<PAGE>
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
Commission file number 0-27856
CALIFORNIA COMMUNITY BANCSHARES CORPORATION
(Exact name of small business issuer as specified in its charter)
DELAWARE 68-0366324
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
555 MASON STREET, SUITE 280, VACAVILLE, CA 95688-4612
(Address of principal executive offices) (ZIP Code)
(707) 448-1200
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 968,294
Transitional Small Business Disclosure Format (check one): Yes No X
<PAGE>
INDEX
CALIFORNIA COMMUNITY BANCSHARES CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 1 - FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Balance Sheets -- March 31, 1996 and December
31, 1995. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Income -- Three Months ended
March 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . 4
Statements of Cash Flows -- Three Months ended March 31, 1996 and
1995. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Condensed Consolidated Statement of Changes in Shareholders' Equity. 6
Notes to Condensed Consolidated Financial Statements -- March 31,
1996. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . 6
PART II - OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . .13
Item 1 - LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . .13
Item 2 - CHANGES IN SECURITIES. . . . . . . . . . . . . . . . . . . . . .13
Item 3 - DEFAULTS UPON SENIOR SECURITIES. . . . . . . . . . . . . . . . .13
Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. . . . . . .13
Item 5 - OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . .13
Item 6 - EXHIBITS AND REPORTS OF FORM 8-K . . . . . . . . . . . . . . . .13
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS -- MARCH 31, 1996 AND DECEMBER 31, 1995
California Community Bancshares Corporation
(In Thousands, except shares information)
(UNAUDITED)
03/31/96 12/31/95
-------------------------
ASSETS
CASH AND DUE FROM BANKS $7,815 $9,346
FEDERAL FUNDS SOLD $7,300 $1,915
-------------------------
TOTAL CASH AND CASH EQUIVALENTS $15,115 $11,261
SECURITIES:
SECURITIES HELD-TO-MATURITY $0 $0
SECURITIES AVAILABLE-FOR SALE, NET OF
UNREALIZED (LOSS) OF $(309) AND $(111) $29,635 $29,780
-------------------------
TOTAL SECURITIES $29,635 $29,780
LOANS RECEIVABLE: $110,375 $110,392
LESS: ALLOWANCE FOR LOAN LOSSES $1,175 $1,158
-------------------------
NET LOANS RECEIVABLE $109,200 $109,234
BANK PREMISES AND EQUIPMENT, NET $2,191 $2,137
INVESTMENTS IN REAL ESTATE DEVELOPMENT VENTURES $4,575 $4,607
OTHER REAL ESTATE OWNED $182 $182
ACCRUED INTEREST RECEIVABLE & OTHER ASSETS $2,646 $2,882
-------------------------
TOTAL ASSETS $163,544 $160,083
-------------------------
-------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
DEPOSITS:
NON INTEREST BEARING $24,944 $21,900
INTEREST BEARING:
TRANSACTION $18,416 $19,216
SAVINGS $55,683 $54,157
TIME:
$100,000 OR MORE $18,410 $18,422
OTHER TIME $27,284 $28,539
-------------------------
TOTAL DEPOSITS $144,737 $142,234
REPURCHASE AGREEMENTS $1,089 $665
FEDERAL FUNDS PURCHASED $0 $0
OTHER BORROWED MONEY $750 $0
ACCRUED INTEREST PAYABLE & OTHER LIABILITIES $544 $897
CONVERTIBLE SUBORDINATED DEBENTURES $4,020 $4,025
-------------------------
TOTAL LIABILITIES $151,140 $147,821
SHAREHOLDERS' EQUITY
COMMON STOCK, $.10 PAR VALUE, AUTHORIZED
4,000,000 SHARES;
OUTSTANDING, 968,294 AND 966,153 $10,829 $10,814
RETAINED EARNINGS $1,754 $1,513
UNREALIZED LOSS ON SECURITIES AVAILABLE FOR
SALE (NET OF TAX) ($179) ($65)
-------------------------
TOTAL SHAREHOLDERS' EQUITY $12,404 $12,262
-------------------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $163,544 $160,083
-------------------------
-------------------------
See Notes to Condensed Consolidated Financial Statements (Unaudited)
3
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME --
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
California Community Bancshares Corporation
(Unaudited)(In Thousands Except Earnings per Common Share)
THREE MONTHS
ENDED MARCH 31,
1996 1995
-------------------
INTEREST INCOME:
LOANS AND LOAN FEES $2,623 $2,516
SECURITIES:
TAXABLE $353 $269
TAX EXEMPT $93 $174
