-----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, DusZqfcm5c+76ngvz20Wtm1TAD7bGlZH57cH2gfsDr0yuFJOLOSUf8kdxtskcDkW KvzrgVKlEuAz/7HFEAxTNQ== 0001047469-98-039922.txt : 19981113 0001047469-98-039922.hdr.sgml : 19981113 ACCESSION NUMBER: 0001047469-98-039922 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALIFORNIA INDEPENDENT BANCORP CENTRAL INDEX KEY: 0000948976 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 680349947 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-26552 FILM NUMBER: 98743707 BUSINESS ADDRESS: STREET 1: 1005 STAFFORD WAY STREET 2: P O BOX 1575 CITY: YUBA CITY STATE: CA ZIP: 95992 BUSINESS PHONE: 9166744444 MAIL ADDRESS: STREET 1: P O BOX 1575 STREET 2: 1005 STAFFORD WAY CITY: YUBA CITY STATE: CA ZIP: 95992 10-Q 1 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC. 20549 (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________________to_______________________. Commission File Number 0-265520 California Independent Bancorp ------------------------------ (Exact name of registrant as specified in its charter) California 68-0349947 ---------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1227 Bridge St., Suite C, Yuba City, California 95991 ----------------------------------------------------- (Address of principal executive offices) (Zip Code) (530) 674-4444 -------------- (Registrant's telephone number, including area code) N/A --- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Outstanding at Class September 30, 1998 ----- ------------------ Common stock, no par value 1,741,568 shares
This report contains a total of 24 pages PART I- FINANCIAL INFORMATION ITEM 1 PAGE CALIFORNIA INDEPENDENT BANCORP AND SUBSIDIARIES FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS 3 CONSOLIDATED STATEMENTS OF INCOME FOR THREE MONTHS 4 CONSOLIDATED STATEMENTS OF INCOME FOR NINE MONTHS 5 CONSOLIDATED STATEMENTS OF CASH FLOWS 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7-8 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9-22 ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 22 PART II- OTHER INFORMATION ITEM 1 LEGAL PROCEEDINGS 23 ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS 23 ITEM 3 DEFAULTS UPON SENIOR SECURITIES 23 ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 23 ITEM 5 OTHER INFORMATION 23 ITEM 6 EXHIBITS AND REPORTS ON FORM 8K 23 SIGNATURES 24 2 PART I-FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CALIFORNIA INDEPENDENT BANCORP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
September 30, December 31, 1998 1997 --------------------------- ---------------------------- Assets Cash and due from banks $18,147 $18,425 Federal funds sold - 35,600 --------------------------- ---------------------------- Total Cash and Equivalents 18,147 54,025 Investment securities: Available-for-sale securities, at fair value 38,779 38,042 Held-to-maturity securities, at amortized cost (fair value of $8,854 and $19,245 respectively) 8,758 19,156 --------------------------- ---------------------------- Total investments 47,537 57,198 Loans: Commercial and agricultural 87,643 79,385 Consumer 2,265 1,956 Real Estate 82,486 51,959 Lease financing 30,907 33,465 Other 311 1,022 --------------------------- ---------------------------- Total loans 203,612 167,787 Less allowance for possible loan losses (5,525) (5,514) --------------------------- ---------------------------- Net Loans 198,087 162,273 Premises and equipment, net 7,903 8,178 Interest receivable 3,028 2,671 Other real estate owned - 918 Other assets 5,025 6,267 --------------------------- ---------------------------- Total assets 279,727 291,530 --------------------------- ---------------------------- --------------------------- ---------------------------- Liabilities and shareholders' equity Deposits: Demand, non-interest bearing $50,078 $62,224 Demand, interest bearing 46,055 40,133 Savings and Money Market 56,931 68,790 Time certificates 89,871 95,784 --------------------------- ---------------------------- Total deposits 242,935 266,931 Interest payable 1,593 1,814 Federal funds purchased and other borrowings 10,896 - Other liabilities 1,032 1,415 --------------------------- ---------------------------- Total liabilities 256,456 270,160 Shareholders' equity: Common stock, no par value; 20,000,000 shares authorized; 1,741,568 and 1,651,131 shares outstanding September 30, 1998 and December 31, 1997, respectively 15,508 13,587 Retained earnings 7,752 7,864 Debt guarantee of ESOP (80) (80) Net unrealized gains (losses) on available-for-sale securities 91 (1) --------------------------- ---------------------------- Total shareholders' equity 23,271 21,370 --------------------------- ---------------------------- Total liabilities and shareholders' equity $279,727 $291,530 --------------------------- ---------------------------- --------------------------- ----------------------------
See accompanying notes to consolidated financial statements 3 CALIFORNIA INDEPENDENT BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Three months Three months Ended Ended September 30, 1998 September 30, 1997 -------------------------------------------------------------------- Interest income: Interest and fees on loans $5,699 $5,395 Interest on investment securities 857 573 Interest on federal funds sold - 194 ------------------------------- --------------------------- Total interest income 6,556 6,162 ------------------------------- --------------------------- Interest expense: Demand, interest bearing 434 326 Savings 366 627 Time certificates 1,258 1,447 Other 312 6 ------------------------------- --------------------------- Total interest expense 2,370 2,406 ------------------------------- --------------------------- Net interest income 4,186 3,756 Provision for possible loan losses (754) - ------------------------------- --------------------------- Net interest income after provision for possible loan losses 3,432 3,756 ------------------------------- --------------------------- Other income: Service charges 232 274 Net gain (loss) on securities transactions - - Real Estate Brokered loan fees 348 231 Lease Commissions and fees 465 516 Other 514 437 ------------------------------- --------------------------- Total other income 1,559 1,458 ------------------------------- --------------------------- Other expenses: Salaries and benefits 2,118 1,988 Occupancy 215 203 Equipment 374 331 Advertising and promotion 67 85 Stationery and supplies 72 63 Telephone expenses 109 103 Legal and professional fees 231 95 Other operating expenses 722 708 ------------------------------- --------------------------- Total other expenses 3,908 3,576 Earnings before income taxes 1,083 1,638 Income taxes 404 650 ------------------------------- --------------------------- Net Income $679 $988 ------------------------------- --------------------------- ------------------------------- --------------------------- Basic earnings per share $0.41 $0.60 ------------------------------- --------------------------- ------------------------------- --------------------------- Weighted average shares outstanding 1,669,503 1,650,073 ------------------------------- --------------------------- Diluted: Earnings per share $0.39 $0.52 ------------------------------- --------------------------- ------------------------------- --------------------------- Weighted average shares outstanding 1,732,686 1,899,879 ------------------------------- --------------------------- Cash dividend paid per share of common stock $0.11 $0.11 ------------------------------- --------------------------- ------------------------------- ---------------------------
