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: MARCH 31, 1997
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
(Issuer'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 March 31, 1997 is: 1,422,368
<PAGE>2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
The information required by Item 310(b) of Regulation S-B is attached hereto
as Exhibit A.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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 three month period
ended March 31, 1997. Prior to 1996, the Bank filed its periodic reports
under the Securities Exchange Act of 1934 with the Federal Reserve Board.
CHANGES IN FINANCIAL CONDITION
During the three month period ended March 31, 1997, deposits increased $7.2
million or 3.8% to $199.8 million. During the same period, gross loans
increased $1.4 million or 1.0% to $147.1 million, as a result of an increase
in real estate and consumer loans being partially offset by a decrease in
municipal loans. Investment securities increased $1.6 million or 4.0% to
$41.5 million. Excess liquidity during the period was invested in federal
funds.
During the three month period ending March 31, 1997, past due and non-accrual
loans decreased to $0.7 million (0.3% of total assets), compared with $2.4
million (1.1% of total assets) at December 31, 1996. The Bank's allowance for
loan losses at March 31, 1997 was 1.6% of loans and leases which compared with
1.4% at December 31, 1996.
EARNINGS SUMMARY
Net income for the quarter ended March 31, 1997 was $634,000, or $0.41 per
share, compared with net income of $865,000 or $0.57 per share in the same
quarter a year ago. This apparent decline can be attributed to the decrease
in realized gains on securities in 1997 ($26,000) when compared to the same
period in 1996 ($589,000). Securities were sold in the first quarter of 1996
to support an increase in loans.
NET INTEREST INCOME
Total interest income increased $445,000 or 11.3% for the quarter ended March
31, 1997, as compared to the prior year. During the same period, interest
expense increased $104,000 or 7.6%. Net interest income for the quarter ended
March 31, 1997 was $2.9 million and $2.6 million for the quarter ended March
31, 1996. Average loans and leases as a percentage of average earning assets
was 75.2% during the quarter ended March 31, 1997, compared to 73.9% a year
earlier. The average balance of other earning assets as a percentage of
average earning assets was 24.8% during the quarter ended March 31, 1997,
compared to 26.1% a year earlier.
<PAGE>3
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 a net additional provision to
the allowance for loan losses for the three month period ended March 31, 1997
of $206,000 compared to $240,000 for the same period in 1996. Loans charged
off during the three month period totaled $48,000 in 1997 and $375,000 in
1996. Recoveries in the same period were $6,000 in 1997 and $120,000 in 1996.
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/loss on sale of loans and fixed assets,
service charges on deposit accounts and other service charges, commissions and
fees including Lease Department, Merchant BankCard Department and Issuing
BankCard Department income. In the quarter ended March 31, 1997, income from
these sources was $1.5 million, an increase of $453,000 from the same period
in 1996. The increase was attributable primarily to increases in Merchant
BankCard Department and Issuing BankCard Department income.
NON-INTEREST EXPENSE
Non-interest expenses increased $734,000 or 29.1% to $3.3 million for the
quarter ended March 31, 1997, compared to the same period in 1996. The
increase was due in part to increased personnel expenses, fixed asset expense
and Issuing BankCard Department expense. During the quarter ended March 31,
1997, the Company had a total of 181 full-time equivalent employees, compared
to 141 full-time equivalent employees during the same quarter 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 March 31, 1997:
REQUIRED MINIMUM COMPANY'S ACTUAL
TIER 1 6.00 11.58
TOTAL CAPITAL 10.00 12.83
LEVERAGE 5.00 8.80
<PAGE>4
Future growth and earnings retention, as currently projected by management,
are expected to provide for the maintenance of capital ratios in conformity
with the requirements.
INCOME TAXES
The provision for income taxes was $326,000 for the quarter ended March 31,
1997, compared to $564,000 in the same quarter a year earlier. The provision
is classified as current tax liability for interim reporting purposes. The
tax rate was 40.0% for the quarter ended March 31, 1997, compared to 39.5% for
the same quarter in 1996.
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
27.8% at March 31, 1997, and 26.4% at December 31, 1996.
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
On or about March 14, 1997, a Proxy Statement of Humboldt Bancorp was mailed
to shareholders of record as of February 28, 1997 by the Board of Directors
soliciting proxies for use at the Annual Meeting of Shareholders to be held on
April 16, 1997. At the meeting the shareholders were asked to elect
management's nominees for Directors (11), and to ratify the appointment of
Richardson & Company as independent certified accountants. All eleven
nominated Directors were elected and Richardson & Company were ratified as the
Company's independent certified accountants.
