-----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, VqfXPM6JnVSWGptbylW1DBusdlIz9mQtXoeIxydJb69eBis6P9SjRSog/6UmfPt8 28mJb5CpWBoNOADHp00Jhg== 0000929624-00-000409.txt : 20000327 0000929624-00-000409.hdr.sgml : 20000327 ACCESSION NUMBER: 0000929624-00-000409 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000229 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000324 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: 8-K/A SEC ACT: SEC FILE NUMBER: 000-13287 FILM NUMBER: 577651 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 8-K/A 1 AMENDMENT NO. 1 TO FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A Amendment No. 1 Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): February 29, 2000 CIVIC BANCORP --------------------- (Exact name of registrant as specified in its charter) California 000-13287 680022322 ---------------------- ------------------ ---------------------- State of Incorporation Commission File No. IRS Employer ID Number 2101 Webster Street, Oakland, California 94612 ----------------------------------------------- Address, including zip code, of registrant's principal executive office (510) 836-6500 -------------------------------------------------- Registrant's telephone number, including area code This amendment is filed to include the financial statements of the acquired business and the pro forma financial statements reflecting the acquisition. Item 2. Acquisition or Disposition of Assets. At the close of business on February 29, 2000, Civic BanCorp acquired East County Bank of Antioch, California, by the merger of East County Bank with and into CivicBank of Commerce. The purchase price was approximately $14,250,000 in cash, or approximately 1.8 times shareholders' equity of East County Bank. The Company is paying the purchase price from cash on hand of the combined banks. CivicBank of Commerce will operate the East County Bank as offices of CivicBank of Commerce. Item 7. Financial Statements and Exhibits. (a) Financial Statements of Business Acquired. The financial ----------------------------------------- statements of East County Bank as of and for the year ended December 31, 1999 are included with this report. (b) Pro Forma Financial Information. Pro forma financial statements ------------------------------- reflecting the acquisition of East County Bank are included with this report. (c) Exhibits. -------- No. Description -- ----------- 2. Agreement and Plan of Merger among CivicBank of Commerce, Civic BanCorp and East County Bank dated as of October 18, 1999 (incorporated by reference from exhibit 2.1 to the Company's Form 10-Q for the quarter ended September 30, 1999). 23 Consent of Moss Adams, LLP. Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has caused this current report to be signed on its behalf by the undersigned duly authorized person. Date: March 21, 2000 Civic BanCorp By: /s/ Gerald Brown --------------------------- Its Chief Financial Officer 2 EAST COUNTY BANK FINANCIAL STATEMENTS and REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS December 31, 1999 and 1998 C O N T E N T S
Page REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 3 FINANCIAL STATEMENTS BALANCE SHEETS 4 STATEMENTS OF EARNINGS 5 STATEMENT OF SHAREHOLDERS' EQUITY 6 STATEMENTS OF CASH FLOWS 7 NOTES TO FINANCIAL STATEMENTS 9
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS -------------------------------------------------- The Board of Directors and Shareholders East County Bank We have audited the accompanying balance sheet of East County Bank as of December 31, 1999, and the related statements of earnings, shareholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Bank's management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements as of and for the year ended December 31, 1998 were audited by another auditor whose report dated January 22, 1999 expressed an unqualified opinion on those statements. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of East County Bank at December 31, 1999, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. /s/ Moss Adams LLP Stockton, California January 14, 2000 EAST COUNTY BANK BALANCE SHEETS December 31, ASSETS
1999 1998 ----------- ----------- Cash and due from banks (note B) $ 4,545,175 $ 3,043,010 Federal funds sold 7,860,000 4,240,000 ----------- ----------- Total cash and cash equivalents 12,405,175 7,283,010 Securities available-for-sale (note C) 15,669,061 14,998,431 Loans held for sale (note E) 1,549,267 436,784 Loans held for investment (note D) 46,715,667 47,564,816 Bank premises and equipment, net (note F) 510,858 496,407 Interest receivable and other assets (note G) 1,711,517 1,335,704 ----------- ----------- $78,561,545 $72,115,152 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Deposits (note H) Non interest-bearing demand deposits $18,878,596 $18,184,957 Interest-bearing demand deposits 4,656,695 5,610,002 Time certificates, under $100,000 19,622,776 15,152,033 Time certificates, $100,000 and over 10,848,815 10,452,116 NOW deposits 9,284,138 7,628,763 Savings deposits 8,355,655 8,453,691 ----------- ----------- Total deposits 71,646,675 65,481,562 Interest payable and other liabilities 687,758 762,351 ----------- ----------- Total liabilities 72,334,433 66,243,913 Commitments and contingencies (note L) - - Shareholders' equity Preferred stock, no par value, 10,000,000 shares authorized, none issued or outstanding - - Common stock, no par value, 20,000,000 shares authorized, 563,442 and 542,942 shares issued and outstanding in 1999 and 1998, respectively 5,345,910 5,242,160 Accumulated other comprehensive income, net of tax (229,613) 13,367 Retained earnings 1,110,815 615,712 ----------- ----------- Total shareholders' equity 6,227,112 5,871,239 ----------- ----------- $78,561,545 $72,115,152 =========== ===========
The accompanying notes are an integral part of these statements. 4 EAST COUNTY BANK STATEMENTS OF EARNINGS Year ended December 31,
1999 1998 ---------- ---------- Interest income Interest and fees on loans $4,960,794 $4,589,583 Interest on securities available-for-sale 874,615 957,288 Interest on federal funds sold 401,341 356,452 ---------- ---------- Total interest income 6,236,750 5,903,323 ---------- ---------- Interest expense Interest-bearing demand, savings and other time deposits 1,406,929 1,297,472 Time certificates, $100,000 and over 425,069 437,096 ---------- ---------- Total interest expense 1,831,998 1,734,568 ---------- ---------- Net interest income 4,404,752 4,168,755 Provision for credit losses 714,050 275,000 ---------- ---------- Net interest income after provision for credit losses 3,690,702 3,893,755 Other income Service fees on deposit accounts 460,544 467,913 Gain on sale of loans 349,107 161,664 Loan servicing 217,363 236,824 Other 10,557 11,667 ---------- ---------- 1,037,571 878,068 Other expenses Salaries and employee benefits 2,251,069 2,104,344 Occupancy and equipment 545,959 530,866 Professional fees 352,301 363,941 Deposit and other insurance 57,687 56,812 Promotion and advertising 134,919 135,292 Other 554,235 565,541 ---------- ---------- 3,896,170 3,756,796 ---------- ---------- Earnings before income taxes 832,103 1,015,027 Income taxes 337,000 414,000 ---------- ---------- NET EARNINGS $ 495,103 $ 601,027 ========== ========== Net earnings per common share - basic (note M) $ .89 $ 1.11 ========== ========== Net earnings per common share - assuming dilution (note M) $ .84 $ 1.03 ========== ==========
5 The accompanying notes are an integral part of these statements. 6 EAST COUNTY BANK STATEMENT OF SHAREHOLDERS' EQUITY Years ended December 31, 1999 and 1998
