<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from..........................
Commission file number 333-16951
BSM BANCORP
(Exact name of registrant as specified in its charter)
CALIFORNIA NO. 77-0442667
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation)
2739 Santa Maria Way, Santa Maria, California 93455
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (805) 937-8551
Not applicable
(Former name or former address, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(c) of the Securities Exchange Act of
1934 during the preceding 12 months (of shorter period that the registrant
was required to file such reports) Yes [X], and (2) has been subject to such
filing requirements for the past 90 days. Yes[] No[X]
APPLICABLE ONLY TO CORPORATE ISSUERS
On July 30, 1997, there were 2,979,939 shares of BSM Bancorp Common Stock
outstanding.
1
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BSM BANCORP
June 30, 1997
INDEX
<TABLE> PAGE
<CAPTION> ----
PART I - FINANCIAL INFORMATION
<S> <C>
Item 1 - Financial Statements
Consolidated Balance Sheet at June 30, 1997 and
December 31, 1996. . . . . . . . . . . . . . . . . . . 3
Consolidated Statement of Income for the six months ended
June 30, 1997 and 1996 . . . . . . . . . . . . . . . . 4
Consolidated Statement of Cash Flows for the six months ended
June 30, 1997 and 1996 . . . . . . . . . . . . . . . . 5
Consolidated Statement of Changes in Capital from January 1, 1996
through June 30, 1997 . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements. . . . . . . . . . 7
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations. . . . . . . . . . . . . . . 8
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders . . . 10
Item 5 - Other Information . . . . . . . . . . . . . . . . . . . . 10
Item 6 - Exhibits and Reports on Form 8-K. . . . . . . . . . . . . 11
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BSM BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
JUNE 30, 1997 DECEMBER 31, 1996
------------- -----------------
<S> <C> <C>
Cash and due from banks. . . . . . . . . . . . . . . . . . . $ 20,141,286 $ 17,643,554
Federal funds sold . . . . . . . . . . . . . . . . . . . . . 12,924,000 13,920,000
------------ ------------
Cash and cash equivalents . . . . . . . . . . . . . . . . . 33,065,286 31,563,554
Investments:
Securities available-for-sale . . . . . . . . . . . . . 28,393,561 23,865,611
Securities held-to-maturity (market value of. . . . . . 63,897,480 68,339,127
$63,773,193 and $68,331,524, respectively)
Loans, net of unearned income. . . . . . . . . . . . . . . . 176,490,823 179,391,366
Allowance for loan losses . . . . . . . . . . . . . . . (2,345,762) (2,701,876)
------------ ------------
Net loans. . . . . . . . . . . . . . . . . . . . . . . . . . 174,145,061 176,689,490
Premises and equipment . . . . . . . . . . . . . . . . . . . 13,191,099 12,648,207
Accrued interest receivable and other assets . . . . . . . . 7,782,742 8,291,296
------------ ------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . $320,475,229 $321,397,285
------------ ------------
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES
<S> <C> <C>
Deposits:
Noninterest-bearing demand. . . . . . . . . . . . . . . $ 66,624,126 $ 67,181,717
Interest-bearing demand . . . . . . . . . . . . . . . . 107,438,275 111,528,482
Time deposits under $100,000. . . . . . . . . . . . . . 74,123,041 70,229,443
Time deposits $100,000 or more. . . . . . . . . . . . . 36,563,964 37,338,194
------------ ------------
Total deposits. . . . . . . . . . . . . . . . . . . 284,749,406 286,277,386
Accrued interest payable and other liabilities . . . . . . . 1,650,856 2,487,932
------------ ------------
Total liabilities . . . . . . . . . . . . . . . . . 286,400,262 288,765,768
------------ ------------
Shareholders' equity:
Common stock, 50,000,000 authorized;
Issued and outstanding
2,975,139 as of June 30, 1997
2,973,631 as of December 31, 1996 . . . . . . . . . . . . 11,506,138 11,460,488
Undivided profits. . . . . . . . . . . . . . . . . . . . . . 22,580,865 21,176,801
Valuation of securities available-for-sale, net of tax . . . (12,036) (5,772)
------------ ------------
Total capital . . . . . . . . . . . . . . . . . . . 34,074,967 32,631,517
------------ ------------