<PAGE>5
ITEM 5 - OTHER INFORMATION - NONE
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
Exhibit (27) - Financial Data Schedule
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: May 15, 1997 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>6
Humboldt Bancorp and Subsidiary
Notes to Consolidated Financial Statements
March 31, 1997
(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 March 31, 1997 and the results of operations for the three
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 1996 Annual Report on Form 10-KSB.
The results of operations for the three months ended March 31, 1997 are not
necessarily indicative of the operating results through December 31, 1997.
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 Company's normal internal
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 March 31, 1997, the Company's total recorded investment in impaired loans
was $18,975.00 for which there is a related allowance for credit losses of
$18,975.00 determined in accordance with these Statements.
<PAGE>7
The average recorded investment in the impaired loans during the three months
ended March 31, 1997 was $23,213.00. The related amount of interest income
recognized during the period that such loans were impaired was $854.12 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 $581.47.
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 $3.4 million at
March 31, 1997.
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 March 31, 1997 was
1,583,626 and for the period ending March 31, 1996 was 1,531,336.
<PAGE>
<TABLE>
<CAPTION>
HUMBOLDT BANCORP AND SUBSIDIARY CONSOLIDATED CONSOLIDATED
CONSOLIDATED BALANCE SHEETS UNAUDITED AUDITED
MARCH 31 DECEMBER 31
1997 1996
<S> <C> <C>
IN THOUSANDS OF DOLLARS
ASSETS:
Cash and due from banks $10,694 $10,247
Interest bearing deposits in banks 20 20
Federal funds sold 9,760 6,570
Investment securities (at fair value of $41,547
and $39,933, respectively) 41,547 39,933
Loans held for sale 40 63
Loans:
Real estate-construction & land development 20,939 21,205
Real estate-commercial and agriculture 62,675 61,030
Real estate-Family and Multifamily residential 32,647 31,456
Commercial, Industrial and argicultural 21,366 20,559
Lease Financing 3,196 3,168
Consumer loans 5,943 4,529
State and political subdivisions 0 2,875
Other 301 850
------- -------
147,067 145,672
Less: deferred loans fees (759) (765)
------- -------
Total loans 146,308 144,907
Less: allowance for credit losses (2,310) (2,146)
------- -------
Net loans 143,998 142,761
Premises and equipment, net 5,989 6,064
OREO 257 0
Investment in associated companies 1,984 0
Intangible Assets 861 933
Other Assets 8,212 8,147
------- -------
Total assets $223,362 $214,738
======= =======
LIABILITIES
Deposits:
Demand $52,853 $50,412
Demand-Interest-bearing 39,644 41,511
Time, $100,000 and over 30,467 26,432
Other time 59,470 57,951
Savings 17,389 16,270
------- -------
199,823 192,576
Borrowed funds 772 775
Other liabilities 2,533 1,787
------- -------
203,128 195,138
SHAREHOLDERS' EQUITY
Preferred stock,no par value; 1,000,000
shares authorized,none issued
Common stock, no par value; 1,000,000 shares
authorized, 1,422,368,Shares in 1997 and 1,266,509
in 1996 issued and outstanding 17,275 17,179
Retained earnings 2,694 2,060
Unrealized gain/loss 265 361
------- -------
Total shareholders' equity 20,234 19,600
------- -------
Total liabilities & shareholders' equity $223,362 $214,738
======= =======
NOTE: HUMBOLDT BANCORP BECAME EFFECTIVE JANUARY 2 1996.
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HUMBOLDT BANCORP
STATEMENT OF OPERATIONS
For the THREE months ended
MARCH 31, 1997 and 1996 UNAUDITED UNAUDITED
IN THOUSANDS OF DOLLARS MARCH 31 MARCH 31
1997 1996
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $3,716 $3,112
Interest on deposits in banks 2 13
Interest & dividends on securities 560 726
Interest on federal funds sold 108 90
------ ------
Total Interest income 4,386 3,941
INTEREST EXPENSE
Interest on demand deposits 232 227
Interest on other savings deposits 77 82
Interest on time deposits 100000+ 354 303
Interest on all other time deposits 801 751
Interest on other borrowings 15 12
----- ------
Total interest expense 1,479 1,375
Net interest income 2,907 2,566
Provision for loan losses 206 240
NON INTEREST INCOME
Service charges on deposit accts 213 148
Other fee income 1,357 843
All other noninterest income (81) 45
----- -----
Total Noninterest income 1,489 1,036
Realized gain/loss on securities 26 589
NON INTEREST EXPENSE
Salaries & employee benefits 1,592 1,292
Premises & fixed asset expense 534 347
Other noninterest expense 1,130 883
----- -----
Total noninterest expense 3,256 2,522
INCOME BEFORE TAXES 960 1,429
Applicable income taxes 326 564
----- -----
NET INCOME $634 $865
===== =====
----- -----
INCOME PER WEIGHTED AVERAGE SHARE $0.41 $0.57
===== =====
NOTE: HUMBOLDT BANCORP BECAME EFFECTIVE JANUARY 2 1996.
