-----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, Hxs6tdhe1oixREqghxfYT1qQJ7eDNymJIvhAcSVlD0qY+B5jgA/5qK3CnMT8lKFM lAxsLahcG0AgUIa6QyltRA== 0000929624-96-000006.txt : 19960514 0000929624-96-000006.hdr.sgml : 19960514 ACCESSION NUMBER: 0000929624-96-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960513 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: 96561212 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 March 31, 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 April 30, 1996: 4,514,203 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 March 31, 1996, March 31, 1995 and December 31, 1995 3 Consolidated Statements of Operations - Three Months Ended March 31, 1996 and March 31, 1995 4 Consolidated Statements of Cash Flows - Three Months Ended March 31, 1996 and March 31, 1995 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6 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) March 31 March 31 December 31 1996 1995 1995 --------- ---------- ----------- ASSETS - ------ Cash and due from banks $13,465 $13,578 $16,758 Federal funds sold 8,850 32,000 14,800 --------- ---------- ---------- Total cash and cash equivalents 22,315 45,578 31,558 Securities available for sale 7,908 10,123 10,021 Securities held to maturity (market value of $49,030, $54,729 and $52,163, respectively) 48,539 54,923 51,199 Other securities 1,576 1,509 1,636 Loans: Commercial 76,600 69,168 70,417 Real estate-construction 3,934 4,177 4,067 Real estate-other 55,887 56,364 61,752 Installment and other 17,067 19,704 18,460 --------- ---------- ---------- Total loans 153,488 149,413 154,696 Less allowance for loan losses 5,076 3,242 4,960 --------- ---------- ---------- Loans - net 148,412 146,171 149,736 Interest receivable and other assets 3,825 4,464 3,914 Leasehold improvements and equipment - net 1,656 2,011 1,730 Foreclosed assets 712 795 770 Other assets held for sale 275 306 275 --------- ---------- ---------- TOTAL ASSETS $235,218 $265,880 $250,839 ========= =========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ LIABILITIES Deposits: Noninterest-bearing $64,257 $74,761 $73,149 Interest-bearing: Checking 21,971 22,237 24,791 Money market 71,250 92,817 68,151 Time and savings 45,376 47,546 54,007 --------- ---------- ---------- Total deposits 202,854 237,361 220,098 Accrued interest payable and other liabilities 1,952 1,653 1,381 --------- ---------- ---------- Total liabilities 204,806 239,014 221,479 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, 4,514,203, 4,447,945 and 4,488,485 shares 36,914 36,467 36,751 Retained deficit (6,486) (9,641) (7,411) Net unrealized (loss) gain on securities available for sale (16) 40 20 --------- ---------- ---------- Total shareholders' equity 30,412 26,866 29,360 --------- ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $235,218 $265,880 $250,839 ========= ========== ==========
3 CIVIC BANCORP AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS -------------------------------------
(In thousands except shares and per share amounts) Three Months Ended March 31, ----------------------------- 1996 1995 INTEREST INCOME: ------------ ----------- Loans $4,132 $3,985 Securities available for sale, securities held for investment and other securities 933 1,048 Tax exempt securities 3 4 Federal funds sold 24 174 ------------ ----------- Total interest income 5,092 5,211 INTEREST EXPENSE: Deposits 1,122 1,305 Other borrowing 14 - ------------ ----------- Total interest expense 1,136 1,305 ------------ ----------- NET INTEREST INCOME 3,956 3,906 Provision for loan losses 225 300 ------------ ----------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 3,731 3,606 ------------ ----------- NONINTEREST INCOME: Customer service fees 135 147 Other 44 43 ------------ ----------- Total noninterest income 179 190 NONINTEREST EXPENSE: Salaries and employee benefits 1,534 1,532 Occupancy 249 248 Equipment 214 223 Goodwill and core deposit amortization 64 72 Data processing services 64 71 FDIC insurance 1 126 Telephone and postage 56 65 Consulting fees 60 90 Legal fees 45 34 Marketing 55 58 Foreclosed asset expense 80 50 Other 368 412 ------------ ----------- Total noninterest expense 2,790 2,981 ------------ ----------- INCOME BEFORE INCOME TAXES 1,120 815 Income tax expense 195 35 ------------ ----------- NET INCOME $ 925 $ 780 ============ =========== NET INCOME PER COMMON SHARE $0.20 $0.18 ============ =========== Weighted average shares outstanding used to compute net income per common share 4,569,171 4,448,033 ============ ===========
4 CIVIC BANCORP AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------- (In thousands)
