-----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, U3dhlH1/wxkkvXW8a2wrnHSZe1PehJrA5gj6g04zNMBgVBGc75Qxdu3ZHfOGmjRq XKJeZOUu8pXUR4bTFojkLQ== 0000898430-96-003446.txt : 19960805 0000898430-96-003446.hdr.sgml : 19960805 ACCESSION NUMBER: 0000898430-96-003446 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960802 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CIVIC BANCORP CENTRAL INDEX KEY: 0000747205 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 680022322 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13287 FILM NUMBER: 96603035 BUSINESS ADDRESS: STREET 1: 2101 WEBSTER ST STREET 2: 14TH FLOOR CITY: OAKLAND STATE: CA ZIP: 94612 BUSINESS PHONE: 510-836-6500 MAIL ADDRESS: STREET 1: 2101 WEBSTER STREET STREET 2: 14TH FLOOR CITY: OAKLAND STATE: CA ZIP: 94612 10-Q 1 QUARTERLY REPORT FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Quarterly Report Under Section 13 or 15(d) of the Securities and Exchange Act of 1934 For the Quarter Ended Commission file number June 30, 1996 0-13287 - --------------------- ---------------------- CIVIC BANCORP (Exact name of Registrant as specified in its charter) California 68-0022322 - --------------------------------- ------------------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 2101 Webster Street, Oakland, California 94612 ---------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (510) 836-6500 --------------------- 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 ----- ----- Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of August 2, 1996: 4,514,903 The total number of pages in this form is 19 ------ The index of exhibits appears on page 18 ------ 1 CIVIC BANCORP AND SUBSIDIARY Index to Form 10-Q Page Number ----------- PART I Item 1. Financial Statements Consolidated Balance Sheets June 30, 1996, June 30, 1995 and December 31, 1995 3 Consolidated Statements of Operations - Three Months Ended June 30, 1996 and and June 30, 1995 and Six Months Ended June 30, 1996 and June 30, 1995 4-5 Consolidated Statements of Cash Flows - Six Months Ended June 30, 1996 and June 30, 1995 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II. Other Information 18 SIGNATURES 19 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CIVIC BANCORP AND SUBSIDIARY ---------------------------- CONSOLIDATED BALANCE SHEETS --------------------------- (In thousands except shares)
June 30 June 30 December 31 1996 1995 1995 ASSETS ------- ------- ----------- - ------ Cash and due from banks $ 17,314 $ 17,105 $ 16,758 Federal funds sold 12,200 15,100 14,800 -------- -------- -------- Total cash and cash equivalents 29,514 32,205 31,558 Securities available for sale 6,068 10,127 10,021 Securities held to maturity (market value of $44,092, $52,295 and $52,163, respectively) 43,838 51,711 51,199 Other securities 1,646 1,518 1,636 Loans: Commercial 79,765 64,646 70,417 Real estate-construction 2,574 4,224 4,067 Real estate-other 62,852 54,466 61,752 Installment and other 17,434 18,770 18,460 -------- -------- -------- Total loans 162,625 142,106 154,696 Less allowance for loan losses 5,050 4,499 4,960 -------- -------- -------- Loans - net 157,575 137,607 149,736 Interest receivable and other assets 3,443 4,215 3,914 Leasehold improvements and equipment - net 1,595 1,962 1,730 Foreclosed assets 422 884 770 Other assets held for sale 275 297 275 -------- -------- -------- TOTAL ASSETS $244,376 $240,526 $250,839 ======== ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ LIABILITIES Deposits: Noninterest-bearing $ 69,992 $ 68,313 $ 73,149 Interest-bearing: Checking 25,268 18,445 24,791 Money market 72,006 81,291 68,151 Time and savings 44,345 43,840 54,007 -------- -------- -------- Total deposits 211,611 211,889 220,098 Accrued interest payable and other liabilities 1,409 1,381 1,381 -------- -------- -------- Total liabilities 213,020 213,270 221,479 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY Preferred stock no par value; authorized, 10,000,000 shares; none issued or outstanding - - - Common stock no par value; authorized, 10,000,000 shares; issued and outstanding, 4,514,903, 4,447,945 and 4,488,485 shares 36,918 36,467 36,751 Retained deficit (5,501) (9,271) (7,411) Net unrealized gain (loss) on securities available for sale (61) 60 20 -------- -------- -------- Total shareholders' equity 31,356 27,256 29,360 -------- -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $244,376 $240,526 $250,839 ======== ======== ========