Accumulated Common Other Stock Comprehensive Retained Comprehensive ------------------------------ Shares Amount Income Earnings Income Total --------------- ----------- ------------- ------------- -------------- ---------- Balances, January 1, 1998 543,142 $ 5,245,374 $ 14,685 1,056 $5,261,115 Stock retired (200) (3,214) - - (3,214) Comprehensive income: Net earnings - - $ 601,027 601,027 - 601,027 Other comprehensive income, net of tax of $8,556 Unrealized gains on securities - - 12,311 - 12,311 12,311 --------------- ----------- ------------- ------------- -------------- ---------- Comprehensive income $ 613,338 ============= Balances, December 31, 1998 542,942 5,242,160 615,712 13,367 5,871,239 Stock options exercised 20,500 103,750 - - 103,750 Comprehensive income: Net earnings - - $ 495,103 495,103 - 495,103 Other comprehensive income, net of tax of $168,851 Unrealized loss on securities - - (242,980) - (242,980) (242,980) --------------- ----------- ------------- ------------- -------------- ---------- Comprehensive income - - $ 252,123 - - - ============= Balances, December 31, 1999 563,442 $ 5,345,910 $ 1,110,815 $ (229,613) $6,227,112 =============== =========== ============= ============= ==========
7 The accompanying notes are an integral part of this statement. 8 EAST COUNTY BANK STATEMENTS OF CASH FLOWS Year ended December 31,
1999 1998 ------------ ------------- Cash flows from operating activities: Net earnings $ 495,103 $ 601,027 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 240,336 202,113 Gain on sale of loans (349,107) (161,664) Loss on disposal of other assets 5,781 - Provision for credit losses 714,050 275,000 Increase in interest receivable and other assets (6,962) (205,817) (Decrease) increase in interest payable and other liabilities (74,593) 109,481 Originations of loans held for sale (5,654,264) (2,024,243) Proceeds from sales of loans held for sale 4,890,888 2,269,185 ----------- ------------ Net cash provided by operating activities 261,232 1,065,082 Cash flows from investing activities: Proceeds from maturities and calls of securities available-for-sale 4,475,904 15,775,000 Purchase of securities available-for-sale (5,587,289) (16,045,633) Net increase in loans held for investment (64,901) (10,629,425) Purchase of equipment (231,644) (163,750) ----------- ------------ Net cash used in investing activities (1,407,930) (11,063,808) Cash flows from financing activities: Retirement of common stock - (3,214) Proceeds from exercise of stock options 103,750 - Net increase in demand and interest- bearing deposits 1,297,671 3,683,827 Net increase in time deposits 4,867,442 6,515,170 ----------- ------------ Net cash provided by financing activities 6,268,863 10,195,783 Net increase in cash and cash equivalents 5,122,165 197,057 Cash and cash equivalents, beginning of year 7,283,010 7,085,953 ----------- ------------ Cash and cash equivalents, end of year $12,405,175 $ 7,283,010 =========== ============
9 EAST COUNTY BANK STATEMENTS OF CASH FLOWS - CONTINUED Year ended December 31,
1999 1998 ---------- ---------- Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $1,731,518 $1,734,632 Income taxes $ 386,800 $ 467,729
Noncash investing and financing activities: The Bank foreclosed on loans with balances of $200,000 and $0 in 1999 and 1998, respectively. 10 The accompanying notes are an integral part of these statements. 11 EAST COUNTY BANK NOTES TO FINANCIAL STATEMENTS Years ended December 31, 1999 and 1998 NOTE A - SUMMARY OF ACCOUNTING POLICIES East County Bank (the "Bank") was organized as an association for the purpose of banking under the laws of the United States, on January 6, 1986. On October 9, 1998, the Bank converted from a national bank to a state bank chartered by the State of California. On this date, each share of the Bank's common stock was automatically converted to no par value common stock. The Articles of Incorporation provide for the issuance of 20,000,000 shares of common stock, no par value and 10,000,000 shares of preferred stock, no par value as authorized by the Bank's Board of Directors. The Bank operates as a commercial bank with offices in the cities of Antioch, Concord, Walnut Creek, and Sacramento, California. The Bank provides traditional commercial banking services to individuals and small and medium- sized businesses through three branches and one loan production office serving the nine county San Francisco Bay Area. The Walnut Creek branch was opened in November 1999. The accounting and reporting policies of the Bank conform to generally accepted accounting principles and general practice within the banking industry. In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates. A summary of the significant accounting policies applied in the preparation of the accompanying financial statements follows: 1. Fair values of financial instruments The financial statements include various estimated fair value information as of December 31, 1999 and 1998. Such information, which pertains to the Bank's financial instruments, does not purport to represent the aggregate net fair value of the Bank. Further, the fair value estimates are based on various assumptions, methodologies and subjective considerations, which vary widely among different financial institutions and which are subject to change. The following methods and assumptions are used by the Bank. Cash and cash equivalents: The carrying amounts reported in the balance sheet for cash and short-term instruments approximate those assets' fair values. 12 EAST COUNTY BANK NOTES TO FINANCIAL STATEMENTS Years ended December 31, 1999 and 1998 NOTE A - SUMMARY OF ACCOUNTING POLICIES - CONTINUED Securities: Fair values for securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. Loans receivable: For variable-rate loans that reprice frequently and have no significant change in credit risk, fair values are based on carrying values. The fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. The carrying amount of accrued interest approximates its fair value. Off-balance-sheet instruments: Fair values for the Bank's off-balance-sheet lending commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the credit standing of the counterparties. Deposit liabilities: The fair values estimated for demand deposits (interest and non-interest checking, passbook savings, and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). The carrying amounts for variable-rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date. Fair values for fixed- rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of the aggregate expected monthly maturities on time deposits. The carrying amount of accrued interest payable approximates its fair value. 2. Cash and cash equivalents The Bank has defined cash and cash equivalents to include cash, due from banks and federal funds sold. Generally, federal funds are sold for one-day periods. 3. Securities available-for-sale Available-for-sale securities consist of bonds, notes and debentures not classified as trading securities or held-to-maturity securities. Unrealized holding gains and losses, net of tax, are reported as a net amount in a separate component of shareholders' equity, accumulated other comprehensive income, until realized. Gains and losses on the sale of available-for-sale securities are determined using the specific identification method. The amortization of premiums and accretion of discounts are recognized as adjustments to interest income over the period to maturity. The Bank's portfolio consists only of securities available-for-sale as of December 31, 1999 and 1998. 13 EAST COUNTY BANK NOTES TO FINANCIAL STATEMENTS Years ended December 31, 1999 and 1998 NOTE A - SUMMARY OF ACCOUNTING POLICIES - CONTINUED 4. Sale of SBA loans The Bank originates loans to customers under the Small Business Administration ("SBA") program that generally provides for SBA guarantees of a portion of each loan. The Bank sells the guaranteed portion of certain loans to a third party and retains only the unguaranteed portion in its portfolio. Loans held for sale are recorded at the lower of cost or market. The Bank's investment in the SBA loan is allocated among the retained portion of the loan and the sold portion of the loan based on the relative fair market value of each portion. A gain is recognized on the sold portion based on its allocated fair value and the rate differential between the rate paid by the borrower to the Bank and the rate paid by the Bank to the purchaser by reducing the carrying value of the retained portion which increases the future yield. The Bank recognizes a servicing asset relating to the servicing of SBA loans sold which is amortized over the period of estimated net servicing income. The servicing asset was not material as of December 31, 1999 and 1998. 