Total Liabilities & Capital . . . . . . . . . . . . $320,475,229 $321,397,285
------------ ------------
------------ ------------
</TABLE>
3
<PAGE>
BSM BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTH PERIODS SIX MONTH PERIODS
ENDED JUNE 30, ENDED JUNE 30,
------------------------------------------------------
1997 1996 1997 1996
------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans. . . . . . . . . . . $4,548,060 $4,423,534 $ 9,157,101 $ 8,555,372
Interest on investment securities-taxable . . . 1,147,064 1,021,364 2,280,650 1,944,021
Interest on investment securities-nontaxable. . 206,224 152,259 370,258 306,761
Other interest income . . . . . . . . . . . . . 139,975 159,817 271,514 328,683
------------------------------------------------------
TOTAL INTEREST INCOME . . . . . . . . . . . . . 6,038,323 5,756,974 12,079,523 11,134,837
------------------------------------------------------
INTEREST EXPENSE:
Interest on demand and savings deposits . . . . 597,278 625,861 1,179,356 1,238,775
Interest on time deposits . . . . . . . . . . . 1,480,101 1,341,318 2,910,271 2,580,539
------------------------------------------------------
TOTAL INTEREST EXPENSE. . . . . . . . . . . . . 2,077,378 1,967,179 4,089,626 3,819,314
NET INTEREST INCOME BEFORE PROVISION. . . . . . 3,960,944 3,789,795 7,989,896 7,315,523
------------------------------------------------------
Less: Provision for loan losses . . . . . . . . 0 7,000 30,000 15,500
------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION . . . . . . 3,960,944 3,782,795 7,959,896 7,300,023
OTHER OPERATING INCOME:
Service charges and fees. . . . . . . . . . . . 511,624 431,509 992,799 874,602
Other fee income. . . . . . . . . . . . . . . . 180,894 151,613 319,434 274,675
Merchant discount fees. . . . . . . . . . . . . 160,305 137,971 290,272 236,531
Other income. . . . . . . . . . . . . . . . . . 23,418 65,215 109,858 126,268
------------------------------------------------------
TOTAL OTHER OPERATING INCOME. . . . . . . . . . 876,241 786,308 1,712,363 1,512,076
------------------------------------------------------
OTHER OPERATING EXPENSES:
Salaries and employee benefits. . . . . . . . . 1,797,672 1,602,104 3,639,114 3,177,851
Occupancy expenses. . . . . . . . . . . . . . . 245,943 248,865 485,457 462,984
Furniture and equipment . . . . . . . . . . . . 362,435 355,291 722,741 687,290
Advertising and promotion . . . . . . . . . . . 201,451 140,837 353,907 260,724
Professional expenses . . . . . . . . . . . . . 88,319 136,281 168,949 229,612
Office expenses . . . . . . . . . . . . . . . . 236,693 201,864 501,708 379,244
Merchant processing costs . . . . . . . . . . . 137,904 123,203 256,492 225,304
Other expenses. . . . . . . . . . . . . . . . . 239,665 235,429 549,025 401,813
------------------------------------------------------
TOTAL OTHER OPERATING EXPENSES. . . . . . . . . 3,310,082 3,043,874 6,677,393 5,824,822
------------------------------------------------------
Income before taxes . . . . . . . . . . . . . . 1,527,103 1,525,229 2,994,866 2,987,277
Provision for income taxes. . . . . . . . . . . 592,000 588,000 1,144,800 1,141,000
------------------------------------------------------
NET INCOME. . . . . . . . . . . . . . . . . . . $ 935,103 $ 937,229 $ 1,850,066 $ 1,846,277
------------------------------------------------------
------------------------------------------------------
EARNING PER SHARE . . . . . . . . . . . . . . . $ 0.31 $ 0.31 $ 0.61 $ 0.62
Number of shares used in computation. . . . . . 3,023,000 3,004,000 3,022,000 2,998,000
------------------------------------------------------
------------------------------------------------------
</TABLE>
4
<PAGE>
BSM BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTH PERIODS SIX MONTH PERIODS
ENDED JUNE 30, ENDED JUNE 30,
----------------------------------------------------------
1997 1996 1997 1996
----------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income. . . . . . . . . . . . . . . . . . . . . . . . . $ 935,103 $ 937,229 $ 1,850,066 $ 1,846,277
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization. . . . . . . . . . . . . 317,979 295,400 612,803 567,641
Provision for credit losses. . . . . . . . . . . . . . 0 7,000 30,000 15,500