3 CIVIC BANCORP AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS ------------------------------------- (In thousands except shares and per share amounts) (unaudited)
Three Months Ended Six Months Ended ---------------------------------- ---------------------------------- June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995 ------------- ------------- ------------- ------------- INTEREST INCOME: Loans $4,053 $ 4,012 $ 8,185 $ 7,997 Securities available for sale, securities held to maturity, and other securities 925 (1,057) 1,858 2,105 Tax exempt securities 31 3 34 7 Federal funds sold 19 240 43 414 ------ ---------- ---------- ---------- Total interest income 5,028 5,312 10,120 10,523 INTEREST EXPENSE: Deposits (1,115) (1,303) 2,237 2,608 Other borrowings 17 - 31 - ------ ---------- ---------- ---------- Total interest expense 1,132 1,303 2,268 2,608 ------ ---------- ---------- ---------- NET INTEREST INCOME 3,896 4,009 7,852 7,915 Provision for loan losses 225 (1,440) 450 1,740 ------ ---------- ---------- ---------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 3,671 2,569 7,402 6,175 ------ ---------- ---------- ---------- NONINTEREST INCOME: Customer service fees 145 143 280 290 Other 33 274 77 317 ------ ---------- ---------- ---------- Total other income 178 417 357 607 NONINTEREST EXPENSES: Salaries and employee benefits 1,491 1,379 3,025 2,911 Occupancy 253 246 502 494 Equipment 214 221 428 444 Goodwill and core deposit amortization 65 71 129 143 Data processing services 61 77 125 148 FDIC insurance - 126 1 252 Telephone and postage 70 65 126 130 Consulting fees 60 26 120 116 Legal fees 45 67 90 101 Marketing 61 61 116 119 Foreclosed asset expense 73 (95) 153 (45) Other 276 337 644 749 ------ ---------- ---------- ---------- Total other expenses 2,669 2,581 5,459 5,562 ------ ---------- ---------- ---------- INCOME BEFORE INCOME TAXES 1,180 405 2,300 1,220 Income tax expense 195 35 390 70 ------ ---------- ---------- ---------- NET INCOME $ 985 $ 370 $ 1,910 $ 1,150 ====== ========== ========== ========== NET INCOME PER COMMON SHARE $0.21 $0.08 $0.40 $0.25 ====== ========== ========== ========== Weighted average shares outstanding to compute net income per common share 4,609,492 4,519,336 4,589,331 4,499,305 ========= ========= ========= =========
4 CIVIC BANCORP AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------- (In thousands)
Six Months Ended June 30, ---------------------------- 1996 1995 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,910 $ 1,150 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 450 1,740 Depreciation and amortization 536 686 Loss on sale of fixed assets - 32 Loss (gain) on sale of foreclosed assets 43 (187) Write-down of foreclosed assets 73 20 Decrease in deferred loan fees (58) (80) Change in assets and liabilities: Decrease in interest receivable and other assets 342 1,006 Increase in accrued interest payable and other liabilities 28 197 ------- -------- Net cash provided by operating activities 3,324 4,564 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (193) (204) Expenditures on foreclosed assets - (22) Proceeds from sales of foreclosed assets 307 367 Pay-down on other assets held for sale - 9 Net (increase) decrease in loans (8,306) 11,771 Activities in securities held to maturity: Proceeds from maturing securities 11,084 10,000 Purchases of securities (3,730) (10,107) Activities in securities available for sale: Proceeds from maturing securities 10,000 12,073 Purchases of securities (6,210) (6,034) ------- -------- Net cash provided by investing activities 2,952 17,853 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from exercise of stock options 167 - Net decrease in deposits (8,487) (21,942) ------- -------- Net cash used in financing activities (8,320) (21,942) ------- -------- Net (decrease) increase in cash and cash equivalents (2,044) 475 Cash and cash equivalents at beginning of period 31,558 31,730 ------- -------- Cash and cash equivalents at end of period $29,514 $ 32,205 ======= ======== Cash paid during year for: Interest $ 2,370 $ 2,575 ======= ======== Income taxes $ 955 $ 28 ======= ======== Supplemental schedule of noncash investing activity: Loans transferred to foreclosed assets $ 75 $ 462 ======= ========