5. Loans held for investment Loans held for investment are stated at the principal amount outstanding, net of the allowance for credit losses and net of deferred loan fees. Interest on loans is calculated by using the simple interest method on the daily balance of the principal amount outstanding. Loan fees and certain origination costs are deferred and amortized to interest income as yield adjustments over the contractual term of the related loans. Loans on which the accrual of interest has been discontinued are designated non-accrual loans. Accrual of interest on loans is discontinued either when reasonable doubt exists as to the full and timely collection of interest or principal or when a loan becomes contractually past due by ninety days or more with respect to interest or principal. When a loan is placed on non-accrual status, all interest previously accrued but not collected is reversed against current period interest income. Income on such loans is then recognized only to the extent that cash is received and where the future collection of principal is probable. Interest accruals are resumed on such loans only when they are brought fully current with respect to interest and principal and when, in the judgment of management, the loans are estimated to be fully collectible as to both principal and interest. 14 EAST COUNTY BANK NOTES TO FINANCIAL STATEMENTS Years ended December 31, 1999 and 1998 NOTE A - SUMMARY OF ACCOUNTING POLICIES - CONTINUED 6. Allowance for credit losses The allowance for credit losses is maintained at a level deemed appropriate by management to provide for known and inherent risks in the loan portfolio and commitments to extend credit. The allowance is based upon management's continuing assessment of various factors affecting the collectibility of loans and commitments to extend credit, including current and projected economic conditions, past credit experience, the value of the underlying collateral, and such other factors which in management's judgment deserve current recognition in estimating potential credit losses. Loans deemed uncollectible are charged off and deducted from the allowance. Subsequent recoveries are credited to the allowance. Impaired loans, as defined, are measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or, the fair value of the collateral if the loan is collateral dependent. The Bank considers a loan impaired when it is probable that all amounts of principal and interest due, according to the contractual terms of the loan agreement, will not be collected, which is the same criteria used for the transfer of loans to non-accrual status. Interest income is recognized on impaired loans in the same manner as non-accrual loans. 7. Premises and equipment Premises and equipment consist primarily of leasehold improvements, furniture and equipment and are stated at cost less accumulated depreciation and amortization. Depreciation is computed on a straight-line basis over the shorter of the estimated useful lives of the related assets or the lease terms. Equipment 3 - 5 years Furniture and fixtures 3 - 5 years Leasehold improvements 5 - 10 years Automobiles 3 years Leasehold improvements are amortized over the lesser of the useful life of the asset or the term of the lease. The straight-line method of depreciation is followed for all assets for financial reporting purposes, but accelerated methods are used for tax purposes. Deferred income taxes have been provided for the resulting temporary differences. 15 EAST COUNTY BANK NOTES TO FINANCIAL STATEMENTS Years ended December 31, 1999 and 1998 NOTE A - SUMMARY OF ACCOUNTING POLICIES - CONTINUED 8. Income taxes Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. 9. Foreclosed real estate Real estate properties acquired through, or in lieu of, loan foreclosure are to be sold and are initially recorded at the lower of carrying amount or fair value at the date of foreclosure. After foreclosure, valuations are periodically performed by management. Any subsequent revisions in estimates of fair value less cost to sell are reported as adjustments to the carrying amount of the real estate provided that the adjusted carrying amount does not exceed the original carrying amount at the date of foreclosure. Revenue and expenses from operations and changes in the valuation allowance are included in other operating expenses. 10. Stock based compensation Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock Based Compensation," requires entities to disclose the fair value of their employee stock options, but permits entities to continue to account for employee stock options under Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees." The Bank has determined that it will continue to use the method prescribed by APB Opinion No. 25, which recognizes compensation cost to the extent of the difference between the quoted market price of the stock at the date of grant and the amount an employee must pay to acquire the stock. The Bank grants stock options to employees with an exercise price equal to the quoted market price of the stock at the date of grant. Accordingly, no compensation cost is recognized for stock option grants. Disclosure requirements in accordance with SFAS No. 123 are included at Note J. 16 EAST COUNTY BANK NOTES TO FINANCIAL STATEMENTS Years ended December 31, 1999 and 1998 NOTE A - SUMMARY OF ACCOUNTING POLICIES - CONTINUED 11. Statement of Financial Accounting Standards No. 133 In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This Statement standardizes the accounting for derivative instruments, including certain derivative instruments embedded in other contracts, by requiring that an entity recognize those items as assets or liabilities in the statement of financial position and measure them at fair value. In June 1999, the FASB issued SFAS No. 137, which defers the effective date of SFAS No. 133. The Bank will adopt SFAS No. 133 as of July 1, 2000 and has made no assessment of the potential impact of adopting SFAS No. 133 at this time. 12. Reclassifications Certain reclassifications have been made to the 1998 financial statements to conform to the 1999 presentation. NOTE B - CASH AND DUE FROM BANKS Cash and due from banks includes balances with the Federal Reserve and other correspondent banks. The Bank is required to maintain specified reserves by the Federal Reserve Bank. The average reserve requirements are based on a percentage of the Bank's deposit liabilities. In addition, the Federal Reserve requires the Bank to maintain a certain minimum balance at all times. NOTE C - SECURITIES The amortized cost and estimated fair value of debt securities as of December 31, 1999 are as follows:
Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value ----------- ---------- ----------- ----------- Available-for-sale securities: Obligations of US government agencies $14,272,340 $ - $(375,406) $13,896,934 Municipalities 1,508,846 5,269 (19,038) 1,495,077 Other 277,050 - - 277,050 ----------- ---------- --------- ----------- $16,058,236 $ 5,269 $(394,444) $15,669,061 =========== ========== ========= ===========
17 EAST COUNTY BANK NOTES TO FINANCIAL STATEMENTS - CONTINUED Years ended December 31, 1999 and 1998 There were no sales of securities during 1999. 18 EAST COUNTY BANK NOTES TO FINANCIAL STATEMENTS Years ended December 31, 1999 and 1998 NOTE C - SECURITIES - CONTINUED The amortized cost and estimated fair value of debt securities at December 31, 1998 are as follows:
Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value ----------- ---------- ----------- ----------- Available-for-sale securities: Obligations of US government agencies $14,709,125 $ 58,603 $ (35,947) $14,731,781 Other 266,650 - - 266,650 ----------- ---------- ---------- ----------- $14,975,775 $ 58,603 $ (35,947) $14,998,431 =========== ========== ========== ===========
There were no sales of securities during 1998. The amortized cost and estimated fair value of debt securities at December 31, 1999 by contractual maturity or call date are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or pre-pay obligations with or without call or prepayment penalties.
