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, 1998
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 common stock outstanding at September 30, 1998 was: 1,778,887
<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
subsidary of the Company. The reorganization became effective January 2, 1996.
On April 1, 1998, Bancorp Financial Services, a small ticket leasing company,
jointly owned by Humboldt Bank and Tehema Bank, was transferred from the Bank to
the Company. The business operation of the Company is conducted through its
wholly owned subsidary, Humboldt Bank, and through a 50% ownership with Tehema
Bank of Bancorp Financial Services. Therefore the following discussion, covering
the nine months period ended September 30, 1998, analyzes the financial
condition and results of operations of both the Bank and Bancorp Financial
Services on a consolidated basis. 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 nine month period ended September 30, 1998, deposits increased $22.1
million or 8.7% to $277.3 million. During the same period, total loans increased
$20.6 million or 12.9% to $180.4 million, as a result of increases in real
estate loans, commercial industrial and agricultural loans, lease financing
loans and other loans, which increases were partially offset by a small decrease
in consumer loans. Loans held for sale increased $3.2 million. The increase in
deposits and loans is attributable to internal factors and is not the result of
acquisitions.
At September 30, 1998, deposits had increased $28.5 million or 11.4% from $248.8
million at September 30, 1997. Total loans had increased $23.3 million or 14.8%
from $157.1 million at September 30, 1997. The increase in deposits and loans is
attributable to internal factors and is not the result of acquisitions.
At September 30, 1998, investment securities had decreased $0.7 million or 0.9%
to $79.4 million. The small decrease is attributable to an increase in federal
funds sold. Excess funds continue to be invested in federal funds on a daily
basis.
At September 30, 1998, investments had increased $8.2 million or 11.6% from
$71.2 million at September 30, 1997. The increase in investments is attributable
to deposits increasing more than loans and to a small decrease in federal funds
sold.
During the nine month period ending September 30, 1998, past due and non-accrual
loans decreased to $1.8 million (0.6% of total assets), compared with $3.1
million (1.1% of total assets) at December 31,
<PAGE>3
1997. The Company's allowance for loan losses at September 30, 1998 was 1.5% of
loans and leases which compared with 1.5% at December 31, 1997.
At September 30,1998, past due and non-accrual loans had decreased $0.7 million
or 28.0% from $2.5 million at September 30, 1997. The Company's allowance for
loan losses at September 30, 1998 was 1.5% of loans and leases which compared
with 1.4% at September 30, 1997.
Earnings Summary
Net income for the nine months ended September 30, 1998 was $2,811,000 or $1.59
per share (diluted $1.38 per share), compared with net income of $2,109,000 or
$1.23 per share (diluted $1.07 per share) in the same period a year ago. This
can be attributed to increases in interest income ($3,292,000 or 22.7%), and
increases in non-interest income ($3,157,000 or 57.9%) offset by increases in
interest expense ($884,000 or 17.8%), loan loss provision ($1,076,000 or
231.4%), non-interest expenses ($3,038,000 or 26.6%), taxes ($647,000 or 60.3%)
and a decrease in realized gain on sale of securities ($102,000 or 100%).
Net income for the three months ended September 30, 1998 was $1,108,000 or $0.63
per share (diluted $0.54 per share), compared with net income of $773,000 or
$0.46 per share (diluted $0.39 per share) in the same three month period a year
ago. This can be attributed to increases in interest income ($708,000 or 13.2%),
and increases in non-interest income ($1,359,000 or 67.5%), offset by increases
in interest expense ($123,000 or 6.7%), loan loss provision ($402,000 or
349.6%), non-interest expenses ($830,000 or 19.0%), taxes ($321,000 or 93.3%)
and a decrease in realized gain on sale of securities ($56,000 or 100%).