5 CIVIC BANCORP AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The unaudited consolidated financial statements of Civic Bancorp and subsidiary are prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q. In the opinion of management, all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods have been included. These unaudited consolidated financial statements should be read in conjunction with the Company's annual report on Form 10-K for the year ended December 31, 1995. The results of operations and cash flows are not necessarily indicative of those expected for the year. Net income per share computed on a primary and fully diluted basis is substantially the same. 2. SUBSEQUENT EVENT - QUASI-REORGANIZATION The Company's deficit retained earnings at June 30, 1996 were incurred primarily as a result of substantial writedowns of real estate loans and foreclosed assets in 1992 and 1993, and the conditions giving rise to those losses have substantially changed. As a result, the Company determined that it was appropriate to effect a quasi-reorganization which was approved by the Company's Board of Directors on April 17, 1996 and by the shareholders on May 30, 1996, and to be effective July 1, 1996. In a quasi-reorganization, assets and liabilities are restated to fair values at the effective date. However, no adjustments were made to the assets and liabilities of the Company since, in the opinion of management, the book value of the Company's assets and liabilities approximated fair value at July 1, 1996. As part of a quasi-reorganization, the deficit of $5.5 million in retained earnings was eliminated against common stock (paid-in capital). Retained earnings in the future will be dated to reflect only the results of operations subsequent to the effective date of the quasi-reorganization. Any future tax effects of the temporary differences, operating loss and tax credit carryforward items which arose prior to the effective date of the quasi-reorganization will be reported as a direct credit/debit to common stock (paid-in capital) as they are realized. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS OVERVIEW For the six months ended June 30, 1996, the Company reported net income of $1,910,000, or $.41 per share compared to a net income of $1,150,000 or $.26 6 per share for the same period in 1995. The annualized return on average assets was 1.62% for the six months ended June 30, 1996 compared to .91% for the same period in 1995. The annualized return on average shareholders' equity for the six months ended June 30, 1996 and 1995 was 12.56% and 8.54%, respectively. RESULTS OF OPERATIONS Net interest income for the six months ended June 30, 1996 was consistent with the prior year of $7.9 million. Total interest income for the first six months of 1996 equaled $10.1 million, a decrease of $.4 million from the same period in 1995. The impact on interest income from the decline in the volume of earning assets was offset by a shift in the mix of earning assets to higher yielding loans. Total average earning assets declined $13.0 million or 5.6% to $218.5 million for the first half of 1996 from $231.5 million for the same period of the prior year, however average loans and leases, as a percentage or total earning assets, increased to 72.3% from 64.2% for the same periods, respectively. Average loans yielded 10.5% as compared to 6.4% on investments and Federal fund sales. Total interest expense for the first six months of 1996 and 1995 equaled $2.3 million and $2.6 million, respectively, a decrease of $.3 million or 13.0%. The decrease is due to the lower volume of interest bearing liabilities which averaged $137.6 million for the first half of 1996 from $156.5 million for the same period of the prior year. In addition to reducing interest expense, the decline in interest bearing liabilities also had a positive effect on net interest margin by creating a shift in the mix of funding liabilities toward non-interest bearing liabilities, primarily demand deposits and capital. Demand deposits and capital, as a percentage of total liabilities, increased to 41.6% for the first half of 1996 from 37.9% for the same period of the prior year. The net interest margin increased to 7.27% at June 30, 1996 from 6.90% at June 30, 1995, an increase of .37%. The increase is primarily attributed to the shifts in earning assets and funding liabilities as previously discussed. 7 The following table presents an analysis for the average daily balances, interest income and expense and the interest rates calculated for each category of interest earning assets and interest-bearing liabilities for the six months ended June 30, 1996 and 1995.