Amortized Estimated Cost Fair Value ----------- ----------- Available-for-sale securities: Due in one year or less $ 115,000 $ 114,747 Due after one year through five years 12,862,623 12,485,939 Due after five years through ten years 2,020,024 1,975,475 Due after ten years 783,539 815,850 Other 277,050 277,050 ----------- ----------- $16,058,236 $15,669,061 =========== ===========
Securities are pledged to secure public deposits as required or permitted by law. Pledged securities at December 31, 1999 and 1998 had a carrying value and estimated fair value of $6,640,862 and $3,899,295, respectively. 19 EAST COUNTY BANK NOTES TO FINANCIAL STATEMENTS - CONTINUED Years ended December 31, 1999 and 1998 NOTE D - LOANS HELD FOR INVESTMENT Loans held for investment at December 31, consist of the following:
1999 1998 ----------- ----------- Commercial $17,954,736 $21,124,875 Consumer and other 6,800,219 7,500,729 Real estate 16,768,517 14,542,097 SBA 6,363,049 5,490,845 ----------- ----------- 47,886,521 48,658,546 Deferred loan fees and costs (92,680) (120,239) Allowance for credit losses (1,078,174) (973,491) ----------- ----------- Total $46,715,667 $47,564,816 =========== ===========
Changes in the allowance for credit losses are as follows:
1999 1998 ---------- --------- Balance, January 1 $ 973,491 $ 838,225 Provision charged to operations 714,050 275,000 Loans charged off (647,222) (158,362) Recoveries 37,855 18,628 ---------- --------- Balance, December 31 $1,078,174 $ 973,491 ========== =========
Loans on which accrual of interest has been discontinued, reduced or renegotiated amounted to $521,487 and $402,733 at December 31, 1999 and 1998, respectively. Interest income would have increased approximately $41,083 and $75,400 in 1999 and 1998, respectively, if the contractual rate of interest on these loans had been accrued. At December 31, 1999 and 1998, there were no commitments to lend additional funds to borrowers whose loans are classified as non-accrual or renegotiated. 20 EAST COUNTY BANK NOTES TO FINANCIAL STATEMENTS - CONTINUED Years ended December 31, 1999 and 1998 NOTE D - LOANS HELD FOR INVESTMENT - CONTINUED Impaired loans at December 31, 1999 aggregated approximately $518,000. The average investment in impaired loans during 1999 was $383,650. The allowance for credit losses relating to impaired loans was approximately $101,000 at December 31, 1999. Impaired loans charged off during 1999 approximated $530,000 and recoveries of amounts previously charged off amounted to approximately $14,000. Total cash collected on impaired loans during 1999 approximated $680,000, of which $658,000 was credited to the principal balance outstanding and $23,000 was recognized as interest income. The provision charged to operations for impaired loans during 1999 approximated $500,000. Interest income that would have been recognized on impaired loans was approximately $39,000 for the year ended December 31, 1999. Impaired loans at December 31, 1998 aggregated approximately $943,000. The average investment in impaired loans during 1998 was $690,600. The allowance for credit losses relating to impaired loans was approximately $112,000 at December 31, 1998. There is no allowance for credit losses recorded for impaired loans approximating $290,000. Impaired loans charged off during 1998 approximated $128,000 and recoveries of amounts previously charged off amounted to approximately $11,000. Total cash collected on impaired loans during 1998 approximated $76,000, of which $67,000 was credited to the principal balance outstanding and $9,000 was recognized as interest income. The provision charged to operations for impaired loans during 1998 approximated $144,000. Interest income that would have been recognized on impaired loans was approximately $6,000 for the year ended December 31, 1998. Approximately 51% of the Bank's loans are for general commercial and SBA uses including professional, retail and small businesses. The SBA loans consist of the unguaranteed portions that the Bank holds for investment. Approximately 14% of the Bank's loans are consumer loans and 35% are for real estate. Generally, real estate loans are collateralized by real property and other loans are collateralized by funds on deposit, business or personal assets. Repayment is generally expected from the cash flows of the borrower. NOTE E - LOANS SOLD AND HELD FOR SALE The Bank originates SBA loans with the general intent of selling the guaranteed portion of such loans, usually at a price in excess of par, and retaining the remaining unguaranteed portion in its loans held for investment. When the Bank sells the guaranteed portion of such loans, it transfers the SBA guarantee to the buyer and retains the servicing function. The 21 EAST COUNTY BANK NOTES TO FINANCIAL STATEMENTS - CONTINUED Years ended December 31, 1999 and 1998 Bank allocates its recorded investment in such loans between the portion sold and the portion retained based upon approximations of their relative fair values at the time of sale. 22 EAST COUNTY BANK NOTES TO FINANCIAL STATEMENTS - CONTINUED Years ended December 31, 1999 and 1998 NOTE E - LOANS SOLD AND HELD FOR SALE - CONTINUED The Bank is servicing the sold guaranteed portion of SBA loans amounting to $16,176,842 and $16,830,467 at December 31, 1999 and 1998, respectively. The portion of these loans sold is not reflected in the accompanying balance sheets. Servicing SBA loans for other investors consists of collecting payments, disbursing payments to investors and foreclosure processing. The Bank earns servicing income over the life of the loans as it services such loans on behalf of investors. Loan servicing income is recorded on the accrual basis and includes servicing fees from investors and certain charges from borrowers, such as late payment fees. NOTE F - PREMISES AND EQUIPMENT Premises and equipment at December 31, consist of the following:
1999 1998 ------------ ----------- Furniture and equipment $ 1,237,620 $1,087,783 Leasehold improvements 300,015 275,487 ----------- ---------- Total 1,537,635 1,363,270 Accumulated depreciation and amortization (1,026,777) (866,863) ----------- ---------- Total premises and equipment $ 510,858 $ 496,407 =========== ========== Depreciation and amortization expense is $211,412 and $218,302 for 1999 and 1998, respectively. NOTE G - OTHER ASSETS Other assets at December 31, are as follows: 1999 1998 ----------- ---------- Interest income receivable $ 676,580 $ 636,912 Deferred income tax asset 463,000 409,000 Prepaid expenses 174,783 183,355 Other real estate owned 200,000 - Other 197,154 106,437 ----------- ----------
23 EAST COUNTY BANK NOTES TO FINANCIAL STATEMENTS - CONTINUED Years ended December 31, 1999 and 1998 $ 1,711,517 $1,335,704 =========== ==========
24 EAST COUNTY BANK NOTES TO FINANCIAL STATEMENTS - CONTINUED Years ended December 31, 1999 and 1998 NOTE H - TIME DEPOSITS Certificates of deposit and their remaining maturities at December 31, 1999 are as follows:
Year ending December 31, ------------------------ 2000 $28,012,945 2001 1,494,082 2002 56,300 2003 876,264 2004 - Thereafter 32,000 ----------- $30,471,591 ===========
NOTE I - INCOME TAXES The components of the provision for income taxes for the years ended December 31, are as follows:
1999 1998 --------- --------- Current Federal $255,000 $362,000 State 122,000 106,000 -------- -------- Total 377,000 468,000 Deferred Federal (5,000) (44,000) State (35,000) (10,000) -------- -------- Total (40,000) (54,000) -------- -------- $337,000 $414,000 ======== ========
25 EAST COUNTY BANK NOTES TO FINANCIAL STATEMENTS - CONTINUED Years ended December 31, 1999 and 1998 NOTE I - INCOME TAXES - CONTINUED The components of the Bank's deferred tax assets and liabilities (included in other assets on the balance sheet) at December 31, are as follows:
1999 1998 -------- --------- Deferred tax assets: Allowance for credit losses $333,000 $305,000 State income tax 30,000 42,000 Accumulated depreciation 72,000 51,000 Other 28,000 14,000 -------- -------- 463,000 412,000 -------- -------- Deferred tax liabilities: Accumulated accretion on securities - (3,000) -------- -------- Net deferred income tax asset $463,000 $409,000 ======== ========
The Bank believes, based upon the available information, that all deferred tax assets will be realized in the normal course of operations. Accordingly, these assets have not been reduced by a valuation allowance. NOTE J - EMPLOYEE STOCK OPTION PLAN On May 6, 1992, the shareholders approved the East County Bank 1992 Stock Option Plan (the "1992 Plan") under which options to purchase a maximum of 120,000 shares of Common Stock may be granted to selected officers, directors and key full-time salaried employees of the Bank. On September 3, 1998, the shareholders approved an increase in the number of shares available under the 1992 Plan to 162,943 shares. Under the 1992 Plan, options may, at the discretion of the Board of Directors, be granted either as Incentive Stock Options (as defined in the Internal Revenue Code of 1986, as amended) or as Nonstatutory Stock Options. The options will have an exercise price of not less than the fair market value of the Common Stock on the date the option is granted and, unless otherwise provided by the Board of Directors, will vest over a four-year period, with 25% of the shares exercisable at the end of each year the grantee has completed as a director or employee of the Bank and have a term of ten years. 26 EAST COUNTY BANK NOTES TO FINANCIAL STATEMENTS - CONTINUED Years ended December 31, 1999 and 1998 NOTE J - EMPLOYEE STOCK OPTION PLAN - CONTINUED The fixed stock option plan is accounted for under APB Opinion No. 25 and related Interpretations. Accordingly, no compensation cost has been recognized for the plan. Had compensation cost for the plan been determined based on the fair value of the options at the grant dates consistent with the method of SFAS No. 123, the Bank's net earnings and earnings per share would have been reduced to the pro forma amounts indicated below.
1999 1998 ---------- ------------ Net earnings As reported $495,103 $601,027 Pro forma $449,953 $532,540 Basic earnings per share As reported $ .89 $ 1.11 Pro forma $ .81 $ .98 Diluted earnings per share As reported $ .84 $ 1.03 Pro forma $ .77 $ .91
The fair value of each option grant is estimated on the date of grant using the Binomial options-pricing model with the following weighted-average assumptions used for grants in 1998: expected volatility of 17.89 percent; risk-free interest rate of 5.78 percent; and expected lives of 8.0 years. No options were granted in 1999. The total compensation expense associated with the options granted in 1998 is approximately $140,000. At December 31, 1999 the amount remaining to be included in subsequent years proforma disclosures approximated $50,000. 27 EAST COUNTY BANK NOTES TO FINANCIAL STATEMENTS - CONTINUED Years ended December 31, 1999 and 1998 NOTE J - EMPLOYEE STOCK OPTION PLAN - CONTINUED A summary of the status of the Bank's fixed stock option plan as of December 31, 1999 and 1998 and changes during the years then ended are presented below.