See accompanying notes to consolidated financial statements 4 CALIFORNIA INDEPENDENT BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Nine months Nine months Ended Ended September 30, 1998 September 30, 1997 -------------------------------------------------------------------- Interest income: Interest and fees on loans $15,640 $14,646 Interest on investment securities 2,803 1,867 Interest on federal funds sold 420 1,026 ------------------------------- --------------------------- Total interest income 18,863 17,539 ------------------------------- --------------------------- Interest expense: Demand, interest bearing 1,250 1,038 Savings 1,178 1,945 Time certificates 3,888 3,975 Other 414 18 ------------------------------- --------------------------- Total interest expense 6,730 6,976 ------------------------------- --------------------------- Net interest income 12,133 10,563 Provision for possible loan losses (1,440) (3,336) ------------------------------- --------------------------- Net interest income after provision for possible loan losses 10,693 7,227 ------------------------------- --------------------------- Other income: Service charges 692 760 Net gain (loss) on securities transactions - - Real Estate Brokered loan fees 818 496 Lease Commissions and fees 1,556 1,223 Other 1,245 1,134 ------------------------------- --------------------------- Total other income 4,311 3,613 ------------------------------- --------------------------- Other expenses: Salaries and benefits 6,188 5,585 Occupancy 587 527 Equipment 1,065 941 Advertising and promotion 239 309 Stationery and supplies 224 242 Telephone expenses 280 292 Legal and professional fees 720 232 Other operating expenses 1,953 1,789 ------------------------------- --------------------------- Total other expenses 11,256 9,917 Earnings before income taxes 3,748 923 Income taxes 1,406 311 ------------------------------- --------------------------- Net Income $2,342 $612 ------------------------------- --------------------------- ------------------------------- --------------------------- Basic earnings per share $1.41 $0.37 ------------------------------- --------------------------- ------------------------------- --------------------------- Weighted average shares outstanding 1,657,949 1,634,717 ------------------------------- --------------------------- Diluted: Earnings per share $1.36 $0.32 ------------------------------- --------------------------- ------------------------------- --------------------------- Weighted average shares outstanding 1,721,132 1,888,052 ------------------------------- --------------------------- Cash dividend paid per share of common stock $0.33 $0.33 ------------------------------- --------------------------- ------------------------------- ---------------------------
See accompanying notes to consolidated financial statements 5 CALIFORNIA INDEPENDENT BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months ended September 30, 1998 and September 30, 1997 (UNAUDITED) (DOLLARS IN THOUSANDS)
September 30, 1998 Sptember 30, 1997 ------------------------------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $2,342 $612 Adjustments to reconcile net income to net cash provided by operating activities- Depreciation and amortization 839 718 Provision for possible loan losses 1,440 3,336 Write-down of other real estate owned 54 0 Provision for deferred taxes 75 9 (Increase) decrease in assets- Interest receivable (357) (455) Other assets 1,167 336 Increase (decrease) in liabilities- Interest payable (221) 329 Fed Funds purchased, other borrowings and other liabilities 10,514 507 ------------------------------------------------------ Net cash provided by operating activities 15,853 5,392 CASH FLOWS FROM INVESTING ACTIVITIES: Net (increase) decrease in loans (37,359) (35,444) Purchase of investments (20,369) (18,100) Proceeds from maturity of HTM Securities 12,781 11,406 Proceeds from sales/maturity of AFS Securities 17,341 3,273 Proceeds from sales of other real estate owned 969 178 Purchases of premises and equipment (565) (1,388) ------------------------------------------------------ Net cash used for investing activities (27,202) (40,075) CASH FLOWS FROM FINANCING ACTIVITIES: Net (decrease) in noninterest bearing deposits (12,145) 231 Net increase (decrease) in interest bearing deposits (11,851) 18,871 Cash dividends (546) (512) Stock options exercised 25 101 Cash paid in lieu of fractional shares (12) (15) ------------------------------------------------------ Net cash provided by (used in) financing activities (24,529) 18,676 NET INCREASE (DECREASE) (35,878) (16,007) ------------------------------------------------------ CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 54,025 64,228 ------------------------------------------------------ CASH AND CASH EQUIVALENTS, END OF PERIOD 18,147 48,221 ------------------------------------------------------ ------------------------------------------------------
See accompanying notes to consolidated financial statements 6 CALIFORNIA INDEPENDENT BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1 - Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC"). In the opinion of Management, the unaudited consolidated financial statements contain all adjustments which are necessary to present fairly the financial position of California Independent Bancorp ("Company") and its subsidiaries at September 30, 1998 and December 31, 1997, and the results of its operations for the periods ended September 30, 1998 and 1997, respectively. Certain information and footnote disclosures normally presented in annual financial statements prepared in accordance with generally accepted accounting principles have been omitted in accordance with SEC rules or regulations. The results of operations for the period ended September 30, 1998, are not necessarily indicative of the operating results for the full year ending December 31, 1998. It is suggested that these financial statements be read in conjunction with the financial statements and notes included in the Company's Annual report for the year ended December 31, 1997. Note 2 - Consolidation The consolidated financial statements include the accounts of the Company, its wholly owned subsidiary Feather River State Bank ("Bank"), and the Bank's wholly owned subsidiary EPI Leasing Company Inc. ("EPI"). All material intercompany accounts and transactions have been eliminated in consolidation. Note 3 - Loans to Directors In the ordinary course of business, the Company makes loans to directors of the Company, which on September 30, 1998, amounted to a total of approximately $5,214,000. Note 4 - Commitments & Contingent Liabilities In the normal course of business, there are various outstanding commitments and contingent liabilities, such as commitments to extend credit and letters of credit, which are not reflected in the financial statements. Management does not anticipate any material loss as a result of these transactions. 