FEDERAL FUNDS SOLD $14 $3
-------------------
TOTAL INTEREST INCOME $3,083 $2,962
INTEREST EXPENSE:
TIME DEPOSITS $100,000 OR MORE $254 $152
OTHER DEPOSITS $905 $1,015
FEDERAL FUNDS AND REPURCHASE AGREEMENTS PURCHASED $15 $29
OTHER BORROWED FUNDS $1 $0
CONVERTIBLE SUBORDINATED DEBENTURES $80 $87
-------------------
TOTAL INTEREST EXPENSE $1,255 $1,283
NET INTEREST INCOME $1,828 $1,679
PROVISION FOR LOAN LOSSES $114 $69
-------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES $1,714 $1,610
OTHER OPERATING INCOME:
SERVICE CHARGES ON DEPOSIT ACCOUNTS $193 $195
GAIN SALE OF AVAILABLE-FOR SALE SECURITIES $1 $6
OTHER FEES AND CHARGES $190 $79
-------------------
TOTAL OTHER OPERATING INCOME $384 $280
OTHER OPERATING EXPENSES:
SALARIES AND EMPLOYEE BENEFITS $820 $774
OCCUPANCY $289 $287
OTHER $412 $400
-------------------
TOTAL OTHER OPERATING EXPENSES $1,521 $1,461
INCOME BEFORE PROVISION INCOME TAXES $577 $429
PROVISION FOR INCOME TAXES $215 $100
-------------------
NET INCOME $362 $329
NET INCOME PER COMMON SHARE:
PRIMARY $0.36 $0.33
FULLY DILUTED $0.31 $0.29
WEIGHTED AVERAGE SHARES USED TO COMPUTE INCOME
PER COMMON AND EQUIVALENT SHARES:
PRIMARY 1,004,138 999,067
FULLY DILUTED 1,319,432 1,314,754
See Notes to Condensed Consolidated Financial Statements (Unaudited)
4
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STATEMENTS OF CASH FLOWS -- THREE MONTHS
ENDED MARCH 31, 1996 AND 1995
California Community Bancshares Corporation
(Unaudited)
THREE MONTHS
ENDED MARCH 31,
-----------------
1996 1995
-----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $362 $329
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION $166 $148
PROVISION FOR LOAN LOSSES $114 $69
PROVISION FOR DEFERRED INCOME TAXES
NET GAIN ON THE SALE OF SECURITIES ($1) $6
LOSS (GAIN) ON THE SALE OF PREMISES AND EQUIPMENT ($7) $0
EFFECT OF CHANGES IN:
INTEREST RECEIVABLE AND OTHER ASSETS $236 ($107)
INTEREST PAYABLE AND OTHER LIABILITIES ($353) ($166)
-----------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $1,223 $279
CASH FLOWS FROM INVESTING ACTIVITIES:
PURCHASES OF AVAILABLE-FOR-SALE SECURITIES ($535) ($1,961)
PROCEEDS FROM SALES OF AVAILABLE-FOR-SALE SECURITIES $0 $3,028
PROCEEDS FROM MATURITIES, CALLS OR REPAYMENTS OF
AVAILABLE-FOR-SALE SECURITIES $541 $309
PURCHASES OF HELD TO MATURITY SECURITIES $0 ($579)
NET CHANGE IN LOANS RECEIVABLE ($80) $706
PROCEEDS FROM SALES OF OTHER REAL ESTATE OWNED $0 ($4)
PURCHASES OF PREMISES AND EQUIPMENT ($172) ($37)
PROCEEDS FROM SALES OF PREMISES AND EQUIPMENT $14 $14
CHANGE IN INVESTMENTS IN REAL ESTATE DEVELOPMENT $3 $0
-----------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES ($229) $1,476
CASH FLOWS FROM FINANCING ACTIVITIES:
NET CHANGE IN DEPOSITS:
NON-INTEREST BEARING $3,044 ($1,275)
INTEREST BEARING ($541) $1,815
NET CHANGE IN REPURCHASE AGREEMENTS $424 $65
PROCEEDS FROM ISSUANCE (CONVERSION) OF CONVERTIBLE DEBT ($5) $0
NET CHANGE IN OTHER BORROWINGS $750 $0
CASH DIVIDENDS PAID ($121) ($119)
CASH PROCEEDS FROM DEBENTURE CONVERSION $5 $0
CASH PROCEEDS FROM STOCK OPTIONS EXERCISED $10 $29
-----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES $3,566 $515
INCREASE IN CASH AND EQUIVALENTS $4,560 $2,270
CASH AND CASH EQUIVALENTS:
BEGINNING OF YEAR $11,261 $7,347
-----------------
END OF PERIOD $15,115 $9,617
-----------------
-----------------
ADDITIONAL INFORMATION:
CASH PAYMENTS
INCOME TAX PAYMENTS $0 $50
-----------------
-----------------
INTEREST PAYMENTS $1,365 $1,384
-----------------
-----------------
See Notes to Condensed Consolidated Financial Statements (Unaudited)
5
<PAGE>
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
California Community Bancshares Corporation
(Unaudited) (In Thousands, Except Number of Shares)
<TABLE>
COMMON STOCK
-------------------
UNREALIZED
LOSS ON
INVESTMENT
NUMBER OF SECURITIES
SHARES RETAINED AVAILABLE SHAREHOLDERS'
OUTSTANDING AMOUNT EARNINGS FOR SALE EQUITY
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE
DECEMBER 31, 1995 966,153 $10,814 $1,513 ($65) $12,262
STOCK OPTIONS EXERCISED 1,749 $10 $10
STOCK DEBENTURES CONVERTED 392 $5 $5
CASH DIVIDEND ON COMMON STOCK ($121) ($121)
CHANGE IN UNREALIZED LOSS-INVESTMENT