Net Interest Income
Total interest income increased $3,292,000 or 22.7% for the nine months ended
September 30, 1998, compared with the prior year. During the same period,
interest expense increased $884,000 or 17.8%. Net interest income for the nine
months ended September 30, 1998 was $11.9 million and $9.5 million for the
period ended September 30, 1997. Average loans and leases as a percentage of
average earning assets was 65.1% during the nine months ended September 30,
1998, compared with 69.9% a year earlier. The average balance of other earning
assets as a percentage of average earning assets was 34.9% during the nine
months ended September 30, 1998, compared with 30.1% a year earlier.
Total interest income increased $708,000 or 13.2% for the three months ended
September 30, 1998, and interest expense increased $123,000 or 6.7% compared
with the same three month period in the prior year. Net interest income for the
three months ended September 30, 1998 was $4.1 million and $3.5 million for the
three months ended September 30, 1997. The increase in interest income is
attributable to increased interest and fees on loans ($ 0.8 million), offset by
small decreases in interest on deposits in banks, interest and dividends on
securities and interest on federal funds sold ($ 0.1 million). The small
increase in interest expense is attributable to increases in interest on time
deposits of $100,000 or more, interest on other borrowings and interest on
demand deposits ($ 0.2 million) offset by decreases in interest on savings
deposits and all other time deposits ($ 0.1 million).
<PAGE>4
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's provision for loan losses for the nine months period
ended September 30, 1998 increased $1,076,000 compared to a decrease of $74,000
for the same period in 1997. Loans charged off during the nine months period
totaled $1,279,000 in 1998 and $423,000 in 1997. Recoveries in the same period
were $147,000 in 1998 and $45,000 in 1997.
The Company's provision for loan losses for the three month period ended
September 30, 1998 increased $402,000 or 349.6% compared with the same period in
1997. Loans charged off during the three month period totaled $413,000 in 1998
and $318,000 in 1997. Recoveries in the same period were $40,000 in 1998 and
$17,000 in 1997.
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 nine months ended September 30, 1998, income
from these sources was $8.6 million, an increase of $3,157,000 from the same
period in 1997. The increase was attributable primarily to increases in Merchant
Bankcard Department income ($1.3 million), Issuing Bankcard Department income
($0.3 million), Lease Department income ($0.3 million), service charges on
deposits ($0.8 million), and other non interest income ($0.5 million)
In the three months ended September 30, 1998, non-interest income was $3.4
million, an increase of $1,359,000 from the same period in 1997. The increase is
attributable primarily to increases in Merchant Bankcard Department income ($0.7
million), Issuing Bankcard Department income ($0.1 million), service charges on
deposits ($0.2 million), and other non-interest income ($0.4 million)
Non-Interest Expense
Non-interest expenses increased $3.0 million or 26.6% to $14.5 million for the
nine months ended September 30, 1998, compared to the same period in 1997. The
increase is attributable to increased personnel expenses ($1.8million), fixed
asset expense ($0.2 million), and other non interest expenses ($1.0 million)
which include increases in Merchant Bankcard Department expense ($1.1 million)
Card service expense ($0.3 million), Postage expense ($0.1 million), Stationery
and Supply expense ($0.1 million) and a decrease in Issuing Bankcard Department
expense ($0.6 million).
Non-interest expenses increased $0.8 million or 19.0% to $5.2 million for the
three months ended September 30, 1998, compared with the same period in 1997.
The increase is attributable to increased personnel expenses ($0.7 million), and
other non-interest expenses ($0.1 million) which include increases in Merchant
Bankcard Department expense ($0.6 million) and decreases in Issuing Bankcard
Department expense ($0.4 million) and other outside services of ($0.1 million).
<PAGE>5
Number of Employees
At September 30, 1998, the Company had a total of 257 full-time equivalent
employees, compared to 209 full-time equivalent employees at the same period a
year earlier.
In the three months ended September 30 1998, the number of full-time equivalent
employees increased by 9 compared with 6 in the same three months period in
1998.
