SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: SEPTEMBER 30, 1996
Commission File Number: 0-27784
HUMBOLDT BANCORP
(Exact name of small business issuer as specified in its charter)
CALIFORNIA 93-1175446
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
701 FIFTH STREET
EUREKA, CALIFORNIA
(Address of principal executive offices)
95501
(Zip Code)
(707) 445-3233
(Registrant's telephone number, including area code)
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 twelve 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.
X Yes No
Number of shares of common stock outstanding at September 30, 1996 is:
1,392,855
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
The information required by Rule 10-01 of Regulation S-X is attached hereto as
Exhibit A.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
On November 10, 1995, the shareholders of Humboldt Bank (the "Bank") approved
a Plan of Reorganization by and between the Bank, Humboldt Merger Company and
Humboldt Bancorp (the "Company") whereby the Bank became a wholly owned
subsidiary of the Company. The reorganization became effective January 2,
1996. The sole business operation of the Company is conducted through its
wholly owned subsidiary, Humboldt Bank. The following discussion, therefore,
although presented on a consolidated basis, analyzes primarily the financial
condition and results of operations of the Bank for the nine month period
ended September 30, 1996. Previously, the Bank filed its periodic reports
under the Securities Exchange Act of 1934 with the Federal Reserve Board.
CHANGES IN FINANCIAL CONDITION
During the nine month period ended September 30, 1996, deposits increased
$12.0 million or 6.85% to $186.5 million. During the same period, loans
increased $28.0 million or 24.2% to $143.7 million, primarily as a result of
an increase in residential real estate loans and construction and land
development loans secured by real estate. Investment securities decreased
$17.5 million or 32.6% to $36.3 million. Excess liquidity during the period
was invested in federal funds.
During the nine month period ending September 30, 1996, past due loans were
$1.1 million (0.5% of total assets), and compares with $1.8 million (0.9% of
total assets) at December 31, 1995. The Bank's allowance for loan losses at
September 30, 1996 was 1.6% of total loans, the same as at December 31, 1995.
EARNINGS SUMMARY
Net income for the nine months ended September 30, 1996 was $2,199,000, or
$1.43 per share, compared with net income of $1,330,000 or $0.89 per sht
income increased $1,054,000 or 9.5% for the nine months ended September 30,
1996, as compared to the same period during the prior year. For the nine
months ended September 30, 1996, interest expense increased $234,000 or 6.1%
as compared to the same period during the prior year. Net interest income for
the nine months ended September 30, 1996 was $8,106,000 and $7,286,000 for the
nine months ended September 30, 1995. Average loans as a percentage of
average earning assets was 73.2% during the nine months ended September 30,
1996, compared to 62.0% a year earlier. The average balance of lower yielding
other earning assets as a percentage of average earning assets was 26.8%
during the nine months ended September 30, 1996, compared to 38.0% a year
earlier.
PROVISION FOR LOAN LOSSES
The Company maintains its allowance for loan losses at a level considered
appropriate by management to provide for known and inherent risks in the loan
portfolio. This consideration includes an evaluation of various factors
affecting the collectability of loans, including current and projected
economic conditions, past credit experience and a periodic review of the
Company's loan portfolio. The Company recorded an additional provision to the
allowance for loan losses for the nine month period ended September 30, 1996
of $539,000 compared to $593,000 for the same period in 1995. This decrease
was mainly due to anticipated losses not materializing on loans in non-accrual
in 1995. Loans charged off during the nine month period totaled $273,000 in
1996 and $262,000 in 1995. Recoveries in the same period were $111,000 in
1996 and $42,000 in 1995.
On January 1, 1995, the Company adopted SFAS No. 114, "Accounting by Creditors
for Impairment of a Loan". The effect of adoption on the Company's financial
statements was not material.
NON-INTEREST INCOME
Non-interest income consists of gain on sale of loans and securities, service
charges and other fees related to deposit accounts, SBA and mortgage service e
deposit box rentals, Lease Department income and fees, Merchant BankCard
Department income and fees and miscellaneous other fees. In the nine months
ended September 30, 1996, income from these sources was $3,536,000, an
increase of $1,156,000 from the same period in 1995. The increase was
attributable primarily to increases in Lease and Merchant BankCard Department
income and gains on sales of securities.