Three Months Ended March 31, ---------------------------- 1996 1995 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 925 $ 780 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 225 300 Depreciation and amortization 239 311 Write-down of foreclosed assets 58 20 (Decrease) increase in deferred loan fees (42) 2 Change in assets and liabilities: Decrease in interest receivable and other assets 24 757 Increase in accrued interest payable and other liabilities 571 469 -------- ------- Net cash provided by operating activities 2,000 2,639 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (80) (63) Net decrease in loans 1,141 4,565 Expenditures on foreclosed assets - (29) Proceeds from sales of foreclosed assets - 276 Activities in securities held to maturity: Proceeds from maturing securities 5,067 6,062 Purchases of securities (2,290) (3,025) Activities in securities available for sale: Proceeds from maturing securities 5,000 5,000 Purchases of securities (3,000) (5,107) -------- ------- Net cash provided by investing activities 5,838 7,679 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from exercise of stock options 163 - Net (decrease) increase in deposits (17,244) 3,530 -------- ------- Net cash (used in) provided by financing activities (17,081) 3,530 -------- ------- Net (decrease) increase in cash and cash equivalents (9,243) 13,848 Cash and cash equivalents at beginning of period 31,558 31,730 -------- ------- Cash and cash equivalents at end of period $22,315 $45,578 ======== ======= Cash paid during year for: Interest $ 1,184 $ 1,282 ======= ======= Income taxes $ 30 - ======= ======= Supplemental schedule of non-cash investing activity: Loans transferred to foreclosed assets - $ 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 (the Company) have been prepared in accordance with generally accepted accounting principles and with the instructions to Form 10-Q. In the opinion of management, all necessary adjustments have been made to fairly present the financial position, results of operations and cash flows for the interim periods presented. 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 complete fiscal year. Net income per common share computed on a primary and fully diluted basis is substantially the same. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 Overview For the three months ended March 31, 1996, the Company reported net income of $925,000, or $.20 per share compared to a net income of $780,000 or $.18 per share for the same period of the prior year. The annualized return on average assets was 1.57% for the three months ended March 31, 1996 compared to 1.23% for the same period of the prior year. The annualized return on average shareholders' equity for the three months ended March 31, 1996 and 1995 was 12.37% and 11.79%, respectively. RESULTS OF OPERATIONS Net interest income for the three months ended March 31, 1996 was $4.0 million, increasing $50,000 or 1.3% from net interest income of $3.9 million for the same period in 1995. Net interest income was consistent with the prior year as the positive impacts of a more favorable mix of earning assets and a decrease in the volume of interest bearing liabilities were offset by the negative impact of a decrease in the volume of earning assets. Total interest income for the first three months of 1996 equaled $5.1 million, a decrease of $119,000 from interest income earned in the same period in 1995. The decrease in total interest income was attributed to the decrease in total average earning assets which was partially offset by a shift in earning assets to higher yielding loans from Federal funds sold and investment securities. Average earning assets decreased $14.3 million or 6.1% to $218.7 million for the first quarter of 1996 from $233.0 million for the same period of the prior year. Offsetting the 6 decline in earning assets was an increase in the average loan volume of $7.6 million which has a higher rate of return than that of Federal fund sold and securities. Total interest expense for the first three months of 1996 equaled $1.1 million and decreased 13.0% from the $1.3 million for the three months ended March 31, 1995 due to a decline of $21.9 million or 13.7% in the volume of interest bearing liabilities. The net interest margin increased 47 basis points to 7.27% for the first quarter of 1996 from 6.80% for the same period of the prior year. The increase in the margin is primarily attributed to the shift in earning assets to higher yielding loans, as previously discussed, and a shift in the proportion of total assets funded by interest-free liabilities. The proportion of total assets funded by demand deposits and capital increased to 41.3% for the first quarter of 1996 from 37.0% for the first quarter of 1995. Conversely, the proportion of total assets funded by interest-bearing liabilities decreased to 58.7% from 63.0% from the same period, respectively. 