Net amortization of premium/discounts-investments. . . 112,751 109,875 211,640 203,805
Loans originated for sale. . . . . . . . . . . . . . . (235,000) (1,721,200) (1,555,141) (2,487,200)
Proceeds from loan sales . . . . . . . . . . . . . . . 1,055,000 2,971,167 2,339,479 3,796,734
Net loss (gain) from sale of other real estate owned . (12,802) (25,755) 35,385 (25,755)
Net loss (gain) from sale of fixed assets. . . . . . . (355) (10,670) (45,937) (48,392)
Net change in accrued interest, other assets and
other liabilities. . . . . . . . . . . . . . . . . . . (1,081,350) (645,323) (1,008,617) (895,541)
----------------------------------------------------------
Net cash provided by operating activities . . . . . . . . . 1,091,326 1,917,723 2,469,679 2,973,069
INVESTING ACTIVITIES
Proceeds from maturities of securities held to maturity . . 3,402,000 5,140,000 9,860,077 19,326,923
Proceeds from maturities of securities available for sale . 5,000,000 0 7,173,000 0
Purchases of held-to-maturity securities. . . . . . . . . . (3,739,236) (8,722) (8,181,594) (16,285,606)
Purchases of available-for-sale securities. . . . . . . . . (4,181,623) (2,973,766) (9,158,586) (12,578,969)
Net decrease in loans . . . . . . . . . . . . . . . . . . . (3,880,560) (2,534,148) 1,675,100 3,753,870
Purchases of premises and equipment . . . . . . . . . . . . (116,226) (1,116,057) (1,159,498) (1,214794)
Proceeds from the sale of other real estate owned . . . . . 327,381 206,737 702,596 326,302
Proceeds for the sale of equipment. . . . . . . . . . . . . 355 10,670 49,740 60,146
Net cash received for purchase of Citizens Bank . . . . . . 0 8,067,071 0 8,067,071
----------------------------------------------------------
Net cash provided (used) by investing activities. . . . . . (3,187,909) 6,791,784 960,835 1,454,943
FINANCING ACTIVITIES
Net decrease in demand and savings deposits . . . . . . . . 6,203,775 413,211 (4,647,798) (13,748,561)
Net increase in time deposits . . . . . . . . . . . . . . . 1,921,212 2,455,597 3,119,368 10,063,667
Payments for dividends/distributions. . . . . . . . . . . . 0 0 (446,002) (549,852)
Proceeds from the exercise of stock options . . . . . . . . 13,449 86,200 45,650 118,500
----------------------------------------------------------
Net cash provided (used) by financing activities. . . . . . 8,138,436 2,955,008 (1,928,782) (4,116,246)
----------------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . 6,041,853 11,664,515 1,501,732 311,767
----------------------------------------------------------
CASH AND CASH EQUIVALENTS , BEGINNING OF YEAR . . . . . . . 27,023,433 18,772,145 31,563,554 30,124,894
----------------------------------------------------------
CASH AND CASH EQUIVALENTS, JUNE 30, . . . . . . . . . . . . $33,065,286 $30,436,661 $33,065,286 $30,436,661
----------------------------------------------------------
----------------------------------------------------------
Cash paid during the year for interest. . . . . . . . . . . 2,529,823 2,163,825 4,568,471 3,443,224
Cash paid during the year for income taxes. . . . . . . . . 1,115,134 1,066,800 1,116,077 1,190,272
</TABLE>
5
<PAGE>
BSM BANCORP
STATEMENT OF CHANGES IN CAPITAL
(Unaudited)
<TABLE>
<CAPTION>
NET
COMMON SHARES UNREALIZED
------------- ADJUSTMENT IN
NUMBER OF UNDIVIDED AVAILABLE FOR
SHARES AMOUNT PROFITS SALE SECURITIES TOTAL
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1996. . . . 2,950,081 $11,250,288 $ 18,673,257 $ 51,221 $ 29,974,766
Proceeds from exercise of
stock options. . . . . . . . . . 14,000 118,500 118,500
Dividends paid. . . . . . . . . . (549,852) (549,852)
Net income for the period . . . . 1,846,277 1,846,277
Adjustment in available for sale
Securities, net of taxes of
$ 113,387. . . . . . . . . . . . (170,080) (170,080)
--------------------------------------------------------------------------------------
BALANCE AT JUNE 30, 1996. . . . . 2,953,081 11,368,788 19,969,682 (118,859) 31,219,611
Issuance of organizational stock. 150 1,500 1,500
Proceeds from exercise of
stock options. . . . . . . . . . 9,400 90,200 90,200
Adjustment in available for sale
Securities, net of taxes of
$(75,391). . . . . . . . . . . . 113,087 113,087
Net income for the period . . . . 1,207,119 1,207,119
--------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996. . . 2,973,631 11,460,488 21,176,801 (5,772) 32,631,517