7 Note 5 - Cash Dividends In February, May and August of 1997 and 1998, the Company paid an eleven cent per share cash dividend. Note 6 - Earnings Per Share In February 1997, the Financial Accounting Standards Board (" FASB") issued SFAS No. 128, "Earnings per Share," which establishes standards for computing and presenting earnings per share ("EPS"). It replaced the presentation of primary EPS with a presentation of basic EPS. It also required dual presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and required reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. The statement is effective for financial statements issued for periods ending after December 15, 1997, and requires restatement for all periods presented. The implementation of this statement does not have a material effect on the Company's reported financial position or net income. Note 7- Comprehensive Income In 1998, the Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income," which requires companies to report all changes in equity during a period, except those resulting from investment by owners and distribution to owners. Total comprehensive income for the nine months ended September 30, 1998, and September 30, 1997, is $2,433,000 and $611,000, respectively. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS California Independent Bancorp ("CIB," and with its subsidiaries the "Company") is a financial institution holding company headquartered in Yuba City, California. CIB has one subsidiary, Feather River State Bank ("Bank") which operates as a California state chartered commercial bank. The Bank has one wholly owned subsidiary, EPI Leasing Company Inc. ("EPI"), a equipment leasing company located in Citrus Heights, California. Certain statements in this Form 10-Q quarterly report include forward-looking information within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are subject to the 'safe harbor' provisions created by those sections. These forward-looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such risks and uncertainties include, but are not limited to, the following factors: competitive pressure in the banking industry; changes in the interest rate environment; general economic conditions, either nationally or regionally, are less favorable than expected, resulting in, among other things, a deterioration in credit quality and an increase in the provision for possible loan losses; changes in the regulatory environment; and changes in business conditions, volatility of rate sensitive deposits, operational risks including data processing system failures or fraud; asset/liability matching risks and liquidity risks; and changes in the securities markets. In addition, such risks and uncertainties include mortgage banking activities, merchant card processing and concentration of lending activities. The following sections discuss significant changes and trends in financial condition, capital resources and liquidity of the Company from December 31, 1997 to September 31, 1998, and significant changes and trends in the Company's results of operations for the three and six months ended September 31, 1998, compared to the same period in 1997. OVERVIEW OF CHANGES IN THE FINANCIAL STATEMENTS Net income for the nine month period ending September 30, 1998, was $2,342,000 resulting in diluted earnings of $1.36 per share. This represents a significant increase over the same period in 1997, which saw a net income of $612,000, or $.32 per share on a diluted basis. The growth in Net Income in 1998 over 1997 can primarily be attributed to a reduction in contributions to the Allowance for Loan Losses to $1,440,000 in 1998 compared to $3,336,000 for the same period in 1997. Total assets at September 30, 1998, decreased from the December 31, 1997 total of 291,530,000 by 4.0% to $279,727,000. The Company's outstanding net loans were $198,087,000 at September 30, 1998. This represents an increase of $35,814,000 or 22.1% from the December 31, 1997 amount of $162,273,000. This rise was primarily due to an increase of 58.8% or $30,527,000 in Real Estate Loans. The Company's investment portfolio at September 30, 1998, was $47,537,000, or 17.0% of total assets, a decrease from $57,198,000 or 19.6% of total assets at December 31, 1997. At September 30, 1998, the Company had no overnight Federal Funds Sold as 9 compared to $35,600,000 at December 31, 1997. The decrease in Federal Funds Sold was due to the need to fund an increased seasonal loan demand. Because of the need to fund the increased seasonal loan demand, the Company had $10,896,000 in outstanding Federal Funds purchased and other borrowings at September 30, 1998. The Company had no balances outstanding on these borrowing lines at December 31, 1997. Deposits at September 30, 1998, were $242,935,000 compared to $266,931,000 at December 31, 1997, a decrease of 9.0%. The total loan-to-deposit ratio was 83.8% at September 30, 1998, compared to 62.9% at December 31, 1997. This increase was the result of normal seasonal lending cycles of agriculture loans and an increased focus by the Company in real estate lending. LOANS The Company lends primarily to small and medium sized businesses, small to large sized farmers and consumers within its market area, which is comprised principally of Sutter, Yuba, Colusa and Yolo counties and secondarily Butte, Glenn, Sacramento, Placer, Madera and Fresno counties. In addition, The Company originates commercial and industrial equipment leases through the Bank's subsidiary EPI, which is headquartered in Citrus Heights. Due to the seasonal nature of the Company's agricultural lending activities, outstanding loan balances historically increase during the second and third quarters of the year and peak during the late third quarter. The following table illustrates the increase (decrease) in the Company's loan portfolio for September 30, 1998 over December 31, 1997.
