UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________________________________
Commission file number: 333-68207
FIRST COASTAL BANCSHARES
CALIFORNIA NO. 95-4693574
(State of other jurisdiction of incorporation) (IRS Employer Identification No.)
275 Main Street, El Segundo, California 90245
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 322-2222
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) and (2) has been subject to such filing requirements for the
past 90 days. Yes [X ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
On November 3, 1999, there were 1,248,492 shares of First Coastal Bancshares
Common Stock outstanding.
1
<PAGE>
First Coastal Bancshares
September 30, 1999
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets at September 30, 1999 and
December 31, 1998.................................................................. 3
Condensed Consolidated Statements of Income for the three
months, and nine months ended September 30, 1999 and 1998.......................... 4
Condensed Consolidated Statements of Changes in Shareholders' Equity from
January 1, 1998 through September 30, 1999......................................... 5
Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 1999 and 1998........................................... 6
Notes to Consolidated Financial Statements................................................... 7 - 8
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations..................................................................... 9 - 13
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings............................................................................ 14
Item 2 - Changes in Securities........................................................................ 14
Item 3 - Defaults upon Senior Securities.............................................................. 14
Item 4 - Submission of Matters to a Vote of Security Holders.......................................... 14
Item 5 - Other Information............................................................................ 14
Item 6 - Exhibits and Reports on Form 8-K............................................................. 14
</TABLE>
2
<PAGE>
Item 1. Financial Statements
First Coastal Bancshares and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited - Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
<S> <C> <C>
Cash and Due From Bank $ 8,363 $ 2,745
Short Term Investments 7,700 700
--------- ---------
CASH AND CASH EQUIVALENTS 16,063 3,445
Investment Securities, net 38,364 14,679
Loans 68,610 55,163
Allowance for Loan Losses (846) (549)
--------- ---------
NET LOANS 67,764 54,614
Premises and Equipment, net 655 386
Other Real Estate Owned, net -- 116
Goodwill, net 5,554 1,770
Issuance Costs, net - Trust Preferred Securities 1,001 --
Accrued Interest and Other Assets 2,262 1,725
--------- ---------
$ 131,663 $ 76,735
========= =========
Noninterest-Bearing Deposits $ 32,713 $ 14,474
Interest-Bearing Deposits 67,414 44,117
--------- ---------
TOTAL DEPOSITS 100,127 58,591
Other Borrowings 17,000 11,000
Company Obligated Mandatorily Redeemable
Preferred Securities of Subsidiary Trust Holding
Solely Junior Subordinated Debentures 6,600 --
Accrued Interest and Other Liabilities 827 884
--------- ---------
TOTAL LIABILITIES 124,554 70,475
Preferred Stock 1,993 2,658
Common Shares 6,631 3,673
Accumulated Deficit (483) (40)
Accumulated Other Comprehensive Income (1,032) (31)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 7,109 6,260
--------- ---------
$ 131,663 $ 76,735
========= =========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
3
<PAGE>
Item 1. Financial Statements - Continued
First Coastal Bancshares and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited - Dollar Amounts in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30 September 30
-------------------------- ------------------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest Income $ 2,242 $ 1,399 $ 5,854 $ 3,954
Interest Expense 1,014 609 2,596 1,651
------- ------- ------- -------
Net Interest Income 1,228 790 3,258 2,303
Provision for Loan Losses -- -- 50 10
------- ------- ------- -------
Net Interest Income after
Provision for Loan Losses 1,228 790 3,208 2,293
Noninterest Income 315 154 767 416
Noninterest Expense 1,592 783 4,153 2,223
------- ------- ------- -------
(Loss) Income before Taxes (49) 161 (178) 486
Income Taxes 20 82 29 245
------- ------- ------- -------
Net (Loss) Income $ (69) $ 79 $ (207) $ 241
======= ======= ======= =======
Per Share Data:
Net (Loss) Income - Basic $ (0.10) $ 0.01 $ (0.35) $ 0.04
Net (Loss) Income - Diluted $ (0.10) $ 0.01 $ (0.35) $ 0.04
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
4
<PAGE>
Item 1. Financial Statements - Continued