Retirement of organizational
stock. . . . . . . . . . . . . . (150) (1,500) (1,500)
Proceeds from exercise of
stock options. . . . . . . . . . 4,800 49,350 49,350
Partial distribution-El Camino
Merger . . . . . . . . . . . . . (142) (2,200) (2,200)
Dividends paid. . . . . . . . . . (446,002) (446,002)
Net income for the period . . . . 1,850,066 1,850,066
Adjustment in available for sale
Securities, net of taxes of
$ 4,176. . . . . . . . . . . . . (6,264) (6,264)
--------------------------------------------------------------------------------------
BALANCE AT JUNE 30, 1997. . . . . 2,978,139 $11,506,138 $ 22,580,865 $ (12,036) $ 34,074,967
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statement
6
<PAGE>
BSM BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION AND MANAGEMENT REPRESENTATION
BSM Bancorp (the "Company") was incorporated on November 12, 1996, for the
sole purpose of becoming a bank holding company for Bank of Santa Maria (the
"Bank"). Following regulatory consent and with the approval of the Bank's
shareholders, the Bank merged with BSM Merger Company (a wholly-owned
subsidiary of the Company) (the "Merger"), as of the close of business on
March 11, 1997 and thereby became a wholly-owned subsidiary of the Company.
As of December 31, 1996, the Company had only one shareholder and it had no
SEC nor Federal Reserve Bank reporting requirements. Following completion of
the Merger, the Company is required to file periodic reports under section
15(d) of the Exchange Act. A quarterly report on Form 10Q was filed on March
31, 1997, for the first time. As the Merger was recorded using the pooling
of interest method, restatement of prior balances were necessary to meet
accounting standards. Accordingly, the financial statements herein contain
balances prior to the actual existence of the Company which reflect what the
"consolidated" entity would have reported as restated for all acquisitions,
either recorded by pooling or purchase accounting.
The unaudited consolidated financial statements has been prepared in
accordance with generally accepted accounting principles and with the
instructions to Form 10-Q. On January 10, 1997, the Bank acquired El Camino
National Bank through an exchange of Bank stock. This acquisition was
accounted for using the pooling of interest method. The annual report for
Bank of Santa Maria, although disclosing the merger, did not restate the 1996
financial numbers as the effect on the reported numbers was not deemed
material. Concurrently, the Bank was in the process of obtaining regulatory
approval to form the Company. While the management of BSM Bancorp believes
that the disclosures presented are sufficient to make the information not
misleading,, reference should be made to the Bank's Annual Report for the
year ended December 31, 1996. Management had elected to include a
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY to assist the
reader in the analysis of the Merger and the acquisition , both of which
occurred during the first quarter.
The accompanying consolidated balance sheets, statements of income,
statements of changes in shareholders' equity and statement of cash flows (as
restated for the acquisition of El Camino National Bank and the subsequent
Merger of the Bank of Santa Maria by the Company), reflect all material
adjustments necessary for fair presentation of the Company's financial
position as of June 30, 1997 and December 31, 1996 and the results of
operations for the six months ended June 30, 1997 and 1996. All such
adjustments were of a normal recurring nature.
NOTE 2 - CAPITAL SECTION OF THE CONSOLIDATED BALANCE SHEET.
As explained in Note 1, BSM Bancorp acquired Bank of Santa Maria on March 11,
1997. Prior to that date, there were only 150 shares of BSM Bancorp Common
Stock outstanding. The Bank, as of December 31, 1996, as restated for the
acquisition of El Camino, was authorized to issue 25,000,000 shares of Common
Stock and had 2,973,481 outstanding.
NOTE 3 - EARNINGS PER SHARE
Earnings per common share are based upon weighted average number of shares
outstanding during the period plus shares issuable upon the assumed exercise
of outstanding common stock options rounded to the nearest 1,000 shares.