7 The following table presents an analysis of the components of net interest income for the three month periods ended March 31, 1996 and 1995. Three months ended March 31, ---------------------------------------------------------------------- 1996 1995 --------------------------------- --------------------------------- Interest Rates Interest Rates Average Income/ Earned/ Average Income/ Earned/ Balance Expense/2/ Paid Balance Expense/2/ Paid --------- ----------- -------- --------- ----------- -------- ASSETS Securities available for sale $ 6,162 $ 90 9.86% $ 11,508 $ 169 5.97% Securities held for investment: U.S. Treasury securities 10,747 164 6.14% 14,603 186 5.16% U.S. Government agencies 38,411 649 6.80% 39,834 649 6.61% Municipal securities/1/ 333 3 4.08% 228 4 6.39% Commercial paper 483 7 5.85 1,422 21 6.07% Other securities 1,623 23 5.69% 1,558 23 5.93% Federal funds sold and securities purchased under agreements to resell 1,819 26 5.40% 12,290 174 5.66% Loans:/2/,/3/ Commercial 76,470 2,025 10.65% 70,302 1,940 11.19% Real estate-construction 3,976 104 10.47% 5,938 130 8.87% Real estate-other 61,515 1,872 10.28% 59,161 1,398 10.28% Installment and other 17,151 431 10.10% 20,153 517 10.40% --------- -------- -------- --------- -------- ------- Total Loans 159,112 4,132 10.45% 151,554 3,985 10.66% --------- -------- -------- --------- -------- ------- Total Earning Assets 218,710 5,092 5.36% 232,997 5,211 9.07% Cash and due from banks 15,558 15,989 Leasehold improvements and equipment - net 1,703 2,047 Interest receivable and other assets 3,598 4,996 Foreclosed assets 758 997 Assets held for sale 275 306 Less allowance for loan loss (5,062) 3,260 --------- --------- TOTAL ASSETS $235,540 $254,072 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Interest bearing: Checking $ 22,396 52 0.94% $ 22,170 69 1.26 Money market 72,486 557 3.14% 88,750 721 3.29 Time and savings 43,284 513 4.77% 19,172 515 4.25 Other borrowed funds 995 14 5.64% - - - --------- -------- -------- --------- -------- ------- Total interest bearing liabilities 138,161 1,136 3.31% 160,092 1,305 3.20 Demand deposits 65,624 66,049 Other liabilities 1,844 1,462 Shareholders' equity 29,911 26,649 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $235,540 $254,072 ========= ========= Net Interest Income $3,956 $3,906 ======== ======== Net Interest Margin 7.27% 6.80% ======== ======= - -----------------
(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 $105,000 and $112,000 for March 31, 1996 and 1995, respectively; fees on real estate loans of $126,000 and $79,000 for March 31, 1996 and 1995, respectively; and fees on installment and other loans of $8,000 and $5,000 for March 31, 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 three month period ended March 31, 1996. Analysis of Changes in Interest Income and Expense Increase (Decrease) Due to Change in 1996 over 1995
Volume 1 Rate 2 Total --------- -------- ------- (In thousands) Increase (decrease) in interest income: Securities available for sale $ (77) $ (2) $ (79) Securities held to maturity: U.S. Treasury securities (48) 26 (22) U.S. government agency (18) 18 0 Municipal securities 1 (2) (1) Commercial paper (14) 0 (14) Other securities 1 (1) 0 Federal funds sold (149) (1) (150) Loans: Commercial 187 (102) 85 Real estate-construction (42) 16 (26) Real estate-other 174 0 174 Installment and other (74) (12) (86) --------- -------- ------- Total Loans 245 (98) 147 --------- -------- ------- Total increase (decrease) $ (59) $ (60) $(119) --------- -------- ------- (Increase) decrease in interest expense: Deposits: Interest bearing checking $ (1) $ 18 $ 17 Money market 136 28 164 Savings and time 58 (56) 2 Other borrowed funds (14) 0 (14) --------- -------- ------- Total increase (decrease) $ 179 $ (10) $ 169 --------- -------- ------- Total change in net interest income $120 $ (70) $ 50 ========= ======== =======
(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. 9 Provision for Loan Losses The provision for loan losses for the three months ended March 31, 1996 was $225,000, a decrease of $75,000 or 25.0% from the three months ended March 31, 1995. The amount of the provision was reduced due to a decline in the level of net loan charge-offs. Non-Interest Income Non-interest income for the three months ended March 31, 1996 was $179,000, a decrease of $11,000 or 5.79% from the three months ended March 31, 1995. The decrease in customer service fees is attributed to the decline in deposits. Non-Interest Expense Non-interest expense totaled $2.8 million and $3.0 million for the three months ended March 31, 1996 and 1995, respectively. FDIC assessments declined $125,000 or 99.2% for the first quarter of 1996 as compared to the prior year due to declines in the assessment rates. The Company reduced the volume of external marketing consulting in 1996 from 1995 which reduced the level of consulting expenses. For the three months ended March 31, 1996 the Company recorded a write-down on one foreclosed property of $50,000 and incurred $30,000 in expenses associated with managing, maintaining and liquidating foreclosed assets compared to a write-down of $20,000 and expenses of $30,000 for the three months ended March 31, 1995. The following table summarizes the significant components of noninterest expense for the dates indicated.
