<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[_X_] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the Quarterly Period Ended March 31, 2000
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: 0-27384
CAPITAL CORP OF THE WEST
------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 77-0405791
------------------------------- ----------------------
(State or other jurisdiction of IRS Employer ID Number
incorporation or organization)
550 West Main, Merced, CA 95340
----------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (209) 725-2200
Former name, former address and former fiscal year, if changed since last
report: Not Applicable
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
The number of shares outstanding of the registrant's common stock, no par
value, as of March 31, 2000 was 4,525,982. No shares of preferred stock, no
par value, were outstanding at March 31, 2000.
1
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CAPITAL CORP OF THE WEST
Table of Contents
<TABLE>
<S> <C>
PART I. -- FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Income and Comprehensive Income 4
Consolidated Statement of Changes in Stockholders Equity 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures about Market Risk 30
PART II. -- OTHER INFORMATION
Item 1. Legal Proceedings 30
Item 2. Changes in Securities 30
Item 3. Defaults Upon Senior Securities 30
Item 4. Submission of matters to a vote of Security Holders 30
Item 5. Other Information 30
Item 6. Exhibits and Reports on Form 8-K 31
SIGNATURES 32
</TABLE>
2
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Capital Corp of the West
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
03/31/00 12/31/99
-------- --------
(Dollars in thousands)
<S> <C> <C>
ASSETS
Cash and noninterest-bearing deposits in other banks $ 24,614 $ 41,582
Federal funds sold 11,440 8,640
Time deposits at other financial institutions 850 850
Investment securities available for sale, at fair value 134,561 117,814
Investment securities held to maturity at cost, fair value of
$33,155,000, and $28,675,000 at March 31, 2000 and
December 31, 1999, respectively 33,945 29,554
Loans, net of allowance for loan losses of $6,792,000 and
$6,542,000 at March 31, 2000 and December 31, 1999,
respectively 340,938 324,726
Interest receivable 3,851 3,436
Premises and equipment, net 13,071 13,163
Intangible assets 4,871 5,069
Other assets 18,744 18,716
-------- --------
Total assets $586,885 $563,550
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing demand $ 79,424 $ 87,564
Negotiable orders of withdrawal 72,923 72,788
Savings 177,365 164,158
Time, under $100,000 100,546 101,395
Time, $100,000 and over 81,670 68,996
-------- --------
Total deposits 511,928 494,901
Short term borrowings 16,200 17,600
Long term borrowings 9,195 3,214
Accrued interest, taxes and other liabilities 4,298 4,158
-------- --------
Total liabilities 541,621 519,873
Preferred Stock, no par value; 10,000,000 shares authorized;
None outstanding - -
Common stock, no par value; 20,000,000 shares authorized;
4,525,982 and 4,496,201 issued & outstanding at
March 31, 2000 and December 31, 1999 35,743 35,593
Retained earnings 12,257 10,743
Accumulated other comprehensive loss (2,736) (2,659)
-------- --------
Total shareholders' equity 45,264 43,677
-------- --------
Total liabilities and shareholders' equity $586,885 $563,550
======== ========
</TABLE>
See accompanying notes
3
<PAGE>
Capital Corp of the West
Consolidated Statements of Income and Comprehensive Income
(Unaudited)
<TABLE>
<CAPTION>
For the three months
ended March 31,
2000 1999
------- ------
(Dollars in thousands, except per share amounts)
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 8,479 $6,712
Interest on deposits with other financial institutions 12 10
Interest on investments held to maturity:
Taxable 491 184
Non-taxable 56 22
Interest on investments available for sale:
Taxable 1,836 1,533
Non-taxable 285 324
Interest on federal funds sold 74 158
------- ------
Total interest income 11,233 8,943
INTEREST EXPENSE:
Interest on negotiable orders of withdrawal 121 110
Interest on savings deposits 1,514 1,358
Interest on time deposits, under $100,000 1,323 1,064
Interest on time deposits, $100,000 and over 990 537
Interest on other borrowings 356 137
------- ------
Total interest expense 4,304 3,206
Net interest income 6,929 5,737
Provision for loan losses 763 507
------- ------
Net interest income after provision for loan losses 6,166 5,230
NONINTEREST INCOME:
Service charges on deposit accounts 813 733
Income from real estate held for sale or development - 250
Other 334 396
------- ------
Total noninterest income 1,147 1,379
NONINTEREST EXPENSES:
Salaries and related benefits 2,506 2,214
Premises and occupancy 406 330
Equipment 590 491
Professional fees 161 331
Marketing 228 166
Goodwill and intangible amortization 198 198
Supplies 128 140
Other 926 926
------- ------
Total noninterest expenses 5,143 4,796
Income before income taxes 2,170 1,813
Provision for income taxes 656 662
------- ------
Net income $ 1,514 $1,151
- -------------------------------------------------------------------------------------
Comprehensive Income:
Unrealized loss on securities arising during the period (77) (159)
Comprehensive Income $ 1,437 $ 992
======= ======
- -------------------------------------------------------------------------------------
Basic earnings per share $ 0.34 $ 0.25
Diluted earnings per share $ 0.33 $ 0.24
</TABLE>
See accompanying notes
4
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Capital Corp of the West
Consolidated Statement of Changes in Shareholders' Equity
(Unaudited)
(Amounts in thousands except number of shares)
<TABLE>
<CAPTION>
Common Stock Accumulated
--------------------------- other
Number of Retained comprehensive
shares Amounts earnings income Total
--------- ------- -------- -------------- -------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1999 4,496 $35,593 $10,743 $(2,659) $43,677
Exercise of stock options 30 150 0 0 150
Net Change in fair market value
of investment securities, net of
tax effect of $(34) 0 0 0 (77) (77)
Net income 0 1,514 1,514
----- ------- ------- ------- -------
Balance, March 31, 2000 4,526 $35,743 $12,257 $(2,736) $45,264
===== ======= ======= ======= =======
</TABLE>
See accompanying notes
5
<PAGE>
Capital Corp of the West
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
3 months ended 3 months ended
03/31/00 03/31/99
-------------- --------------
(Dollars in thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,514 $ 1,151
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Provision for loan losses 763 507
Depreciation, amortization and accretion, net 534 803
Gain on sale of real estate held for sale 0 250
Net decrease in interest receivable & other assets (411) (3,951)
Net increase (decrease) in deferred loan fees 36 (313)
Net decrease in accrued interest payable & other liabilities 192 1,318
-------- --------
Net cash provided by (used in) operating activities 2,628 (235)
INVESTING ACTIVITIES:
Investment securities purchases (24,090) (243)
Proceeds from maturities of investment securities 2,074 13,030
Proceeds from sales of AFS investment securities 721 -
Net increase in time deposits in other financial institutions - (1,250)
Proceeds from sales of commercial and real estate loans 528 304
Net increase in loans (17,341) (13,044)
Purchases of premises and equipment (394) (281)
Proceeds from sales of real estate held for sale - 250
-------- --------
Net cash used in investing activities (38,502) (1,234)
FINANCING ACTIVITIES:
Net increase (decrease) in demand, NOW and savings deposits 5,149 (3,188)
Net increase in certificates of deposit 11,826 1,706
Net proceeds (repayments) from other borrowings 4,581 (6,712)
Exercise of stock options 150 -
-------- --------
Net cash provided by (used in) financing activities 21,706 (8,194)
Net decrease in cash and cash equivalents (14,168) (9,663)
Cash and cash equivalents at beginning of period 50,222 44,896
-------- --------
Cash and cash equivalents at end of period $ 36,054 $ 35,233
======== ========
CASH PAID DURING THE QUARTER:
Interest paid 4,252 3,195
Income tax payments 1,100 -
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Investment securities net unrealized (losses) gains; net of tax $ (77) $ (159)
Transfer of securities from available for sale to held to maturity - 4,327
Loans transferred to other real estate owned 143 -
</TABLE>
See accompanying notes
6
<PAGE>
Capital Corp of the West
Notes to Consolidated Financial Statements
March 31, 2000 and December 31, 1999
(Unaudited)
GENERAL - COMPANY
Capital Corp of the West (the "Company" or "Capital Corp") is a bank
holding company incorporated under the laws of the State of California on
April 26, 1995. On November 1, 1995, the Company became registered as a bank
holding company, and is a holder of all of the capital stock of County Bank
(the "Bank"). During 1998, the Company formed Capital West Group, a subsidiary
that engages in the financial institution advisory business but is currently
inactive. The Company's primary asset is the Bank and the Bank is the
Company's primary source of income. The Company's securities consist of
20,000,000 shares of Common Stock, no par value, and 10,000,000 shares of
Authorized Preferred Stock. As of March 31, 2000 there were 4,525,982 common
shares outstanding, held of record by approximately 2,200 shareholders. There
were no preferred shares outstanding at March 31, 2000. The Bank has two
wholly owned subsidiaries, Merced Area Investment & Development, Inc. ("MAID")
and County Asset Advisors ("CAA"). CAA is currently inactive. All references
herein to the "Company" include the Bank, the Bank's subsidiaries and Capital
West Group, unless context otherwise requires.