Interest Rates Interest Rates Average Income/ Earned/ Average Income/ Earned/ Balance Expense/2/ Paid Balance Expense/2/ Paid ------- ---------- ------- ------- ---------- ------- ASSETS Securities available for sale $ 8,257 $ 243 5.95% $ 10,828 $ 329 6.13% Securities held for investment: U.S. Treasury securities 10,783 329 6.17% 14,219 368 5.22% U.S. Government agencies 36,105 1,220 6.83% 40,307 1,320 6.60% Municipal securities 1,566 34 4.43% 227 7 6.37% Commercial Paper 632 19 5.95% 1,477 45 6.08% Other securities 1,627 47 5.85% 1,536 43 5.60% Federal funds sold 1,607 43 5.40% 14,248 414 5.86% Loans/2,3/ Commercial 77,386 4,104 10.72% 68,817 3,848 11.28% Real estate-construction 3,130 165 10.64% 4,872 258 10.67% Real estate-other 60,344 3,063 10.26% 55,197 2,884 10.54% Installment and other 17,035 853 10.12% 19,737 1,007 10.28% -------- ------- ----- -------- ------- ----- Total Loans 157,895 8,185 10.48% 148,623 7,997 10.85% -------- ------- ----- -------- ------- ----- Total Earning Assets 218,417 10,120 9.37% 231,465 10,523 9.17% Cash and due from banks 16,119 15,820 Leasehold improvements and equipment - net 1,675 2,022 Interest receivable and other assets 3,511 4,412 Foreclosed assets 737 1,072 Assets held for sale 275 409 Less Allowance for Loan Loss (4,999) (3,268) -------- -------- TOTAL ASSETS $235,790 $251,932 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Interest-bearing: Checking $ 22,876 107 0.95% $ 21,101 132 1.26% Money market 70,033 1,106 3.19% 88,052 1,444 3.31% Time and savings 43,601 1,024 4.75% 47,350 1,032 4.39% Other borrowed funds 1,121 31 5.62% - - -% -------- ------- ----- -------- ------- ----- Total interest-bearing liabilities 137,631 2,268 3.33% 156,503 2,608 3.36% Demand deposits 65,959 66,964 Other liabilities 1,790 1,523 Shareholders' equity 30,410 26,942 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $235,790 $251,932 ======== ======== Net Interest Income $ 7,852 $ 7,915 ======= ======= Net Interest Margin 7.27% 6.90% ===== =====
- -------------------------------------------------------------------------------- (1) Tax-exempt interest income has not been adjusted to a fully taxable equivalent basis. (2) Non-performing loans have been included in the average loan balances. Interest income is included on non-accrual loans only to the extent cash payments have been received. (3) Interest income includes loan fees on commercial loans of $221,000 and $223,000 for June 30, 1996 and 1995, respectively; fees on real estate loans of $236,000 and $184,000 for June 30, 1996 and 1995, respectively; and fees on installment and other loans of $16,000 and $9,000 for June 30, 1996 and 1995, respectively. 8 The following table sets forth changes in interest income and interest expense for each major category of interest-earning assets and interest-bearing liabilities, and the amount of change attributable to volume and rate changes for the six month period ended June 30, 1996
Analysis of Changes in Interest Income and Expense Increase (Decrease) Due to Change in 1996 over 1995 Volume/1/ Rate/2/ Total --------- ------- ----- Increase (decrease) in interest income Securities available for sale $ (78) $ (8) $ (86) Securities held to maturity: U.S. Treasury securities (89) 50 (39) U.S. government agency (138) 38 (100) Municipal securi3 42 (15) 27 Commercial paper (26) 0 (26) Other securities 2 2 4 Federal funds sold (367) (4) (371) Loans: Commercial 480 (224) 256 Real estate-construction (92) (1) (93) Real estate-other 269 (90) 179 Installment and other (138) (16) (154) ----- ----- ------ Total loans 519 (331) 188 ----- ----- ------ Total increase (decrease) $(135) $(268) $ (403) ----- ----- ------ (Increase) decrease in interest expense: Deposits: Interest-bearing checking $ (11) $ 36 $ 25 Money market 295 43 338 Savings and time 82 (74) 8 Other borrowed funds (31) 0 (31) ----- ----- ------ Total (increase) decrease $ 335 $ 5 $ 340 ----- ----- ------ Total change in net interest income $ 200 $(263) $ (63) ===== ===== ======