1999 1998 ----------------- -------------------------- Weighted Weighted Average Average Exercise Exercise Shares Price Shares Price ------- -------- ---------------- -------- Outstanding at beginning of year 95,600 $8.47 69,600 $ 6.55 Granted - $ - 26,500 $13.49 Exercised 20,500 $5.06 - $ - Forfeited - $ - (500) $ 7.50 ------- ------- Outstanding at end of year 75,100 $9.40 95,600 $ 8.47 ======= ======= Options exercisable at year end 66,350 $8.92 76,175 $ 7.64 Weighted-average fair value of options granted during the year $ - $ 5.33
The following information applies to options outstanding at December 31, 1999: Number outstanding 75,100 Range of exercise prices $5.00 to $16.25 Weighted-average exercise price $9.40 Weighted-average remaining contractual life 5.33 years
NOTE K - EMPLOYEE BENEFIT PLAN In 1989, the Bank adopted a 401(k) plan ("the Plan") which was available to all employees who had completed one year of service with the Bank except: 1) an employee who had not worked at least 1,000 hours during the year, 2) a leased employee, 3) an employee who has not attained age 21, 4) an employee covered by a collective bargaining agreement. Eligible employees could contribute up to 15 percent of gross compensation to the Plan. The Bank could elect to make a matching contribution equal to a percentage of the employee contribution, or a profit sharing contribution which would be allocated to each Plan participant based on compensation relative to other participants. Vesting of Bank 28 EAST COUNTY BANK NOTES TO FINANCIAL STATEMENTS - CONTINUED Years ended December 31, 1999 and 1998 contributions to the Plan occurs at a rate of 20 percent per year starting in the third year of service. 29 EAST COUNTY BANK NOTES TO FINANCIAL STATEMENTS - CONTINUED Years ended December 31, 1999 and 1998 NOTE K - EMPLOYEE BENEFIT PLAN - CONTINUED Effective July 1, 1998, the Plan was amended to allow eligible employees to participate in the Plan in the quarter following the start of employment. Employees who have completed one year of service with the Bank are eligible to participate in the employer contribution. Other Plan provisions were unchanged. Bank matching contributions to the Plan amounted to $25,760 and $20,615 for the years ended December 31, 1999 and 1998, respectively. NOTE L - COMMITMENTS AND CONTINGENCIES The Bank is a defendant in certain claims and legal actions arising in the ordinary course of business. In the opinion of management, after consultation with legal counsel, the ultimate disposition of these matters is not expected to have a material adverse effect on the financial condition of the Bank. The Bank leases its premises under noncancelable operating leases with initial terms expiring in 2003. Certain of these leases contain renewal options and escalation clauses that provide for increased rentals. The future minimum lease commitments at December 31, 1999 under the noncancelable leases are as follows: Year ending December 31, ------------------------ 2000 $280,553 2001 284,481 2002 250,229 2003 103,995 2004 - -------- $919,258 ======== Rental expenses under these leases are $225,058 for 1999 and $204,816 for 1998. 30 EAST COUNTY BANK NOTES TO FINANCIAL STATEMENTS - CONTINUED Years ended December 31, 1999 and 1998 NOTE M - EARNINGS PER SHARE The Bank calculates earnings per share (EPS) in accordance with SFAS No. 128, "Earnings per Share." SFAS No. 128 requires the presentation of basic EPS and diluted EPS, which considers all dilutive common stock equivalents.
For the Year Ended December 31, 1999 -------------------------------------- Income Shares Per-Share (Numerator) (Denominator) Amount ------------ ------------- --------- Net earnings $495,103 ----------- Basic EPS Net earnings available to common stockholders 495,103 553,400 $ .89 ========= Effect of Dilutive Securities Stock options - 34,365 ----------- ------------ Diluted EPS Net earnings available to common stockholders $495,103 587,765 $ .84 =========== ============ ========= For the Year Ended December 31, 1998 -------------------------------------- Income Shares Per-Share (Numerator) (Denominator) Amount ----------- ------------ --------- Net earnings $601,027 ----------- Basic EPS Net earnings available to common stockholders 601,027 543,115 $1.11 ========= Effect of Dilutive Securities Stock options - 40,899 ----------- ------------ Diluted EPS Net earnings available to common stockholders $601,027 584,014 $1.03 =========== ============ =========
31 EAST COUNTY BANK NOTES TO FINANCIAL STATEMENTS - CONTINUED Years ended December 31, 1999 and 1998 NOTE M - EARNINGS PER SHARE - CONTINUED Options to purchase 4,000 shares of common stock at $16.25 a share were granted during 1998. They were not included in the computation of diluted EPS in 1999 nor in 1998 because the options' exercise price was greater than the average market price of the common shares. The options, which expire on December 17, 2008, were still outstanding at December 31, 1999. NOTE N- REGULATORY MATTERS The Bank is subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory--and possibly additional discretionary--actions by regulators that, if undertaken, could have a direct material effect on the Bank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). Management believes, as of December 31, 1999 that the Bank meets all capital adequacy requirements to which it is subject. As of December 31, 1999, the most recent notification from the Federal Reserve Bank categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Bank must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the following table. There are no conditions or events since that notification that management believes have changed the Bank's category. 32 EAST COUNTY BANK NOTES TO FINANCIAL STATEMENTS - CONTINUED Years ended December 31, 1999 and 1998 NOTE N - REGULATORY MATTERS - CONTINUED The Bank's actual capital amounts and ratios are also presented in the following table.