GENERAL - BANK
The Bank was organized on August 1, 1977, as County Bank of Merced, a
California state banking corporation. The Bank commenced operations on
December 22, 1977. In November 1992, the Bank changed its legal name to County
Bank. The Bank's securities consist of one class of Common Stock, no par value
and is wholly owned by the Company. The Bank's deposits are insured under the
Federal Deposit Insurance Act by the Federal Deposit Insurance Corporation
("FDIC") up to applicable limits stated therein. Like most state-chartered
banks of its size in California, it is not a member of the Federal Reserve
System. During the fourth quarter of 1999, Town and Country Finance and Thrift
(the "Thrift") was merged into County Bank.
INDUSTRY AND MARKET AREA
The Bank engages in general commercial banking business primarily in
Fresno, Madera, Mariposa, Merced, Tulare, Toulumne and Stanislaus counties.
The Bank has fifteen branch offices: two in Merced with one branch centrally
located in Merced and the other in downtown Merced within the Bank's
administrative office building, two in Modesto, two in Turlock and single
offices in Atwater, Dos Palos, Hilmar, Los Banos, Livingston, Madera,
Mariposa, Sonora and Visalia.
OTHER FINANCIAL NOTES
All adjustments which in the opinion of Management are necessary for a
fair presentation of the Company's financial position at March 31, 2000 and
December 31, 1999 and the results of operations for the three month period
ended March 31, 2000 and 1999, and the statements of cash flows for the three
months ended March 31, 2000 and 1999 have been included. The interim results
for the three months ended March 31, 2000 and 1999 are not necessarily
indicative of results for the full year. These financial statements should be
read in conjunction with the financial statements and the notes included in
the Company's Annual Report for the year ended December 31, 1999.
7
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The accompanying unaudited financial statements have been prepared on a
basis consistent with the generally accepted accounting principles and with
the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Basic earnings per share (EPS) is computed by dividing net income
available to shareholders by the weighted average number of common shares
outstanding during the period. Diluted earnings per share is computed by
dividing net income available to common shareholders by the weighted average
number of common shares outstanding during the period plus potential common
shares outstanding. Diluted earnings per share reflects the potential
dilution that could occur if securities or other contracts to issue common
stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the Company.
The following table provides a reconciliation of the numerator and
denominator of the basic and diluted earnings per share computation of the
three month periods ending March 31, 2000 and 1999:
<TABLE>
<CAPTION>
For The Three Months
Ended March 31,
--------------------
(Dollars in thousands, except per share data) 2000 1999
-------- --------
<S> <C> <C>
Basic EPS computation:
Net income $ 1,514 $ 1,151
======== ========
Average common shares outstanding 4,507 4,607
======== ========
Basic EPS $ 0.34 $ .25
======== ========
Diluted EPS Computations:
Net income $ 1,514 $ 1,151
======== ========
Average common shares outstanding 4,507 4,607
Stock options 125 135
-------- --------
4,632 4,742
======== ========
Diluted EPS $ 0.33 $ 0.24
======== ========
</TABLE>
8
<PAGE>
Prospective Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133 ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, which amends the disclosure
requirements of Statement No. 52, FOREIGN CURRENCY TRANSLATIONS and Statement
No. 107, DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS. SFAS 133
supersedes Statements No. 80 ACCOUNTING FOR FUTURE CONTRACTS, No. 105
DISCLOSURE OF INFORMATION ABOUT FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET
RISK AND FINANCIAL INSTRUMENTS WITH CONCENTRATIONS OF CREDIT RISK and No. 119,
DISCLOSURE ABOUT DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL
INSTRUMENTS. SFAS No. 133 establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other assets or liabilities on the balance sheet and measurement of those
instruments at fair value. If certain conditions are met, a derivative may be
specifically designated as (a) a hedge of the exposure to changes in the fair
value of a recognized asset or liability or an unrecognized firm commitment (a
fair value hedge) or (b) a hedge of the exposure to variable cash flows of a
forecasted transaction (a cash flow hedge).
In June 1999, the FASB issued SFAS No. 137, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES - DEFERRAL OF THE EFFECTIVE DATE OF SFAS
NO. 133. SFAS No. 137 defers the effective date of SFAS No. 133 from all
fiscal quarters of fiscal years beginning after June 15, 1999 to all fiscal
quarters of fiscal years beginning after June 15, 2000.
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements that are subject
to risks and uncertainties and include information about possible or assumed
future results of operations. Many possible events or factors could affect the
future financial results and performance of the company. This could cause
results or performance to differ materially from those expressed in our
forward-looking statements. Words such as "experts", "anticipates",
"believes", "estimates", variations of such words and other similar
expressions are intended to identify such forward-looking statements. These
statements are not guarantees of future performance and involve certain risks,
uncertainties and assumptions which are difficult to predict. Therefore,
actual outcomes and results may differ materially from what is expressed or
forecasted in, or implied by, such forward-looking statements.
Readers of the Company's Form 10-Q should not rely solely on forward-
looking statements and should consider all uncertainties and risks discussed
throughout this report, as well as those discussed in the Company's 1999
Annual Report on Form 10-K filed March 17, 2000. These statements are
representative only on the date hereof, and the Company undertakes no
obligation to update any forward-looking statements made. Some possible events
or factors that could occur that may cause differences from expected results
include the following: the Company's loan growth is dependent on economic
conditions, as well as various discretionary factors, such as decisions to
sell, or purchase certain loans or loan portfolios; participations of loans
and the management of borrower, industry, product and geographic
concentrations and the mix of the loan portfolio. The rate of charge-offs and
provision expense can be affected by local, regional and international
economic and market conditions, concentrations of borrowers, industries,
products and geographical conditions, the mix of the loan portfolio and
management's judgements regarding the collectibility of loans. Liquidity
requirements may change as a result of fluctuations in assets and liabilities
and off-balance sheet exposures, which will impact the capital and debt
financing needs of the Company and the mix of funding sources. Decisions to
purchase, hold, or sell securities are also dependent on liquidity
requirements and market volatility, as well as on and off-balance sheet
positions. Factors that may impact interest rate risk include local, regional
and international economic conditions, levels, mix, maturities, yields or
rates of assets and liabilities and the wholesale and retail funding sources
of the Company. Factors that may cause actual noninterest expense to differ
from estimates include the ability of third parties with whom the Company has
business relationships to fully accommodate uncertainties related to the
Company's efforts to prepare its technology systems and non-information
technology systems for the Year 2000, as well as uncertainties relating to the
ability of third parties with whom the Company has business relationships to
address the Year 2000 issue in an adequate manner.
The Company is also exposed to the potential of losses arising from
adverse changes in market rates and prices which can adversely impact the
value of financial products, including securities, loans, and deposits. In
addition, the banking industry in general is subject to various monetary and
fiscal policies and regulations, which include those determined by the Federal
Reserve Board, the Federal Deposit Insurance Corporation and state regulators,
whose policies and regulations could affect the Company's results.
Other factors that may cause actual results to differ from the
forward-looking statements include the following: competition with other local
and regional banks, savings and loan associations, credit unions and other
nonbank financial institutions, such as investment banking firms, investment
advisory firms, brokerage firms, mutual funds and insurance companies, as well
as other entities which offer financial services; interest rate, market and
monetary fluctuations; inflation; market volatility; general economic
conditions; introduction and acceptance of new banking-related products,
services and enhancements; fee pricing strategies, mergers and acquisitions
and their integration into the Company and management's ability to manage
these and other risks.
10
<PAGE>
The following discussion and analysis is designed to provide a better
understanding of the significant changes and trends related to the Company and
its subsidiaries' financial condition, operating results, asset and liability
management, liquidity and capital resources and should be read in conjunction
with the Consolidated Financial Statements of the Company and the Notes
thereto.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 COMPARED WITH THREE MONTHS ENDED MARCH
31, 1999
OVERVIEW. For the three months ended March 31, 2000 the Company reported
record net income of $1,514,000. This compares to $1,151,000 for the same
period in 1999 and represents an increase of $363,000 or 32%. Basic and fully
diluted earnings per share were $.34 and $.33 for the three months ending
March 31, 2000. This compares to basic and fully diluted earnings per share
of $.25 and $.24 for the three months ending March 31, 1999 and represents an
increase of $0.09 per share for both basic and fully diluted earnings per
share. The annualized return on average assets was 1.08% and .94% for the
first three months of 2000 and 1999. The Company's annualized return on
average equity was 13.73% and 10.56% for the three months ended March 31,
2000 and 1999.
NET INTEREST INCOME. The Company's primary source of income is net
interest income and is determined by the difference between interest income
and fees derived from earning assets and interest paid on interest bearing
liabilities. Net interest income for the three months ended March 31, 2000
totaled $6,929,000 and represented an increase of $1,192,000 or 21% when
compared to the $5,737,000 achieved during the three months ended March 31,
1999.