- -------------------------------------------------------------------------------------------------------------------------- (Dollars in thousands) September 30, December 31, Increase (Decrease) 1998 1997 1998 over 1997 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Loans: Commercial $ 87,643 $ 79,385 $ 8,258 10.4% Consumer 2,265 1,956 $ 309 15.8% Real Estate 82,486 51,959 $30,527 58.8% Leases 30,907 33,465 $(2,558) (7.6%) Other 311 1,022 $ (711) (69.6%) -------------------------------------------------------------------------- Total Loans $203,612 $167,787 $35,825 21.4% - --------------------------------------------------------------------------------------------------------------------------
Total loans outstanding as of September 30, 1998 were $203,612,000 representing an increase of $35,825,000 or 21.4% over December 31, 1997. The increase is attributable to two principal events: 1. The Company's real estate loan portfolio increased 58.8% between December 31, 1997 and September 30, 1998, from $51,959,000 to $82,486,000. This increase was influenced primarily by a rise in real estate construction loans. The Company 10 extends construction loans primarily to builders and developers of single family houses and individual borrowers. The rise in real estate construction loans was accredited to the Company's strong business development efforts and a general increase in residential real estate activity in the Company's market area. In addition to construction loans, the Company has also increased its portfolio of term, residential real estate loans. 2. Agricultural and Commercial loans increased $8,258,000 or 10.4% between December 31, 1997 and September 30, 1998. Most of this increase occurred in the agricultural portfolio. The Company provides a wide range of loan products to farmers and agri-businesses throughout its trade area. Agricultural loans are reported under the "Commercial Loan" category in the consolidated balance sheet. The rise is largely a matter of the timing of the agricultural operating cycle. Many of the Company's agricultural loans are annual crop production loans. September 30 is typically a high point in the agricultural credit cycle. Crops are usually sold during the fourth quarter and the loan balances are reduced. The Company's lease portfolio decreased from $33,465,000 on December 31, 1997 to $30,907,000 on September 30, 1998 representing a decrease of 7.6%. The Company originates commercial and industrial equipment leases through the Bank's subsidiary EPI. During the first and third quarters of 1998, the Company elected to sell several pools of leases as part of its portfolio management strategy. These lease pool sales resulted in the reduction in lease receivables as of September 30, 1998 compared to December 31, 1997. LOAN QUALITY During the third quarter of 1998, the Company completed a restructuring of the Bank's loan administration. Loan administration is considered a critical part of lending operations as this unit is charged with management and oversight of the loan portfolio. The restructuring involved reassigning certain loan management duties among existing staff members and hiring additional staff and is intended to strengthen management's supervision over the loan portfolio. The Company places loans on nonaccrual status if (1) principal or interest has been in default for 90 days or more, unless the loan is both well secured and in the process of collection; (2) payment in full of principal or interest is not expected; or (3) the financial condition of the borrower has significantly deteriorated. 11 The table shown below summarizes the composition of non-performing loans as of September 30, 1998, December 31, 1997 and September 30, 1997, as well as the changes between the periods.
-------------------------------------------------------------------------------------- $ Amt. Change $ Amt. Change $ Amt. (Dollars in thousands) 9/30/98 12/31/97 9/30/97 - ---------------------- -------------------------------------------------------------------------------------- Accruing loans past due 90 days or more Commercial 0 137 (67%) 428 Agricultural 0 0.4 -0- Real Estate 0 82 (362%) 379 Leases 41 (62%) 109 (58%) 260 Consumer 1 0.2 54 -------------------------------------------------------------------------------------- TOTAL 42 (87%) 329 (70%) 1,121 -------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------- Nonaccrual Loans Commercial 1,055 +52% 692 (43%) 1,221 Agricultural 2,726 (45%) 5,013 +44% 3,480 Real Estate 2,525 +66% 1,518 (32%) 2,258 Leases 177 +38% 128 -0- Consumer 0 0 -0- -------------------------------------------------------------------------------------- TOTAL 6,483 (11%) 7,351 +5% 6,959 -------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------- Total Nonperforming 6,525 (15%) 7,680 (5%) 8,080 -------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------
The Company has reduced nonperforming loans by 20% during the past year and by 15% in the first three quarters of 1998. Nonperforming loans comprised 3.2% of the portfolio on September 30, 1998, which was down from 4.5% of the portfolio on December 31, 1997 and 4.4% on September 30, 1997. The Company's nonperforming loans escalated significantly during the first half of 1997. The increase in nonperforming loans during that period was attributable to heightened risk exposure in a limited number of large credit relationships. Since that time, the Company has made a concerted effort to reduce nonperforming loans. In 1997, management assembled an experienced group of loan collectors to aggressively collect the troubled loans and recover charged-off loans. Additionally, a plan was adopted to aggressively reduce the level of nonperforming and problem loans. This approach has been successful. The Company devises specific loan resolution plans based upon the circumstances surrounding the particular credit relationship. Plans are designed to return the highest dollar amount to the Company in the shortest time while reducing credit risk exposure. All of the nonperforming loans listed above are in the process of collection. In terms of specific resolution plans, 27% of these loans (approximately $1.7 million) have been restructured, 21% of the loans (approximately $1.3 million) are in the process of collateral liquidation and 52% of the loans (approximately $3.3 million) are currently in an undetermined status. Management projects additional progress toward the resolution of these troubled loans during the fourth quarter of 1998. However, due to particular 12 factors surrounding specific nonperforming loans, Management projects that some of these credits will require several additional quarters to resolve. The Company's nonperforming loans are concentrated in two credit relationships that comprise 64% of the total. One large agricultural credit relationship comprises 46% of the total. This borrower sustained financial difficulty stemming from a combination of factors. The debtor is currently in bankruptcy, which has slowed progress towards ultimate loan resolution. Ongoing negotiations are occurring in an attempt to restructure the credit. Management anticipates a conclusion to the restructuring during the fourth quarter of 1998. The second largest nonaccrual loan, comprising 17% of total nonperforming loans, is to a real estate developer. The bank financed a subdivision that did not proceed as scheduled. The borrower has sustained cash flow and solvency problems. This credit has been restructured under a new development plan. Progress was made during the second and third quarters of 1998 as the real estate market improved modestly and the borrower was