First Coastal Bancshares and Subsidiaries
Condensed Consolidated Statements of Changes in Shareholders' Equity
(Unaudited - Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
Accumulated
Other
Preferred Common Comprehensive Accumulated Comprehensive
Stock Shares Income Deficit Income Total
--------- ------- ------------- ----------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
January 1, 1998 $ 2,658 $ 3,360 $ (13) $ 5 $ 6,010
Dividends - Preferred Stock (286) (286)
Common Stock Repurchased (78) (78)
Exercise of Warrants 250 250
Recognition of Deferred Tax
Assets Generated Prior to
Quasi-Reorganization 141 141
Comprehensive Income
Net Income $ 259 259 259
Change in Unrecognized Loss
of Securities Available for
Sale, Net of Taxes (36) (36) (36)
-------
Comprehensive Income $ 223
=======
------- ------- ------- ------- -------
December 31, 1998 2,658 3,673 (40) (31) 6,260
Proceeds from Stock Offering 1,901 1,901
Redemption of Preferred Stock (586) (57) (643)
Conversion of Preferred to
Common Stock (79) 79
Dividends - Preferred Stock (179) (179)
Redemption of Common Stock (12) (12)
Exercise of Warrants 875 875
Common Shares Reissued 115 115
Comprehensive Income
Net Loss $ (207) (207) (207)
Change in Unrecognized Loss
of Securities Available for
Sale, Net of Taxes (1,001) (1,001) (1,001)
-------
Comprehensive Loss $(1,208)
=======
------- ------- ------- ------- -------
September 30, 1999 $ 1,993 $ 6,631 $ (483) $(1,032) $ 7,109
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
5
<PAGE>
Item 1. Financial Statements - Continued
First Coastal Bancshares and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited - Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
--------------------------
1999 1998
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net (Loss) Income $ (207) $ 241
Adjustments to Reconcile Net (Loss) Income to
Net Cash Provided by Operating Activities:
Depreciation and Amortization 417 194
Provision for Loan Losses 50 10
Other Items - Net (98) 372
-------- --------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 162 817
INVESTING ACTIVITIES
Purchases of Investment Securities (26,630) (10,134)
Sale and Maturities of Investment Securities 4,530 14,139
Net Cash and Cash Equivalents from AIB Acquisition 8,600 --
Net Change in Loans 5,345 (16,317)
Proceeds from Sale of Other Real Estate Owned 150 41
Purchase of Premises and Equipment (65) (52)
-------- --------
NET CASH USED
BY INVESTING ACTIVITIES (8,070) (12,323)
FINANCING ACTIVITIES
Net Change in Deposits 6,887 27,656
Net Change in Other Borrowings 6,000 (3,550)
Trust Preferred Securities, net of Costs 5,582 --
Proceeds from Supplemental Stock Offering, net of Costs 1,901 --
Proceeds from Exercise of Warrants and Options 990 --
Redemption of Preferred and Common Stock (655) (80)
Dividends (179) (214)
-------- --------
NET CASH PROVIDED
BY FINANCING ACTIVITIES 20,526 23,812
-------- --------
INCREASE IN CASH
AND CASH EQUIVALENTS 12,618 12,306
Cash and Cash Equivalents at Beginning of Period 3,445 2,954
-------- --------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 16,063 $ 15,260
======== ========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
6
<PAGE>
Item 1. Financial Statements - Continued
First Coastal Bancshares and Subsidiaries
Notes to Consolidated Financial Statements
Note 1 - Basis of Presentation and Management Representation
The accompanying financial information has been prepared in accordance with the
Securities and Exchange Commission rules and regulations for quarterly reporting
and therefore does not necessarily include all information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles. This information should be read
in conjunction with the Company's Form 10-KSB filed on May 10, 1999 and Form
SB-2 filed on February 12, 1999.
The consolidated financial statements include First Coastal Bancshares and its
wholly owned subsidiaries, First Coastal Bank, N.A. (the "Bank") and First
Coastal Capital Trust.
Operating results for interim periods are not necessarily indicative of
operating results for an entire fiscal year. In the opinion of management, the
unaudited financial information for the nine month period ended September 30,
1999 and 1998, reflect all adjustments, consisting only of normal recurring
accruals and provisions, necessary for a fair presentation thereof.
Some matters discussed in this Form 10-QSB may be "forward-looking statements"
within the meaning of the Private Litigation Reform Act of 1995 and therefore
may involve risks, uncertainties and other factors which may cause our actual
results to be materially different from the results expressed or implied by our
forward-looking statements. These statements generally appear with words such as
"anticipate," "believe," "estimate," "may," "intend," and "expect."