Total interest and fees on earning assets were $11,233,000 for the three
months ended March 31, 2000, an increase of $2,290,000 or 26% from the
$8,943,000 for the same period in 1999. The level of interest income is
affected by changes in volume of and rates earned on interest-earning assets.
Interest-earning assets consist primarily of loans, investment securities and
federal funds sold. The increase in interest income for the three months ended
March 31, 2000 was primarily the result of an increase in the volume of
interest-earning assets. Average interest-earning assets for the three months
ended March 31, 2000 were $505,773,000 compared with $434,811,000 for the
three months ended March 31, 1999, an increase of $70,962,000 or 16%.
Interest expense is a function of the volume of and the rates paid on
interest-bearing liabilities. Interest-bearing liabilities consist primarily
of certain deposits and borrowed funds. Total interest expense was $4,304,000
for the three months ended March 31, 2000, compared with $3,206,000 for the
three months ended March 31, 1999, an increase of $1,098,000 or 34%. This
increase was primarily the result of an increase in the rates of
interest-bearing liabilities. Average interest-bearing liabilities were
$436,329,000 for the three months ended March 31, 2000 compared with
$373,814,000 for the same three months in 1999, an increase of $62,515,000 or
17%. Average interest rates paid on interest-bearing liabilities were 3.95%
for the three months ending March 31, 2000 compared with 3.43% for the same
three months of 1999, an increase in interest rates paid of 52 basis points
or 15%.
The increase in interest-earning assets and interest-bearing liabilities
is primarily the result of increased market penetration within our target
markets. The Company has not expanded the branch network locations since the
purchase of three branches of Bank of America in December 1997.
The Company's net interest margin, the ratio of net interest income to
average interest-earning assets, was 5.48% for the three months ended March
31, 2000 compared with 5.28% for the same period in 1999. Net interest margin
provides a measurement of the Company's ability to employ funds profitably
during the period being measured. The Company's increase in net interest
margin was
11
<PAGE>
primarily attributable to a moderate change in the mix of interest-earning
assets. Loans as a percentage of average interest-earning assets were 66% for
the three months ended March 31, 2000 compared to 63% for the three months
ended March 31, 1999.
12
<PAGE>
AVERAGE BALANCES AND RATES EARNED AND PAID. The following table presents
condensed average balance sheet information for the Company, together with
interest rates earned and paid on the various sources and uses of its funds
for each of the periods indicated. Nonaccruing loans are included in the
calculation of the average balances of loans, but the nonaccrued interest on
such loans is excluded.
AVERAGE BALANCE SHEET & ANALYSIS OF NET INTEREST EARNINGS
<TABLE>
<CAPTION>
Three months ended Three months ended
March 31, 2000 March 31, 1999
Average Average
Balance Interest Yield/rate Balance Interest Yield/rate
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Federal funds sold $ 5,268 $ 74 5.62 % $ 12,917 $ 158 4.89 %
Time deposits at other financial institutions 850 12 5.65 706 10 5.67
Taxable investment securities: 134,249 2,327 6.93 115,332 1,717 5.95
Nontaxable investment securities (1) 29,806 341 4.58 30,147 346 4.59
Loans, gross: (2) 335,600 8,479 10.11 275,709 6,712 9.74
-------- ------- ----- -------- ------- -----
Total interest-earning assets: 505,773 11,233 8.88 434,811 8,943 8.23
Allowance for loan losses (6,724) (4,852)
Cash and due from banks 22,678 20,789
Premises and equipment, net 13,169 13,212
Interest receivable and other assets 26,949 26,395
-------- --------
Total assets $561,845 $490,355
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Negotiable order of withdrawal $ 71,850 $ 121 0.67 $ 66,033 $ 110 0.67
Savings deposits 170,994 1,514 3.54 172,237 1,358 3.15
Time deposits 171,804 2,313 5.39 127,679 1,601 5.02
Other borrowings 21,681 356 6.57 7,865 137 6.97
-------- ------- ----- -------- ------- -----
Total interest-bearing liabilities 436,329 4,304 3.95 373,814 3,206 3.43
Noninterest-bearing deposits 76,905 69,818
Accrued interest, taxes and other liabilities 4,515 3,107
-------- --------
Total liabilities 517,749 446,739
Total shareholders' equity 44,096 43,616
-------- --------
Total liabilities and shareholders' equity $561,845 $490,355
======== ========
Net interest income and margin (3) $ 6,929 5.48 % $ 5,737 5.28 %
======= ===== ======= =====
</TABLE>
(1) Interest on nontaxable securities is not computed on a tax-equivalent
basis.
(2) Amounts of interest earned includes loan fees of $135,971 and $193,000 for
March 31, 2000 and 1999 respectively.
(3) Net interest margin is computed by dividing net interest income by total
average interest-earning assets.
13
<PAGE>
NET INTEREST INCOME CHANGES DUE TO VOLUME AND RATE. The following table
sets forth, for the periods indicated, a summary of the changes in average asset
and liability balances and interest earned and interest paid resulting from
changes in average asset and liability balances (volume) and changes in average
interest rates and the total net change in interest income and expenses. The
changes in interest due to both rate and volume have been allocated to volume
and rate changes in proportion to the relationship of the absolute dollar amount
of the change in each.
Net Interest Income Variance Analysis:
<TABLE>
<CAPTION>
Three months ended
March 31, 2000 compared to March 31, 1999
VOLUME RATE TOTAL
(Dollar in thousands)
<S> <C> <C> <C>
Increase (decrease) in interest income:
Federal funds sold $ 21 $ (105) $ (84)
Time deposits at other financial - 2 2
institutions
Taxable investment securities 488 122 610
Tax-exempt investment securities (1) (4) (5)
Loans 262 1,767 1,505
------- ------- -------
Total: $ 770 $ 1,520 $ 2,290
======= ======= =======
Increase (decrease) interest expense:
Interest bearing demand $ 1 $ 10 $ 11
Savings deposits 166 (10) 156
Time deposits 125 587 712
Other borrowings (8) 227 219
------- ------- -------
Total: $ 284 $ 814 $ 1,098
======= ======= =======
Increase in net interest income $ 486 $ 706 $ 1,192
======= ======= =======
</TABLE>
PROVISION FOR LOAN LOSSES. The provision for loan losses for the three
months ended March 31, 2000 was $763,000 compared with $507,000 for the three
months ended March 31, 1999, an increase of $256,000 or 50%. See "Allowance
for Loan Losses" contained herein. As of March 31, 2000 the allowance for loan
losses was $6,792,000 or 1.95% of total loans. At March 31, 2000,
nonperforming assets totaled $2,704,000 or .46% of total assets, nonperforming
loans totaled $2,314,000 or .67% of total loans and the allowance for loan
losses totaled 294% of nonperforming loans. No assurance can be given that
nonperforming loans will not increase or that the allowance for loan losses
will be adequate to cover losses inherent in the loan portfolio.
NONINTEREST INCOME. Noninterest income decreased by $232,000 or 17% to
$1,147,000 for the three months ended March 31, 2000 compared with $1,379,000
in the same period in 1999. Service charges on deposit accounts increased by
$80,000 or 11% to $813,000 for the three months ended March 31, 2000 compared
with $733,000 for the same period in 1999. Income from the sale of real
estate held for sale or development decreased by $250,000 from 1999 levels,
and other income decreased by $62,000 or 16% for the three month period ended
March 31, 2000 when compared to the same period in 1999. The decrease in
income from the sale of real estate recorded during the first quarter of 2000
resulted from a lack of a real estate sale, compared to the sale of 1 real
estate parcel that was sold in 1999. Subsequent to March 31, 2000, the Bank
received $438,000 in proceeds from the sale of a parcel of land that was
classified as other real estate owned. The land parcel had a recorded book
value of $0. Estimated gain on sale from this parcel of land, after reserves
for continuing liabilities, if any, will be recorded in the second quarter of
2000.
NONINTEREST EXPENSE. Noninterest expenses increased by $347,000 or 7% to
$5,143,000 for the three months ended March 31, 2000 compared with $4,796,000
for the same period in 1999. The primary components of noninterest expenses
were salaries and employee benefits, furniture and
14
<PAGE>
equipment expenses, occupancy expenses, professional fees, marketing supplies,
and other operating expenses.
For the three months ended March 31, 2000, salaries and related benefits
increased by $292,000 or 13% to $2,506,000 from the $2,214,000 recorded for
the same period in 1999. Premises and occupancy expenses increased by $76,000
or 23% to $406,000 for the three months ending March 31, 2000 from $330,000
during the same period in 1999. The primary reason for the increase in
occupancy costs in 2000 is related to relocation and retrofit charges related
to branch facilities in Fresno, Madera, and Modesto. Equipment expenses
increased by $99,000 or 20% to $590,000 during the three months ended March
31, 2000 from the $491,000 experienced during the same period in 1999. When
comparing the results of the three months ending March 31, 2000 to three
months ending March 31, 1999, professional fees decreased by $170,000 or 51%,
marketing expenses increased by $62,000 or 37%, goodwill and intangible
amortization expense did not change from 1999 levels, supplies expense
decreased by $12,000 or 9%, and other expenses did not change from 1999
levels. The salary expense increases were primarily the result of increased
staffing levels and normal salary progression. Decreased professional fees
were the result of decreased use of consultants to identify and develop
profitability enhancement strategies, and increased marketing expenditures
designed to provide greater market penetration within our existing markets
were incurred.