able to sell certain real property. According to the terms of the plan, Management expects additional loan reductions during the fourth quarter of 1998 and/or the first quarter of 1999. The remaining 36% of the nonperforming loans are distributed amongst the commercial, agricultural, real estate and lease portfolios. As indicated in the table above, the Company has sustained an overall decrease in nonaccrual loans of 11% between December 31, 1997 and September 30, 1998. However, the separate nonaccrual categories for commercial, real estate and leases actually sustained increases. Nonaccrual real estate loans increased primarily due to the reclassification of two loans previously classified as agricultural and now reported under the real estate category. In addition, the real estate nonaccruals increased due to a real estate developer with two loans declaring bankruptcy. The commercial nonaccrual category increased primarily as a result of the failure of two retail business loan relationships. Finally, Nonaccrual leases increased due to several bankruptcies and business failures sustained by lessees. The Company's Allowance for Loan Loss Reserves totaled $5,525,000 or 2.71% of gross loans as of September 30, 1998. This amount is compared to $5,514,000 as of December 31, 1997 and $4,146,000 as of September 30, 1997. The Company uses the allowance method in providing for possible loan losses. Loan losses are charged to the allowance for possible loan losses and recoveries are credited to it. Management believes that the total allowance for loan losses is adequate to cover potential losses in the loan portfolio. While Management uses available information to provide for loan losses, future additions to the allowance may be necessary based on changes in economic conditions and other factors. Additions to the allowance for loan losses are made by provisions for possible loan losses. The provision for possible loan losses is charged to operating expense and is based upon past loan loss experience and estimates of potential loan losses which, in Management's judgment, deserves current recognition. Other factors considered by Management include growth, composition and overall quality of the loan portfolio, review of specific problem loans and current economic conditions that may affect the borrower's ability to repay the loan. Actual losses may vary from current estimates. The estimates are reviewed constantly, and adjustments, as necessary, are charged to operations in the period in which they become known. 13 RESULTS OF OPERATIONS Three and nine months ended September 30, 1998, compared with Three and nine months ended September 30, 1997 Net interest income after provision for possible loan losses was $3,432,000 for the three months ended September 30, 1998 as compared to $3,756,000 for the same period in 1997. For the nine month period ending September 30,1998, interest income after provision for possible loan losses was $10,693,000 as compared to $7,227,000 for the same nine month period in 1997. During the first half of 1997, the Bank chose to increase its allowance for possible loan losses, which caused the Company's net interest income after provision for possible loan losses to decrease. During the three month period ending September 30, 1998, the Company's net income decreased by $309,000 over the same period in 1997 to $679,000. This decrease was due to an additional provision for possible loan losses amounting to $754,000 during the third quarter of 1998. For the nine month period ending September 30, 1998, net income increased by $1,730,000 over the same period in 1997 to $2,342,000. Additionally, during the three month period ending September 30, 1998, the Company realized a 6.4% or $394,000 increase in total interest income for 1998 over 1997. Total Interest Income stood at $6,556,000 in 1998, as compared to the 1997 amount of $6,162,000. During the nine month period the Company recognized a 7.5% or $1,324,000 increase in 1998 over 1997 total interest income, which stood at $18,863,000 in 1998, as compared to the 1997 amount of $17,539,000. The growth in total interest income can be attributed to a rise in the balance of average loans in 1998 over 1997. The increase in 1998 over 1997 amounted to 7.13% and 7.30% for the three and nine month periods, respectively. The yield on average loans for the three and nine month periods ended September 30, 1998, compared to the same periods in 1997, is set forth in the following table:
- ---------------------------------------------------------------------------------------------------------------------- Three months Three months Nine months Nine months (Dollars in Ended Ended Ended Ended thousands) September 30, 1998 September 30, 1997 September 30, 1998 September 30, 1997 - ---------- ----------------------------------------------------------------------------------------------- Average loans Outstanding $209,008 $195,101 $188,413 $175,596 Average yields 10.91% 11.06% 11.07% 11.12% Amount of interest & fees earned $ 5,699 $5,395 $ 15,640 $14,646 Average prime rate 8.50% 8.50% 8.50% 8.42% - ----------------------------------------------------------------------------------------------------------------------
The Company also experienced a decrease in Total Interest Expense of 1.5% or $36,000, for the three months ending September 30, 1998 over 1997, and 3.5% or $246,000, for the nine months ending September 30, 1998 over 1997. These decreases in interest expense 14 are primarily reflective of the Company's decision to adjust the rates it pays on deposits to levels consistent with the markets it serves, thereby resulting in a lower average interest rate paid on its deposits. Rates and amounts paid on average deposits, including noninterest-bearing deposits for the three and nine month periods ended September 30, 1998, compared to the same periods in 1997, are set forth in the following table:
- ---------------------------------------------------------------------------------------------------------------------- Three months Three months Nine months Nine months (Dollars in Ended Ended ended Ended thousands) September 30, 1998 September 30, 1997 September 30, 1998 September 30, 1997 - ---------- ----------------------------------------------------------------------------------------------- Average deposits Outstanding $245,279 $250,167 $252,171 $243,566 Average rates paid 3.34% 3.84% 3.34% 3.82% Amount of interest paid or accrued $2,051 $ 2,400 $6,316 $6,976 - ----------------------------------------------------------------------------------------------------------------------
The Company experienced an increase in Total Other Income of $101,000 or 6.9% for the three month period and $698,000 or 19.3% for the nine month period ended September 30, 1998, over the same period in 1997. The growth was primarily due to increased real estate brokered loan fees amounting to $117,000 or 50.6% for the three month period, and $322,000 or 64.9% for the nine month period. Both increases are attributed to an elevated real estate loan volume. Another source contributing to the growth in Total Other Income was a nine month increase of $333,000 or 27.2% in Lease Commissions and fees in 1998 over 1997. This increase can be attributable to a rise in volume in the Company's lease business. Total Other Expenses for the three and nine months ended September 30, 1998, were $3,908,000 and $11,256,000, respectively. These figures reflect an increase of $332,000 and $1,339,000 over the same respective three and nine month periods. The increases were primarily the result of higher salaries and benefits expense along with professional and legal fees. Salaries and benefits increased $130,000 or 6.5% for the three month period and $603,000 or 10.8% for the nine month periods ending September 30, 1998. Aside from normal salary raises, the additional expense was due to increased commissions earned as a result of the higher volume of Real Estate lending and leasing activity. Additionally, during the third quarter of 1998, the Bank expanded its Loan Administration staff in order to recognize the increased loan volume and to implement the restructuring of the department. Legal and professional fees increased $136,000 for the three month period and $488,000 for the nine month periods ending September 30, 1998, over the same period in 1997. This rise is attributed to the escalated legal expense associated with collection and resolution of nonperforming loans. 15 The following tables summarize the principal elements of operating expenses and disclose the increases (decreases) and percent of increases (decreases) for the three and nine month periods ended September 30, 1998 and 1997:
- ------------------------------------------------------------------------------------------------------------------- Increase (Decrease) Three months ended September 30, 1998 over 1997 ---------------------------------------------------------------------------------- (Dollars in thousands) 1998 1997 - ---------------------- --------------------------------------------- Salaries and benefits $2,118 $ 1,988 $130 6.5% Occupancy 215 203 12 5.9% Equipment 374 331 43 13.0% Advertising and promotion 67 85 (18) (21.2%) Stationery & supplies 72 63 9 14.3% Telephone expenses 109 103 6 5.8% Legal and professional fees 231 95 136 143.2% Other operating expenses 722 708 14 2.0% ---------------------------------------------------------------------------------- Total other expenses $3,908 $ 3,576 $332 9.3% ---------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------
Increase (Decrease) Nine months ended September 30, 1998 over 1997 ---------------------------------------------------------------------------------- (Dollars in thousands) 1998 1997 - ---------------------- --------------------------------------------- Salaries and benefits $6,188 $5,585 $603 10.8% Occupancy 587 527 60 11.4% Equipment 1,065 941 124 13.2% Advertising and promotion 239 309 (70) (22.7%) Stationery & supplies 224 242 (18) (7.4%) Telephone expenses 280 292 (12) (4.1%) Legal and professional fees 720 232 488 210.3% Other operating expenses 1,953 1,789 164 9.2% ---------------------------------------------------------------------------------- Total other expenses $11,256 $9,917 $1,339 13.5% ----------------------------------------------------------------------------------
Applicable income taxes for the three and nine month periods ended September 30, 1998, were $404,000 and $1,406,000 as compared to the September 30, 1997 amounts of $650,000 and $311,000, respectively. LIQUIDITY The Bank's liquid assets consist of cash and due from banks, federal funds sold and investment securities with maturities of one year or less (exclusive of pledged securities). Historically, during the first two quarters of each year the Bank generally has experienced excess liquidity due to the seasonal trends of the banks agricultural and real estate loan portfolio. The Bank's seasonal agricultural loan demand tends to challenge the Bank's liquidity position beginning in the second quarter and continuing into the third quarter of each year. The Bank has formal and informal borrowing arrangements with the Federal Reserve Bank to meet unforeseen deposit outflows or seasonal loan funding demands. The Bank has also entered into an agreement with Lehman Brothers for a standby short-term loan 16 secured by U.S. Government and Agency Obligations in the Bank's investment portfolio, in order to fund any liquidity needs not met by other sources of funding as warranted by loan demand. As of September 30, 1998, the Bank had $10,896,000 outstanding on these lines and had no balances outstanding as of December 31, 1997. RATE SENSITIVITY Interest rate sensitivity is the relationship between market interest rates and net interest income due to the repricing characteristics of assets and liabilities. If more liabilities than assets reprice in a given period (a liability sensitive position), market interest rate changes will be reflected more quickly in liability rates. If interest rates decline, a liability sensitive position will benefit net income. Alternatively, where assets reprice more quickly than liabilities in a given period (an asset sensitive position), a decline in market rates will have an adverse effect on net interest income. The Company is subject to considerable competitive pressure in generating deposits and loans at rates and terms prevailing in the company's market areas. However, Management's objective is to maintain the stability of the net interest margin in times of fluctuating interest rates by maintaining an appropriate mix of interest rate sensitive assets and liabilities. Management does not manage its interest rate sensitivity to maximize income based on its prediction of interest rates, but rather to minimize interest rate risk to the Company by stabilizing the Company's Net Interest Margin in all interest rate environments. Management has developed a matrix that calculates changes to the Net Interest Margin in both an increasing rate environment and a decreasing rate environment. A 200 basis point (2%) shock rate is used for this calculation. The matrix calculates a one-year Interest Rate Risk taking into consideration the delays in the timing of repricing based on actual experience. The one-year Interest Rate Risk ratios at September 30,1998, for an increasing rate environment and a decreasing rate environment were 11.2% and 25.2%, respectively. This means that if interest rates go up the Bank's Net Interest Margin will increase; if interest rates go down it will decrease. CAPITAL RESOURCES Total shareholders' equity on September 30, 1998, increased by $1,901,000 to $23,271,000 over December 31, 1997, total shareholders' equity of $21,370,000. The Company is subject to capital adequacy guidelines issued by federal regulators. These guidelines are intended to reflect the degree of risk associated with both on- and off-balance sheet items. Financial institutions are expected to comply with a minimum ratio of qualifying total capital to risk-weighted assets of 8%, at least half of which must be in Tier 1 Capital. In addition, federal agencies have adopted a minimum leverage ratio of Tier 1 Capital to total assets of 4%, which is intended to supplement risk-based capital requirements and to ensure that all financial institutions continue to maintain a minimum level of core capital. 17 As can be seen by the following tables, the Company exceeded all regulatory capital ratios on September 30, 1998, and on December 31, 1997: Risk-Based Capital Ratio As of September 30, 1998