7
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
For the six months ended June 30, 1997, the Company reported net income of
$1,850,000, or $.61 per share compared to a net income of $1,846,000, or $.62
per share for the same six month period in 1996. The second quarter of each
year was essentially the same at $.31 for each period. The annualized return
on average assets was 1.20% for the first half of 1997 compared to 1.29% for
the first half of 1996, as restated for the El Camino merger. Return on
average shareholders' equity for the six month period ended June 30, 1997 and
1996 was 10.92% and 12.14% respectively.
FINANCIAL CONDITION
Total assets as of June 30, 1997, decreased .3% to $320.5 million in
comparison to restated total assets of $321.4 million as of December 31,
1996. Historically, the Company has experienced a decline in overall asset
totals with the comparable decline for the first half of 1996, recorded at
.8% after factoring out the purchase of approximately $29 million in assets
in conjunction with the May, 1996 Citizens acquisition. Cash and cash
equivalents increased by $1.5 million with funds provided by the operating
activities used to cover a net outflow of deposit dollars. Loans declined by
$2.9 million during the first half of 1997, compared to a $5.7 million
decline during the same period in 1996, after factoring the purchase of
approximately $18 million dollars in loans in conjunction with the May, 1996
Citizens acquisition. The percentage of decline is only 1.6% for 1997,
versus 3.4% for 1996, which appears to be attributable to the expanded
service area and mix of loans rather than directly tied to the economy.
While total investment dollars remained essentially constant, the mix between
securities held to maturity and available for sale reflects the Company's
policy to have a larger percentage of security dollars available to meet
liquidity needs. This was accomplished by purchasing "available for sale"
securities from the proceeds of maturing "held to maturity" securities. The
increase in premises and equipment by a net $543,000 included the purchase of
land adjacent to the Bank's main office previously leased for employee
parking and cost associated with the purchase and refurbishing of the
building used for the newly opened Atascadero Branch. The Bank's cash flow
continued to benefit from several sales of other real estate owned properties
during the second quarter.
Deposits declined by $1.5 million during the first half of 1997, versus a
$3.4 million decline during the same period in 1996, after factoring in the
purchase of approximately $29 million in deposits in conjunction with the
May, 1996 Citizens acquisition. The percentage of decline was .5% for 1997,
versus 1.3% for 1996. The decline appears to attributable to the runoff of
deposit dollars associated with the acquisition of El Camino National Bank in
January of 1997 and the acquisition of Citizens in May of 1996. A certain
level of runoff was anticipated by Company management.
The Bank, prior to its acquisition by the Company, paid semiannual dividends,
a policy which was first implemented in mid 1996. During the first quarter
of 1996, the Directors of the Bank paid a $.20 per share annual cash dividend
which was augmented in August of 1996, with the first semiannual dividend of
$.15 per share. In January of 1997, the Bank again paid a $.15 per share
cash dividend. The Company was the beneficiary of an organizational dividend
of $150,000 on March 12, 1997, from the Bank. With the Company now fully
organized, a $.20 cash dividend was declared in July, 1997, payable on August
15, 1997. Both the Bank and the Company maintain strong liquidity positions.
RESULTS OF OPERATIONS
Interest income on loans was up by $602,000 in the first half of 1997,
compared with the first quarter of 1996. The increase in interest income was
primarily attributable to the increase in average outstanding loans, which
were by $9.6 million. The effective yield only was up approximately 17 basis
points. Approximately 83% of this positive variance is due then to the volume
increase, primarily from the purchase of loans in conjunction with the
Citizens acquisition. There was also a difference caused by the number of
days during the respective first quarters which accounts for approximately
$45,000.
Interest income on investments, including Federal funds transactions,
increased by $343,000 during the first half of 1997, over the comparable
period in 1996. This increase, as with loans, was primarily attributable to
the increase in funds available for investment, which were up by $9.8
million. The effective yield was up only 18 basis points. Approximately 78%
of this positive variance is due then to the volume increase (primarily from
the investible cash, $8.1 million), made
8
<PAGE>
available in conjunction with the Citizens acquisition. There was also a
difference caused by the number of days during the respective first halves
which accounts for approximately $14,000.