PROVISION FOR INCOME TAXES. The Company recorded a decrease of $6,000 or
1% in the income tax provision to $656,000 for the three months ended March
31, 2000 compared to the $662,000 recorded for the same period in 1999. During
the first quarter of 2000, the Company experienced an effective tax rate of
30.2% compared to 36.5% recorded for the same period in 1999. The decrease in
income taxes during the first quarter of 2000 is primarily related to
increased utilization of federal low income housing credits that were obtained
from investments in limited partnerships in low-income affordable housing
projects, and increased investments in bank qualified municipal bonds. The
Company had net investments in affordable housing projects of $5,306,000 as of
March 31, 2000 and $5,736,000 as of March 31, 1999, resulting in tax credits
of $140,000 and 80,000 respectively.
INTEREST RATE RISK
Interest rate risk is an integral part of managing a banking
institution's primary source of income, net interest income. The Company
manages the balance between rate-sensitive assets and rate-sensitive
liabilities being repriced in any given period with the objective of
stabilizing net interest income during periods of fluctuating interest rates.
The Company considers its rate-sensitive assets to be those which either
contain a provision to adjust the interest rate periodically or mature within
one year. These assets include certain loans and investment securities and
federal funds sold. Rate-sensitive liabilities are those which allow for
periodic interest rate changes within one year and include maturing time
certificates, certain savings deposits and interest-bearing demand deposits.
The difference between the aggregate amount of assets and liabilities that
reprice at various time frames is called the "gap." Generally, if repricing
assets exceed repricing liabilities in a time period the Company would be
deemed to be asset-sensitive. If repricing liabilities exceed repricing assets
in a time period the Company would be deemed to be liability-sensitive.
Generally, the Company seeks to maintain a balanced position whereby there is
no significant asset or liability sensitivity within a one-year period to
ensure net interest margin stability in times of volatile interest rates. This
is accomplished through maintaining a significant level of loans, investment
securities and deposits available for repricing within one year.
15
<PAGE>
The following tables set forth the interest rate sensitivity of the
Company's interest-earning assets and interest-bearing liabilities as of
March 31, 2000, using the interest rate sensitivity gap ratio. For purposes
of the following table, an asset or liability is considered rate-sensitive
within a specified period when it can be repriced or matures within its
contractual terms.
<TABLE>
<CAPTION>
AT MARCH 31, 2000
--------------------------------------------------------------------------
AFTER 3 AFTER 1
BUT YEAR BUT
WITHIN WITHIN WITHIN AFTER NONINTEREST-
3 MONTHS 12 MONTHS 5 YEARS 5 YEARS BEARING TOTAL
--------- --------- -------- -------- ------------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Time deposits at other banks $ 850 $ - $ - $ - $ - $ 850
Federal funds sold 11,440 - - - - 11,440
Investment securities 5,702 7,166 59,219 93,143 3,276 168,506
Loans 147,032 44,851 111,077 44,770 - 347,730
--------- --------- -------- -------- -------- --------
Total earning assets 165,024 52,017 170,296 137,913 $ 3,276 528,526
Noninterest-earning assets and
allowances for loan losses - - - - 58,359 58,359
--------- --------- -------- -------- -------- --------
Total assets $ 165,024 $ 52,017 $170,296 $137,913 $ 61,635 $586,885
LIABILITIES AND
SHAREHOLDERS' EQUITY
Demand deposits $ - $ - $ - $ - $ 79,424 $ 79,424
Savings, money market and NOW deposits
250,288 - - - - 250,288
Time deposits 38,562 92,183 18,597 - - 182,216
Other interest-bearing liabilities 10,200 6,000 6,000 3,195 - 25,395
Other liabilities and shareholders'
equity - - - - 49,562 49,562
--------- --------- -------- -------- -------- --------
Total liabilities and shareholders'
equity 331,924 98,183 24,597 3,195 128,986 $586,885
Incremental gap (166,900) (46,166) 145,699 134,718 (67,351)
Cumulative gap $(166,900) $(213,066) $(67,367) $ 67,351 $ -
Cumulative gap as a % of earning
assets (31.60)% (40.31)% (12.74)% 12.74%
</TABLE>
The Company was liability-sensitive with a negative cumulative one-year
gap of $213,066,000 or (40.31)% of interest-earning assets at March 31, 2000.
In general, based upon the Company's mix of deposits, loans and investments,
increases in interest rates would be expected to result in a decrease in the
Company's net interest margin.
The interest rate gaps reported in the tables arise when assets are
funded with liabilities having different repricing intervals. Since these
gaps are actively managed and change daily as adjustments are made in
interest rate views and market outlook, positions at the end of any period
may not be reflective of the Company's interest rate sensitivity in
subsequent periods. Active management dictates that longer-term economic
views are balanced against prospects for short-term interest rate changes in
all repricing intervals. For purposes of the analysis above, repricing of
fixed-rate instruments is based upon the contractual maturity of the
applicable instruments. Actual payment patterns may differ from contractual
payment patterns. The change in net interest income may not always follow the
general expectations of an asset-sensitive or liability-sensitive balance
sheet during periods of changing interest rates, because interest rates
earned or paid may change by differing increments and at different time
intervals for each type of interest-sensitive asset and liability. As a
result of these factors, at any given time, the Company may be more sensitive
or less sensitive to changes in interest rates than indicated in
16
<PAGE>
the above tables. Greater sensitivity would have a more adverse effect on net
interest margin if market interest rates were to increase, and a more
favorable effect if rates were to decrease.
An additional measure of interest rate sensitivity that the Company
monitors through a detailed model is its expected change in net interest
income. This model's estimate of interest rate sensitivity takes into account
the differing time intervals and differing rate change increments of each
type of interest-sensitive asset and liability. It then measures the
projected impact of changes in market interest rates on the Company's net
interest income. Based upon the March 31, 2000 mix of interest-sensitive
assets and liabilities, given an immediate and sustained increase in the
market interest rates of 2%, this model estimates the Company's net interest
income over the next year would decrease by $585,000 or 2% of net interest
income. No assurance can be given that the actual net interest income would
not decrease by more than $585,000 or 2% in response to a 2% increase in
market interest rates or that actual net interest income would not decrease
substantially if market interest rates increased by more than 2%. During the
second quarter of 1999, the Company contracted with interest rate sensitivity
consultants to provide additional expertise in the interest rate sensitivity
modeling process and has updated the model it uses for interest rate risk
analysis. The estimates stated above were derived from this updated model.
FINANCIAL CONDITION
Total assets at March 31, 2000 were $586,885,000, an increase of
$23,335,000 or 4% compared with total assets of $563,550,000 at December 31,
1999. Net loans were $340,938,000 at March 31, 2000, an increase of
$16,212,000 or 5% compared with net loans of $324,726,000 on December 31,
1999. Deposits were $511,928,000 at March 31, 2000, an increase of
$17,027,000 or 3% compared with deposits of $494,901,000 at December 31,
1999. The increase in total assets of the Company from December 31, 1999 to
March 31, 2000 was primarily the result of an increase in leverage that was
maintained in the Company's investment portfolio and an increase in
investments derived from increased certificates of deposit.
Total shareholders' equity was $45,264,000 at March 31, 2000, an
increase of $1,587,000 or 4% from $43,677,000 at December 31, 1999. The
growth in shareholders' equity from December 31, 1999 to March 31, 2000 was
achieved through the retention of accumulated earnings.
INVESTMENT PORTFOLIO. The following table sets forth the carrying amount
(fair value) of available for sale investment securities as of March 31, 2000
and December 31, 1999.
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
--------------------------
2000 1999
-------- -----------
(Dollars in thousands)
<S> <C> <C>
AVAILABLE FOR SALE SECURITIES:
U.S. Treasury and U.S. Government agencies $ 26,610 $ 16,756
State and political subdivisions 23,522 23,371
Mortgage-backed securities 46,306 43,723
Collateralized mortgage obligations 25,137 20,341
Corporate debt securities 9,710 9,660
Equity securities 3,276 3,963
-------- --------
Carrying amount and fair value $134,561 $117,814
======== ========
</TABLE>
17
<PAGE>
The following table sets forth the carrying amount (amortized cost) and
fair value of held to maturity securities at March 31, 2000 and December 31,
1999.