Note 2 - Acquisition of American Independent Bank, N.A. ("AIB")
On March 8, 1999, the Bank acquired 100% of the outstanding common stock of
American Independent Bank, N.A. for approximately $6.5 million in cash. AIB had
total assets of approximately $38 million on March 8, 1999. The acquisition was
accounted for using the purchase method of accounting in accordance with
Accounting Principles Board Opinion No, 16. "Business Combinations". Under this
method of accounting, the purchase price was allocated to the assets, deposits
and liabilities assumed based on their fair values as of the acquisition date.
The financial statements include the operations of AIB from the date of
operations.
Due to the size and complexity of this acquisition, the Company estimates the
allocation period for evaluating and determining the allocation of the cost of
the acquisition will not be completed prior to issuance of its 1999 annual
report. Through September 30, 1999, goodwill totaling approximately $3.85
million has been recorded and is being amortized over fifteen years on a
straight-line basis.
7
<PAGE>
Note 2 - Acquisition of American Independent Bank, N.A. - Continued
The following table sets forth selected pro forma unaudited combined financial
results of the Company and AIB. The pro forma operating data reflects the effect
of the acquisition of AIB as if it was consummated at the beginning of each
period presented. The pro forma results are not indicative of the results that
would have occurred had the acquisition been in effect for the full periods
presented, nor are they indicative of the results of future operations.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
1999 1998 1999 1998
------- ------- ------- -------
(Dollar amounts in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest and Noninterest Income:
The Company $ 2,557 $ 1,553 $ 6,621 $ 4,370
AIB - Pre-Merger -- 962 637 2,737
------- ------- ------- -------
Total $ 2,557 $ 2,515 $ 7,258 $ 7,107
======= ======= ======= =======
Net (Loss) Income:
The Company $ (69) $ 79 $ (153) $ 241
AIB - Pre-Merger -- 79 (505) 147
Interest Costs - Pro Forma, net of Tax -- (116) (77) (384)
Goodwill Amortization- Pro Forma -- (65) (42) (191)
------- ------- ------- -------
Total $ (69) $ (23) $ (777) $ (151)
======= ======= ======= =======
Per Share Data:
Basic $ (0.10) $ (0.08) $ (0.86) $ (0.33)
Diluted $ (0.10) $ (0.08) $ (0.86) $ (0.33)
</TABLE>
These pro forma disclosures include adjustment to interest expense from the
funds borrowed to fund a portion of the purchase as well as adjustments to per
share data to reflect the issuance of common stock to fund the balance of the
purchase. No adjustments have been reflected in these amounts for the
anticipated cost savings to be derived from this merger.
Note 3 - Earnings Per Share
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share." Accordingly, basic earnings
per share are computed by dividing income available to common shareholders by
the weighted average number of common shares outstanding during each period. The
computation of diluted earnings per share also considers the number of shares
issuable upon the assumed exercise of outstanding common stock options and the
number of shares issuable upon the assumed conversion of the convertible
preferred stock. These items were anti-dilutive for the periods reported and
therefore dilutive earnings per shares is reported as the same as basic earnings
per share.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Income Summary
For the three months ended September 30, 1999, the Company reported a net loss
of $69,000, or $(0.10) basic loss per share compared to a net income of $79,000,
or $ 0.01 basic income per share for the same three month period in 1998. For
the nine months ended September 30, 1999, the Company reported a net loss of
$207,000, or $(0.35) basic loss per share compared to a net income of $241,000,
or $(0.04) basic income per share for the same nine month period in 1998.
The annualized return on average assets was (0.25)% for the first nine months of
1999 compared to 0.45% for 1998. Annualized return on average shareholders'
equity for the first nine months of 1999 and 1998 was (3.79)% and 5.42%,
respectively.
Net Interest Income
Net interest income is the amount by which the interest and amortization of fees
generated from loans and other earning assets exceeds the cost of funding those
assets, usually deposit account interest expense. Net interest income depends on
the difference (the "interest rate spread") between gross interest and fees
earned on the loans and investment portfolios and the interest rates paid on
deposits and borrowings. Net interest income was $1,228,000 for the quarter
ended September 30, 1999, compared to $790,000 for the quarter ended September
30, 1998. Net interest income was $3,258,000 for the nine months ended September
30, 1999, compared to $2,303,000 for the nine months ended September 30, 1998.