Quarter Ended March 31 Dollar % (Dollars in thousands) 1996 1995 Change Change --------- -------- ------ ------- Salaries and employee benefits........... $1,534 $1,532 $2 0.1% Occupancy............................... 249 248 1 0.4% Equipment............................... 214 223 (9) -4.0% Goodwill and core deposit amortization.. 64 72 (8) -11.1% Data processing services................ 64 71 (7) -9.9% FDIC insurance.......................... 1 126 (125) -99.2% Telephone and postage................... 56 65 (9) -13.8% Consulting fees......................... 60 90 (30) -33.3% Legal fees.............................. 45 34 11 32.4% Marketing............................... 55 58 (3) -5.2% Foreclosed asset expenses............... 80 50 30 60.0% Other................................... 368 412 (44) -10.7% --------- -------- ------ ------- TOTAL NONINTEREST EXPENSE............... $2,790 $2,981 ($191) -6.4% ========= ======== ====== =======
10 Provision for Income Taxes At December 31, 1995 the Company had approximately $1.1 million of state net operating loss carryforwards which begin to expire in 1998 and $455,000 of tax credit carryforwards which begin to expire in 2006. Due to the utilization of such carryforwards, the Company recorded a provision for income taxes of $195,000 for Federal and state alternative minimum taxes for the three months ended March 31, 1996. FINANCIAL CONDITION Loans Average loans increased $7.6 million or 4.9% to $159.1 million for the three months ended March 31, 1996 from $151.6 million for the same period in 1995. The increase in average loans is attributed to an improving economic environment and an overall increase in loan demand. Real estate construction loans as a percentage of total loans outstanding were 2.6% at March 31, 1996 compared to 2.8% at March 31, 1995. The relatively low level of real estate construction loans reflects management's decision to curtail real estate construction loan commitments because the risks associated with real estate construction loans are generally considered to be higher than risks associated with 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. The decline in the real estate-other category from December 31, 1995 to March 31, 1996 is due to the pay-off of one large loan. The following table sets forth the amount of loans outstanding in each category and the percentage of total loans outstanding for each category as of the date indicated.
March 31 Dec. 31 March 31 ----------------- ------------------ ---------------- 1996 1995 1995 ----------------- ------------------ ---------------- Amount Percent Amount Percent Amount Percent --------- ------- -------- -------- -------- ------- (Dollars in thousands) Commercial...................... $ 76,600 49.9% $ 70,417 45.5% $ 69,168 46.3% Real estate - construction...... 3,934 2.6% 4,067 2.6% 4,177 2.8% Real estate - other............. 55,887 36.4% 61,753 39.9% 56,364 37.7% Installment and other........... 17,067 11.1% 18,460 11.9% 19,704 13.2% --------- ------- --------- -------- -------- ------- TOTAL......................... $153,488 100.0% $154,696 100.0% $149,413 100.0% ========= ======= ========== ======= ======== ======
Foreclosed Assets Foreclosed assets totaled $712,000 at March 31, 1996, a decrease of $83,000 or 10.4% from March 31, 1995, and consist of two parcels of raw land and one finished lot. 11 Non-Performing Assets The following table provides information with respect to the Company's past due loans and components of non-performing assets at the dates indicated.