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
-------------------------
2000 1999
-------- -----------
(Dollars in thousands)
<S> <C> <C>
HELD TO MATURITY SECURITIES:
U.S. Treasury and U.S. Government agency $ 1,000 $ 1,004
State and political subdivisions 4,322 4,389
Mortgage-backed securities 23,705 24,161
Collateralized Mortgage Obligations $ 4,918 -
------- -------
Carrying amount (amortized cost) $33,945 $29,554
======= =======
Fair value $33,155 $28,675
======= =======
</TABLE>
The following table sets forth the maturities of the Company's debt
security investments at March 31, 2000 and the weighted average yields of
such securities calculated on a book value basis using the weighted average
yields within each scheduled maturity grouping. Maturities of mortgage-backed
securities and collateralized mortgage obligations are stipulated in their
respective contracts. However, actual maturities may differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without call prepayment penalties. Yields on municipal securities
have not been calculated on a tax-equivalent basis.
<TABLE>
<CAPTION>
AT MARCH 31, 2000
---------------------------------------------------------------------------------------
WITHIN ONE YEAR ONE TO 5 YEARS FIVE TO TEN YEARS OVER TEN YEARS
--------------- ----------------- ----------------- --------------- TOTAL
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT
------ ----- ------- ----- ------- ----- ------ ----- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Available for Sale Securities:
Treasury and U.S. Government agency $ - -% $22,259 6.48% $ - -% $ 4,351 6.42% $ 26,610
State and political 509 7.80 - - 3,328 4.28 19,685 4.45 23,522
Mortgage-backed securities - - 1,028 6.76 677 7.61 44,601 6.61 46,306
Collateralized mortgage obligations 94 6.31 5,106 6.60 7,763 6.73 12,174 6.99 25,137
Corporate debt securities - - 4,101 6.32 - - 5,609 7.20 9,710
--------------------------------------------------------------------------------------
Carrying amount and fair value 603 7.57 32,494 6.49 11,768 6.09 86,420 6.20 131,285
--------------------------------------------------------------------------------------
Held to maturity securities:
Treasury and U.S. Government agency - - 1,000 7.95 - - - - 1,000
State and political - - - - 1,345 5.05 2,977 5.19 4,322
Mortgage-backed securities - - 3,590 7.15 14,457 7.23 5,658 7.02 23,705
Collateralized mortgage obligations - - 4,918 7.85 - - - - 4,918
Carrying amount (amortized cost) - - 9,508 7.60 15,802 7.04 8,635 6.39 33,945
--------------------------------------------------------------------------------------
Total securities $603 7.57% $42,002 6.74% $27,570 6.64% $95,055 6.22% $165,230
==== ==== ======= ==== ======= ==== ======= ==== ========
</TABLE>
In the above table, mortgage-backed securities and collateralized
mortgage obligations are shown repricing at the time of maturity rather than
in accordance with their principal amortization
18
<PAGE>
schedules. The Company does not own securities of a single issuer whose
aggregate book value is in excess of 10% of its total equity.
LOAN PORTFOLIO. The following table shows the composition of the
Company's loan portfolio at the dates indicated.
<TABLE>
<CAPTION>
AT MARCH 31, AT DECEMBER 31,
------------------------------------------------------
2000 1999
------------------------- -------------------------
PERCENT PERCENT
DOLLAR AMOUNT OF LOANS DOLLAR AMOUNT OF LOANS
------------- -------- ------------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Loan Categories:
Commercial $ 61,973 18% $ 53,932 16%
Agricultural 67,321 19 58,247 17
Real estate construction 9,696 3 11,926 4
Real estate mortgage 121,803 35 120,978 37
Consumer 86,937 25 86,185 26
-------- --- -------- ---
Total 347,730 100% 331,268 100%
-------- === -------- ===
Less allowance for loan losses (6,792) (6,542)
-------- --------
Net loans $340,938 $324,726
======== ========
</TABLE>
The table that follows shows the maturity distribution of the portfolio
of commercial, agricultural, real estate construction, real estate mortgage,
and consumer loans at March 31, 2000:
<TABLE>
<CAPTION>
AT MARCH 31, 2000
------------------------------------------------------------
AFTER 1 BUT
(Dollars in thousands) WITHIN 1 YEAR WITHIN 5 YEARS AFTER 5 YEARS TOTAL
------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMERCIAL AND AGRICULTURAL
Loans with floating interest rates $43,276 $ 21,243 $ 26,202 $ 90,721
Loans with fixed interest rates 5,983 15,763 16,827 38,573
------- -------- -------- --------
Subtotal 49,259 37,006 43,029 129,294
REAL ESTATE CONSTRUCTION
Loans with floating interest rates 2,742 911 3,779 7,432
Loans with fixed interest rates 1,621 - 643 2,264
------- -------- -------- --------
Subtotal 4,363 911 4,422 9,696
REAL ESTATE MORTGAGE
Loans with floating interest rates 8,050 20,654 53,188 81,892
Loans with fixed interest rates 5,400 4,665 29,846 39,911
------- -------- -------- --------
Subtotal 13,450 25,319 83,034 121,803
CONSUMER INSTALLMENT
Loans with floating interest rates 11,747 7,713 - 19,460
Loans with fixed interest rates 3,648 62,478 1,351 67,477
------- -------- -------- --------
Subtotal 15,395 70,191 1,351 86,937
------- -------- -------- --------
Total $82,467 $133,427 $131,836 $347,730
======= ======== ======== ========
</TABLE>
19
<PAGE>
The table that follows shows the maturity distribution of the portfolio
of commercial, agricultural, real estate construction, real estate mortgage,
and consumer loans at December 31, 1999:
<TABLE>
<CAPTION>
December 31, 1999
--------------------------------------------------------
Within One to Over
(Dollars in thousands) One year Five Years After 5 years Total
--------------------------------------------------------
<S> <C> <C> <C> <C>
COMMERCIAL AND AGRICULTURAL
Loans with floating rates $ 45,955 $ 27,877 $17,535 $ 95,367
Loans with predetermined rates 8,605 6,016 6,191 16,812
-------- -------- ------- --------
Subtotal 54,560 33,893 23,726 112,179
REAL ESTATE--CONSTRUCTION
Loans with floating rates 4,730 1,169 1,578 7,477
Loans with predetermined rates 2,738 1,711 - 4,449
-------- -------- ------- --------
Subtotal 7,468 2,880 1,578 11,926
REAL ESTATE--MORTGAGE
Loans with floating rates 7,027 68,770 24,041 99,838
Loans with predetermined rates 4,232 16,908 - 21,140
-------- -------- ------- --------
Subtotal 11,259 85,678 24,041 120,978
CONSUMER INSTALLMENT
Loans with floating rates 19,186 9,593 - 28,779
Loans with predetermined rates 23,129 33,301 976 57,406
-------- -------- ------- --------
Subtotal 42,315 42,894 976 86,185
Total $115,602 $165,345 $50,321 $331,268
======== ======== ======= ========
</TABLE>
OFF-BALANCE SHEET COMMITMENTS. The following table shows the
distribution of the Company's undisbursed loan commitments at the dates
indicated.
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
(Dollars in thousands) 2000 1999
--------- ------------
<S> <C> <C>
Letters of credit $ 2,674 $ 2,674
Commitments to extend credit 120,865 101,847
-------- --------
Total $123,539 $104,521
======== ========
</TABLE>
20
<PAGE>
OTHER INTEREST-EARNING ASSETS. The following table relates to other
interest-earning assets not disclosed previously for the dates indicated.
This item consists of a salary continuation plan for the Company's executive
management and deferred retirement benefits for participating board members.
The plan is informally linked with universal life insurance policies for the
salary continuation plan. Income from these policies is reflected in
noninterest income.
<TABLE>
<CAPTION>
AT MARCH 31, AT DECEMBER 31,
(Dollars in thousands) 2000 1999
------------ ---------------
<S> <C> <C>
Cash surrender value of life insurance $5,877 $5,792
====== ======
</TABLE>
NONPERFORMING ASSETS. Nonperforming assets include nonaccrual loans,
loans 90 days or more past due, restructured loans and other real estate
owned.
Nonperforming loans are those which the borrower fails to perform in
accordance with the original terms of the obligation and include loans on
nonaccrual status, loans past due 90 days or more and restructured loans. The
Company generally places loans on nonaccrual status and accrued but unpaid
interest is reversed against the current year's income when interest or
principal payments become 90 days or more past due unless the outstanding
principal and interest is adequately secured and, in the opinion of
management, is deemed in the process of collection. Interest income on
nonaccrual loans is recorded on a cash basis. Payments may be treated as
interest income or return of principal depending upon management's opinion of
the ultimate risk of loss on the individual loan. Cash payments are treated
as interest income where management believes the remaining principal balance
is fully collectible. Additional loans not 90 days past due may also be
placed on nonaccrual status if management reasonably believes the borrower
will not be able to comply with the contractual loan repayment terms and
collection of principal or interest is in question.
A "restructured loan" is a loan on which interest accrues at a below
market rate or upon which certain principal has been forgiven so as to aid
the borrower in the final repayment of the loan, with any interest previously
accrued, but not yet collected, being reversed against current income.
Interest is reported on a cash basis until the borrower's ability to service
the restructured loan in accordance with its terms is established. The
Company had no restructured loans as of the dates indicated in the above
table.