The total amount of net interest income increased for the quarter and nine
months ended September 30, 1999 compared to the same periods in 1998 due to the
significant increase in interest-earning assets. This increase was due to the
combined effect of the acquisition of AIB as well as overall growth in
investments funded by short-term borrowings.
The following table sets forth the components of net interest income, average
earning assets and net interest margin (dollar amounts in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended Year Ended
September 30, September 30, December 31,
1999 1998 1999 1998 1998
-------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
Interest Income $ 2,242 $ 1,399 $ 5,854 $ 3,954 $ 5,365
Interest Expense 1,014 609 2,596 1,651 2,262
-------- -------- -------- -------- --------
Net Interest Income $ 1,228 $ 790 $ 3,258 $ 2,303 $ 3,103
======== ======== ======== ======== ========
Average Earning Assets $109,038 $ 68,481 $ 96,549 $ 64,662 $ 66,796
Net Interest Margin (1) 4.50% 4.61% 4.50% 4.75% 4.65%
</TABLE>
(1) Interim periods are presented on an annualized basis.
9
<PAGE>
Net Interest Income - Continued
The net interest margin declined in the first quarter of 1999 compared to the
same quarter in 1998 due to the 75 basis point decline in the prime rate during
the fourth quarter of 1998. The majority of the Bank's loans and its investments
in federal funds sold reprice daily with changes in the prime rate. This decline
continued into the third quarter of 1999, but had a lesser effect due to the
increase in interest-earning assets from the acquisition of AIB in early March,
investments acquired during the second and third quarters which were funded by
short-term borrowings, the 25 basis point increase in the prime rate during July
and the gradual repricing of interest-bearing deposits.
Further contributing to the decrease in net interest margin was the interest
expense relating to the recently issued $6.6 million in preferred securities.
Interest expense incurred on these securities, net of tax effect, was $116,000
in each of the third and second quarter of 1999. Had these distributions not
been charged to earnings, the Company would have recognized net income of
$47,000 and $71,000 in the third quarter and second quarter of 1999
respectively.
The prime rate was 8.50% for the first nine months of 1998, and then experienced
25 basis point declines in September, October and November to end the year at
7.75%. The prime rate increased 25 basis points in July and again in August 1999
to 8.25%.
Provision for Loan Losses
During the second quarter of 1999, the Company contributed $50,000 to the
allowance for loan losses. The Company made no contribution to the allowance for
loan losses in the first and third quarters of 1999. Total contributions to the
allowance for loan losses in the first nine months of 1998 were $10,000.
Management believes that the allowance, which stands at 1.2% of total loans at
September 30, 1999, is adequate to cover future losses.
Changes in the allowance for loan losses for the quarter and nine months ended
September 30, 1999 and 1998 are as follows (dollar amounts in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
1999 1998 1999 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
Allowance, Beginning of Period $ 960 $ 538 $ 549 $ 615
Provision for Loan Losses -- -- 50 10
Loans (Charged Off) - net of Recoveries (114) 24 (155) (63)
Allowance from AIB Acquisition -- -- 402 --
----- ----- ----- -----
Allowance, End of Period $ 846 $ 562 $ 846 $ 562
===== ===== ===== =====
</TABLE>
Noninterest Income
Non Interest Income represents deposit account service charges and other types
of non-loan related fee income. Non-interest income for the quarter ended
September 30, 1999 totaled $315,000 compared to $154,000 for the same period
ended 1998. Non-interest income for the nine months ended September 30, 1999
totaled $767,000 compared to $416,000 for the same period ended 1998. The
increase is primarily the result of the additional noninterest income related to
operations of the AIB branches after the acquisition on March 8, 1999 and the
gain on sale of $58,000 on an OREO property in June 1999.
10
<PAGE>
Noninterest Expense
Noninterest Expenses represent salaries, occupancy expenses, professional
expenses, outside services and other miscellaneous expenses necessary to conduct
business. Noninterest expense for the quarter ended September 30, 1999 totaled
$1,592,000 compared to $783,000 for the same period during 1998. Noninterest
expense for the nine months ended September 30, 1999 totaled $4,153,000 compared
to $2,223,000 for the same period during 1998.