Year 2000 Issue
General
The Company formed a committee of senior company personnel in late 1997 to
address the issue of computer programs and embedded computer chips being unable
to distinguish between the year 1900 and the year 2000. The committee meets on a
regular basis to evaluate, review progress, and make recommendations on the
various phases of the Year 2000 project. The Company is satisfied with the
progress made to date and is on track to complete the project in time for the
Year 2000 date change.
Project
The Company-wide project is divided into seven major phases
1. The Awareness Phase
2. The Assessment Phase
3. The Vendor, Customer and Employee Notification Phase
4. The Vendor and Customer Response Review Phase
5. The Testing Phase
6. The Contingency Phase
7. The Renovation Phase
The Awareness Phase consisted of gaining executive level support for the
resources necessary to perform compliance work, of establishing a Year 2000
project team and of developing an overall strategy that encompassed the in-house
core system, out-sourced systems, vendors, customers and suppliers including
correspondents. The Awareness Phase is fully completed.
The Assessment Phase consisted of assessing the size, scope, and complexity of
the problem, detailing the magnitude of the effort necessary to address the Year
2000 project and the preparation of a Year 2000 action plan. This phase
identified all hardware, software, network, ATM and various other processing
platforms, and customer and vendor interdependencies affected by the year 2000
date change. The assessment went beyond informational systems to include
environmental systems that are dependent on embedded microchips such as security
systems, elevators and vaults. The Assessment Phase is fully completed.
<PAGE>6
The Vendor, Customer and Employee Notification Phase consisted of the following:
1. The mailing of letters to critical vendors requesting information
on their Year 2000 compliance plans and readiness.
2. The mailing of letters to, and personal contact with major
customers (with special emphasis given key loan customers), to
ascertain their awareness, preparations and compliance plans
relative to the Year 2000 problem.
3. Company staff members were guest speakers at several service clubs
in the area outlining the Year 2000 problem.
4. Meetings were held with all staff members within the Company to
advise them of the Year 2000 problem, and the steps the Company
was taking to ensure compliance.
5. The Bank's Year 2000 Policy Statement, as well as other
informational items, has been made available both to customers
and other interested parties.
The Vendor, Customer and Employee Notification Phase is completed. The Company,
however, will continue to keep vendors, customers and employees updated on its
compliance progress and general Year 2000 issues.
The Vendor and Customer Response Review Phase is on going. The Company is
continuing to follow up with vendors and customers who have not yet responded
and with those whose responses were deemed to be less than satisfactory. The
Company is continuing to require all loan officers to include in their loan
write-ups a discussion of the customer's Year 2000 preparedness. The Company is
of the opinion that this phase will be a continuing project throughout the
remainder of 1998 and on into 1999.
The Testing Phase is a multifaceted process that is critical to the Year 2000
project and inherent in each phase of the project plan. This process includes
the testing of incremental changes to hardware and software components. In
addition to testing upgraded components, connections with other systems will be
verified to ensure that all changes are accepted by internal and external users.
The committee will assure the effective and timely completion of all hardware
and software testing prior to final implementation and will have ongoing
discussions with their vendors of their testing efforts. The Company has
prepared, and the Board of Directors has approved, the Company's Year 2000 Test
Plan. Several of the necessary test scripts are completed but the Company is
slightly behind its internal schedule in this phase of the project due to a
major upgrade to the Company's core system not being ready for installation when
originally anticipated. The installation of the upgrade is scheduled for
November and the Testing Phase of the core system will then commence. In the
meantime, several of the ancillary systems have been tested without incident.
The Company is on pace for timely completion of the necessary testing as
required by its regulatory agencies.
The Contingency Phase will consist of developing plans to address remediation
and business resumption functions that rely on mission critical systems. The
contingency plan is in the process of being formalized in writing. The Company
anticipates that the Contingency Phase plan will be completed by March 31, 1999.