The following table summarizes nonperforming assets of the Company at
March 31, 2000 and December 31, for the years indicated:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------- ------------
(Dollars in thousands)
<S> <C> <C>
Nonaccrual loans $1,609 $1,984
Accruing loans past due 90 days or more 705 6
------ ------
Total nonperforming loans 2,314 1,990
Other real estate owned 390 247
------ ------
Total nonperforming assets $2,704 $2,237
====== ======
Nonperforming loans to total loans .67% .60%
Nonperforming assets to total assets .46% .40%
</TABLE>
21
<PAGE>
Contractual accrued interest income on loans on nonaccrual status as of
March 31, 2000 and 1999, that would have been recognized if the loans had
been current in accordance with their original terms was approximately
$258,000 and $235,000, respectively.
At March 31, 2000, nonperforming assets represented .46% of total
assets, an increase of .06% of total assets compared to the .40% at December
31, 1999. Nonperforming loans represented .67% of total loans at March 31,
2000, an increase of 7 basis points compared to the .60% at December 31,
1999. Nonperforming loans that were secured by first deeds of trust on real
property were $0 at March 31, 2000 and December 31, 1999. Other forms of
collateral such as inventory and equipment secured the remaining
nonperforming loans as of each date. No assurance can be given that the
collateral securing nonperforming loans will be sufficient to prevent losses
on such loans.
The increase in nonperforming loans and nonperforming assets as of March
31, 2000 compared with their levels as of December 31, 1999, was due
primarily to a slight increase in delinquent agricultural, commercial, and
consumer installment loans.
At March 31, 2000, the Company had $390,000 invested in three properties
acquired through foreclosure. Each property is carried at the lower of its
estimated market value, as evidenced by an independent appraisal, or the
recorded investment in the related loan, less estimated selling expenses. At
foreclosure, if the fair value of the real estate is less than the Company's
recorded investment in the related loan, a charge is made to the allowance
for loan losses. The Company expects to sell most of these properties within
a twelve month period. No assurance can be given that the Company will sell
such properties during 2000 or at any time or the amount for which such
property might be sold.
In addition to property acquired through foreclosure, the Company has
investments in residential real estate lots in various stages of development
in Merced County through MAID. MAID held one property for sale or development
at March 31, 2000. This investment was completely written off in 1995,
although County Bank still retains title to this property. During the first
three months of 2000, no lots were sold. On May 3, 2000 the last remaining
MAID land parcel was sold. Sales proceeds totaled $438,000. A gain entry for
net sales proceeds less remaining costs related to certain obligations of
MAID and the Company will be recorded in the second quarter of 2000.
Management defines impaired loans, regardless of past due status on
loans, as those on which principal and interest are not expected to be
collected under the original contractual loan repayment terms. An impaired
loan is charged off at the time management believes the collection process
has been exhausted. At March 31, 2000 and December 31, 1999, impaired loans
were measured based on the present value of future cash flows discounted at
the loan's effective rate, the loan's observable market price or the fair
value of collateral if the loan is collateral-dependent. Impaired loans at
March 31, 2000 were $2,314,000 (all of which were also nonaccrual loans), on
account of which the Company had made provisions to the allowance for loan
losses of $575,000.
Except for loans that are disclosed above, there were no assets as of
March 31, 2000, where known information about possible credit problems of
borrower causes management to have serious doubts as to the ability of the
borrower to comply with the present loan repayment terms and which may become
nonperforming assets. Given the magnitude of the Company's loan portfolio,
however, it is always possible that current credit problems may exist that
may not have been discovered by management.
22
<PAGE>
ALLOWANCE FOR LOAN LOSSES
The following table summarizes the loan loss experience of the Company
for the three months ended March 31, 2000 and 1999, and for the year ended
December 31, 1999.
<TABLE>
<CAPTION>
MARCH 31
----------------------- DECEMBER 31
2000 1999 1999
-------- -------- -----------
(Dollars in thousands)
<S> <C> <C> <C>
ALLOWANCE FOR LOAN LOSSES:
Balance at beginning of period $ 6,542 $ 4,775 $ 4,775
-------- -------- --------
Provision for loan losses 763 507 2,659
Charge-offs:
Commercial and agricultural 207 123 531
Real estate construction 0 - -
Consumer 400 297 1,323
-------- -------- --------
Total charge-offs 607 420 1,854
-------- -------- --------
Recoveries
Commercial and agricultural 5 430 715
Real estate-mortgage - - -
Consumer 89 91 247
-------- -------- --------
Total recoveries 94 521 962
Net charge-offs (recoveries) 513 (101) 892
-------- -------- --------
Balance at end of period $ 6,792 $ 5,383 $ 6,542
======== ======== ========
Loans outstanding at period-end $347,730 $281,822 $331,268
======== ======== ========
Average loans outstanding $335,600 $275,709 $303,463
======== ======== ========
Net charge-offs (recoveries) to average 0.15% (0.04%) 0.29%
loans
Allowance for loan losses
To total loans 1.95% 1.91% 1.97%
To nonperforming assets 251.18% 219.22% 292.45%
</TABLE>
The Company maintains an allowance for loan losses at a level considered
by management to be adequate to cover the inherent risks of loss associated
with its loan portfolio under prevailing and anticipated economic conditions.
In determining the adequacy of the allowance for loan losses, management
takes into consideration growth trends in the portfolio, examination of
financial institution supervisory authorities, prior loan loss experience for
the Company, concentrations of credit risk, delinquency trends, general
economic conditions, the interest rate environment and internal and external
credit reviews. In addition, the risks management considers vary depending on
the nature of the loan. The normal risks considered by management with
respect to agricultural loans include the fluctuating value of the
collateral, changes in weather conditions and the availability of adequate
water resources in the Company's local market area. The normal risks
considered by management with respect to real estate construction loans
include fluctuation in real estate values, the demand for improved commercial
and industrial properties and housing, the availability of permanent
financing in the Company's market area and borrowers' ability to obtain
permanent financing. The normal risks considered by management with respect
to real estate mortgage loans include fluctuations in the value of real
estate. Additionally, the Company relies on data obtained through independent
appraisals for significant properties to determine loss exposure on
nonperforming loans.
The balance in the allowance is affected by the amounts provided from
operations, amounts charged off and recoveries of loans previously charged
off. The Company recorded provisions for loan losses in the first three
months of 2000 of $763,000 compared with $507,000 in the same period of 1999.
The increase in loan loss provisions in 2000 was recorded primarily to
support the general loan growth of the Company that has occurred during 2000.
23
<PAGE>
The Company's charge-offs, net of recoveries, were $513,000 for the
three months ended March 31, 2000 compared with $(101,000) for the same three
months in 1999. The increase in net charge-offs for the first quarter of 2000
was primarily due to increased charge-offs that occurred within the consumer
installment segment of the loan portfolio during the first three months of
2000. The increased charge-offs in this segment of the portfolio are
primarily attributable to the strong loan growth that has occurred in this
segment over the last several quarters.
As of March 31, 2000, the allowance for loan losses was $6,792,000 or
1.95% of total loans outstanding, compared with $6,542,000 or 1.97% of total
loans outstanding as of December 31, 1999 and $5,383,000 or 1.91% of total
loans outstanding as of March 31, 1999. During the first quarter of 2000, the
allowance for loan loss increased $250,000 or 4% compared to December 31,
1999 levels.
The Company uses a method developed by management for determining the
appropriate level of its allowance for loan losses. This method applies
relevant risk factors to the entire loan portfolio, including nonperforming
loans. The methodology is based, in part, on the Company's loan grading and
classification system. The Company grades its loans through internal reviews
and periodically subjects loans to external reviews which then are assessed
by the Company's audit committee. Credit reviews are performed on a monthly
basis and the quality grading process occurs on a quarterly basis. Risk
factors applied to the performing loan portfolio are based on the Company's
past loss history considering the current portfolio's characteristics,
current economic conditions and other relevant factors. General reserves are
applied to various categories of loans at percentages ranging up to 1.8%
based on the Company's assessment of credit risks for each category. Risk
factors are applied to the carrying value of each classified loan: (i) loans
internally graded "Watch" or "Special Mention" carry a risk factor from 1.0%
to 2.0%; (ii) "Substandard" loans carry a risk factor from 15% to 40%
depending on collateral securing the loan, if any; (iii) "Doubtful" loans
carry a 50% risk factor; and (iv) "Loss" loans are charged off 100%. In
addition, a portion of the allowance is specially allocated to identified
problem credits. The analysis also includes reference to factors such as the
delinquency status of the loan portfolio, inherent risk by type of loans,
industry statistical data, recommendations made by the Company's regulatory
authorities and outside loan reviewers, and current economic environment.
Important components of the overall credit rating process are the asset
quality rating process and the internal loan review process.