SECURITIES AVAILABLE FOR SALE ($114) ($114)
NET INCOME, MARCH 31, 1996 $362 $362
------------------------------------------------------------
BALANCE AT MARCH 31, 1996 968,294 $10,829 $1,754 ($179) $12,404
------------------------------------------------------------
------------------------------------------------------------
</TABLE>
See Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- MARCH 31, 1996
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
California Community Bancshares Corporation (the Company) include the accounts
of the Company and its subsidiary. Significant intercompany items and
transactions have been eliminated. Such financial statements have been prepared
in accordance with generally acceptable accounting principals for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission (SEC) and, in Management's opinion, include
all adjustments (consisting only of normal recurring adjustments ) necessary for
a fair presentation of results for such interim periods. Certain information
and note disclosures normally included in annual financial statements prepared
in accordance with generally accepted accounting principals have been omitted
pursuant to SEC rules or regulations; however, the Company believes that the
disclosures made are adequate to make the information presented not misleading.
For further information refer to the consolidated financial statements and notes
thereto included in the Company's annual report on Form 10-KSB for the fiscal
year ended December 31, 1995. Operating results for the interim periods
presented are not necessarily indicative of the results that may be expected for
the year ended December 31, 1996.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
As California Community Bancshares Corporation (the "Company") has not
commenced any business operations independent of Continental Pacific Bank (the
"Bank"), the following discussion pertains primarily to the Bank. Average
balances, including such balances used in calculating certain financial ratios,
are generally comprised of average daily balances for the Company.
OVERVIEW
The Company earned $362,000 for the first quarter of 1996. This is the
second-highest quarterly return ever. The most recent quarter's income was also
10% higher than the $329,000 reported in the same quarter last year. Fully
diluted earnings per share increased to $.31 from $.29 in the same quarter the
prior year.
6
<PAGE>
Net income before taxes increased $148,000 or 34.5% in the first quarter of
1996 versus the amount reported in the first quarter of 1995. Net interest
income and other operating income both improved in the current quarter versus
the same quarter last year while other operating expenses showed a moderate
increase. Net interest income increased $149,000 or 8.9% due to higher average
rates received on interest earning assets and lower average rates paid on
interest bearing liabilities as well as increased average interest earning
assets balances offset partially by increased average time deposits balances.
Net interest margin for the first quarter of 1996 was 5.26% versus 4.89% in
the first quarter of 1995. Other operating income increased $104,000 or 37.1%.
Other fees and charges, primarily fees from the sale of Small Business
Administration (SBA) loans, accounted for this increase. Other operating
expense increased $60,000 or 4.1%. Of this amount, $46,000 was attributed to
increased salaries and employee benefits.
Assets of the Company totalled $163.5 million at March 31, 1996, a $3.4
million increase over the previous quarter's total. Increases in cash and
Federal Funds sold accounted for the increase. Increases in deposits of $2.5
million and borrowed funds of $1.2 million mostly offset the changes in assets.
Return on Average Assets (ROA) was .92% and Return on Average Equity (ROE)
was 11.62% in the first quarter of 1996. For the same period in 1995, these
ratios were .85% and 12.29%, respectively. At March 31, 1996, the Company had a
leverage ratio of 8.02%, a Tier 1 risk-based capital ratio of 9.78% and total
risk based capital ratio of 13.82%. These compare to 7.75%, 9.65% and 13.71%,
respectively at December 31, 1995.