To be well capitalized under For capital prompt corrective Actual adequacy purposes: action provisions: ------------------ ------------------- -------------------- Amount Ratio Amount Ratio Amount Ratio ---------- ------ ----------- ------ ---------- -------- As of December 31, 1999: Total capital (to Risk Weighted Assets) $7,173,623 12.6% $4,559,244 *8.0% $5,699,055 *10.0% Tier I capital (to Risk Weighted Assets) $6,456,725 11.3% $2,279,622 *4.0% $3,419,433 * 6.0% Tier I capital (to Average Assets) $6,456,725 8.2% $3,148,350 *4.0% $3,935,437 * 5.0% As of December 31, 1998: Total capital (to Risk Weighted Assets) $6,549,000 11.9% $4,395,000 *8.0% $5,494,000 *10.0% Tier I capital (to Risk Weighted Assets) $5,858,000 10.7% $2,197,000 *4.0% $3,296,000 * 6.0% Tier I capital (to Average Assets) $5,858,000 7.5% $3,141,000 *4.0% $3,926,000 * 5.0%
NOTE O - FINANCIAL INSTRUMENTS The Bank is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit in the form of loans or through standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest-rate risk in excess of the amount recognized in the balance sheet. * = more than or equal to 33 EAST COUNTY BANK NOTES TO FINANCIAL STATEMENTS - CONTINUED Years ended December 31, 1999 and 1998 NOTE O - FINANCIAL INSTRUMENTS - CONTINUED The Bank's exposure to credit loss is represented by the contractual amount of those instruments and is usually limited to amounts funded or drawn. The contract or notional amounts of these agreements, which are not included in the balance sheets, are an indicator of the Bank's credit exposure. Commitments to extend credit generally carry variable interest rates and are subject to the same credit standards used in the lending process for on- balance-sheet instruments. Additionally, the Bank periodically reassesses the customer's creditworthiness through ongoing credit reviews. The Bank generally requires collateral or other security to support commitments to extend credit. Contract Amount ---------- Financial instruments whose contract amounts represent credit risk: Undisbursed loan commitments $8,511,389 Standby letters of credit 192,000 ---------- $8,703,389 ========== Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. 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 Bank evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management's credit evaluation. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, and income- producing commercial and residential properties. Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. 34 EAST COUNTY BANK NOTES TO FINANCIAL STATEMENTS - CONTINUED Years ended December 31, 1999 and 1998 NOTE O - FINANCIAL INSTRUMENTS - CONTINUED The following table provides summary information on the estimated fair value of financial instruments at December 31, 1999:
Carrying Estimated Amount Fair Value ------------- ------------- Financial assets: Cash and cash equivalents $ 12,405,175 $ 12,405,175 Securities available-for-sale 15,669,061 15,669,061 Loans held for sale 1,549,267 1,549,267 Loans held for investment 47,886,521 47,489,972 Accrued interest receivable 676,580 676,580 Financial liabilities: Deposits (71,646,675) (71,400,153) Accrued interest payable (58,445) (58,445) Off-balance-sheet liabilities: Undisbursed loan commitments and standby letters of credit - (85,000)
The following table provides summary information on the estimated fair value of financial instruments at December 31, 1998:
Carrying Estimated Amount Fair Value ------------- ------------- Financial assets: Cash and cash equivalents $ 7,283,010 $ 7,283,010 Securities available-for-sale 14,998,431 14,998,431 Loans held for sale 436,784 436,784 Loans held for investment 48,658,546 48,787,211 Accrued interest receivable 636,912 636,912 Financial liabilities: Deposits (65,481,562) (65,371,443) Accrued interest payable (54,395) (54,395) Off-balance-sheet liabilities: Undisbursed loan commitments and standby letters of credit - (134,000)
35 EAST COUNTY BANK NOTES TO FINANCIAL STATEMENTS - CONTINUED Years ended December 31, 1999 and 1998 NOTE O - FINANCIAL INSTRUMENTS - CONTINUED The carrying amounts include $521,487 and $402,733 of non-accrual loans (loans that are not accruing interest) at December 31, 1999 and 1998, respectively. Management has determined that primarily because of the uncertainty and the difficulty of predicting the timing of such cash flows excessive amounts of time and money would be incurred to estimate the fair values of nonperforming assets. The following aggregate information is provided at December 31, about the contractual provisions of these assets: 1999 1998 ---------- ---------- Aggregate carrying amount $521,487 $402,733 Effective rate 11.25% 11.42% Average term to maturity 26 months 58 months NOTE P - RESTRICTIONS ON RETAINED EARNINGS Under current California state banking laws, the Bank may not pay cash dividends in an amount which exceeds the lesser of retained earnings of the Bank or the Bank's net earnings for its last three fiscal years, (less the amount of any distributions to shareholders made during that period). If the above requirements are not met, cash dividends may only be paid with the prior approval of the Commissioner of the Department of Financial Institutions, in an amount not exceeding the Bank's net earnings for its last fiscal year or the amount of its net earnings for its current fiscal year. Accordingly, the future payment of cash dividends will depend on the Bank's earnings and its ability to meet its capital requirements. NOTE Q - ACQUISITION In October of 1999, the Bank entered into a definitive agreement with Civic Bancorp to merge East County Bank with Civic Bank of Commerce. The merger agreement is subject to approval by the Federal Reserve, Department of Financial Institutions and the shareholders of East County Bank. The Bank will be acquired by Civic Bancorp in a cash transaction expected to close by February 29, 2000. 36 HISTORICAL AND PRO FORMA COMBINED FINANCIAL STATEMENTS The following unaudited pro forma condensed combined balance sheet at December 31, 1999, and pro forma condensed combined statement of income for the year ended December 31, 1999 combine the historical balance sheets of Civic BanCorp and Subsidiary and East County Bank as if the Merger had been effective on December 31, 1999, and the income statements of Civic BanCorp and East County Bank as if the Merger had been effective on the beginning of the period presented. The pro forma information also gives effect to the cancellation of 587,765 shares of East County Bank common stock, no par value, outstanding at February 29, 2000, with an aggregate value (Exchange Amount) equal to $23.98 per share in exchange for cash consideration. The pro forma adjustments are based upon available information and upon certain assumptions that management believes are reasonable under the circumstances. The Merger is accounted for under the purchase method of accounting, after giving effect to the pro forma adjustments described in the accompanying notes. Under this method of accounting, the purchase price has been allocated to the assets and liabilities of East County Bank based on preliminary estimates of fair values as of the date of acquisition. The actual fair values will be determined following consummation of the Merger. These unaudited pro forma combined financial statements should be read in conjunction with the historical consolidated financial statements and the related notes thereto of Civic BanCorp and the historical financial statements of East County Bank. The unaudited pro forma combined statements of income are not necessarily indicative of financial condition or operating results which would have been achieved had the Merger been consummated on the respective dates indicated and should not be construed as representative of future operations. CIVIC BANCORP AND SUBSIDIARY AND EAST COUNTY BANK - ------------------------------------------------- UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1999 (In Thousands Except Shares and Per Share Amounts) - -------------------------------------------------