March 31 Dec. 31 March 31 1996 1995 1995 -------- ------- -------- (Dollars in thousands) Loans 90 days or more past due and still accruing.... $ 497 $ 325 $ 367 Non-accrual loans.................................... 2,920 2,859 2,979 Other assets held for sale........................... 275 275 306 Foreclosed assets.................................... 712 770 795 -------- ------- -------- Total non-performing assets........................ $4,404 $4,229 $4,447 ======== ======= ======== Non-performing assets to period end loans, other assets held for sale plus foreclosed assets 2.85% 2.70% 2.95% ======== ======== ========
At March 31, 1996, the recorded investment in loans considered to be impaired under Statement of Financial Accounting Standards No. 114 "Accounting by Creditors for Impairment of a Loan" as amended by Statement of Financial Accounting Standards No. 118 was $2,920,000 all of which were on a non-accrual basis. Included in this amount was $97,000 of impaired loans for which the related allowance for loan losses was $77,000 and $2,823,000 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 quarter ended March 31, 1996, the average recorded investment in impaired loans was $2,950,000 and no interest income was recognized on impaired loans. If interest income on those loans had been recognized, such income would have approximated $111,000. 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 in relation to the risk of future losses inherent in the loan portfolio. The allowance is increased by charges to operating expenses and reduced by net charge-offs. 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, ascertains whether there are probable losses which must be charged off and assesses the aggregate risk characteristics of the portfolio. Factors which influence management's judgment include the impact of forecasted economic conditions, historical loan loss experience, the evaluation of risks which vary with the type of loan, creditworthiness of the borrower and the value of the underlying collateral. Management believes the allowance for loan losses was adequate at March 31, 1996. 12 The following table summarizes the changes in the allowance for loan losses for the periods indicated:
Three months Year Three Months Ended Ended Ended 3-31-96 12-31-95 3-31-95 ------------ -------- ------------ (Dollars in thousands) Balance, at beginning of period.......... $4,960 $3,216 $3,216 Charge-offs: Commercial............................. 95 188 50 Real estate - construction............. - 884 345 Real estate - other.................... 50 33 - Installment and other.................. 9 310 58 ------------ -------- ------------ Total charge-offs.................... 154 1,415 453 Recoveries: Commercial............................. 26 336 140 Real estate - construction............. 2 144 - Real estate - other.................... 15 34 - Installment and other.................. 2 80 30 ------------ -------- ------------ Total recoveries..................... 45 594 179 ------------ -------- ------------ Net charge-offs.......................... 109 821 274 Provision charged to operations.......... 225 2,565 300 ------------ -------- ------------ Balance, at end of period................ $5,076 $4,960 $3,242 ============ ======== ============ Ratio at net charge-offs to average loans (annualized))..................... 0.27% 0.55% 0.72% ============ ======== ============ Allowance at period end to total loans outstanding............................ 3.31% 3.21% 2.17% ============ ======== ============
The balance in the allowance for loan losses at March 31, 1996 was $5.1 million or 3.31% of total loans compared to $3.2 million or 2.17% at March 31, 1995. Potential Problem Loans At March 31, 1996 there were no loans which represented material credits about which management has serious doubts as to the ability of the borrowers to comply with the original terms and conditions. At March 31, 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. 13 Investment Portfolio The Company's investment portfolio is used primarily for liquidity purposes and secondarily for investment income. The portfolio is primarily composed of U.S. Treasury and U.S. government agency instruments and investment grade municipal obligations. The total of securities available for sale and held to maturity declined $4.8 million as funds provided by maturing securities were used to accommodate deposit withdrawals. The table below summarizes the book value and estimated market values of the Company's portfolio of securities held to maturity, securities available for sale and other securities.
March 31, 1996 December 31, 1995 ------------------ -------------------- Bank Market Book Market Value Value Value Value -------- ------- ------- ------- (Dollars in thousands) SECURITIES HELD TO MATURITY: U.S. Treasury securities............. $10,787 $10,831 $10,756 $10,924 U.S. government agencies and corporation........................ 35,162 35,670 40,272 41,058 Municipal securities................. 2,425 2,357 171 181 Collateralized mortgage obligations.. 165 172 - - -------- ------- ------- ------- TOTAL.............................. $48,539 $49,030 $51,199 $52,163 ======== ======= ======= ======= SECURITIES AVAILABLE FOR SALE: U.S. Treasury securities............. $ - $ - $5,005 $5,011 U.S. government agencies and corporation........................ 7,924 7,908 4,996 5,010 -------- ------- ------- ------- TOTAL.............................. $7,924 $7,908 $10,001 $10,021 ======== ======= ======= =======
Deposits For the three months ended March 31, 1996 average deposits totaled $202.8 million, a decrease of $23.4 million or 10.3% from $226.1 million for the same period in 1995. Management attributes the decline in deposits, particularly money market deposits, to increased competition from and availability of nondeposit products such as mutual funds. For the three months ended March 31, 1996, average demand deposits totaled $65.6 million, a decrease of $425,000 or 0.6% from the same period in 1995. Average demand deposits as a percentage of total deposits increased to 32.4% for the first quarter of 1996 from 29.2% for the same period of the prior year. Average interest-bearing deposits decreased $22.9 million or 14.3% for the three months ended March 31, 1996 from the same period in 1995. Average interest-bearing deposits comprised 67.6% of 14 average total deposits for the three months ended March 31, 1996 and 70.8% of average total deposits for the three months ended March 31, 1995. The table below sets forth information regarding the Bank's average deposits by amount and percentage of total deposits for the three months ended March 31, 1996 and 1995.