During the second quarter of 1996, the Company began negotiating with
another financial institution to purchase a single branch office located in
Contra Costa County through a purchase and assumption transaction, which would
include assuming the Seller's branch office lease obligations. Such an
acquisition, if consummated, would be consistent with the Company's strategic
plan to expand Continental Pacific Bank's deposit and lending market into
contiguous markets. While the terms of a purchase and assumption agreement had
not been finalized as of the date hereof, if the transaction is finalized, the
Bank's deposits could increase by approximately ten percent (10%) from March 31,
1996 levels. Insignificant amounts of loans would be purchased as well and a
premium would be paid for the branch deposits. Such a transaction would be
subject to satisfaction of a number of conditions including receipt of
regulatory approvals and no material adverse change in the condition of the
branch prior to closing. There can be no assurance that a purchase and
assumption agreement will be finalized on terms acceptable to the Company, or if
finalized, that the transaciton will be consummated.
The following tables provide a summary of the major elements of income and
expense for the first quarter of 1996 compared with the first quarter of 1995.
CONDENSED COMPARATIVE INCOME STATEMENT
California Community Bancshares Corporation
(In Thousands, Except Earnings per Common Share)
THREE MONTHS PERCENTAGE CHANGE
ENDED MARCH 31, INCREASE /(DECREASE)
1996 1995
--------------------------------------------
INTEREST INCOME $3,083 $2,962 4.1%
INTEREST EXPENSE $1,255 $1,283 -2.2%
-----------------
NET INTEREST INCOME $1,828 $1,679 8.9%
PROVISION FOR LOAN LOSSES $114 $69 65.2%
-----------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES $1,714 $1,610 6.5%
OTHER OPERATING INCOME $384 $280 37.1%
OTHER OPERATING EXPENSES $1,521 $1,461 4.1%
-----------------
INCOME BEFORE INCOME TAXES $577 $429 34.5%
PROVISION FOR INCOME TAXES $215 $100 115.0%
-----------------
NET INCOME $362 $329 10.0%
FULLY DILUTED EARNINGS PER SHARE $0.31 $0.29 6.9%
7
<PAGE>
NET INTEREST INCOME / NET INTEREST MARGIN
Net interest income represents the excess of interest and fees earned on
interest-earning assets over the interest paid on deposits and borrowed funds.
Net interest margin is net interest income expressed as a percentage of average
interest earning assets. Net interest comprises the major portions as the
Company's revenue.
In the quarter ended March 31, 1996, interest income increase $121,000 or
4.1% over the same period last year. Higher rates earned on loans and taxable
securities and an increase in average taxable security balances were the factors
contributing to the increase in interest income. Average rates earned on loans
were 9.70% in the first quarter of 1996, 29 basis points or 3.1% higher than the
9.41% earned in the first quarter of 1995. Average rates earned on taxable
securities were 6.14%, 26 basis points higher than the 5.88% earned in the same
period last year. Average taxable security balances were $5.0 million (27%)
higher than last year. Interest from loans and taxable securities together
provided an increase of $197,000 in interest income. Interest on average non
taxable securities, which declined by $5.6 million from the same quarter last
year, fell by $87,000 partially offsetting the above increase. The remaining
$11,000 increase in interest income was contributed by an increase in interest
income from Federal Funds Sold due to an increase in average balances.
In the first quarter of 1996, interest expense decreased by $28,000 or 2.2%
from the year earlier period. Interest paid on time deposits increased $131,000
or 27.6%. Rates paid on these deposits increased from 4.76% in 1995 to 5.27% in
1996. This accounted for an increase in interest expense of $52,000. As the
rates paid on time deposit increased, deposits shifted from saving and money
market accounts into time deposits. Increased average time deposit balances of
$5.7 million resulted in additional interest expense of $78,000. These
increases were more than offset by 59 basis point reduction in the average rate
paid on savings and money market deposits and a $6.2 million decline in average
balances. The lower interest rates paid on these deposits reduced interest
expense by $88,000 and the lower average balances reduced interest expense by
$52,000. Lower average balances in federal funds purchased and other borrowed
funds and a lower rate paid on the convertible debentures contributed a majority
of the remaining decline in interest expense, $11,000 and $7,000, respectively.
The combined effect of the increase in interest income and the decrease in
interest expense in the first quarter of 1996 versus the first quarter of 1995
resulted in an increase of $149,000 in net interest income. Net interest margin
increased 37 basis points from 4.89% to 5.26%.