- -------------------------------------------------------------------------------------------------------- Company Bank (Dollars in thousands) Amount Ratio Amount Ratio - -------------------------------------------------------------------------------------------------------- Tier 1 Capital $ 22,971 8.54% $ 22,792 8.48% Tier 1 Capital minimum requirement 10,755 4.00% 10,751 4.00% ------------------------------------------------------------------ Excess $ 12,216 4.54% $ 12,041 4.48% ------------------------------------------------------------------ ------------------------------------------------------------------ Total Capital 26,357 9.80% 26,178 9.74% Total Capital minimum requirement 21,509 8.00% 21,502 8.00% ------------------------------------------------------------------ Excess $ 4,848 1.80% $ 4,676 1.74% ------------------------------------------------------------------ Risk-adjusted assets $268,868 $268,775 ------------------------------------------------------------------ ------------------------------------------------------------------ Leverage Capital Ratio Tier 1 Capital to quarterly $ 22,971 7.83% $ 22,792 7.77% average total assets Minimum leverage requirement 11,738 4.00% 11,735 4.00% ------------------------------------------------------------------ ------------------------------------------------------------------ Excess $ 11,233 3.83% $ 11,057 3.77% ------------------------------------------------------------------ ------------------------------------------------------------------ Total Quarterly average assets $293,445 $293,363 ------------------------------------------------------------------ - --------------------------------------------------------------------------------------------------------
18 Risk Based Capital Ratio As of December 31, 1997
- --------------------------------------------------------------------------------------------------------------- Company Bank (Dollars in thousands) Amount Ratio Amount Ratio - --------------------------------------------------------------------------------------------------------------- Tier 1 Capital $21,151 8.99% $21,040 8.96% Tier 1 Capital Minimum requirement 9,413 4.00% 9,390 4.00% ------------------------------------------------------------------- Excess $11,738 4.99% $11,650 4.96% ------------------------------------------------------------------- ------------------------------------------------------------------- Total Capital 24,124 10.25% 24,006 10.23% Total Capital minimum Requirement 18,826 8.00% 18,780 8.00% ------------------------------------------------------------------- Excess $ 5,298 2.25% $ 5,226 2.23% ------------------------------------------------------------------- ------------------------------------------------------------------- Risk-adjusted assets $235,330 $234,750 ------------------------------------------------------------------- ------------------------------------------------------------------- Leverage Capital Ratio Tier 1 Capital to quarterly $21,151 7.43% $21,040 7.40% Average total assets Minimum leverage requirement 11,384 4.00% 11,377 4.00% ------------------------------------------------------------------- Excess $9,767 3.43% $9,663 3.40% ------------------------------------------------------------------- ------------------------------------------------------------------- Total quarterly average assets $284,598 $284,423 - ---------------------------------------------------------------------------------------------------------------
DIVIDENDS Federal and State banking and corporate laws could limit the banks ability to pay dividends to the Company. The Federal Reserve Board has issued a policy statement that a bank holding company should not declare or pay a cash dividend to its shareholders if the dividend would place undue pressure on the capital of its subsidiary banks or if the dividend could be funded only through additional borrowings or other arrangements that may adversely affect the financial position of the holding company. In addition, a bank holding company may not continue its existing rate of cash dividends on its common stock unless its net income is sufficient to fully fund each dividend, and its prospective rate of earnings retention is sufficient to fully fund each dividend and appears consistent with its capital needs, asset quality and overall financial condition. As a result of the Bank's disappointing 1997 financial performance and concerns disclosed during the Bank's December 31, 1997, joint regulatory examination, the Bank's Board of Directors has passed a resolution which requires the Bank to seek the written approval of the Federal Deposit Insurance Corporation and California Department of Financial Institutions prior to the payment of any cash dividends. 19 SUPERVISION AND REGULATION The Company and the Bank operate in a highly regulated environment and are subject to supervision and examination by various federal and state regulatory agencies. The Company, as a bank holding company, is subject to regulation and supervision by primarily the Federal Reserve, and the Bank, as a California-chartered commercial bank, is subject to supervision and regulation by primarily the Federal Deposit Insurance Corporation ("FDIC") and the California State Department of Financial Institutions ("DFI"). Federal and California state laws and regulations govern numerous matters involving both entities, including maintenance of adequate capital and financial condition, permissible types, amounts and terms of extensions of credit and investments, permissible non-banking activities, the level of reserves against deposits, and restrictions on dividend payments. The federal and state regulatory agencies possess extensive discretion and powers to prevent or remedy unsafe or unsound practices or violations of law by banks and bank holding companies. The Company and the Bank also undergo periodic examinations by one or more of these regulatory agencies, which may subject them to changes in asset valuations, in amounts of required loss allowances, and in operating restrictions resulting from the regulators' judgments based on information available to them at the time of their examination. The Bank's operations are also subject to a wide variety of state and federal consumer protection and similar statutes and regulations. Those and other restrictions limit the manner in which the Company and the Bank may conduct business and obtain financing. The laws and regulations to which the Company and the Bank are subject can and do change significantly from time to time, and such changes could materially affect the Company's business, financial condition, and operating results. As a result of the Company's and Bank's disappointing 1997 financial performance and concerns disclosed during the Bank's December 31, 1997 joint regulatory examination, the Bank's board of directors has passed a resolution to remedy the concerns which include: maintaining and, if necessary, retaining qualified management; maintaining the Bank's Tier 1 leverage capital in such an amount as to equal or exceed seven percent (7%) of the Bank's FDIC Part 325 total assets (as of September 30, 1998, the Bank's Tier 1 leverage capital ratio stands at 7.77%); continuing with the diligent implementation of a previously adopted plan to reduce the level of non-performing and problem loans, and to revise lending and collection policies and procedures; continuing with the diligent implementation of a revised operating budget and cost control plan in order to restore the Bank's prior level of profitability; ensuring that the Bank maintains an adequate reserve for loan losses; and, requiring the Bank to seek prior approval of the FDIC and DFI before the payment of any cash dividends. It is anticipated that, during the fourth quarter, the Company's board of directors will adopt similar resolutions directed toward the Company. Additionally, the FDIC and Federal Reserve have notified the Bank and Company that they have determined that the condition of the Bank and Company are such that prior approval of the regulatory agencies is necessary before adding or replacing any member of the boards of directors, employing any person as a senior executive officer, or changing the responsibilities of any senior executive officer so that the individual would be assuming a different senior executive officer position. Finally, due to the Bank's condition, the FDIC is also restricting the Company's and the Bank's ability to enter into any contracts to pay or make any golden parachute and indemnification payments to institution affiliated parties. 