The Renovation Phase will consist of renovating, replacing and retiring
non-compliant systems, as well as evaluating Year 2000 code enhancements,
hardware and software upgrades, system replacements and
<PAGE>7
other associated changes. The Company anticipates that the Renovation Phase will
continue throughout the remainder of 1998 and on into 1999.
Costs
The total cost associated with required modifications to become Year 2000
compliant is not expected to be material to the Company's financial position.
The estimated total cost of the Year 2000 project is approximately $500,000.00.
A minimal amount, other than time of the committee members, has been expended on
the Year 2000 project as of September 30, 1998. The Company is also expensing
and reserving $10,000.00 a month for possible loan losses caused by Year 2000
problems. This reserve will be approximately $225,000.00 at December 31, 1999.
Risks
The failure to correct material Year 2000 problems could result in the
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. Due to the general
uncertainty inherent in the Year 2000 problem, resulting in part from
uncertainty of the Year 2000 readiness of third party suppliers and customers,
the Company is unable to specifically determine at this time whether the
consequences of Year 2000 failures will have a material impact on the Company's
results of operations, liquidity or financial condition. However, its ongoing
Year 2000 efforts are expected to significantly reduce the Company's level of
uncertainty about the Year 2000 problem and, in particular, about the Year 2000
compliance and readiness of its critical vendors. The Company believes that,
with implementation of new business systems, if necessary, and the completion of
the project as scheduled, the possibility of significant interruptions of normal
operations should be reduced to a minimum.
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, 1998:
REQUIRED COMPANY'S
MINIMUM ACTUAL
TIER 1 6.00 10.82
TOTAL CAPITAL 10.00 12.04
LEVERAGE 5.00 7.97
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.
<PAGE>8
Income Taxes
The provision for income taxes was $1,720,000 for the nine months ended
September 30, 1998, compared to $1,073,000 in the same period a year earlier.
The provision is classified as current tax liability for interim reporting
purposes. The tax rate was 38.0% for the nine months ended September 30, 1998,
compared to 33.7% for the same period in 1997.
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 30.6% at September 30, 1998,
38.8% at December 31, 1997 and 37.1% at September 30, 1997.
<PAGE>9
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
(a) Exhibits
27.1 Financial Data Schedule
<PAGE>10
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: November 12, 1998 HUMBOLDT BANCORP
ALAN J. SMYTH
Alan J. Smyth
Senior Vice President and
Chief Financial Officer
THEODORE S. MASON
Theodore S. Mason
President and
Chief Executive Officer
<PAGE>11
Humboldt Bancorp and Subsidiary
Notes to Consolidated Financial Statements
September 30, 1998
(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, 1998 and 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 1997 Annual Report on Form 10-KSB. The results
of operations for the nine months ended September 30, 1998 are not necessarily
indicative of the operating results through December 31, 1998.
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. This statement is 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 September 30, 1998, the Company's total recorded investment in impaired loans
was $9,999 for which there is a related allowance for credit losses of $1,628
determined in accordance with these Statements. The average recorded investment
in the impaired loans during the nine months ended September 30, 1998 was
$10,000. The related amount of interest income recognized during the period
<PAGE>12
that such loans were impaired was $733 and the amount of interest income
recognized using a cash-basis method of accounting during the time within the
period that such loans were impaired was $722.
On March 31, 1998, the Company adopted SFAS No. 130 "Reporting Comprehensive
Income." This statement establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general-purpose financial statements. This Statement requires
that all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. This Statement
does not require a specific format for that financial statement but requires
that an enterprise display an amount representing total comprehensive income for
the period in that financial statement.
This Statement requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b) display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position.
This Statement is effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods provided for
comparative purposes is required.
Comprehensive income is defined as "the change in equity [net assets] of a
business enterprise during a period from transactions and other events and
circumstances from non-owner sources. It includes all changes in equity during a
period except those resulting from investments by owners and distributions to
owners."