8
<PAGE>
The following tables provide summaries of the components of interest
income, interest expense and net interest margins on earning assets for the
quarter ended March 31, 1996 versus the same periods in 1995.
ANALYSIS OF CHANGES IN NET INTEREST MARGIN ON AVERAGE EARNINGS ASSETS
California Community Bancshares Corporation
(In Thousands)
<TABLE>
THREE MONTHS ENDED
MARCH 31, 1996 MARCH 31, 1995
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE EARNED/ YIELD/ AVERAGE EARNED/ YIELD/
BALANCE (1) PAID RATE BALANCE (1) PAID RATE
----------- -------- ------- ----------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
INTEREST EARNING ASSETS
FEDERAL FUNDS SOLD $1,016 $14 5.42% $240 $3 5.75%
INTEREST EARNING DEPOSITS $0 $0 0.00% $0 $0 0.00%
TAXABLE INVESTMENT SECURITIES $23,159 $353 6.14% $18,188 $264 5.88%
NONTAXABLE INVESTMENT SECURITIES $6,959 $93 5.38% $12,528 $180 5.84%
LOANS, NET (2)(3) $108,711 $2,623 9.70% $108,388 $2,515 9.41%
----------- -------- ------- ----------- -------- -------
TOTAL INTEREST EARNING ASSETS $139,845 $3,083 8.87% $139,344 $2,962 8.62%
CASH AND DUE FROM BANKS $8,216 $6,232
PREMISES AND EQUIPMENT, NET $2,200 $2,365
INVESTMENT IN DEVELOPMENT VENTURES $4,592 $4,620
ACCRUED INTEREST RECEIVABLE
AND OTHER ASSETS $2,133 $1,792
----------- -------- ----------- --------
TOTAL AVERAGE ASSETS $156,986 $154,353
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
INTEREST-BEARING LIABILITIES:
INTEREST-BEARING NOW ACCOUNTS $18,149 $57 1.26% $17,841 $55 1.26%
SAVINGS DEPOSITS AND MMDA $16,677 $97 2.34% $18,733 $109 2.35%
MONEY MANAGEMENT $36,850 $400 4.36% $40,973 $528 5.23%
TIME DEPOSITS $27,601 $351 5.12% $27,556 $323 4.75%
TIME DEPOSITS OVER $100,000 $18,582 $254 5.50% $12,939 $152 4.76%
FEDERAL FUNDS PURCHASED $210 $3 5.55% $1,294 $19 6.08%
SECURITY REPURCHASE AGREEMENTS $934 $12 5.34% $760 $10 5.23%
OTHER BORROWINGS $37 $1 6.52% $0 $0 0.00%
SUBORDINATED DEBENTURES $4,025 $80 8.03% $4,025 $87 8.74%
----------- -------- ------- ----------- -------- -------
TOTAL AVERAGE INTEREST-BEARING
LIABILITIES $123,065 $1,255 4.10% $124,121 $1,283 4.19%
NONINTEREST-BEARING DEMAND DEPOSITS $21,262 $19,299
ACCRUED INTEREST PAYABLE AND OTHER
LIABILITIES $188 $221
----------- -------- ------- ----------- -------- -------
TOTAL AVERAGE LIABILITIES $144,515 $1,255 3.49% $143,641 $1,283 3.62%
=========== ===========
TOTAL EQUITY $12,471 $10,712
TOTAL AVERAGE LIABILITIES AND
SHAREHOLDERS' EQUITY $156,986 $154,353
NET INTEREST RATE SPREAD (4) 4.77% 4.43%
NET INTEREST INCOME $1,828 $1,679
NET INTEREST MARGIN (5) 5.26% 4.89%
</TABLE>
1 AVERAGE BALANCES ARE COMPUTED PRINCIPALLY ON THE BASIS OF DAILY BALANCES
2 NONACCRUAL LOANS ARE INCLUDED
3 INTEREST INCOME ON LOANS INCLUDES FEES ON LOANS OF $111,000 IN 1996 AND
$133,000 IN 1995.