Interest expense on interest-bearing deposits were up by $270,000 in the
first half of 1997, compared with the first half of 1996. The increase in
interest expense was attributable to the average interest-bearing deposits
which were up by $16.5 million. The effective rate which was down
approximately 2 basis points. The reduction in the rate decreased the
overall interest expense cost by about $22,000. There was also a difference
caused by the number of days during the respective first halves which
accounts for approximately $21,000.
Net interest margin improved from 5.71% for first half 1996, to 5.83% for the
same period in 1997. The provision for loan losses of $30,000 is sufficient
to bring the allowance for loan losses to a balance considered to be adequate
to absorb potential losses in the portfolio. Management's determination of
the adequacy of the allowance is based upon a detailed evaluation of the
portfolio, current economic conditions and trends, historical loan loss
experience and other risk factors.
Non interest income increased $200,000 or 13.25% to $1,712,000 as of June 30,
1997. While the effect of the mergers contributed to the increase service
fee base, fees from the sale of loans into the secondary market also are
reflected in the overall increase in 1997. Non interest expenses increased
$853,000 or 14.63% t0 $6,677,000 as of June 30, 1997. Approximately 45% of
this overall increase is related to increased salary expense, due directly to
the three additional operating branches reflected in the first half of 1997.
Two of these branches (Citizens Bank) were acquired in May of 1996 and
accounted for using purchase accounting along with the newly opened
Atascadero branch. The number of full-time equivalents, as restated for the
El Camino merger, grew from 174 as of June 30, 1996, to 204 as of June 30,
1997. This represents a 17.24% increase. Also during the first half of
1997, the Bank absorbed certain costs associated with the El Camino merger
totaling approximately $56,000, goodwill amortization from the Citizens
acquisition totaling $66,000, increased occupancy costs for the three
additional locations of approximately $67,000, as well as increased
promotional expenses associated with the El Camino merger and the opening of
the Atascadero Branch of approximately $33,000. There was also a writedown
of $54,000 to one of the Bank's OREO properties which occurred during the
first half. While some of these aforementioned expenses will be ongoing,
approximately $120,000 appear to be of a non-reoccurring nature. Excluding
these dollars would bring the percentage of increase in noninterest expenses
for the first half of 1997 (when compared to first half 1996), down to
12.57%, which is more in line with the increase in noninterest income.
CAPITAL RESOURCES
The Company and its bank subsidiary are subject to risk-based capital
regulations adopted by the federal banking regulators. These guidelines are
used to evaluate capital adequacy and are based upon an institution's assets
risk profile and off-balance sheet exposures, such as unused loan commitments
and letters of credit. The following table sets forth the Company's and the
Bank's leverage and risk-based capital ratios at June 30, 1997:
<TABLE>
<CAPTION>
(In thousands) COMPANY BANK
Amount % Amount %
------ ------ ------ ------
<S> <C> <C> <C> <C>
LEVERAGE RATIO. . . . . $ 32,247 10.31% $ 32,137 10.28%
Regulatory minimum. . . $ 12,513 4.00% $ 12,507 4.00%
Excess. . . . . . . . . $ 19,734 6.31% $ 19,630 6.28%
RISKED-BASED RATIOS
Tier 1 capital. . . . . $ 32,247 14.99% $ 32,137 14.95%
Tier 1 minimum. . . . . $ 8,607 4.00% $ 8,601 4.00%
Excess. . . . . . . . . $ 23,640 10.99% $ 23,536 10.95%
Total capital . . . . . $ 34,593 16.08% $ 34,483 16.04%
Total capital minimum . $ 17,213 8.00% $ 17,202 8.00%
Excess. . . . . . . . . $ 17,380 8.08% $ 17,281 8.04%
</TABLE>
The management of the Company is not aware of any trends, events,
uncertainties or recommendations by regulatory authorities that will have or
that are reasonably likely to have material effect on the liquidity, capital
resources or operations of the Company.
9
<PAGE>
PART II - OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following is a summary of matters submitted to vote at the Annual Meeting
of Shareholders of BSM Bancorp:
a) The first Annual Meeting of Shareholders was held on May 15, 1997.
b) The meeting involved the election of directors.