NON-INTEREST EXPENSE
Non-interest expenses increased $1,200,000 or 17.3% to $8,150,000 for the nine
months ended September 30, 1996, compared to the same period in 1995. The
increase was due in part to increased personnel expenses, fixed asset expense,
Credit Card Issuing and Merchant BankCard Department expense, and telephone
expense. During the nine months ended September 30, 1996, the Company had a
total of 161 full-time equivalent employees, compared to 134 full-time
equivalent employees during the same period a year earlier.
CAPITAL RESOURCES
Management seeks to maintain adequate capital to support anticipated asset
growth and credit risks and to ensure that the Company meets all regulatory
capital requirements.
The Company is required to maintain certain regulatory minimum capital ratios.
The following table outlines these ratios at September 30, 1996:
REQUIRED COMPANY'S
MINIMUM ACTUAL
TIER 1 6% 11.13%
TOTAL CAPITAL 10% 12.38%
LEVERAGE 5% 8.53%
Future growth and earnings retention, as currently projected by management,
are expected to provide for the maintenance of capital ratios in conformance
with the requirements.
INCOME TAXES
The provision for income taxes was $1,381,000 for the nine months ended
September 30, 1996, compared to $947,000 in the same period a year earlier.
The provision is classified as current tax liability for interim reporting
purposes. The tax rate was 38.6% for the nine months ended September 30,
1996, compared to 41.6% for the same period in 1995.
LIQUIDITY
The Company manages its liquidity to ensure that sufficient funds are
available to meet loan commitments and deposit fluctuations. Primary sources
of liquidity include cash and due from bank deposits, unpledged short-term
U.S. Government securities and federal funds sold. The Bank's primary
liquidity ratio, which is the ratio of liquid assets to total deposits, was
25.9% at September 30, 1996, and 28.7% at December 31, 1995.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Company is not involved in any legal proceedings that would have a
material adverse effect on its financial statements.
ITEM 2 - CHANGES IN SECURITIES - NONE
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES - NONE
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - NONE
ITEM 5 - OTHER INFORMATION - NONE
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K - NONE
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed by the undersigned, thereunto duly authorized.
Date: October 25, 1996 HUMBOLDT BANCORP
Alan J. Smyth
______________________________________
Alan J. Smyth
Senior Vice President & Chief Financial Officer
Theodore S. Mason
______________________________________
Theodore S. Mason
President & Chief Executive Officer
<PAGE>
HUMBOLDT BANCORP AND SUBSIDIARY CONSOLIDATED BANK ONLY
CONSOLIDATED BALANCE SHEETS UNAUDITED AUDITED
(IN THOUSANDS OF DOLLARS) 09/30/96 DECEMBER 31, 1995
ASSETS:
Cash and Due From Banks 9646 7281
Interest Bearinh Deposits in Banks 1020 1120
Federal Funds Sold 7050 5470
Investment Securities(Market Value of
$36,334 and $53,875 respectively) 36,334 53,875
Loans Held For Sale 924 1880
LOANS
Commercial, Industrial & 19,227 16,284
Agricultural
Real Estate - Commercial and Farm 62,214 54,879
Land
Real Estate - Residential 1 to 5 31,820 21,156
Real Estate - Construction & Land 21,456 15,874
Development
Consumer 3732 3396
Lease Financing 3207 3974
Municipal Loans 1825 0
Other 236 159
143,717 115,722
Less: Deferred Loan Fees (869) (616)
TOTAL LOANS 142,848 115,106
Less: Allowance For Credit (2,245) (1,868)
Losses
NET LOANS 140,603 113,238
Premises and Equipment (net) 5808 5009
Intangible Assets 1026 1305
Other Assets 6098 4734
TOTAL ASSETS 208,509 193,910
LIABILITIES (Deposits)
Demand 49,950 39,879
Demand-Interest Bearing 38,610 41,543
Time - $100,000 and over 24,860 23,230
Other Time 57,285 54,098
Savings 15,780 15,776
186,485 174,526
Borrowed Funds 778 787
Other Liabilities 2724 1665
189,987 176,978
SHAREHOLDERS' EQUITY
Preferred stock, no par value;
1,000,000 shares authorized,
none issued
Common stock, no par value;
1,000,000 shares authorized,
1,392,855 shares in 1996 and
1,266,509 in 1995, issued and
outstanding 17,030 14,851
Retained Earnings 1283 1268
Unrealized Gain/Loss 209 815
TOTAL SHAREHOLDERS' EQUITY 18,522 16,934
TOTAL LIABILITIES & SHAREHOLDERS'
EQUITY 208,509 193,912
NOTE: HUMBOLDT BANCORP BECAME EFFECTIVE JANUARY 2, 1996.