(1) Changes not solely attributed to rate or volume have been allocated to volume. (2) Loan fees are reflected in rate variances. (3) Tax-exempt interest income has not been adjusted to a fully taxable equivalent basis. Provision for Loan Losses The provision for loan losses for the six months ended June 30, 1996 was $450,000, a decrease of $1,290,000 or 74.1% from the six months ended June 30, 1995. In the second quarter of 1995, the Company made a special provision 9 following the completion of a regular examination by the Federal Reserve Bank of San Francisco. The provision in 1996 reflects a return to a normalized level. Noninterest Income Non-interest income for the six months ended June 30, 1996 was $357,000, a decrease of $250,000 or 41.2% from the six months ended June 30, 1995. The decrease in other income is attributed to non-recurring transactions during the first six months of 1995 which included a gain on the sale of foreclosed property of $72,000, the recovery of $132,000 related to the sale of mortgage division in September 1994 and interest income of $58,000 allowed on a income tax refund. Customer service fees for the six months ended June 30, 1996 declined $10,000 or 3.4% from the six months ended June 30, 1995 primarily due to the decrease in deposit volumes. Noninterest Expense Noninterest expense totaled $5.5 million and $5.6 million for the six months ended June 30, 1996 and 1995, respectively. Salaries and employee benefits expense increased $114,000 or 3.9% from June 30, 1995 due an increase in incentive accruals and normal merit increases. Full time equivalent personnel numbered 102 on June 30, 1996 compared to 116 on June 30, 1995. For the six months ended June 30, 1996 the Company recorded expenses of $153,000 associated with the maintenance of foreclosed assets which included a loss of $43,000 on the sale of one property. For the same period in 1995, recoveries associated with foreclosed assets exceeded maintenance expenses by $45,000. FDIC insurance expense declined to $1,000 for the first half of 1996 from $252,000 for the same period of the prior year due to a reduction in the assessment rate. Other expense declined $105,000 to $644,000 for the first half of 1996 from $749,000 for the first half of 1995. Included in 1995 was an expense of $85,000 resulting from a legal settlement. The following table summarizes the significant components of noninterest expense for the dates indicated: 10
Noninterest Expense -------------------------------------------- June 30 June 30 Dollar % 1996 1995 Change Change ------- ------- ------ ------ Salaries and related benefits............................... $3,025 $2,911 $ 114 3.9% Occupancy................................................... 502 494 8 1.6% Equipment................................................... 428 444 (16) -3.6% Goodwill and core deposit amortization...................... 129 143 (14) -9.7% Data processing services.................................... 125 148 (23) -15.5% FDIC insurance.............................................. 1 252 (251) -99.6% Telephone and postage....................................... 126 130 (4) -3.0% Consulting fees............................................. 120 116 4 3.4% Legal fees.................................................. 90 101 (11) -10.8% Marketing................................................... 116 119 (3) -2.5% Foreclosed asset expenses................................... 153 (45) 198 -440.0% Other....................................................... 644 749 (105) -14.0% ------ ------ ------ ------ TOTAL NONINTEREST EXPENSE................................... $5,459 $5,562 $ (103) -1.8% ====== ====== ====== ======
Provision for Income Taxes At December 31, 1995 the Company had net deferred tax assets of approximately $3.1 million and a valuation allowance of the same amount. At that time, the Company also had approximately $1.1 million in state net operating loss carryforwards and $455,000 in Federal income tax credits. The effective tax rate of the Company's $390,000 provision for income taxes for the six months ended June 30, 1996 differs from the Federal statutory income tax rate due to a change in the valuation allowance. FINANCIAL CONDITION Loans Average loans increased $9.3 million or 6.2% to $157.9 million for the six months ended June 30, 1996 from $148.6 million for the same period in 1995. The increase in average loans is attributed to an improving economy and an overall increase in loan demand. Real estate construction loans, as a percentage of total loans, were 1.6% at June 30, 1996 compared to 3.0% the prior year. The relatively low level of real estate construction loans reflects management's decision to curtail real estate construction lending because the risks associated with construction loans are generally higher than those of other forms of lending. Other real estate loans consist of mini-perm loans and land acquisition loans which are primarily owner-occupied and are generally granted based on the rental or lease income stream generated by the property. 11 The following table sets forth the amount of loans outstanding in each category and the percentage of total loans outstanding for each category at the dates indicated.