Proxies were solicited by BSM Bancorp's management pursuant to
Regulation 14A under the Securities Exchange Act of 1934. There was no
solicitation in opposition to management's nominees as listed in the
proxy statement and all such nominees were elected pursuant to the vote
of the shareholders as indicated in the proxy statement. The name of
each director elected is listed in item (c) below.
c) The only matter upon which a vote was taken was the election of the
directors. The results were as follows:
<TABLE>
<CAPTION>
For Authority Withheld
---------------------------
<S> <C> <C>
Armand Acosta 2,355,531 5,941
Richard E. Adam 2,355,531 5,941
Fred L. Crandall, Jr. 2,355,531 5,941
A. J. Diani 2,355,531 5,941
William A. Hares 2,355,531 5,941
Roger A. Ikola 2,355,531 5,941
Toshiharu Nishino 2,355,531 5,941
Joseph Sesto, Jr. 2,354,131 7,341
William A. Snelling 2,355,531 5,941
Mitsuo Taniguchi 2,355,531 5,941
Joseph Ziemba 2,353,985 7,487
</TABLE>
d) N/A
ITEM 5 - OTHER INFORMATION
DECLARATION OF CASH DIVIDEND
The Board of Directors of BSM Bancorp declared a $.20 per share dividend to
the shareholders of record as of the close of business on July 25, 1997,
payable on August 15, 1997. The Company's Board is following a pattern
established by its recently acquired subsidiary to pay cash dividends on a
semi-annual basis. The Bank of Santa Maria paid a $.15 per share dividend in
February of 1997.
10
<PAGE>
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
A) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Exhibit
-------------------------------------------------------------------------
<S> <C>
2.1 Plan of Reorganization and Merger Agreement - Annex 1 of
Written Consent Statement/Prospectus*
3.1 Articles of Incorporation of Registrant*
3.2 Amendment to Articles of Incorporation of Registrant*
3.3 Amendment to Articles of Incorporation of Registrant*
3.4 Bylaws of the Registrant*
10.1 Form of Indemnification Agreement*
10.2 BSM Bancorp 1996 Stock Option agreement as approved by
California Department of Corporations**
10.3 Form of Written Consent*
10.4 Nipomo Branch Land Lease*
10.5 Lompoc Branch Lease*
10.6 Form of "Change in Control" Employment Contract**
27 Financial Data Schedule (for SEC use only)
</TABLE>
*All documents listed are incorporated by reference and can be
found in the Registration Statement of the Company filed on Form
S-4.
**This exhibit is contained in BSM Bancorp's Quarterly Report on Form
10-Q for the period ended March 31, 1997, filed with the Commission
on May 15, 1997 (Commission File No. 333-16951), and incorporated
by reference.
B) Reports on Form 8 - K
There were no reports on Form 8-K during the three months ended June
30, 1997.
11
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BSM Bancorp
(Registrant)
/s/ William A. Hares
Date: July 25, 1997 William A. Hares
President and
Chief Executive Officer
/s/ F. Dean Fletcher
Date: July 25, 1997 F. Dean Fletcher
Executive Vice President
and Chief Financial Officer
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 20,141,286
<INT-BEARING-DEPOSITS> 218,125,280
<FED-FUNDS-SOLD> 12,924,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 28,393,561
<INVESTMENTS-CARRYING> 63,897,480
<INVESTMENTS-MARKET> 63,773,193
<LOANS> 176,490,823
<ALLOWANCE> (2,345,762)
<TOTAL-ASSETS> 320,475,229
<DEPOSITS> 284,749,406
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,650,856
<LONG-TERM> 0
0
0
<COMMON> 11,506,138
<OTHER-SE> 22,568,829
<TOTAL-LIABILITIES-AND-EQUITY> 320,475,229
<INTEREST-LOAN> 9,157,101
<INTEREST-INVEST> 2,650,908
<INTEREST-OTHER> 271,514
<INTEREST-TOTAL> 12,079,523
<INTEREST-DEPOSIT> 4,089,626
<INTEREST-EXPENSE> 4,089,626
<INTEREST-INCOME-NET> 7,989,896
<LOAN-LOSSES> 30,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 6,677,393
<INCOME-PRETAX> 2,994,866
<INCOME-PRE-EXTRAORDINARY> 2,994,866
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,850,066
<EPS-PRIMARY> .62
<EPS-DILUTED> .61
<YIELD-ACTUAL> 5.84
<LOANS-NON> 1,324,869
<LOANS-PAST> 41,627
<LOANS-TROUBLED> 538,770
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,351,221
<CHARGE-OFFS> (441,648)
<RECOVERIES> 55,334
<ALLOWANCE-CLOSE> 2,345,762
<ALLOWANCE-DOMESTIC> 2,345,762
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