The increase in noninterest expense is due to 1) the acquisition of AIB on March
8, 1999 and 2) the Bank's strategic marketing plan. The majority of the increase
in each period was the additional salaries and employee benefits and occupancy
costs related to the two AIB branches acquired. Additionally, the Company
experienced an increase of $53,000 in other costs related to non-capitalizable
merger related costs and goodwill amortization on the AIB purchase of $148,000
during the first nine months of 1999.
In connection with the Bank's marketing efforts, salaries and benefits increased
approximately $22,000 per month beginning the second quarter due to the hiring
of new marketing officers representing the "sales force" for the Bank.
Additionally, the Company experienced a $33,000 increase in advertising during
the first nine months of 1999.
Other non-recurring costs incurred during the first nine months of 1999 include
an increase of $139,000 in professional fees related to operational audits and
Y2K costs and a $78,000 write-down in the carrying value of its OREO.
Additionally, the Company discovered certain irregular operations activities at
its Gardena branch, which had began prior to the acquisition of the branch in
March 1999. These activities resulted in losses which were charged to earnings
in the amount of $89,000 in the third quarter of 1999. The Company also recorded
an increase in Goodwill of $244,000, net of tax effect, to reflect the portion
of the loss present at AIB prior to the acquisition on March 8, 1999 that is
included in the allocation of the purchase price. The Goodwill amortization
increased $1,600 per month due to this adjustment. The Company is pursuing
recovery of this loss through its insurance company.
Income Taxes
The Company's income tax provision for the first nine months of 1999 was $29,000
resulting in an effective rate of 41.4% on income before taxes and goodwill
amortization. The tax provision for the first nine months of 1998 was $245,000,
resulting in an effective rate of 42.0% on income before taxes and goodwill
amortization.
Balance Sheet Analysis
Total assets at September 30, 1999 totaled $131.7 million, up 72% from the $76.7
million reported at December 31, 1998. A portion of this increase was the result
of the first quarter acquisition of AIB, which had total assets of $38 million
at the acquisition date of March 8, 1999. To fund this increase, the Company
increased shareholders' equity $1.9 million through a supplemental stock
offering and issued $6.6 million in Trust Preferred Securities.
11
<PAGE>
Asset Quality
The following table sets forth the components of non-performing assets and
related ratios: (dollar amounts in thousands)
<TABLE>
<CAPTION>
September 30,
----------------------- December 31,
1999 1998 1998
------ ------ ------------
<S> <C> <C> <C>
Loans 90 Days Past Due and Still Accruing $ 209 $ 54 $ 8
Loans on Nonaccrual 590 403 726
------ ------ -----
Nonperforming Loans 799 457 734
Other Real Estate Owned -- 218 116
Nonperforming Assets $ 799 $ 675 $ 850
====== ====== =====
Nonperforming Loans as a Percent
of Total Loans 1.16% 0.81% 1.33%
Allowance for Loan Losses as a Percent
of Nonperforming Loans 105.88% 122.98% 74.80%
Nonperforming Assets as a Percent
of Total Assets 0.61% 0.83% 1.11%
</TABLE>
The primary ratios of loan quality have generally improved in the first nine
months of 1999. The allowance for loan losses as a percent of nonperforming
loans increased to 105.88% at September 30, 1999, up from 74.80% at December 31,
1998. Likewise, the ratio of nonperforming assets as a percent of total assets
has declined to 0.61% as of September 30, 1999 compared to 1.11% at December 31,
1998.
Other Borrowings
Other borrowings at September 30, 1999 consist of $10.0 million in short-term
borrowings from the Federal Home Loan Bank and $1.0 million in long-term
borrowings from a correspondent bank. The Company uses these sources to fund
asset growth and offset fluctuations in demand for deposits.
Trust Preferred Securities
During the first quarter of 1999 the Company completed an offering of $6.6
million in 11 7/8% Cumulative Preferred Securities through a wholly-owned
subsidiary, First Coastal Capital Trust. Under generally accepted accounting
policies, the securities are reported as liabilities of the Company. The
interest payments are reported as interest expense and the amortization of the
related costs of the offering ($1.0 million) are reported as other non-interest
expense. The Trust Preferred Securities mature on December 31, 2028.