June 30 Dec. 31 June 30 ----------------- ----------------- ----------------- 1996 1995 1995 ----------------- ----------------- ----------------- Amount Percent Amount Percent Amount Percent -------- ------- -------- ------- -------- ------- (Dollars in thousands) Commercial $ 79,765 49.0% $ 70,417 45.5% $ 64,646 45.5% Real estate - construction 2,574 1.6% 4,067 2.6% 4,224 3.0% Real estate - other 62,852 38.6% 61,752 39.9% 54,466 38.3% Installment and other 17,434 10.7% 18,460 11.9% 18,770 13.2% -------- ----- -------- ----- -------- ----- TOTAL $162,625 100.0% $154,696 100.0% $142,106 100.0% ======== ===== ======== ===== ======== =====
Non-Performing Assets The following table provides information with respect to the Company's non- performing assets at the dates indicated.
June 30 Dec. 31 June 30 1996 1995 1995 ------- --------- ------- (Dollars in thousands) Loans 90 days or more past due and still accruing... $ 518 $ 325 $2,463 Non-accrual loans................................... 2,620 2,859 2,737 Other assets held for sale.......................... 275 275 297 Foreclosed assets................................... 422 770 884 ------ ------ ------ Total non-performing assets........................ $3,835 $4,229 $6,381 ====== ====== ====== Non-performing assets to period end loans, other assets held for sale plus foreclosed assets 2.34% 2.71% 4.45% ====== ====== ======
At June 30, 1996 the recorded investment in loans considered to be impaired under SFAS No. 114 was $2,620,000, all of which were on a non-accrual basis. Included in this amount are $283,000 of impaired loans for which the related allowance for loan losses is $21,000, and $2,337,000 of impaired loans which approximate the fair value of the supporting collateral and accordingly do not have an associated allowance for loan loss. For the six months ended June 30, 1996 the average recorded investment in impaired loans was $2.7 million and no income was recognized on impaired loans. If interest income on those loans had been recognized, such income would have approximated $143,000. Allowance for Loan Losses The allowance for loan losses is maintained at a level that management of the Company considers to be adequate for losses that can be reasonably anticipated 12 in relation to the risk of future losses inherent in the loan portfolio. In assessing the adequacy of the allowance for loan losses, management relies on its ongoing review of the loan portfolio to identify potential problem loans in a timely manner, ascertain whether there are probable losses which must be charged off and assess the aggregate risk characteristics of the portfolio. Factors which influence management's judgment include the impact of forecasted economic conditions, historical loan loss experience, and the evaluation of risks which vary with the type of loan, creditworthiness of the borrower and the value of the underlying collateral. Analysis of the Allowance for Loan Losses The following table summarizes changes in the allowance for loan losses for the periods indicated:
Six Months Year Six Months Ended Ended Ended 6-30-96 12-31-95 6-30-95 ---------- -------- ---------- (Dollars in thousands) Balance, at beginning of period......... $4,960 $3,216 $ 3,216 Charge-offs: Commercial............................. 95 188 50 Real estate - construction............. 230 884 614 Real estate - other.................... 175 33 - Installment and other.................. 126 310 164 ------ ------ ------- Total charge-offs..................... 626 1,415 828 Recoveries: Commercial............................. 111 336 215 Real estate - construction............. 45 144 101 Real estate - other.................... 105 34 7 Installment and other.................. 5 80 48 ------ ------ ------- Total recoveries...................... 266 594 371 ------ ------ ------- Net charge-offs......................... 360 821 457 Provision charged to operations......... 450 2,565 (1,740) ------ ------ ------- Balance, at end of period............... $5,050 $4,960 $ 4,499 ====== ====== ======= Ratio of net charge-offs to average loans (annualized)..................... 0.45% 0.55% 0.61% ====== ====== ======= Allowance at period end to total loans outstanding............................ 3.11% 3.21% 3.17% ====== ====== =======
The balance in the allowance for loan losses at June 30, 1996 was $5.1 million or 3.11% of total loans compared to $4.5 million or 3.17% at June 30, 1995. The coverage of the allowance for loan losses to non-performing loans has 13 stabilized and management believes that the allowance for loan losses was adequate at June 30, 1996 based upon the detailed review of the loan portfolio. Potential Problem Loans At June 30, 1996 there were no loans classified for regulatory purposes as loss, doubtful, substandard or special mention that have not been disclosed in the discussion above that (i) represented or resulted from trends or uncertainties which management anticipated would have a material impact on future operating results, liquidity, capital resources or (ii) represented material credits about which management was aware of information that would cause serious doubt as to the ability of the borrower to comply with the loan repayment terms. Investment Portfolio The Company's investment portfolio is used primarily for liquidity purposes and secondarily for investment income. The portfolio is primarily composed of US Treasury and US government agency instruments and investment grade municipal obligations. The table below summarizes the book value and estimated market values of investment securities at the dates indicated.