The Board also stated that "a full set of financial statements for a period
should show: Financial position at the end of the period, earnings (net income)
for the period, comprehensive income (total non-owner changes in equity) for the
period, cash flows during the period, and investments by and distributions to
owners during the period." Prior to issuance of this Statement, the Board had
neither required that an enterprise report comprehensive income, nor had it
recommended a format for displaying comprehensive income.
Note 3 - Consolidation
The consolidated financial statements include the accounts of Humboldt Bancorp,
its wholly-owned subsidiary, Humboldt Bank and its 50% ownership with Tehema
Bank, of Bancorp Financial Services. All material intercompany accounts and
transactions have been eliminated in consolidation.
Note 4 - Commitments
The bank had outstanding performance letters of credit of $6.9 million at
September 30, 1998 and 3.9 million at September 30, 1997.
<PAGE>13
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, 1998 was
1,768,492 and for the period ending September 30, 1997 was 1,717,462.
Net income per share (diluted) is calculated by using the weighted average
common shares (diluted) outstanding. The weighted average number of common
shares (diluted) used in computing the net income per common share (diluted) for
the period ending September 30, 1998 was 2,042,259 and for the period ending
September 30, 1997 was 1,967,725.
<PAGE>14
<TABLE>
<CAPTION>
HUMBOLDT BANCORP AND SUBSIDIARY CONSOLIDATED CONSOLIDATED
CONSOLIDATED BALANCE SHEETS UNAUDITED AUDITED
(IN THOUSANDS OF DOLLARS) SEPTEMBER 30, DECEMBER 31, 1997
1998
<S> <C> <C>
ASSETS:
Cash and Due From Banks 18,021 21,442
Interest Bearing Deposits in Banks 3,020 3,020
Federal Funds Sold 9,380 3,520
Investment Securities (Market value of $79,437 and 79,437 80,180
$80,180 respectively)
Loans Held For Sale 3,238 48
LOANS
Real Estate-Construction and Land Development 18,053 20,165
Real Estate-Commercial and Agriculture 81,258 65,772
Real Estate-Family and Multifamily Residential 28,408 27,205
Commercial, Industrial and Agriculture 32,514 28,766
Lease Financing 9,992 8,732
Consumer Loans 8,163 9,502
State and Political Subdivisions 0 0
Other 2,743 502
181,131 160,644
Less: Deferred Loan Fees (744) (809)
TOTAL LOANS 180,387 159,835
Less: Allowance for Credit Losses (2,779) (2,371)
NET LOANS 177,608 157,464
Premises and Equipment (net) 8,266 5,635
OREO 175 148
Investment in Associated Companies 2,274 2,022
Intangible Assets 1,498 1,545
Other Assets 10,027 9,063
TOTAL ASSETS 312,944 284,087
LIABILITIES
Deposits:
Demand 89,485 70,767
Demand-Interest Bearing 49,124 52,004
Time - $100,000 and over 47,484 40,643
Other Time 70,098 69,821
Savings 21,094 21,951
277,285 255,186
Borrowed Funds 3,423 1,761
Other Liabilities 5,665 3,586
286,373 260,533
SHAREHOLDERS' EQUITY
Preferred stock, no par value; 1,000,000 shares
authorized, none issued
Common stock, no par value; 20,000,000 shares authorized,
1,778,887 shares in 1998 and 1,576,542 in 1997, issued 25,515 20,495
and outstanding
Retained Earnings 279 2,200
Additional Paid in Capital 114 114
Unrealized Gain/Loss 663 745
TOTAL SHAREHOLDERS' EQUITY 26,571 23,554
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 312,944 284,087
</TABLE>
NOTE: Humboldt Bancorp became effective January 2, 1996.
See notes to consolidated financial statements.