4 NET INTEREST RATE SPREAD REPRESENTS THE AVERAGE YIELD EARNED ON
INTEREST-EARNING ASSETS LESS THE AVERAGE RATE PAID ON INTEREST-BEARING
LIABILITIES
5 NET INTEREST MARGIN IS COMPUTED BY DIVIDING NET INTEREST INCOME BY TOTAL
AVERAGE EARNING ASSETS
9
<PAGE>
ANALYSIS OF VOLUME AND RATE CHANGES ON NET INTEREST INCOME AND EXPENSE
California Community Bancshares Corporation
( in Thousands)
FOR THE THREE MONTHS ENDED
MARCH 31, 1996 OVER 1995
INCREASE (DECREASE) DUE TO CHANGE IN:
-------------------------------------
VOLUME YIELD/RATE TOTAL
------ ---------- -----
FEDERAL FUNDS SOLD $11 ($0) $11
TAXABLE INVESTMENT SECURITIES $77 $12 $89
NONTAXABLE INVESTMENTS ($73) ($14) ($87)
LOANS, NET (1)(2) $29 $79 $108
------ ---------- -----
TOTAL INTEREST INCOME $44 $77 $121
INTEREST BEARING LIABILITIES
INTEREST BEARING
NOW ACCOUNTS $2 $0 $2
SAVINGS DEPOSITS AND MMDA ($52) ($88) ($140)
TIME DEPOSITS $78 $52 $130
------ ---------- -----
TOTAL DEPOSITS $28 ($36) ($8)
FEDERAL FUNDS PURCHASED ($14) ($2) ($16)
SECURITY REPURCHASE AGREEMENTS $2 $0 $2
OTHER BORROWINGS $1 $0 $1
SUBORDINATED DEBENTURES $0 ($7) ($7)
------ ---------- -----
TOTAL INTEREST EXPENSE $17 ($45) ($28)
------ ---------- -----
NET INTEREST INCOME $27 $122 $149
------ ---------- -----
------ ---------- -----
1 NONACCRUAL LOANS ARE INCLUDED
2 INTEREST INCOME ON LOANS INCLUDES FEE INCOME ON LOANS OF $111,000 IN 1996
AND $133,000 IN 1995
PROVISION FOR LOAN LOSSES
In the first quarter of 1996, the Company provided $114,000 for loan losses
versus $69,000 in the same period last year. The provision replenished the net
loans charged off during the period and added $17,000 for growth in outstanding
loan balances as well as general economic factors. The allowance for loan
losses was 1.06% of loans receivable at March 31, 1996 versus 1.02% at March 31,
1995. Management's ongoing analysis of the loan portfolio determined that the
balance of $1,175,000 in the allowance for loan losses will be adequate to
absorb losses inherent in the loan portfolio.
OTHER OPERATING INCOME
Total other operating income in the first quarter of 1996 increased
$104,000 or 37.1% over the same period in 1995. Income from service charges on
deposit accounts remaining somewhat constant at $195,000 in 1995 and $193,000 in
1996. Gain on Sale of securities declined from $6,000 in 1995 to $1,000 in
1996. The significant increases occurred in other fees and charges. In the
fourth quarter of 1995, the Bank instituted a new policy regarding its SBA loan
portfolio that allows the Bank to sell the guaranteed portion of these loans in
the secondary market for a premium. Fee income from this activity in the first
quarter of 1996 generated $61,000. Fee income on sale of 1-4 family mortgages
increased by $23,000 from $25,000 in 1995 to $48,000 in 1996. In the fourth
quarter of 1995 the Bank also began offering a new service (referred to as
"Business Manager"), wherein the Bank would purchase account receivables on a
recourse basis from its customers. This activity generated $16,000 in fees in
the current quarter. Together increases in these three areas accounted for
$100,000 of the $104,000 increase in other operating income. No other
individual item experienced significant changes. These activities are expected
to continue to generate fee income in the future.
OTHER OPERATING EXPENSE
Other operating expense increased by $60,000 or 4.1% in the first quarter
of 1996 versus the same period last year. For the quarter, salaries and
benefits were up $46,000 or 5.9% due to normal salary
10
<PAGE>
progressions and increased commissions and bonuses. Occupancy expense was up
$2,000 over the same period in the prior year while other expenses were up
$12,000. For the current quarter other operating expense totalled $1,521,000
or 3.875% of average assets. Management continually reviews and attempts to
minimize these expenses. It is the goal of the Company to reduce the
overhead ratio to 3.5%.
PROVISION FOR INCOME TAXES
The Company recorded a $215,000 provision for income taxes in the first
quarter of 1996, which was $115,000 higher than the tax provision recorded in
the same quarter last year. Taxes were significantly lower in 1995 since
approximately 41% of pretax income in 1995 was derived from nontaxable
securities while only 16% of 1996's pretax income was produced from this source
as well as a $38,000 credit adjustment to income taxes in the first quarter of
1995. The effective tax rate for the current period was 37.3%. The Company
does not anticipate increasing its holding of nontaxable securities in the near
future.