The allowance is based on estimates and ultimate future losses may vary
from current estimates. It is always possible that future economic or other
factors may adversely affect the Company's borrowers, and thereby cause loan
losses to exceed the current allowance. In addition, there can be no
assurance that future economic or other factors will not adversely affect the
Company's borrowers, or that the Company's asset quality may not deteriorate
through rapid growth, failure to enforce underwriting standards, failure to
maintain appropriate underwriting standards, failure to maintain an adequate
number of qualified loan personnel, failure to identify and monitor potential
problem loans or for other reasons, and thereby cause loan losses to exceed
the current allowance.
24
<PAGE>
The following table summarizes a breakdown of the allowance for loan
losses by loan category and the allocation in each category as a percentage
of total loan allowance at the dates indicated:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
------------------ ------------------
LOANS LOANS
% %
TO TOTAL TO TOTAL
(Dollars in thousands) AMOUNT LOANS AMOUNT LOANS
------ -------- ------ --------
<S> <C> <C> <C> <C>
Commercial and agricultural $3,395 37% $3,365 34%
Real estate - construction 372 3 358 4
Real estate - mortgage 1,883 35 1,815 36
Consumer 1,142 25 1,004 26
------ --- ------ ---
Total $6,792 100% $6,542 100%
====== === ====== ===
</TABLE>
The allocation of the allowance to loan categories is an estimate by
management of the relative risk characteristics of loans in those categories.
No assurance can be given that losses in one or more loan categories will not
exceed the portion of the allowance allocated to that category or even exceed
the entire allowance.
EXTERNAL FACTORS AFFECTING ASSET QUALITY. As a result of the Company's
loan portfolio mix, the future quality of its assets could be affected by
adverse economic trends in its region or in the agricultural community. These
trends are beyond the control of the Company.
California is an earthquake-prone region. Accordingly, a major
earthquake could result in material loss to the Company. At times the
Company's service area has experienced other natural disasters such as floods
and droughts. The Company's properties and substantially all of the real and
personal property securing loans in the Company's portfolio are located in
California. The Company faces the risk that many of its borrowers face
uninsured property damage, interruption of their businesses or loss of their
jobs from earthquakes, floods or droughts. As a result these borrowers may be
unable to repay their loans in accordance with their terms and the collateral
for such loans may decline significantly in value. The Company's service area
is a largely agricultural region and therefore is highly dependent on a
reliable supply of water for irrigation purposes. The area obtains nearly all
of its water from the run-off of melting snow in the mountains of the Sierra
Nevada to the east. Although such sources have usually been available in the
past, water supply can be adversely affected by light snowfall over one or
more winters or by any diversion of water from its present natural courses.
Any such natural disaster could impair the ability of many of the Company's
borrowers to meet their obligations to the Company.
Parts of California have experienced significant floods in the late
1990s. No assurance can be given that future flooding will not have an
adverse impact on the Company and its borrowers and depositors.
LIQUIDITY. In order to maintain adequate liquidity, the Company must
have sufficient resources available at all times to meet its cash flow
requirements. The need for liquidity in a banking institution arises
principally to provide for deposit withdrawals, the credit needs of its
customers and to take advantage of investment opportunities as they arise.
The Company may achieve desired liquidity from both assets and liabilities.
The Company considers cash and deposits held in other banks, federal funds
sold, other short term investments, maturing loans and investments, payments
of principal and interest on loans and investments and potential loan sales
as sources of asset liquidity. Deposit growth and access to
25
<PAGE>
credit lines established with correspondent banks and market sources of funds
are considered by the Company as sources of liability liquidity.
The Company reviews its liquidity position on a regular basis based upon
its current position and expected trends of loans and deposits. These assets
include cash and deposits in other banks, available-for-sale securities and
federal funds sold. The Company's liquid assets totaled $171,465,000 and
$168,886,000 on March 31, 2000 and December 31, 1999, respectively, and
constituted 30% of total assets on those dates. Liquidity is also affected by
the collateral requirements of its public deposits and certain borrowings.
Total pledged securities were $120,935,000 at March 31, 2000 compared with
$105,008,000 at December 31, 1999.
Although the Company's primary sources of liquidity include liquid
assets and a stable deposit base, the Company maintains lines of credit with
the Federal Reserve Bank of San Francisco, Federal Home Loan Bank of San
Francisco and Pacific Coast Bankers' Bank aggregating $57,822,000 of which
$17,200,000 was outstanding as of March 31, 2000 and $12,600,000 was
outstanding as of December 31, 1999. Funds received causing an increase in
outstanding short term borrowings during the first quarter of 2000 were used
to purchase securities within the investment portfolio. Management believes
that the Company maintains adequate amounts of liquid assets to meet its
liquidity needs. The Company's liquidity might be insufficient if deposit
withdrawals were to exceed anticipated levels. Deposit withdrawals can
increase if a company experiences financial difficulties or receives adverse
publicity for other reasons, or if its pricing, products or services are not
competitive with those offered by other institutions.
CAPITAL RESOURCES. Capital serves as a source of funds and helps
protect depositors against potential losses. The primary source of capital
for the Company has been internally generated capital through retained
earnings. The Company's shareholders' equity increased by $1,587,000 or 4%
from December 31, 1999 to March 31, 2000.
The Company is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate mandatory and possibly additional discretionary
actions by the regulators that, if undertaken, could have a material adverse
effect on the Company's financial statements. Management believes, as of
March 31, 2000, that the Company, the Bank and the Thrift met all capital
requirements to which they are subject. The Company's leverage capital ratio
at March 31, 2000 was 7.74% as compared with 7.50% as of December 31, 1999.
The Company's total risk based capital ratio at March 31, 2000 was 11.14% as
compared to 11.24% as of December 31,1999.
26
<PAGE>
The Company's and Bank's actual capital amounts and ratios met all
regulatory requirements as of March 31, 2000 and were summarized as follows:
<TABLE>
<CAPTION>
To Be Well Capitalized
For Capital Under Prompt
Actual Adequacy Purposes Corrective
Dollars in thousands Action Provisions:
- ----------------------------------------------------------------------------------------------------------------------------
Consolidated Amount Ratio Amount Ratio Amount Ratio
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As of March 31, 2000
Total capital (to risk weighted assets) $ 48,599 11.14 % $ 34,908 8.0 % $ 43,636 10.0 %
Tier 1 capital (to risk weighted assets) 43,128 9.88 17,454 4.0 26,181 6.0
Leverage ratio* 43,128 7.74 22,279 4.0 27,849 5.0
The Bank:
- ----------------------------------------------------------------------------------------------------------------------------
As of March 31, 2000
Total capital (to risk weighted assets) $ 45,782 10.62 % $ 34,479 8.0 % $ 43,099 10.0 %
Tier 1 capital (to risk weighted assets) 40,378 9.37 17,239 4.0 25,859 6.0
Leverage ratio* 40,378 7.32 22,051 4.0 27,563 5.0
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The leverage ratio consists of Tier 1 capital divided by quarterly average
assets. The minimum leverage ratio is 3 percent for banking organizations that
do not anticipate significant growth and that have well-diversified risk,
excellent asset quality and in general, are considered top-rated banks.
The Company has no formal dividend policy, and dividends are issued
solely at the discretion of the Company's Board of Directors, subject to
compliance with regulatory requirements. In order to pay any cash dividends,
the Company must receive payments of dividends or management fees from the
Bank. There are certain regulatory limitations on the payment of cash
dividends by banks and thrift and loan companies.
On May 23, 2000 the Company's Board of Directors authorized management to
repurchase up to 200,000 shares or $2,300,000 of the Company's common stock.
As of March 31, 2000 the Company had repurchased 137,000 shares for $1,768,000
in open market transactions. Management's authorization to repurchase Company
common stock will continue until withdrawn by the Board of Directors.
DEPOSITS. Deposits are the Company's primary source of funds. At March
31, 2000, the Company had a deposit mix of 41% in savings deposits, 29% in
time deposits, 16% in interest-bearing checking accounts and 16% in
noninterest-bearing demand accounts. Noninterest-bearing demand deposits
enhance the Company's net interest income by lowering its costs of funds.
The Company obtains deposits primarily from the communities it serves. No
material portion of its deposits has been obtained from or is dependent on any
one person or industry. The Company's business is not seasonal in nature. The
Company accepts deposits in excess of $100,000 from customers. These deposits
are priced to remain competitive. At March 31, 2000, the Company had brokered
deposits of $13,648,000.