East County Pro Forma Adjustments Civic BanCorp Bank Debits Credits --------------- ----------- -------------- ------------ INTEREST INCOME: Loans $ 24,421 $ 4,961 Investment secudities 4,399 875 Federal funds sold 1,312 401 803 (a) --------------- ----------- -------------- ------------ Total Interest Income 30,132 6,237 803 INTEREST EXPENSE: Deposits 8,194 1,832 Other borrowings 23 - --------------- ----------- -------------- ------------ Total Interest Expense 8,217 1,832 --------------- ----------- -------------- ------------ NET INTEREST INCOME 21,915 4,405 803 Provision for loan losses 315 714 --------------- ----------- -------------- ------------ Net Interest Income After Provision for Loan Losses 21,600 3,691 803 NON-INTEREST INCOME: Customer service fees 971 461 Disposition of client warrants 333 - Gain on sale of other assets held for sale 67 349 Other 156 227 --------------- ----------- -------------- ------------ Total Non-Interest Income 1,527 1,037 - NON-INTEREST EXPENSE: Salaries and employee benefits 8,330 2,251 Occupancy and equipment 2,157 546 Professional fees 487 352 Marketing 248 135 Goodwill and core deposit amortization 168 - 559 (C) Other 2,271 612 --------------- ----------- -------------- ------------ Total Non-Interest Expense 13,661 3,896 559 --------------- ----------- -------------- ------------ INCOME BEFORE INCOME TAXES 9,466 832 (1,362) Income tax expense 3,616 337 557 --------------- ----------- -------------- ------------ NET INCOME $ 5,850 $ 495 $ (805) --------------- ----------- -------------- ------------ BASIC INCOME PER SHARE $ 1.24 $ 0.89 --------------- ----------- ------------ DILUTED INCOME PER SHARE $ 1.21 $ 0.84 --------------- ----------- ------------ Weighted average shares outstanding used to compute basic net income per common share 4,713,181 553,400 (553,400) Dilutive effects of stock options 138,722 34,365 (34,365) --------------- ----------- -------------- ------------ Total diluted weighted average shares outstanding used to compute diluted net income per common share 4,851,903 587,765 (587,765) =============== =========== ============== ============ Pro Forma Combined ----------------- INTEREST INCOME: Loans $ 29,382 Investment secudities 5,274 Federal funds sold 910 ----------------- Total Interest Income 35,566 INTEREST EXPENSE: Deposits 10,026 Other borrowings 23 ----------------- Total Interest Expense 10,049 ----------------- NET INTEREST INCOME 25,517 Provision for loan losses 1,029 ----------------- Net Interest Income After Provision for Loan Losses 24,488 NON-INTEREST INCOME: Customer service fees 1,432 Disposition of client warrants 333 Gain on sale of other assets held for sale 416 Other 383 ----------------- Total Non-Interest Income 2,564 NON-INTEREST EXPENSE: Salaries and employee benefits 10,581 Occupancy and equipment 2,703 Professional fees 839 Marketing 383 Goodwill and core deposit amortization 727 Other 2,883 ----------------- Total Non-Interest Expense 18,116 ----------------- INCOME BEFORE INCOME TAXES 8,936 Income tax expense 3,396 ----------------- NET INCOME $ 5,540 ----------------- BASIC INCOME PER SHARE $ 1.18 ----------------- DILUTED INCOME PER SHARE $ 1.14 ----------------- Weighted average shares outstanding used to compute basic net income per common share 4,713,181 Dilutive effects of stock options 138,722 ----------------- Total diluted weighted average shares outstanding used to compute diluted net income per common share 4,851,903 ================= See notes to consolidated financial statements.
CIVIC BANCORP AND SUBSIDIARY AND EAST COUNTY BANK - -------------------------------------------------
UNAUDITED PRO FORMA COMBINDED BALANCE SHEET AS OF DECEMBER 31, 1999 (In Thousands Except Shares) - --------------------------- Civic East County Pro Forma Adjustments Pro Forma BanCorp Bank Debit Credit Combined ---------- ----------- ------- ----------- ----------- ASSETS - ------ Cash and due from banks $ 12,205 $ 4,545 $ 16,750 Federal funds sold 7,500 7,860 14,605 755 ---------- ----------- ---------- ----------- Total cash and cash equivalents 19,705 12,405 $ 14,605 17,505 Securities available for sale 31,665 15,669 47,334 Securities held to maturity 43,416 - 43,416 Other securities 2,126 - 2,126 Total loans 285,537 49,343 334,880 Less allowance for loan losses 4,850 1,078 5,928 ---------- ----------- Loans - net 280,687 48,265 328,952 Interest receivable and other assets 6,151 1,712 7,863 Intangible Assets - - 8,378 (b) 8,378 Leasehold improvements and equipment - net 1,621 511 2,132 ---------- ----------- ------- ---------- ----------- TOTAL ASSETS $ 385,371 $ 78,562 $ 8,378 $ 14,605 $ 457,706 ---------- ----------- ------- ---------- ----------- LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ LIABILITIES: Deposits: Noninterest bearing $ 65,277 $ 18,879 $ 84,156 Interest-bearing: Checking 11,851 9,284 21,135 Money market 160,432 4,657 165,089 Time and savings 97,154 38,827 135,981 ---------- ----------- ----------- Total deposits 334,714 71,647 406,361 Accrued interest payable and other liabilities 4,453 688 5,141 ---------- ----------- ----------- Total liabilities 339,167 72,335 411,502 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY Common stock no par value; authorized 34,751 5,346 5,346 (b) 45,443 Retained earnings, (subsequent to July 1,1996 11,701 1,111 1,111 (b) 11,701 Accumulated other comprehensive (loss) income, net (248) (230) 230 (248) ---------- ----------- ------- ---------- ----------- Total shareholders' equity 46,204 6,227 6,227 230 46,204 ---------- ----------- ------- ---------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 385,371 $ 78,562 $ 6,227 230 $ 457,706 ---------- ----------- ------- ---------- ----------- Shares Outstanding 4,674,411 563,442 563,442 4,674,411
CIVIC BANCORP AND SUBSIDIARY AND EAST COUNTY BANK - ------------------------------------------------- UNAUDITED PRO FORMA COMBINDED BALANCE SHEET AND INCOME STATEMENT AS OF DECEMBER 31, 1999 NOTES (Dollars in thousands) (a) Purchase price is $14,605,250 which will originate from Federal funds sold. $14,605,250 at 5.5% will impute an opportunity cost of $803,000. (b) Purchase price $ 14,605 Less: Common Stock (5,346) Retained Earnings (1,111) Accumulated comprehensive income 230 ------------ Goodwill $ 8,378 (c) Goodwill to be amortized over 15 years. Goodwill $ 8,378 Amortization period 15 Annual Amortization Expense $ 558
Exhibit Index No. Description Page - -- ----------- ---- 23.2 Consent of Moss Adams LLP EX-23.2 2 CONSENT OF MOSS ADAMS LLP EXHIBIT 23.2 The Board of Directors and Shareholders East County Bank We consent to incorporation by reference on Form 8-K of Civic BanCorp of our report dated January 14, 2000, relating to the Balance Sheets, Statements of Earnings, Statement of Shareholders' Equity, and Statements of Cash Flows of East County Bank as of December 31, 1999 which report appears in the December 31, 1999 Audited Financial Statements. /s/ Moss Adams LLP Stockton, California March 24, 2000 -----END PRIVACY-ENHANCED MESSAGE-----