LOANS
In the first quarter of 1996, net loan balances declined $34,000 or less
than 1% from the previous quarter total. Although total loans outstanding
showed little change between periods, the composition of the loans portfolio
changed significantly. For example, construction and land loans increased $1.1
million, equity lines increased $1.0 million while loans secured by 1-4 first
liens declined by $.4 million, and commercial real estate loans declined by $1.5
million. All other loan categories had moderate increases or decreases. The
Bank's largest loan category, real estate mortgage loans constituted 70.9% of
total loans outstanding at December 31, 1995 and 69.2% at March 31, 1996. While
the economy in the Bank's market area has remained relatively soft, the Bank has
aggressively marketed its loan products giving special attention to its SBA loan
program and the new Business Manager program. Loan underwriting standards have
been maintained, but pricing has been more competitive. Management believes
modest loan growth should continue through 1996.
At March 31, 1996, securities available-for-sale had a fair market value of
$29,635,000 with an amortized cost basis of $29,944,000. This portfolio
consisted of $12,113,000 in mortgage-backed securities, $10,368,000 in U.S.
Government agency bonds and $6,917,000 in securities issued by states and
political subdivisions in the U.S. as well as $237,000 in Federal Home Loan Bank
stock. Approximately 63% of the debt security portfolio is floating rate, tied
to either the 11th District Cost of Funds Index or Prime rate. This portfolio
is a good source of both liquidity and income.
11
<PAGE>
NONPERFORMING ASSETS
As shown in the following table, total nonperforming assets have increased
$125,000 since year end, but have declined by $330,000 from a year ago. Since
last quarter nonaccrual loans increased by $104,000, accruing loans past due 90
days or more increased by $24,000 while restructured loans decreased by $3,000.
Non performing assets represent 1.16% of total assets while the ratio of
allowance for loan losses to nonperforming loans is 68.23%. Management
continues to make a concerted effort to reduce problem and potential problem
loans to reduce risk of loss.
MARCH 31, DECEMBER 31,
1996 1995
--------- ------------
NONACCRUAL LOANS $1,153 $1,049
ACCRUING LOANS PAST DUE 90 DAYS OR MORE $102 $78
RESTRUCTURED LOANS (IN COMPLIANCE WITH
MODIFIED TERMS) $467 $470
--------- ------------
TOTAL NONPERFORMING LOANS $1,722 $1,597
OTHER REAL ESTATE OWNED $182 $182
--------- ------------
TOTAL NONPERFORMING ASSETS $1,904 $1,779
TOTAL LOANS, END OF PERIOD $111,039 $111,124
TOTAL ASSETS, END OF PERIOD $163,544 $160,083
ALLOWANCE FOR LOAN LOSSES $1,175 $1,158
NONPERFORMING LOANS TO TOTAL LOANS 1.55% 1.44%
ALLOWANCE FOR LOAN LOSSES TO NONPERFORMING
LOANS 68.23% 72.51%
NONPERFORMING ASSETS TO TOTAL ASSETS 1.16% 1.11%
ALLOWANCE FOR LOAN LOSSES TO NONPERFORMING
ASSETS 61.71% 65.09%
ALLOWANCE FOR LOAN LOSSES
The Bank maintains its allowance for loan losses at a level considered by
management to be adequate to cover the risk of loss in the loan portfolio at a
particular point in time. This determination includes an evaluation and
analysis of historical experience, current loan mix and volume, as well as
current and projected economic conditions.
The following table presents information concerning the allowance and
provision for loan losses.
MARCH 31, MARCH 31,
1996 1995
-----------------------
BALANCE, BEGINNING OF PERIOD $1,158 $1,108
PROVISION CHARGED TO OPERATIONS $114 $69
LOANS CHARGED OFF $99 $66
RECOVERIES OF LOANS PREVIOUSLY CHARGED OFF $2 $7
-----------------------
BALANCE, END OF PERIOD $1,175 $1,118
TOTAL LOANS, END OF PERIOD $111,039 $110,361
ALLOWANCE FOR LOANS LOSSES TO LOANS, END OF PERIOD 1.06% 1.01%
LIQUIDITY
Liquidity is measured by various ratios, The most common being the
liquidity ratio of cash, time deposits in other banks, Federal Funds sold, and
investment securities as compared to total deposits. At March 31, 1996, this
ratio was 31%.
The Bank also manages its interest rate sensitivity. This process focuses
on reducing the impact on net interest income due to shifts in interest rates.
The Bank measures its interest rate sensitivity with an asset liability
simulation model. The model analyzes the mix and repricing characteristics of
interest rate sensitive assets and liabilities using multipliers (how interest
rates change when Federal Funds rate changes by 1%) and lags (time it takes for
rates to change after Federal Funds rate changes). The model simulates the
effects on net interest income when the Federal Funds rate experiences a 1%
increase or decrease compared to current levels.