*See notes to consolidated financial statements.
<PAGE>
HUMBOLDT BANCORP
STATEMENT OF OPERATIONS
For the three months ended
09/30/96 & 09/30/95 UNAUDITED UNAUDITED
(in thousands of dollars) 09/30/96 09/30/95
INTEREST INCOME
Interest and Fees on Loans 3618 2925
Interest on Deposits in Banks 14 16
Interest & Dividends on Securities 522 841
Interest on Federal Funds Sold 83 140
Total Interest Income: 4237 3922
INTEREST EXPENSE
Interest on Demand Deposits 38 45
Interest on Other Savings Deposits 273 255
Interest on Time Deposits 310 283
$100,000+
Interest on All Other Time Deposits 752 751
Interest on Other Borrowings 12 36
Total Interest Expense: 1385 1370
Net Interest Income 2852 2552
Provision For Loan Losses 76 228
NON-INTEREST INCOME
Service Charges on Deposit Accounts 201 145
Other Fee Income 1128 753
All Other Non-interest Income 23 50
Total Non-interest Income: 1352 948
Realized Gain/Loss on Securities 3 154
NON-INTEREST EXPENSE
Salaries & Employee Benefits 1463 1179
Premises & Fixed Asset Expense 496 349
Other Non-interest Expense 959 1036
Total Non-interestExpense: 2918 2564
INCOME BEFORE TAXES 1213 862
Applicable Income Taxes 473 359
NET INCOME 740 503
INCOME PER SHARE $0.46 $0.33
NOTE: HUMBOLDT BANCORP BECAME EFFECTIVE JANUARY 2, 1996.
*See notes to consolidated financial statements
<PAGE>
HUMBOLDT BANCORP
STATEMENT OF OPERATIONS
For the nine months ended
09/30/96 & 09/30/95 UNAUDITED UNAUDITED
(in thousands of dollars) 09/30/96 09/30/95
INTEREST INCOME
Interest and Fees on Loans 10,116 8,299
Interest on Deposits in Banks 40 46
Interest & Dividends on Securities 1799 2413
Interest on Federal Funds Sold 252 395
Total Interest Income: 12,207 11,153
INTEREST EXPENSE
Interest on Demand Deposits 121 126
Interest on Other Savings Deposits 804 718
Interest on Time Deposits 910 861
$100,000+
Interest on All Other Time Deposits 2230 2101
Interest on Other Borrowings 36 61
Total Interest Expense: 4101 3867
Net Interest Income 8106 7286
Provision For Loan Losses 539 593
NON-INTEREST INCOME
Service Charges on Deposit Accounts 505 425
Other Fee Income 2946 1839
All Other Non-interest Income 85 116
Total Non-interest Income: 3536 2380
Realized Gain/Loss on Securities 627 154
NON-INTEREST EXPENSE
Salaries & Employee Benefits 4122 3355
Premises & Fixed Asset Expense 1276 935
Other Non-interest Expense 2752 2660
Total Non-interest Expense: 8150 6950
INCOME BEFORE TAXES 3580 2277
Applicable Income Taxes 1381 947
NET INCOME 2199 1330
INCOME PER SHARE $1.43 $0.89
NOTE: HUMBOLDT BANCORP BECAME EFFECTIVE JANUARY 2, 1996
*See notes to consolidated financial statements
<PAGE>
HUMBOLDT BANCORP STATEMENT OF CASH CONSOLIDATED BANK ONLY
FLOWS UNAUDITED UNAUDITED
For the nine months ended September SEPTEMBER 30 SEPTEMBER 30
30, 1996 & 1995 1996 1995
(in thousands of dollars)
OPERATING ACTIVITIES
Net Income - Adjustments to reconcile
net income to net cash provided by
operating activities: 2,199 1,330
Provision for Loan Loss 539 593
Depreciation 712 548
Amortization and Other 668 17
<Gain>/Loss on Sale of Securities <627> <154>
Net Change in Other Assets <932> <680>
Net Change in Other Liabilities 1059 972
Net Change in Loans Held for Sale 956 322
NET CASH PROVIDED BY OPERATING ACTIVITIES 4574 2948
INVESTING ACTIVITIES
Net Change in Interest-bearing