Average Deposits --------------------------------------------- Three Months Ended March 31, --------------------------------------------- 1996 1995 ---------------------- --------------------- Amount Percentage Amount Percentage --------- ---------- --------- ---------- Demand accounts............. $ 65,624 32.4% $ 66,049 29.2% Interest-bearing checking... 22,396 11.0% 22,170 9.8% Money market................ 71,486 35.3 88,750 39.2% Savings and time............ 43,284 21.3% 49,172 21.7% -------- ----- -------- ----- Total.................. $202,790 100.0 $226,141 100.0% ======== ===== ======== =====
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 $100,000 or more at March 31, 1996 had the following schedule of maturities:
(In thousands) -------------- Three months or less.................... $17,104 After three months through six months... 2,637 After six months through twelve months.. 1,404 After twelve months..................... 455 -------------- Total............................... $21,600
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. Cash and cash equivalents declined $9.2 million at March 31, 1996 from December 31, 1995 as the cash flows required for financing activities exceeded the funds provided by operating and investing activities. Cash and cash equivalents of $17.1 million were required to accommodate deposit withdrawals which were partially funded by a combination of operating activities, which provided $2 million of cash and cash equivalents, and investing activities, principally maturing loans and maturing securities, which provided $5.8 million of cash and cash equivalents. 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 15 Federal Reserve Bank of San Francisco for open window borrowing. At March 31, 1996 the Bank had no outstanding borrowings against these arrangements. Additionally, at March 31, 1996, unpledged government securities that are available to secure additional borrowing in the form of reverse repurchase agreements totaled approximately $48.5 million. At March 31, 1996 the Bank had no reverse repurchase agreements. 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 (up to six months) and long term (up to five years) borrowing. At March 31, 1996 there were no outstanding advances. 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, divided by (b) total assets less pledged securities. Using this definition at March 31, 1996, the Company had a liquidity ratio of 31.8% as compared to 40.2% at March 31, 1995. Capital Resources Total shareholders' equity increased to $30.4 million at March 31, 1996 from $29.4 million at December 31, 1995 reflecting retained income of $925,000 for the first quarter of 1996 and $163,000 resulting from the exercise of employee stock options. 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, the allowance for loan losses. General loan loss reserves included in Tier 2 capital cannot exceed 1.25% of risk-weighted assets. 16 At March 31, 1996 the Company's risk-based capital ratio was 18.27%. The following table presents the Company's risk-based capital and leverage ratios as of March 31, 1996 and December 31, 1995.
RISK-BASED CAPITAL RATIOS -------------------------------------- (Dollars in thousands) March 31, 1996 December 31, 1995 ---------------- ------------------- Amount Ratio Amount Ratio ------- ------ ------- ------ Company Capital Ratios: Tier 1 Capital............... $29,234 17.02% $28,102 16.04% Tier 1 minimum requirement... 6,871 4.00% 7,008 4.00% ------- ------ ------- ------ Excess....................... $22,363 13.02% $21,094 12.04% ======= ====== ======= ====== Total Capital................ $31,381 18.27% $30,29 17.29% Total Capital minimum requirement................ 13,742 8.00% 14,016 8.00% ------- ------ ------ ------ Excess....................... $17,639 10.27% $16,276 9.29% ======= ====== ======= ====== Risk-adjusted assets $171,777 $175,194 ======= ======= Leverage ratio............... 12.17% 10.99% Leverage ratio minimum....... 4.00% 4.00% ------ ------ Leverage ratio excess........ 8.17% 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 - None 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: May 9, 1996 By: /s/ Herbert C. Foster - ----------------- ---------------------------- Herbert C. Foster President 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 3-MOS DEC-31-1995 JAN-01-1996 MAR-31-1996 13,465 0 8,850 0 7,908 48,539 49,030 153,488 5,076 235,218 202,854 0 1,952 0 0 0 36,914 (6,486) 235,218 4,132 960 0 5,092 1,122 1,136 3,956 225 0 2,790 1,120 1,120 0 0 925 .20 .20 7.27 2,920 497 0 0 4,960 154 45 5,076 5,076 0 0
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