<PAGE>15
<TABLE>
<CAPTION>
HUMBOLDT BANCORP
STATEMENT OF OPERATIONS UNAUDITED UNAUDITED
For The Three Months Ended September 30, 1998 and 1997 Sept 30, Sept 30, 1997
(In Thousands of Dollars) 1998
<S> <C> <C>
INTEREST INCOME
Interest and Fees on Loans 4,934 4,150
Interest on Deposits in Banks 44 46
Interest and Dividends on Securities 886 932
Interest on Federal Funds Sold 192 220
Total Interest Income 6,056 5,348
INTEREST EXPENSE
Interest on Demand Deposits 55 43
Interest on Other Savings Deposits 278 331
Interest on Time Deposits $100,000+ 639 495
Interest on all Other Time Deposits 929 981
Interest on Other Borrowings 47 (3)
Total Interest Expense 1,948 1,847
Net Interest Income 4,108 3,501
Provision for Loan Losses 517 115
NON INTEREST INCOME
Service Charges on Deposit Accounts 503 298
Other Fee Income 2,179 1,444
All Other Non-Interest Income 690 271
Total Non-Interest Income 3,372 2,013
Realized Gain/Loss on Securities 0 56
NON INTEREST EXPENSE
Salaries and Employee Benefits 2,376 1,692
Premises and Fixed Asset Expense 659 641
Other Non-Interest Expense 2,155 2,005
Total Non-Interest Expense 5,190 4,338
INCOME BEFORE TAXES 1,773 1,117
Applicable Income Taxes 665 344
NET INCOME 1,108 773
COMPREHENSIVE INCOME.
NET OF TAX UNREALIZED HOLDING GAINS FOR PERIOD 226 0
COMPREHENSIVE INCOME 1,334 773
INCOME PER SHARE $0.63 $0.46
INCOME PER SHARE DILUTED $0.54 $0.39
</TABLE>
NOTE: Humboldt Bancorp became effective January 2, 1996.
See notes to consolidated financial statements.
<PAGE>16
<TABLE>
<CAPTION>
HUMBOLDT BANCORP AND SUBSIDIARY
STATEMENT OF OPERATIONS UNAUDITED UNAUDITED
For The Nine Months Ended September 30, 1998 and 1997 Sept 30, 1998 Sept 30, 1997
(In Thousands of Dollars)
<S> <C> <C>
INTEREST INCOME
Interest and Fees on Loans 13,998 11,755
Interest on Deposits in Banks 132 71
Interest and Dividends on Securities 3,238 2,189
Interest on Federal Funds Sold 421 482
Total Interest Income 17,789 14,497
INTEREST EXPENSE
Interest on Demand Deposits 156 121
Interest on Other Savings Deposits 967 878
Interest on Time Deposits $100,000+ 1,794 1,260
Interest on all Other Time Deposits 2,818 2,673
Interest on Other Borrowings 120 39
Total Interest Expense 5,855 4,971
Net Interest Income 11,934 9,526
Provision for Loan Losses 1,541 465
NON INTEREST INCOME
Service Charges on Deposit Accounts 1,543 788
Other Fee Income 5,755 3,963
All Other Non-Interest Income 1,311 701
Total Non-Interest Income 8,609 5,452
Realized Gain/Loss on Securities 0 102
NON INTEREST EXPENSE
Salaries and Employee Benefits 6,763 4,939
Premises and Fixed Asset Expense 1,962 1,768
Other Non-Interest Expense 5,746 4,726
Total Non-Interest Expense 14,471 11,433
INCOME BEFORE TAXES 4,531 3,182
Applicable Income Taxes 1,720 1,073
NET INCOME 2,811 2,109
INCOME PER SHARE $1.59 $1.23
INCOME PER SHARE DILUTED $1.38 $1.07
</TABLE>
NOTE: Humboldt Bancorp became effective January 2, 1996.
See notes to consolidated financial statements.