12
<PAGE>
Capital
Total shareholders' equity at September 30, 1999 totaled $7.1 million, which
represented a 12.6% increase from $6.3 million at December 31, 1998. This
increase was primarily attributable to the supplemental stock offering completed
in March 1999.
The Bank maintains capital ratios above the Federal regulatory guidelines for a
"well-capitalized" bank. The ratios are as follows:
<TABLE>
<CAPTION>
Regulatory
Minimum Ratio
for September 30, December 31,
"Well-Capitalized" 1999 1998
------------------ ------------- ------------
<S> <C> <C> <C>
Tier 1 Capital (to Average Assets) 5.00% 5.97% 5.39%
Tier 1 Capital (to Risk Weighted Assets) 6.00% 9.57% 8.27%
Total Capital (to Risk Weighted Assets) 10.00% 11.82% 11.17%
</TABLE>
The Company's ratios at September 30, 1999 were 3.99% for Tier 1 capital to
average assets, 6.30% for Tier 1 capital to risk-weighted assets and 13.63% for
Total capital to risk-weighted assets.
Liquidity
Management is not aware of any future capital expenditures or other significant
demands on commitments which would severely impair liquidity.
Year 2000 Compliance
The Company has completed the validation of its systems, as defined under FFIEC
guidelines. A comprehensive plan was developed and all system conversions and
testing were substantially completed as of December 31, 1998. Additionally, the
Company has prepared a Y2K Disaster Recovery Plan and has trained its staff in
emergency preparedness. The Company estimates its total costs over the
three-year period 1998 - 2000 will be approximately $136,000, of which $125,000
has been incurred through September 30, 1999. None of these costs, however, are
expected to materially impact the results of operations in any one reporting
period.
Ultimately, the potential impact of the year 2000 issue will depend not only on
the corrective measures the Company undertakes, but also on the way in which the
year 2000 issue is addressed by governmental agencies, businesses, and other
entities who provide data to, or receive data from the Bank or whose financial
condition or operational capability is important to the Company such as
suppliers or customers. Communications with significant customers and vendors
have been initiated to determine the extent of risk created by those third
parties' failure to remediate their own year 2000 issues. However, it is not
possible, at present, to determine the financial effect if significant customer
and/or vendor remediation efforts are not resolved in a timely manner.
13
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Due to the nature of the banking business, the Company is at
times party to various legal actions; all such actions are of
a routine nature and arise in the normal course of business.
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 Items
None
Item 6 - Exhibits and Reports on Form 8-K
A) Financial Data Schedule - Exhibit 27
B) Reports on Form 8-K
None
14
<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.
First Coastal Bancshares
Date: November 15, 1999 _________________________
Don M. Griffith
Chief Executive Officer,
Chairman and Director
Date: November 15, 1999 _________________________
Deborah A. Marsten
Chief Financial Officer,
Vice Chair of the Board
and Secretary
15
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 8,363
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 7,700
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 38,364
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 68,610
<ALLOWANCE> 846
<TOTAL-ASSETS> 131,663
<DEPOSITS> 100,127
<SHORT-TERM> 16,000
<LIABILITIES-OTHER> 1,048
<LONG-TERM> 7,600
0
1,993
<COMMON> 6,631
<OTHER-SE> (1,515)
<TOTAL-LIABILITIES-AND-EQUITY> 131,663
<INTEREST-LOAN> 4,462
<INTEREST-INVEST> 1,248
<INTEREST-OTHER> 144
<INTEREST-TOTAL> 5,854
<INTEREST-DEPOSIT> 1,660
<INTEREST-EXPENSE> 2,596
<INTEREST-INCOME-NET> 3,258
<LOAN-LOSSES> 50
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,153
<INCOME-PRETAX> (178)
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (207)
<EPS-BASIC> (0.35)
<EPS-DILUTED> (0.35)
<YIELD-ACTUAL> 4.50
<LOANS-NON> 590
<LOANS-PAST> 209
<LOANS-TROUBLED> 471
<LOANS-PROBLEM> 3,589
<ALLOWANCE-OPEN> 549
<CHARGE-OFFS> 205
<RECOVERIES> 50
<ALLOWANCE-CLOSE> 846
<ALLOWANCE-DOMESTIC> 797
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 49
</TABLE>