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HUMBOLDT BANCORP
STATEMENT OF CASH FLOWS
For the three months ended March 31, 1997
IN THOUSANDS OF DOLLARS CONSOLIDATED CONSOLIDATED
UNAUDITED UNAUDITED
MARCH 31 MARCH 31
1997 1996
<S> <C> <C>
OPERATING ACTIVITIES
Net income 634 865
Adjustments to reconcile net income
to net cash provided by operating activities:
Provision for loan loss 206 240
Depreciation 345 190
Amortization and other 244 191
(Gain)/loss on sale of securities (25) (589)
Equity in loss/income of Associated company 16 0
Net change in other assets (229) (219)
Net change in other liabilities 746 895
Net change in loans held for sale 23 1,508
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,960 3,081
INVESTING ACTIVITIES
Net change in interest-bearing deposits in banks 0 100
Federal funds sold, net (3,190) (2,190)
Securities held-to-maturity
Investment purchases 0 0
Proceeds from maturities of investments 0 0
Proceeds from sale of investments 0 0
Securities available-for-sale
Investment purchases (7,721) (9,776)
Proceeds from maturities of investments 1,738 2,059
Proceeds from sale of investments 4,058 19,673
Net change in loans (1,468) (12,007)
Purchases of premises and equipment (270) (167)
Investment in associated company (2,000) 0
NET CASH USED FOR INVESTING ACTIVITIES (8,853) (2,308)
FINANCING ACTIVITIES
Net change in deposits 7,247 (445)
Payments on borrowed funds (3) (3)
Stock options exercised 96 0
NET CASH PROVIDED BY FINANCING ACTIVITIES 7,340 (448)
NET CHANGE IN CASH AND CASH EQUIVALENTS 447 325
Cash and due from banks
at begining of period 10,247 7,281
CASH AND DUE FROM BANKS
AT END OF PERIOD 10,694 7,606
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for:
Interest 1,472 1,366
Income Taxes 0 6
NON-CASH TRANSACTIONS:
Unrealized holding losses on securities 453 (806)
Deferred income taxes on unrealized holding
losses on securities 188 335
Deposit liabilities assumed in exchange for assets
acquired in connection with purchase of branches 0 0
</TABLE>
<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>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-END> MAR-31-1997 MAR-31-1996
<CASH> 10,694 7,606
<INT-BEARING-DEPOSITS> 20 1,020
<FED-FUNDS-SOLD> 9,760 7,660
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 41,547 41,604
<INVESTMENTS-CARRYING> 0 0
<INVESTMENTS-MARKET> 0 0
<LOANS> 146,348 127,429
<ALLOWANCE> (2,310) (2,051)
<TOTAL-ASSETS> 223,362 194,754
<DEPOSITS> 199,823 174,082
<SHORT-TERM> 0 0
<LIABILITIES-OTHER> 2,533 2,560
<LONG-TERM> 772 784
0 0
0 0
<COMMON> 17,275 14,851
<OTHER-SE> 2,959 2,477
<TOTAL-LIABILITIES-AND-EQUITY> 223,362 194,754
<INTEREST-LOAN> 3,716 3,112
<INTEREST-INVEST> 560 726
<INTEREST-OTHER> 110 103
<INTEREST-TOTAL> 4,386 3,941
<INTEREST-DEPOSIT> 1,464 1,363
<INTEREST-EXPENSE> 1,479 1,375
<INTEREST-INCOME-NET> 2,907 2,566
<LOAN-LOSSES> 206 240
<SECURITIES-GAINS> 26 589
<EXPENSE-OTHER> 3,256 2,522
<INCOME-PRETAX> 960 1,429
<INCOME-PRE-EXTRAORDINARY> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 634 865
<EPS-PRIMARY> 0.41 0.57
<EPS-DILUTED> 0.41 0.57
<YIELD-ACTUAL> 6.16 5.74
<LOANS-NON> 73 619
<LOANS-PAST> 237 154
<LOANS-TROUBLED> 101 189
<LOANS-PROBLEM> 0 102
<ALLOWANCE-OPEN> 2,146 1,868
<CHARGE-OFFS> (48) (66)
<RECOVERIES> 6 9
<ALLOWANCE-CLOSE> 2,310 2,051
<ALLOWANCE-DOMESTIC> 794 656
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 1,516 1,395
</TABLE>