<PAGE>17
<TABLE>
<CAPTION>
HUMBOLDT BANCORP STATEMENT OF CASH FLOWS CONSOLIDATED CONSOLIDATED
For the Nine Months Ended Sept 30, 1998 and 1997 UNAUDITED UNAUDITED
(In Thousands of Dollars) Sept 30, 1998 Sept 30, 1997
<S> <C> <C>
OPERATING ACTIVITIES
Net Income - Adjustments to reconcile net income to net
cash provided by operating activities: 2,811 2,109
Provision for Loan Loss 1,541 465
Depreciation 1,131 1,149
Amortization and Other 1,182 949
(Gain)/Loss on Sale of Securities 0 (102)
Equity in Loss/Income of Associated Company (160) 24
Net Change in Other Assets (906) (1,223)
Net Change in Other Liabilities 2,079 2,455
Net Change in Loans Held for Sale (3,190) (458)
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,488 5,368
INVESTING ACTIVITIES
Net Change in Interest-bearing Deposits in Banks 0 (3,000)
Federal Funds Sold (Net) (5,860) (3,450)
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 (21,501) (48,445)
Proceeds From Maturities of Investments 20,522 7,005
Proceeds From Sale of Investments 446 10,233
Net Change in Loans (21,860) (12,523)
Purchase of Premises and Equipment (3,943) (670)
Proceeds from the disposal of Premises & Equipment 181 0
Premium Paid on Deposits Purchased 0 (1,039)
Investment in Associated Company (92) (2,000)
Proceeds from Sale of Foreclosed Real Estate 148 0
NET CASH USED FOR INVESTING ACTIVITIES (31,959) (53,889)
FINANCING ACTIVITIES
Net Change in Deposits 22,099 56,168
Net Change in Borrowings 1,662 (10)
Stock Options Exercised 297 203
Fractional Shares Purchased (8) (5)
NET CASH PROVIDED BY FINANCING ACTIVITIES 24,050 56,356
NET CHANGE IN CASH AND CASH EQUIVALENTS (3,421) 7,835
Cash and Due From Banks at Beginning of Period 21,442 10,247
CASH AND DUE FROM BANKS AT END OF PERIOD 18,021 18,082
SUPPLEMENTAL DISCLOSURES
Cash Paid During the Period For: Interest 5,937 4,950
Income Taxes 1,905 1,289
NON-CASH TRANSACTIONS
Unrealized Holding Losses on Securities (141) 616
Deferred Income Taxes on Unrealized Holding Gains and
Losses on Securities 59 (257)
Loans transferred to foreclosed real estate 175 0
Deposit Liabilities Assumed in Exchange for Assets Acquired
in Connection with Purchase of Branches 0 75
Stock Dividend 4,723 3,113
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE 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>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 18,021
<INT-BEARING-DEPOSITS> 3,020
<FED-FUNDS-SOLD> 9,380
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 79,437
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 183,625
<ALLOWANCE> (2,779)
<TOTAL-ASSETS> 312,944
<DEPOSITS> 277,285
<SHORT-TERM> 0
<LIABILITIES-OTHER> 5,665
<LONG-TERM> 3,423
0
0
<COMMON> 25,515
<OTHER-SE> 1,056
<TOTAL-LIABILITIES-AND-EQUITY> 312,944
<INTEREST-LOAN> 13,998
<INTEREST-INVEST> 3,238
<INTEREST-OTHER> 553
<INTEREST-TOTAL> 17,789
<INTEREST-DEPOSIT> 132
<INTEREST-EXPENSE> 5,855
<INTEREST-INCOME-NET> 11,934
<LOAN-LOSSES> 1,541
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 14,471
<INCOME-PRETAX> 4,531
<INCOME-PRE-EXTRAORDINARY> 4,531
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,811
<EPS-PRIMARY> 1.59
<EPS-DILUTED> 1.38
<YIELD-ACTUAL> 6.37
<LOANS-NON> 251
<LOANS-PAST> 537
<LOANS-TROUBLED> 37
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,371
<CHARGE-OFFS> (1,279)
<RECOVERIES> 147
<ALLOWANCE-CLOSE> 2,779
<ALLOWANCE-DOMESTIC> 977
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,802
</TABLE>