27
<PAGE>
Maturities of time certificates of deposits of $100,000 or more
outstanding at March 31, 2000 and December 31, 1999 are summarized as
follows:
<TABLE>
<CAPTION>
MARCH 31, 2000 DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Three months or less $32,907 $21,157
Over three to six months 22,077 20,655
Over six to twelve months 25,415 16,901
Over twelve months 1,271 10,283
------- -------
Total $81,670 $68,996
======= =======
</TABLE>
BORROWED FUNDS
At March 31 2000 and December 31, 1999, the Company's borrowed funds consisted
of the following:
<TABLE>
<CAPTION>
(Dollars in thousands) MARCH 31 DECEMBER 31
2000 1999
<S> <C> <C>
Treasury tax loan, dated March 31, 2000; variable rate of
6%; rate reprices monthly based on the federal funds
rate; payable April 1, 2000 $ 5,000 $ 5,000
FHLB loan, dated June 17, 1999; variable rate of 5.94%;
rate reprices monthly based on the 1 month LIBOR;
payable on June 19, 2000 2,600 2,600
FHLB loan, dated February 16, 2000; variable rate of 5.92%; rate
reprices monthly based on the 1 month
LIBOR; payable on February 16, 2001 6,000 -
FHLB loan, dated March 20, 2000; variable rate of 6.02%; rate
reprices monthly based on the 1 month
LIBOR; payable on March 20, 2001 2,600 -
FHLB loan, dated February 16, 2000; fixed rate of
6.60%; payable on February 16, 2005 4,000 5,000
FHLB loan, dated March 20, 2000; fixed rate of 6.55%
payable on March 21, 2005 2,000 5,000
Long-term note from unaffiliated bank dated December 22, 1997;
fixed rate of 7.80%; principal and interest payable
monthly at $25,047; payments calculated as fully
amortizing over 25 years with a 10 year call 3,195 3,214
-------- --------
Total $ 25,395 $ 20,814
======== ========
</TABLE>
The increase in other borrowings during the first quarter of 2000 was
primarily due to the implementation of a leveraged investment strategy that uses
additional FHLB borrowings to fund purchases of investment securities within the
Bank's investment portfolio.
28
<PAGE>
RETURN ON EQUITY AND ASSETS
<TABLE>
<CAPTION>
Three months ended Three months ended Year ended
March 31 March 31 December 31
2000 1999 1999
---- ---- ----
<S> <C> <C> <C>
Annualized return on average assets 1.08% 0.94% 0.99%
Annualized return on average equity 13.73% 10.56% 11.86%
Average equity to average assets 7.85% 8.89% 8.35%
</TABLE>
IMPACT OF INFLATION
The primary impact of inflation on the Company is its effect on interest
rates. The Company's primary source of income is net interest income which is
affected by changes in interest rates. The Company attempts to limit
inflation's impact on its net interest margin through management of rate
sensitive assets and liabilities and the analysis of interest rate
sensitivity. The effect of inflation on premises and equipment, as well as on
interest expenses, has not been significant for the periods covered in this
report.
REAL ESTATE DEVELOPMENT ACTIVITIES
California law allows state-chartered banks to engage in real estate
development activities. The Bank established MAID in 1987 pursuant to this
authorization. After changes in federal law effectively required that these
activities be divested as prudently as possible but in any event before 1997,
MAID reduced its activities and embarked on a plan to liquidate its real
estate holdings. In 1995, the uncertainty about the effect of the investment
in MAID on the results of future operations caused management to write off its
remaining investment of $2,881,000 in real property development.
At March 31, 2000, MAID held one real estate project including improved
and unimproved land in various stages of development. MAID continues to
develop this project, and any amounts realized upon sale or other disposition
of this asset above its current carrying value of zero will result in
noninterest income at the time of such sale or disposition. During the first
three months of 1999, no lots were sold. Although the Company expects that the
sale or disposition of its remaining project will result in some positive
contribution to noninterest income at some time in the future, no assurance
can be given as to whether or when such sale or disposition will be completed
or that the amount, if any, that the Company will ultimately realize on such
asset or whether such amount will exceed the future expenses required to hold
and complete development of the project. The Company's regulatory deadline for
completing its divestiture of this asset is December 31, 2000. The last
remaining parcel of land held by MAID was sold on May 3, 2000 for net proceeds
of $438,000 which will result in gain on sale of real estate, less any
outstanding liabilities and warranties, during the second quarter of 2000.
29
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the normal course of business, the Company is exposed to market risk
which includes both price and liquidity risk. Price risk is created from
fluctuations in interest rates and the mismatch in repricing characteristics
of assets, liabilities, and off balance sheet instruments at a specified point
in time. Mismatches in interest rate repricing among assets and liabilities
arise primarily through the interaction of the various types of loans versus
the types of deposits that are maintained as well as from management's
discretionary investment and funds gathering activities. Liquidity risk arises
from the possibility that the Company may not be able to satisfy current and
future financial commitments or that the Company may not be able to liquidate
financial instruments at market prices. Risk management policies and
procedures have been established and are utilized to manage the Company's
exposure to market risk.
On March 31, 2000, the interest rate position of the Company was
relatively neutral as the impact of a gradual parallel 100 basis-point rise or
fall in interest rates over the next 12 months was estimated to be
approximately 1-2% of net interest income when compared to stable rates. See
"BUSINESS - Selected Statistical Information - Interest Rate Sensitivity" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Interest Rate Risk Management."
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a party to routine litigation in the ordinary course of its
business. In the opinion of management, pending and threatened litigation is
not likely to have a material adverse effect on the financial condition or
results of operations of the Company. Also see "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Memorandum of
Understanding." contained herein.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
In the opinion of management, there is no additional information relating to
these periods being reported which warrants inclusion in the report.
30
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION OF EXHIBITS
<S> <C> <C>
3.1 Articles of Incorporation, incorporated by reference from (filed as Exhibit *
3.1 of the Company's March 31, 1996 Form 10Q filed with the SEC on or about
November 14, 1996).
3.2 Bylaws (filed as Exhibit 3.2 of the Company's March 31, 1996 Form 10Q filed *
with the SEC on or about November 14, 1996.)
10 Employment agreement between Thomas T. Hawker and Capital Corp. (Filed as *
Exhibit 10 of the Company's 1996 form 10K filed with the SEC on or about
March 31, 1997)
10.1 Administration Construction Agreement (filed as Exhibit 10.4 *
of the Company's 1995 Form 10K filed with the SEC on or about
March 31, 1996).
10.2 Stock Option Plan (filed as Exhibit 10.6 of the Company's 1995 Form 10K *
filed with the SEC on or about March 31, 1996).
10.3 401 (k) Plan (filed as Exhibit 10.7 of the Company's 1995 Form 10K filed *
with the SEC on or about March 31, 1996).
10.4 Employee Stock Ownership Plan (filed as Exhibit 10.8 of the Company's 1995 *
Form 10K filed with the SEC on or about March 31, 1996).
10.5 Purchase Agreement for three branches from Bank of America is incorporated *
herein by reference from Exhibit 2.1 Registration Statement on Form S-2
filed July 14, 1997, File No. 333-31193.
10.6 Change-in-Control Agreement between R. Dale McKinney and Capital Corp of the *
West (filed as Exhibit 10.6 of the Company's 1999 Form 10K with the SEC on
or about March 17, 2000).
10.7 Deferred Compensation Agreement between members of the board of directors *
and Capital Corp of the West (filed as Exhibit 10.7 of the Company's 1999
Form 10K with the SEC on or about March 17, 2000).
10.8 Executive Salary Continuation Agreement between certain members of executive *
management and Capital Corp of the West (filed as Exhibit 10.8 of the
Company's 1999 Form 10K with the SEC on or about March 17, 2000).
</TABLE>
(b) REPORTS ON FORM 8-K
None
* DENOTES DOCUMENTS WHICH HAVE BEEN INCORPORATED BY REFERENCE.
31
<PAGE>
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.
CAPITAL CORP OF THE WEST
(Registrant)
By /s/ THOMAS T. HAWKER
---------------------------------------
Thomas T. Hawker
President and
Chief Executive Officer
By /s/ R. DALE MCKINNEY
---------------------------------------
R. Dale McKinney
Chief Financial Officer
32
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 24,614
<INT-BEARING-DEPOSITS> 850
<FED-FUNDS-SOLD> 11,440
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 134,561
<INVESTMENTS-CARRYING> 33,945
<INVESTMENTS-MARKET> 33,155
<LOANS> 347,730
<ALLOWANCE> 6,792
<TOTAL-ASSETS> 586,885
<DEPOSITS> 511,928
<SHORT-TERM> 16,200
<LIABILITIES-OTHER> 4,298
<LONG-TERM> 9,195
0
0
<COMMON> 35,743
<OTHER-SE> 9,521
<TOTAL-LIABILITIES-AND-EQUITY> 586,885
<INTEREST-LOAN> 8,479
<INTEREST-INVEST> 2,668
<INTEREST-OTHER> 86
<INTEREST-TOTAL> 11,233
<INTEREST-DEPOSIT> 3,948
<INTEREST-EXPENSE> 4,304
<INTEREST-INCOME-NET> 6,929
<LOAN-LOSSES> 763
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,143
<INCOME-PRETAX> 2,170
<INCOME-PRE-EXTRAORDINARY> 1,514
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,514
<EPS-BASIC> 0.34
<EPS-DILUTED> 0.33
<YIELD-ACTUAL> 5.48
<LOANS-NON> 1,609
<LOANS-PAST> 705
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,542
<CHARGE-OFFS> 607
<RECOVERIES> 94
<ALLOWANCE-CLOSE> 6,792
<ALLOWANCE-DOMESTIC> 6,792
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