June 30, ---------------------------------------------- 1996 1995 ------------------- -------------------- Book Market Book Market Value Value Value Value ------- ------- ------- ------- (Dollars in thousands) SECURITIES HELD TO MATURITY: U.S. Treasury securities........ $10,818 $10,805 $10,781 $10,809 U.S. government agencies and corporation................... 29,081 29,434 40,517 41,064 Municipal securities............ 3,790 3,699 226 227 Collateralized mortgage obligations.................... 149 154 187 195 ------- ------- ------- ------- TOTAL......................... $43,838 $44,092 $51,711 $52,295 ======= ======= ======= ======= SECURITIES AVAILABLE FOR SALE: U.S. Treasury securities........ $ - $ - $10,066 $10,127 U.S. government agencies and corporation................... 6,129 6,068 - - ------- ------- ------- ------- TOTAL......................... $ 6,129 $ 6,068 $10,066 $10,127 ======= ======= ======= =======
Deposits For the six months ended June 30, 1996, average deposits totaled $202.5 million, a decrease of $21.0 million or 9.4% from $223.5 million for the same period in 1995. Management attributes the decline in deposits, particularly money market deposits, to increased competition and availability of nondeposit products such as mutual funds. 14 For the first half of 1996, average demand deposits totaled $66.0 million a decrease of $1.0 million or 1.5% from the same period in 1995. Average demand deposits as a percentage of total deposits increased to 32.6% for the six months ended June 30, 1996 from 30.0% for the same period of the prior year. Average interest-bearing deposits decreased $20.0 million or 12.8% for the six months ended June 30, 1996 from the same period in 1995. The table below sets forth information regarding trends in the Bank's average deposits by amount and percentage of deposits for the six months ended June 30, 1996 and 1995.
Average Deposits ------------------------------------------- Six Months Ended June 30, ------------------------------------------- 1996 1995 -------------------- -------------------- Amount Percentage Amount Percentage -------- ---------- -------- ---------- Demand accounts............ $ 65,959 32.5% $ 66,964 29.9% Interest-bearing checking.. 22,876 11.2% 21,101 9.4% Money market............... 70,033 34.5% 88,052 39.4% Savings and time........... 43,601 21.5% 47,350 21.1% -------- ----- -------- ----- Total................. $202,469 100.0% $223,467 100.0% ======== ===== ======== =====
Certificates of deposit over $100,000 are generally considered a higher cost and less stable form of funding than lower denomination deposits and may represent a greater risk of interest rate and volume volatility than small retail deposits. Time certificates of deposit over $100,000 or more at June 30, 1996 had the following schedule of maturities:
(In thousands) June 30, 1996 ------------- Three months or less $10,208 After three months through six months 7,079 After six months through twelve months 2,665 After twelve months 212 ------- Total $20,164 =======
LIQUIDITY AND CAPITAL RESOURCES Liquidity Liquidity management refers to the Bank's ability to acquire funds to meet loan demand, fund deposit withdrawals and to service other liabilities as they come due. To augment liquidity, the Bank has informal Federal Funds borrowing arrangements with correspondent banks totaling $24.0 million and maintains a credit arrangement with the Federal Reserve Bank of San Francisco for open window borrowing. Additionally, at June 30, 1996, unpledged government securities available to secure additional borrowing in the form of reverse 15 repurchase agreements totaled approximately $37.0 million. At June 30, 1996 and 1995, the Bank had no outstanding borrowings against these arrangements. The Bank is a member of the Federal Home Loan Bank of San Francisco and through membership has the ability to pledge qualifying collateral for short term borrowing, (up to six months), and long term borrowing, (up to five years). At June 30, 1996 and 1995 there were no outstanding advances. The liquidity position of the Company declined by $2.0 million during the first half of 1996 as the funds provided by operating and investing activities were exceeded by the funds required by financing activities. Operating activities contributed $3.3 million and maturing loans and investing activities provided $3.0 million