20 YEAR 2000 COMPLIANCE The "Year 2000 issue" has generally been described as the inability of computers systems, software, and other equipment utilizing microprocessors to distinguish the year 1900 from the year 2000. The Year 2000 issue poses significant risks for all businesses, households, and governments and could result in system failures and miscalculations causing disruptions in normal business and governmental operations if action is not taken to fix the problem before the year 2000 arrives. The Company is currently engaged in a four-phase management program that includes assessment, renovation, validation, and implementation. To ensure Year 2000 compliance, the Company has identified all major applications and systems that may require modification. The Company's program includes all computer systems, including PC and network hardware and software, and mainframe and mainframe software. The program also covers all equipment and other systems utilized in the Company and Bank's operations or on the premises from which the Company and Bank operates. In addition, the Bank is in the process of communicating with its large borrowers, customers, and major vendors to determine the Bank's and/or the Company's vulnerability to those third parties should they fail to resolve their Year 2000 issues. The responses are being evaluated; however, there can be no guarantee that the systems of other companies on which the Company's systems rely will be converted on time, or that a failure to convert by another company, or a conversion that is incompatible with the Company's systems, would not have a materially adverse effect on the Company. The Company's program calls for the utilization of internal and external resources to implement its Year 2000 project. The Company expects to complete the majority of its efforts by the end of 1998, leaving adequate time to assess and correct any significant issues that may materialize. The purchase of any necessary hardware and software will be capitalized in accordance with normal policy. Personnel and all other costs related to the project are being expensed as incurred. To date, the Company has expended approximately $200,000.00 on its Year 2000 compliance efforts. Management estimates an additional expenditure of $200,000.00 will be required to complete its program. The majority of these costs are expected to be incurred during 1998 and are not expected to have a material impact on the Company's cash flows, results of operations, or financial condition. NEW ACCOUNTING PRONOUNCEMENTS SFAS No. 131 - Disclosures About Segments of an Enterprise and Related Information SFAS No. 131 establishes standards for public business enterprises' reporting of information about operating segments in annual financial statements. The Statement requires that the enterprises report selected information concerning operating segments in interim financial reports issued to shareholders. Additionally, the Statement establishes requirements for related disclosures about products, services, geographic areas and major customers. SFAS No. 131 requires public business enterprises to report a measure of segment profit or loss, certain specific revenue and expense items, and segment assets. The Statement further requires reconciliation of total segment revenues, total segment profit or loss, total segment assets, and other amounts disclosed for segments to corresponding 21 amounts in the enterprise's general-purpose financial statements. It requires that all public business enterprises report information about the revenues derived from the enterprise's products or services (or groups of similar products and services), about the countries in which the enterprise earns revenues and holds assets, and about major customers regardless of whether that information is used in making operating decisions. However, SFAS No. 131 does not require an enterprise to report information that is not prepared for internal use if reporting it would be impracticable. SFAS No. 131 also requires that a public business enterprise report descriptive information about the way that the operating segments were determined, the products and services provided by the operating segments, differences between the measurements used in reporting segment information and those used in the enterprise's general purpose financial statements, and changes in the measurement of segment amounts from period to period. SFAS No. 131 is effective for financial statements for periods beginning after December 15, 1997. In the initial year of application, comparative information for earlier years is to be restated. This statement need not be applied to interim financial statements in the initial year of its application, but comparative information for interim periods in the initial year of application is to be reported in financial statements for interim periods in the second year of application. The Company has adopted the applicable provisions of SFAS No. 131. Segment disclosures will be presented in the financial statements for the year ended December 31, 1998. SFAS No. 133 - Accounting for Derivative Instruments and Hedging Activities In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires recognition of all derivatives as either assets or liabilities in the statement of financial condition and the measurement of those instruments at fair value. Recognition of changes in fair value will be recognized into income or as a component of other comprehensive income depending upon the type of the derivative and its related hedge, if any. SFAS No. 133 is effective for the Company beginning January 1, 2000. The Company is in the process of determining the impact of SFAS No. 133 on the Company's financial statements, which is not expected to be material. ITEM 3. QUANTITATIVE AND QUALITITAVE DISCLOSURES ABOUT MARKET RISK In Management's opinion, the Company's market risk and interest rate risk profiles are within reasonable tolerances at this time. (See Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations, sections discussing "Liquidity" and "Rate Sensitivity" at pages 16 and 17). No significant changes to the market risk or interest rate risk of the Company have occurred since December 31, 1997. 22 PART II- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. None reported. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. No changes. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matters were submitted during the period. ITEM 5. OTHER INFORMATION. None reported. ITEM 6. EXHIBITS AND REPORTS ON FORM 8K. (a) Exhibits. None filed. (b) No reports on Form 8K were filed during the period. 23 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. California Independent Bancorp Date: November 5, 1998 /S/ Robert J. Mulder ----------------------------- --------------------------------- Robert J. Mulder President Date: November 5, 1998 /S/ Annette Bertolini ----------------------------- ---------------------------------- Annette Bertolini Chief Financial Officer 24 EX-27 2 EX-27
9 0000948976 CALIFORNIA INDEPENDENT BANCORP 1,000 U.S. DOLLARS 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 1 18,147 0 0 0 38,779 8,758 8,854 203,612 5,525 279,727 242,935 10,896 1,032 80 0 0 15,508 7,763 279,727 15,640 2,803 420 18,863 6,316 6,730 12,133 1,440 0 11,256 3,748 3,748 0 0 2,342 1.41 1.36 9.51 6,785 42 0 6,313 5,514 1,719 290 5,525 5,525 0 0
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