Deposits in Banks 100 107
Federal Funds Sold (N et) <1,580> 3460
Securities Held-to-Maturity
Investment Purchases 0 <7,778>
Proceeds From Maturities of Investments 0 6405
Proceeds From Sale of Investments 0 0
Securities Available-for-Sale
Investment Purchases <9,867> <18,878>
Proceeds From Maturities of Investments 3511 7000
Proceeds From Sale of Investments 23099 3154
Net Change in Loans <27,905> <15,401>
Purchase of Premises and Equipment <1,511> <539>
NET CASH USED FOR INVESTING ACTIVITIES <14,153> <29,390>
FINANCING ACTIVITIES
Net Change in Deposits 11958 29052
Payments on Borrowed Funds <9> <8>
Stock Options Exercised 0 35
Fractional Shares Purchased <5> <3>
NET CASH PROVIDED BY FINANCING ACTIVITIES 11944 29076
NET CHANGE IN CASH AND CASH EQUIVALENTS 2365 2634
Cash and Due From Banks at Beginning of
Period 7281 5726
CASH AND DUE FROM BANKS AT END OF PERIOD 9646 8360
SUPPLEMENTAL DISCLOSURES
Cash Paid During the Period For: Interest 4084 3843
Income Taxes 2089 1176
NON-CASH TRANSACTIONS
Unrealized Holding Losses on Securities <1,036> 985
Deferred Income Taxes on unrealized
holding losses on securities 431.00 <409>
Deposit Liabilities assumed in exchange
for assets acquired in connection with
purchase of branches 0 1,879
Stock Dividend 2184 1647
<PAGE>
Humboldt Bancorp and Subsidiary
Notes to Consolidated Financial Statements
September 30, 1996
(Unaudited)
Note 1 - Basis of Presentation
In the opinion of Management, the unaudited interim consolidated financial
statements contain all adjustments of a normal recurring nature, which are
necessary to present fairly the financial condition of Humboldt Bancorp and
Subsidiary at September 30, 1996 and the results of operations for the nine
months then ended.
Certain information and footnote disclosures presented in the Company's annual
financial statements are not included in these interim financial statements.
Accordingly, the accompanying unaudited interim consolidated financial
statements should be read in conjunction with the financial statements and
notes thereto included in the Company's 1995 Annual Report on Form 10-KSB.
The results of operations for the nine months ended September 30, 1996 are not
necessarily indicative of the operating results through December 31, 1996.
Note 2 - New Accounting Policies
On January 1, 1995, the Company adopted SFAS No. 114, "Accounting by Creditors
for Impairment of a Loan". This statement addresses the accounting and
reporting by creditors for impairment of certain loans. A loan is impaired
when, based upon current information and events, it is probable that a
creditor will be unable to collect all amounts due according to the
contractual terms of the loan agreement. These statements are applicable to
all loans, uncollateralized as well as collateralized, except large groups of
smaller-balance homogeneous loans that are collectively evaluated for
impairment such as consumer installment loans and loans held for sale which
are measured at fair value or at the lower of cost or fair value. Impairment
is measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate, except that as a practical
expedient, the Company measures impairment based on a loan's observable market
price or the fair value of the collateral if the loan is collateral dependent.
