $ 7,001 Cumulative $(9,170) $(10,627) $(6,634) $13,652 $20,653 $20,653 ============================================================================================================ Ratio of cumulative gap to total assets (13)% (15)% (10)% 20% 30% 30% ============================================================================================================
At March 31, 1996, 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. 10 11 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 1 capital), and a leverage ratio of at least 3%. At March 31, 1996, the Bank had a total capital-to-risk-weighted assets ratio of 19.4%, with a tier 1 capital ratio of 18.2%, and a leverage ratio of 8.6%. Recent Accounting Developments - ------------------------------ In 1995, the FASB issued Statement No. 123, "Accounting for Stock-based Compensation". Statement No. 123 establishes financial accounting and reporting standards for stock-based employee compensation plans such as a purchase plan. The Statement generally suggests stock-based compensation transactions be accounted for based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. An enterprise may continue to follow the requirements of Accounting Principles Board (APB) Opinion No. 25, which does not require compensation to be recorded if the consideration to be received is at least equal to the fair value at the measurement date. If an enterprise elects to follow APB Opinion No. 25, it must disclose the pro forma effects on net income as if compensation were measured in accordance with the suggestions of Statement No. 123. The Company has not determined if it will continue to follow APB Opinion No. 25 or follow the guidance of Statement No. 123. However, adoption of this pronouncement in 1996 is not expected to have a material impact on the financial statements. 11 12 PART II. OTHER INFORMATION Items 1 - 4. Inapplicable Item 5. Other Information ----------------- On April 26, 1996, COMBANCORP signed an agreement in principle for BanPonce to acquire all of the common stock of COMBANCORP for $10,375,000 in cash. BanPonce, a $16 billion bank holding company based in Puerto Rico, operates 215 bank branches, including 29 in New York, 6 in New Jersey, 4 in Chicago and 1 in Los Angeles. The merger is conditioned upon obtaining the execution of a definitive agreement, approval of the shareholders of COMBANCORP, receipt of all required governmental and regulatory consents and other customary closing conditions. Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits (27) Financial Data Schedule (b) Reports on Form 8-K The registrant filed no reports on Form 8-K during the quarter ended March 31, 1996. 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 6, 1996 By: /s/ RICHARD F. DEMERJIAN --------------------------------- Richard F. Demerjian Chief Executive Officer Date: May 6, 1996 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-31-1996 JAN-01-1996 MAR-31-1996 1 5,010,455 9,690,000 1,700,000 0 120,000 25,038,203 0 23,726,665 402,433 68,969,617 62,524,042 0 223,948 0 4,453,300 0 0 1,768,327 68,969,617 650,258 560,253 0 1,210,511 305,080 305,080 905,431 (130,000) 3,317 782,117 144,263 144,263 0 0 83,863 0.15 0.15 0 0 0 0 0 0 0 0 0 0 0 0
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