12
<PAGE>
Both the traditional GAP analysis and the asset liability simulation model
showed, as of March 31, 1996, the Bank was moderately liability sensitive.
EQUITY
As a result of the $362,000 earned in first quarter of 1996, the $15,000
sale of common stock from the exercise of stock options and conversion of
debentures and the payment of $121,000 in dividends, the following capital
levels and ratio were obtained. The following table also includes the
regulatory capital minimums to be considered well capitalized.
ACTUAL WELL CAPITALIZED RATIO
-----------------------------------------------
LEVERAGE $12,583 8.02% $7,849 5.00%
TIER ONE RISK-BASED $12,583 9.78% $7,719 6.00%
TOTAL RISK BASED $17,778 13.82% $12,865 10.00%
RISK WEIGHTED ASSET $128,647
AVERAGE TOTAL ASSETS $156,985
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
N/A
ITEM 2 - CHANGES IN SECURITIES
N/A
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
N/A
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
N/A
ITEM 5 - OTHER INFORMATION
N/A
ITEM 6 - EXHIBITS AND REPORTS OF FORM 8-K
PAGE
a. EXHIBITS
1. Computations of Earnings Per Share 15
27. 16
b. REPORTS ON FORM 8-K
NONE
13
<PAGE>
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.
CALIFORNIA COMMUNITY BANCSHARES CORPORATION
Date May 14, 1996 /S/ WALTER O. SUNDERMAN
---------------- ----------------------------
Walter O. Sunderman
President and
Chief Executive Officer
Date May 14, 1996 /S/ ANDREW S. POPOVICH
---------------- ----------------------------
Andrew S. Popovich
Executive Vice President and
Chief Administrative Officer
14
<PAGE>
EXHIBIT 1
COMPUTATIONS OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE) ( UNAUDITED)
FOR THE THREE MONTHS
ENDED MARCH 31,
---------------------
1996 1995
----------------------
WEIGHTED AVERAGE SHARES USED TO INCOME
COMMON AND EQUIVALENT SHARES:
PRIMARY 1,004,138 999,067
FULLY DILUTED 1,319,432 1,314,754
----------------------
----------------------
NET INCOME USED IN THE COMPUTATION
OF INCOME PER COMMON SHARE:
NET INCOME, AS REPORTED USED TO
COMPUTE PRIMARY INCOME PER SHARE $362 $329
----------------------
----------------------
ADJUSTMENT FOR AFTER TAX EFFECT OF INTEREST
PAID ON CONVERTIBLE DEBENTURES $47 $50
----------------------
NET INCOME, AS ADJUSTED USED TO COMPUTE
FULLY DILUTED INCOME PER SHARE 409 379
----------------------
----------------------
INCOME PER COMMON AND EQUIVALENT SHARE:
PRIMARY $0.36 $0.33
FULLY DILUTED $0.31 $0.29
----------------------
----------------------
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from
Form 10QSB Condensed Consolidated Balance Sheet March 31, 1996 and
December 31, 1995 and Condensed Consolidated Statements of Income - three
months ended March 31, 1996 and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<CIK> 0001009325
<NAME> CCBC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 7,815
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 7,300
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 29,635
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 110,375
<ALLOWANCE> 1,175
<TOTAL-ASSETS> 163,544
<DEPOSITS> 144,737
<SHORT-TERM> 1,839
<LIABILITIES-OTHER> 544
<LONG-TERM> 4,020
0
0
<COMMON> 10,829
<OTHER-SE> 1,575
<TOTAL-LIABILITIES-AND-EQUITY> 163,544
<INTEREST-LOAN> 2,623
<INTEREST-INVEST> 460
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 3,083
<INTEREST-DEPOSIT> 1,159
<INTEREST-EXPENSE> 1,255
<INTEREST-INCOME-NET> 1,828
<LOAN-LOSSES> 114
<SECURITIES-GAINS> 1
<EXPENSE-OTHER> 1,521
<INCOME-PRETAX> 577
<INCOME-PRE-EXTRAORDINARY> 577
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 362
<EPS-PRIMARY> .36
<EPS-DILUTED> .31
<YIELD-ACTUAL> 8.87
<LOANS-NON> 1,153
<LOANS-PAST> 102
<LOANS-TROUBLED> 467
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,158
<CHARGE-OFFS> 99
<RECOVERIES> 2
<ALLOWANCE-CLOSE> 1,175
<ALLOWANCE-DOMESTIC> 812
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 363
</TABLE>