Loans are measured for impairment as part of the Comparnal asset review
process.
Interest income is recognized on impaired loans in a manner similar to that of
all loans. It is the Company's policy to place loans that are delinquent 90
days or more as to principal or interest on a nonaccrual of interest basis
unless secured and in the process of collection, and to reverse from current
income accrued but uncollected interest. Cash payments subsequently received
on nonaccrual loans are recognized as income only where the future collection
of principal is considered by management to be probable.
At September 30, 1996, the Company's total recorded investment in impaired
loans was $149,000 for which there is a related allowance for credit losses of
$87,000 determined in accordance with these Statements.
The average recorded investment in the impaired loans during the nine months
ended September 30, 1996 was $154,000. The related amount of interest income
recognized during the period that such loans were impaired was $2,082 and the
amount of interest income recognized using a cash-basis method of accounting
during the time within the period that the loans were impaired was $1,986.
Note 3 - Consolidation
The consolidated financial statements include the accounts of Humboldt Bancorp
and its wholly-owned subsidiary, Humboldt Bank. All material intercompany
accounts and transactions have been eliminated in consolidation.
Note 4 - Commitments
The Bank has outstanding performance letters of credit of $3,814,000 at
September 30, 1996.
Note 5 - Net Income Per Common Share
Net income per share is calculated by using the weighted average common shares
outstanding. The weighted average number of common shares used in computing
the net income per common share for the period ending September 30, 1996 was
1,539,227 and for the period ending September 30, 1995 was 1,487,605.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
CONSOLIDATED BALANCE SHEETS, CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER
INTERNALLY GENERATED REPORTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001008554
<NAME> HUMBOLDT BANCORP
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> SEP-30-1996 SEP-30-1995
<CASH> 9,646 8,360
<INT-BEARING-DEPOSITS> 1,020 1,120
<FED-FUNDS-SOLD> 7,050 10,450
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 36,334 33,668
<INVESTMENTS-CARRYING> 0 15,097
<INVESTMENTS-MARKET> 0 15,565
<LOANS> 142,848 108,651
<ALLOWANCE> (2,245) (1,704)
<TOTAL-ASSETS> 208,509 186,696
<DEPOSITS> 186,485 168,556
<SHORT-TERM> 0 0
<LIABILITIES-OTHER> 2,724 1,843
<LONG-TERM> 778 790
0 0
0 0
<COMMON> 17,030 14,851
<OTHER-SE> 1,492 656
<TOTAL-LIABILITIES-AND-EQUITY> 208,509 186,696
<INTEREST-LOAN> 10,116 8,299
<INTEREST-INVEST> 1,799 2,413
<INTEREST-OTHER> 292 441
<INTEREST-TOTAL> 12,207 11,153
<INTEREST-DEPOSIT> 0 0
<INTEREST-EXPENSE> 4,101 3,867
<INTEREST-INCOME-NET> 8,106 7,286
<LOAN-LOSSES> 539 593
<SECURITIES-GAINS> 627 154
<EXPENSE-OTHER> 8,150 6,950
<INCOME-PRETAX> 3,580 2,277
<INCOME-PRE-EXTRAORDINARY> 3,580 2,277
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,199 1,330
<EPS-PRIMARY> 1.43 0.89
<EPS-DILUTED> 1.43 0.89
<YIELD-ACTUAL> 6.01 6.05
<LOANS-NON> 494 129
<LOANS-PAST> 171 60
<LOANS-TROUBLED> 149 268
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 1,868 1,331
<CHARGE-OFFS> (273) (262)
<RECOVERIES> 111 42
<ALLOWANCE-CLOSE> 2,245 1,704
<ALLOWANCE-DOMESTIC> 843 385
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 1,402 1,319
</TABLE>