in cash and cash equivalents. Cash and cash equivalents of $8.3 million were required to meet the decrease in deposits. The liquidity position of the Company may be expressed as a ratio defined as (a) cash, federal funds sold, other unpledged short term investments and marketable securities, including those maturing after one year, (b) divided by total assets less pledged securities. Using this definition at June 30, 1996, the Company had a liquidity ratio of 30.6% as compared to 35.3% at December 31, 1995. The decline in the liquidity position reflects the shift in earning assets from securities to loans. Capital Resources Total shareholders' equity increased to $31.4 million at June 30, 1996 from $29.4 million at December 31, 1995 reflecting the addition to capital of $167,000 from the exercise of employee stock options and retained income of $1,910,000 offset by the change in the unrealized gain (loss) on securities available for sale. The Company and the Bank are subject to capital adequacy guidelines issued by the Federal Reserve Board of Governors which require a minimum risk-based capital ratio of 8%. At least 4% must be in the form of "Tier 1" capital and consists of common equity, non-cumulative perpetual preferred stock and minority interests in the equity accounts of consolidated subsidiaries. "Tier 2" capital consists of cumulative and limited-life preferred stock, mandatory convertible securities, subordinated debt and, subject to certain limitations, (no more than 1.25% of risk-weighted assets) the allowance for loan losses. 16 At June 30, 1996, the Company's risk-based capital ratio was 18.23%. The following table presents the Company's risk-based capital and leverage ratios as of June 30, 1996 and December 31, 1995.
RISK-BASED CAPITAL RATIOS ------------------------------------ (Dollars in thousands) June 30, 1996 December 31, 1995 --------------- ----------------- Amount Ratio Amount Ratio -------- ------- -------- ------- Company Capital Ratios: Tier 1 Capital $ 30,265 16.95% $ 28,102 16.04% Tier 1 minimum requirement 7,139 4.00% 7,008 4.00% -------- ----- -------- ----- Excess $ 23,125 12.95% $ 21,094 12.04% ======== ===== ======== ===== Total Capital $ 32,531 18.22% $ 30,292 17.29% Total Capital minimum requirement 14,278 8.00% 14,016 8.00% -------- ----- -------- ----- Excess $ 18,252 10.22% $ 16,276 9.29% ======== ===== ======== ===== Risk-adjusted assets $178,487 $175,194 ======== ======== Leverage ratio 12.11% 10.99% Leverage ratio minimum 4.00% 4.00% ----- ----- Leverage ratio excess 8.11% 6.99% ===== =====
17 PART II. OTHER INFORMATION Item 1. Legal Proceedings - None Item 2. Changes in Securities - None Item 3. Defaults Upon Senior Securities - None Item 4. Submission of Matters to a Vote of Security Holders (a) The annual meeting of shareholders of Civic BanCorp was held on May 30, 1996. (b) With respect to the election of directors at the annual meeting of shareholders on May 30, 1996 (i) proxies for the meeting were solicited pursuant to Regulation 14 under the Securities Exchange Act of 1934, (ii) there was no solicitation in opposition to management's nominees as listed in the proxy statement, and (iii) all such nominees were elected. (c) At the meeting, shareholders approved the Civic BanCorp Quasi- reorganization as described in the proxy statement and in footnote 2 - Subsequent Event - Quasi-reorganization. The plan was approved by 2,426,056 votes in favor, 15,008 votes against and 10,893 votes abstaining. The total number of shares of the Company's common stock outstanding as of April 11, 1996, the record date of the annual meeting was 4,514,203. Item 5. Other Information - None Item 6. Exhibits and Reports on Form 8-K - None 18 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 and in the capacity indicated. CIVIC BANCORP ------------- (Registrant) Date: August 2, 1996 By: /s/ HERBERT FOSTER ------------------------------------ Herbert Foster Chairman Chief Executive Officer 19 EX-27 2 FINANCIAL DATA SCHEDULE
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FILING. 1,000 6-MOS DEC-31-1995 JAN-01-1996 JUN-30-1996 17,314 0 12,200 0 6,068 43,838 44,092 162,625 5,050 244,376 211,611 0 1,409 0 0 0 36,918 (5,562) 244,376 8,185 1,935 0 10,120 2,237 2,268 7,852 450 0 5,459 2,300 2,300 0 0 1,910 .41 .41 7.27 2,620 518 0 0 4,960 626 266 5,050 5,050 0 0
-----END PRIVACY-ENHANCED MESSAGE-----